Ergo Newsletter
ELB E-Bulletin | Vol 2 | Issue 10 | October 2020
Anshul Prakash
Ergo Update
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
Ergo
COVID 19 MCA rolls out sanitization scheme for Companies and LLPs
Amidst the ongoing pandemic of Covid 19, the Ministry of Corporate Affairs (MCA) has rolled out the Companies Fresh Start Scheme 2020 (Company Scheme) and modifications to the LLP Settlement Scheme, 2020 (LLP Scheme). The Company Scheme and the LLP Scheme seek to provide a fresh start to the companies and limited liability partnerships (LLP) granting them opportunity to sanitize the existing defaults in filing of forms, statements, documents, undertakings, returns etc. (collectively referred to as Document(s)) and get absolved from the penal consequences of such default under the Companies Act 2013 (CA 2013) and Limited Liability Partnership Act 2008 (LLP Act) and rules made thereunder by companies and LLPs during the moratorium period from 1 April 2020 till 30 September 2020. The Company Scheme further gives an opportunity to inactive company to get itself declared as ‘dormant company’ and minimize compliance requirements.
Ergo
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
Ergo Update
Direct Tax Disputes Resolution Bill receives Presidents assent
With the intent to reduce the direct tax litigation pending before various courts / appellate forums [i.e. the Supreme Court or High Courts or Income Tax Appellate Tribunal or Commissioner of Income Tax (Appeals)], the Government of India introduced ‘The Direct Tax Vivad Se Vishwas Bill, 2020’ (Scheme) before the Lok Sabha on 5 February 2020 (please see our Ergo). Thereafter, various representations were made by the stakeholders expressing their concerns and suggested modifications to the Scheme. The modified Scheme was passed by the Lok Sabha on 4 March 2020 (please see our Ergo) and by the Rajya Sabha on 13 March 2020.
Sanjay Sanghvi
Regulatory Updates
Update on COVID-19 - States tighten regulations as positive cases are on the rise
With each passing hour, the number of confirmed cases of COVID-19 in India is increasing rapidly. As of 13 March 2020 (5 pm), the number reached 81. The country has also reported one casualty in Karnataka.
Pursuant to our previous advisory dated 5 March 2020 and update dated 12 March 2020, we set out additional guidelines and regulations being issued by various State Governments to contain the pandemic.
Anshul Prakash, Vinay Joy
Regulatory Updates
Karnataka Government Notification/Regulations on COVID-19
The World Health Organisation has declared COVID-19 (better known as corona virus) a pandemic, with the number of cases outside China increasing 13-fold. Owing to an unprecedented increase in the number of cases globally as well as in the state, the Karnataka Government has included COVID- 19 within the ambit of epidemic diseases and has released the Karnataka Epidemic Diseases, COVID-19 (Corona Virus Disease 2019) Regulations (Regulations) vide notification dated 11 March 2020, under the aegis of the Epidemic Diseases Act, 1897. These Regulations set out guidelines that spells out the roles and responsibilities of both health officials and the public to mitigate and combat the growing threat of COVID-19. These Regulations will be valid for a period of one year effective from the date of its publication in the official gazette. Though our Ergo on 12 March 2020 briefly touched upon the Regulations, in this update, we have gone into greater detail, covering the key provisions of the Regulations and the impact thereof.
Vinay Joy
Ergo Update
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
Ergo
Coronavirus And Workplace Management Plan Manage But Do Not Fret
A global pandemic now, COVID-19 was not something the world seemed to have been ready for when it was first discovered in Wuhan, China, in December 2019. A member of the larger family of coronavirus (including Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS)) which causes illness in both humans and animals, COVID-19 impacts the respiratory system of its target. Having the capability to spread from person to person through droplets from mouth or nose, COVID-19 has transmitted far and beyond, with 93,090 confirmed cases across the world as per the situation report released by World Health Organization (WHO) on 4 March 2020. WHO has declared COVID-19 as a public health emergency of international concern.
Anshul Prakash
Ergo Newsflash
Direct Tax Disputes Resolution Bill passed in the Lok Sabha
With an intent to reduce direct tax litigation pending before various courts/ appellate forums [ie Supreme Court or High Court or Income Tax Appellate Tribunal (ITAT) or Commissioner of Income Tax (Appeals) (CIT(A)), together referred to as Appellate Forum], the Government introduced ‘The Direct Tax Vivad Se Vishwas Bill, 2020’ (Scheme) before the Lok Sabha on 05 February 2020 (please see our Ergo). Thereafter, various representations were made by the stakeholders expressing their concerns and suggested modifications to the Scheme. Government has noted these concerns and suitably modified the Scheme that has been passed by the Lok Sabha on 04 March 2020.
Sanjay Sanghvi
Ergo Update
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
Ergo Update
The Rights Issue process – supplemented and simplified
Securities and Exchange Board of India (SEBI) has recently notified amendments to the SEBI (Issue of Capital and Disclosure Requirements) Regulations 2018 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 to make the rights issue process more efficient and effective, and to reduce the overall time taken to undertake a rights issue, from approximately 55 days to approximately 31 days (the Amendment). Our ERGO on the Amendment can be accessed here. Some of the key changes introduced by the Amendment include (a) discontinuing allotment of securities in a physical manner; (b) mandatory use of Application Supported by Blocked Amount (ASBA) facility as a payment mechanism; and (c) introduction of credit and trading of Rights Entitlements (REs).
Sudhir Bassi
Ergo Update
SEBI introduces guidelines for rights issues by listed infrastructure investment trusts
India’s capital markets regulator, the Securities and Exchange Board of India (SEBI) has issued a circular dated 17 January 2020 introducing “Guidelines for rights issue of units by a listed Infrastructure Investment Trusts (InvIT)” (Guidelines). Under the Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014 (InvIT Regulations), a listed InvIT may issue units through various modes including a follow-on offer, preferential allotment, qualified institutional placement and rights issue. In November 2019 SEBI introduced frameworks for issue of units by listed InvITs through preferential issues and institutions placement. Our ERGO on same is available here.
Sudhir Bassi
Ergo Update
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
Ergo Update
Delhi High Court judgment on director disqualification
The Hon’ble Delhi High Court (Court), on 4 November 2019, pronounced its judgment on the issue of disqualification of directors of companies which had failed to file their returns / financial statements for a period of 3 (three) or more consecutive years, as prescribed under section 164 (2) (a) read with section 167 of the Companies Act, 2013 (Act).
Raj Panchmatia, Peshwan Jehangir
Ergo Update
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