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Corporate Law Brief-May 2024

We extend a warm welcome to our esteemed readers as we present our newsletter. In this edition, we shed light on the latest developments in India’s corporate legal sphere for May 2024.

We extend a warm welcome to our esteemed readers as we present our newsletter. In this edition, we shed light on the latest developments in India’s corporate legal sphere for May 2024. Our dedicated team has compiled a range of news and insights, encompassing regulatory advancements to keep you informed. Stay ahead with our carefully curated newsletter, featuring regulatory updates and insights. Sit back, relax with your favorite drink, and embark on a journey to abreast you of the latest developments in India’s corporate legal landscape.

Recent Updates:

To curb antibiotic misuse, India’s drug regulator, the Directorate General of Health Services, Central Drugs Standard Control Organization, has instructed state counterparts to submit lists of licensed antibiotic combinations within two weeks from their letter dated May 16, 2024. Additionally, they are required to monitor and report unapproved combinations.

The Government is planning to create a unified portal to centralize all digital public goods (DPGs) like Aadhaar and Unified Payments Interface, making it easy for users to navigate. This portal seeks to bring under its ambit both existing DPGs and those still being developed. The process involves government departments providing details about their digital public infrastructure. 

RBI Deputy Governor M. Rajeshwar Rao urged Asset Reconstruction Companies to adopt transparent and non-discriminatory practices in the recovery process, emphasizing adherence to the fair practice code. 

The Government plans to launch a mobile application within the next two months to alert consumers about deceptive online practices, known as dark patterns. These include hidden charges, false urgency, and difficult subscription cancellations. The app will detect dark patterns on major e-commerce platforms and allow users to file complaints. 

State-owned banks are set to jointly request the Government to restore their authority to issue ‘look-out circulars’ (LOCs) to prevent dodgy borrowers from fleeing India. This follows a judgement of the Bombay High Court that invalidated this power. Banks maintain that LOCs are essential for loan recovery. To restore this authority, the Government may need to enact new legislation or amend existing laws, to provide a legal basis for issuing LOCs. The power for bank heads to issue LOCs was first granted in 2018 after major financial scandals. 

India has requested details from the European Union (EU) about its proposed regulation on deforestation free products, which could impact India’s exports of coffee, cocoa, soya, wood, rubber, and leather. Set to apply to large firms by December 2024 and small firms by June 2025, this regulation could significantly affect India’s $1.3 billion agricultural exports to the EU, because of India’s high deforestation rates. 

The Ministry of Commerce held discussions with experts and officials on creating a standard operating procedure (SoP) for negotiating free trade agreements (FTAs) at ‘Chintan Shivir’, organized on May 16 and 17, 2024, in Neemrana, Rajasthan. The deliberations focused on India’s FTA negotiation strategy, addressing issues like labour, environment, gender, and digital trade. Key themes included economic assessment, stakeholder consultations, and capacity building. The Ministry emphasized the need for interdisciplinary expertise and real-time drafting during negotiations. Additionally, they discussed India’s approach to critical minerals and the challenges concerning data sovereignty, consumer protection and cyber-security. 

In a recent official statement, the Ministry of Commerce and Industry stated that the World Intellectual Property Organization’s treaty on intellectual property, genetic resources, and associated traditional knowledge is significant for India, as it will help countries protect their traditional knowledge, preserve biodiversity, promote transparency in the patent system, and strengthen innovation. 

The International Financial Services Centres Authority (IFSCA) is considering allowing non-banking financial players to operate as risk aggregators for small customers in GIFT City, enabling these customers to engage in FX transactions aggregated and settled with banks. With Indian bonds soon to be included in global indices, interest in offshore interest rate derivatives is expected to grow.

Reserve Bank of India (RBI) Updates:

RBI vide its notification dated May 03, 2024, has amended the Master Direction – Risk Management and Inter-Bank Dealings, effective immediately. The key points of the amendment are as follows: 

  • specifying who shall be authorised persons as per the provisions of the Foreign Exchange Management Act, 1999;
  • bringing Stand Alone Primary Dealers (SPDs) within the ambit of Authorised Dealer;
  • specifying the compliances for Authorised Dealer (AD) Category – I banks and SPDs while participating in the Exchange Traded Currency Derivatives (ETCD) market;
  • a new provision to deal with borrowing of overseas foreign currency by SPDs authorised as Authorised Dealer Category III institutions;
  • prescribing a Centralised Information Management System / email method for communication regarding fixing of Net Overnight Open Position Limit (NOOPL) for calculating capital charge on foreign exchange risk, and Aggregate Gap Limits (AGL); and
  • the limits for exceeding total capital.

The Foreign Exchange Management (Deposit) Regulations, 2016 has been amended to allow a person residing outside India to open, hold and maintain an interest bearing account in Indian Rupees and/or foreign currency, for posting and collecting margin in India, for a permitted derivative contract entered into by such person. 

RBI has regularized the issuance of partly paid units issued by Alternative Investment Funds (AIFs), to persons resident outside India by way of compounding, prior to the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2024, which came into force on March 14, 2024. AD Banks are required to report such issuances by AIFs to the RBI through the FIRMS Portal, and provide conditional acknowledgments for such reporting. 

RBI, vide press release dated May 28, 2024, launched the Platform for Regulatory Application, Validation and Authorisation (PRAVAAH) portal, through which, any entity/ individual can seek authorisation, license or regulatory approvals on any reference made to them by the RBI. Additionally, a retail direct mobile application, for easing the transacting of Government securities, and a fintech repository, containing information on the Indian fintech sector, and enabling users to gain a better regulatory understanding of the Indian fintech sector, were launched.

SEBI Updates

The International Financial Services Centre Authority (IFSCA) released a circular dated May 02, 2024, facilitating investments from non-resident Indians (NRIs) and Overseas Citizens of India (OCIs) into Indian securities, through schemes/funds in an IFSC. 

SEBI, introduced a circular dated May 02, 2024, to the Association of Portfolio Managers in India, to ease the digital on-boarding process for clients, and to enhance transparency through disclosures. The circular: 

  • mandates portfolio managers to provide a fee calculation tool to all clients highlighting various fee options with multi-year fee calculations;
  • prescribes certain additional fee disclosures; and
  • mandates portfolio managers to provide their client with a “most-important terms and conditions” document.

On May 07, 2024, SEBI issued a circular on the Periodic Reporting Format for Investment Advisers. This circular prescribes a standardized reporting format for the submission of information by investment advisers pertaining to their activities on a periodic basis. Investment Advisers are required to submit periodic reports for half-yearly periods ending on September 30 and March 31 of every financial year within 7 and 15 days respectively. 

SEBI issued a circular on May 13, 2024, on the Certification requirements for the Key Investment Team of the manager of an AIF, which shall be effective immediately. This circular, amongst other things, stipulates that the key investment team of the manager of an AIF shall have at least 1 key personnel with relevant certification, as a criterion for obtaining a certificate of registration as an AIF. 

SEBI issued a circular on May 14, 2024, which seeks to review the validation of Know Your Customer (KYC) Records by KYC Registration Agencies (KRAs) under the Risk Management Framework, in a move that will ensure ease of transacting for investors. This circular, by modifying the Master Circular on KYC norms for the securities market dated October 12, 2023, allows KRAs to verify the PAN, name, address, email, and mobile number from official databases.

In order to verify market rumors’ and enhance transparency to protect investors, SEBI in collaboration with Industry Standards Forum (ISF), and representatives from Associated Chambers of Commerce and Industry of India (ASSOCHAM), Confederation of Indian Industry (CII), and Federation of Indian Chambers of Commerce and Industry (FICCI), vide circular dated May 21, 2024, has published industry standards, which mainly address:

  • scope and ambit of mainstream media;
  • M & A transaction specific aspects; and
  • non – M &A transaction related aspects.

SEBI, vide circular dated May 21, 2024, has announced a framework for considering unaffected price for transactions after confirming market rumours. Listed entities are required to verify market rumours after material price movement, pursuant to the amendment dated May 17, 2024, to the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 (LODR). According to the framework, if a rumour is confirmed within 24 hours of material price movement, the unaffected price will be considered for transactions on which pricing norms specified by SEBI, or the stock exchanges are applicable. The requirement to verify market  rumors under Regulation 30(11) of LODR, shall be applicable to the top 100 listed entities with effect from June 01, 2024, and to top 250 listed entities with effect from December 1, 2024. 

SEBI issued a circular on May 24, 2024, on audio-visual (AV) presentation of disclosures made in public issue offer documents. Companies should make their disclosures in the AV format, bilingually – English and Hindi, which shall then be placed in the public domain. This shall be applicable to the salient disclosures made in the draft red herring prospectus (DRHP), red herring prospectus (RHP), and price band advertisement for public issues. Such AV shall include details relating to risk factors, capital structure, objects of the offer, business of the issuer, financial information, litigations and material developments. This circular shall be applicable to all DRHPs voluntarily from July 01, 2024, and mandatorily from October 01, 2024. 

SEBI introduced a circular on May 27, 2024, on the timelines for disclosures by social enterprises on social stock exchange (SSE), for the financial year 2023-24. Not-for-Profit Organizations (NPOs) registered on the SSE, whose designated securities are listed on SSE and social enterprises that have registered or raised money through the SSE, are to make annual disclosures as per circular dated September 19, 2022, by October 31, 2024, for the financial year 2023-24.  

In May 2024, SEBI issued various Master Circulars which are as follows: 

Master Circular for Registrars to an Issue and Share Transfer Agents:

SEBI, on May 07, 2024, issued the Master Circular for Registrars to an Issue and Share Transfer Agents (RTA) which is a compilation of relevant circulars issued earlier. This master circular lays down provisions relating to registration mechanisms for RTA’s, transfer-related matters, investor grievance redressal, investor charter, and a cyber security and cyber resilience framework for RTA’s. The highlights of the said master circular are as follows:

  • disclosure of email ID of the grievance redressal division/ compliance officer by registered RTA’s, exclusively to register investors’ complaints;
  • maintenance by every RTA, a statement of capital adequacy requirement for each quarter; 
  • every RTA to submit not later than 3 months from close of each financial year, a certified true copy of their net worth certificate; and
  • furnishing to SEBI the reports dealing with regulatory compliance and investor grievance redressal, by the compliance officer of the RTA, on a half yearly basis, within 3 months of expiry of the half year.

Master Circular for Alternative Investment Funds (AIFs) and Debenture Trustees:

SEBI issued the Master Circular for Alternative Investment Funds (AIFs)  and Master Circular for Debenture Trustees, on May 07, 2024, and May 16, 2024, respectively, consolidating the various circulars issued earlier.
Master Circular for ESG Rating Providers: 

SEBI has issued a Master Circular for Environmental, Social, and Governance (ESG) Rating Providers on May 16, 2024, consolidating guidelines and obligations under the Credit Rating Agencies Regulations, 1999. This master circular aims to provide clarity on and streamline the regulatory compliances for ESG Rating Providers, listed entities, and market intermediaries.
Master Circular for Foreign Portfolio Investors, Designated Depository Participants, and Eligible Foreign Investors: 

SEBI’s Master Circular, released on May 30, 2024, and effective immediately, consolidates provisions for Foreign Portfolio Investors (FPIs), Designated Depository Participants (DDPs), and Eligible Foreign Investors. This master circular elaborates on the following aspects:

  • registration of FPI’s;
  • KYC requirements for FPI’s;
  • investment conditions / restriction on FPI’s registered under the SEBI (Foreign Portfolio Investor) Regulations, 2019;
  • guidelines for participation / functioning of eligible foreign investors in an IFSC; and
  • publishing of an investor charter and disclosure of complaints by DDP’s on their websites.

Ministry of Corporate Affairs (MCA) Updates:

The MCA, vide general circular dated May 07, 2024, has extended the deadline for filing LLP BEN-2 and LLP Form No. 4D under the Limited Liability Partnership Act, 2006, to July 01, 2024, without additional fees, considering the transition of MCA-21 from version-2 to version-3. E-form LLP BEN-2 deals with filing a return to the registrar in respect of declaration under Section 90 (Investigation of beneficial ownership of shares in certain cases) of the Companies Act, 2013, and LLP Form 4D deals with filing of a return to the registrar in respect of declaration of beneficial interest in contribution received by the LLP.

Technology, Media, and Telecommunications Updates:

The Telecom Regulatory Authority of India (TRAI), vide press release dated May 22, 2024, delved into unsolicited commercial communications (UCC), and summarized the approaches, measures, and issues, which were discussed in a meeting of the Joint Committee of Regulators, convened by TRAI on May 21, 2024, at its headquarters in New Delhi. 

The Department of Telecommunications (DoT) plans to notify rules under the Telecommunications Act, 2023, by September 15, 2024, targeting spectrum allotment, call interception, and biometric data collection. This initiative is part of their 100-day agenda to streamline regulations and ensure compliance. These rules will cover about 35-37 areas, including spectrum pricing for satellite communications. 

The DoT, on May 20, 2024, issued additional know-your customer (KYC) instructions for the verification of business users. These instructions state that in scenarios where end users are unidentifiable, such as SIMs obtained for research and development purposes, and testing activities for a specified purpose, the requirement of end user is optional. For such end users, connections must be issued directly by employees of the telecom companies.

Consumer Updates:

The Directorate General of Foreign Trade issued a notification dated May 20, 2024, prohibiting the import of new and second-hand goods, listed under the Electronics and Information Technology Goods (Requirement of Compulsory Registration) Order, 2021, whether refurbished, repaired or reconditioned. These goods must be registered with the Bureau of Indian Standards (BIS) and comply with BIS labelling requirements.

The National Institute of Nutrition has proposed revised dietary guidelines to tackle high sugar content in packaged foods and beverages. These recommendations, aimed at addressing rising obesity and diabetes levels, could impact various branded products, including soft drinks, juices, and snacks. 

Tax Updates

Several individuals working for Indian subsidiaries of foreign companies have received notices from the Income Tax Department for undisclosed or untaxed amounts. It has been identified that there are discrepancies between the employees’ annual Income Tax Returns (ITRs) and information obtained by the revenue department through legislations such as the Foreign Account Tax Compliance Act. Some employees failed to report their reinvested dividends which were used to buy more shares. Although these dividends are taxable in India, they were not reported in the employees’ ITRs. 

The Government has promised to review concerns about the levy of Goods and Services Tax (GST) on co-lending arrangements between Non-Banking Financial Companies (NBFCs) and banks. During a meeting with finance ministry officials, banks and NBFCs highlighted that GST notices could distort lending costs. Tax authorities claim co-lending is a service, which is subject to 18% tax, but it was argued that it is not a service and hence should not be taxed.

Upcoming Nuggets:

SEBI on May 17, 2024, issued a consultation paper on Facilitating Investments by Indian Mutual Funds in Overseas Funds that invest a certain portion of their assets in Indian Securities. The comments/suggestions on the proposals outlined in the said consultation paper were invited by June 07, 2024. 

SEBI has issued a draft circular dated May 09, 2024, on Enhancement of Operational Efficiency and Risk Deduction – Pay out of securities directly to client DEMAT account. Currently, the clearing corporation credits security pay-outs in the broker’s pool account, from where the same is credited to the respective client DEMAT accounts. In order to enhance efficiency and reduce risks to the clients, it is proposed to make direct payout of securities to the client account mandatory. Comments / suggestions on this draft circular were invited by May 30, 2024. 

Following the announcement in the Statement on Developmental and Regulatory Policies dated October 06, 2023, regarding the establishment of a prudential framework for Income Recognition, Asset Classification and Provisioning pertaining to Advances – Projects under Implementation, RBI, on May 03, 2024, has published the draft Reserve Bank of India (Prudential Framework for Income Recognition, Asset Classification and Provisioning Pertaining to Advances – Projects under Implementation) Directions, 2024. Comments on these draft directions are invited from the public/ stakeholders by June 15, 2024. 

The Legal Metrology Division, Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, on May 13, 2024, published the draft rules on radar equipment for the measurement of speed of vehicles. These rules stipulate that radar equipment installed after notification of the final rules, must be verified and stamped within one year, along with verification and stamping of existing installed equipment, whenever their re-verification becomes due. Comments on these rules by stakeholders were invited by June 11, 2024. 

The Legal Metrology Division, Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution, on May 30, 2024, published the draft rules on moisture meters for cereal grains and oilseeds. These rules stipulate that all moisture meters for cereal grains and oil seeds are to be verified and stamped before sale / being put to use, and those moisture meters for cereal grains and oil seeds, which are already in use at the time of publication of these draft rules, shall be verified and stamped within one year. Comments on these rules by stakeholders should be submitted by June 29, 2024. 

The International Labour Organisation (ILO) will introduce a comprehensive legal framework to protect the global workforce from biological hazards, addressing the impact of the Covid-19 pandemic. At the 112th International Labour Conference in Geneva, 187 countries, including India, will discuss minimizing these risks.

From the Docket:

The Supreme Court of India, in the matter titled Bar of Indian Lawyers vs D.K. Gandhi PS National Institute of Communicable Diseases and another, declared that services provided by lawyers are contracts of personal service, and consequently, shall be excluded from the definition of services under the Consumer Protection Act, 1986 (CPA), which was re-enacted in 2019. It was held that lawyers cannot be prosecuted under the CPA for deficiencies in their services. 

The Delhi High Court, in the matter of Pfizer Products Inc. vs Renovision Exports Pvt. Ltd. and another, opined that similarity in sound could mislead consumers into believing that “VIGOURA” (name used for homeopathic medicine by Renovision) is either a variant of, or associated with, or endorsed by, the makers of “VIAGRA” (an allopathic drug, trademark of which Pfizer possesses). Unlike non-medicinal products, where confusion might only result in economic harm, confusion with respect to medicinal products could pose serious risks to public health. The Delhi High Court permanently restrained Renovision and anyone acting on their behalf from manufacturing, selling, offering for sale, marketing, advertising and using the mark “VIGOURA” in any manner, as this would amount to infringement or passing off of Pfizer’s mark of “VIAGRA”. 

We trust that this edition of our newsletter has proven to be an enlightening and valuable resource for your professional endeavours. If you have any questions about any of these developments or would like to see something different next month, we warmly encourage you to reach out to us at

We will be back next month with another newsletter. Until then, stay safe, stay healthy, and enjoy!