We are back in your inbox with updates from India’s corporate legal landscape for the month of August. The key announcement made last week is the notification of changes to Section 92 of the Companies Act, 2013, which requires every company to place a copy of the annual return of the company on its website and a web link of such return is required to be included in the Board’s report. The amendment was passed in January 2018, but had not been brought into effect yet. The Central Government has declared August 28, 2020 to be the effective date for bringing the amendment into effect. The relevant rules have also been amended and the companies will no longer be required to attach a copy of their annual return in Form No. MGT-9, if their board report provides the link to their website where annual return has been uploaded.
To support borrowers who have been affected by Covid-19, the Reserve Bank of India (RBI) has, on August 06, 2020, opened a window under its Prudential Framework Directions to enable lenders to implement a resolution framework for loans by eligible borrowers. The benefit of this window can only be extended to organizations and individuals who pass the eligibility criteria mentioned in the resolution framework. On the same day, the RBI relaxed the Loan to Value (LTV) ratio for loans against pledge of gold ornaments, from 75% to 90%, which is likely to enable additional borrowings by households, entrepreneurs and small businesses who are facing a liquidity crunch.
On the other hand, to maintain the balance of the banking system, the RBI has issued a series of pecking orders to the commercial banks announcing (i) the change in the treatment of debt mutual funds and exchange traded funds under it’s Basel III Regulations; (ii) revised criteria for opening of current accounts; and (iii) stricter implementation of renewal of credit facilities in accordance with the board approved policy. Further, exercising its powers under the RBI Act, 1934 to regulate Core Investment Companies (CIC), it has tightened the guidelines redefining the ‘adjusted net worth’, and capping the layers of entities in a group CIC to two, amongst other changes.
To support entities researching on vaccine for Covid-19, Ministry of Corporate Affairs (MCA) has amended the Companies (Corporate Social Responsibility Policy) Rules, 2014 to allow existing companies involved in research and development of drugs and vaccines in their normal course of business to classify their contribution to development of Covid-19 vaccine as CSR expenditure and to promote Sustainable Development Goals (SDGs). It has further reiterated that the companies which are not able to hold their Annual General Meeting in a timely manner may file an application to the Registrar of Companies in Form GNL – 1 seeking extension of time.
An arm of the RBI is also involved in regulating payment system operators in India. Fostering the digital payment initiatives, the RBI has come up with a pilot scheme allowing certain permitted payment system operators to launch products that enable offline transactions using cards, wallets and mobile devices. It has also invited applications for receiving authorization as a pan-India umbrella entity. A Positive Pay System for clearing cheques has also been announced last month. The details of the system are yet to be notified by the regulatory authority. Focusing on increasing confidence of customers in digital banking and ensuring transparency, the RBI has directed the banks to formulate an online dispute resolution system for handling consumer grievances with minimal manual intervention. Also, it has amended the Foreign Exchange Management (Export and Import of Currency) Regulations, 2015 to make provision for export or import of currency on prior approval basis.
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From the Docket
In Vikrant Singh Malik and others v. Supertech Limited and others, the Supreme Court clarified that a composite complaint under Section 12(1)(c) of the Consumer Protection Act, 1986 requires commonality in the grievance of the consumers and it must be filed on behalf of all the consumers having such interest. The application for composite complaint must be supported with a ‘representation certificate’. It further held that such a composite complaint could not be denied on the ground that the consumers are party to different agreements executed on different dates with different sizes of flats.
In Wg. Cdr. Arifur Rahman Khan and Aleya Sultana and Ors. v. DLF Southern Homes Pvt. Ltd., the Supreme Court overturned the decision of National Consumer Disputes Redressal Commission while adjudicating on a matter pertaining to compensation for delay in delivery of possession of the flats to the purchaser. It ruled that when an Apartment Buyers Agreement provides a specific clause to compute compensation to be paid to the purchaser in case of delay in delivery of the possession, the Parties are not bound by such clause if the compensation calculated is unreasonable. The Courts have the power to provide additional compensation depending on the nature of the agreement, amount of delay and harm to the purchaser.
In Money Market Services (India) Private Limited. v. Union of India through Secretary, Ministry of Corporate Affairs, the Delhi High Court reiterated that doctrine of forum conveniens and nature of cause of action needs to be closely analysed by the High Court in each case. A Serious Fraud Investigation Office’s order issued in Delhi cannot give jurisdiction to the courts in Delhi to adjudicate on Registrar of Companies (Chennai)’s order in relation to striking off the Company’s name.
We will be back in your inbox next month. Till then, stay safe and stay healthy!