The Monthly Digest- October 2022

January 10, 2023by admin0

Reserve Bank of India (RBI)

  1. Reserve Bank of India (Unhedged Foreign Currency Exposure) Directions, 2022

RBI has issued directives to the banks on Unhedged Foreign Currency Exposure (UFCE) of the entities which have borrowed from banks, applicable to all commercial banks (excluding Payments Banks and Regional Rural Banks). These instructions shall come into force from January 1, 2023.

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12402&Mode=0

 

  1. Reserve Bank of India (Financial Statements – Presentation and Disclosures) Directions, 2021 – Disclosure of Divergence in Asset Classification and Provisioning

RBI has issued directions under which commercial banks (excluding Regional Rural Banks (RRBs)) are required to disclose details of divergence in asset classification and provisioning. These instructions shall come into effect for disclosures in the notes to the annual financial statements of the year ending March 31, 2023, and onwards.

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12401&Mode=0

 

  1. Appointment of Internal Ombudsman by the Credit Information Companies

Reserve Bank of India has directed all Credit Information Companies holding a Certificate of Registration under sub-section (2) of Section 5 of the Act, 2005 (the Act) to comply with the RBI (Credit Information Companies- Internal Ombudsman) Directions, 2022.

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12395&Mode=0

 

  1. Review of Regulatory Framework for Asset Reconstruction Companies (ARCs)

ARCs play a vital role in the management of distressed financial assets of banks and financial institutions. RBI has set up a committee to undertake a comprehensive review of the working of ARCs and recommended suitable measures for enabling them to function in a more transparent and efficient manner. Based on the Committee’s recommendations and feedback from the stakeholders, the regulatory framework for ARCs has been amended.

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12399&Mode=0

 

5 – Claims Received from the National Credit Guarantee Trustee Company Ltd (NCGTC) – Classification for the Purpose of Maintenance of Cash Reserve Ratio (CRR)/Statutory Liquidity Ratio (SLR)

RBI notified that the amounts received by a bank from the National Credit Guarantee Trustee Company Ltd towards claims in respect of guarantees invoked and held by them pending adjustment of the same towards the relative advances, need not be treated as outside liabilities for the purpose of computation of NDTL for CRR and SLR.

https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=12403&Mode=0

SEBI

6 – Reduction in denomination for debt securities and non-convertible redeemable preference shares

SEBI has amended the Chapter V of the Operational Circular no. SEBI/HO/DDHS/P/CIR/2021/613 dated August 10, 2021, issued by SEBI, which prescribes provisions pertaining to denomination of issuance and trading of Non-convertible Securities.

https://www.sebi.gov.in/legal/circulars/oct-2022/reduction-in-denomination-for-debt-securities-and-non-convertible-redeemable-preference-shares_64429.html

7 – Block Mechanism in demat account of clients undertaking sale transactions

SEBI has clarified that the block mechanism introduced vide circular no. CIR/HO/MIRSD/DOP/P/CIR/2022/595 dated July 16, 2021, shall not be applicable to clients having arrangements with custodians registered with SEBI for clearing and settlement of trades.

https://www.sebi.gov.in/legal/circulars/aug-2022/block-mechanism-in-demat-account-of-clients-undertaking-sale-transactions_62131.html

8 – Request for Quote (RFQ) platform for trade execution and settlement of trades in listed Non-convertible Securities, Securitised Debt Instruments, Municipal Debt Securities and Commercial Paper

SEBI has allowed stock brokers registered under the debt segment of the Stock Exchange (s)to place/ seek bids on the RFQ platform on behalf of client(s), in addition to the existing option of placing bids in a proprietary capacity.

https://www.sebi.gov.in/legal/circulars/oct-2022/request-for-quote-rfq-platform-for-trade-execution-and-settlement-of-trades-in-listed-non-convertible-securities-securitised-debt-instruments-municipal-debt-securities-and-commercial-paper_64215.html

 

9 – Governing Council for Social Stock Exchange (“SSE”)

SEBI has issued a circular pertaining to Governing Council for Social Stock Exchange (SSE), to protect the interest of investors in securities market and to promote the development of, and to regulate the securities market.

https://www.sebi.gov.in/legal/circulars/oct-2022/governing-council-for-social-stock-exchange-sse-_64000.html

10 – Suspension, Cancellation or Surrender of Certificate of Registration of a Credit Rating Agency

SEBI has provided for cancellation, suspension or surrender of certificate of registration of a Credit Rating Agency (CRA). This is to facilitate orderly migration of credit ratings of listed or proposed to be listed, non-convertible securities, securitised debt instruments, security receipts and municipal debt securities or commercial paper, and other regulated products.

https://www.sebi.gov.in/legal/circulars/oct-2022/suspension-cancellation-or-surrender-of-certificate-of-registration-of-a-credit-rating-agency_63998.html

Arbitration

11 – The Court can conduct a preliminary inquiry under Section 11 of the A&C Act to ascertain the arbitrability of the dispute.

The SC in Emaar India Ltd. v. Tarun Aggarwal Projects LLP has held that the arbitration, agreement must be construed considering the intention of the parties and if Arbitration mechanism has been precluded for the redressal of the dispute by the Arbitration agreement, the same cannot be invoked by the parties.

https://www.livelaw.in/pdf_upload/823-emaar-india-ltd-v-tarun-aggarwal-projects-llp-30-sep-2022-437943.pdf

12 – Invocation of arbitration by only one of the constituents of the joint ventures is not valid invocation of arbitration.

The Delhi High Court (‘DHC’) in Consulting Engineers Group Limited v. National Highways Authority of India (NHAI) has held that a joint venture (JV) in itself is a legal entity and therefore, action by only one of the parties to the joint venture could not be construed as action on part of the JV.

https://main.sci.gov.in/supremecourt/2015/27371/27371_2015_34_1502_22897_Judgement_14-Jul-2020.pdf

13 – Madras High Court on the specific performance of contract ordered in the arbitral award.

The Madras High Court (‘MHC’) in M/s. Macro Marvel Projects Ltd v. J. Vengatesh and Ors. has held that when the parties have chosen arbitration as the mode of dispute adjudication through a valid arbitration clause, the award of the Arbitral Tribunal cannot be set aside merely because an alternate view is possible.

https://www.livelaw.in/pdf_upload/macro-marvel-projects-ltd-versus-j-vengatesh-ors-438240.pdf

14 – Invoking arbitration for notified claims: Delhi HC

The DHC in M/s Janta Associates and Co. Ltd. v. Indian Oil Foundation & Anr. has held that the determination of a claim being a ‘Notified Claim’ is outside the scope of Arbitration.

https://www.livelaw.in/pdf_upload/janta-associates-and-co-ltd-versus-indian-oil-foundation-anr-439252.pdf

Gaming Industry

15 – Supreme Court dismisses special leave petition (SLP) against Rajasthan High Court order holding fantasy sports as games of skill

Supreme Court dismisses petition alleging that Dream 11’s fantasy sport games amounted to sports betting, and gambling activities/games of chance. Petition was filed before the High Court of Rajasthan in 2019. A division bench of the Supreme Court dismissed the SLP, i.e., refused the petitioner permission to appeal, on September 9, 2022.

https://www.thehindu.com/news/national/supreme-court-upholds-rajasthan-high-court-decision-on-online-fantasy-game-dream-11/article35803208.ece

16 – Group of Ministers likely to suggest GST on gaming industry

A Group of Ministers (GoM) was constituted to suggest the GST rate on casinos, race courses and online gaming. GoM is seeking a legal opinion on the applicable tax rate and is seeking to differentiate between the three sectors (casinos, horse racing, and online gaming), before making its final recommendations to the GST Council.

https://www.business-standard.com/article/economy-policy/gom-on-gst-levy-on-casinos-online-gaming-to-seek-further-legal-opinion-122090501301_1.html

17 – CBDT scrutinizes players’ winnings on online gaming platforms

As per reports, the Central Board of Direct Taxes (“CBDT”) is scrutinizing earnings by players on fantasy gaming apps and online gaming platforms, and non-filing of income tax returns in this respect. The reports suggest that the department has uncovered earnings amounting to INR 58,000 crores in the last three years.

https://www.business-standard.com/article/economy-policy/gom-on-gst-levy-on-casinos-online-gaming-to-seek-further-legal-opinion-122090501301_1.html

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