We are back in your inbox with updates from India’s corporate legal landscape for the month of September. This month witnessed the shortest monsoon session of the Parliament and arguably the most effective one. Parliament amended the Companies Act, 2013 to decriminalise certain offences, relax CSR obligations and beneficial ownership compliances, setting up of new benches of National Company Law Appellate Tribunal, amongst other changes. Foreign Contribution (Regulation) Amendment Act, 2020 too was passed making the law on foreign contribution made to non-profit bodies more rigid. Amongst other legislations, Bilateral Netting of Qualified Financial Contracts Act, 2020 was passed to ensure financial stability and promote competitiveness in Indian financial markets.
Meanwhile, the Ministry of Corporate Affairs (“MCA”) has extended the timeline for inclusion of independent directors’ details in the data bank till December 31, 2020. Further, the timeline for approval of financial statements and the board’s report in virtually held board meetings has also been extended until December 31, 2020 . This extension becomes more crucial in light of the relaxation in the due date for holding the Annual General Meeting of the company. Most of the Registrars of Companies have passed orders extending the due date of Annual General Meeting to December 31, 2020. Further, the validity of other MCA’s Covid-19 reliefs have been extended to December 31, 2020, including conducting virtual Extraordinary General Meeting, deadline of filing of forms for creation/ modification of charges, Companies Fresh Start Scheme, 2020 and LLP Settlement Scheme, 2020. These extensions will ease the secretarial compliances of the corporate bodies.
The Reserve Bank of India (“RBI”) has revised and consolidated the guidelines on priority sector lending through recently issued Master Direction. It has also (i) set the sector specific financial parameters to be taken into consideration while granting loans to borrowers under the Resolution Framework; (ii) emphasised the need of the robust compliance system and the role of the Chief Compliance Officer in banking institutions; and (iii) directed banks to have an automated system in place for Income Recognition, Asset Classification and Provisioning processes by June 30, 2021. Exercising its powers under the Payment and Settlement Systems Act, 2007, the RBI has designated the National Payments Corporation of India as the authority to develop a Positive Pay System for Cheque Truncation System. Under this system, the drawer would be required to reconfirm the details of the certain large amount cheque electronically to the drawee bank before it can be encashed.
The Securities Exchange Board of India (“SEBI”) has set March 31, 2021 as the deadline for re-lodgment of physical transfer deeds which were not being converted into demat account due to rejection of such requests. The SEBI has also extended the validity of SEBI Observations till March 31, 2021. Further, SEBI has issued guidelines for Investment Advisors and notified the commencement date of the Securities and Exchange Board of India (Investment Advisers) (Amendment) Regulations, 2020 as September 30, 2020.
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From the Docket
In Sagufa Ahmed v. Upper Assam Plywood Products (P.) Ltd., the Supreme Court clarified that an extension of the limitation period on account of the ongoing pandemic would not apply to the statutory period for condonation of delay applications in filing appeals. While rejecting an appeal in a case that was dismissed in December 2019, it held that the benefit of its order passed on March 23, 2020 merely extended the limitation period and not the time upto which delay could be condoned in exercise of discretion conferred by the law.
In Economy Hotels India Services (P.) Ltd. v. Registrar of Companies, the NCLAT ruled that the tribunal cannot, merely on account of a typographical error in the minutes of a meeting, reject the application filed before it for reduction of share capital. In this case, the company in the minutes of the annual general meeting had mentioned the resolution passed for reduction of share capital as an ordinary resolution inadvertently. The NCLAT held that substantively the company had complied with Section 66 of the Companies Act, 2013 and an inadvertent error cannot be a reason for rejection of the application.
In Delhi and District Cricket Association v. Sudhir Kumar Aggarwal and others, the Delhi High Court while adjudicating on the issue of jurisdiction held that issues such as allegations of oppression and mismanagement and the wrongful appointment of an ombudsman in violation of the articles of association could not be entertained by a civil court. The provisions of the Companies Act, 2013 grant exclusive jurisdiction to the National Company Law Tribunal to adjudicate on such matters and a civil court cannot interfere in such matters.
In Ashish Kumar Garg and others v. State of Haryana and others, the Punjab and Haryana High Court has passed an interim order directing schools to not charge transport fees as the classes are conducted online and the fees charged for maintenance of the school building should be levied only to the extent of fifty percent.
We will be back in your inbox next month. Till then, stay safe and stay healthy!