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iconErgo Update

31 Aug '20

Supreme Court reiterates suit to commence De Novo after return of plaint under order VII Rule 10 and 10a of the Code of Civil Procedure, 1908

By decision dated 5 August 2020 in M/s EXL Careers & Anr. vs. Frankfinn Aviation Services (P) Ltd. (CA No. 2904 of 2020), a three judge bench of the Hon’ble Supreme Court resolved conflicting views in two of its earlier division bench judgments - ONGC vs. Modern Construction & Company(2014)1SCC648 (‘ONGC’) and Joginder Tuli vs. S. L. Bhatia (1997) 1 SCC 502 (‘Joginder Tuli’). It approved ONGC and held that a suit filed in a court having jurisdiction after the return of plaint under Order VII Rule 10, Civil Procedure Code, 1908 (‘CPC’) is to be treated as a fresh filing and Oriental Insurance Company Ltd. vs. Tejparas Associates and Exports Pvt. Ltd. (2019) 9 SCC 435 (‘Oriental Insurance’) was overruled.

Vivek Jhunjhunwala

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iconErgo

25 Mar '20

COVID 19 MCA continues to reduce compliance burden for Companies and LLPs

With the increase in COVID 19 cases in India, the Indian Government announced a complete nationwide lockdown for 21 days starting from 00:00 hours of 25 March 2020. Knowing that this unprecedented lockdown will further disrupt the business continuity of all sectors, the Hon’ble Finance Minister, Ms. Nirmala Sitharaman (FM) on the afternoon of 24 March 2020 announced a slew of fiscal and monetary stimulus measures giving companies a huge sigh of relief in these trying times. Continuing the theme of FM, the Ministry of Corporate Affairs (MCA) in the evening of 24 March 2020 granted further relaxations from few statutory compliances under the Companies Act, 2013 (CA 2013) to companies and limited liability partnerships (LLP) vide a circular bearing no. 11/2020. These new relaxations are in addition to earlier relaxations granted by MCA on 19 March 2020 – elaborated in our earlier Ergos dated 21 March 2020 and 24 March 2020.

Sharad Abhyankar, Manisha Shroff

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iconErgo Update

06 Mar '20

The Banning of Unregulated Deposit Schemes Rules 2020

The President of India had promulgated the Banning of Unregulated Deposit Schemes Ordinance on 21 February 2019 (Ref: No. 7 of 2019) (Ordinance) which was replaced by the Banning of Unregulated Deposit Schemes Act 2019 on 31 July 2019 (Ref: Act No. 21 of 2019) (Act). In our Ergo dated 7 March 2019 (which can be accessed here) we had provided an overview of the Ordinance and its key highlights. To recap, the Ordinance (and subsequently the Act), amongst other things, bans solicitation and receipt of unregulated deposits, creates a framework for reporting and monitoring of deposit schemes, and sets out a prosecution and penalty mechanism for its enforcement. An ‘Unregulated Deposit Scheme’ means a scheme or arrangement under which deposits are accepted or solicited by a deposit taker by way of a business (and notably not for purposes of business), and such deposit is not regulated by any sectoral regulator or ministry.

Rishabh Bharadwaj

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iconErgo Update

07 Feb '20

RBI enlarges net of cyber security controls – now covers ATM switch application service providers

Digital transactions and fintech have been the buzz words during the past few years. The Indian government, the regulators and the industry have trained their focus on adopting fintech and digital transactions.

Nikhilesh Panchal

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iconErgo Update

23 Jan '20

SEBI introduces new guidelines for the rights issue of units by Real Estate Investment Trusts

Under the Securities and Exchange Board of India (Real Estate Investment Trusts) Regulations 2014 and relevant guidelines and circulars issued thereunder (REIT Regulations), a real estate investment trust (REIT) is required to list its units on a recognised stock exchange only through an initial public offer. Subsequently, further issuance of units may be undertaken by way of a follow on public offering, a preferential issue, an institutional placement or a rights issue, in the manner specified by the Securities and Exchange Board of India (SEBI).

Sudhir Bassi

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iconErgo Update

26 Nov '19

Cabinet Approves Amendment of Toll Operate and Transfer Model of National Highways Authority of India

The Cabinet Committee on Economic Affairs (CCEA), on 20 November 2019 gave its approval to the proposed amendment to the to the Toll Operate Transfer (TOT) model of the National Highways Authority of India (NHAI). After the successful roll out of the TOT model in 2016, CCEA’s recent decision appears to be with a view to increase more participation of institutional investors in national highways sector for raising funds for NHAI.

Dibyanshu

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iconErgo Newsflash

06 Nov '19

Ministry of Labour and Employment presents draft Central rules under the new framework on wages

In a step towards implementation of the recently notified Code on Wages, 2019 (Wages Code) which awaits a notification to be brought into force, the Ministry of Labour and Employment the draft Code on Wages (Central) Rules, 2019 (Draft Central Rules) on 1 November 2019. The Draft Central Rules will be available for public comments for a period of one month.

It may be noted that most of the provisions of the Draft Central Rules are intended to apply to the following establishments (Covered Establishments):

a)       establishments carried on by or under the authority of the Central Government;

b)       railways;

c)        mines;

d)       oil fields;

e)       major ports;

f)        air transport services;

g)       telecommunication;

h)       banking and insurance companies;

i)         corporations / authorities established by a Central Act;

j)         central public sector undertaking and their subsidiaries; and

k)        establishment of contractors for the purposes of the above-mentioned establishments.

While the ‘appropriate government’ for most private establishments is the state government which is yet to implement the provisions of the Wages Code, it is likely that the state governments would take a cue from the Draft Central Rules and make similar provisions for the establishments falling under their jurisdiction.

Set out below are some of the important provisions of the Draft Central Rules. The other provisions of the draft rules have reiterated the position in the existing Central rules under the Minimum Wages Act, 1948 (MW Act), the Payment of Wages Act, 1936 (PW Act) and the Payment of Bonus Act, 1965.

Ø  Categorisation of employees: In an important change, the Draft Central Rules define unskilled, semi-skilled, skilled and highly skilled occupations for the purpose of Covered Establishments and also provide a list of occupations in Schedule E which would fall in each of these categories. The Draft Central Rules then stipulate that the Central Government shall take into consideration the skill of the employees while fixing the minimum rates of wages and can, for this purpose, modify, delete or add any entry in Schedule E.

The term ‘unskilled occupation’ has been defined to mean one which, in its performance, requires the application of a bare minimum operating experience. Semi-skilled occupations require application of skill gained by on-the-job experience although subject to supervision / guidance of a skilled employee. Skilled occupations, on the other hand, require not only skill and competence which could be attained through experience on the job or training as an apprentice, but also some degree of judgment / decision making. An increased level of professional training or occupational experience for a considerable period qualifies an occupation as highly skilled, requiring an employee to assume full responsibility for his / her decision making and performance.

Ø  Hours of work etc.: As for Covered Establishments other than factories (which would continue to be governed by the Factories Act, 1948), a period of 9 hours would constitute a normal working day which shall not exceed 12 hours in any day after including the rest intervals. While these provisions are a reproduction of those under the MW Act, an important change is the absence of a stipulation on the working hours of children in view of the embargo imposed on engagement of children under the Child and Adolescent Labour (Prohibition and Regulation) Act, 1986. 

The Draft Central Rules also provide that where the employees are engaged in any work of emergency which could not have been foreseen or any work which for technical reasons is required to be completed before the duty is over or other similar works of urgency, the actual work hours (excluding rest intervals and periods of inaction) cannot exceed 9 hours while the spread-over (i.e. normal working hours combined with rest intervals and periods of inaction) would be limited to 16 hours.

Ø  Manner of fixing floor wage: In order to cater to the issue of disparity in the minimum rates of wages across states in India, the Wages Code provides that the Central Government shall fix a ‘floor wage’ taking into account the minimum living standards of a worker. However, the Central Government may prescribe different floor wages for different geographical areas (Floor Wage). The respective state governments may fix a different minimum wage for areas falling under their jurisdiction, provided such wage should at least match the Floor Wage.

In furtherance of these provisions, the Draft Central Rules provide that the Central Government shall consult the Central Advisory Board (Board) for fixing the Floor Wage for states taking into account factors such as the food, clothing and housing requirements of 3 adult consumption units including the worker in the family. The advice of the Board will be circulated by the Central Government to all state governments for consultation. It is likely that state governments will press for fixation of different Floor Wages to suit the local dynamics.

Ø  Single application for filing of claims: Much like the PW Act, the Wages Code provides for a joint application of claims which may be filed on behalf of a number of employees in the establishment. It may be noted that the PW Act is limited in its application to only certain kinds of establishments (i.e. establishments relating to motor transport or air transport services, dock, wharf, jetty, inland vessel, mine, quarry, oilfield, plantation, production or manufacture of articles for their use / transport / sale, construction / development / maintenance of buildings etc., and any other establishment which the appropriate government may specify; so far, only few states such as Maharashtra, Karnataka, Haryana and Tamil Nadu have extended its application to shops and commercial establishments). However, the Wages Code is applicable to all kinds of establishments including shops and commercial establishments, thus allowing employees of such establishments to file a joint application.

Further to this objective, the Draft Central Rules provide that the employees of Covered Establishments can file a joint application with respect to various claims such as shortfall in payment of wages including minimum wages, failure to pay overtime etc. 

Ø  Maintenance of consolidated registers: The Wages Code provides for consolidation of compliance requirements for maintaining registers. Pursuant to the said provision, the Draft Central Rules provide that all fines and deductions and the realisations thereof pertaining to Covered Establishments shall be prepared in Form I. Given that the provisions relating to fines and deductions apply to ‘employees’ which is defined under the Wages Code to include managerial employees as well, employers would be required to record details of even such employees such as designation, acts and omissions leading to imposition of fines, damage or loss caused due to neglect or default of the employee, total amount of wages paid etc. Similarly, the employer of a Covered Establishment would be required to maintain a register of employees in Form IV which shall have the same particulars as those set out in the Ease of Compliance to Maintain Registers under various Labour Laws Rules, 2017.

Ø  Procedure for composition of offences: The Wages Code has introduced a provision for compounding of offences which are not punishable with imprisonment. Such compounding may be allowed by the prescribed officer for a sum of 50% of the maximum fine provided for the relevant offence. However, such opportunity is unavailable to an employer for the second time or thereafter within a period of 5 years from the date of either (i) commission of a similar offence which was earlier compounded; or (ii) commission of a similar offence for which such person was earlier convicted.

In furtherance to the aforesaid provision, the Draft Central Rules provide, in relation to the Covered Establishments, that an application in Form VI will be required to be made by the employer to the Gazetted Officer notified under Section 56(1) of the Wages Code containing details pertaining to the offence and any pending prosecution against the employer at the time of making the application. 

Ø  Responsibility of principal employers: In an unexpected move that is likely to impact all establishments, the Draft Central Rules provide that where the employees are employed in an establishment through contractor, the company which is the proprietor of the establishment shall pay to the contractor the amount payable to him / her before the date of payment of wages so that payment is made to contract workers within the stipulated timeline. Further, where the contractor fails to pay minimum bonus to his / her employees, the principal employer shall be responsible for such payment.

On the whole, the Draft Central Rules have retained most of the rules framed under the extant laws on wages and may enable employers get a sense of the provisions likely to be implemented by states for private establishments under the Wages Code. However, clarity on several aspects is warranted. For example, the provisions on hours of work and overtime under the Wages Code and the Draft Central Rules may overlap with similar provisions in state-specific shops and establishments statutes (S&E Act). Further, under the S&E Act of several states, exemption is granted to managerial employees from the provisions thereof, which exemption is not provided under the Wages Code, thus leading to uncertainty as to whether provisions relating to overtime, permissible deductions from wages etc. will apply to such employees. The provision in the Draft Central Rules imposing the obligation on the principal employer to make advance payment to the contractor for payment of wages to contract workers (without there being any obligation on the contractor to produce the relevant records indicating the amount to be paid) and to pay minimum bonus to contract workers are understandably onerous and impracticable, given that the principal employer does not have the same level of visibility as regards contract labour related compliances which a contractor is likely to possess. The provisions should, at the very least, allow the principal employer to recover, from the contractor, the amounts paid by it in respect of the contract workers.

-               Anshul Prakash (Partner), Abhisek Choudhury (Associate) and Deeksha Malik (Associate)

For any queries please contact: editors@khaitanco.com

Anshul Prakash

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iconErgo Update

24 Oct '19

A Diwali Gift for locals – Andhra Pradesh notifies rules for employment of local candidates in industries/factories

On 14 October 2019, the Government of Andhra Pradesh (Government) notified and brought into effect the Andhra Pradesh Employment of Local Candidates in the Industries / Factories Rules, 2019 (Rules) framed under the Andhra Pradesh Employment of Local Candidates in the Industries / Factories Act, 2019 (Local Candidates Act).

Important Provisions and Compliances

In a sweeping decision, the Government has made it mandatory for existing and upcoming factories, industries, joint ventures and public-private partnership projects to reserve 75% of employment for local candidates. Some of the important provisions including compliance requirements under the Local Candidates Act read with the Rules are set out below:

  • Applicability: The Local Candidates Act applies to every factory (as defined under the Factories Act, 1948), industry (as defined under the Industries (Development and Regulation) Act, 1951), joint venture (commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities) and project taken up under public-private partnership model (collectively called Covered Entity / Covered Entities) located in the state of Andhra Pradesh.
     
  • Employer’s obligations: Every Covered Entity is required to engage local candidates which should be at least 75% of the employment in the concerned organisation. Further, first preference is required to be given to candidates belonging to the village / town /city in which the Covered Entity is situated. The term ‘local candidate’ has been defined to mean a candidate domiciled in Andhra Pradesh for more than 10 years, either himself / herself or through his / her family members.

In case of a new Covered Entity, every employer / occupier / owner / authorised person shall, while applying for statutory permissions and clearances, inform the manpower and skill requirements to the nodal agency. The nodal agency would comprise of the District Collector (Chairman), General Manager of the District Industry Centre (Member) and District Employment Officer (Member). Upon receipt of the information, the nodal agency shall assess the availability of skilled manpower in the desired number. Where there is a shortfall vis-à-vis the requirement, a training and skill upgradation plan shall be prepared by the nodal agency in consultation with the employer / occupier / owner / authorised person. The entity will have a 3-year window to train and engage local candidates in ‘active collaboration’ with the Government (i.e. technical collaboration through initiatives such as establishment of skill development centres).

In case of an existing Covered Entity, the employer / occupier / owner / authorised person would be required to furnish details of its existing manpower, number of local candidates employed, shortfall in the manpower along with a proposed action plan to ensure compliance with the Local Candidates Act to the nodal agency within 30 days from the date of commencement of the Rules. It is unclear if the nodal agency would be required to prepare a training and skill upgradation plan for such Covered Entity in the manner specified above. The existing Covered Entity would be required to comply with the 75% local employment criterion within three years of the commencement of the Rules.

As regards continuing employer obligations, the Local Candidates Act and the Rules provide that every Covered Entity shall furnish a quarterly report (within 30 days from the end of each quarter, the first quarter commencing from January each year) in Form LER 1 and any other information required in relation to appointment of local candidates to the nodal agency. Further, every Covered Entity must maintain a record of the local status of each local candidate engaged by it in the form of (a) local status record register, (b) pay bill register, (c) attendance register / muster roll and (d) returns / reports.

  • Exemptions: The Covered Entities have been given an option to apply for exemption from the provisions of the Local Candidates Act and the Rules. However, during the period of exemption (which will ordinarily be one year), suitable local candidates are required to be identified and trained by the Covered Entity.
     
  • Penalties: The penalty for non-compliance of the provisions shall be fine which may extend to INR 25,000 in case of first offence and INR 50,000 in case of any subsequent offence. Additionally, the Government has the power to cancel the licenses / clearances of any Covered Entity which is found to not have been meeting the minimum 75% local employment criterion for six consecutive months.

Comment

The Local Candidates Act read with the Rules is the first-of-its-kind legislation providing for reservation of local candidates in industries / factories, irrespective of whether these are government-owned. Without going into the vires of the statute from a constitutional law perspective, it is submitted that the statute comes with several ambiguities and areas of concern.

It is unclear if the Local Candidates Act is intended to apply to shops and establishments. This is because the term ‘employer’ has been defined under the Local Candidates Act to mean a person covered under Section 2(9) of the Andhra Pradesh Shops and Establishments Act, 1988. Further, a transition from nil to at least 75% reservation in case of existing Covered Entities will create several practical challenges including treatment of the non-local workforce which even a 3-year window may not be able to address.

As regards the requirement of reservation, it would have been prudent to limit the same to the shop floor level of workers who are relatively easier to identify and engage as compared to employees at the higher rungs of the establishment (such as managerial employees) who come with specialised knowledge and experience. The costs associated with finding a suitable replacement coupled with costs that may be incurred on engaging and training locals may make compliance with the new law onerous. Further, it remains to be seen how an ‘active collaboration’ between the Covered Entity and the Government will work in practice and to what extent the Government would share the costs with the Covered Entities to ensure effective implementation of the Local Candidates Act.

-        Anshul Prakash (Partner), Deeksha Malik (Associate) and Kosheel Gupta (Associate)

For any queries please contact: editors@khaitanco.com

Anshul Prakash

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