Welcome to our updates from the world of corporate law and regulation.
With metropolitan cities and corporate hubs reopening, businesses require more support from governments to face the existential crisis. In this newsletter, we bring to you the key announcements that impact the corporate sector.
Last week, the government notified the Banking Regulation (Amendment) Ordinance, 2020 to bring cooperative banks within the regulatory purview of the Reserve Bank of India (“RBI”) and to enable regulators to come up with reconstruction schemes for banking companies, as and when required, in the public interest, without making an order of moratorium. The government of India has also, deriving powers from the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020, extended the due date (i) for filing income tax returns for Financial Year 2018-19 to July 31, 2020 and for Financial Year 2019-20 to November 30, 2020; (ii) for furnishing of TDS statements to July 31, 2020; and (iii) for issuance of TDS certificates till August 15, 2020, amongst other extensions.
With the National Credit Guarantee Trustee Company extending the emergency credit line to Micro, Small and Medium Enterprises (MSME) borrowers, the RBI has directed lenders to assign zero percent risk weight to such loans. Further, the benefits of some announcements made in the Finance Minister’s Covid 19 Atma Nirbhar Bharat package for the MSME sector would come into effect this month along with a revised registration process via the Udyam Portal.
Several registered lenders have come up with digital lending platforms or have partnered with entities providing such services to increase the accessibility of their services. RBI has recently cautioned against such platforms, reiterating the obligations of lenders under the RBI’s Fair Practices Code, to ensure transparency and an accessible grievance redressal mechanism. Consequently, the RBI has directed lenders to ensure that the name of the lender is visible on such digital platforms and that sanction letters for loans must be on the letterhead of such lender only.
The RBI has extended deadlines for five compliances that were expected of payment system entities under the Payment & Settlement Systems Act, 2007. These compliances include the recently notified guidelines on payment gateway and payment aggregators, amongst other necessary compliances. Further, the RBI has also extended the benefit of increase in borrowing limit of banks under Marginal Standing Facility and maintenance of minimum Cash Reserve Ratio till September 2020.
As a part of it’s Covid-19 relief package, the Ministry of Corporate Affairs (“MCA”) has introduced the following benefits:
- the extension of the requirement to create the deposit repayment reserve of 20% of deposits maturing during the financial year 2020-21 and to invest or deposit at least 15% of amount of debentures maturing in specified methods of investments or deposits before 30th April 2020 till September 30, 2020;
- extension of the permissible date to conduct extraordinary general meetings through video conferencing till September 30, 2020;
- extension for conducting board meetings through video conferencing for restricted matters such as approval of annual financial statements, board’s report, prospectus, etc. till September 30, 2020;
- extension of time frame for existing independent directors to get their name enrolled in the data bank till September 2020; and
- relaxation of the time frame for filing forms for creation or modification to charges for the forms that were expected to be filled on or after March 01, 2020 till September 30, 2020.
The Department of Financial Services has come up with the Draft Pension Fund (Foreign Investment) Rules, 2020 and a draft framework for decriminalising certain offences under various existing legislations which comes within its purview for public comments. The said drafts indicate that the government may introduce investor friendly reforms.
From the Docket
In Rajasthan State Warehousing Corporation v. Star Agriwarehousing and Collateral Management Ltd. & Others, the Supreme Court, while setting aside an interim stay order, reiterated that in contractual matters, the courts must look into the consequences of a stay order on the project concerned. The Court must take into account the escalated costs and the delay in executing the contract that may be incurred due to the stay order. Further, it observed that the state government undertaking is entitled to assign work to the successful bidders and cannot be compelled to assign work to short term contractors who were engaged prior to the completion of the bidding process.
In Shakti Nath & Others v. Alpha Tiger Cyprus Investment No. 3 Ltd. & Others, the Supreme Court directed the parties to execute a share purchase agreement for acquisition of the company. It held that the execution of the share purchase agreement does not prejudice the rights and interests of parties to the agreement in any manner, specifically after the parties had agreed to execute the same in an affidavit of undertaking submitted to the Court.
In Bharat Heavy Electricals Limited v. Egypitian Electricity Transmission Company & Others, the Delhi High Court, while adjudicating on whether it had the jurisdiction to entertain the suit, held that the courts at Delhi would have jurisdiction as a part of the cause of action had arisen in Delhi. It took into account the fact that payments were payable in Delhi in accordance with the terms of the contract and held that even though the contract provided that it would be governed by Egyptian laws, in the absence of a clause conferring exclusive jurisdiction to Egyptian courts, the courts at Delhi can also have natural jurisdiction if any part of cause of action has arisen in Delhi.
These were the updates from India’s corporate legal landscape for the month of June. We hope you enjoyed them. We will be back in your inbox next month. Till then, stay safe and stay healthy