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THE MONTHLY LEGAL
BULLETIN
ISSUE 16 | September 2020
A comprehensive guide to legal updates
nCoVID-19 UPDATES
Given the current situation in India due to nCoVID-19 pandemic, we have collated the relevant
information, including, notifications, advisories and circulars issued by various government
ministries to make them available at one source, for the benefit of the reader. We have
provided the relevant material at the following link on our website:
https://www.pioneerlegal.com/covid-19-resource-centre/.
You will find the relevant articles, ministry updates and judicial updates at the above link. Our
research team is continuously updating the material in the resource center, on a weekly basis.
CORPORATE Report”. The committee has proposed two
formats for disclosures, a comprehensive
Supreme Court asks MCA to respond to PIL format and a lite version. The committee also
regarding higher threshold for appointing stated that with regard to listed entities
company secretary reporting may be done by top 1000 listed
companies, by market capitalization. The
The Supreme Court issued a notice to MCA
reporting requirement may be extended by
on August 7, 2020 in a public interest
MCA to unlisted companies above a
litigation filed against MCA’s recent
specified threshold of turnover and/or paid-
notification for increasing the minimum
up capital. Smaller unlisted companies
threshold paid up capital of a company from
below this threshold may adopt a lite version
Rs. 5 crores to Rs. 10 crores for appointing
of the format on voluntary basis. The
company secretaries. This notification came
committee also recommended that the
into effect from April 1, 2020 and has made
report be integrated with the MCA21 portal.
thousands of company secretaries irrelevant.
The BRR can be accessed here.
MCA releases Report of the Committee on
Business Responsibility Reporting MCA issues clarification on extension of
time for holding Annual General Meeting
MCA released the report of the committee
on business responsibility reporting (“BRR”) The MCA vide its circular dated August 17,
on August 11, 2020 to develop new BRR 2020 has relaxed the timeline for holding
formats for listed and unlisted companies. Annual General Meeting (“AGM”) for the
financial year ended on March 31, 2020
In the report, the committee recommends a
beyond the statutory period provided under
new reporting framework called “the
Section 96 of Companies Act, 2013. Earlier
Business Responsibility and Sustainability
1ISSUE 16 | September 2020
on May 5, 2020 had issued clarification medicine funded by the central or state
regarding holding of AGM through video governments or a public sector entity would
conferencing or other audio-visual means. also count as CSR. Companies can also
The latest circular provides for a company to contribute their CSR funds to public funded
apply for extension of AGM to the concerned universities, institutions under AYUSH and
RoC in case of failure to conduct AGM departments of biotechnology, atomic
through video conferencing or other audio energy, pharmaceuticals and science and
visual means. The RoC can provide a technology.
maximum of three months extension beyond
which the company has to file application in The notification for including R&D
form GNL-1 for seeking further extension on expenditure for new vaccines and drugs can
or before September 29, 2020. be accessed here.
The circular can be accessed here. The notification for list of institutions for
contributing CSR funds to can be accessed
MCA initiates discussion with RBI, SEBI, here.
DPIIT on possibility of single e-compliance
window Companies (Management and
Administration) Amendment Rules, 2020
MCA has initiated discussions with RBI, SEBI
and Department for Promotion of Industry MCA vide notification dated August 28, 2020
and Internal Trade (“DPIIT”) regarding the has published the Companies (Management
possibility of setting up a single window for and Administration) Amendment Rules,
e-compliance by companies in order to avoid 2020. The notification came into effect on
duplicate filing. In the proposed single c- the date of publication in the Official
compliance platform there can be an auto-fill Gazette. Rule 12 has been amended to state
system which pulls the required data from that the extract of annual return has to be
MCA-21. Companies are currently having to attached with the board report in Form MGT-
make multiple filings, and different 9 provided that a company will not be
regulators have different requirements/ required to attach the extract of the annual
formats for submission of data. However, return with the board’s report in case the
once a single window platform is in place, web link of such return has been disclosed in
companies can file their data at a single the board’s report as per Section 92 of the
place and regulators can also obtain this Companies Act, 2013.
data from the same single source.
The notification can be accessed here.
MCA notifies amendments in CSR Rules to
MCA issues clarification on dispatch of
include R&D expenditure for new vaccine,
notice under Section 62(2) of the
drugs
Companies Act, 2013 by listed companies
MCA has notified two amendments in for rights issues
Schedule VII of the Corporate Social
MCA issued a clarification on August 3, 2020
Responsibility (“CSR”) Rules which allow
on its earlier general circular dated May 11,
companies to spend their CSR funds in
2020 regarding dispatch of notice under
research and development (“R&D”) of new
Section 62(2) of the Companies Act, 2013
vaccines, drugs and medical devices in three
(“Act”) by listed companies for rights issues
financial years starting from 2020-
opening upto July 31, 2020. The applicability
21.Contributing to R&D projects in the field
of the general circular has now been
of science, technology, engineering and
2ISSUE 16 | September 2020
extended upto December 31, 2020. Securities and Exchange Board of India
Accordingly, for listed companies complying (Listing Obligations and Disclosure
with circulars issued by SEBI, inability to Requirements) (Second Amendment)
dispatch the relevant notice to shareholders Regulations, 2020
via registered post or speed post or courier
would not be viewed as a violation of The Securities and Exchange Board of India
Section 62(2) of the Act for rights issues (Listing Obligations and Disclosure
opening upto December 31, 2020. Requirements) (Second Amendment)
Regulations, 2020 have come into effect on
The circular can be accessed here. August 5, 2020.
CAPITAL MARKETS The amendment provides that listed
companies will intimate the record date of
SEBI issues circular on Procedural corporate actions like mergers, de-mergers,
Guidelines for Proxy Advisors splits etc. to all stock exchanges where it is
listed or where stock derivatives are
SEBI issued a circular dated August 3, 2020
available on its stock or where its stock form
outlining procedural guidelines to be
part of an index on which derivatives are
followed by proxy advisors which will come
available.
into effect from January 1, 2021 in
accordance with the SEBI circular dated The notification can be accessed here.
August 27, 2020. Under the guidelines, proxy
advisors are required to formulate voting SEBI issues circular on administration and
recommendation policies and disclose these supervision of investment advisers
updated policies to its clients. The proxy
advisors have to ensure that the policies are SEBI has issued a circular on Administration
reviewed at least once annually. and Supervision of Investment Advisers on
August 6, 2020 declaring that a wholly
Amongst other matters, proxy advisors are owned subsidiary of the stock exchange will
also required to share their report with administer and supervise investment
clients and the company simultaneously and advisers registered with SEBI. The
alert clients about any factual errors in the recognition of the stock exchange subsidiary
report within 24 hours of receipt of will be based on the eligibility of the stock
information. The guidelines also state the exchange. The stock exchange must have
various disclosures the proxy advisors are to been in existence for a minimum 15 years and
make in relation to the methodologies and must have a minimum net worth of Rs. 200
processes followed in the development of crore. Once authorized by SEBI, the stock
their research, and the legal requirements exchange subsidiary will discharge several
and rationale behind recommendation of responsibilities as a regulator of investment
higher standards. advisers including grievance redressal of
clients and investment advisers and
The circular can be accessed here. monitoring activities of investment advisers
by obtaining periodical reports.
The notification extending time of the
circular coming into effect can be accessed The circular can be accessed here.
here.
3ISSUE 16 | September 2020
SEBI releases circular on Resources for company is required to redress the
Trustees of Mutual Funds complaint and submit an action taken report
within 30 days. For any failure to redress
SEBI has issued a circular on on August 10, investor grievances pending beyond 60
2020 on “Resources for Trustees of Mutual days, the stock exchange is required to take
Funds” to provide administrative assistance appropriate action against them. A fine of
to mutual fund trustees for monitoring the Rs. 1,000 per day per complaint will be
various activities of mutual funds. Its levied on the listed entity for violation of
provisions take effect from October 1, 2020. Regulation 13 of SEBI (LODR) Regulations,
2015.
The circular directs trustees to appoint a
dedicated officer having professional The circular can be accessed here.
qualification and minimum 5 years of
experience in finance and financial services SEBI may move to T+1 cycle for faster
related. The scope of work of the said officer settlement of stock trades
is to be specified by the trustees. trustees
are required to have standing arrangements SEBI is considering lowering the settlement
with independent firms for special purpose cycle for completion of share transaction to
audit and/or to seek legal advice in case of T+1 (trade plus one day) from the current
any requirement as identified and whenever T+2 days cycle. With this, shares would be
considered necessary. transferred to the buyer's demat account the
day after the transaction, and the seller
The circular can be accessed here. would receive the proceeds. SEBI is of the
view that the shift to T+1 can be
SEBI releases circular on investor implemented once the market adjusts to the
grievances redressal mechanism - handling new margin system.
of SCORES complaints by stock exchanges
Corrigendum to master circular for
SEBI released a circular on investor depositories dated October 25, 2019 on
grievances redressal mechanism – handling preservation of records
of SCORES complaints by stock exchanges
and standard operating procedure for non- SEBI vide its circular dated August 18, 2020
redressal of grievances by listed companies has stated that depositories and depository
on August 13, 2020. The circular states that participants are required to preserve records
the stock exchange will be the first recourse for a minimum of eight years in place of five
for certain categories of complaints against years and carry out required changes to
listed companies. systems and bye-laws, rules and regulations
for its implementation. Original forms of
Investors are encouraged to initially take documents are also required to be preserved
up their grievances for redressal with the in either physical form or electronic record,
concerned listed company directly. copies of which have been taken from any
SCORES platform can also be used to submit enforcement agency during the course of
grievances directly to the company for their investigation.
resolution. In case the company does not
redress the complaint within 30 days the The circular can be accessed here.
complaints are forwarded to the designated
stock exchange (“DSE”) through SCORES.
On receipt of complaint, the DSE takes up
the complaint with the company and the
4ISSUE 16 | September 2020
SEBI releases consultation paper on the float within 6 months and 25% public float
format for Business Responsibility and within 3 years from the date the MPS norm is
Sustainability Reporting breached. Comments from public and market
intermediaries have to be submitted by
SEBI released a consultation paper for a new September 18, 2020.
format for business responsibility and
sustainability reporting under which 1000 The consultation paper can be accessed
listed entities by market capitalisation have here.
to file the reports as per the disclosure
requirements under the National Voluntary Centre rejects SEBI’s request to tap phones
Guidelines on Social, Environmental and in insider trading cases
Economic Responsibilities of Business.
The centre rejected SEBI’s request for
It will be mandatory from 2021-22 to tapping phone calls in order to book people
implement this format. The disclosures under involved in insider trading. The government
the report have been introduced to enable believes that this should be resorted to in
the companies to engage with their cases where there is threat to national
shareholders in a meaningful manner. Public security, terror financing and money
comments on the consultation paper have to laundering and should be the last resort as it
be submitted by September 18, 2020. conflict with fundamental rights.
The consultation paper can be accessed SEBI releases master circular for mutual
here. funds
Recalibration of threshold for minimum SEBI has released a master circular for
public shareholding norms, enhanced mutual funds vide notification dated August
disclosures in corporate insolvency process 24, 2020 for effective regulation of the
cases mutual fund industry. It is a compilation of all
the circulars issued by SEBI on mutual funds
SEBI has proposed a consultation paper upto March 31, 2020, which were in
dated August 19, 2020 to seek comments operation as on the date of the circular and
from public on recalibration of threshold for supersedes the previous master circular
minimum public shareholding (“MPS”) dated July 10, 2018.
norms, enhanced disclosures in corporate
insolvency process and seek relisting of The master circular can be accessed here.
shares pursuant to an approved resolution
SEBI releases frequently asked questions
plan.
on portfolio managers
SEBI said it is possible that pursuant to
SEBI vide notification dated August 25, 2020
implementation of the resolution plan, public
has released frequently asked questions
shareholding may drop to very low levels
(“FAQ”) on portfolio managers. In the FAQs,
and low public shareholding gives rise to
amongst other matters, SEBI has clarified
several concerns like failure of fair discovery
that portfolio managers cannot impose a
of price of the scrip, need for increased
lock-in period for investments of their clients
surveillance measures and may become a red
but that they can charge a fee for early exits.
flag in the future. SEBI has suggested that
Portfolio managers can also charge a fee for
post corporate insolvency resolution
rendering services which can be a fixed
process, it may be made mandatory for
amount or based on performance or a
companies to achieve at least 10% public
5ISSUE 16 | September 2020
combination of both. No upfront fees may Amendment) Regulations, 2020 come into
however, be charged by portfolio managers. effect on August 5, 2020.
Other questions such as procedure for
registering as portfolio manager, minimum The amendment clarified that where a
net worth requirement of a portfolio liquidator realizes any amount but does not
manager have also been answered. distribute the same, he will be entitled to a
fee corresponding to the amount realised by
The FAQs can be accessed here. him, and where a liquidator distributes any
amount, which is not realised by him, he will
Regulatory measures to contain market be entitled to a fee corresponding to the
volatility amid COVID-19 pandemic amount distributed by him.
extended till September 24
The notification can be accessed here.
SEBI has extended the enforcement of
regulatory measures which were introduced Insolvency and Bankruptcy Board of India
in March 2020 to contain market volatility (Insolvency Resolution Process for
amid the COVID-19 pandemic, have been Corporate Persons) (Fourth Amendment)
extended till September 24, 2020. Regulations, 2020
The press release can be accessed here. The Insolvency and Bankruptcy Board of
India (Liquidation Process) (Third
BANKING & FINANCE Amendment) Regulations, 2020 have come
into effect on August 7, 2020.
Insolvency and Bankruptcy Board of India
(Voluntary Liquidation Process) (Second Insolvency and Bankruptcy Code, 2016
Amendment) Regulations, 2020 requires interim resolution professionals to
offer a choice of three insolvency
The Insolvency and Bankruptcy Board of
professionals to be appointed as an
India (Voluntary Liquidation Process)
authorized representative to represent
(Second Amendment) Regulations, 2020
financial creditors in a class. The amendment
have come into effect on August 5, 2020.
provides that the three insolvency
professionals must be from the state or
The amendment provides that a corporate
union territory which has the highest number
person may replace the liquidator by
of creditors in the class as per the records
appointing another insolvency professional
maintained by the corporate debtor.
by way of a resolution which will include
terms and conditions of appointment and the
Other changes provided by the amendment
remuneration payable to such insolvency
include:
professional. The insolvency professional will
intimate IBBI within three days of being The authorized representative being
appointed. required to circulate the agenda and seek
preliminary views of creditors in the class
The notification can be accessed here.
before the meeting and seeking voting
instructions only after circulation of
Insolvency and Bankruptcy Board of India
minutes of meeting and vote accordingly.
(Liquidation Process) (Third Amendment)
Regulations, 2020
The committee of creditors voting on all
complaint resolution
The Insolvency and Bankruptcy Board of
plans simultaneously, after evaluating all
India (Liquidation Process) (Third
6ISSUE 16 | September 2020
the complaint resolution plans with the chairman’s presence on key meetings may be
resolution plan which receives the highest decided by the board.
votes, but not less than 66% of voting
share, to be considered as approved. RBI issued statement on developmental
and regulatory policies
The notification can be accessed here.
The statement issued by RBI on August 6,
IBBI lists out red flags to aid insolvency 2020 sets out various developmental and
professionals detect avoidance regulatory policy measures with the
transactions objective of enhancing liquidity support for
both financial markets and other
IBBI has come up with a document on stakeholders. The policies are meant to
August 7, 2020 to aid insolvency further ease the financial stress caused by
professionals during the corporate COVID-19 and improve the flow of credit,
insolvency resolution process and help digital payments, increase customer safety in
detect if the corporate debtor has been cheque payments and facilitate innovation
subjected to any avoidance transactions. across the financial sector by leveraging
technology through an innovation hub.
The document lists out various factors
including the need to look at whether the Some of the credit provisions include:
corporate debtor is present at the address
that is given in the corporate affairs ministry Resolution framework for COVID-19
records. It also noted that non-existence of related stress: RBI has decided to provide
an office of the corporate debtor at such an a window under the prudential framework
address is also a red flag. to enable lenders to implement a
resolution plan in respect of eligible
The document also states that predominance corporate exposures without change in
of cash transactions generally undertaken by ownership and personal loans, while
the entity, presence of name sake directors, classifying such exposures as standard
frequent change of auditors is also a subject to specified conditions. This was
potential red flag. introduced with the intention to facilitate
revival of activities and mitigate impact
A complete list of red flags to detect
on ultimate borrowers.
avoidance transactions can be accessed
here. The circular can be accessed here.
RBI’s draft code on governance likely to Restructuring of MSME debt: RBI has
cap tenure of private banks’ CEOs at 15 decided that since MSME borrowers are
years facing stress on account of the economic
fallout of the pandemic, lending
RBI in a revisit to draft code on governance
institutions may restructure the debt
is likely to cap the tenure of the chief
under the existing framework. The
executive officers (“CEOs”) of private banks
restructuring will be implemented by
at 15 years, irrespective of whether they are
March 31, 2021.
promoters or professionals. The other
change likely to take place is to make CEOs The circular can be accessed here.
part of the risk management committee and
an invitees to audit committee meetings. The Streamlining the use of multiple
operating accounts by large borrowers: It
7ISSUE 16 | September 2020
is considered necessary to take guidelines also mention that the parent CIC
appropriate measures for strengthening in the group or the CIC with the largest asset
credit discipline through appropriate size will constitute a Group Risk Management
safeguards for opening of current Committee (“GRMC”) which will report to
accounts and cash credit/overdraft the board of the CIC and it must meet at
accounts for customers availing credit least once in a quarter. The GRMC will have
facilities from multiple banks. to analyze material risks to which the group,
its businesses and subsidiaries are exposed.
The circular can be accessed here. All CICs with asset size of more than Rs.
5,000 crores need to appoint a Chief Risk
Scheme of offline retail payments using
Officer.
cards and mobile devices:
The Guidelines can be accessed here.
RBI has proposed to allow a pilot scheme
for small value payments in off-line mode RBI releases framework for authorisation of
with built-in features for safeguarding pan-India umbrella entity for retail
interest of users, liability protection, etc. payments
The circular can be accessed here. RBI on August 18, 2020 released its
framework for setting up pan-India umbrella
Creation of Reserve Bank innovation hub:
entities on retail payment systems under
Section 4 of Payment and Settlement
To promote innovation across the
Systems Act, 2007.
financial sector by leveraging on
technology, RBI will set up an innovation
Companies having a minimum paid-up
hub in India which will act as a centre for
capital of Rs 500 crore are eligible to apply
ideation and incubation of new
by February 26, 2021 in the prescribed form
capabilities which can be used to create
(Form A) for setting up, managing and
innovative and viable financial products
operating new payment systems in the retail
and/or services.
space comprised of ATMs, White Label POs,
Aadhar based payments and remittance
The statement can be accessed here.
services.
RBI releases review of guidelines for core
Apart from this, the scope of activities will
investment companies
include operation of clearing and settlement
RBI released a notification revising systems for banks and non-banks;
guidelines for core investment companies identification and management of risks;
(“CIC”) on August 13, 2020. The revised monitoring retail payment system
guidelines are stricter, mandating more development and related issues in order to
disclosures, better risk management and a avoid fraud.
simpler group structure. The guidelines
All the promoter groups of the umbrella
amongst other things provide that where
entity will be owned and controlled by Indian
amount representing any direct or indirect
resident citizens only. And no single
capital contribution made by one CIC in
promoter/promoter group will have more
another CIC to the extent such amount
than 40% investment in the capital of the
exceeds 10% of Owned Funds of the
umbrella entity. The promoter/promoter
investing CIC, it will be deducted while
group has to demonstrate a capital
computing adjusted net worth. The
contribution of not less that 10% at the time
8ISSUE 16 | September 2020
of application and its shareholding can be Other recommendations by the committee
diluted to a minimum of 25% after 5 years of include:
commencement.
Gratuity should be provided to contract
In the case of a foreign direct labourers, seasonal workers, piece rate
investment/foreign portfolio investment, workers, fixed term employees and
additional capital requirements are to be daily/monthly wage workers;
fulfilled under FEMA along with application
for authorisation and necessary approval In case of non-payment of dues by the
from competent authority. employer, the employee should have
access to a redressal mechanism to hold
The notification can be accessed here. the employer liable;
Extension of time for submission of returns Interstate migrant workers should be
under Section 31 of the Banking Regulation included in a separate category in the
Act, 1949 Code and a welfare fund should be
created for them.
RBI has released a notification dated August
26, 2020 which states that as per Section 31 Union Ministry of Labour to relax penal
read with Section 56 of the Banking provisions in draft social security code
Regulation Act, 1949 accounts, balance sheet
and auditor’s report are to be published in To improve ease of doing business by
the prescribed manner and 3 copies are to decriminalizing laws, the Union Ministry of
be furnished to RBI within 3 months from the Labour is considering relaxing penal
end of the relevant period. RBI may extend provisions for violations under the Employee
the said period by a further period not Provident Fund and Miscellaneous Provisions
exceeding three months. RBI has also Act, 1952 (“EPF”) and the Employees’ State
extended the furnishing of returns under Insurance Act, 1948 (“ESIC”) in the final
Section 31 for the financial year ended March version of the proposed Code on Social
31, 2020 by a period of 3 months for primary Security, 2020. The Union Ministry of Labour
and co-operative banks. will move the cabinet to seek approval for
the changes to the code. The proposed
The notification can be accessed here. changes include:
LABOUR & EMPLOYMENT Reduction in jail term from 3 years to 2
years in case an employer fails to make
Standing Committee of Parliament on contributions to EPF or ESIC.
Labour recommends reduction of gratuity
eligibility to one year Removal of imprisonment clause for
violations including reducing wages or
The Standing Committee of Parliament on benefits admissible to an employee,
Labour in its report on Code on Social deducting wage of an employee, or if an
Security, 2019 (“Code”) on August 4, 2020 exempted establishment defaults on
recommended that that the eligibility period complying with conditions granting
for payment of gratuity to an employee after exemption.
termination be reduced to 1 year from the
current minimum period of 5 years. Reduction of maximum imprisonment
from 5 years to 3 years for repeat
offences.
9ISSUE 16 | September 2020
We also publish a quarterly newsletter that vegetarian and non-vegetarian along with
provides a brief overview on important and nutritional value relating to food items.
relevant developments in the employment
law space both at the central and state level. The notification can be accessed here.
The last issue of our labour law and
FSSAI decides to not count period from
employment newsletter can be found here.
March 22, 2020 to December 31, 2020 for
REGULATORY accumulation of penalties
Foreign direct investment in commercial Due to the current situation of COVID-19
coal mining in India only under government pandemic FSSAI has decided to not count
route for countries sharing land border the period starting from March 22, 2020 to
with India December 31, 2020 for accumulation of
penalties under Food Safety and Standards
Ministry of Coal issued a press release on (Licensing and Registration of Food
August 3, 2020 regarding the participation in Businesses) Regulations, 2011 due to non-
the auction process for commercial coal submission of returns of previous financial
mining in India. The ministry citing the years.
amendment made to the foreign direct
investment (“FDI”) policy vide press note 3 The notification can be accessed here.
in April 2020 stated that countries which
Government considering permitting FDI for
share land border with India are only
limited liability partnership in construction
permitted to invest in coal mining under the
development
government route. Earlier, as per FDI policy,
2017 central government had permitted
The government is considering a proposal to
100% FDI under automatic route in coal
permit FDI in limited liability partnership
mining activities.
firms engaged in construction development
with a view to attracting overseas fund
The press release can be accessed here.
inflows. Currently, FDI is permitted under the
Food Safety and Standards (Packaging and automatic route in LLPs which are operating
Labelling) First Amendment Regulations, in sectors where 100% FDI is allowed
2020 through automatic route and there are no
performance conditions. In construction
The Food Safety and Standards Authority of development too, 100% FDI is permitted
India (“FSSAI”) vide its notification dated through automatic route. DPIIT is soon going
August 21, 2020 promulgated the Food to approach the Union Cabinet to seek
Safety and Standards (Packaging and approval.
Labelling) First Amendment Regulations,
2020. The food business operators are Parliamentary panel recommends
required to comply with the Regulations by permitting regulated FDI in tobacco
January 1, 2022.
A parliamentary panel has recommended
The key changes of the amendment state permitting FDI in tobacco sector and
that all establishments having central license establishing tobacco farms for export to
or more than 10 outlets will mention calorific benefit farmers. The panel also
value against food items on all mediums. recommended that consultations with
Along with that, they will also mention Chinese government should be made to
information regarding allergens and logo for
10ISSUE 16 | September 2020
restart export in light of the Indian-Chinese Until an online procedure to file details is
phytosanitary protocol being renewed. established builders have been advised to
file the application with the relevant
Union Minister for Housing and Urban authority in writing in Form A. Different fee
Affairs says government to soon allow brackets have been decided as per the
100% FDI in rental housing nature of project.
Union Minister for Housing and Urban Affairs, The fee brackets can be accessed here.
Hardeep Singh Puri said that the government
will soon allow 100% FDI in the rental Stamp duty slashed to 2% by Maharashtra
housing segment, in response to a demand government until December, 2020
raised by National Real Estate Development
Council. He also announced that the real The Maharashtra government on August 29,
estate sector will have a “Permanent 2020 temporarily reduced the stamp duty on
Working Group” to attend to any issues or instrument of conveyance or agreement to
matters pertaining to the sector for faster sell of any immovable property from 5% to
decision making. 2% for the period starting from September
01, 2020 until December 31, 2020 to boost
Lower threshold being contemplated for the stagnant real estate market.
beneficial owners under new FDI Rule
Further, stamp duty from January 1, 2021 to
India may lower the threshold for beneficial March 31, 2021 will be 3%.
ownership under the FDI policy which was
recently amended to require prior The notification can be accessed here.
government approval for investments
RECENT JUDICIAL DECISIONS
originating from China and other countries
sharing land borders with India.
Supreme Court issues notice in plea
challenging Gujarat Labour and
The Department for Promotion of Industry
Employment Department’s notification
and Internal Trade has already held
extending work hours under Factories Act,
consultations with stakeholders and a
1948 without overtime pay. Constitutional
Cabinet approval may be sought for the final
validity also challenged in petition before
proposal. Policymakers are deliberating
Gujarat High Court
between a 25% or 10% limit, keeping in mind
that the latter is consistent with the
The Supreme Court vide its order dated
definition of beneficial ownership under the
August 4, 2020 issued notice in a plea
Companies Act, 2013. A defined beneficial
challenging the notification issued by the
ownership threshold will exempt investments
Gujarat Labour and Employment Department
below that level from scrutiny.
granting exemptions to all factories in the
state from provisions of the Factories Act,
MISCELLANEOUS
1948 (“Act”), relating to daily working hours,
Jammu & Kashmir notifies rules under weekly working hours, intervals for rest, and
RERA even from the duty to pay overtime wages at
double rate as fixed under Section 59 of the
The Union Territory of Jammu & Kashmir has Act.
become the 33rd state/union territory to
notify rules under Real Estate (Regulation The plea filed by Gujarat Mazdoor Sabha
and Development) Rules, 2020. contended that the notification was issued
11ISSUE 16 | September 2020
for a period starting from April 20 to July 19, of disgorgement within 45 days from the
2020, in order to grant exemptions to all date of the coming in force of the order.
factories in Gujarat from Sections 51, 54, 55
and 56 of the Act. As per the notification, the The order also restrained Top Class Capital
workers in Gujarat were to work 12 hours in a Markets from accessing the securities market
day, 72 hours in a week, whereas according or being associated with it in any manner for
to the Act, workers can only be made to a period of 1 year from the order date, and
work 9 hours in a day and 48 hours in a from buying, selling or dealing in the
week. The plea also pointed out that the securities of Aurobindo Pharma Ltd. directly
notification states that overtime wages for or indirectly for a period of 3 years from the
the extra hours will be paid in proportion to order date.
existing wage which is a violation of Section
The order can be viewed here.
59 of the Act which says that overtime
wages must be paid at double the ordinary
Section 57 of Transfer of Property Act
rate. The petitioners have sought
permits Court to declare a property free of
appropriate directions for quashing of the
encumbrance even against will of
notification.
encrumbrancer
A petition challenging the constitutional
The Kerala High Court vide judgment dated
validity of Factories (Gujarat Amendment)
August 5, 2020 in MP Varghese v Annamma
Ordinance, 2020 has also been filed under
Yacob & Ors clarified that Section 57 of the
Article 226 before the Gujarat High Court by
Transfer of Property Act, 1857 (“TPA”) was
the petitioners. The petition contended that
enacted to assist any party to the sale of an
if the Ordinance were to be followed,
immovable property which is subject to an
workmen employed in the factory would be
encrumbrance to fructify the sale for its fair
forced labour which is prohibited under
value. Section 57 also provides for sale of
Article 23 of the Constitution. It also claims
immovable property both by a court or out
that the Ordinance is unconstitutional,
of court as also in execution of a decree.
arbitrary, discriminatory and against human
rights. Gujarat High Court has issued a notice Section 57 of TPA enables any party to the
to the state government on the petition vide sale of immovable property burdened by an
order dated August 11, 2020. encumbrance to apply to Court for a
declaration that the said property is freed
The Supreme Court order can be viewed
from such encrumbrance on deposit of sums
here.
to be adjudged by it, and for the issuance of
an order of conveyance or vesting order,
SEBI orders Top Class Capital Markets to
proper for giving effect to the sale.
pay Rs. 3.8 crores with interest in
Aurobindo Pharma Ltd. insider trading case
The Court has also held that Section 57 of
the TPA permits the courts to declare a
SEBI has issued its final order on August 4,
property free of encrumbrance even against
2020 in the matter of Aurobindo Pharma Ltd.
the will of the encrumbrancer. Hence,
and its promoters settling an insider trading
Section 57 of TPA is wider in its amplitude
case. In its final order, SEBI has directed Top
and is operative even in the case where sale
Class Capital Markets to disgorge the illegal
is not directed by Order XXXIV of the Civil
gains of Rs. 3.8 crores made by it along with
Procedure Code.
an interest of 12% per annum beginning from
March 4, 2009 till the date of actual payment
The judgment can be viewed here.
12ISSUE 16 | September 2020
Limitation period of 3 years after teacher. The respondents sought dismissal of
occurrence of default applicable on the writ petition on the ground that it was a
insolvency law private unaided minority educational
institution and not amenable to writ
The Supreme Court vide judgment dated jurisdiction. The Court held that since the
August 14, 2020 in the matter of Babulal school was subject to the control and
Vardharji Gurjar v. Veer Gurjar Aluminium supervision of the Jammu and Kashmir
Industries Pvt. Ltd. & Anr. held that the School Education Act and the Jammu and
Limitation Act, 1963 (“Act”) is applicable on Kashmir School Education Rules the writ
insolvency laws as well and NCLT cannot petition is maintainable.
admit cases of default more than 3 years as
per the period prescribed in the Act. The judgment can be viewed here.
Veer Gurjar Aluminium Industries defaulted Daughters have coparcenery rights even if
on a loan taken by it in 2011 from their father was not alive when Hindu
Corporation Bank. The loan was later taken Succession (Amendment) Act, 2005 came
over by an asset reconstruction company into force
named JM Financial ARC which filed an
insolvency application against the debtor in The Supreme Court vide judgment dated
2017. NCLT admitted the application in 2017, August 11, 2020 in the matter of Vineeta
against which the debtor moved NCLAT Sharma v. Rakesh Sharma has held that a
stating that the financial creditor cannot file daughter will have a share after Hindu
an insolvency application in 2018 for a Succession (Amendment) Act, 2005
default which occurred in 2011. However, irrespective of whether her father was alive
NCLAT rejected the plea. The debtor moved or not at the time of the amendment.
the Supreme Court wherein the Court held
The bench comprising of Justices Arun
that insolvency proceedings from 2011 are
Mishra, S. Abdul Nazeer and M.R. Shah
clearly barred by limitation, since it is more
overruled the contrary observations made in
than the permissible limit of 3 years after the
Prakash v. Phulavati and Mangammal v. T.B.
occurrence of the default.
Raju and held that Section 6 of the Hindu
The judgment can be viewed here. Succession Act, 1956 (“Act”) confers status
of coparcener on the daughter born before
Writ petitions are maintainable against or after amendment equal to that of a son.
private un-aided schools The Supreme Court has also held that the
amended Act, which gives daughters equal
The Jammu and Kashmir High Court vide its rights to ancestral property, will have a
judgment dated August 4, 2020 in the retrospective effect. The rights can be
matter of Satvinder Singh v. Presentation claimed by daughters born earlier with effect
Convent Senior Secondary School through from September 9, 2005 with savings as
its Principal Gandhi Nagar, Jammu and Anr. provided in Section 6(1) of the Act, as to the
has held that since private unaided schools disposition or alienation, partition or
fall within the ambit of public functions and testamentary disposition which had taken
education rules, writ petitions against them place before December 20, 2004.
are maintainable. In the present matter, the
writ petition was filed against Presentation The bench also observed that as per Section
Convent Secondary School, seeking 6(5) of the Act, a plea or oral partition
quashing of the petitioner’s termination cannot be accepted as the statutory
order and his reinstatement as a physics recognized mode of partition effected by a
13ISSUE 16 | September 2020
deed of partition duly registered under the execution or performance of referred
provisions of the Registration Act, 1908 or contract alone will apply and not the
effected by a decree of court. arbitration agreement unless special
reference is made to arbitration clause. The
The judgment can be viewed here. Court also held that the mere existence of
multiple proceedings and/or chance of a
Penalty for causing noise pollution up to
matter proceeding in multiple forums is not
Rs. 1 lakh approved by National Green
sufficient reason to render an arbitration
Tribunal
agreement inoperative.
The National Green Tribunal (“NGT”) has
The order can be viewed here.
approved penalties for noise pollution norms
proposed by Central Pollution Control Board Order to implead former Executive Director
(“CPCB”) up to Rs. 1 lakh. CPCB also of the Punjab National Bank in Nirav Modi
proposed heavy penalties for bursting case set aside
firecrackers causing sound beyond
permissible limits and the fine for bursting NCLAT vide judgment dated August 17, 2020
crackers in residential areas is Rs. 1,000, Rs. set aside an order to implead the former
3,000 in silence zones and Rs. 10,000 and Executive Director of Punjab National Bank
Rs. 20,000 for public rallies in residential (“PNB”) K V Brahmaji Rao in a matter
and silence zones respectively. The penalty involving the Rs. 14,000 crore scam by Nirav
for repeat of violation within fixed premises Modi. In 2019, NCLT had directed impleading
is Rs. 20,000 and more than two violations 19 people including Rao and freezing their
will invite a penalty of Rs. 1 lakh and the assets on a petition filed by MCA. NCLAT
premises will be sealed. held that since Rao was the executive
director of PNB, Head Office, New Delhi, he
The order can be viewed here. was an employee of another organization
and cannot be impleaded as respondent in
Courts in India have power to grant anti-
the company petition which is against the
arbitration injunction against foreign
Nirav Modi Group and Gitanjali Group of
seated arbitration sparingly
Companies.
The Calcutta High Court vide order dated
The judgment can be viewed here.
August 12, 2020 in the matter of Balasore
Alloys Ltd. v. Medima LLC held that while Forfeiture clause in sale agreements most
civil courts in India have the power to grant unjust and exploits homebuyers
anti-arbitration injunctions against a foreign
seated arbitration, this power is to be used Maharashtra Real Estate Regulatory
sparingly with caution, and only under the Authority (“MahaRera”) vide order dated
circumstances enumerated in paragraph 24 August 13, 2020 struck down a forfeiture
of Modi Entertainment Network v. W.S.G. clause in the sale agreements of two flats at
Cricket ((2003) 4 SCC 341). a Godrej Properties’ housing project in
Vikhroli on the grounds that it was unjust
Justice Saraf held that where a contract and unreasonable and exploits flat
between the parties provides that the purchasers. The clause in question was to
execution or performance of that contract forfeit 20% of the amount of total
will be in terms of another contract which consideration plus interest on delayed
contains provisions for settlement of payment. In the previous order MahaRera
disputes by arbitration, the terms of member Shri B. D. Kapadnis said the
14ISSUE 16 | September 2020
forfeiture clause in agreements entered Supreme Court lays down tests to
under the Maharashtra Ownership of Flats determine fraud exception to the
Act, 1963 invites cancellation of the bond arbitrability of disputes
and empowers the promoter to recover
interest for payment delay till the balance is The Supreme Court vide judgment dated
paid. He added that model agreements August 19, 2020 in the matter of Avitel Post
empower the promoter to terminate Studios Ltd. v. HSBC Pie Holdings (Mauritius)
agreement on non-payment by due date but Ltd. laid down tests to determine serious
with prior notice of 15 days to enable the allegations exemption to arbitrability of
allottee to remedy breaches. disputes. The bench comprising of Justices
R.F. Nariman and Navin Sinha has held that
Action instituted under Specific Relief Act, serious allegations of fraud as a ground for
1963 is arbitrable as it is not an action in exemption from arbitral proceedings arise
rem only if either of the two tests laid down are
satisfied. The first test is satisfied only when
The Supreme Court vide judgment dated either the party against whom breach is
August 19, 2020 in the matter of Deccan alleged hasn’t entered into an agreement
Paper Mills Co. Ltd. v. Regency Mahavir relating to arbitration at all or the arbitration
Properties, held that an action instituted clause or agreement cannot be said to exist.
under Section 31 of the Specific Relief Act, The second test is satisfied in cases in which
1963 (“Act”) is not an action in rem, but an allegations of fraudulent practices are made
action in personam, and hence it is against the State, in which case hearing of
arbitrable. The Court also observed that the the case by a writ court becomes necessary
expression “any person” in Section 31 of the and the questions raised are predominantly
Act does not include a third party, but is related to public law.
restricted to a party to the written
instrument or any person who can bind such The bench observed that there is no such
party. fraud as would vitiate the arbitration clause
in the Share Subscription Agreement entered
The appellant had contended in its appeal into between the parties as it’s clear that this
that since the prayer in the suit is for clause is to be read as an independent
cancellation of written instruments, the clause. Impersonation, false representations
proceeding being a proceeding in rem would made and diversion of funds was held to be
fall within one of the exceptions listed in having no public favour to attract the fraud
Booz Allen & Hamilton Inc. v. SBI Home exception.
Finance Ltd. ((2011 5 SCC 532). The Court
dismissed the appeals and observed that the The judgment can be viewed here.
cancellation of the instrument under Section
31 is as between the parties to the action and Delhi High Court issues blanket injunction
their privies and not against all persons restraining use of domain name Amul to
generally, as the instrument that is cancelled give Amul legal protection against
is to be delivered to the plaintiff in the fraudulent companies
cancellation suit. Thus the action under
The Delhi High Court vide order dated
Section 31(1) is in personam, and therefore
August 28, 2020 in the matter of Gujarat
arbitrable.
Cooperative Milk Marketing Federation Ltd.
The judgment can be viewed here. & Anr v. Amul Franchise issued a blanket
injunction restraining all registrars of domain
15ISSUE 16 | September 2020
names from selling the domain name ‘Amul’ Just and reasonable compensation to flat
as a prefix or suffix in any combination. buyers for delay by builders
The petitioners have been receiving The Supreme Court vide judgment dated
complaints for more than a year from victims August 24, 2020 in the matter of Wg. Cdr.
who were deceived by fake websites which Arifur Rahman Khan and Aleya Sultana v.
offered jobs with Amul or distributor or DLF Southern Homes Pvt. Ltd. has held that
franchise dealerships for which they paid failure on the developer’s part to comply
money ranging from Rs. 25,000 to Rs. 10 with the contractual obligation to provide
lakh which was being deposited in branches the flat to the purchaser within a stipulated
of nationalized banks. The Court observed period amounts to a deficiency and in the
that Amul being a well known trademark event that there is gross delay in handing
deserved such protection and directed the over possession of the flat beyond the
Department of Telecommunications, Ministry stipulated period the consumer forum may
of Information Technology and the National award just and reasonable compensation to
Internet Exchange of India to block access to the buyers. The jurisdiction of the consumer
these fraudulent websites. The Court has also forum is not constrained by the terms of a
directed nationalized banks to disclose all rate in apartment buyers’ agreement.
the details of the account holders in whose
accounts the victims were asked to deposit The bench comprising of Justice D.Y.
money. Chandrachud and Justice K.M. Joseph
reversed an order of the National Consumer
The order can be viewed here. Disputes Redressal Commission which
dismissed the consumer complaint filed by
Supreme Court asks centre to clarify stand 339 flat buyers and absolving the developer
on interest waiver during moratorium and builder of additional liability other than
what is provided in the Apartment Buyers’
The Supreme Court vide order dated August
Agreement. The Bench directed DLF
26, 2020 had sought clarification from the
Southern Homes Pvt. Ltd and Annabel
centre on the waiver of interest on interest
Builders & Developers Pvt. Ltd. to pay 6%
for deferred payments of instalments for
interest per annum on the cost of the flats to
loans during the moratorium period
those buyers who were handed possession
announced due to the lockdown.
after a gross delay of 2 to 4 years.
On September 1, 2020 the central
The judgment can be viewed here.
government told the Supreme Court that the
loan moratorium period is extendable by 2 Hotels require consent to operate in terms
years. It also said that it has been decided of the Water Act and the Air Act
that the central government and the Bankers
Association will together decide on the The National Green Tribunal, Principal Bench,
matter of interest payable on loans during New Delhi vide order dated August 24, 2020,
moratorium period. On September 10, 2020 in the matter of Pramod Kumar Agarwal v.
the Supreme Court passed an order for Uttarakhand Environment Protection and
interim extension of loan moratorium till Pollution Control Board (“UEPPCB”) with
September 28, 2020, directing banks not to M/s Sushila Touring Hotel has held that
tag any loans as non-performing assets till hotels cannot avoid obligations under the
further directions. Water (Prevention and Control of Pollution)
Act, 1974 (“Water Act”) to prevent
The order can be viewed here. discharge of any untreated pollutants. In this
16ISSUE 16 | September 2020
case, the appellants challenged orders of the
UEPPCB requiring appellants to make
arrangements for sewage treatment and to
obtain consent to operate in terms of the
Water Act and the Air (Prevention and
Control of Pollution) Act, 1974 (“Air Act”) on
the contention that the appellants’ hotels are
operating since 1980 and the Water Act does
not require a consent to operate unless a
date is notified by the State Government and
since they do not have any plant or
machinery or generator set or boiler the Air
Act also does not apply to them. The
National Green Tribunal referring to Section
26 of the Water Act observed that it applies
to an establishment set up prior to 1974.
Hence the regulatory framework of Water
Act and Air Act are applicable to appellants
for running hotels where polluted water and
air generation potential are not ruled out.
The order can be viewed here.
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