India has moved up from the 77th to the 63rd rank in the World Bank’s 2020 Report on ease of doing business and the government of India aims to move further up the ladder through regulatory reforms. Recently, the Company Law Committee comprising representation from the government, lawyers, chartered accountants, banks and the corporate sector released a report recommending several amendments to the Companies Act to maintain a balance between compliance with corporate laws and easing business. One of the several recommendations is to recategorise 23 compoundable offences to an in-house framework and reduce the penalty for default in the filing of annual returns.
The Reserve Bank of India is also contributing to this vision by opening up more avenues for people who are not a resident in India. It has expanded the scope of Special Non-Resident Rupee Account to transactions relating to External Commercial Borrowings, trade credits, export/ import invoicing and business related transactions in the GIFT city. The RBI, as a part of its vision to promote digital payments, has proposed to not charge any fee for NEFT payments from savings bank customers.
Keeping the interests and protection of consumer in mind, the Department of Consumer Affairs has released the draft Consumer Protection (e-commerce) Rules, 2019 inviting comments from all stakeholders.
The RBI has also notified technical specifications that need to be followed by all account aggregators who deal with financial data and issued guidelines for compensation to Whole Time Directors, Chief Executive Officers, and Material Risk Takers in private sector banks and foreign banks operating in India.
To foster an effective governance mechanism, there has been an increase in the norms applicable to regulatory bodies. Recently, the National Company Law Tribunal, while hearing one of the matters, directed the Secretary of the Ministry of Corporate Affairs to be made a party to all cases involving company petitions. This would ensure that documents placed before the bench are authentic and ensure speedy justice. The Securities and Exchanges Board of India (SEBI) has, through a circular, also enhanced its governance norms for Credit Rating Agencies and reiterated disclosure requirements for listed entities in respect of defaults on payment of interest or repayment of principal amounts on loans from banks and financial institutions and unlisted debt securities.
From the docket
In ITC Ltd. v. Securities and Exchange Board of India, the Securities Appellate Tribunal of Mumbai reiterated the position of law on ‘related party transactions’. The tribunal was of the opinion that even though ‘related party transactions’ are defined differently under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, there was no room for interpreting them in any other manner but their plain meaning. Relying on the intent of the legislature, it held that the said term could not be expanded to include transactions in which directors may have any real or perceived interest.
The Apex Court of India, in Central Bureau of Investigation v. Arvind Khanna, has held that in a situation where an Indian resident receives money from a non-resident Indian father without the permission of regulatory authorities, court proceedings initiated under the Foreign Contribution Regulation Act, 2010 could not be dropped. The onus was on the Indian resident to prove that the money so received was not from a ‘foreign source’ and was within the four corners of the law.
These were the updates from India’s corporate law for the month of November. We hope you enjoyed them and look forward to reading more!