The Monthly Digest – March 2021

MINISTRY OF CORPORATE AFFAIRS

• The Ministry of Corporate Affairs vide notification no. G.S.R. 159(E) amended the Companies (Management and Administration) Rules, 2014 by amending Rule 11 and Rule 12 which deals with Filing of Annual Return in Form No. MGT-7 and Filing of Annual Return with registrar respectively.

In rule 20, after proviso in sub-rule (2), two explanations regarding Nidhi, Agency, cut-off date, cyber security, electronic voting system, remote e-voting, secured system, and voting by electronic means have been updated. For Form No.MGT-7, amended forms No.MGT-7 and MGT-7A shall be substituted. Read More

 

• As per the Commencement notification S.O. 1066(E), the provisions of clause (i) of section 23 of Companies (Amendment) Act, 2017 (1 of 2018) which deals with sections 92(1) of the Companies Act, 2013 came into force from 5th March 2021. Read More

• As per the Commencement notification S.O. 1255(E), the provisions of section 32 and section 40 of Companies (Amendment) Act, 2020 (29 of 2020) came into force from 18th March 2021. Read More

 

• The Ministry of Corporate Affairs vide notification no. S.O. 1256(E) amended the Companies Act, 2013 (18 of 2013) by amending Schedule V of the act. Some of the changes are as follows:

1. In Schedule V of the Companies Act, 2013, in PART II, under the heading Remuneration, in Section I,II, and III, after the words managerial person or persons, the words “or other director or directors” shall be inserted; 
2. Table A has been updated and sets the maximum yearly remuneration for managerial person or other director.
3.  According to the explanation inserted in Section III, the term “or other director” shall mean a non-executive director or an independent director. Read More

 

• As per the Commencement notification dated 24th March 2021, the provisions of section 23 and section 45 of Companies (Amendment) Act, 2020 (29 of 2020) came into force from 24th March 2021. Read More

• The Ministry of Corporate Affairs has vide its notification dated 24.03.2021, also known as the Companies (Accounts) Amendment Rules, 2021, amended the Companies (Accounts) Rules, 2014 and inserted sub-rule 1 in Rule 3 and notified that every company which uses accounting software for maintaining its books of account, shall use only such accounting software which creates an edit log of each change made along with the date when such changes were made and ensuring that the audit trail cannot be disabled. Read More

It also inserted the clauses (xi) and (xii) in rule 8(5), which deals with the details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 and the details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions.

 

• The Ministry of Corporate Affairs has vide its Notification Dated 24th March 2021 notified Companies (Audit and Auditors) Amendment Rules, 2021  which came into effect on 1st April 2021 and amended Rule 11 by omitting clause (d) and inserting clause (e), (f) and (g). Read More

• The Ministry of Corporate Affairs vide notification dated 24th March 2021 amended the Companies Act, 2013 (18 of 2013) by amending Schedule III of the act which deals with the general instructions for preparation of Balance Sheet and Statement of Profit and Loss of a Company. The said changes came into force on 1st April 2021. Read More

 

Insolvency and Bankruptcy Board

 

Insolvency and Bankruptcy Board of India (Liquidation Process) (Amendment) Regulations, 2021

Insolvency and Bankruptcy Board of India via Notification No. IBBI/2020-21/GN/REG069 dated 4th March 2021 amended the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. 

In regulation 31, sub-regulation (2) has been amended and states as follows: “The liquidator shall file the list of stakeholders with the Adjudicating Authority within forty-five days from the last date for receipt of the claims.” 

In sub-regulation (5) clause (d) has been inserted and provides for filling on the electronic platform of the Board for dissemination on its website. Read More

 

Filing of list of stakeholders under clause (d) of sub-regulation (5) of regulation 31 of the IBBI (Liquidation Process) Regulations, 2016

Insolvency and Bankruptcy Board of India via Circular No. IBBI/LIQ/40/2021 dated 4th March 2021 stated that the liquidator shall verify every claim as on the liquidation commencement date, and thereupon prepare a list of stakeholders, with specified details. The list of stakeholders shall be filed with the Adjudicating Authority and the same may be modified, with its approval. The liquidator shall file the list of stakeholders on the electronic platform of the Board for dissemination on its website. In pursuance of the same, the Board has made available an electronic platform at www.ibbi.gov.in for filing of list of stakeholders as well as updating it thereof. The insolvency professionals are directed to file the list of stakeholders, in the given format, within three days of the preparation of the list or modification thereof. The filings due as on the date of circular shall be filed within 15 days of this circular. Read More

 

Guidelines for Appointment of Insolvency Professionals as Administrators under the Securities and Exchange Board of India (Appointment of Administrator and Procedure for Refunding to the Investors) Regulations, 2018

The Securities and Exchange Board of India (Appointment of Administrator and Procedure for Refunding to the Investors) Regulations, 2018, [Regulations] provide for appointment of Insolvency Professionals (IPs) as Administrators. The Insolvency and Bankruptcy Board of India vide Notification dated 9th March 2021 laid down the Guidelines that have been prepared in consultation with SEBI to facilitate appointment of IPs as Administrators. Read More

 

Securities and Exchange Board of India

Code of Conduct & Institutional mechanism for prevention of Fraud or Market Abuse

Pursuant to the report of the Committee on Fair Market Conduct (‘Committee’), necessary changes have been carried out in SEBI (Prohibition of Insider Trading) Regulations, 2015. Based on this, SEBI has decided that the Code of Conduct and Institutional Mechanism for prevention of fraud or market abuse shall be applicable to Stock Exchanges, Clearing Corporations and Depositories also, on the lines of Regulation 9(1) to 9(4) of PIT Regulations. Read More

 

Circular on Mutual Funds

With respect to proposals relating to modifications in various circulars issued under Mutual Funds Regulations, SEBI has decided to implement various changes vide Circular No. SEBI/HO/IMD/DF2/CIR/P/2021/024 dated 4th March 2021, regarding, Gross Exposure Limits, Investment Pattern, Procedure for Change in Control of AMC, Requirement of Regulations, New Sponsor(s), Undertakings by new Trustee(s)/Sponsor(s), Disclosures to Unitholders, Revision of all Standard Offer Documents, Go Green Initiatives, AMC’s Annual Reports for unitholders, Filing of Annual Information Return (AIR) by Mutual Funds, Investment in securities by employees of AMC(s) and Trustees of Mutual Funds amongst other things. Read More

Unique Client Code (UCC) and mandatory requirement of Permanent Account Number (PAN)

In the Union budget 2020, launch of instant PAN facility was announced and subsequently, Income Tax (IT) Department launched the facility of e-PAN which is generated instantly through Aadhaar based e-KYC. In order to rationalize the compliance requirement of collecting and maintaining copies of PAN of clients by their respective members and enhance the use of e-PAN, SEBI has modified certain provisions of SEBI circular dated September 16, 2016 via Circular No. SEBI/HO/CDMRD/DNP/CIR/P/2021/30 dated March 08, 2021. Read More

 

Clarification on valuation of bonds issued under Basel III framework

SEBI, vide para 8 of the circular SEBI/HO/IMD/DF4/CIR/P/2021/032 dated March 10, 2021, has inter alia stated that the maturity of all perpetual bonds shall be treated as 100 years from the date of issuance of the bond for the purpose of valuation. In furtherance of the same, SEBI has amended the deemed residual maturity for the purpose of valuation of existing as well as new bonds issued under Basel III framework vide Circular No. SEBI/HO/IMD/DF4/CIR/P/2021/034 dated 22nd March 2021.  Read More

 

Transfer of business by SEBI registered intermediaries to other legal entity

SEBI has made clarifications regarding the registration applications pursuant to transfer of business (SEBI regulated business activity) from one legal entity which is a SEBI registered Intermediary (transferor) to other legal entity (transferee). 

1. The transferee shall obtain fresh registration from SEBI in the same capacity before the transfer of business if it is not registered with SEBI in the same capacity
2. In case of change in control pursuant to both regulatory process and non-regulatory process, prior approval and fresh registration shall be obtained. While granting fresh registration to same legal entity, same registration number shall be retained.
3. If the transferor ceases to exist, its certificate of registration shall be surrendered. In case of complete transfer of business by the transferor, it shall surrender its certificate of registration. In case of partial transfer, it can continue to hold certificate of registration. Read More

 

Guidelines pertaining to Surrender of FPI Registration

In terms of SEBI (Foreign Portfolio Investors) Regulations, 2019, any FPI desirous of surrendering the certificate of registration may request to the DDP. In order to have a uniform market practice for processing of such surrender requests, DDPs shall adhere to the additional guidelines laid down by SEBI vide Circular No. SEBI/HO/IMD/FPI&C/CIR/P/2021/045 dated 30th March, 2021. Read More

 

Legal Updates

 

IBC prevails over Power Purchase Agreements

A two-member bench of Hon’ble Justice Dhananjaya Chandrachud and Hon’ble Justice MR Shah in the matter of Gujarat Urja Vikas Nigam Ltd v. Amit Gupta & Ors observed that a buyer cannot terminate a Power Purchase Agreement even if it contains a clause that allows for such an action if an insolvency application is admitted against a power supplier. Further, it was observed that the NCLT has jurisdiction to adjudicate contractual disputes, related to the insolvency of the Corporate Debtor. Read More

Tata-Mistry Case

The Supreme Court of India has set aside the 2019 order of The Hon’ble National Company Law Appellate Tribunal which had reinstated Cyrus Mistry on the Board of Tata Sons and Group. The three judge bench, led by Hon’ble Chief Justice of India SA Bobde, allowed all petitions by Tata Group and dismissed all petitions by Mistry Group. Read More

Person ineligible under Section 29A of IBC to submit a resolution plan, cannot propose a Scheme of Compromise and Arrangement

The bench comprising Hon’ble Justices DY Chandrachud and Hon’ble MR Shah held that a person, who is ineligible under Section 29A of the Insolvency Bankruptcy Code to submit a resolution plan, cannot propose a Scheme of Compromise and Arrangement under s. 230 of the Companies Act, 2013, when the company is undergoing liquidation under the auspices of the IBC. Further, the apex court upheld the validity of Regulation 2B of the Liquidation Process Regulations, specifically the proviso to Regulation 2B(1). Read More

NCLT/NCLAT cannot interfere with the Commercial Wisdom of the COC

A three judge bench comprising Hon’ble Justices AM Khanwilkar, BR Gavai and Krishna Murari set aside an order of the NCLAT which had annulled the decision of Committee of Creditors (CoC) which was taken in accordance with its ‘commercial wisdom’. The Court held that the commercial wisdom of CoC is not to be interfered with, excepting the limited scope as provided under Sections 30 and 31 of the I&B Code. Read More

 

Directorate of Revenue Intelligence not proper office under s. 28(4), Customs Act

The main issue before the Supreme Court was whether the Directorate of Revenue Intelligence had authority to issue a show cause notice under Section 28(4) of the Act for recovery of duties allegedly not levied when the goods have been cleared for import by a Deputy Commissioner of Customs who decided that the goods are exempted. The Court held that Parliament has employed the article “the” and not “a/an” not accidently but with the intention to designate the proper officer who had assessed the goods at the time of clearance. The Court clarified that where the statute confers the same power to perform an act on different officers, the two officers, especially when they belong to different departments, cannot exercise their powers in the same case. Read More

Statement under s. 313, CrPC is not a substantive evidence to rebut the presumption under s. 139, NI Act

The bench comprising Hon’ble Justices Indu Malhotra and Ajay Rastogi was considering an appeal against a Himachal Pradesh High Court judgment. The court noted that the accused has only recorded her statement under s. 313 of the Code of Criminal Procedure, and has not adduced any evidence to rebut the presumption under s. 139 of the Negotiable Instruments Act. The Court held that the statement of the accused recorded under s. 313 of CrPC is not a substantive evidence of defence to rebut the presumption. Read More

 

Person who has not drawn the cheque cannot be prosecuted under section 138 of NI Act, even in case of joint liability

In the case of Alka Khandu Avhad v. Amar Syamprasad Mishra and Anr, the Hon’ble Supreme Court held that, two private individuals cannot be said to be “other association of individuals” for invoking s. 141 of the NI Act. Further, it was held that a person other than a person who has drawn the cheque on an account maintained by him, cannot be prosecuted for the offence under s. 138 of the NI Act. It was further observed that a person might have been jointly liable to pay the debt, but such a person, cannot be prosecuted unless the bank account is jointly maintained and he is the signatory to the cheque. Read More

A sole proprietorship will fall under international commercial arbitration if the proprietor is a foreign resident

In the case Amway India v. Ravindranath Rao and another, the Hon’ble  Supreme Court of India set aside an order of the Hon’ble Delhi High Court regarding the appointment of an Arbitrator. The Hon’ble Apex court held that the Hon’ble Delhi High Court had no jurisdiction as the dispute was an international commercial arbitration within the meaning of s. 2 (1)(f) of the Arbitration and Conciliation Act as one of the parties was a habitual resident of a foreign country. Read More

RECENT UPDATES IN FOREIGN DIRECT INVESTMENT

Govt. allows NRIs to now acquire up to 100% equity in Air India

In the month of March this year, the government allowed non-resident Indians (NRIs) to acquire up to 100 per cent stake in Air India.

 

FDI norms in Digital Sector

Changing FDI norms, the government permitted 26 per cent FDI in digital sectors last year in December.

 

India picks up the FDI pace

The Measures taken by the Government on the fronts of FDI policy reforms, investment facilitation and ease of doing business have resulted in increased FDI inflows into the country as India has attracted total FDI inflow of US$ 72.12 billion during April to January, 2021. It is the highest ever for the first ten months of a financial year and 15% higher as compared to the first ten months of 2019-20 (US$ 62.72 billion).

 

Service sector leading the way ahead

The Computer Software & Hardware has emerged as the top sector during the first ten months of FY 2020-21 with 45.81 per cent of the total FDI Equity inflow followed by Construction (Infrastructure) Activities (13.37 per cent) and Services Sector (7.80 per cent) respectively. As per the trends shown during the month of January, 2021, the consultancy services emerged as the top sector with 21.80 per cent of the total FDI Equity inflow followed by Computer Software & Hardware (15.96 per cent) and Service Sector (13.64 per cent).

 

Increase the FDI  limit in the Insurance sector

As per Union Budget 2021, the government will increase the foreign direct investment (FDI) limit in the insurance sector from 49 percent to 74 percent. An amendment to the Insurance Act, 1938 will also allow foreign ownership and control with safeguards.

 

Gujrat recorded FDI growth

Gujarat accounted for 53 per cent of India’s FDI between April-September 2020 ($16 billion) when the country was under lockdown because of the Covid-19 pandemic. On the front of Industrial Entrepreneurship Memorandum (IEM), Gujarat recorded a growth of 333 per cent in proposed investments in 2019 over the previous year.