We are back in your inbox with updates from India’s corporate legal landscape for the month of October.
The Ministry of Corporate Affairs has announced that, during the financial year 2020-21, non-compliance with the residency rule of 182 days in a year for at least one director in each company will not attract any penal consequences.
The Ministry of Finance has recently declared, in the form of a scheme, the grant of mandatory ex-gratia payment to eligible borrowers of the difference between compound interest and simple interest of six months (March 2020 to August 2020) in their respective bank accounts.
The Reserve Bank of India (“RBI”) has, through amendments to the Interest Subvention Scheme for Incremental credit to MSMEs 2018, extended its validity of the scheme upto March 31, 2021 and in certain cases, waived off the prerequisite of having a valid Udyog Aadhaar number. The RBI has also taken several measures to ease business for banks which will in turn benefit the consumers. This includes extending the deadline to submit annual returns for banks to December 31, 2020; and revision of risk weights of individual housing loans and regulatory retail portfolio.
Recently, Securities and Exchange Board of India (“SEBI”) acknowledged the role of the investment advisory committee in an Alternative Investment Fund (AIF) and has made the members of such investment committee additionally accountable for compliance with the SEBI (Alternative Investment Funds) Regulations, 2012. Prior to this amendment, the Manager of the AIF was the key person responsible for investment decisions. Similar to other regulatory authorities, SEBI has also extended the timeline for compliance with some regulatory requirements.
With increasing focus on digital payments, a self-regulatory mechanism for payment system operators is the need of the hour. In furtherance of the same, the RBI has provided a regulatory framework for setting up a Self Regulatory Body for payment system operators and has opened up registration for the same. Further, to streamline the use of Quick Response (QR) codes for making payments, the RBI has instructed all payment system operators to shift to existing interoperable QR codes i.e. UPI QR and Bharat QR by March 31, 2022. It is expected that the RBI shall extend the validity of the Certificates of Authorization issued to payment system operators (currently for a period of five years) perpetually, subject to certain conditions.
The “co-origination model” (a model under which banks and registered non-banks were allowed to collaborate for lending to the priority sector and share the risk and benefits) will soon be extended to all Non-Banking Financial Companies (NBFCs). The government seeks to revise the conditions of such a model through the introduction of a revised framework called ‘Co-Lending Model’. The detailed terms of this scheme shall be released soon. Amidst this pandemic, RBI has also penalised the non-compliant entities. Last month, RBI had cancelled NBFC registration of seven entities and had also imposed monetary penalty on two banks for not complying with its rules & regulations. Further, as promised in Statement on Developmental and Regulatory Policies, with effect from December 2020, similar to the National Electronic Funds Transfer (NEFT) system, even Real Time Gross Settlement System (RTGS) shall be available for making digital payments round the clock.
The Ministry of Labor and Employment has invited comments on the draft Industrial Relation (Central) Rules, 2020 from all the relevant stakeholders. These rules will be notified under the newly enacted Industrial Relations Code, 2020. Further, the Ministry of Commerce & Industry has issued a consolidated version of the Foreign Direct Investment Policy, 2020 which incorporates all the changes that have occured since 2017, including the recently announced 26% cap on FDI in digital news media, limitation of investment by persons from neighbouring countries, amongst other changes.
The RBI has revised the regulatory guidelines applicable to housing finance companies under the National Housing Bank Act, 1987, and the Reserve Bank of India Act, 1934. Recently, the President of India passed an ordinance titled ‘The Commission for Air Quality Management in National Capital Region and Adjoining Areas Ordinance, 2020’ to curb air pollution in the Delhi-NCR region. This ordinance allows for the setting up of a committee which has wide powers, including to inspect commercial premises, identify the cause of pollution, issue directions to entities or a class of entities to act in a certain manner, amongst others.
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From the docket
In JK Paper v. SEBI, the High Court of Bombay has distinguished between a ‘reasonable opportunity’ and ‘reasonable opportunity of being heard’. It held that while considering an exemption application under the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, a reasonable opportunity does not mandatorily include physical appearance before SEBI. The Court observed that principles of natural justice are fulfilled even in cases where JK Paper was allowed to file additional written submissions before SEBI without any physical appearance.
In Alibaba Nabibasha v. Small Farmers Agri-Business Consortium, the High Court of Delhi reiterated the settled position of law on liability of a director for day-to-day operations of the company after his/her resignation. It observed that a cheque which was issued after a director’s resignation, the director cannot be held responsible for it getting dishonored due to ‘insufficient funds’ even though the director was involved in the negotiations of such transaction prior to the resignation.
We will be back in your inbox next month. Till then, stay safe and stay healthy!