THE JOURNAL FOR GOVERNANCE PROFESSIONALS - ICSI

VOL 51 | NO. : 02 | Pg. 156 | February 2021 | `100/- (Single Copy)ISSN 0972-1983

THE JOURNAL FOR GOVERNANCE PROFESSIONALS

BUDGET 2021 SHRI AMIT SHAH, HON’BLE UNION MINISTER OF HOME AFFAIRS, GOVT. OF INDIA

CS NAGENDRA D. RAOPRESIDENT, ICSI

CS DEVENDRA V. DESHPANDEVICE PRESIDENT, ICSI

Annual Subscription

The Council Contents

Mode of Citation: CSJ (2021)(02/--- (Page No.)

‘Chartered Secretary’ is generally published in the first week of every month. n Non-receipt of any issue should be notified within that month. n Articles on subjects of interest to company secretaries are welcome. n Views expressed by contributors are their own and the Institute does not accept any responsibility. n The Institute is not in any way responsible for the result of any action taken on the basis of the advertisements published in the journal. n All rights reserved. n No part of the journal may be reproduced or copied in any form by any means without the written permission of the Institute. n The write ups of this issue are also available on the website of the Institute.

Printed & Published byThe Institute of Company Secretaries of India‘ICSI House’, 22, Institutional Area, Lodi Road, New Delhi - 110 003. Phones : 41504444, 45341000, Grams : ’COMPSEC’ Fax : 91-11-24626727 E-Mail : [email protected] Weblink : http://support.icsi.eduWebsite : http://www.icsi.edu

Editor : Ashok Kumar Dixit

Vol. : LI n No.02 n Pg 1-156 n February-2021

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CHARTERED SECRETARY[ Registered under Trade Marks Act, 1999 ]

®ISSN 0972-1983

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President

Nagendra D. Rao

Vice President

Devendra V. Deshpande

Members (in alphabetical order)

Dr. Ahalada Rao Vummenthala

Anil Gupta (Govt. Nominee)

Ashish Garg

Balasubramanian Narasimhan

Chetan Babaldas Patel

Deepak Kumar Khaitan

Gyaneshwar Kumar Singh (Govt. Nominee)

Hitender Mehta

Dr. (Ms.) Madhu Vij (Govt. Nominee)

Manish Gupta

Manoj Pandey (Govt. Nominee)

Niraj Preet Singh Chawla

Praveen Soni

Ramasubramaniam C.

Ranjeet Pandey

S Santhanakrishnan (Govt. Nominee)

Vineet K. Chaudhary

Secretary

Asish Mohan

Chairman

Niraj Preet Singh Chawla

Members (in alphabetical order)

Dr. Ahalada Rao Vummenthala

Amit Kaushal

Anil Gupta

Ms. Aastha Gupta

Chetan Nayak k

Dr. D. K. Jain

G. R. Bhatia

H. M. Dattatri

Dr. (Ms.) Madhu Vij

Manoj Bisht

Puneet Handa

Vasudev Rao Devki

Vivek Hegde

Editor & Publisher

Ashok Kumar Dixit

Legal Correspondent

T. K. A. Padmanabhan

Editorial Advisory Board02

From the President 10Union Budget - 2021-22 28Articles 55Legal World 117From the Government 127News from the Institute 141Ethics in Profession 149CG Corner 151

FEBRUARY 2021 | 3 CHARTERED SECRETARY

CHARTERED SECRETARY GREETS AND CONGRATULATES

CS NAGENDRA D. RAO AND CS DEVENDRA V. DESHPANDE ON THEIR ELECTION AS PRESIDENT AND VICE PRESIDENT RESPECTIVELY OF THE INSTITUTE FOR THE YEAR 2021-22

CS Devendra V. Deshpande, Vice President, The ICSI

A Fellow Member of the ICSI and a Post Graduate in Commerce from Pune University, CS Devendra V Deshpande was elected to the Central Council of the ICSI for the term 2019 -

2022. He was the Chairman of ICSI Centre for Corporate Governance, Research and Training (CCGRT), Mumbai and ICSI Centre of Excellence (CoE), Hyderabad in the 2020. He is a Nominee Director at ICSI IIP.

CS Deshpande also headed the Information Technology Committee of the ICSI for the year 2019. He was member of various committees Constituted by ICSI including Executive Committee,

Corporate Laws and Governance Committee, Training & Educational Facilities Committee, Placement Committee, PMQ Course Committee, Election Reforms Committee and International Affairs Committee for the year 2019.

He has been actively associated with the Institute since 2004. Elected to the WIRC of lCSI, for the term 2015 – 18, he served as Chairman of Pune Chapter of WIRC of ICSI in the year 2013 and was an active Managing Committee member for the period from 2007 - 2014. CS Devendra V Deshpande has been a practicing Company Secretary since 2004 and specialises in the field of Corporate Laws, Foreign Exchange Laws, Audits under Company Law and Allied Laws, Secretarial Audit and Corporate Restructuring.

CS Nagendra D. Rao, President, The ICSI

A Fellow Member of The ICSI, CS Nagendra D. Rao is a Law Graduate from University of Mumbai and has a Bachelor’s Degree in Commerce. He is a Designated Partner and

Founder of CS Nagendra D. Rao and Associates, LLP, a firm of Practising Company Secretaries in Bengaluru. He was elected to the Central Council of the ICSI for the term 2019-2022 and served as Vice-President of The ICSI for the year 2020 before being elected as President for 2021. With over 15 years of experience in Corporate Sector he specializes in Corporate and Securities Laws, Capital Markets Transactions, Business Planning, Mergers & Acquisitions,

Financial Restructuring, Strategic Investment, Funds Planning & Arrangement.

He has been associated with the ICSI for several years now. He was elected to the Southern India Regional Council for two terms viz., 2011-2014 & 2015-2018 and has served as Chairman for the year 2015. Prior to that he was elected to the Managing Committee of the Bengaluru Chapter of the ICSI for the period 2007-2010 and was elevated as Chairman during the year 2009.

CS Nagendra D. Rao was a member of the Central Taxes, Corporate Laws & GST Committee of the Federation of Karnataka Chambers of Commerce & Industry for the year 2018-19. He was a member of the Corporate Affairs and Taxation Committee of the Bangalore Chamber of Industry & Commerce during the period 2000 – 2004. In recognition for his outstanding service rendered in the field of education CS Nagendra D. Rao was conferred the title “VIDYA VIKAS” by Dr. D.G. Shetty Educational Society (R), Dharwad, Karnataka.

4 | FEBRUARY 2021 CHARTERED SECRETARY

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SElection of ICSI President and Vice President

for the year 2021-22


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S ICSI delegation led by CS Nagendra D. Rao, the newly elected President met Shri Amit Shah, Hon’ble Union Minister of Home Affairs, Govt. of India.

ICSI Delegation led by CS Nagendra D. Rao, the newly elected President met officials of Ministry of Corporate Affairs, Govt. of India

Meeting with Shri Rajesh Verma, Secretary, MCA

Meeting with Shri Gyaneshwar Kumar Singh, Joint Secretary, MCA Meeting with Shri K.V.R. Murty, Joint Secretary, MCA

Meeting with Shri Manoj Pandey, Joint Secretary, MCA


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61. ICSI President, CS Nagendra D. Rao and Vice President, CS Devendra V. Deshpande met Dr. T. V. Somanathan, Secretary, Department of

Expenditure, Ministry of Finance and deliberated upon role of Company Secretaries professionals as regards the recently rolled out Union Budget 2021-22

2. ICSI delegation led by CS Ashish Garg, Immediate Past President Felicitated Smt. Sumitra Mahajan (Ex Speaker, Lok Sabha) on conferring Padma Bhushan Award.

3. Group photo of CS Nagendra D. Rao, the newly elected President with Council Members and ICSI Officials.4. Group photo of CS Nagendra D. Rao, the newly elected President, CS Devendra V. Deshpande, Council Members and ICSI Official Smt. Sarah

Arokiaswamy.5. CS Nagendra D. Rao addressing at Bengaluru Chapter of ICSI.6. Group photo of ICSI Bengaluru Chapter Members with ICSI President, CS Nagendra D. Rao.

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7. CS Nagendra D. Rao, the newly elected President, ICSI addressing at Kolhapur Chapter of ICSI on 1st February, 2021.8. Felicitation of CS Nagendra D. Rao, the newly elected President, ICSI and CS Devendra V. Deshpande, the newly elected Vice President, ICSI at Kolhapur

Chapter of ICSI.9. ICSI President, CS Nagendra D. Rao addressing during 72nd Republic day celebration at ICSI House, Lodi Road. 10. 72nd Republic day celebration at NIRC of ICSI. Group photograph of CS Nagendra D. Rao, the newly elected President, CS Devendra V. Deshpande, Council

Member and ICSI Officials. 11. CS Balasubramanian N met Dr. K. Thirumalai muthu, Regional Director (Southern Region), Ministry of Corporate Affairs.12. CS Balasubramanian N met Shri K.G. Joseph Jackson, Registrar of Companies, Tamil Nadu, Andaman & Nicobar Islands.13. Felicitation Ceremony of newly elected President & Vice-President of ICSI organized by Belagavi Chapter of SIRC of ICSI on 31st January, 2021.

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Glimpses of ICSI Webinars

WEBINAR ONWEBINAR ON UNION BUDGET 2021-22 ON 2ND FEBRUARY, 2021

WEBINAR ONWEBINAR ON IMPLEMENTATION OF NEW TRAINING STRUCTURE

UNDER CS (AMENDMENT) REGULATIONS, 2020 ON 3RD FEBRUARY, 2021

Addressed by:Dr. Girish Ahuja, Eminent Tax Expert & Past Central Council Member, ICSI

CS Bimal Kumar Jain, Eminent Tax Expert

Addressed by:CS Nagendra D. Rao, President, ICSI, CS Devendra V. Deshpande, Vice-President, ICSI


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The Institute of Company Secretaries of India with its legacy of more than five decades, is an Institution which has not

only upheld the masthead of good governance but has been a proud partner and a key player in the journey of nation building. Akin to all other academic institutions, the core task is to embed the knowledge, skill and talent and create fine professionals; what makes it stand out is the uniqueness in the part played by our members in the Indian Corporate Arena.

Being elected as the President of my Alma Mater, to me is not just a reposing faith by my fellow Council Colleagues but a responsibility bestowed on me by all the members, students and all the stakeholders of the Institute. While I assure you that I will keep the best interests of all of you in sight in my decisions, I believe that the achievement of the vision and mission of this Institution has always counted on the support of each one of you. And it is for this journey of marching ahead to achieve our shared goals that I seek the blessings of Lord Ganesha in the shloka above.

UNION BUDGET 2020-21: MAKING AN ATMANIRBHAR BHARAT Charles Darwin said and I quote, “It is the long history of humankind that those who learned to collaborate and improvise most effectively have prevailed.” While it was a first-of-its-kind measure in 2020 to have rolled out a package of Rs. 20 lakh crore with the sole intent of enhancing the economic resilience of the country. The Union Budget presented on 1st February 2021 by Smt. Nirmala Sitharaman, Hon’ble Minister of Finance and Corporate Affairs, touches

upon every facet and aspect of the Indian economy and its stakeholders with unprecedented proposed outlay with specific focus on Infrastructure Development re-iterate the commitment for making a self-reliant Bharat.

The Institute is bringing out a dedicated publication titled ‘Union Budget 2021-22’ comprising views from Industry Experts and learned professionals so as to share detailed insights with all the stakeholders. This edition of Chartered Secretary, too, has been dedicated as a special edition with focus on the Union Budget for FY 2021-22.

EXCELLENCE AND HIGHEST STANDARDS OF ETHICAL CONDUCT: THE MAKINGS OF A TRUE PROFESSIONAL With focus on the new age of digital transformation, promotion of ease of doing business, enhance user experience and strengthen enforcement, the Hon’ble Finance Minister in her Budget speech proposed to revamp the Ministry of Corporate Affairs (MCA) portal using data analytics, artificial intelligence, and machine learning to make regulatory filings much more convenient for corporates and professionals. The developments what we are looking at is a futuristic AI-based in MCA-21 when version 3.0 of the portal is rolled out.

In the wake of the developments of the likes of e-adjudication and online compliance monitoring; the roles, responsibilities and expectations of all stakeholders are being redefined, more than ever. All these would call for a heightened level of awakening on the part of our members to constantly strive towards excellence with a rejuvenated

Dear Professional Colleagues,

AJOmZZ nÙmHª$ JOmZZ§ Ah[Z©e_² &AZoH$X§V§ ^º$mZm§ EH$XÝV§ Cnmñ_ho &&

(As the rays from the lotus-face of Devi Parvati is always on her beloved son, similarly, the grace of Lord Sri Ganesha is always on his Devotees; granting their many prayers;

the Devotees who worship him with deep devotion.)


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Tsense of zeal and vigour and move beyond the confines of our contemporary set of activities.

Friends, while I might have shared this earlier, but to me, the role of professionals is obviously very important in all situations and particularly so when the economy is on the cusp of faster growth trajectory given the significance of further strengthening of good corporate governance. Being a professional body of high repute, highest standards of ethical conduct, the expectation by all the stakeholders is natural. It is for these reasons that all of us need to ensure adherence to not just sound corporate governance practices by the corporates but self-governance as well.

MEETINGS WITH DIGNITARIESAfter becoming the President, the first priority is to receive blessings of those who have been pillars of support and who continue to be the guiding light in all our initiatives and endeavours.

I feel extremely happy that my journey has begun with the blessings of Shri. Amit Shah ji, Hon’ble Minister of Home Affairs, Government of India and also with various senior Officials and members of the Ministry of Corporate Affairs. Numerous meetings have been held with Senior officials and Members of the Ministry of Corporate Affairs, on various occasions, but the meetings with Shri Rajesh Verma, Secretary, MCA; Shri Manoj Pandey, Shri Gyaneshwar Kumar Singh, Shri K.V.R. Murty, Joint Secretaries, Ministry of Corporate Affairs were a reinstatement of their continued support and that of their expectations from the Institute as well as the profession in future too. It was indeed a great honour to have met Dr. T. V. Somanathan, Secretary, Department of Expenditure, Ministry of Finance and deliberate upon the role of professionals in the recently rolled out Union Budget 2021-22.

The Institute of Company Secretaries of India has always taken pride in the fact that it has stood tall in meeting the expectations of the Regulatory Authorities, taking forward their objectives and rendering them successful. The role played by our Institute is very much appreciated by the Regulatory Authorities.

NEW TRAINING STRUCTURE: NEW LEARNINGS, NEW BEGINNINGS Given the pandemic in the past year and the lockdown, the Institute had granted temporary relaxation to the students on the applicability of Regulation 46BA and 46BB of the Company Secretaries (Amendment) Regulations, 2020 for a period of six months i.e., upto 2nd February, 2021. Accordingly, with effect from 3rd February, 2021, the new training structure shall be applicable. As per the new training structure, students shall be required to complete Executive Development Programme (EDP) of one month after passing Executive Programme; Practical Training for 21 months after completion of EDP and undertake a Corporate Leadership Development Programme (CLDP) for minimum period of 30 days but not exceeding 60 days after passing the Professional Programme.

I am absolutely sure that these new Trainings shall not only hone the soft skills of the next gen professionals but enhance

their capabilities rendering them well equipped to serve both the profession, the corporates and the entire nation.

WAY FORWARD: FUTURE AND BEYOND…The new Training Structure is just the first of the many firsts to follow; I hope and believe that the journey and road ahead shall mark the ushering in a new era of governance in all spheres for our professionals.

Our Vision is to be a global leader in promoting good corporate governance and Mission is to develop high calibre professionals facilitating good corporate governance. It is imperative that all of us indulge and engage in continued Action, striving fervently towards achievement of these aims. The Institute intends to achieve its Vision and Mission by undertaking following initiatives

Gaining recognitions under varied laws of the land,

Creating opportunities of knowledge upgradation and Upskilling by way of Webinars, Seminars, Courses and other Programmes,

holistic development of our students as future Governance Professionals and

building the brand ICSI which resonates with the word governance on the global platform.

As they saying goes, “No one can whistle a symphony. It takes a whole orchestra to play it”. I indeed feel extremely gratuitous towards all the Past Presidents, Secretaries, Council Members and members of Team ICSI and all our well-wishers for having strengthened the foundation of this great organisation. The combined efforts have contributed for the high reputation of the ICSI, which is looked upon with great admiration. While feeling extremely humbled and honoured, I look forward to your continued support in all our future endeavours to be undertaken for the betterment of the Institute and the profession.

Seeking blessing for a fulfilling journey ahead, I would conclude with the following shloka:

› gh ZmddVw &gh Zm¡ ^wZºw$ &

gh dr`ª H$admdh¡ &VoO[ñd ZmdYrV_ñVw _m [d[Ûfmdh¡ &

Together may we move.Together may we relish.

Together may we perform with vigour.May what has been studied by us be filled with brilliance.

Together we can. Together we will.

With kind regards,

Yours Sincerely

CS Nagendra D. RaoPresident, ICSI


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ICSI INITIATIVES UNDERTAKEN DURING

THE MONTH OF JANUARY, 2021INITIATIVES FOR MEMBERSMEETINGS WITH DIGNITARIESDuring the month of January, 2021, meetings were held with:

Dr. Harsh Vardhan, Hon’ble Union Minister for Health and Family Welfare

Prof. (Dr.) D. P. Singh, Chairman, University Grants Commission

Shri Rajesh Verma, Secretary, Ministry of Corporate Affairs

Shri Manoj Pandey, Joint Secretary, Ministry of Corporate Affairs

Shri K.V.R. Murty, Joint Secretary, Ministry of Corporate Affairs

Shri Gyaneshwar Kumar Singh, Joint Secretary, Ministry of Corporate Affairs

Shri B. Srikumar, Joint Director, Ministry of Corporate Affairs

REPRESENTATIONS SUBMITTED DURING JANUARY, 2021During the month of January, 2021, the following suggestions, views and representations were submitted to various Regulatory Authorities:

Suggestions of ICSI on the Occupational Safety, Health and Working Conditions Code (Central) Rules, 2020 submitted to the Ministry of Labour & Employment on January 3, 2021.

Request to authorize PCS for certification of maintenance of hundred percent asset cover under Regulation 56(1)(d) of the SEBI (LODR) Regulations, 2015 submitted to Chairman, SEBI on January 5, 2021.

Request for recognition to Company Secretary in Practice under the Rajasthan Investment Promotion Scheme – 2019 submitted to Principal Secretary (Finance), Government of Rajasthan on January 11, 2021.

Request for further relief under various Schemes submitted to the MCA on January 11, 2021.

Suggestions of ICSI on the Report of the Internal Working Group (IWG) of RBI to review extant ownership guidelines and corporate structure for Indian private sector banks submitted to RBI on January 15, 2021.

Request for extension in timelines for annual filing of E-forms submitted to the MCA on January 21, 2021.

Request for extension in timelines for filings by LLPs submitted to the MCA on January 22, 2021

Request to authorize PCS for certification under Regulation 13 of the SEBI (Share Based Employee

Benefits) Regulations, 2014 submitted to SEBI on January 25, 2021.

Recognition of Company Secretary (CS) Qualification equivalent to Post Graduate Degree for appointment of Assistant Professor in Universities and Colleges to University Grants Commission.

HONORARY FELLOW MEMBERSHIPS CONFERREDDuring the Award Ceremony of the 20th ICSI National Awards for Excellence in Corporate Governance, 2020 held on 13th January, 2021, honorary degree of the ICSI was conferred upon Shri Kumar Mangalam Birla, Chairman, Aditya Birla Group.

20TH ICSI NATIONAL AWARDS FOR EXCELLENCE IN CORPORATE GOVERNANCE, 2020The Award Ceremony of the 20th ICSI National Awards for Excellence in Corporate Governance, 2020 was held at Radisson Blu, Noida on 13th January, 2021 in recognition of the impeccable performances by Corporates and Professionals in the Corporate Governance arena.

Shri Piyush Goyal, Hon’ble Union Minister for Railways, Commerce & Industry, Consumer Affairs and Food & Public Distribution, graced the occasion as the Chief Guest while Hon’ble Mr. Justice A.K. Sikri Former Judge, Supreme Court of India and International Judge, Singapore International Commercial Court, was the Chairman of the Jury for the Awards.

The ICSI Lifetime Achievement Award for translating Excellence in Corporate Governance into reality was conferred on Dr. Cyrus S. Poonawalla, Chairman, Poonawalla Group.

The 20th ICSI National Award for Excellence in Corporate Governance for Best Governed Large Medium and Emerging Company in Listed and Unlisted Category, was presented to the following Companies:

ITC Limited (Listed Company: Large Category) TATA Metaliks Limited (Listed Company: Medium

Category) Vaibhav Global Limited (Listed Company: Emerging

Category) Numaligarh Refinery Limited (Unlisted Company: Large

Category) Talwandi Sabo Power Limited (Unlisted Company:

Medium Category) Arohan Financial Services Limited (Unlisted Company:

Emerging Category)To acknowledge the commitment of business houses in integrating social and environmental concerns with their


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SIbusiness operations, the Institute presented the 5th ICSI CSR Excellence Awards to: Reliance Industries Limited (Large Category) Natco Pharma Limited (Medium Category) Minda Industries Limited (Emerging Category)

Aimed at recognising the importance of the Secretarial Audit Report, ICSI instituted Best Secretarial Audit Report Award last year. This year the award was presented to CS Makarand Joshi, for Secretarial Audit Report of Mahindra Logistics Limited.

21ST NATIONAL CONFERENCE OF PRACTISING COMPANY SECRETARIESThe ICSI organised the 21stNational Conference of Practising Company Secretaries on 15-16 January, 2021 at Udaipur, Rajasthan on the theme ‘Achieving Excellence through Digital Transformation’. Shri Arjun Ram Meghwal, Hon’ble Minister of State for Parliamentary Affairs and Heavy Industries &Public Enterprises, presided over as the Chief Guest. The Institute also signed a Memorandum of Understanding with IIM-Bodhgaya on the occasion under the ICSI Academic Collaboration with Dr. Vinita S. Sahay, Director, IIM-Bodhgaya in the benign presence of Hon’ble Minister.

ICSI CONVOCATIONICSI organised its first hybrid Convocation (in physical mode as well as in e-mode) on 18th January, 2021, for awarding certificates to around 3400 Associate Members and 350 Fellow Members of the Institute, for the year 2020. In physical mode the Convocation was held at the four regional centres at Chennai, Delhi NCR, Kolkata and Mumbai for the eligible members who have opted for any of them and also at Hyderabad for a small group of members hailing from the city.

The inaugural event took place at Hotel ITC Kohenur, Knowledge City, Madhapur, Hyderabad in the benign presence of the Chief Guest, His Excellency Shri M. Venkaiah Naidu, Hon’ble Vice President of India. Hon’ble Minister for Home, Prisons and Fire Services, Government of Telangana, Shri Mohammed Mahmood Ali was also present as the Guest of Honour on the occasion. The inaugural event from 10.30 AM to 11.30 AM was common for all centres who joined the ceremony virtually. This was immediately followed by the regional Convocations. After the members received their certificates at Hyderabad, e-convocation commenced for participants who have confirmed for the same.

The inaugural event was live streamed on ICSI social media platforms such as Facebook, You Tube and Twitter. The speech of Hon’ble Vice President of India was also live telecast on Rajya Sabha TV.

CELEBRATION OF 72ND REPUBLIC DAYRepublic Day holds great significance to all of us, as it is the occasion when we honour the day on which the Constitution of India came into effect while replacing the Government of India Act, 1935. To rejoice the glory of India, the Institute celebrated 72nd Republic Day on January 26, 2021 through the flag hosting at the Head Quarters, Regional Offices and Chapters Pan India.

MANDATORY CPE CREDITS FOR THE YEAR 2020-21Continuous Professional Education (CPE) is important for further capacity building and constant upskilling of the members by keeping them abreast with latest developments in profession, widening their knowledge base and improving their skills to maintain the cutting edge by providing training and expertise in critical areas of professional interest.

Accordingly, the Council of the Institute issued the ICSI (Continuous Professional Education) Guidelines, 2019 which came into effect from 1st April 2020. Under the present Guidelines, every member is required to obtain the CPE Credits as under:

Member’s age CPE Credits in a year (1stApril – 31stMarch)

Employment PracticeBelow 60 years 20 20Above 60 years (If member is in gainful employment/ holding CoP)

10 10

The maximum number of CPE Credits that may be obtained by a member through web-based learning activities such as webinars is capped at 8 in a year with the overall limit of 12 CPE Credits under unstructured category.

No set-off of excess CPE Credits obtained under unstructured category is permitted against the CPE Credits to be obtained under structured category. Neither is any carry forward of the excess CPE Credits allowed under the Guidelines.

It may be noted that the PCH requirement for the FY 2020-2021 has to be completed latest by 31.03.2021. Members who have not completed the stipulated hours may complete the said date. The said Guidelines are available at https://www.icsi.edu/media/webmodules/CPE-Gls.pdf

Kindly ensure that the mandatory credit hours are obtained by you before the completion of the block year i.e. 31st March, 2021 as the same will be linked with the payment of annual membership/COP fee for the FY 2021-22.

REVISED GUIDANCE NOTE ON MEETINGS OF THE BOARD OF DIRECTORS AND GENERAL MEETINGSTo facilitate the compliance of Secretarial Standard on Meetings of the Board of Directors (SS-1) and Secretarial Standard on General Meetings (SS-2), the ICSI had issued Guidance Notes on Meetings of the Board of Directors and General Meetings.

To align these Guidance Note with the legal amendments brought in by the Companies (Amendment) Act, 2017 and to specify the relaxations given by MCA due to COVID-19, these have been revised by the ICSI on the basis of the relevant provisions of the Act and the rules, circulars, clarifications etc. issued by the MCA until 31st December, 2020.These Guidance Notes elucidates the basis for setting the particular Standard, explains the procedural & practical aspects thereof


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ICSI and gives illustrative examples. The responses to various

issues/queries raised by the stakeholders have also been integrated.

The Revised Guidance Notes on Meetings of the Board of Directors and General Meetings were released at the 21st National Conference of Practicing Company Secretaries on 15thJanuary, 2021at Udaipur and made available on the website of ICSI for reference of all the stakeholders.

LAUNCH OF ICSI CERTIFICATE COURSESDuring the month January, 2021, ICSI launched / started registration for the following Certificate Courses:

Certificate Course on Insolvency and Bankruptcy code Certificate Course on Intellectual Property RightsCertificate Courses on Securities Law Certificate Course on Corporate Restructuring Certificate Course for POSH (second batch)Certificate Course on Commercial Contract Management

(second batch)Certificate Course on Independent Director (second

batch)Certificate Course on FEMA (second batch)Certificate Course on Forensic Audit (fourth batch)Certificate Course on Certified CSR Professionals (fifth

batch)Certificate Course on GST (sixth batch) The Institute is getting overwhelming response for the courses and the registration for the above mentioned has been extended till 28th February, 2021. Candidates registered for the above courses will be granted 15 structured CPE credit on completion.

ICSI SIGNATURE AWARD SCHEMEThe Institute launched the ICSI Signature Award Scheme under which top rank holders in B.Com. Final Examinations in reputed universities and also specialised programmes/ papers of IITs / IIMs are awarded a Gold Medal and a Certificate. During the month, MOUs were signed with:

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State University / College /Institute

Date of MoU

1. Telangana Maulana Azad National Urdu University

12.01.2021

2. Bihar IIM Bodh Gaya 14.01.20213. Jammu & Kashmir Govt of Jammu &

Kashmir Higher Education Dept.

18.01.2021

ICSI ACADEMIC COLLABORATIONS WITH UNIVERSITIES AND ACADEMIC INSTITUTIONS ICSI “Academic Collaborations with Universities and Academic Institutions” initiative is aimed to establish a connect

between ICSI and various Universities and institutions of national repute, through a memorandum of understanding (MoU) covering a number of schemes under one umbrella towards learning and development of students, academicians and professionals.

MoUs were signed with the following universities and academic Institutions during the month of January, 2021 under the Academic Collaborations with Universities and Academic Institutions initiative of ICSI:

Maulana Azad National Urdu University, Hyderabad on 12th January 2021

IIM, Bodhgaya, Bihar on 15th January 2021 Dept. of Higher Education, J & K, Jammu & Kashmir on

18.01.2021

ICSI STUDY CENTRE SCHEMEA Memorandum of Understanding was signed by ICSI with Goswami Tulsidas Govt. P G College, Karwi, Chitrakoot on 9th January,.2021 under ICSI Study Centre scheme.

ICSI INSTITUTE OF INSOLVENCY PROFESSIONALS

LIT UP (Limited Insolvency Examination Training)

Pursuant to the IBBI (Insolvency Professionals) Regulations, 2016, an individual is eligible for registration as an Insolvency Professional only after passing Limited Insolvency Examination conducted by IBBI. In view of the same, ICSI IIP organized three days intensive training program for preparation of Limited Insolvency Examination from 22nd January, 2021 to 24th January, 2021. The entire syllabus as prescribed by IBBI for Limited Insolvency Examination was covered by eminent professionals and the program was very well appreciated by all the participants.

Pre-Registration Educational Course

Pursuant to the IBBI (Insolvency Professionals) Regulations, 2016, individuals are eligible to register themselves as Insolvency Professionals (IP) only after undergoing through the mandatory 50 hours Pre Registration Educational Course from an Insolvency Professional Agency after his/her enrolment as a Professional Member. ICSI IIP jointly with the other three Insolvency Professional Agencies conducted Pre-Registration Educational Course online from 18th January, 2021 to 24th January, 2021.

Workshop

7 hours workshop conducted on ‘Practical Aspects of Mergers and Acquisitions in India for IPs’” on 16th January, 2021. It was attended by approximately hundred Professionals.

Roundtable on ‘ILC (sub-committee) report on Pre-packaged Insolvency Resolution Process’

ICSI IIP organized a Roundtable on ‘ILC (sub-committee) report on Pre-packaged Insolvency Resolution Process’ on 18th January, 2021. The round table discussion was attended by 176 participants.


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SIINITIATIVES FOR STUDENTS

YUVOTSAV 2021: 21ST NATIONAL CONFERENCE OF STUDENT COMPANY SECRETARIES

The 21st National Conference of Student Company Secretaries was held at Hyderabad on 12th January, 2020 to mark the 158th Birth Anniversary of Swami Vivekananda in the presence of Tamilisai Soundararajan, Hon’ble Governor of Telangana and Shri G. Kishan Reddy, Hon’ble Minister of State for Home Affairs. ICSI Students participated through both physical and virtual mode.

FINAL ROUND OF ALL INDIA COMPANY LAW QUIZ 2020 HELD ON 11TH JANUARY 2021

All India Company Law Quiz 2020 was organized for the existing students of ICSI to enhance their visibility, level of knowledge and understanding in Company Law & allied areas and to generate interest among the students for in-depth study of the subject including greater conceptual clarity.

Final round of All India Company Law Quiz 2020 was held on 11th January, 2021 in hybrid mode. To create awareness of the profession amongst the other students who aspire to join CS Profession, play along round was also organised simultaneously during the Competition.

48 Finalists (16 Finalists for each Stage) participated in the final round. The winners of Final Round of the Quiz were given three cash awards and commendation certificates under each of the segments, i.e., CS Foundation, Executive, and Professional Programme.

ONLINE QUIZ ON CURRENT AFFAIRS AND GENERAL KNOWLEDGE

The Institute, through a novel initiative, for creating awareness about the profession has is organizing Online Quiz on Current Affairs & General Knowledge. There is no participation fee and the students can register in two different categories:

Category 1 - students pursuing 11&12 class of any stream

Category 2 - Students passed 12th/pursuing Graduation/Post Graduation, in any stream

The final round was held on 10th December, 2020 and the winners in each Category were rewarded with cash prizes.

Apart from the 1st, 2nd and 3rd prize worth Rs. 50000, Rs. 25000 and Rs.10000 respectively, special appreciation award of Rs. 5000/- and also 10 consolation prizes of Rs. 1000 each in both categories will be given. The first prize winners in both categories were awarded at the Award Ceremony of the 20th ICSI National Awards for Excellence in Corporate Governance held on 13th January, 2021.

COMPANY SECRETARY EXECUTIVE ENTRANCE TEST (CSEET) To test the aptitude of the candidates required for the profession of Company Secretaries, Company Secretary Executive Entrance Test (CSEET) has been introduced as the qualifying test for registration to Executive Programme through the Company Secretaries (Amendment) Regulations, 2020. Various initiatives were taken for the CSEET students:3rd CSEET held on 9th January, 2021

CSEET(May session) will be held on 8th May 2021 May 2021 Session of CSEET will be held on 8th May 2021 through remote proctored mode. Students can register upto 15th April, 2021 for CSEET which is the next cut-off date of CSEET registration. Registration can be done at https://smash.icsi.in/Scripts/CSEET/Instructions_CSEET.aspx Webinar on “Technical session on how to appear in

CSEET through remote proctored mode”

A Webinar on “Technical session on how to appear in CSEET through remote proctored mode” was held on 5th January, 2021 for the students who appeared in CSEET held in January 2021.Webinar helped students immensely in clearing their doubts with respect to technical aspects of CSEET.Commencement of online CSEET classes Most of the Regional/Chapter Offices have commenced classes for the students appearing in CSEET to be held in May 2021. Interested students can click at the link to contact Regional/Chapter offices: https://www.icsi.edu/media/webmodules/websiteClassroom.pdfDeclaration of result of Foundation and CSEET on 18th

January 2021.

The result of Foundation and CSEET was declared on 18th January 2021 and the results have been made available at the website of the Institute.

COMMENCEMENT OF ONLINE CLASSES OF CSEET/ FOUNDATION/ EXECUTIVE/ PROFESSIONAL PROGRAMME FOR JUNE 2021 SESSION OF EXAMINATION BY REGIONAL /CHAPTER OFFICESRegional/Chapter Offices of the Institute are conducting online classes for the students of CSEET/ Foundation/Executive/Professional Programme appearing in June 2021 exam. Interested students can contact the nearest Region/Chapter to join the classes. Details of Regional/Chapter offices are available at https://www.icsi.edu/media/webmodules/websiteClassroom.pdf

STUDENT COMPANY SECRETARY, CS FOUNDATION E-BULLETIN AND CSEET E-BULLETINThe Student Company Secretary e-journal for Executive/ Professional programme students of ICSI, CS Foundation course e-journal for Foundation programme students of ICSI and CSEET e-bulletin covering the latest update on the subject on the CSEET have been released for the month of January, 2021. The journals are available on the Academic corner of the Institute’s website at the link: https://www.icsi.edu/e-journals/


72ND REPUBLIC DAY PAN INDIA CELEBRATIONS HELD ON 26TH JANUARY 2021


Call for Articles

The term ‘good governance’ is frequently used in all walks of life. Good governance is expected to be participatory, transparent, accountable, effective, equitable and promotes rule of law. Good governance is always linked to Business ethics. International organisations always give paramount importance to good governance. Almost all major development institutions today say that promoting good governance is an important part of their agenda. In a well-cited quote, former UN Secretary-General Kofi Annan noted that “good governance is perhaps the single most important factor in eradicating poverty and promoting development”.

Different schools define governance is different ways. Governance experts are habituated to routinely focus on different types of governance viz. global governance, corporate governance, IT governance, participatory governance and so on, which may tend to be related only peripherally to the good governance agenda vis-à-vis deals with truly ideal governance framework from a country or globe. Considering the different facets, global outlook and its relevance from all spheres, ICSI is happy to invite articles on various facets of Governance which includes : Strategy and Governance – Two sides of the same coin;Global and International Governance;Corporate Governance;Parliament, Participatory and Democratic Governance;IT Governance;Integrated Governance;Governance- Sustainability and Inclusive growth;Minimum Government – Maximum Governance;Lessons of governance from the ancient era; and many more….As a part of Women’s Day Celebrations, we also invite research articles from authors on Women leadership, Women empowerment, Women on Board and other related topics.

Members and other readers desirous of contributing articles on the above said themes may send the same latest by Monday February 22, 2021 at [email protected] for considering in the March 2021 issue of Chartered Secretary. Minimum length of the article should be 2500 words.We look forward to your co-operation in making this initiative of the Institute a success.

Call for articles for publication in Chartered Secretary – March 2021


STANDING, NON-STANDING COMMITTEES/ BOARDS OF THE COUNCIL FOR THE YEAR 2021

1 Executive Committee1. Nagendra D.Rao Chairman2. Devendra V. Deshpande Member3. Ashish Garg Member4. Manoj Pandey Member

(Govt. Nominee)5. Deepak Kumar Khaitan Member6. Praveen Soni Member7. Ranjeet Pandey Member

2 Finance Committee1. Nagendra D.Rao Chairman2. Devendra V. Deshpande Member3. Santhanakrishnan S. Member

(Govt. Nominee)4. Chetan B. Patel Member 5. Manish Gupta Member6. N. P. S. Chawla Member7. Ranjeet Pandey Member

3 Examination Committee1. Nagendra D.Rao Chairman2. Devendra V. Deshpande Member3. Gyaneshwar Kumar Singh Member

(Govt. Nominee)4. B. Narasimhan Member 5. Chetan B. Patel Member6. N. P. S. Chawla Member7. Vineet K. Chaudhary Member

4 Financial Services Committee1. B. Narasimhan Chairman2. Anil Gupta Member

(Govt. Nominee)3. Madhu Vij (Dr.) Member

(Govt. Nominee)4. Chetan B. Patel Member5. Manish Gupta Member6. Praveen Soni Member7. Ramasubramaniam C. Member

5 Corporate Laws and Governance Committee

1. Ranjeet Pandey Chairman2. Ashish Garg Member3. Chetan B. Patel Member4. Deepak Kumar Khaitan Member5. Manish Gupta Member6. Praveen Soni Member7. Ramasubramaniam C. Member

6 Professional Development Committee1. Nagendra D. Rao Chairman2. Anil Gupta Member

(Govt. Nominee)3. Santhanakrishnan S. Member

(Govt. Nominee)4. Hitender Mehta Member5. N. P. S. Chawla Member6. Praveen Soni Member7. Ranjeet Pandey Member8. Ramasubramaniam C. Member9. Vineet Kumar Chaudhary Member

7 Training & Educational Facilities Committee1. Devendra V. Deshpande Chairman2. Ashish Garg Member 3. Madhu Vij (Dr.) Member

(Govt. Nominee)4. Ahalada Rao Vummenthala (Dr.) Member5. B. Narasimhan Member6. Chetan B. Patel Member7. Deepak Kumar Khaitan Member8. Manish Gupta Member

8 Practising Company Secretaries Committee1. Manish Gupta Chairman2. B. Narasimhan Member3. Chetan B. Patel Member4. Deepak Kumar Khaitan Member5. Praveen Soni Member6. Vineet K. Chaudhary Member

9 Information Technology Committee1. Praveen Soni Chairman2. Santhanakrishnan S. Member

(Govt. Nominee)3. Chetan B. Patel Member4. Manish Gupta Member5. RamasubramaniamC. Member

10 Peer Review Committee1. Devendra V. Deshpande Chairman2. Chetan B. Patel Vice-Chairman3. Ashish Garg Member4. Hitender Mehta Member5. N. P. S. Chawla Member6. Ramasubramaniam C. Member7. G. M. Ganapathi Member8. L. N. Joshi Member9. R. Sridharan Member

11 Placement Committee1. Ahalada Rao Vummenthala (Dr.) Chairman2. B. Narasimhan Member3. Hitender Mehta Member4. N. P. S. Chawla Member5. Praveen Soni Member

12 PMQ Course Committee1. Manish Gupta Chairman2. Ahalada Rao Vummenthala (Dr.) Member3. Chetan B. Patel Member4. Deepak Kumar Khaitan Member5. Praveen Soni Member6. Vineet K. Chaudhary Member

13 Secretarial Standards Committee1. B Narasimhan Chairman2. Anil Gupta Member

(Govt. Nominee)3. Ahalada Rao Vummenthala (Dr.) Member 4. Deepak Kumar Khaitan Member5. Praveen Soni Member6. Ramasubramaniam C. Member7. Satwinder Singh Member8. S. Sudhakar Member 9. Ajay Sancheti Member


14 Expert Advisory Committee1. Hitender Mehta Chairman2. Anil Gupta Member


(Govt. Nominee)4. Ahalada Rao Vummenthala (Dr.) Member 5. N. P. S. Chawla Member6. K. Sethuraman Member7. Raj Kumar Agarwal Member

15 Editorial Advisory Panel1. N. P. S. Chawla Chairman2. Anil Gupta Member


(Govt. Nominee)4. Ahalada Rao Vummenthala (Dr.) Member5. Amit Kaushal Member6. Astha Gupta (Ms.) Member7. Chetan Nayak K. Member8. D. K. Jain (Dr.) Member9. G. R. Bhatia Member

10. H. M. Dattatri Member11. Manoj Bisht Member12. Puneet Handa Member13. Vasudev Rao Devki Member14. Vivek Hegde Member

16 ICSI-CCGRT & COEs Management Committee1. Chetan B. Patel Chairman2. B. Narasimhan Member 3. Manish Gupta Member4. Praveen Soni Member5. Ramasubramaniam C. Member6. Veerash M J Member7. Pradeep Kulkarni Member

17 Election Reforms & Chapter Guidelines Committee1. Ranjeet Pandey Chairman2. Santhanakrishnan S. Member

(Govt. Nominee)3. Chetan B. Patel Member4. Deepak Kumar Khaitan Member5. Manish Gupta Member6. N. P. S. Chawla Member 7. Praveen Soni Member8. Ramasubramaniam C. Member

18 Quality Review Board1. Nishi Singh (Ms.) Chairperson2. Devendra Kumar Member3. Ritika Bhatia (Ms.) Member4. Manish Gupta Member5. Pramod Kumar Rai Member

19 International Affairs Committee1. Ashish Garg Chairman2. B. Narasimhan Member 3. Hitender Mehta Member4. N. P. S. Chawla Member5. Ranjeet Pandey Member

20 Auditing Standards Committee1. Vineet K. Chaudhary Chairman2. Hitender Mehta Vice-Chairman3. Ahalada Rao Vummenthala (Dr.) Member4. Ramasubramaniam C. Member 5. G. V. Srinivasa Murthy Member6. Rajeev Bhambri Member

21 Disciplinary Committee*1. Nagendra D. Rao Presiding Officer2. Meenakshi Datta Ghosh (Ms.) Member

(Govt. Nominee)3. Nalin Kohli Member

(Govt. Nominee)4. B. Narasimhan Member5. Ranjeet Pandey Member

22 Board of Discipline*1. Deepak Kumar Khaitan Presiding Officer2. Manish Gupta Member3. Asish Mohan Member

23 Expert Group on Secretarial Standards1. Satwinder Singh Chairman 2. S. Sudhakar Vice-Chairman3. Awanish Dwivedi Member4. Narayan Shankar Member 5. R Kalidas Member 6. B. Renganathan Member7. D. C. Jain Member8. Deepak Sharma Member9. Dwarakanath C. Member

10. Jayan K. Member11. Makarand Joshi Member12. Morur Elayappan Vadivel Selvamm Member13. Rajveer Singh Member14. Sanjeev Grover Member15. S. C. Sharada (Ms.) Member16. S. C. Vasudeva Member17. Tridib Barat Member18. V. Karthick Member

24 Research Committee1. Ramasubramaniam C. Chairman2. Ahalada Rao Vummenthala (Dr.) Member3. Hitender Mehta Member4. N. P. S. Chawla Member5. Avnish Mahta Member6. Gaurav Gunjan Member

* Till the constitution of new Committee.


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P - 27Budget Analysis - 2021-22

Budget 2021-2022: Consolidating the Reforms AgendaM.S. Mani, Sandeep Jaiswal and Meenakshi Krishnamurthy

Budget 2021-22 starts with a congratulatory tone for applauding the country for having survived economically

as well as humanely through the once-in-a-century pandemic. The Centre for Economics and Business Research has projected a GDP growth rate of 9% in 2021-22. The pandemic led to the Union Government to present five mini budgets last year to steady the economy and provide a balance between protecting lives and livelihoods. With the ambition still set at becoming a USD 5 Trillion economy in the next few years, the Budget lays down 6 cornerstones with a vision for Atmanirbhar Bharat. These six cornerstones are Health and Wellbeing, Physical & Financial Capital, Infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and R&D and Minimum Government and Maximum Governance. While the earlier economic survey placed emphasis on Thalinomics, the current economic survey identifies the need for a Bare Necessities Index which determines a country’s strength to survive a pandemic. The economic survey and the budget indicate the continued V-shaped recovery of the Indian economy.

Union Budget 2021: A snapshot of key proposed tax amendmentsPramod Achuthan, Meera R. Iyer, Vaibhav Gupta and Divya Khushwani

The Union Budget 2021 presented by the FM on 1 February 2021 has adhered to a ‘no-harm’ strategy in the first paperless

budget The Budget proposals spelling out the government’s plan for economic recovery without worrying about fiscal deficit have been cheered by the markets as well. Budget 2021 focused on providing impetus to 6 specific pillars which are Health and Wellbeing, Capital and Infrastructure, Development for Aspirational India, Reinvigorating Human Capital, Innovation and Research, and Ease of Governance. The article captures the key amendments related to direct tax and indirect tax proposals. On the tax side, one would notice that proposals of the Finance Bill, 2021 are woven around the themes of simplification of tax administration, ease of compliance and reduction in litigation. Some of the noteworthy direct tax proposals include introduction of withholding tax provisions on purchase of goods, dispute resolution mechanism for small taxpayers, clarifications on equalisation levy provisions and allowing tax appeals to take place without in person court appearances. Similarly changes in rates structure in Customs Duty are geared towards promoting domestic manufacturing in sync with the Atmanirbhar Bharat strategy of the Government. Amendments in GST regulations such as self-certified reconciliation statement instead of GST audit, zero-rating benefit to SEZ for authorized operations seek to provide relief to taxpayers and providing clarity.

Budget 2021-22 - A big push towards a $5 Trillion EconomyAnil Gupta

The Union Budget 2021-22 was presented on the back of an unprecedented pandemic shock that hit the Indian economy

and reduced GDP growth by 7.7%. The Finance Minister’s promise of a ‘never-seen-before’ Budget had increased expectations, and after the Budget, the stock markets reacted jubilantly by soaring over 2,300 points. Irrespective of the reaction of the stock markets, there are quite a few positives in the Budget like the push for Ease of Doing Business by increase in the threshold of definition of “Small Company”, setting up of a Dispute Resolution Committee for small taxpayers, addressing various hardships faced by Non-Residents, thrust on implementation of infrastructure projects etc. The article concludes that the Budget has set its priorities right and it has recognised the need to take concrete measures to revive the economic growth engine, which it has done in a spectacular manner.

The Union Budget 2021-22 – A balancing act in the wake of COVID -19Asish Mohan

P resenting the Union Budget 2021-22, the Hon’ble Finance Minister highlighted the six pillars of the Budget

namely Health & Well-being; Physical & financial capital & Infrastructure; Inclusive development for aspirational India; Reinvigorating human capital; Innovation & R&D and Minimum Government and Maximum Governance. For corporate professionals, the proposals for the consolidation of the provisions of Securities and Exchange Board of India Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalized single Securities Markets Code is an important highlight. The definition of Small Companies under the Companies Act, 2013 has been proposed to be changed by increasing their thresholds for Paid up capital from “not exceeding Rs. 50 lakh” to “not exceeding Rs. 2 Crore” and turnover from “not exceeding Rs. 2 Crore” to “not exceeding Rs. 20 Crore”. There are also proposals providing incentives for One-Person Company (OPC). The effective booster shots of the budget being a big push for infrastructure sector and thrust for privatisation and with no surprises of higher taxes, the Budget 2021 stands successful in achieving a balanced demand stimulus. The author concludes that overall, it is a budget that ensures that the momentum of economic recovery is sustained with least disruption.

The ambrosia called Mahabharata, the didactic Vidura Neeti and other like beacons His Holiness Shri Eeshapriya Teertha and Dr. Sudheendhra Putty

The Mahabharata is not a mere epic; it is a romance, telling the tale of heroic men and women as also about some

who were divine. It is a whole literature in itself, containing a code of life, a philosophy of social and ethical relations, and

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Experts Speak on Union Budget - 2021-22

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speculative thought on human problems that is hard to rival. While there is in it that eternal panacea, the Bhagawad Gita, the noblest of scriptures and grandest of sagas, the epic is also home to the sagacious utterances of the right and righteous Vidura. The Vidura Neeti coalesces all that is noble, lofty, wise and congealed wisdom that ought to be essential in today’s world. The conversation, at times, the monologue, encompasses a diaspora of aspects from statecraft to charity and administration to piety. That it is always contemporary is but an ode to the ancient Indian scriptures, its vastness, profundity and timelessness. Together with these pearls of wisdom, this epic and our other scriptures have much to offer and we have much to imbibe from them. That includes the primacy to education which is at the core of a knowledge society and the need for an administrator to be poise personified. Finally, there is the aspect of transition and knowledge diffusion of which the Udupi Krishna Matha is a shining exemplar. This article attempts to assimilate the crème de la crème of the above with a view to guide professionals by drawing on the ancient scriptures and goading India to re-emerge as the thought leader of the world.

SEBI and Green Investing Bonds Green and Blue, let’s give them their duePradeep Ramakrishnan, Richa Agarwal and Pawan Kumar Chowdhary

A green bond is like any other bond where a debt instrument is issued by an entity for raising funds from investors.

However, what differentiates a Green bond from other bonds is that the proceeds of a Green Bond offering are ‘ear-marked’ for use towards financing ‘green’ projects. SEBI defines that a debt security shall be considered as ‘Green’ if the funds raised through issuance of the debt securities are to be utilised for project(s) and/or asset (s) falling under any of the specified broad categories. It is observed that Municipalities around the world have adopted green bond route to contribute to a climate action and adapt their infrastructure to climate changes. The article also introduces the reader to the concept of blue bond which is a debt instrument issued by governments, development banks or others to raise capital from impact investors to finance marine and ocean-based projects that have positive environmental, economic and climate benefits. SEBI is one of the few regulators in the world to enable the issue of Green bonds prescribing provisions in the SEBI (Issue and Listing of Debt Securities) Regulations, 2008. So far there have been four issues of Green Bonds which have raised Rs. 17120 Million. The article concludes that Green bonds offer a great avenue for investment, more so for investors focused on sustainable investing.

Related Party Transaction – Few suggestions to a practical approach B. Chandra

Related party transactions (RPT’s) are common to any business in any country and are not something unique to

India and it would not be correct to state that such transactions are common to family-owned businesses only. Basically, there are two extremes in related party transactions namely efficient transactions which fulfil underlying economic needs of the company on one hand and transactions which compromise management’s responsibility to shareholders

or a board of director’s monitoring function on the other. The article highlights the key differences in the regulation of the RPT’s under the Companies Act, 2013 and the SEBI (Listing and Disclosure Obligations) Regulations, 2015. SEBI constituted a working group to suggest changes with respect to regulation of RPT’s. To sum up, the article concludes that it is difficult for any regulator to prescribe if such transactions are beneficial or detrimental to the firm’s performance. However, disclosure of RPTs can provide stakeholders with necessary information that can be used by them and the regulators to either discipline firms that engage in RPTs or take precautions against them

Investment in Startups- Stages of investment and challenges for PromotersVivek Sadhale, Vikas Agarwal and Nikita Navindgikar

While the standard market practices in terms of the rights provided to investors may differ in each business, it is

important that the promoters understand the risks associated with the rights they negotiate with the investors. Promoters should remember that while there could be market trends for reasonably acceptable rights and clauses in investment transactions, it ultimately depends on the bargaining power that the promoters have while discussion with investors. Promising businesses and bargaining power can help promoters to take away clauses in their favour and also maintain balance between the rights provided to all categories of investors in their startups.

CS: The Corporate Board’s AnchorArun Balakrishnan

T he Companies Act 2013 had given the status of Key Management Personnel (KMP) to the Company Secretary

(CS) along with the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). Thus, the importance of the CS in the organisation has been made a part of the statute ever since 2014. Chairperson of the Board depends upon the CS to ensure that the Board’s decision is compliant, and not in violation of the various statutes that govern corporate life in the country. It is the CS who ensures that the minutes contain a fair and correct summary of the proceedings that took place and accurately reflects the decision that has been arrived at. Proper conduct of the Annual General Meeting (AGM) and the occasional Extraordinary General Meeting (EGM) are also the responsibility of the CS and an experienced CS would do a fine balancing act in this regard to keep all interested parties happy. The article concludes that from the perspective of the CS profession, Secretarial Audit becomes an additional parameter for his / her performance appraisal. In this sense, Secretarial Audit could be called a peer review of the work of the whole-time secretary.

Atmanirbhar Bharat-Role of Intellectual Property in FinanceDr. Gouri Gargate

I s there a link between Atmanirbhar Bharat and the Intellectual Property? Is it possible to become Armanirbhar by creating and

exercising intellectual property rights? What are the potential areas in the IP domain that need attention of the professionals in the field of finance and compliance? The author has made an attempt to answer these questions in this article. The article deals with eight types of IPs out of which Patent, copyright, industrial design, trademark, and Trade Secrets are the five most important types. The article highlights the vast potential for the effective utilisation

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research organisations and academic organisations. Most of the focus on valuation and taxation concepts in India concentrates on tangible assets while there is huge scope in the areas of IP. The article concludes that If all stakeholders take advantage of IP instrument, there is a possibility that IP can help and contribute in building up trillion-dollar economy, and make India –Atmanirbhar.

Labour reforms agenda–Perspectives of the new labour codesAnupam Malik and Jorawer Singh

T he new labour codes not only extends the protection to those who needed it the most, but also helps in deciding the quantum

of benefits available in much simpler unambiguous terms. The subjective interpretation by officers and middlemen is getting curtailed, ushering in a transparent and collaborative work environment in the organisation, which is further assisted by local level bi-partite dispute resolution mechanisms being promoted under the codes. Simpler, consolidated law no doubt will help is easy understanding, implementation, compliance, reporting and record keeping for compliance professionals. The organisations stuck at 99 “on-role employees” for fear of stringent exit /retrenchment /closure conditions can now add on 200 more people and can test their potential to expand without fear, reaping in benefits of the “economies of scale”. The inclusion of “sales promotion employees”, “interstate migrants”, “gig /unorganised employees” marks a major step towards the “universal social security” for all.

Corporate Governance in India – Concept, Compliance and the way forwardP. Raju Iyer and Rakesh Shankar Ravisankar

E ffective Corporate Governance practices present opportunities to manage risks and add value to business operations thereby

these practices are rightly viewed as a differentiator in promoting sustainable competitive advantage. There is a global consensus about the objective of ‘good’ Corporate Governance - maximizing long-term shareholder value to all stakeholders. Indian belief and practice of “Vasudhaiva Kutumbakam” [Entire Globe is a single Family] has invited multi national corporates from all spheres of the business operations to operate from India and out of India. Further it has to be appreciated that to promote sound corporate governance the management has to adhere to strict compliance standards. An increasing amount of empirical evidence throws into light that good corporate governance contributes to competitiveness and long-term value creation. The article concludes that the way forward should be that Corporate Governance should not only monitor the company’s performance and compliance but also monitor and manage potential conflicts of interests of Board, Management and other stakeholders for which the momentum will come from the market forces and industry best CG practices.

Listed Companies Under CIRP / Liquidation – Remedy for ShareholdersMilind B. Kasodekar and Amar R. Kakaria

S ince 2016, Insolvency and Bankruptcy Code has helped hundreds of ailing companies to revive which has immensely

benefitted various stakeholders ~ Lenders, employees, creditors, suppliers, society, banks, government departments as well as shareholders. Even large corporate houses have been positively exploring this avenue to boost up their growth plans and this process is likely to gain further momentum due to ongoing economic slowdown after COVID-19 outbreak. With multiple success stories across different industries in recent past, there is likely to be an increasing demand for ailing listed companies with proven track record. Needless to mention, with continued listing

status, the chances of revival would be higher and shareholders have better chance of getting an exit opportunity instead of facing complete value erosion of their investments in such companies.

Some important aspects of the Negotiable Instruments ActVadapalli Srinivas

T he Negotiable Instruments Act, 1881 (NI Act) is perhaps among the very important old legislations that have stood the test of

time except for some consequential amendments over more than a century. The only tweaking that became necessary are the ones dealing with penalties in case of dishonour of cheques. The article discusses and analyses some important aspects of the said NI Act in three parts namely Analysis of certain important sections, Analysis of important judgements of Supreme Court and High Court and Analysis of the amendments to the NI Act. While dealing with the amendments, the article concludes that Section 143 A of the NI Act is applicable prospectively, that is, with effect from 01.09.2018 and Section 148 of the NI Act is applicable retrospectively

Competition Law and Health Care Sector: Contemporary PerspectiveDr. Susmitha P. Mallaya

H ealthcare sector has become a highly competitive market where it is difficult to afford the health services including medicines by the

common man in India, especially in the wake of outbreak of COVID-19 pandemic world over, loss of both livelihood and employment opportunities. Though, right to health is recognised as the basic fundamental right by the Supreme Court of India, it has become a challenging task for the States and Central Government to meet the needs of people to protect their health. Unlike the National Health Policies implemented for the citizens in the developed countries, in India, burden of health cost is self-funded by the patients and their families. Hence, they are the primary convalescent of the health system in India. In this regard, the role of Competition Commission of India (CCI) becomes pertinent being a market regulator of sectors including health care. They have come up with a Policy Note which focuses on the idea of making markets work for affordable Health Care. While deciding the cases before them, they have observed that many of the anti-competitive practices are prevailing in the health care sector. Nonetheless, CCI has been using, consistently, advocacy measures as part of its functions to regulate and bring awareness of such practices adopted by the stakeholders in the sector. It has also perceived that information asymmetry in health care sector has significantly restricted the choice of consumers in the health care sector. The issues that arise in this sector are many, it consists of health care professionals, pharmacists, lab technologists, policy frame work of health ministry etc. In March 2020, cease and desist order was issued by CCI against certain pharmaceutical companies for entering into anti-competitive horizontal arrangements with stockist and druggist association. Hence, in the present scenario, there is an enhanced risk of cartelization also in the health care sector with regard to the supply of the essential medicines to their distributors by the pharma companies in the wake of pandemic as well as tie in agreements with hospital network and laboratories which will have an adverse impact on the consumers.

Role of Independent Directors – “Bhishma Way or Jatayu Way”Sudhakar Saraswatula

I ndependent Director is given a very significant importance both under the Companies Act, 2013 (CA 2013) and the SEBI

(Listing and Disclosure Obligations) Regulations, 2015 (Listing Regulations). Independent Directors are seen as catalysts of change and have to facilitate the corporates to navigate through the growing complexities and ever-increasing compliances of

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Legal World P-117nLMJ 02: 02: 2021 In our opinion, neither Section 192 IPC

nor Section 199 IPC, incorporate the principle of vicarious liability, and therefore, it was incumbent on the complainant to specifically aver the role of each of the accused in the complaint.[SC]

nLW 09: 02: 2021 The question as to whether the notification dated 24th March 2020 applies to a particular petition that has been filed prior to the said notification or not is also a question to be determined by the Bench of the NCLT and not by the Registrar of the Tribunal.[DEL]

nLW 10: 02: 2021 Further, the mere fact that the Gujarat Act might apply may not be sufficient for the writ courts to entertain the plea of Respondent No. 1 to challenge the ruling of the arbitrator under Section 16 of the Arbitration Act. [SC]

nLW 11: 02: 2021 There being no concluded contract, there could be no question of any breach on the part of the Appellant or of damages or any risk purchase at the cost of the Appellant.[SC]

nLW 12: 02: 2021 In the facts of the present case, the Principal Secretary to the Government of Haryana would be ineligible to be appointed as an arbitrator, since he would have a controlling influence on the Appellant Company being a nodal agency of the State.[SC]

law. Under CA 2013, they have to inter alia perform their duties as director and also comply with the code of conduct as per Schedule IV. . In the case of a listed company, they also have to discharge their obligations and responsibilities as required under the Listing Regulations. The article while deliberating the dilemma and challenges faced by an independent director presented the contrasting approach displayed by Jatayu in the epic Ramayana and Bhishma in the epic Mahabharata, when they faced a similar situation of rescuing a hapless woman. The author concludes with reference to independent directors that when we see some injustice or some problem, and take a decision, we have only two options - either close our eyes to it or do something about it - follow "the Bhishma way" or "the Jatayu way" and whichever way we choose remember there will also be a result - "the Bhishma result" or "the Jatayu result".

Uniform Face Value for Listed Equity Shares –Need of the HourJanak M. Shah

T he Indian equity market is flooded with 5000+ listed companies, each having its own freedom in deciding the face Value of its

equity shares. As a result, in most industries, there are number of companies having different face value of their equity shares. Such a high degree of heterogeneity in face value does not allow investors, a true and fair inter-company comparison by using some of the basic market and financial statistics. Investors expect the market to provide at least basic comfort level in making meaningful comparisons and facilitating thereby in taking right ‘buy-hold-sell’ decisions. This article is an attempt to highlight the urgency for adopting a uniform face value approach.

Anomalies in PIT Regulations intentional or un-intentional!Makarand Joshi

W hile interpreting and applying PIT Regulations, predominantly SEBI relies on purposive interpretation. Many times words

are read in larger context to serve the cause. However there are some occasions where words are not serving the cause and may need amendment in Regulations. This article is dealing with such intentional or un-intentional wording in PIT Regulations!

109

105From The Government P-127n Relaxation on levy of additional fees in filing of e-forms AOC-

4, AOC-4 (CFS), AOC-4 XBRL and AOC-4 Non-XBRL for the financial year ended on 31.03.2020 under the Companies Act, 2013

n Companies(Incorporation) Amendment Rules, 2021 n Commencement Notification dt 22.01.2021n Companies (CSR Policy) Amendment Rules, 2021 n Commencement Notification dt 22.01.2021n Scheme for condonation of delay for companies restored on

the Register of Companies between 01 December 2020 and 31 December 2020. under section 252 of the Companies Act. 2013

n Clarification on spending of CSR funds for Awareness and public outreach on COVID-19 Vaccination programme

n Clarification on holding of AGM through VC other OAVMn Revision of Monthly Cumulative Report (MCR)n Relaxations relating to procedural matters –Issues and Listingn Relaxation from compliance with certain provisions of the SEBI

(Listing Obligations and Disclosure Requirements) Regulations, 2015 due to the COVID -19 pandemic

n Norms for investment and disclosure by Mutual Funds in Exchange Traded Commodity Derivatives (“ETCDs”)

n Revision in Daily Price Limits (DPL) for Commodity Futures Contracts

n Review of Volatility Scan Range (VSR) for Option contracts in Commodity Derivatives Segment

n Amendment to Regulation 20(6) of SEBI (AIF) Regulations, 2012n Monthly Reporting of Portfolio Managersn Transfer of excess contribution made by Stock Exchanges

from Core SGF of one Clearing Corporation to the Core SGF of another Clearing Corporation

n Refund of security deposit

Other Highlights P-147

v NEWS FROM THE INSTITUTE

v MISCELLANEOUS CORNER

v GST CORNER

v ETHICS IN PROFESSION

v CG CORNER v STARTUP INDIA

nLW 13: 02: 2021 This Court has constituted the aforesaid Confidentiality Club keeping in mind the objection, of Xiaomi, to a “two-tier” Confidentiality Club, as sought by Interdigital.[Del]

nLW 14: 02: 2021 The onus was entirely upon the employee to prove that she had worked continuously for 240 days’ in the twelve months preceding the date of her alleged termination, which she failed to discharge.[SC]

nLW 15: 02: 2021 When the Bar Council of India appears to be discharging its regulatory functions, it cannot be said to be an ‘enterprise’ within the meaning of Section 2(h) of the Competition Act.[CCI]

nLW 16: 02: 2021 The Developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer‘s Agreement.[SC]


Budget Analysis 2021-22


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Dream Plan for the Economy

CS Nagendra D. Rao, President, ICSI

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May All be Happy, May All be Free from Illness. May All See what is Auspicious, May no one Suffer.

The primary reason as to why the Budget Session of the Parliament is one of the most significant events can be attributed to the fact that it is this very day and the speech of the Hon’ble Minister of Finance shares the Dream Plan for the economy and the vision as to where the goal plans, expectations, initiatives and actions lie as regards the various comprising segments of the Economy.

The six pillars on which the Foundation of the budget for the financial year 2021-22 has been laid are the ones demanding maximum attention in the present times. Health & well-being, Physical & financial capital & infrastructure, Inclusive development for aspirational India, Reinvigorating human capital, Innovation & R&D, and Minimum Government & Maximum Governance; each pillar comes with its own set of needs and yet one which will reap far-reaching and long-term impact.

Amongst others, since Governance forms part of the Budget as one of the six pillars, the same is accompanied by dedicated actions and initiatives, the intended course is heartily welcomed by the Institute of Company Secretaries of India (ICSI).Unveiled by the Hon’ble Finance Minister Smt. Nirmala Sitharaman on 1st February, 2021, the Union Budget 2021 proposes several reforms for the India Inc. including the persuasion of digital transformation in the Regulatory arena building a new MCA-21 3.0 using data analytics, artificial intelligence, and machine learning. With AI based features being inculcated, the times to follow shall witness a much stronger governance framework encasing the Indian

Corporate Sector and a much enhanced role play for the Governance Professionals.

The reforms proposed under the Companies Act, 2013 as well as the Limited Liability Partnership Act, 2008; from amendment in definitions to decriminalization of offences, come across as definitive and resolute attempts to enhance the ease of doing business in the Indian Diaspora.

Moves like no income tax return filing for senior citizens above 75 years, having only pension and interest income, and setting up of faceless dispute resolution committee for individual tax payers, it is indeed applaud-able on the part of the Government that ease is being provided in compliance under the Taxation Laws as well. With the Institute taking pride in being an extended arm of the Regulatory Authorities, the new rules for removal of double taxation for NRIs, and a reduction in the time period of tax assessments among other measures are highly appreciated.

With the Securities Markets forever being in limelight as one of the major representatives of the economic positioning of the nation, the proposition of a ‘one market code’ for rationalizing different security market regulations is a welcome step towards enhancing the advancement in Ease of doing business (EODB) index. Allowing One Person Companies (OPCs) to grow without a restriction on paid up capital and turnover, to convert in any type of company at any time, and alterations in the residency limit would not only simplify the business processes for such companies but also bring much more businesses in the organized sector which again would strengthen the governance scenarios further.

Shifting focus upon the remaining pillars, a boost for the healthcare sector with a significant increase of 137% in the outlay and the decision to spend a major chunk on Covid-19 vaccine development and inoculation is a much needed step.

There is a complete agreement with the thought of the Hon’ble Finance Minister that for achieving a 5-trillion dollar economy, our manufacturing sector has to grow in double digits on a sustained basis and our manufacturing companies need to become an integral part of global supply chains.

If the entire Budget was to be looked at both holistically and categorically, it is indeed quite heartening to witness the efforts made in placing focus on the various sectors, segments and comprising components of the Indian Economy. Furthermore, it would indeed be a greater delight to play our roles both as Governance Professionals and as an Institute in rendering the propositions of the Budget a grand success.

For as we all believe,

Together we can. Together we will.


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Anil Sharma, Chartered AccountantPart-time Member of National Financial Reporting Authority, Adjunct Faculty with the Indian Institute of Corporate Affairs., Ex-Independent Director of UCO Bank.

In the Union budget, 2021, Finance Minister Smt Nirmala Sitaraman has made some important proposals to ensure availability of sufficient flow of funds for the economy which is on the recovery path. The important

amongst them are recapitalization of public sector banks (PSBs) with 20,000 Crores and setting up an asset reconstruction company and an asset management company which shall take over ever increasing stressedassets burden of the banks.

Capital infusion will improve their capital position and they would be in a better position to give credit to the industry and trade.It would also help the banks to comply regulatory requirements under BASEL norms. On the other hand, taking away bad loans from the banks’ balance sheet would also be helpful to them in increasing credit flow in the market as stressed assets increase provisioning requirements. Thrust on Mudra loans and additional credit limits/loans provided to the borrowers during COVID 19 period were being suspected as worrisome development in increasing the stress assets with the banks to their highest in nearly two decades. It was estimated that stressed assets with the banking sector has already touched 14% of its total loans. Idea of floating Asset Reconstruction Company (also being referred as Bad Bank) and asset Management Company are very wise and timely moves. Banking sector shall be able to concentrate on fresh credit growth after transferring the stressed assets from their balance sheets to the proposed asset reconstruction company and they shall not be required to spend most of their time and energy in recoveries from bad loans.

Management and disposal of stressed assets shall be handled by specialised company which may dispose of the assets to alternate investment funds (AIFs).It is interesting to note that the banking industry has been advocating setting up of bad bank since 2016 when the first wave of stressed assets was witnessed by the banks.

Another important announcement in the Budget was setting up a Development Financial Institution (DFI) for the long term fund requirements of the economy. The Finance Minister has allocated Rs. 20,000 crores towards its capital and it is proposed that sufficient remaining resources shall be generated through debt financing to cater to long term fund requirements of Rs 6—70 Lakh crores in next four –five years. It is worthwhile to mention here that National Infrastructure Pipeline (NIP), as announced by the Government in 2018 has further expanded to include 7400 projects having long term fund requirements of exceeding Rs 100 Lakh crores in next four five years. DFI shall also address the Liquidity mismatch of commercial banks as they were using short term funds to finance long term projects. In the recent past, the banking sector has witnessed generation of very high level ofstressed assets due to this factor.

One more announcement relating to the banking sector in the Union Budget, 2021 is the proposed disinvestment of two small public sector banks in addition to IDBI Bank. Though the name of the two banks have not been disclosed but it is expected that small but profitable public sector banks will be offered. The Government is proposing to bring legislative amendments in the parliament to enable it to do so. We have witnessed the merger of 13 public sector banks in recent past which indicates the Government’s intention to restrict its ownership to 4-5 large banks. Some of the very large non-banking financial companies, operating in India, may be the potential buyers for these small banks as Reserve Bank of India is working on bringing regulatory provisions for them at par with the banks. In that situation, it would be wiser for them to operate as a bank rather than a NBFC.

Banking Sector in Union Budget, 2021

The Budget will boost and strengthened the markets infrastructure framework for capital formation

Mr. Ashishkumar Chauhan, MD & CEO, BSE

Overall, the budget is big on large picture and vision despite the calamitous period we have witnessed last financial year. I would give it 9.5/10.The markets were buoyant reacting to the budget proposals as no new

taxes and levies have been imposed. The rationalization of tax structures for FPIs, NRIs, Invite and REITs will also help attract more funds for capital formation in India. A consolidated securities market act, domestic gold exchange regulator, LIC IPO, other PSU Disinvestment’s by showing a clear cut forward path has given tremendous boost and strengthened the markets infrastructure framework for capital formation. Tax efficient zero coupon bonds for infra financing will bring in significant flows and enhance the role of the capital markets

in nation building.


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Mr. C. VR. Rajendran, Managing Director & CEO, CSB Bank Limited

The budget is able to bring back the positive mood in the market and in the economy by rightly addressing the concerns of different segments. The government has taken bold steps for fiscal management which

are good for our economy. Announcements towards privatisation, disinvestment, and capitalisation …all will give a big boost to the economic stability. The moves for setting up an ARC for cleaning up the Bank Balance Sheets, DFI for project finance, privatisation of banks etc are key announcements that are aimed at making the systems more efficient. The increase in deposit insurance limit from existing Rs 1 lakh to Rs 5 lakh will infuse more confidence in retail customers. The allocations towards health, public distribution, agriculture,

MSME, education, employment creation, skill development, - all shows government’s commitment to have a balanced economy with primary focus on health and welfare of the people.

Promising and positive especially considering the V shaped recovery in the Economy

Mr. C J George, Managing Director of Geojit Financial Services Ltd

It is dream budget as it has provided more benefits than anticipated. It appears to be promising and positive especially considering the V shaped recovery in the economy. For the BFSI sector, raising the

FDI limit in insurance to 74 percent from 49 percent is a step towards embracing privatization and I feel it is the right direction. The proposed Asset Reconstruction and Management Company will help clean up the banks’ balance sheets. The proposed unified securities market code will help reduce compliance costs as well as boost the ease of doing business in the financial markets. I believe that India’s financial sector is headed for much better times. The positive budget announcements have been well received by the stock markets.

CS Ashish Garg, President, Corporate Secretaries International Association, (CSIA) Hong Kong Immediate Past President, The Institute of Company Secretaries of India (ICSI)

The heat and surge felt days and weeks prior to the presentation of the Fiscal Budget is sufficient to portray the significance of the document, its constituents and its long ranging and far reaching impact on each and

every component of the economy. The Indian Corporate Sector with its chunk of role played in the economic diaspora has always vied the Budget with great expectations and anticipation. The lawmakers too have while fully understanding this role have accorded due substance to this segment in the process of budget making on a year-on-year basis. It is for this reason that the past years have witnessed some of the major reforms

redefining the course of functioning and operations of the Indian businesses as well as the professionals. While on one hand the goal of enhancing the ease of doing business is being accomplished; the impact on the Indian growth trajectory has been all positive.

If the year gone by is to be re-winded and understood minutely, it would not be an exaggeration to say that both the Lawmakers and the Regulatory Authorities have not only stood strong in their roles but have placed exceptional efforts in reposing the faith of the populace in the Economy and its growth story. The Rs. 20 Lakh crore packages rolled out under the aegis of Atmanirbhar Bharat followed by today’s Fiscal Budget for the Financial Year 2021-22 have not only reinstated but reiterated faith in the Government’s view of Minimum Government, Maximum Governance.

If one was to look at the Union Budget presented by the Hon’ble Minister of Finance and Corporate Affairs, Smt. Nirmala Sitharaman, the aspects covered, the decisions proposed and the reforms put to order as regards companies, is quite impeccable.

The announcements in Budget for decriminalization of LLPs, revision of definition of small companies, incentives for incorporation of OPCs, strengthening the framework of NCLT and launch of MCA21 version 3.0 adding modules for e-scrutiny, e-Adjudication, e-Consultation and Compliance Management will definitely a leap forward for the Indian economy to be in US$ 5 trillion economic club.

Maximum governance, minimum government reiterated: Union Budget 2021

Big boost to the Economic stability


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Mr. Deepak Parekh, Chairman, HDFC Ltd.

Three aspects stand out in this budget. First, there were no surprises in terms of higher taxes or cess. Consequently, markets reacted favourably, deeming the budget as non-disruptive. Second, is the

recognition that as India builds, India grows. Increased capex in infrastructure if implemented in a timely manner will have a multiplier impact on various sectors in the economy and will create jobs. Third, is the commitment to pursue long-pending reforms such as privatisation of public financial sector entities. The key monitorable is how quickly legal amendments are done as it is imperative that the government shores up non-tax revenues.

The announcement of an asset reconstruction company and asset management company to consolidate and takeover existing debt is positive move. This will help financial institutions that are struggling to raise capital and impairing their ability to lend. India’s low bank credit growth of sub 7% is a function of risk aversion on a part of borrowers and also the NPA woes of banks. Disclaimer: The information contained herein (including any accompanying documents) is confidential and is intended solely for the addressee(s). If you have erroneously received this message, please immediately delete it and notify the sender. Also, if you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution or taking any action in reliance on the contents of this message or any accompanying document is strictly prohibited and is unlawful. The organisation is not responsible for any damage caused by a virus or alteration of the e-mail by a third party or otherwise. The contents of this message may not necessarily represent the views or policies of Housing Development Finance Corporation Limited.

Dattatraya Joshi, Executive Director & Secretary HiKoki Power Tools India Private Limited, (formerly known as Hitachi Koki India Private Limited)

In her budget 2021-22, the Union Finance Minister has presented a comprehensive package that will accelerate the all-round economic growth. The special focus on the infrastructure and ease of doing business, is a

welcome move. It is indeed a landmark budget, which will boost the confidence level of all stakeholders, just after the pandemic.

The FM has announced many bold and unconventional stimulus, which will accelerate the economy. Though these measures are going to increase the fiscal deficit to 9.5% in FY21, given the circumstance, the FM has done a right job, by taking the risk of increased fiscal deficit. However, this is only a pain in the short term and once all these measures start giving result, this will reverse the trend of high fiscal deficit.

As an outcome of the higher fiscal deficit, most of the funds are being used for capital expenditure. With this, Government has given higher thrust towards infrastructure (like, strengthening roadways, railways, metro rail, port development, micro irrigation etc. This will go a long way in building the nation.

The FM has announced several measures towards, ease of doing business. The announcement like, faceless Income tax Appellate Tribunal centre, Corporate affairs MCA21 portal, reducing the time limit of re-opening Income tax proceedings to three years form six years, enhancement of the threshold limit of the definition of small Companies (which will predominantly encourage all start-ups), will certainly boost the confidence of the investors at a large and encourage them to invest more and build capacity. In turn, this willdirectly help in creation of employment.

The Government is continuing to focus on affordable housing, by extending the additional deduction of Rs. 1.5 lakhs for loans taken till March 2022, for the purchase of affordable houses. In additionto this, Government’s move to allocate higher capital outlay, showcases its intention to build capabilities in India to become stronger, healthier and more resilient society.

The bold announcement by the FM on privatisation of two Public Sector Banks, in addition to a General Insurance Company, IDBI Bank and the IPO of LIC, is commendable. This will help in improving the performance of some of the struggling PSUs. Similarly, the scrappage policy of the Government is a good initiative, which will push the demand for Auto sector.

Overall, it is growth oriented and demand push budget.

Push for growth, Infrastructure and Ease of doing business is welcome

Markets reacted favourably, deeming the budget as non-disruptive


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Mr. J. C. Sharma, Vice Chairman & Managing Director, Sobha Limited

1. “We welcome the announcement of the well thought out Union Budget 2021-22 by the Hon’ble Finance Minister today which will propel growth through public investments, raise demand and create jobs, savings, and consumption. Overall the Budget proposals if seen in the backdrop of the pandemic’s devastating impact, resulting in weak revenue inflow and high expenditure towards providing essential relief to the vulnerable sections of the society – it is indeed commendable.” 2. “It is heartening to note the Government’s focus on “Housing for All” and affordable housing as priority areas. Further the announcement of tax holiday for the affordable housing developers for one more year for

developing affordable rental housing projects as part of Pradhan Mantri Gareeb Awas Yojana- Urban to ensure affordable housing for the migrant workers is admirable.”

3. “Needless to add, these proposed steps will strengthen the overall real estate sector and boost confidence amongst buyers and builders alike. However, if long standing demands of the sector like granting industry status, rationalizing the GST rates (by allowing the input tax credit), access to funds and ensuring longer repayment cycles, lowering tax on raw materials, and increasing Rs. 2 Lakh tax rebate on housing loan interest rates to at least Rs. 5 Lakh could have been taken - it would have gone a long way to support the real estate developers and generate healthier housing demand. This would have had a lasting positive ripple effect on the national economy.”

Dr. G.B. Rao, Past President, ICSI

Economic Development and a Caring Society with no raise in Tax/Cesses is welcomed by one and all. To make individual taxpayers’ life easier, senior citizens above the age of 75 years, who only have pension and interest as a source of income will be exempted from filing the income tax returns. Amendment/Revision in the Definition/Rules regarding Small Companies, One Person Companies, Mergers/ Amalgamation inter se will reduce compliance burden and promote investment and ease of doing business.Legislative Changes: A Securities Markets Code will be introduced to consolidate four Acts including

the SEBI Act, 1992 and the Government Securities Act, 2007. The Insurance Act, 1938 will be amended to increase the permissible FDI limits in insurance companies from 49% to 74%, and allow foreign ownership and control with safeguards. The Companies Act, 2013 will be amended to revise the definition of small companies by increasing threshold for paid up capital (from Rs 50 lakh to Rs 2 crore) and annual turnover (from Rs 2 crore to Rs 20 crore). Certain offences under the Limited Liability Partnership Act, 2008 will be decriminalised. The Deposit Insurance and Credit Guarantee Corporation Act, 1961 will be amended to ensure that depositors get time-bound and easy access to their deposits to theextent of their insurance cover. The minimum loan size for NBFCs to be eligible for debt recovery under the SARFAESI Act, 2002 will be reduced from Rs 50 lakh to Rs 20 lakh.

Revision in rules under Companies Act 2013, easing norms for setting up of One Person Company (OPC) by reducing the residency limit of NRIs from 182 to 120 days. Non-resident individuals are now enabled to set up One Person Companies (OPC) with no paid up capital and turnover restrictions, reducing registration timeline from 182 days to120 days

Now the scheme of fast track merger can be entered into between: two or more small companies; holding company and its wholly-owned subsidiary company; two or more start-up companies; one or more start-up company with one or more small company.

The Budget will promote investment and Ease of Doing Business

Mr. Gopal Krishna Agarwal, FCA, National Spokesperson of BJP, economic affairs at Bhartiya Janta Party (BJP)

With 34 % increase in capital expenditure, the Govt has met the expectations of all on increasing spend, this will help economy all round. Health has been a big focus of this budget, increasing health expense by 137

% will take india to have global footprint in pharma sector. Agriculture sector with commitment of 150% of MSP on cost, and setting up of Agri infra and development funds for strengthening APMC mandis and increasing procurement of wheat and paddy etc by about 120 %, points towards our focus of agriculture. MSME has got good support by tweaking import and custom duties on basic raw materials and increasing them on those products that MSME manufacture domestically.

This is very innovative approach that inspite of all resource constraints, Govt has not restricted itself on expenditure and has also given a path for fiscal consolidation.

Government has given path for fiscal consolidation

Positive ripple effect on the National Economy


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CS N K Jain, Past Secretary & CEO

The Hon’ble Finance Minister admirably rose to the exceptional challenges in making the Budget for the Financial Year 2021-22. Key Highlights are as under:-

No New Taxes: The most noteworthy aspect is that no additional burden has been proposed. Economic growth considerations took centre stage.Focus on CAPEX: More than one third increase in the budget allocation for infrastructure sectors will help create demand and improve country’s competitiveness.

Significant Reforms Announced: (i) Strategic sale of public sector companies including two Public Sector Banks and a General Insurance Company (ii) Monetization of Assets (iii) Strategic approach to government ownership of businesses (iv) Increase in the limit of FDI in the Insurance Sector; and (v) Additional funds for bank recapitalization.Significant Changes in Company Law: One Person Companies with very few restrictions proposed to incentivise start-ups. Compliance burden on approximately 2 lac companies will be substantially reduced as such companies will stay “small” with 4 times higher capital ( Rs 2 crs against Rs 50 lacs now) and 10 times higher turnover (Rs 20 crs against Rs 2 crs now).One Securities Code: Proposal to introduce a single unified securities market code will help eliminate overlapping and outdated laws. The Government intends to consolidate the SEBI Act, Depositories Act, Securities Contracts (Regulation) Act and Government Securities Act. It will improve ease of doing business. Bond market would be a key beneficiary of the unification of laws. Ease of Compliance Burden: Several steps have been announced to ease the compliance burden on direct tax payers. Information based assessments will help reduce harassment of taxpayers.I will rate this Budget as one of the best in recent times. Hope the focus will now shift to executing the intent shown in the Budget.

CS Makarand Lele, Past President, ICSI

India Budget 2021 gives clear indications of emergence of India from the unfortunate historical Pandemic phase. Budget reforms & measures are clearly supportive to the progressive growth of business and taking Indian economy

to next height. Government has rightfully refrained from increasing any additional tax burden on the society at large at this emergence phase. It has rather provided boosting measures for make in India, MSME and Start-ups.

Budget has shown a trend of moving over to a self-certification & self- reliance zone over a regulatory and licensing regime. Measures like abolition of GST audit, increasing the limit for small companies, changes in tax

audit pattern, modernization of regulatory offices, consolidation of capital market laws, removal of TDS on dividend payments, increasing limits for restricted FDI’s sector will further add values to Ease of Doing Business policy. Introduction of de-criminalization of offenses, facilitation of e-courts, e-adjudication, e- scrutiny, reduced penalties for small companies, rationalization in labour laws are some of the corporate reforms, India was looking forward for couple of years. Attachment of penal provisions to CSR compliances & transfer of unspent amount to government funds will provide more funds in the social development. These changes in CSR laws will boost social development scenario in India. On this background, Professional institutions & professionals are required to review and realign their strategies and approaches. Digitalization in compliance & regulatory zone is on fast forward mode. In coming 5 years every professional in order to survive need to identify completely new ways and roads to travel & survival. They also need to adopt new techniques and new consulting approaches. I am sure under able leadership of CS Nagendra D. Rao, the newly elected President, ICSI will launch new professional reforms and will emerge as strong option available in Indian consulting league. I therefore welcome the budget 2021 and compliment government of India for introduction of much needed progressive reforms.

Mr. M. A. Yusuff Ali, Chairman & Managing Director of Lulu Group International

The Union Budget 2021 presented by our Hon’ble Finance Minister is indeed a very good budget which is in line with the great vision of our Hon’ble Prime Minister. The Budget will help to propel the Indian Economy

even amidst the global pandemic challenges. The Budget has given a huge thrust to healthcare along with infrastructure, education, development and research. As an NRI businessman I welcome the announcement of One-Person-Companies or OPCs in India by NRIs which will be a game-changer especially for the start-up sector and the new generation businesses

The Budget will help to propel the Indian Economy

Budget reforms & measures are taking Indian economy to next height

Economically Sensible and Socially Sensitive Budget


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Mr. Raj Vikash Verma, Chairman – AU Small Finance Bank Limited

The Union Budget 2021-22 can well be a watershed year for the country’s Budget making exercise. It can be described as a bold budget that could be a game changer for the economy in the post-COVID era. It has a slew of measures and policies that could

unleash the animal spirit and bring out the best in terms of Private investments across all sectors, real economy and the financial sector. The fear that the Government expenditure, which is largely capex is going to crowd out the private investment is a misnomer. Rather the Government spend will lead and stimulate the private investments, giving right kind of confidence and direction to the Investors and the market in general. In my view, stepping up the Government spend exponentially even at the cost of higher fiscal deficit, is a step in the right direction. While the Government may appear to be excessively relying on the revenue expectations from asset monetization and sale of investments in PSEs/PSBs, besides tax collections and borrowings, it is a well taken call. Surely

the Government will take calibrated measures, based on the state of the market. The Budget also takes a medium to long term view and has sought to address the issues of long term stability by signalling important institutional and policy changes, viz. new institutional format for Infrastructure financing, privatization of PSBs, new ARC or bad bank for buying out and managing banks’ NPAs etc. Many of these measures are strategic in nature, the impact of which will unfold gradually over 3 to 4 years. With an eye on GDP and employment, the Government’s spend on infrastructure, both in terms of quality and quantum, besides renewed push to social sectors such as health and education, are going to script a good growth story. The Budget cannot be faulted for not addressing the big picture, as it has indeed brought into focus a mix of small and big picture comprising short/medium and long term view of the economy, covering the commercial, financial and social sectors through both fiscal and market support. This is a bold budget in several ways. It makes a major departure from some conventional thinking – we have in the past, been too obsessed with the concept of fiscal deficit remaining within the FRBM limits. I personally feel the demand of the time and the need of the hour is to open up the Purse, keep pushing the limits and discover new boundaries. Time is just right to give a go-by to the FRBM Act and give the right signals to the stake holders and the market, domestic and international, even if it means fiscal deficit exceeding 9%. Similarly, the banking sector could be in for major overhaul both in terms of sentiments and fundamentals through several banking reforms announced in the Budget. With timely and adequate supply responses (real economy) forthcoming, through a slew of production-linked incentives and adequate flow of credit at lower costs, the inflationary pressure as well as the pressure on interest rates and exchange rates could be well managed by RBI. That will be a real icing on the cake, to my mind. A big Thumbs Up to the FM.

CS Preeti Malhotra, Past President, ICSI & Chairperson, Smart Group

With the FY2021-22 budget, the government has given a much needed shot in the arm to the Indian Economy, allowing it to recoup and reinforce its goal of becoming a $5 trillion economy.

The budget’s focus on self-reliance and the spending on Physical Capital and mega Infrastructure projects is indicative of a risk tolerant regime that has not succumbed to the temptation of easy options like COVID tax or health tax. The hike in the FDI limit for investment into the insurance sector along with the willingness of the government to use FDI for national infrastructurewill further pique the interest of foreign investors looking to invest in India. We hope that the Indian government will also capitalise its position in the FDI market by creating a conducive atmosphere for foreign investors by taking small but significant steps such as alleviating

foreign investor concerns regarding matters relating to taxation of their global income. This will allow investors to spend more time in India to tend to their investments andwill catapult India into the League of Nations such as USA and China who remain atop the list of global FDI investment consistently.

Goal of becoming a $5 trillion Economy

Game changer for the economy in the Post-COVID era

Sanjiv Puri, Chairman & Managing Director, ITC Limited

It is a visionary and growth-oriented budget that provides further impetus to build India’s competitiveness as also foster inclusive growth. The enhanced capital expenditure, particularly on infrastructure, will create livelihoods and provide

an accelerated thrust to the V-shaped recovery trajectory. The heightened spends on agriculture and rural infrastructure development are aligned to the comprehensive policy interventions aimed at creating competitive agri value chains to raise farm incomes. These augur well for the economy and will spur a virtuous consumption-investment-employment cycle.

Visionary and growth-oriented Budget

Mr. Saugata Gupta, Managing Director and CEO, Marico Limited

With the announcement of the Union Budget 2021, the Honourable Finance Minister has taken the monumental task of providing stimulus to consumer demand as well as taken the economic environment head-on, aiming for a fiscal deficit of 6.8% of GDP

whilst not making any major change in the taxation structure. Considering the challenges at hand in the face of the pandemic and the slowdown pre-Covid, the budget is well balanced, focusing on key measures including a clear spending focus on health care, vaccination and development of physical infrastructure. It prioritises spending to revive the economy after an unprecedented crisis, despite limited fiscal headroom, which is certainly a big positive step, and will aid the industrial sentiment in India greatly. It has also detailed out inclusive development plans for the agricultural sector and this should help in sustaining the momentum of rural growth.Overall, this Union Budget ticks most of the right boxes with an encouraging capital infusion in infrastructure and funding the same

through prudent borrowing, divestment and restructuring of allocations without impacting consumers negatively. I believe that, going forward, this will bode well for generating demand, driving consumption and sustaining the growth momentum needed to revive the economy.

The budget is well balanced


EXPER

TS OPIN

ION

Mr. Thomas John Muthoot, Chairman- Muthoot Pappachan Group and Chairman CII Kerala State Council on B21

The budget is truly a transformative one as it pulled out all levers with its ambit to mark yet another successful attempt by the government to rejuvenate a pandemic ravaged economy. The bold measures which

encompassed almost all critical sectors of the economy are expected to galvanize the recovery process which has been set into motion. It is encouraging to note that the Finance Minister favoured a major expansion in government spending with a focus on capital expenditure to give a fillip to demand generation and strengthening the recovery momentum. The budget ticked all right boxes of lives, livelihood and growth which would propel the economy to an inclusive growth trajectory.

CS (Dr.) Shyam Agrawal, Past President, ICSI

~agV hagV g~ cI|, H$agV cIoZ H$mo`& Vwcgr àOmgw ^mJgo, ^yn^mZwgmo hmo`&&

O~ gy`© nmZr gmoIVm h¡ Vmo [H$gr H$mo nVm Zhr McVm Am¡a O~ ~agmVHo$ ê$n _| nmZr dmng ~agmVm h¡ Vmo g~Iwe hmo OmVo h¡, RrH$ Bgr àH$ma amOm Eogm hmoZm Mm[hE Omo Eogo H$a cJmE H$r [H$gr H$mo ^ma Zm cJo na O~ àOm H$mo BgH$m dmng cm^ XoVmo g~ Iwe hmo OmE&

VwcgrXmgOr H$hVo h¡ [H$ Eogm gy`© Ho$ g_mZ amOm ~µSo> ^m½` go àOm H$mo [_cVm h¡)

This shloka, sourced from the Tulsidas’s Ramayana, falls in perfect synchronicity with the Union Budget recently rolled out for the Financial Year 2021-22 by Smt. Nirmala Sitharaman, Hon’ble Minister of Finance & Corporate Affairs under the able

leadership of Hon’ble Prime Minister Shri Narendra Modi. The Government of India with this all-inclusive and comprehensive document has once again portrayed its intent and point-blank focus on rendering India a Global Superpower; a goal which can only be achieved by generating resilience and creating self-reliance.The thought of pursuing economic independence even as the nation and the world are recovering from the pandemic; is much embedded in the six pillars of health & well-being, physical & financial capital & infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation & R&D, Minimum Govt & Maximum Governance.The focus on digital transformation, the inclusion of Artificial Intelligence in the processes of Regulation, the minute detailing on aspects concerning India Inc. and bringing out apt reforms, all in all point towards a thoroughly contemporary and yet grounded approach. The current Budget with its reforms for Start-ups and Indian businesses, are creating the perfect pitch to make the nation one of the most favourable destinations for foreign investments. The Finance Bill and the taxation reforms proposed therein are a step ahead into establishing a greater confirmation with the goal of enhancing ease of doing business. As professionals, the Budget seems to be one of opportunities, and an optimistic futuristic outlook towards a sure shot ‘Atmanirbhar Bharat’, a resilient economy and a global super power.

Focus on making ‘Atmanirbhar Bharat’ , a resilient Economy and a Global Super Power

Rejuvenate a pandemic ravaged Economy

Mr. V.P. Nandakumar, Managing Director and Chief Executive Officer, Manappuram Finance Limited

A progressive and growth-oriented budget presented under difficult circumstances that has also given serious consideration to some of the persistent problems of the banking and financial services sector.

We are pleased that the FM has reduced the eligible loan amount for recovery under the SARFAESI Act for NBFCs. It will help in strengthening the NBFC sector by improving credit discipline among borrowers. The one concern we have is about the elevated fiscal deficit and its potential inflationary impact. Going forward, the onus will be on the government to ensure that the deficit levels are progressively brought down in tune with its projections

A progressive and growth-oriented Budget

Vellayan Subbiah, Chairman Cholamandalam Investment and Finance Company Ltd

The budget meets India’s current needs; a number of pro- growth policies and macro expenditure focused budget; would augur well for industries and the Country in total; A perfect fit for the economic position we

are in!”

A perfect fit for the Economic position


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M. S. Mani*, FCS PartnerDeloitte India Mumbai [email protected]

Sandeep Jaiswal* DirectorDeloitte India Mumbai [email protected]

Meenakshi Krishnamurthy*ManagerDeloitte [email protected]

The Economic Survey is themed around the “Once-in-a-Century Crisis” leading to a need to balance between saving lives and livelihoods. The sharp contractions in first quarter of 2020-21 has made a dent in India’s pathway towards achieving the USD 5 Trillion economy. However, the Union Budget puts forth a comprehensive 6 pillar trajectory to fast track India’s movement to become the fastest growing economy in the next two years. The cornerstones of the six-pillar policy are Health & Wellbeing, Physical and Financial Capital and Infrastructure, Inclusive Development for Aspirational India, Reinvigorating Human Capital, Innovation and R&D and Minimum Government, Maximum Governance. While the essence of the budget is to overcome the pandemic, the larger focus also remains on the need to restore the GDP growth by aiming for a target of 9% in 2021 and 7% in 2022.

Budget 2021 marks the introduction of a new era by heralding the introduction of a completely paperless

budget read out by the Hon’ble Finance Minister (FM) from a tablet/I-pad and made available to all sections of society through a mobile application called “Union Budget Mobile App”. While earlier budgets necessitated the printing and distribution of multiple documents and we were accustomed to seeing the FM carrying a bulging briefcase containing the budget papers, it was a pleasant surprise this time to see the FM embrace technology to share the budget with the Parliament and enable digital availability across the country. This was even more appreciable coming on the back of a global pandemic that has shaken the entire world.

The Economic Survey 2020-21, which has set the tone for a discussion on the economic realities based on which the Budget is formulated, labelled COVID-19 as the Once-in-a-Century global Crisis. Being a global pandemic, which has shaken the entire world, it would be instructive to consider the views of the International Monetary Fund (IMF). The report released by the IMF1 predicts that in the midst of

*The views expressed are the personal views of the authors

exceptional uncertainty, the growth of the global economy would be severely impacted, and some countries may report negative growth in 2021 and the growth pains may continue in 2022.

ECONOMIC SURVEY 2020-21

The annual report card of the economy is centred around the balance between lives and livelihood amidst the Once-in-a-Century ‘Synchronized Recession’. The survey justifies India’s strategy of Bayesian model2 to transform short-term trade-off between lives and livelihoods leading to a V-shaped economic recovery.

The contraction in GDP is 23.9% in Q1 of 2020 as compared to Q1 of 2019. Also, there is a 7.5% decline in Q2 as compared to Q2 of 20193. In line with the report released by the IMF, the survey projects a continuation of V-shaped recovery moving towards a GDP growth of 11% in 2021-22. This growth trajectory is largely contingent on the vaccination drive leading to further balance between lives and livelihood. 1https://www.imf.org/en/Publications/WEO/Issues/2021/01/26/2021-world-

economic-outlook-update2 Bayesian Model talks interalia about lives and livelihood3 Page 2 of Economic Survey 2020-21 Volume 1


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KEY AREAS HIGHLIGHTED BY THE ECONOMIC SURVEY

Area Suggestions

Social infrastructure, employment and human development

The survey exhibited the Government’s commitment on investment in social sector viz. education, healthcare, skill development, providing employment opportunity, housing, sanitation etc., in order to bring overall improvement in socio-economic indicators and achieving Sustainable Development Goals.

Defence against India’s Sovereign Credit Rating

Moody’s rating for India as on June 2020 is Baa3. However, based on various statistics ranging from average change in macroeconomic indicators to consumer price inflation, the survey suggests that the sovereign credit ratings do not reflect India's fundamental economic strengths.

The Survey further defends that past episodes of sovereign credit rating changes for India have not had major adverse impact on select indicators such as Sensex return, foreign exchange rate and yield on Government securities.

Inequality over poverty The Survey brings out the point that income per capita (as a proxy for economic growth) and inequality have similar relationships with socio-economic indicators. As an exception to other advanced economies, India’s economic growth and inequality converge in terms of their effects on socio-economic indicators. Therefore, continued focus on growth would also act as a panacea for poverty alleviation.

Focus on bare necessities

The survey constructs a new concept of Bare Necessities Index [‘BNI’] at rural, urban and all India level. The Index which analyses 26 indicators over 5 dimensions (water, sanitisation, housing, micro-environment and other facilities) indicates that compared to 2012 the bare necessities have improved across all States in the country.

Focus has been put more on reduction of variations in the access to bare necessities across States between rural and urban areas and between income groups.

Strengthening of financial institutions and overcoming ‘Original Sin’

The survey places a lot of emphasis on the regulatory forbearance and resulting banking crisis, which urgently needs discontinuation since the economy is on recovery mode. Adequate cleaning up of bank balance sheets to move away from bad lending practices, restrictions on forbearance, asset quality review, complete stop on zombie lending etc. are some of the measures outlined in the survey for the improvement of the banking infrastructure of the country.

Regulator for healthcare Introduction of a sectoral regulator that undertakes regulation and supervision of the healthcare sector has been brought on the table by the economic report card. It is expected that international best practices prevailing in Australia, Germany, Finland, Netherlands etc. may be followed while designing the sectoral regulator for healthcare.

Source: Compiled by the authors

Budget 2021-2022: Consolidating the Reforms Agenda


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FISCAL POSITION Hon’ble Finance Minister stated the following while presenting the Union Budget 2021:

Financial Year

Budget Expenditure (in INR)

Fiscal Deficit Way Forward

2020-21 34.50 lacs crore 9.5% of GDP The Government additionally requires a funding of INR 80,000 crores in the next 2 months

2021-22 34.83 lacs crore 6.8% of the GDP (proposed to maintain same)

It would be imperative to note that as per Fiscal Responsibility and Budget Management Act, 2003, fiscal deficit is mandated to be brought down and pegged at 3% by 31st March 2021, however due to the unprecedented times, the Government has decided to move ahead and temporarily move away from the earlier fiscal glide path.

By following a path of fiscal rectitude in future once the adverse effects of the pandemic subside, the Government intends to reach a fiscal deficit level below 4.5% of GDP by 2025-2026.

The Government is also hoping to achieve the budgeted revenues considering the above budgeted expenditure by increasing the buoyancy of tax revenue through improved compliance, and secondly, by increased receipts from monetization of assets, including Public Sector Enterprises and land.

A glance at some of the key macro-economic parameters as mentioned in the Survey and its convergence with the six pillars outlined in the Union Budget is reproduced below:

FIRST PILLAR: HEALTH & WELL BEINGHealth care systems

The pandemic challenged the health care infrastructure of the country. Despite achieving a recovery rate of more than 95 per cent from COVID-19, the pandemic has cost the country around 1.52 lakh lives. The Budget outlay for Health and Wellbeing is INR 2,23,8464 crores as against the last year’s budget of INR 94,452 crores recording an increase of 137%. The new centrally sponsored scheme i.e. PM AtmaNirbhar Swasth Bharat Yojana is proposed to be launched with an outlay of INR 64,1805 crores over the next 6 years to develop primary, secondary and tertiary care health systems, strengthening existing and creating new institutions, and

detecting and curing new and emerging diseases. The same is also augmented with the exemption from health cess of 5% granted on import of medical devices by International Organization and Diplomatic Missions. As health insurance plays a pivotal role on account of on-going COVID-19 pandemic, FDI limits6 in the insurance companies is to be hiked from 49% to 74% with some safeguards.

The other contributory factors in relation to health & well-being are mentioned below:

Other Contributing Factors

Union Budget Proposition

Universal coverage of water supply

Urban Jal Jeevan Mission is to be launched for providing universal water supply7 in all 4,378 Urban Local Bodies with 2.86 crores household tap connections and liquid waste management in 500 AMRUT cities

Swachh Bharat, Swasth Bharat and Clean Air

Urban Swachh Bharat Mission 2.0 to be launched with a total financial allocation8 of INR 1,41,678 crores over a period of 5 years

Voluntary vehicle scrapping policy

Policy announced for scrappage of vehicles beyond 15 years for used commercial vehicles and beyond 20 years for used personal vehicles to reduce air pollution. Further, to boost domestic manufacturing, Customs Duty rates on import of parts of electrical vehicles have been increased.

Vaccines To boost the vaccination for COVID-19 pandemic, INR 35,000 crores9 are allocated.

Scheduled Castes and Scheduled Tribes Welfare

To assist in creating robust infrastructure facilities a target to establish 750 Eklavya model residential schools in tribal areas has been set

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SECOND PILLAR: PHYSICAL & FINANCIAL CAPITAL AND INFRASTRUCTUREThe world economy has encountered a ‘once in a century crisis’ due to COVID-19 where most of the countries are expecting a contraction in GDP. Our Industrial sector has been no exception to the same and it has experienced a sharp decline during lockdown. However, it has shown great resilience due to its strong fundamentals and various relief measures announced post lockdown with a V-shaped recovery depicted in the graph below:

Source- Page 1 of Budget Highlights

Physical Infrastructure

To make India a Self-reliant nation under the Atmanirbhar Bharat Initiative, Production Linked Incentive (PLI) Scheme has been announced for 13 sectors by the Government to incentivise manufacturers to set-up manufacturing infrastructure. The Government has committed around INR 1.97 lakh crores over 5 years beginning from 2021-2210 to become a global champion in manufacturing and create jobs for youth. In addition to the PLI scheme, the Government has also announced a scheme to establish 7 textile parks in the next 3 years under the Mega Investment Textiles Park (MITRA) in order to become globally competitive in the textile sector and also attract large investments. Further, to provide a level playing field to the domestic textiles industry, it is proposed to increase the Customs duty on certain products which is tabulated below for ease of reference:

Commodity Name Earlier Rate New RateCotton 0% 5% BCD + 5% AIDCCotton waste Nil 10%Raw Silk, Silk Yarn 10% 15%

The road transport sector, which is the backbone of transport system contributes around two-third of total contribution of transport sector to India’s GVA. The graph below depicts the share of various constituents to total transport sector’s GVA:

Source- Survey calculations based on MoRTH data.

It is evident from above graph that road transport is the most integral part of Indian transport sector and the proposed allocation in the budget is INR 1.18 lakh crores as compared to budget allocation for 2020-21 which was only 1.08 lakh crores Financial Infrastructure

Foreign Direct Investment (FDI) is one of the major sources of investment financing for Industry and service sector. Accordingly, the Finance Minister has increased the FDI limit for Insurance Sector to 74 per cent from earlier 49 per cent with safeguards.For the fiscal year 2021-22, it has estimated receipts of INR 1.75 lakh crores from disinvestment and strategic sale. Government intends to privatise two Public Sector banks and one General Insurance company in the year 2021-22 and launch the IPO of the LIC.Also, in order to strengthen the health of the financial institutions of the country, it has been announced that an Asset Reconstruction Company and Asset Management Company will be set up which will take over the stressed debts in the banking system and manage and dispose-off the said assets to interested investors. Further, under ease of doing business index, India’s rank has improved to 63rd position in 2019 from 77th position in 2018 and India has jumped 67 ranks in last three years being the Top-10 improver for three years in row and the biggest gainer among large economies11.

Budget 2021 enfolds with the continued vision of AtmaNirbhar Bharat being realised over the next few years by India becoming largely self-reliant and a business epicentre of the world. The vision of USD 5 Trillion Economy still remains on the radar and double-digit growth in manufacturing sector has been envisioned to achieve the target.

10 Para 40 of Budget Speech 2021 11 Para 8.20 of Chapter-8 Vol.- II, Economic Policy 2020-21



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The Indian Government has always focused on self-reliance within the agriculture and rural sector. During 2020-21, while the GVA for the entire economy contracted by 7.21 per cent, growth in GVA for agriculture maintained a positive growth of 3.4 per cent12.With a view of positive growth in GVA for agriculture, the Government introduced the three farm acts recently. The budget acknowledges that the Minimum Support Price (MSP) for all commodities have surged minimum by 1.5 times the cost of production. This has led to tremendous increase in payment to farmers, notably in cases of wheat, paddy, pulses, cotton, etc. Further, there are enhancements in credit line in agriculture, animal husbandry, diary and fisheries, allocation to rural infrastructure development fund, micro irrigation fund, e-NAM, Operation Green Scheme and Agriculture Infrastructure Fund.To further support the financing of agriculture infrastructure and other development expenditure, ‘Agriculture Infrastructure and Development Cess’ on certain items is being introduced on imported goods and excisable goods and rate of Basic Customs Duty has been lowered in respect of such goods, where such Cess is made applicable. The other contributing factors towards Aspirational India are depicted below:

Other Contributing Factors

Union Budget Proposition

Fisheries Identified substantial investments in the development of modern fishing harbours and fish landing centres

Migrant workers and Labourers

Implementation of one nation one ration card to procure rations from anywhere in country is under implementation by 32 States and UTs covering 86% beneficiaries.

Rationalization of numerous central labour codes into 4 major labour codes covering social security benefits to gig and platform workers, applying minimum wages to all categories, etc.

Financial Inclusion For start-ups in India, margin money requirement to be reduced from 25% to 15% and to include loans for allied agricultural activities. More than double funds have been allocated as compared to last year.

FOURTH PILLAR: REINVIGORATING HUMAN CAPITALIn the Union Budget 2020-21 [BE], 3.5% of the GDP was spent on education.13.

In a situation where the educational institutions remained closed for major part of the previous year, Economic Survey reports that India has enhanced the use of digital technology in education through smart classrooms, digital boards and DTH channels and ICT infrastructure in schools from upper primary to higher secondary level.

Further sigh of relief to education sector is also that more than 15,000 schools will be qualitatively strengthened to include all components of the National Education Policy.14 In order to enhance the quality of education, National Professional Standards for Teachers will be developed which would affect around 92 lakh teachers of the country. It has been proposed to enable the training of 56 lakh school-teachers through the National Initiative for School Heads and Teachers for Holistic Advancement (NISTHA).

Also, in order to support teaching, learning activities, educational planning, governance and administrative activities, it has been proposed to setup National Digital Educational Architecture.

Further, 100 new Sainik Schools will be set up in partnership with NGOs/ private schools/states.15 A legislation has been proposed to be implemented for setting-up of Higher Education Commission of India. It will be an umbrella body having 4 separate vehicles for standard-setting, accreditation, regulation, and funding. It has been proposed to create formal umbrella structures in nine cities across the country to ensure that these institutions have better synergy.

Economic survey has also highlighted launching of PM eVIDYA initiative under the Atma Nirbhar Bharat program in May 2020. Similarly, the Government proposed to amend the Apprenticeship Act launched in 2016, with a view to further enhancing apprenticeship opportunities for the youth. INR 3000 crores has been set aside for the same16.

Amidst the corona virus jolt, a lot of improvement has been seen in the proportion of skilled people over the annual cycle of Periodic Labour Force Survey (PLFS). To continue the same and to increase the skills across borders, Finance Minister in her budget speech stated that a strategic initiative is underway. The same is in partnership with the United Arab Emirates (UAE) and has been undertaken to benchmark skill qualifications, assessment, and certification and is also accompanied by the deployment of certified workforce. Further, Government has proposed to setup collaborative Training Inter Training Programme (TITP) between India and Japan to facilitate transfer of Japanese industrial and vocational skills, technique and knowledge.

FIFTH PILLAR: INNOVATION AND R&D

India ranked 48 amongst 131 countries in terms of its innovation performance measured using the Global Innovation Index (GII) 2020. Based on the diagram below, it can be deduced that India’s ranking in GII is much better than its ranking on various other parameters like Human Capital, Infrastructure etc.17:

12 Para 7.40 of Chapter-7 Vol.- II, Economic Policy 2020-21 [page 233]13 Economic Survey 2020-21

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In order to reach a higher rank on GII and to strengthen the research ecosystem, the Government has proposed following budgeted outlay:

INR 50,000 crore on National Research Foundation.

INR 1,500 crores has been earmarked to promote digital transactions.

Further, the following proposals have been made in the Budget towards Innovation & R&D:

In order to reach new heights in aeronautics, launch of PSLV-CS51 has been proposed through New Space India Limited (NSIL). The first unmanned launch is slated for December 2021.

Deep Ocean Mission with a budget outlay of more than INR 4,000 crores is proposed to be launched for exploration and conservation of deep-sea biodiversity.

Considering the present education system, steps shall be taken to transform classroom transactions from mundane and rote learning to a joyful experience through unique indigenous toy-based learning.

In order to promote value addition in the Electronics Sector, Customs duty on solar inverters has been raised from 5% to 20%.

SIXTH PILLAR: MINIMUM GOVERNMENT MAXIMUM GOVERNANCE

As per Economic Survey, the “Rule of Law” displays that India is lagging behind with score ‘0’ as compared to 1.618 and 1.519 in the UK and US respectively which underlays requirement of reforming the legal structure to have an efficient ex-post mechanism for dispute resolution and contract enforcement in India. Accordingly, Government has proposed to take further measures to rationalize the functioning of Tribunals to improve the score.

The Economic Survey 2020-21 depicts a Cross country comparison of Rule of Law indicator as follows:20

Speaking further, a step towards minimum government, maximum governance has also been taken in the healthcare sector. In order to create an effective enforcement system in the healthcare sector, it has been proposed to present National Commission for Allied Healthcare Professionals Bill in Parliament with a view to ensure transparent, efficient regulation of the 56 allied healthcare professions.Several other requirements, which prevented companies from adopting ‘Work from Home’ and ‘Work from Anywhere’ policies have also been removed.Economic survey listed the need of enactment of Transparency of Rules Act to end any asymmetry of information faced by a citizen. In connection to the same and to have ease of doing business for those who deal with Government or CPSEs, a Conciliation Mechanism has been set up and its use shall be mandated for quick resolution of contractual disputes.

TAXES IN INDIAThe below diagram depicts the tax to GDP ratio in the last 5 years. It can be deduced that GST collection is the highest of all the taxes collected by the Government.

Source: Page 70 of Economic Survey, Vol 2

PERSONAL TAXA relief has been proposed in the form of exemption from filing the income tax return to senior citizens who are of the age of 75 years or above if such taxpayer has only pension income and interest income during an assessment year.In order to encourage the taxpayer to invest in affordable housing, it is proposed to extend the deduction of interest on housing loan to the taxpayer under section 80 EEA till 31st March 2022. Simultaneously, 100% deduction under section 80 IBA to the developer for the affordable housing project is also extended till 31st March 2022.

With an intent to reduce litigation, it is proposed to reduce the maximum time-limit for reopening an assessment. A

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Type of Assessment Current ProposedSerious fraud cases (only if possible tax evasion on income more than 50 lakhs)

10 Years 10 years

Others 6 Years 3 Years

In order to promote digital transactions for the business activities, the tax-audit turnover threshold has been increased to INR 10 crores from INR 5 crores for the taxpayers who carry out 95 per cent of their transactions digitally.

CORPORATE TAXWith an aim to accelerate the tax reforms, following other important measures have been proposed:Considering the response from taxpayers towards Vivad Se

Vishwas Scheme, the Hon’ble Finance Minister proposed to constitute a Dispute Resolution Committee. The said Committee may consider disputes where taxable income of the assessee is up to INR 50 lacs and disputed income is up to INR 10 lacs.

After introducing faceless assessments, it has now been proposed to make faceless Income tax Appellate Tribunals and the personal hearing before the bench could be executed through video conferencing

With an aim to make the International Financial Services Centre a financial hub, various tax incentives have been provided to taxpayers

Any delays in depositing the employee’s PF contribution by the employer will not be allowed as deduction to the employer

The capital gains exemption for investment in start-ups has been extended to 31 March 2022.

INDIRECT TAXES Gross GST collections gained buoyancy from October 2020 onwards, crossing INR 1 lakh crore mark consecutively for last 3 months, thereby providing much needed succour to the Government’s revenue position. The trend in FY 2019-20 and FY 2020-21 of the same is depicted below:

Source: Page 10 of the Budget Highlights

In respect of Customs, the Budget moves ahead with its earlier twin objectives of Make-in-India initiative and help India become a global trade leader. Accordingly, the Budget has proposed to increase the rates of Customs Duty on certain products to protect domestic industries.

With this intention, following measures have been introduced:

Rationalisation of Customs Duty structure by eliminating 80 outdated exemptions and reviewing more than 400 old exemptions Consultations to start from 1st October 2021 with an objective of implementing a revised Customs duty structure

Support to MSMEs hit by recent sharp rise in iron and steel prices by reducing Customs Duty and revoking Anti-Dumping Duty and Countervailing Duties on certain steel products

Introduced Agriculture Infrastructure and Development Cess [on import of certain agricultural items, gold, silver, petrol, diesel, etc.] with an intention to finance agriculture infrastructure and other development expenditure

Rationalisation of Customs Duty rates on raw material inputs to man-made textiles

Rationalisation of Customs Duty on gold and silver

Withdrawal of certain exemptions on parts of chargers and mobiles and charging a moderate rate of 2.5% on certain mobile components

These measures are envisaged to provide a fillip to domestic manufacturing.

The legislative amendments relating to GST are mentioned below :

Legislative amendment on restrictions on availment of input tax credit

Abolition of GST Audit

Modified GST annual return to include a self-certified reconciliation statement

Clarification on retrospective applicability of interest on net cash liability on delayed payment of GST on outward supply transactions

Linking the receipt of foreign exchange remittance in case of export of goods with refund

Restrict the zero-rated supply on payment of integrated tax only for notified supplies and notified categories of taxpayers

CONCLUSIONThe Budget for 2021-22 therefore centres around a self-reliant India i.e. AtmaNirbhar Bharat. The six pillars are envisaged to move India towards self-reliance and the USD 5 Trillion target. Given the current times, the Budget has focussed on India’s growth and is surely tailored to accelerate the growth rate. CS



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Union Budget 2021: A snapshot of key proposed tax amendments

Pramod Achuthan*Partner- Tax & Regulatory ServicesErnst & Young [email protected]

Meera R. Iyer*Senior Manager- People Advisory ServicesErnst & Young [email protected]

Vaibhav Gupta*Senior Manager- Indirect TaxErnst & Young [email protected]

Divya Khushwani*Senior Consultant - Tax & Regulatory ServicesErnst & Young LLP, [email protected]

The Union Budget 2021 presented by the FM on 1 February 2021 has adhered to a ‘no-harm’ strategy in the first paperless budget and was congratulated by the Prime Minister for delivering a Budget which mirrors India’s stance of being ‘pro-active’ rather than ‘reactive’ (similar to its fight against the coronavirus crisis). The Budget proposals spelling out the Modi government’s plan for economic recovery without worrying about fiscal deficit have been cheered by the markets as well. Budget 2021 focused on providing impetus to 6 specific pillars which are Health and Wellbeing, Capital and Infrastructure, Development for Aspirational India, Reinvigorating Human Capital, Innovation and Research, and Ease of Governance. The enclosed article captures the key amendments related to direct tax and indirect tax proposals. On the tax side, one would notice that proposals of the Finance Bill, 2021 are woven around the themes of simplification of tax administration, ease of compliance and reduction in litigation. Some of the noteworthy direct tax proposals include introduction of withholding tax provisions on purchase of goods, dispute resolution mechanism for small taxpayers, clarifications on equalisation levy provisions and allowing tax appeals to take place without in person court appearances. Similarly changes on customs rates structures are geared towards promoting domestic manufacturing in sync with the AtmaNirbhar Bharat strategy of the Government. Amendments in GST regulations such as self-certified reconciliation statement instead of GST audit, zero-rating benefit to SEZ for authorized operations seek to provide relief to taxpayers and providing clarity.

The spotlight rolls back on to the Hon’ble Finance Minister (FM) on February 1 when the FM showcases whats there

in the kitty for the next fiscal year.

After an unprecedented COVID-19 prone year, there were expectations galore from Union Budget 2021 to be a ‘once in a century’ budget and to provide the much needed ‘economic vaccine’ to boost India’s economy and spur it on the road to recovery. Walking on a tight rope in the first post COVID-19 Budget, FM had a herculean task of playing the balancing act between restrained fiscal sustainability vis-à-vis heightened taxpayer expectations.

The Union Budget 2021 presented by the FM on 1 February 2021 has adhered to a ‘no-harm’ strategy in the first paperless budget and was congratulated by the Prime Minister for delivering - a budget which mirrors India’s stance of being ‘pro-active’ rather than ‘reactive’ (similar to its fight against the coronavirus crisis). The Budget proposals spelling out the Modi government’s plan for economic recovery without burdening the common man also brought in a once in a lifetime Budget-day rise in the market indices.

Underlying the government’s resolution of building an “Atmanirbhar Bharat”, Budget 2021 focused on providing impetus to the ‘6 pillars’ – Health and Wellbeing, Capital and Infrastructure, Development for Aspirational India, Reinvigorating Human Capital, Innovation and Research, and Ease of Governance. A generous funding in the healthcare sector, liberalising some of foreign investments rules and opening the doors for private players in public sector undertakings have been lauded by many.

Adverse measures such as an additional cess/ additional surcharges, wealth tax, increase in tax rates etc were rumoured but the FM put these to rest by not increasing the effective tax rate for any class of taxpayers. Contrary to such fears the FM has kept her eye on what is really going * The views expressed are the personal views of the authors


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LEto help the economy. Significant focus on capital expenditure as set out in the budget is really the need of the hour. Fiscal deficit for financial year (‘FY’) 2020-21 has been pegged at 9.5% of GDP and 6.8% for FY 2021-22. On the tax side, the proposals are woven around themes of simplification of tax administration, ease of compliance and reduction in litigation.

The fine print of the Finance Bill 2021 (FB 2021) of course does contain several clauses that need an in-depth analysis. In the ensuing article we have captured few key direct tax and indirect tax proposals introduced by Budget 2021:

I. DIRECT TAX PROPOSALSA. Corporate tax proposals:

1. Key changes affecting the corporate restructuring and acquisitions

Goodwill not regarded as intangible asset eligible for depreciation [effective from assessment year (‘AY’) 2021-22]

In a bold move by the government, the FB 2021 proposes to reverse a landmark Supreme Court ruling in the case of SMIFS Securities Limited, wherein it was held that goodwill of a business is an intangible asset eligible for depreciation. It has been proposed to amend the definition of intangible assets so as to exclude goodwill from its ambit (whether self-generated or acquired goodwill). In respect of acquired goodwill on which depreciation has been claimed in past years upto 31 March 2021, the written down value (i.e. original cost less depreciation claimed in past) and capital gain shall be computed in the manner prescribed. Further, in other cases, the cost of acquisition shall be actual purchase price or NIL in case of self-generated goodwill for the purpose of computing capital gains.

While the long awaited ask for clarity on depreciation on goodwill has been finally addressed by the budget and it may also reduce litigation going forward, there are certain taxpayers who are left in a soup due to this amendment. The disallowance of deduction on goodwill is an unexpected dampener. It will be a barrier for genuine cases of acquisitions, which inherently factor a price for goodwill. Such genuine transactions will not be eligible for immediate benefit by way of depreciation on goodwill. Also, the language of the Memorandum suggests that the Government will continue to litigate past cases of depreciation on goodwill arising out of business reorganisations.

Slump sale to cover all types of transfers, including slump exchange [effective from AY 2021-22]

The definition of slump sale under the ITA has been proposed to be amended to include within its scope all types of transfers, such as sale, exchange, relinquishment of asset etc within its fold. This would augment the fold of capital gains on slump exchange

transactions. There have been divergent judicial views on the subject issue inasmuch as one school of thought advocated that transfer of an asset in lieu of another asset (non-monetary), could not be considered as ‘sale’, leading to non-applicability of section 50B of ITA dealing with capital gains on slump sale; the other being the opposite. With this amendment, the said ambiguity is brought to an end and thus, certainty has been provided qua taxability on a prospective basis.

2. Changes in tax deduction at source (TDS) and tax collection at source (TCS) provisions

Expansion of scope of TDS on purchase of goods and consequential compliance burden [section 194Q - effective from 1 July 2021]

Another significant amendment brought in by FB 2021 with a view to augment revenue and to keep a check on tax evasion is the introduction of a new tax withholding provision, wherein the buyer while making payment to resident for purchase of goods having value exceeding Rs 50 lacs in the previous year is required to withhold taxes at the rate of 0.1%. The obligation to withhold arises only in cases where buyer’s total sales, gross receipts or turnover from the business carried on by him exceed Rs 10 crores during the financial year immediately preceding the financial year in which the purchase of goods is carried out. The said provisions would not be applicable in cases where payment is already subject to TDS or tax collection (TCS) of source obligation under other provisions of the ITL (except TCS provisions under section 206C(1H) applicable on sale of goods with effect from 01 October 2020). In case where buyer fails to furnish Permanent Account Number (PAN), then in such cases the rate of 5% would be applicable instead of rate 0.1%.

TDS on purchases would only increase the burden of compliance. Moreover, it entails cash flow issues for sellers of goods who are already struggling on similar count owing to COVID-19 scenario. Applicability of section 194Q vis-à-vis 206C(1H) would need to be carefully considered. The practical application of the newly introduced provision shall have its own set of challenges and suitable timely clarifications would be highly appreciated.



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filers of income tax returns [section 206AB/ 206CCA - effective from 1 July 2021]

In order to ensure filing of return of income by persons who have suffered a reasonable amount of TDS/TCS, penal TDS/TCS rates have been introduced. As per these provisions, any person making payment or receiving any sum will be required to deduct/collect taxes at higher of the following rates:

(i) at twice the rate specified in the relevant provision of the Act; or

(ii) at twice the rate or rates in force; or (iii) at the rate of five per cent.

if the deductee/ payee has not filed the return of income for last two years preceding the financial year in which tax is required to be deducted/collected, and the tax deducted/collected is INR 50,000 or more in each of the two preceding years. In case provisions of section 206AA are also applicable (absence of PAN), then TDS shall be deducted at a rate higher under proposed section 206AB or existing section 206AA. These provisions are not applicable to a non-resident not having a permanent establishment in India and in few other specified cases. These provisions are really cumbersome to implement from a tax deductors’ perspective and whether the deductors need to rely on declarations from the recipient or whether the CBDT will introduce a system access where compliance can be evaluated needs to be seen.

3. Key rationalisation measures

Clarification on provisions related to Equalisation Levy (EL) – relevant for non-residents [effective from 1 April 2020]

In last Budget 2020, India introduced a last minute surprise Digital Tax in the form of EL at 2% on non-resident ecommerce operators engaged in online sale of goods or online provision of services or facilitation of either. The provisions were widely worded and one of the expectations was that clarifications will be provided especially excluding intra-group transactions on internal digital platforms. While Budget 2021 has introduced significant clarifications on EL, the changes have made the levy even more potent. Key changes include:

Income-tax exemption on revenues subjected to EL shall be applicable from 1 April 2020 (as against 1 April 2021 mentioned earlier)

The transaction in the nature of royalty/ fees for technical services taxable under the provisions of the ITA read with provisions of applicable tax treaty shall not be subject to EL

The terms online sale of goods and online provision of services have been defined in a very wide manner and one needs to now relook at all transactions having some element of a digital character factoring this change

Consideration has been defined in a manner where the question of net consideration versus gross

consideration again comes to the fore in case of facilitators

Clearly, companies need to very closely evaluate transactions having a digital element and keep in mind that EL is already applicable from 1 April 2020 onwards.

Deduction for employees’ contributions to specified funds [ambiguity on whether prospective or retrospective in nature due to current language]

Currently, employer’s contributions to specified funds are allowed as a deduction to employer, if such sums are paid on or before the due date of filing tax return. Absent specific clarity, some High courts had taken a view that the extended due date till filing of tax return should apply even to employees’ contributions to specified funds. It is now clarified that employees’ contributions to specified funds will not be allowed as a deduction if not deposited within the due date provided under the respective Act, rule, orders or notifications as it is a measure of penalizing employers who mis-utilize employee’s contributions.

4. Key amendments relating to dividend

Taking cues from the removal of the Dividend Distribution Tax from the last Budget 2020, the government has taken following measures: To ease compliance, the budget proposes that

dividends paid to ReIT and InVIT (being Real Estate Investment Trust or Infrastructure Investment Trust) shall not be subjected to TDS [effective from 1 April 2020]

Further, FPIs (foreign portfolio investors) shall now be entitled to avail of tax treaty benefits at the stage of withholding tax on dividend payment, subject to availability of prescribed documents. [effective from 1 April 2021]

Currently, interest for deferral of quarterly payment of advance tax is not charged for specified sources of income, where accurate determination of advance tax liability is not possible. The scope is now extended to cover dividend income (except for deemed dividend) (effective from AY 2021-22)

The definition of slump sale under the ITA has been proposed to be amended to include within its scope all types of transfers, such as sale, exchange, relinquishment of asset etc within its fold. This would augment the fold of capital gains on slump exchange transactions. There have been divergent judicial views on the subject issue inasmuch as one school of thought advocated that transfer of an asset in lieu of another asset (non-monetary), could not be considered as ‘sale’, leading to non-applicability of section 50B of ITA dealing with capital gains on slump sale; the other being the opposite.



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reassessment proceedings


6. Other key amendments:


B. Personal tax proposals:

While some of the asks of the aam aadmi around (inter alia) tax relief for employees ‘working from home’, enhancement of thresholds of various archaic deductions / exemptions, residency and taxation rules for stranded workers, etc largely remain unanswered in the Government’s first paperless Budget, the FM did indeed unfurl multiple interesting proposals on the personal tax front. Let us deep dive into some of these proposals:

1. Extension of deduction for purchase of affordable housing

Furthering the theme of ‘housing for all’, availability of deduction of upto INR 1.5 lacs towards interest on loan borrowed from a financial institution for purchase of main residence (with stamp duty value of not exceeding INR 45 lacs) has been extended to 31 March 2022.

2. Taxation of maturity proceeds from Unit Linked Insurance Plans (ULIPs)

Presently, proceeds received from maturity of ULIPs are exempt from taxes on meeting certain specified conditions. The FB 2021 proposes to consider the ULIPs issued on or after 01 February 2021, where the aggregate premium exceeds INR 2,50,000 per annum, as a capital asset. Accordingly, the redemption proceeds from such ULIPs would be chargeable to tax as capital gains. The

mechanism for calculation of such gains would be similar to that applicable for listed equity shares/units of equity oriented mutual funds, subject to additional rules to be prescribed.

3. Taxation of interest earned from various Provident funds

Interest earned from individual’s contributions made to statutory/public provident fund exceeding INR 2.5 lakhs per annum and on recognized provident fund exceeding INR 2.5 lacs is proposed to be taxed from 01 April 2021. Practical challenges such as timing of taxability (ie at the time of annual accrual or on withdrawal), method of calculation of taxable interest, PF Department not declaring interest on a timely basis etc. will hopefully be addressed in the rules to be prescribed on this matter.

4. Codification of the Leave Travel Concession (LTC) Cash Scheme

In order to bolster consumer spending, in October 2020, the FM had announced a scheme permitting admissibility of different types of expenditure in lieu of actual travel to qualify for this exemption, subject to the satisfaction of the requisite criteria. The FB 2021 proposes legislative changes to help with the implementation/administration of this scheme and clarifies some of the points such as – the quantum of exemption, capping of exemption benefit if the amount is not utilised for the desired purposes, etc. These changes are applicable only for the financial year 2020-21 ie up to 31 March 2021.

5. Relaxation for income of Retirement Benefit Account

Indian tax residents who have invested in foreign retirement benefit accounts can face taxation challenges due to a mismatch in taxation rules of different countries causing financial hardship to them. The FB 2021 proposes to introduce rules to reform the manner and year of taxation of such funds.

6. Focus on implementation of new labour codes

While the Indian Government is working on introducing the new labour codes (likely 01 April 2021), specific mention of the same was made by the FM in the budget speech indicating that social security benefits would be extended to gig workers, applicability of minimum wages to all, etc and the codes would aid reduction in the compliance burden on employers through the availability of a single registration and online filings.

II. INDIRECT TAX PROPOSALSA. Customs

1. Introduction of Agricultural Infrastructure and Development Cess (‘AIDC’):

For the purpose of financing improvements in agriculture infrastructure, AIDC is introduced with effect from 2 February 2021 on import of certain items like coal, cotton, silver, gold etc.

BCD has been lowered on most of the items attracting AIDC to not put extra burden on consumers.



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AIDC is also levied as an additional duty of excise on manufacture of petrol and high-speed diesel.

2. Rationalisation of taxes and change in validity of exemptions

To overhaul customs duty structure, sunset clause is introduced for all conditional exemptions currently in force. The conditional exemption notifications would be valid until 31 March 2023 unless withdrawn earlier. Also, all the new conditional exemptions would be valid until 31 March immediately following two years from the date of grant of such exemption.

Government plans to review more than 400 old Customs exemptions through extensive consultations and propose a revised duty structure from 1 October 2021 to provide a simpler tax structure.

Social welfare surcharge (‘SWS’) for all the products is rationalised that would result in a levy of 10% on all products.

3. Procedural changes

To encourage paperless processing, a Common Customs Electronic Portal is proposed to be notified for facilitating registration, filing of documents, payment of duty, serving notices, orders etc. and to act as a one-point digital interface.

Bills of Entry (‘BoE’) to be mandatorily filed a day before the arrival of goods. Presently, BoE can be filed before the end of the next day following the day of arrival of goods.

4. Key amendments in ‘The Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017’ (‘IGCRD’):

IGCRD provides procedural compliances and restrictions for availment of various exemptions under the Customs. These rules have been liberalised to allow goods imported at concessional rate to be used for manufacture of goods on job-work basis.

The amendments further allow capital goods imported in compliance with these rules to be cleared on payment of

differential duty, along with interest, on the depreciated value (depreciation norms as applicable to EOUs under FTP to apply).

5. Others

Customs duty on certain goods increased to promote domestic manufacturing and give further fillip to Make in India initiative. Further tariff rates for certain goods have been amended without change in effective rate of basic customs duty. Relief in duties granted to Iron and steel and defence related imports.

Additional anti-abuse changes pertaining to Anti-Dumping Duty and Countervailing Duty including anti-absorption measures introduced to counter reduction in prices post levy of duties (to negate impact of new levies) without change in circumstances.

Amendments proposed to provide that in case of import of goods by SEZ units, the exemption from payment of CVD and ADD availed at the stage of import would need to be paid back at the stage of clearance of the imported goods as such or clearance of manufactured goods (containing such imported goods) into DTA.

Any enquiry or investigation culminating into issuance of notice under Customs Act, to be completed within two years from the date of initiation of audit, search, seizure or summons (extension of one more year possible).

Strengthening of multiple penal provisions such as penalty for refund claimed by utilising fraudulent input credit invoices, provisions to not absolve a person from paying penalty on account of seizure and confiscation of goods even after conclusion of recovery proceeding, etc.

B. Goods and Service Tax

Below are the amendments that are proposed under the GST regulations:

1. Mandatory requirement of getting annual accounts audited waived:

The provision mandating furnishing of reconciliation statement duly audited by a Chartered Accountant / Cost Accountant (in form GSTR – 9C) is proposed to be removed. Additionally, annual return related provisions have been amended to enable inclusion of a self-certified reconciliation statement reconciling the value of supplies in the annual returns with that of audited annual accounts.

Clarity is awaited on the date of applicability of the amendments for GST audit. The question that remains to be answered is whether GSTR – 9C would be required to be filed for FY 2019-20 and expected timeline for notification of updated form GSTR – 9 in line with the proposed amendment.

Another critical aspect would be to see that the States implement matching amendments in the respective SGST Acts.

2. Proposed amendments with respect to zero rated supplies:

In case of supplies made to SEZ units / developers, amendment is proposed to confine the benefit of zero

Currently, employer’s contributions to specified funds are allowed as a deduction to employer, if such sums are paid on or before the due date of filing tax return. Absent specific clarity, some High courts had taken a view that the extended due date till filing of tax return should apply even to employees’ contributions to specified funds. It is now clarified that employees’ contributions to specified funds will not be allowed as a deduction if not deposited within the due date provided under the respective Act, rule, orders or notifications as it is a measure of penalizing employers who mis-utilize employee’s contributions.



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3. Refund related amendments:

It has been proposed to make the refund of tax paid on export of goods and services option available only to a notified class of taxpayers or class of supplies. Other exporters not notified would then be required to mandatorily opt refund of unutilized input credit and undertake exports made without payment of tax. The details of such notified class of persons / goods or services is still awaited.

In case of export of goods without payment of tax, where export proceeds are not realised within the time-limit specified under FEMA regulations, the refund received is required to be paid back with interest within expiry of 30 days from the end of time limit under FEMA regulations. This provision is presently implemented vide Rule 96B of the CGST Rules, 2017.

4. Others

Section 16 of the CGST Act, 2017 is proposed to be amended to provide that no credit can be availed unless the details of invoice / debit note have been furnished by the supplier in GSTR-1 and such details are communicated to the recipient in GSTR-2A. This might result in an anomaly as Rule 36(4) of CGST Rules, 2017 presently allows for additional availment of 5% of the matched credit.

The definition of the term “Supply” under the GST regulations is proposed to be retrospectively amended from 1 July 2017 to tax transactions between any person and its members / constituents. This amendment is likely to have an impact on position of non-payment of GST adopted by certain membership clubs, associations, etc. in respect of transactions with the members.

Interest on delayed payment of tax to be computed on net cash liability was initially made effective from 1 September 2020, as per which, interest on delayed payment of tax in case of belated filing of GST returns is to be computed only on net cash liability. The same has now been proposed to be incorporated in the GST law by way of a retrospective amendment applicable from 1 July 2017.

GST recovery provisions are proposed to be amended to include tax liability on the turnovers included in outward statement in GSTR-1 but not reported in the return in GSTR-3B.

Penal provisions with respect to “detention, seizure and release of goods and conveyance in transit” are proposed to be delinked from the provisions of “confiscation of goods and levy of penalty”.

III. KEY POLICY ANNOUNCEMENTS

FDI limit in insurance to be increased to 74% from 49% subject to certain conditions.

Asset reconstruction entities to be set up to acquire, manage and turnaround bad loans

Announcement of Voluntary Vehicle Scrapping Policy to phase out old and unfit vehicles

Increased capital outlay of 34% for infrastructure spend with commitment to build additional roads, national highways and improve urban infrastructure

SCRA 1956, SEBI Act 1992, Depositories Act, 1996 and Government Securities Act, 2007 to be consolidated into a rationalized single Securities Markets Code

Decriminalisation of provisions of Limited Liability Partnership Act 2008 to be taken up

Liberalising limits for definition of Small companies and provisions for One Person Companies

IV. CONCLUDING THOUGHTSNo increase in tax rates and no introduction of the much contemplated ‘COVID cess’ was a welcome relief to taxpayers. While many welcome moves have been provided in terms of treaty withholding in case of FPIs, dispute resolution mechanism for small taxpayers, incentivizing start-ups and investments therein, certain dampeners were non availability of depreciation on goodwill, revamp of provisions on amount received on dissolution or reconstitution in case of firms/AOP/BOI, amendments to ambiguous equalization levy provisions, amongst others.Provisions around introduction of TDS on sale of goods where the industry is already struggling to cope and comply with the recently introduced TCS provisions on sale of goods and the requirement to do higher TDS on non-return filers will be cumbersome.

Overall, the budget started the year on a positive note and hope 2021 continues to emit positive vibes while we all test negative! This Budget is more a test match innings rather than the T20 cricket that one is used to and clearly the FM has not worried about the high fiscal deficit with focus on making sure that the green shoots of growth continue their upward momentum. In this backdrop, Rabindranath Tagore’s quote mentioned by the FM in her Budget Speech that “Faith is the bird that feels the light and sings when the dawn is still dark” is quite apt.

We need to all have faith in path laid down by the FM and the proposed 34% increase spending on infrastructure capital expenditure bodes well for future of India’s growth. CS



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The Union Budget 2021-22 was presented on the back of an unprecedented pandemic shock that hit the Indian

economy and reduced GDP growth by 7.7%. The Finance Minister's(FM) promise of a 'never-seen-before' Budget had increased expectations, and after the Budget, the stock markets reacted jubilantly by soaring over 2,300 points. While many do not believe in the reaction of stock markets, there are a few positives in the Budget that even the critics acknowledged.

EASE OF DOING BUSINESSSwiftly pushing efforts to improve the ease-of-doing business and boosting the start-up ecosystem, the budget promised to

Incentivize the incorporation of One Person Companies (OPCs) by allowing OPCs to grow without any restrictions on paid up capital and turnover,

Allowing their conversion into any other type of company other than a Section 8 company at any time,

Reducing the residency limit for an Indian citizen from 182 days to 120 days of stay in India to set up an OPC and

Allowing the Non Resident Indians (NRIs) to incorporate OPCs in India.

The Union Budget proposed to revise the definition under the Companies Act, 2013 for Small Companies by increasing their thresholds for Paid up capital from “not exceeding Rs.50 Lakh” to “not exceeding Rs.2 Crore” and turnover from “not exceeding Rs.2 Crore” to “not exceeding Rs.20 Crore”. This

Budget 2021-22 - A big push towards a $5 Trillion Economy

Anil Gupta*Chartered AccountantNew [email protected]

The Hon’ble Finance Minister Smt. Nirmala Sitaraman has announced a bold and thoughtful budget that addresses the immediate need to power the economic growth engine, putting in place the building blocks for long-term growth and self-reliance by adequately funding core sectors, without over-burdening the common man with new taxes or levies. This article analyses some of the cardinal aspects of Union Budget 2021-22 and its impact towards achieving $5 Trillion Economy.

*Council Member (Government Nominee), ICSI

will is expected to benefit more than two lakh companies in easing their compliance requirements

The fast-track process for mergers (under the Companies Act, 2013) has been extended to include the merger of start-ups with other start-ups as well with small companies. It is also likely to help in bringing the unincorporated businesses into the organised corporate sector.

The provisions relating to resolution of disputes by the Dispute Resolution Committee for small taxpayers is a significant step forward as an alternative dispute resolution mechanism under the Income Tax Act, 1961. The Budget has made it applicable to assessees whose income is less than Rs. 50 lakh and the proposed variation in income is less than Rs. 10 lakhs. In due course, we are sure that the government will see merit in expanding this proposition to bigger taxpayers.

A major relief has been given to the taxpayer with the announcement that the reassessment can be opened only up to 3 years under the Income Tax Act, 1961.

The budget has also addressed various hardships faced by the non-residents with respect to the accrued incomes in their foreign retirement accounts and getting credit for Indian taxes in foreign jurisdictions. These difficulties usually arise due to a mismatch in taxation periods. . The FM has promised to notify rules for removal of double taxation in the coming future.

Further under the Customs law, the time limit of two years (further extendable by one year) stipulated for completion of any proceedings shall assist in time bound completion of proceedings.


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A MAJOR FLIP TO AGRICULTURAL SECTORIn a strong pro-farmer signal amid the agitation against the new farm laws, the Budget grants the state regulated Agri markets (APMC 'mandis') the access to the Agriculture Infrastructure Fund while adding 1,000 mandis on electronic platform (e-NAM). While this seeks to assuage concerns that the old 'mandi' system will be dismantled, it's clear that reforms will be pursued further even as procurement of farm produce at MSP continues through APMC Markets. The FM emphasised how the MSP regime assures a price at least 1.5 times the cost of production and how procurement continues to increase.

The micro-irrigation fund has been doubled to Rs. 10,000 Crores under the Budget and the agri-credit target has been hiked to Rs. 16.5 lakh crores. The FM further ensured increased credit flows to the sectors of animal husbandry, dairy, and fisheries in her budget proposals.

ROAD PROJECTS TO NOW CRUISE AT HIGH SPEEDAt a time when the private sector investment is muted and the capacity utilisation is low, the public spending on infrastructure is the right counter-cyclical measure to boost demand and job creation. The budget allocates significant funding on this front, thereby strengthening the important transport corridors to the far ends of the nation.

The budget has promised to give Six-lane highways, speed radars and new expressways with the “highest ever” budget outlay of Rs 1.18 lakh crores to the Road Transport and Highway Ministry for FY 2021-22, an increase of nearly 18% than what it was estimated to spend by March . The higher allocation came amid the ministry’s target to build a record 11,000 km National Highways during the current financial year. The NHAI will also be allowed to raise Rs 65,000 crore from the market. While giving details of the roadmap for eight major projects, including the Delhi-Mumbai, Bengaluru-Chennai, Delhi-Dehradun, Kanpur-Lucknow and Delhi-Katra expressways, the FM announced that all new four and six-lane highways will have advanced traffic management systems with speed radars, variable message sign boards and GPS enabled recovery vans.

FPI TO REIT AND InvITsThe Budget promised to regulate the Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) to attract more investments and the government announced that the regulations will be amended to allow them to raise debt fund from foreign portfolio investors (FPIs).

Global institutional investors and sponsors of REITs and InvlTs have been seeking the government’s push to enable REIT and InvITs’ debt raising from insurance companies and FPIs. This year’s budget has also exempted dividends paid to REITs or InvlTs from tax deducted at source (TDS). InvITs and REITs have the potential to emerge as important tools for addressing India’s gigantic infra financing needs.

COMMERCIAL REALTY COMPANIES

Though Commercial real estate developers and co-working operators welcomed the announcement for REITs, they were

A major relief has been given to the taxpayer with the announcement that the reassessment can be opened only up to 3 years under the Income Tax Act, 1961.



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They feel that the reduced GST on leasing would have helped in the recovery of the office space segment. This segment has been wounded by business drop of at least 50% due to the work-from-home culture which gained popularity during the pandemic.

In its budget recommendations, the CII had said that Section 16 read with Section 17(5) of the CGST Act, 2017 should be amended to enable the real estate players to avail ITC on procurement of goods and services during the construction phase where the said immovable property is intended for commercial leasing or renting.

UNIFIED SECURITIES MARKET CODE

The budgetary proposal to introduce a unified securities market code will help eliminate overlapping and out-dated laws. The government intends to consolidate the SEBI Act, Depositories Act, Securities Contracts (Regulation) Act and Government Securities Act.

SPOT GOLD EXCHANGES

The finance ministry has named the Securities and Exchange Board of India (SEBI) as the regulator for domestic gold commodity exchanges. At present, besides capital markets, the SEBI regulates only commodity derivatives exchanges, not commodity spot exchanges. It’s a welcome step in filling the gaps in the gold ecosystem to make India a gold price setter instead of a price taker.

TIME FOR THE IDEA OF NATIONAL MONETISATION PIPELINE

A dedicated development financial institution (DFI) has been announced. Previously, when IDBI and ICICI were first set up, there weren't many infrastructure assets in the country —which is not the case now. We hope that the DFI will be able to provide value-added products such as long-term fixed-rate loans at reasonable rates - a product not available at a large scale in the Indian market. A 15-20 year fixed-rate debt product would allow infrastructure investors such as National Investment and Infrastructure Fund (NIIF) to have significant predictability and confidence in acquiring or developing long-term infrastructure assets.

Global institutional investors and sponsors of REITs and InvlTs have been seeking the government’s push to enable REIT and InvITs’ debt raising from insurance companies and FPIs. This year’s budget has also exempted dividends paid to REITs or InvlTs from tax deducted at source (TDS). InvITs and REITs have the potential to emerge as important tools for addressing India’s gigantic infra financing needs.

The continued focus on asset monetisation and strategic disinvestments is highly commendable. Announcement of creation of a National Monetisation Pipeline and its active tracking through National Infrastructure Pipeline will offer confidence to investors on the direction and scale of monetisation.

Assets such as power transmission lines, airports, ports, railway infrastructure, gas pipelines, warehouses and sports stadia will be part of the pipeline.

The combination of a National Infrastructure Pipeline (NIP) for infrastructure building and a National Monetisation Pipeline, for financing the NIP, could lead to a virtuous infrastructure development and recycling at an economic scale.

The Recycling Initiative which started in 2014. With global yields at historic lows, the government should be able to get excellent value for selling assets now and can then use the proceeds to build new projects at low interest rates as well.

A BOLD BUDGET UNDER CHALLENGING CONDITIONS The FM deserves credit in having crafted a budget that sets its priorities right and puts its energies in the right areas. What is important now is to ensure swift implementation of the proposed innovative measures. “Well begun is half done” This proverb is perfect for the Budget. However, the one thing missing in the Budget was the role of Insolvency & Bankruptcy Code, which is claimed to be one of the biggest structural reforms in the recent times. One can only hope that the Budget proposals do not undermine IBC and help overcome the twin balance-sheet issues of both banks and corporate sector.

The government has also budgeted to raise Rs. 1.75 Lakh Crore through disinvestment and strategic sales in the coming fiscal year. It depends upon the privatisation of BPCL and other firms. The target can be achieved provided the government starts divestment early in the fiscal, instead of waiting to find the right time. Implementation holds the key to the viability of the budget numbers.

2021 has dawned with a feeling of hope and optimism. India has done well to limit the spread of COVID-19 over the last few months by swiftly launching the vaccination drive. The need of the hour was and has been to take concrete measures to revive the economic growth engine. The budget does just that in a spectacular fashion. CS



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With the soul lying in the Atmanirbharatha, the nation witnessed a progressive budget with due vitality on

improvement in ease of business, boosting the country into a global innovation hub. The Budget displays a clear focus on a tailored growth plan to revive the economy in the post COVID-19 milieu.

Presenting the Union Budget 2021-22, the Hon’ble Finance Minister highlighted the six pillars of the Budget as under: -

Health & Well-being;Physical & financial capital & Infrastructure;Inclusive development for aspirational India;Reinvigorating human capital;Innovation & R&D andMinimum Government and Maximum Governance.

In the wake of COVID-19 pandemic, this is incontrovertibly a ‘Proactive’ budget, amidst extraordinary circumstances.

VITAL FACETS OF THE BUDGET 2021- 22

The Launch of PM AtmaNirbhar Swasth Bharat Yojana has been the spotlight of budget 2021. The Yojana, with the objective of developing capacities of primary, secondary, and tertiary care Health Systems, strengthening existing national institutions, creating new institutions, to cater to detection, cure of new and emerging diseases etc, has been framed with an outlay of about Rs. 64,180 Crore over 6 years. The

The Union Budget 2021-22 – A balancing act in the wake of COVID-19

Asish Mohan, FCSSecretaryThe ICSINew [email protected]

Come Budget time and it was widely believed that in the wake of the pandemic and with the economy facing unprecedented contraction, there would be a higher dose of taxation. Much to the relief of everyone, the budget proposals did not propose higher taxes. Instead, the budget proposals embraced all sectors of the economy and the emphasis has been to get the economy back on growth path, even if it means a higher fiscal deficit. Budget 2021-22 focuses on enhancing productivity by incentivising the use of technology to make India ‘Atmanirbhar’ and future-ready.

areas of preventive, curative, and wellbeing has been given due weightage.

Further, as an industry incitement, Production Linked Incentive scheme (PLI) has been announced for 13 sectors, which will help bring scale and size in key sectors, create and nurture global champions and provide more employment opportunities.

A scheme of Mega Investment Textiles Parks (MITRA) has also been proposed, catering to the textile industry of the country to pool larger investment and enrich themselves to be globally competitive.

For corporate professionals, the overture for the consolidation of the provisions of Securities and Exchange Board of India Act, 1992, Depositories Act, 1996, Securities Contracts (Regulation) Act, 1956 and Government Securities Act, 2007 into a rationalized single Securities Markets Code, stands germane. The introduction of an investor charter as a right of all financial investors across all financial products will deliver more advantages in the investor protection front.

The proposal to amend the Insurance Act, 1938 to increase the permissible FDI limit from 49% to 74% in Insurance Companies and allow foreign ownership and control with safeguards is much welcoming. It is much pertinent that the majority of Directors on the Board and key management persons would be resident Indians, with at least 50% of Directors being Independent Directors, and specified percentage of profits being retained as general reserve, under the new structure.


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LEAn interesting announcement is the proposal to set up gold exchanges under the supervision of Securities and Exchange Board of India. Given that gold is by and large unregulated, it could give rise to unexplored opportunities given that Indian households are known to hold large quantum of gold.

Having completed the decriminalizing of the procedural and technical compoundable offences under the Companies Act, 2013, the decriminalization of the Limited Liability Partnership (LLP) Act, 2008 has been taken up.

The move of the Government in promoting the small business has garnered much positive vibe in the economy. Micro, Small & Medium Enterprises (MSME) sector is the backbone of national economic edifice and has unremittingly acted as the fulcrum for the Indian economy, providing it resilience towards global financial shocks and hard times. Whether in terms of employment generation or providing innovative platforms for the community, the contributions of small business to local economies has a vital role to play in the stimulation of the national growth. Measures to promote MSMEs and One Person Companies (OPCs) therefore lugs a huge impact. The budget for MSME Sector has been thus, doubled from the last year.

The definition of Small Companies under the Companies Act, 2013 has been proposed to be changed by increasing their thresholds for Paid up capital from “not exceeding Rs. 50 Lakh” to “not exceeding Rs. 2 Crore” and turnover from “not exceeding Rs. 2 Crore” to “not exceeding Rs. 20 Crore”.

Incentivizing the incorporation of One Person Companies (OPCs) by allowing them grow without any restrictions on paid up capital and turnover, permitting their conversion into any other type of company at any time, will pave way to a large number of companies out of complex compliance net. Reducing the residency limit for an Indian citizen to set up an OPC from 182 days to 120 days and also allowing Non-Resident Indians (NRIs) to incorporate OPCs in India are notably welcome measures. This will help more NRIs to invest in India by relaxing the norms of the OPC. The new measures will help the Start-ups and small business to raise more investments towards it from various persons.

With the objective of faster resolution of cases, National Company Law Tribunal (NCLT) framework will be strengthened, e-Courts system shall be implemented and alternate methods of debt resolution and special framework for MSMEs shall be introduced.Launching data analytics, artificial intelligence, machine learning driven MCA-21 Version 3.0 during the coming fiscal 2021-22 are much accelerative reforms. The Version 3.0 will have additional modules for e-scrutiny, e-Adjudication, e-Consultation and Compliance Management.

Inclusive Development for Aspirational India will outline plans for reforms on the core principles of minimum government, maximum governance. The concept of ‘Ease of doing business’ in the regulatory has been the headline in the corporate realm of the country. The proposal for setting up a Conciliation Mechanism and to mandate its use for quick resolution of contractual disputes serves benefits for those who deal with Government or Central Public Sector Enterprises [CPSEs], and carry out contracts. This mechanism shall be a platform for quick resolution for contract disputes and instil confidence in private investors and contractors.

It is noticed that on the fiscal side there is a big hike in capital expenditure to Rs. 5.5 Lakh crore, which is about 34% increase in the outlays, coupled with higher outlays on infrastructure such as roads, highways, railways and urban infrastructure which can give rise to big multiplier effects. All these spends would mean a higher fiscal deficit which is indicated at 6.8% down from the level of 9.5% in 2021 arising out of the COVID-19 Pandemic. The balancing act is sought to be achieved by proposing to borrow Rs. 15.07 Lakh crore from the market, small savings and other resources as also target to raise Rs. 1.75 Lakh crore from a time-bound asset monetization and disinvestment programme.

On the direct tax front, the budget has given relief to senior citizens above 75 years of age from the rigours of filing of income tax returns subject to certain conditions. The threshold for tax audit under Section 44AB of the Income Tax Act, 1961 is proposed to be enhanced from Rs. 5 Crore to Rs. 10 Crore if at least 95% of the total receipts and total expenditure are in modes other than cash. Further, it is proposed to amend Sections 36(1) (va) and 43B of the Income Tax Act, 1961 to allow payment of employee’s contribution by the employer to PF & ESI on or before the due date under the respective statute rather than the last date of filing Income Tax returns. There are proposals for speedy assessment, constitution of a Dispute Resolution Committee and a Board for Advance Ruling. Also, in this context, the Government has proposed to make National Faceless Income Tax Appellate Tribunal Centre. This is indeed a big leap, especially in a scenario where India gears up for a transformation to an advanced digital economy.

On the GST front, the requirement of GST Audit, wherever applicable currently is proposed to be done away with and it is proposed to provide for filing of the annual return on self-certification basis. On the admissibility of GST input credits, it is proposed to provide that input tax credit on invoice or debit note may be availed only when the details of such invoice or debit note have been furnished by the supplier in the statement of outward supplies and such details have been communicated to the recipient of such invoice or debit note.

The effective booster shots of the budget being a big push for infrastructure sector and thrust for privatisation and with no surprises of higher taxes, the Budget 2021 stands successful in achieving a balanced demand stimulus. The Government has taken sincere efforts to push the wheels of the economy making the nation equipped to manage the stress of economic recovery in a post pandemic situation. Overall, it is a budget that ensures the momentum of economic recovery sustained with least disruption. CS

On the direct tax front, the budget has given relief to senior citizens above 75 years of age from the rigours of filing of income tax returns subject to certain conditions. The threshold for tax audit under Section 44AB of the Income Tax Act, 1961 is proposed to be enhanced from Rs. 5 Crores to Rs. 10 Crores if at least 95% of the total receipts and total expenditure are in modes other than cash

The Union Budget 2021-22 – A balancing act in the wake of COVID-19


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n THE AMBROSIA CALLED MAHABHARATA, THE DIDACTIC VIDURA NEETI AND OTHER LIKE BEACONS n SEBI AND GREEN INVESTING BONDS GREEN AND BLUE, LET’S GIVE THEM THEIR DUEn RELATED PARTY TRANSACTIONS – FEW SUGGESTIONS FOR A PRACTICAL APPROACH n INVESTMENT IN STARTUPS- STAGES OF INVESTMENT AND CHALLENGES FOR PROMOTERSn CS: THE CORPORATE BOARD’S ANCHORn ATMANIRBHAR BHARAT-ROLE OF INTELLECTUAL PROPERTY IN FINANCE n LABOUR REFORMS AGENDA–PERSPECTIVES OF THE NEW LABOUR CODESn CORPORATE GOVERNANCE IN INDIA – CONCEPT, COMPLIANCE AND THE WAY FORWARD n LISTED COMPANIES UNDER CIRP / LIQUIDATION – REMEDY FOR SHAREHOLDERSn SOME IMPORTANT ASPECTS OF THE NEGOTIABLE INSTRUMENTS ACTn COMPETITION LAW AND HEALTH CARE SECTOR: CONTEMPORARY PERSPECTIVEn ROLE OF INDEPENDENT DIRECTORS – “BHISHMA WAY OR JATAYU WAY”n UNIFORM FACE VALUE FOR LISTED EQUITY SHARES – NEED OF THE HOURn ANOMALIES IN PIT REGULATIONS INTENTIONAL OR UN-INTENTIONAL!


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THE MAHABHARATA, ITS IMPORTANCE AND ETHICS

The Mahabharata, also known as the Panchama Veda (the fifth Veda), is a veritable encyclopaedia of Hindu religion

and culture. The claim of the Suta, or bard of a Puranic story, Ugrasravas that ‘anything anywhere is an echo of what is

The ambrosia called Mahabharata, the didactic Vidura Neeti and other like beacons

His Holiness Shri Eeshapriya Teertha Pontiff Paryaya Shri Adamaru Matha Udupi [email protected]

Dr. Sudheendhra Putty, FCSAssociate Vice President & Company SecretaryCyient [email protected]

Good administration is based on dharma and ethics. The Mahabharata is an epic that has everything in it. While the song celestial or the Bhagawad Gita and Vishnu Sahasarnama contained therein are streams of ambrosial water flowing, the epic is also home to numerous other nectar like springs such as Vidura Neeti. Words of wisdom, advisories or codes of conduct, call it what you may, this discourse touches upon aspects as varied as erudition, perseverance, industrial relations, aspects of administration, hospitality and charity. Averred millennia ago and yet more germane today as at any other time, these verses are powerhouses and lighthouses of knowledge to all including professionals like company secretaries. Each utterance is worth its weight in gold and worthy of implementation in professional lives. Additionally, the importance of education, emotional equanimity in the face of adversity and working of systems and processes to serve society as reflected in the Mahabharata, King Janaka’s life and the Paryaya system of Udupi ideated by Acharya Madhwa (and modified by saint Vadiraja), respectively stand out as stellar pillars in the world of today. In toto, presented below is a fine bouquet of wise sayings and experiences, which, when implemented would not only stand us in good stead but move us several steps ahead in making India the Vishwaguru.

here’ and ‘what is not here is nowhere’ is no exaggeration. Every aspect of dharma – raja dharma (statecraft), aapat dharma (conduct permissible during dire calamities), daana dharma (liberality) or moksha dharma (conduct pertaining to emancipation) - finds its due place here in the Mahabharata. In fact, the very purpose of the Mahabharata is to expound dharma in all its magnificent ramifications. Viewed in that context, it is a cornucopia of ethics to be followed for all time to come. The Mahabharata is the primary compendium of all ethics.

It is rightly said that itihasa puranabhyam vedam samupabrmhayet - One must complement the study of the Vedas with the Itihasas and the Puranas (Mahabharata Adi Parva 1.267). For the utilization of Mahabharata both as a source and as an aid to the exposition of Vedanta philosophy, it was essential to unearth its in-depth meaning and going beyond the mere story, episodes, events and personalities. In other words, it was imperative to identify the ethical, moral and spiritual issues behind the story and the various episodes contained therein.

Jagadguru Sriman Madhwacharya did precisely that. He gives utmost importance to the Mahabharata as a source of Vedanta philosophy. The Mahabharata Tatparya Nirnaya (MBTN) is amongst the most extensive and elaborate works composed by him. He states that the MBTN helps the understanding of Vedanta in two ways:

It contains all essential teachings of Vedanta philosophy It helps to understand the purport of the entire Vedas and

Upanishads.

Vidura Neeti

It is well known that the Mahabharata is one of the two epics- Ramayana being the other. The Mahabharata is like a vast ocean. It is common knowledge that an ocean contains many gems within it. That is why it is called ratnaakara. One of the bright gems or jewels of this great epic is Vidura and so is the epochal, eponymous treatise – ‘ethical philosophy’ or Vidura Neeti. It is a record of a conversation between Dhritarashtra and Vidura where the former is bemused. Vidura, candid


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LEand pugnacious as ever, repeatedly advises Dhritarashtra and endeavours to din good sense into him. Spread over eight chapters in the Udyogaparva, it is comprised in 588 verses in all. These chapters and verses, while pontificating on the duties of a king or administrator, expatiate in great detail about polity, interaction, treatment of others, truthful behaviour, means to achieve happiness and eschew activities that lead to suffering, discrimination between undesirable and desirable qualities, importance of renunciation, different facets of justice, human welfare, forgiveness, administration and good governance. Taken as a whole and individually each aspect is bulwarked in ethics or right and righteous behaviour. It can be called sage and sane advisory without being officious.

Many verses of the famed Vidura Neeti contain lessons in ethics, administration, dealing with conflicts of interest, human relations and overall good governance. The tome has invaluable guidelines that can mutatis mutandis be applied by Company Secretaries in the discharge of their functions and responsibilities in the contemporary milieu.

What follows below is an analysis and comprehension of some key averments of Vidura:

abhiyuktam balavatā durlabham hīnasādhanam | hrtasvam kāminam coram āviśanti prajāgarāh ||

Vidura adumbrates what qualities are proscribed for an administrator; foremost he must not be someone who gets easily flustered. All his activities and deportment must be directed towards and result in the benefit of the citizens. He must put the welfare of the society above all else. The administration must be independent of his filial ties and predilections. In other words, his mind must be analogous to that of a sanyasi or one who is engaged in renunciation. Only then the administration would be both effective and efficient. Our seers have provided the appellation of Rajarishi to such rulers. When a ruler gets depressed, is weak, or either unprepared or underprepared, compromises on ethics and has a plethora of desires, the administration tends to flounder.

Further, a ruler or administrator must be erudite, scholarly and intelligent. He must look to cater to the well-being of the citizens, understand and analyse their needs and plan accordingly. Vidura then goes on to describe the characteristics of a scholar (implying that an administrator must be a man of letters):

krodho harsaśca darpaśca hrīstambho mānyamānitā |yam arthān nāpakarsanti sa vai pandita ucyate ||

Anger, happiness, conceit, sense of shame or shyness and such other feelings must be present in a ruler to the extent of achieving the larger goals for society. None of them should be such as would wean him away from right conduct or discharge of his duties. For example, anger could be kosher if it be channelized to slay the foes or ward off intemperance; enjoyment of worldly matters is acceptable as long as it does not make the ruler part with confidential information. Only when a person is able to channelise his feelings and emotions would be able to provide solutions.

yasya krtyam na jānanti mantram vā mantritam pare |krtam evāsya jānanti sa vai pandita ucyate ||

A truly learned man is he who does not disclose much when the task is still work-in-progress. He conceals the information from

competitors and emphasises on the protection of confidential information. Vidura stresses on sharing information only on a strictly need to know basis. The product or service speaks for itself once it is accomplished. And that is when the accolades start pouring in.

yasya krtyam na vighnanti sheetamushnan bhayan ratih |samrddhirasamrddhirva sa vai pandita uchyate ||

A scholar (and an administrator) needs to persevere to achieve the predetermined goals in the face of any and all adversity. He lives almost like an altruist. He needs to remain steadfast and undeterred despite all obstacles that may accost him.

na hrsyatyātma-sammāne nāvamānena tapyate |gāngo hrada ivāksobhyo yah sa pandita ucyate ||

One who exults not at honours, and grieves not at insults, and remains unperturbed and un-agitated like a lake on the course of Ganga, is reckoned as a Pandit. There are people who would criticise a ruler no matter what he does; conversely, there would be some who praise and exult at even a wrongful act. The scholarly ruler is the one who remains undaunted and unfazed by the bouquets and brickbats and is steadfast in the discharge of his duty. Accomplishment of the task on hand is paramount. While feedback does come, it ought not to hamper the growth trajectory.

pravrtta vāk-citra katha ūhavān pratibhānavān |āśu granthasya vaktā ca sa vai paṇḍita ucyate ||

An ace administrator must be blessed with the gift of the gab, be intuitive and have foresight. His efforts and initiatives must be such as would not merely impact for the day, but for the future as well. He should be cognizant of the outcome of his actions and their implications. The desire to constantly learn and apply the knowledge for the benefit of society should be paramount.

ekayā dve viniścitya trīmścaturbhir vaśe kuru |pañca jitvā shadviditvā satsapta hitvā sukhī bhava ||

Discriminating the two by means of the one, bring under subjugation the three by means of four, and also conquering the five and knowing the six, and abstaining from the seven, be happy. This cryptic and somewhat enigmatic utterance is pregnant with immense meaning. Let’s unravel it.

One means mind – the mind must discriminate between the two viz., what can be done and what ought not to be done (or right and wrong). The three is an allusion to friendliness, indifference and enmity. These must be subjugated by the four approaches of diplomacy – sama, dana, bheda and danda –



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meaning conciliation, recompense, treachery and force. The top-notch administrator would know which approach to apply to whom and under what circumstances, calling for oodles of dynamism, dexterity and ingenuity. The reference to five is to have control over the sense organs; six is a suggestion to the expedients of foreign policy – sandhi (peace), vigraha (hostility), yana (March or expedition), aasana (doing nothing or inaction), dvaidhibhava (double policy of sandhi and vigraha) and samshraya (seeking asylum). Finally, the seven is an allusion to abstaining from the seven blemishes – woman (as in philandering), gambling, hunting, intoxicants, harsh speech, harsh punishment (not being commensurate with the act) and amassing wealth using unjust means.

Vidura then turns his focus on some other matters of administration. Key aspects of charity and fiscal management are sine qua non for an administrator; he needs to have access to right advice or sage counsel. While citizens are taxed, it should not be painful – such must be the manner of collecting levies. Those who can afford ought to pay taxes; those who cannot, must be incentivised such that they too reach the level of affordability to pay taxes. Currently, the foregoing of subsidies on gas cylinders by thousands of citizens is a case in point. A leader who inspires and works as such is admired and adored; this in turn generates all round positivity. Discretion must be displayed such that there is equality before law and equal protection of laws. There must be no harassment of citizens.

At the other end of the spectrum is the example of Duryodhana who was tutored by Kanika – a person who was a consigliere to Dhritarashtra. Kanika was insidious enough to postulate the exploitation and hoodwinking of the subjects to keep the ruler happy. Thus, the approach of Pandavas and the Kauravas was at complete variance. The former on the right and righteous. The latter, evil.

EMPHASIS ON LEARNINGThe Mahabharata gives us the example of Bhimasena, who, during the rule of Yudhishtira, ensured that each village had at least 5 households that would be engaged in the study of scriptures and propagation of knowledge. This underlines the pride of place given to education in our ancient times. Effective administration is hallmarked by systems and processes being in place for systematic diffusion of knowledge. This translates into the imperative need for constant learning and that is the need of the hour. The administrator must ensure that the welfare of the people includes their education and enhancing their awareness. A ruler fails if he keeps his subjects or citizens illiterate. In the name of secularism, hate and white-washed events of the past must not be peddled. History should be narrated as it was.

To sum up, an able administrator needs to develop a sense of detachment or renunciation. Foremost for him should be welfare of his people or team. The scriptures give us the illustration of the King Janaka. Once, Janaka was taking lessons in the scriptures from the learned. All of a sudden, a soldier came rushing and exclaimed that Mithila was ablaze. The stoic Janaka utters that as a king, he had appointed people with appropriate qualifications and responsibilities to tackle such situations and emergencies. If, despite the arrangements as aforesaid, Mithila was ablaze, the King Janaka states that there is nothing that he could do. Thereafter, he states that all that transpires is indeed His will and reverts to attending the lessons! This one act of stoicism underlines the preponderance attached to learning – even for a ruler. While Janaka was so engrossed, many others, who, too, were taking lessons with him as fellow-wards were perturbed at this news and ran home to salvage their belongings. The point to be discerned here is that the King was calm, composed and equanimity personified. He had made all possible arrangements and provided for all contingencies. An able administrator should be such. Subsequently, it dawns that the ‘fire and blaze’ were merely a canard or a façade and that in reality, everything was hunky dory.

EFFICIENCY IN ADMINISTRATION A shining example of efficient administration is the Paryaya system in Udupi introduced by Acharya Madhwa over 800 years ago. He established 8 mathas or monasteries whose heads (Pontiffs) would take turns every two-years to offer prayers at the shrine of Shri Krishna and thereafter be engaged in the spread of Tattwa Vaada or Dvaita siddhanta, eventually guiding people on the path of knowledge and devotion. In other words, they are engaged relentlessly in the spread of Vedic knowledge and aid mankind towards the denouement of liberation. Acharya Madhwa ensured that the land of Udupi would forever be a beacon light of knowledge and continual learning. For centuries, the Shri Krishna Matha in Udupi has been in the forefront of serving society, be it providing free food to millions of visitors throughout the year or serving in times of calamities such as floods.

The Paryaya system is wherein every two years a pontiff of one the 8 mathas takes over from the other to manage and administer its affairs. It is not merely religious and spiritual; it is much more. It involves the management of the varied activities of the matha – from providing delectable food to thousands of people each day, free of cost irrespective of caste or creed to taking care of cattle to providing education and helping the economy of the place flourish. The important aspect to be discerned here is the transition of management, the diffusion of knowledge and the way the administration runs as a system, independent of individuals. A functional system where like a standard operating procedure, there is seamless diffusion of knowledge and effective administration. The change over which is marked in a ceremony with pomp and gaiety has been going on for several centuries! A perfect example of continuity, succession planning and efficiency in administration.

KEY TAKEAWAYS AND ACTIONABLES FOR COMPANY SECRETARIESWhile the Bhagawad Gita has been a panacea for eons providing breakthroughs wherever there is a breakdown, the Mahabharata as a whole, the Vidura Neeti and the Udupi

Many verses of the famed Vidura Neeti contain lessons in ethics, administration, dealing with conflicts of interest, human relations and overall good governance. The tome has invaluable guidelines that can mutatis mutandis be applied by Company Secretaries in the discharge of their functions and responsibilities in the contemporary milieu.



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Paryaya system introduced by Acharya Madhwa and modified later by Shri Vadiraja have innumerable lessons for today’s Company Secretaries. A summary of key takeaways and actionables is as follows:

Not being flustered in any situation and act in a professional manner. To overcome filial and other ties and acting objectively such that conflicts of interest are eliminated and apparently so

Need to be erudite, scholarly and a man of letters. The imperative need to know everything of something and something of everything. This learning and knowledge to be applied in the best interests of the stakeholders and such that the growth trajectory of the company is always kept in the forefront. Constant knowledge upgradation and continuous learning to be the hallmarks of a true professional

Emotions to be kept in check and ensuring that all attempts of corporate espionage (in the real world and more so, in the cyber world) are effectively nipped. Lure, lucre, honey traps and enticements of all nature to be abhorred punctiliously

Maintain a profile that is appropriate and commensurate with one’s position in life. Not indulging in extravagance or braggadocio and yet keeping up with corporate credo. The paramountcy of confidentiality of information and sharing it on a strictly need to know basis.

Overcoming a plethora of constraints and working subject to the shenanigans of the multitude of stakeholders without ever losing sight of the corporate governance principles.

Ability to take the bouquets and brickbats with similar ease. Feedback must be constructively used to cogitate and processed for improvements. Feedback must never pump up one’s ego nor should it deracinate the self.

Good communication, effective articulation and constant learning should be ingrained in the DNA of the individual

Learn, assimilate, apply (with modifications as required) and implement the best practices by being alive and responsive to the global and industry happenings. Being dexterous, ingenious and objective such that a problem-solving approach is entrenched.

Sharing of knowledge with peers and decision makers for the benefit of the company, industry and eventually, the nation

Developing systems and processes that are independent of individuals so that succession planning happens seamlessly.

Facilitate knowledge transfer and imbibe the distilled wisdom of our seers, forefathers and seniors and refrain from making shibboleths of them. CS

REFERENCES :1. Philosophic Vision of Sri Mahabharata Tatparyanirnaya

and Bhagavata Tatparyanirnaya of Sri Anandateertha Bhagavatpadacharya’s Sarvmoola Grantha; by Prof KT Pandurangi, published by Akhila Bharata Madhwa Mahamandala, Bangalore

2. A Concise Encylopaedia of Hinduism, by Swami Harshananda; published by Ramakrishna Math, Bangalore

3. Vidura Niti; published by Gita Press, Gorakhpur

4. Vidura Niti; English translation by KM Ganguli – accessed at http://library.bjp.org/jspui/handle/123456789/70

5. Assorted writings of KM Munshi from the Bharatiya Vidya Bhavan



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Pradeep Ramakrishnan*, FCSGeneral ManagerSecurities and Exchange Board of [email protected]

Richa Agarwal*Deputy General ManagerSecurities and Exchange Board of [email protected]

Pawan Kumar Chowdhary*Assistant General ManagerSecurities and Exchange Board of [email protected]

With increasing focus on Environment Sustainability and Governance (ESG), companies tapping the bond market for funds can use green bonds as a tool which provides a fillip to ESG while providing monetary resources for the issuing. For the investor, it becomes a tool to spread their philosophy / strategy on sustainability. Green bonds help raise awareness with regard to climate change and provide a platform for investors to back transparent sustainable investment, with returns. India has set ambitious renewable energy goals to improve energy access and energy security while taking action on climate change. India has embarked upon an ambitious target of building 175 gigawatt of solar, wind and other renewable energy capacity by Year 2022 and this requires a massive estimated funding of around USD 264 billion.

WHAT IS A GREEN BOND?

“Our generation may not be able to solve all the problems related to climate change, but we can do our part to

leave a better planet for the next generation” - Kristalina Georgieva, World Bank Group Interim President and World Bank Chief Executive Officer

A green bond is like any other bond where a debt instrument is issued by an entity for raising funds from investors. However, what differentiates a Green bond from other bonds is that the proceeds of a Green Bond offering are ‘ear-marked’ for use towards financing ‘green’ projects. While there are no set guidelines defining the principles for issuance of Green Bonds, International Capital Market Association (ICMA) has however come out with a document called Green Bond Principles, 2015. Green Bond Principles outlines a set of principles that delineates good practices for the process of issuing a green bond, which are divided in four components viz. Use of proceeds, Project evaluation and selection, Management of proceeds and reporting. Using the above, SEBI defines that a debt Security shall be considered as ‘Green’ if the funds raised through issuance of the debt securities are to be utilised for project(s) and/or asset (s) falling under any of the following broad categories:

a) Renewable and sustainable energy including wind, solar, bioenergy, other sources of energy which use clean technology etc.

b) Clean transportation including mass/public transportation etc.

c) Sustainable water management including clean and /or drinking water, water recycling etc.

d) Climate change adaptation e) Energy efficiency including efficient and green buildings

etc.f) Sustainable waste management including recycling,

waste to energy, efficient disposal of wastage etc.g) Sustainable land use including sustainable forestry

and agriculture, afforestation etc.h) Biodiversity conservationHowever, SEBI’s definition is a little different from ICMA Green Bond Principles as they also include other sources of energy which use clean technology etc. This was in consonance with overall stated policy of Government of India that there should be level playing field given the state of development of different countries. The World Bank issued the first green bond in 2008. The world green bond market at present is valued a little above 1 trillion * The views expressed are the personal views of the authors


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LEUSD.1 Europe has been an early bird as far as sovereign green bond issuances go, with Poland and France launching their issues in 2016 and 2017. Sweden and Germany launched their sovereign green bond issuances this year2.The development of the green bond market in the world can be seen from the following snapshot from the World Bank Website3:

GREEN BONDS AND MUNICIPALITIESHistorically speaking, municipal bonds have even predated borrowings by corporates through bonds. For centuries, Italy and America have had Urban Local bodies / Municipal Corporations / Municipalities that have tapped this source for funding their projects. Municipal corporations traditionally depend on their respective states to fund them through grants, apart from taxes, duties and fees levied on the citizens of the municipality. The ubiquitous parking fee is one such example.

MUNICIPAL BONDS AS GREEN BONDS FOR SUSTAINABLE DEVELOPMENTMunicipal infrastructure is important for the competitiveness and quality of life of regions. Municipalities also need to make their contribution to climate action and adapt their infrastructure to climate changes. So, it is worth examining whether the existing financing mix is adequate to cover the necessary investments. The mix can be supplemented by green bonds, which were developed as financing tools for sustainable investment but have been rather uncommon in Germany’s municipalities so far. The main reason is that local governments incur higher costs with this instrument as issuers without being able to identify a significant price advantage in return. Transaction costs have to be reduced before green bonds can unfold their potential for municipalities in the future.

Changes should also be initiated within local governments themselves, particularly in the form of more effective internal coordination and an overarching vision of investments across project boundaries.It is observed that Municipalities around the world have adopted green bond route to contribute to a climate action and adapt their infrastructure to climate changes.

EXAMPLES OF MUNICIPAL GREEN BONDS4

Göteborg, Sweden, was one of the first cities to issue green bonds.4 In the past five years, it brought green bonds to market to a value of more than USD 2.5 billion. They were used to realise projects such as the electrification of the city’s bus fleet, the Västlänken railroad tunnel and the repair and expansion of the Götaälv tram bridge.

Östersund, Sweden, is an example of how this instrument can be used in medium-sized and smaller cities. A town of only 50,000 inhabitants, it issued a green bond of around EUR 80 million in 2017 to finance a number of projects for climate action and the adaptation from renewable energy generation through the procurement of electric vehicles to ground preparation.

Ile-de-France, France, is another municipality that issued green bonds very early on. It placed its seventh green bond already in 2017. Among other things, the construction and redevelopment of schools, metro and tram lines as well as social housing projects were financed with a volume of EUR 500 million.

GREEN BONDS, MUNICIPALITIES AND THE SMART CITIES MISSION5 OF THE GOVERNMENT OF INDIAThe objective of the Smart Cities Mission of the Government of India is to promote cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment and application of ‘Smart’ Solutions. The focus is on sustainable and inclusive development and the idea is to look at compact areas, create a replicable model which will act like a light house to other aspiring cities. The Smart Cities Mission of the Government is a bold, new initiative. It is meant to set examples that can be replicated both within and outside the Smart City, catalysing the creation of similar Smart Cities in various regions and parts of the country.

4https://www.kfw.de/PDF/Download-Center/Konzernthemen/Research/PDF-Dokumente-Fokus-Volkswirtschaft/Fokus-englische-Dateien/Fokus-2019-EN/Fokus-No.-245-March-2019-Green-Bonds.pdf5 http://smartcities.gov.in/content/

1https://www.greenbiz.com/article/1t-milestone-green-bonds-underscores-larger-fixed-income-shifts2https://www.forbes.com/sites/emanuelabarbiroglio/2020/09/02/green-bond-market-will-reach-1-trillion-with-german-new-issuance/?sh=6f244d332e973https://www.worldbank.org/en/news/immersive-story/2019/03/18/10-years-of-green-bonds-creating-the-blueprint-for-sustainability-across-capital-markets

SEBI and Green Investing Bonds Green and Blue, let’s give them their due


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LEAccordingly, the purpose of the Smart Cities Mission is to drive economic growth and improve the quality of life of people by enabling local area development and harnessing technology, especially technology that leads to Smart outcomes. Area-based development will transform existing areas (retrofit and redevelop), including slums, into better planned ones, thereby improving liveability of the whole City. New areas (greenfield) will be developed around cities in order to accommodate the expanding population in urban areas. Application of Smart Solutions will enable cities to use technology, information and data to improve infrastructure and services. Comprehensive development in this way will improve quality of life, create employment and enhance incomes for all, especially the poor and the disadvantaged, leading to inclusive Cities.

The smart city concept as it is envisaged talks about sustainable development towards which green municipal bonds can be a tap-worthy source of funds, which can be explored by the Municipalities.

WHAT IS A BLUE BOND?The blue bond is a debt instrument issued by governments, development banks or others to raise capital from impact investors to finance marine and ocean-based projects that have positive environmental, economic and climate benefits6.

Let us understand how blue bonds work. The Nature Conservancy brings together the World Bank, investors, the coastal nation and public donors to negotiate the debt-for-seas swap deal. Through this initiative, a country’s government undertakes to protect at least 30% of marine areas near the coast, including the coral reefs, mangroves and other important habitats.

In exchange, these countries can restructure their sovereign debt, which leads to lower interest rates and longer payment periods. That saved money goes into a trust fund that pays for conserving marine protected areas and promoting fisheries and other sectors of the nation’s blue economy7.So far, Seychelles has issued Blue Bonds8. Seychelles’ economy is highly dependent on the ocean and on fisheries for food, nutrition and livelihoods; marine habitats, and other blue economy sectors such as tourism. After tourism, the fisheries sector is the country’s most important industry, contributing significantly to annual GDP and employing 17% of the population. Fish products make up around 95% of the total value of domestic exports.

Seychelles understood that the costs of transitioning to sustainable fisheries can be substantial for a small island state, both in terms of management costs and the socio-economic losses as fish stocks are recovering. The sovereign blue bond was issued in October 2018 with a ceiling value of US$15 million, and a maturity of 10 years. The blue bond, as well as the program of marine and ocean-related activities it will support, was prepared with assistance from the World Bank and the Global Environment Facility.

This support included a partial World Bank guarantee ($5 million) and a concessional loan from the Global Environment Facility ($5 million), to partially subsidize payment of the bond coupons. The bonds carried a coupon rate of 6.5%. At least US$12 million from the proceeds were to be allocated for low-interest loans and grants to local fishermen communities, while the remainder was to finance research on sustainable fisheries projects

Significantly, Seychelles has been able to pay back debt holders with the money raised through blue bonds.9

SEBI AND GREEN BONDSWhile the world is still waking up to the potential of blue bonds, a few countries have already issued guidelines for green bond issuances. SEBI is one of the few regulators in the world to enable green bond issuances.

While the legal provisions surrounding issuance of green bonds will be from the SEBI Issue and Listing of Debt Securities) Regulations, 2008, SEBI has issued a specific circular detailing the Disclosure Requirements for Issuance and Listing of Green bonds.10

As per the requirements of the said SEBI circular, an issuer of Green bonds in India shall make following disclosures:

a. environmental objectives of the issue

b. Brief details of the decision-making process issuer has followed / would follow for determining the eligibility of project(s) and/or asset(s), for which the proceeds are being raised through issuance of Green Debt Securities. An indicative guideline of the details to be provided is as under:

i. process followed/ to be followed for determining how the project(s)and/or asset(s)fit within the eligible green projects categories;

ii. the criteria, making the project(s) and/or asset(s)eligible for using the Green Debt Securities proceeds; and

iii. environmental sustainability objectives of the proposed green investment.6https://www.worldbank.org/en/news/feature/2018/10/29/sovereign-blue-bond-

issuance-frequently-asked-questions7 https://www.bbva.ch/en/news/what-are-blue-bonds/8https://www.worldbank.org/en/news/press-release/2018/10/29/seychelles-launches-worlds-first-sovereign-blue-bond

9https://www.forbes.com/sites/korihale/2020/07/21/seychelles-blue-bond-economy-helps-to-lower-its-national-debt/?sh=5c2e7bfd621b10SEBI CIR/IMD/DF/51/2017 dated May 30, 2017

The objective of the Smart Cities Mission of the Government of India is to promote cities that provide core infrastructure and give a decent quality of life to its citizens, a clean and sustainable environment and application of ‘Smart’ Solutions. The focus is on sustainable and inclusive development and the idea is to look at compact areas, create a replicable model which will act like a light house to other aspiring cities. The Smart Cities Mission of the Government is a bold, new initiative.



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c. Details of the system / procedures to be employed for tracking the deployment of the proceeds of the issue.

d. Details of the project(s) and/or asset(s)or areas where the issuer, proposes to utilise the proceeds of the issue of Green Debt Securities, including towards refinancing of existing green project(s) and/or asset(s), if any.

e. The issuer may appoint an independent third-party reviewer / certifier, for reviewing /certifying the processes including project evaluation and selection criteria, project categories eligible for financing by Green Debt Securities, etc.

GREENWASHINGWhile it is good to be excited about issuances of green bonds, one also has to be wary of greenwashing11. It is the practice of either utilising money raised from green bond issuances to negligible or zero environmental benefits or raising money for seemingly green projects by providing false / misleading information. One oft quoted example is that of oil and gas companies that sometimes claim to be reducing greenhouse emissions while actually increasing. A transparent and credible certification of the quality and “greenness” of selected projects would ensure no “green washing” occurs. Currently certification is not mandatory however an issuer can opt for certification and for investors also it mitigates the risk.

GREEN BOND ISSUANCES IN INDIAEver since SEBI came out with the framework on Green Bond Issuances, the following issuers have made use of the same:

S. No.

Issuer Issuance Date

Amount Raised (in Rs. mn)

Coupon (%)

Maturity (years)

1 L&T Infrastructure Finance Company Ltd

29/06/2017 6670 7.59% 7

2 Indian Renewable Energy Development Agency Limited

03/01/2019 2750 8.51% 10

3 Indian Renewable Energy Development Agency Limited

17/01/2019 5900 8.47% 10

4 Tata Cleantech Capital Limited

18-Dec-18 1800 8.74% 5

Though India has not seen much traction in the onshore green bond market, there is a growing market appetite for green bonds, especially in Europe and United Stated. China is also a major market for green bonds. Issuances of Masala Bonds have given the appetite to many investors in Europe and United States.

CONCLUSIONGreen bonds offer a great avenue for investment, more so for investors focused on sustainable investing. India is emerging as one of the largest markets globally for green bonds. These will give a big fillip to environmentally sustainable finance and also help attain climate related goals of India as well as the world. CS11Term coined by environmentalist Jay Westerveld in 1986.

While the world is still waking up to the potential of blue bonds, a few countries have already issued guidelines for green bond issuances. SEBI is one of the few regulators in the world to enable green bond issuances.



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INTRODUCTION

A transaction which could be a business deal, a single or series of financial contracts or an arrangement between

two parties who are joined by a special relationship prior to the transaction would be a related party transaction. Related party transactions are common to any business in any country and are not something unique to India and it would be a misleading conclusion to state that such transactions are common to family-owned businesses only.

A coherent regulatory system dealing with related party transactions, particularly in disclosure and board oversight, existed in India even in the Companies Act 1956. There were sections in the Indian Companies Act, such as 297, 299 and 314(1A) (which have been in place since the enactment of Act in 1956), the Companies Audit Report Order, section 44AB of the Income Tax Act, clauses 32, 41 and 49 of the Listing Agreement between the stock exchanges and the listed companies, which embody the concept a related party transaction, though many of these, did not have any explicit reference to the term, “related party transaction”.

In a Commercial environment, many related party transactions may be unavoidable as these often make tremendous commercial sense and if companies are prohibited from entering into such transactions, it might militate against the principle of maximising the shareholder value. For e.g. If TATA

Related Party Transactions – Few suggestions for a practical approach

B. Chandra*, ACS Practising Company Secretary Chennai [email protected]

Not every Related Party Transaction (RPT’s) is to be treated with suspicion, particularly when there is sound commercial consideration to support the related party transactions. However, considering the increasing use and abuse of power by those in control through RPT’s, these transactions are sought to be regulated strictly under the Companies Act as well as under the tax laws. Also, these regulations are continuously under review and are also not implemented in the manner in which they should be done. There is a need on the part of the regulators such as Ministry of Corporate Affairs (MCA) and SEBI to work in tandem to give shape to the emerging regulatory framework for RPT’s and bring about some stability in such a manner that genuine arms’ length RPT’s are not overregulated, with the Audit Committee consisting of independent directors are anyway expected to oversee the compliance being ensured by the top management of the companies.

*Formerly Indian Company Law Service Officer

Motors is prohibited from sourcing steel from TATA Steel just because there may be a pre-existing relationship between these two Companies, it does not make any economic sense not only to the Companies involved but also to the Indian Economy as a whole.

In the same breath it should be stated that a related party transaction can present a potential or actual conflict of interest and may not be consistent with the best interests of the company and its shareholders. It can lead to situations in which funds are tunnelled out of the company into another entity which is a “related party” or result in situations in which a business opportunity is lost to the detriment of the interests of the company and its shareholders. Corporate frauds have posed an ever-increasing risk to the economic growth and a threat to the national well-being. In almost all the economic frauds or failures, which our country has witnessed, be it Kingfisher or Jet Airways or Bhushan Steel or any other corporate scam we can see a common thread of RPTs running through the Company. In the recent case of a public spat between two promoters of a private airline, in which one promoter has raised objections to dozens of related party transactions entered into during previous years which are said to be not in the best interests of the airlines. The other promoter points out the silence of the first promoter in the previous years besides alleging the first promoter’s holier than thou attitude.

Further in the Satyam case, failed related party transaction unearthed Satyam-Maytas corporate fraud after 10 years, despite the presence of a strong audit Committee and multitude of Corporate Governance Awards received by the Company.

It is therefore evident that RPTs are necessary but with checks and balances depending on the nature of the economy.

TWO TYPES OF RPTs

Around the globe related party transactions can be classified into two extreme types:

a. efficient transactions which fulfil underlying economic needs of the company. If related party transactions are efficient transactions, there would be no need to increase monitoring; as a result, there would be no association between related party transactions and


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b. related party transactions which compromise management’s responsibility to shareholders or a board of director’s monitoring function. In such a case, related party transactions would be more prevalent when a firm’s corporate governance mechanisms are weak, and such firms would have lower returns to the shareholders, called as conflict of interest hypothesis.

REGULATION OF RPTS IN INDIA AS ON DATE In India the Related party transactions are regulated both under the Companies Act and the SEBI (LODR) Regulations. There are differences in both the regulations from the definitions to disclosures. The LODR has a wider coverage than the Companies Act, primarily due to the fact that the LODR governs listed Companies having diverse stakeholders. Some of the key differences in both the legislations are brought out below.

Subject Companies Act LODRDefinition of Related parties

As defined in Section 2(76) of the Companies Act

Both as under the Companies Act and applicable accounting standards. In addition, it includes certain promoters

Definition of related party transactions

Certain specific transactions such sale, purchase etc. but excluding financial transactions

Transfer of resources, services or obligations whether a price is charged or not

Approval requirement

Exempts any approval in respect of transactions which are in the ordinary course and at arm’s length basis. However Companies having the requirement of constituting an audit committee, will have to take approval of such committee.

Requires prior approval of the audit committee whether at arm’s length or otherwise.

Voting in the Share holders’ meeting

Only the concerned related party cannot vote

No related party can vote in favour of the transaction.

Approval for transactions not in the ordinary course

Prior approval of the Board and that of the shareholders with no voting by the concerned related party, beyond the threshold limits.

Approval of the shareholders if a transaction with any RP exceeds 10% of the consolidated turnover.

Both the regulators seem to be in a state of flux since the implementation of Companies Act, 2013 and the LODR. Approval by special resolution for the RPTs under the Companies Act was diluted and voting by related parties not concerned with the transactions was permitted by way of a Circular issued by the Ministry of Corporate Affairs. SEBI on the other hand introduced framing of a Policy on related Party transactions, half yearly disclosures to the Stock exchanges etc. SEBI also went ahead constituting a working group on the Related Party Transactions.

The working group, inter alia, suggested changes in the definition of related party to include related parties of the subsidiary companies and the definition of RPTs to include the transactions of the subsidiary with any of the related parties as well, if the purpose and effect of the transaction is to benefit the related party. It also suggested prior approval of the shareholders in respect of material related party transactions. Though the recommendations are yet to be implemented, it is certain that it will raise a plethora of practical difficulties in its implementation and cause a great deal of stress to the independent directors forming part of the audit committee. The problem gets compounded in several cases, where the promoters do not disclose their ultimate ownership in Companies or have indirect ownership through a network of complex structures both within and outside the country leaving little scope for the independent directors to interpret the complex structure keeping the law of the land in mind.

We have seen that framing and establishing regulations is not an end by itself and the success lies only in effectively implementing the same. Corruption, lack of continuity in government policies, inadequate human and material resources, all of which often lead to implementation gap in any sector including the economic sector. A review of the regulations in place as on date reveals that checks and balances are still lacking.

THE FOLLOWING ARE SOME SUGGESTIONS FOR PONDERING OVER

a. The two regulators, the Ministry of Corporate Affairs and the SEBI which regulate the RPTs need to work in tandem in order to effectively implement any provision of law and also bring about stability in the regulatory regime and a common agenda for both the regulators.

b. As per Section 188 if a transaction is in the ‘ordinary course’ at ‘arm’s length’, there is no need for Board approval for entering into a RPT, be it a related party through a controlling promoter or the management. It is not clear who will decide if a transaction with a related party satisfies the above two criteria; as per Section

In a Commercial environment, many related party transactions may be unavoidable as these often make tremendous commercial sense and if companies are prohibited from entering into such transactions, it might militate against the principle of maximising the shareholder value.



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179 of the Companies Act, the Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do subject to exceptions. Exempting Companies from getting a RPT approved by the Board even if it is in the best interest of the Company does not augur well for the Company’s well-being. Hence the Board should be made responsible including for the irresponsible RPTs rather than making the employed KMPs as scapegoats.

c. The Board approval should be sought from an uninterested board even in a Private Limited Company having direct or indirect public stakeholders in the form of banks or any financial institutions. The exemption to an approval from an uninterested board can be given only to a separate class of Private Limited Companies not having any exposure to public stake. A mechanism already exists in the Companies Act for identification of such Companies in the 05-06-2015 notification and is as follows

a) no other body corporate has invested any money in the share capital of private company; and

b) the borrowings of such a company from banks or financial institutions or anybody corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and

c) such a company has no default in repayment of such borrowings subsisting at the time of making transactions.

Some of the features of the above can be a guide to bring about a separate class of Private Companies requiring grant of exemption from applicability of approval of the Board by an uninterested quorum. It is also suggested that the approval from the Board should be unanimous. Here it may be added that the concept of unanimous approval of the Board is in place in the provisions of Section 186 of the Companies Act which deals with inter-company loans and investments.

d. An objective guidance to decide the terms ‘ordinary course’ and ‘arm’s length’ under the Companies Act which will make the deciding authorities to give speaking approvals for the proposed transactions be it the Board or the audit Committee.

e. The Companies act has introduced the concept of “Significant beneficial ownership “(SBO) in Companies and had asked Companies to identify a SBO who is an individual, even if he has an interest through layers of entities including outside India. The definition of RPs can be amended to include the SBO and all the entities controlled by the SBO. Alternatively, the term “control” can be suitably redefined to cover “De facto control” even if a person directly or indirectly controls less than the majority of the share capital/ voting right in a Company if the investor possesses “De facto Control” over an entity. IFRS 10 explains the method of assessing “de facto control using the following features

a) Number of voting rights held by investor b) the size of the investor’s holding of voting rights

relative to other vote holders c) Number of other parties that would have to act

together to outvote the investor d) an investor with a large minority holding is whether,

based on the best information available, it reasonably expects to have the practical ability to direct the investee’s relevant activities unilaterally going forward

e) Existence of control other than through voting rights, be it contractual or otherwise to the other shareholders.

f. The threshold limit of 10 % of the consolidated turnover under the LODR appears too high and re -introduction of taking approval through a ‘Special Resolution ‘may also help.

To sum up, it is difficult to for any regulator to prescribe if such transactions are beneficial or detrimental to the firm’s performance. However, disclosure of RPTs can provide stakeholders with necessary information to either discipline firms that engage in RPTs or take precautions against them. Besides the audit committee consisting of the independent directors would anyway expect the top management to take steps to ensure effective compliance with checks and balances that are prescribed under the law in force. However, this is where the regulatory framework should not end up overregulating RPT’s that are at arms’ length and based purely on commercial considerations. CS



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Investment in Startups- Stages of investment and challenges for Promoters

Vivek Sadhale Partner LegaLogic Consulting Pune [email protected]

Vikas Agarwal,FCS Partner LegaLogic Consulting Pune [email protected]

Nikita Navindgikar,ACSSenior Legal AdvisorLegaLogic [email protected]

While the standard market practices in terms of the rights provided to investors may differ in each business, it is important that the promoters understand the risks associated with the rights they negotiate with the investors. Promoters should remember that while there could be market trends for reasonably acceptable rights and clauses in investment transactions, it ultimately depends on the bargaining power that the promoters have, while negotiating with investors. Promising businesses and bargaining power can help promoters to take away clauses in their favour and also maintain balance between the rights provided to all categories of investors in their startups.

India has seen flourishing activities in start-ups in the last few years. During the pandemic year, India produced

11 Unicorns. Along with innovative ideas and effective business strategies to generate revenues and run successful businesses, startups are bound to be in need of funds to keep the show going and reach new heights by expanding their reach in markets.

Early stage investments in startups cater to creation of a business model and execution of business ideas whereas series funding rounds cater to needs of businesses for expansion and activities resulting in increase in revenues, creating dedicated customer base and building strong teams for management of affairs.

STAGES OF INVESTMENT IN STARTUPSStart-ups are initially backed by the promoters with their own capital and savings which is also known as bootstrapping or self-funding. This is usually done when the startup is not even up and running but is at an ideation stage.

As the business is set up, startups need additional funds and move to early stage funding to meet their financial needs. Early stage funding generally consist of ‘friends and family round’ or ‘angel investments’.

In friends and family round, the promoters approach their family, relatives, and friends for capital in exchange of shares (or through convertible instruments). Such investments are sought at a preliminary stage of the startups where promoters

have done their bit by way of self-funding or bootstrapping but anticipate that additional funds would be required for the business to grow. Investments under friends and family round cater to the immediate cash needs of the startups. These rounds are less time counsuming and are relatively less complex to raise funds as compared to obtaining finance from external sources like banks or financial institutions.

Post the friends and family round, comes angel around. Angel investment rounds consist of investments from individual high net worth investors, angel networks or organized angel investor funds or family offices. These investment rounds are slightly more sophisticated as compared to friends and family rounds and a formal process is followed including for the documentation, valuation of the company, business model, projections and compliances. With their valuable business insights, domain knowledge and industry experience, having angel investors on board proves to be immensely useful for startups in a number of ways. Fund raised in these stages help create a proper direction for the growth of the business.

Institutional investors test the involvement of promoters in the business and initial funds raised through angel rounds gives confidence to institutional investors to invest. At times, companies prefer to directly opt for seed round of funding instead of the traditional steps of bootstrapping and borrowing from friends and family. Seed round investments in startups primiarily consist of investments from venture capital funds or institutional investors and become relevant for startups at acceleration stage.


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Institutional investors prefer to divide their funding commitment in various stages to get benefit from changing valuation of the investee companies with passage of time and growth in business.

Advanced stage funding is divided into different rounds like Series A, Series B, Series C and so on which target and aim for growth, acceleration, product development, increased market outreach thereby resulting in strong financials and credibility of the startups and higher investment returns for the investors. Investment in each series of investment round is generally targeted towards a specific goal of the business. Series funding rounds are more complex in nature as compared to early stage funding. Series funding rounds often take longer to close as compared to the early stage funding rounds due to the complexitiy involved in terms of number of investors, valuation, rights to be negotiated with all categories of investors, due diligence activities and legal compliances.

RIGHTS OF INVESTORS The rights granted to investors differ at each stage of funding and these rights are usually linked to the amount of funds invested by the investor and the stage at which such funds are introduced in the business.

Early stage investors like friends and family would expect rights in relation to share transfer restrictions, pre-emption rights, exit rights and so on, whereas angel investors would also expect information rights, affirmative rights, board seat, anti-dilution, liquidation preference and the like, in addition to the rights provided to early stage investors. Institutional investors would demand for rights in addition to those granted to the early stage investors and also demand for superior rights in terms of time bound exit, liquidation preference, anti-dilution, owing to the higher valuation at which they enter the companies.

Promoters must seek assistance/advice from legal counsels before deciding the best approach when it comes to granting of rights to investors at different stages of investments. Promoters and prospective investors often agree to basic terms and conditions and rights to be granted to investors by execution of term sheets or memorandum of understanding. The rights granted to the investors are captured in greater detail in investment agreements or shareholders agreements.

A brief analysis of various rights to be negotiated by promoters with each category of investors along with possible options and solutions which promoters can use for negotiating such rights are discussed below.

A) Early stage investors

Given the risk associated with very early stage companies, early stage investors seek more rights (and more shareholding) as compared to the total amount of money they invest in the company. Rights given to early stage investors have a far-reaching effect on the promoters’ ability to exercise effective governance and operational control in the company.

The promoters need to critically evaluate the rights which may dilute the control and operations of the business. Governance rights such as board seat or appointment of observer or affirmative consent rights for management decisions should be provided with checks and balances to ensure that such rights do not create hindrances in the day to day management and critical decision making process of the company.

Similarly, liquidation preference right is another right often demanded by investors which is best avoided by the promoters during early stage investments. Even if the liquidation preference right is granted, the promoters must make the early stage investors well aware that this right would fall away with future investments rounds in the company. If early stage investments happen by way of investment in equity shares, the question of granting a right to preference at the time of liquidation does not arise.

Significant involvement of promoters is the key to balance out the rights, obligations and flexibility provided to each category of investor in the company. It is promoters’ duty to keep a check on the kind of rights granted to early stage investors and inform such investors about the possible dilution of their rights with every new round of investment in the company. This becomes necessary to avoid conflicts and roadblocks at future round of investments.

Early stage investors may prefer to exit and gain return on investment instead of staying invested with limited rights as superior rights are always given to institutional investors in advanced stage funding rounds.

B) Seed investors

Seed series investors bring in larger chunk of investments as compared to the early stage investors and are more focused towards the rate of return on investment. Seed series investors consist of a mix of angel investors and venture capital funds. Nature of securities issued to seed series investors can vary from equity shares, convertible preference shares, etc. Depending on structure of the deal, issuance of compulsorily convertible debentures or convertible notes are options which can be considered by startups.

While the practice differs from industry to industry, many seed series investors demand board seat or a right to represent at the board level by appointment of board observer. While granting a board seat would essentially not result in shifting of control, the promoters may instead negotiate with the seed series investors and agree to provide reporting rights or information rights or board observation right. It is important for promoters to not lose out on the governance control on decision making and operations as these are pillars of growth of the company. Any hindrances caused due to the complexity of decision making process at the board level will have a direct impact on the operations of the company.



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LEAffirmative veto (or consent) rights if agreed to be provided must be only applicable in case of major decisions which can have impact on the overall business of the company. The promoters should negotiate the affirmative consent clause to make it clear, specific and applicable only in case of occurrence of activities listed in the said clause. A step further to safeguard may include having a clause which states deemed consent of investors if no response is received from investors beyond pre-agreed timelines. This is essential for promoters to avoid time lapse in the decision making process.

Seed investors usually seek pre-emption right for future round of investments and consent requirement for future investment rounds. The promoters need to be mindful and ensure pre-emption rights if agreed upon should be restricted to the pro-rata shareholding of the investors in the company. Prior investor consent for future investment rounds should not be agreed upon as it may result in difficulties for the start-up to get future investments resulting in loss of opportunities.

Lock-in for promoters is another expectation of investors and a way to test the involvement of promoters in the business and also indirectly ensure that the promoters do not leave the company while the investors are on board. While a period of 3 to 5 years lock-in is treated as reasonable, the promoters can negotiate to have certain exceptions to the lock-in period wherein sale of shares held by them is permitted even during the agreed lock-in period. Promoters can also agree to keep their shares under lock-in in exchange of certain incentives for growth of business or achievement of financial milestones.

Investors further demand a right of first refusal paired with a tag along right in case of any secondary sale of shares held by promoters. In such cases, the existing investors have a right of first refusal for the shares intended to be transferred/sold by the promoters clubbed with a tag along right where the investors get an opportunity to reserve their right to sell their proportionate shareholding to be acquired by a third party as a part of any transaction that the promoters undertake. These rights are reasonable only if the investors concerned are holding a high stake in the company and intend to increase their stake in the company without allowing new investors to enter.

Liquidation preference clause is another favorite from the investor’s kitty. Investors generally demand for liquidation preference rights in order to secure a specific percentage of return on the investment in the company upon occurrence of liquidation event which inter alia consists of winding up, merger, amalgamation or strategic acquisitions. Having a liquidation preference ensures that the investors get first preference over the distribution of assets of the company upon occurrence of liquidation event. The promoters should negotiate this clause very carefully including the definition of liquidation event, the rate of return agreed over and above the value of investment, the sequence of preference given to the investors and so on. Early stage investors and small investors or investors who have invested in equity shares should be informed by the promoters that the liquidation preference right available with such investors is bound to fall away with future rounds of funding and entry of large institutional investors in the company. It is only reasonable for high value investors to demand first preference at the time of liquidation.

C) Institutional Investors

Institutational investors consist of venture capital funds, private equity funds,and financial insitutions. These institutional investors enter the investee companies at significantly higher valuation and higher amount as compared to early stage investors or seed investors.

It is often seen that the institutional investors demand all rights that are available with the existing investors in the company and to move a step ahead also demand for superior rights and additional rights. It is reasonable and fair for the promoters to provide adequate protection to the investment by these institutional investors and agree to grant rights in proportion to their investment in company.

Typically, in case of multiple investors on board, the lead investor represents interests of all the investors. This kind of structure automatically provides protection to interests of smaller investors without actual involvement in the finer aspects of day to day operations of the company. This mechanism if built well in the transaction documents, helps to maintain harmony amongst the promoters and investors and does not create a situation where one investor is attempting to overpower the other group of investors.

Discomfort and disengagement amongst investors is not desirable as it affects the overall environment in which the company functions and has an impact on the business, operations and overall management of the company.

Right to appoint a director on the board would usually rest with the lead investor in case of multiple investors and the other investors may be granted a right to collectively appoint an observer on the board.

The right of representation at board level could fall away with below a specific threshold of investment. The promoters must ensure that no competitor is appointed as investor’s representative on the board of the company.

In addition to the protection rights as demanded by seed investors including but not limited to lock-in for promoters shares, right of first refusal, right of first offer, tag along right and so on, the investors also demand for anti-dilution rights from promoters.

Anti-dilution right is usually demanded by investors to take care of a scenario where company is allotting shares to a new investor at a price lower than the price paid by the existing

Institutional investors test the involvement of promoters in the business and initial funds raised through angel rounds gives confidence to institutional investors to invest. At times, companies prefer to directly opt for seed round of funding instead of the traditional steps of bootstrapping and borrowing from friends and family. Seed round investments in startups primiarily consist of investments from venture capital funds or institutional investors and become relevant for startups at acceleration stage.



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While anti-dilution by way of full rachet mechanim is the most preferred mechanism by investors for anti-dilution right, for the best interest of the company, the promoters must negotiate anti-dilution clause with broad based weighted average mechanism. Enforcement of anti-dilution clause is a challenging activity in case the investors are non-resident entities/ non-resident individuals as foreign exchange laws in India at present have certain restrictions in terms of the valuation of securities to be issued to non-resident shareholders.

Along with the right of first refusal and tag along right, the institutional investors with a step ahead also demand for drag along rights on the shares held by other shareholders including the promoters. Drag along right gives the investors power to compel the other shareholders in the company to mandatorily sell the shares held by them to third party acquirers to whom the investors plan to sell their stake. This is usually done to get complete exit from the company at a good rate of return on investment. While providing a drag along right to the investors is not beneficial for the promoters, if drag along right is to be agreed upon, the promoters should negotiate the specific list of activities or instances which may trigger the drag along right of the investors. Inability of promoters to provide exit to the investors at a specified time may be agreed as a trigger for drag along rights.

Mechanism for exit demanded by the investors varies from buyback of shares, third party sale, acquisiton by promoters or initial public offering depending on the lifecyle and business cycle of the investee company and the proposed duration of investment made by the investors. For exit, the promoters should be mindful and not take up any personal obligations of granting/providing exits to the investors. While promoters would use their best efforts to provide exit to investors in agreed timelines, considering various external factors involved, it is never a good idea to take up personal obligations to provide exit to investors.

CATERING TO MULTIPLE INVESTORS’ RIGHTSAs the start-up lifecycle advances, the funding requirements keep changing and promoters face new challenges with each new round of funding. It is important that the promoters keep the following aspects in mind to face the new challenges with every new funding round coming up:

Proper documentation at each step is a must: Promoters should make sure that proper documentation is prepared and maintained for all investments by investors including early stage investments. Having

proper documentation at each step is necessary to avoid conflicts at later stage.Execution of the right type of documents will result in compliance with laws and the terms and conditions agreed between the promoters and investors be captured in writing.

Creation of ESOP Pool: Creation of ESOP pool is another important activity which promoters should complete in advance to avoid dilution in investors stakes in future.

Over-valuation may not help: Over- valuation of startups may seem lucrative during early stage investments with a view to raise more money, over-valuation creates problems at late stage investments. Any unforeseen circumstances in business activities bear the risk of requirement to have investments in down rounds. Promoters have a tough time catering to the needs of investors who have the down round protection rights or anti-dilution rights.

Governance model: Composition of the board of directors is a very critical aspect for startups as each investor (whether small or large)would typically demand for board seats and an opportunity to participate in decision making process. The promoter should strike a balance between the minority investors and institutional investors in order to have a board which has adequate representation from the investors. Having too many members on board may create chaotic situations which could become difficult to handle. As they say, too many cooks, spoil the soup!

Treat all investors with fairness: Promoters need to understand it is in their benefit to treat all the investors with fairness. Promoters should be fair and equitable with each investor to gain investor confidence and strengthen relationships with investors. Even though this is not directly linked to amount of investment or documentation, it is always better to have good rapport with investors. Promoters need to be mindful of the fact that dilution of rights at a later stage is clearly communicated to the investors at the time of onboarding the investors. Rights granted to the investors at each stage of investment are generally linked to the amount of investment, the level of risk, valuation of the company at the time of investment and such other factors. Giving away too many rights to investors during early stage investments is not a good idea as each new investor entering the company at later stage would expect similar or more superior rights.

Involvement of Legal Counsel: Promoters should involve legal counsel early on in the investment transactions. It is advisable that the legal counsel is involved at the time of drafting and negotiation of the term sheet. Promoters should engage the legal counsel who understands the nuances of the transaction, has a commercial understanding of the transaction and who can provide bandwidth all through out the transaction to ensure smooth flow of activities and take care of all applicable legal compliances.

Diligence of Investors: Promoters should also conduct a due diligence of the investors who are proposing to make an investment in the company. It is necessary to find out the portfolio companies where investors have invested, person responsible to manage investments and take decisions on behalf of investors. This helps provide good comfort to the promoters as they take the discussion ahead with the investors for the transaction.

Discomfort and disengagement amongst investors is not desirable as it affects the overall environment in which the company functions and has an impact on the business, operations and overall management of the company.



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Jurisdiction: Another important aspect which promoters need to understand in the definitive agreements is the jurisdiction clause. Promoters should insist that in case of any dispute, parties should submit to the jurisdiction of the courts of home country of the investee company. It becomes difficult for the promoters to fight out the dispute, in case parties have agreed to submit to the jurisdiction of the courts of investor’s home country. While non-resident investors may prefer for a neutral seat and venue for arbitration, it is always in the interest of the investee company and the promoters to have arbitration seat and venue to be a place which is a jurisdiction in which the investee company is incorporated and accordingly the local arbitration law should apply.

CASE STUDIESInternet Restaurant Company

A start-up company engaged in the internet based restaurant business which has bagged multiple investments from leading institutional investors in its late series funding rounds has stepped forward to make investments in similar businesses aiming to acquire smaller businesses in similar domain and expand its portfolio. With the lead investor entering the company with majority, the rights were distributed amongst the majority investors and the existing investors became minority investors. While certain rights such as pre-emptive rights, tag along rights were retained by both categories of investors, other rights such as right of first refusal were restricted to majority investors and promoters settled for put option right linked to achievement of milestones. Minority investors were provided specified exit rights. Decision making and governance was well distributed amongst promoters and majority investors with both having certain affirmative veto rights for matters affecting their interests. The promoters of a beverage manufacturing start-up (the investee company in this case) successfully managed to strike the right chord and have all investors happily sailing in the same boat. Diagostics Company

A specialized diagnostics company recently raised Series B funding round from new institutional investors and existing investors consisting of venture capital funds. Angel investors also participated in the investment round. Additional investment by existing investors and new investment from new investors in the same round created lot of tussle amongst the existing and new investors during negotiations for the rights which each category of investors demanded in the investee company.

The promoters had a hard time negotiating and deciding on the rights which different categories of investors would be entitled to. With the extensive list of affirmative veto items demanded by all the investors, a separate set of promoter consultation items were also included to prevent the promoters from losing control in key decisions of the company.

With investors refusing to budge, the size of the board of directors was required to be increased to accommodate the requirements of board seats for the new investors as well as existing investors and promoters were left with bare minimum board representation. Closing the investment round was a time-consuming process as the promoters had a tough time convincing the investors on the rights demanded by them and actual rights granted to such investors. Technology solutions provider company

A company engaged in providing technology and facilitation services had multiple investors in its seed series funding round. More than 7 investors investing in a single investment round consisted of venture capital funds and other institutional investors. The preparedness of the promoters played a vital role in smooth sailing of the entire documentation and completion of investment round. The rights were optimally distributed amongst the majority investors, the existing investors, the minority investors, and the promoters. Information and inspection rights are restricted only to the majority investors. Adequate distribution of rights amongst all stakeholders creates harmony and helps the promoters focus on the growth of business of the company. Actions and demands of the investors depend upon the relation the promoters establish with the investors. If the investors are confident about promoters’ involvement in the business of the company, then investors are not keen on insisting for governance related rights and are usually satisfied with rights which protect their investment in the company.

CONCLUSIONEach stage of investments caters to different needs of the startups and each new investment comes along with its own sets of rights, restrictions and other complexities.Investments support the startups and cater to growth and expansion of businesses which are stemmed out of the ideas and visions of the promoters. Hence, investments in a start up are welcome at any stage in the lifecycle of startups. It is important for the promoters to create a good track record of their work and business in order to attract investors who are willing to invest to support the growth of the startup and at the same time enjoy high returns on investments.While the standard market practices in terms of the rights provided to investors may differ in each business, it is important that the promoters understand the risks associated with the rights they negotiate with the investors. Promoters should remember that while there could be market trends for reasonably acceptable rights and clauses in investment transactions, it ultimately depends on the bargaining power that the promoters have while negotiating with investors. Promising businesses and bargaining power can help promoters to take away clauses in their favour and also maintain balance between the rights provided to various categories of investors in their startups. CS



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LE CS: The Corporate Board’s Anchor

Arun Balakrishnan*Former ChairmanHindustan Petroleum Corporation Limited [email protected]

The Companies Act, 2013 has significantly enhanced the status of a Company Secretary (CS) to the level of a Key Management Personnel (KMP) and it has been seen that the professional CS today enjoys a great deal of respect of the members of the Board for the role that is performed by the CS. The CS plays a significant role in ensuring the quality in the Board Processes and also in the discharge of the responsibility for having in place an effective Compliance Management System. The introduction of Secretarial Audit shows the confidence the regulators have on the professional CS.

The Companies Act 2013 had given the status of Key Management Personnel (KMP) to the Company Secretary

(CS) along with the Chief Executive Officer (CEO) and the Chief Financial Officer (CFO). Thus, the importance of the CS in the organisation has been made a part of the statute ever since 2014. This move, though long overdue, has been a big leap for the profession.

Chairman, CEO’s, Directors and various other officers of the company now see the role of the CS differently. Every department head who has an agenda that requires Board approval has to necessarily route the agenda through the CS whose role it is to fine tune the matter and put it up to the Board in a presentable manner in the agenda. The Functional Director who has a presentation to make to the Board also looks up to the CS, who takes steps in co-ordination with the IT team and other support functions to ensure that the audio-visual equipment is set up and is in good working order. The non-executive Director invariably regards CS as the one-point contact for travel arrangements and hotel stay as well as ensuring that the Board Papers reach him before the statutory seven days. The Managing Director (MD) or a person holding the combined position of Chairman & Managing Director (C&MD), virtually looks up to the CS for all structuring all matters connected to the board process. Thus, it can be seen that the role of the CS acquires gravitas.

The Chairman or rather the Chairperson of the Board is the key functionary of the Board. His / Her decision is final on most matters and it is the CS on whom the Chairperson depends upon to ensure that the Board’s decision is compliant, or not in violation of the various statutes that govern corporate life in

*Former Council Member(Government Nominee),ICSI

the country. The CS, by training, is familiar with the Companies Act, SEBI LODR and most other statutes and his advice is critical to the way the Board conducts itself. A knowledgeable and upright CS will ensure that no decision of the Board would violate the statutes and stands up to pressures from all quarters when it comes to ensuring compliance.

Quoting from experiences with different companies in the last two decades, what stands out from the point of view of a functional Director, CEO, Chairman or as Non-Executive Independent Director is that diplomacy in dealings with the Board members comes naturally to a professional CS in the sense that most of them would not hesitate to tell the Chairman what is right and what is not. And here lies the core competence which all aspiring CS’s should learn. It may not be the best policy to confront the Chairman in a Board meeting, as egos at that level can be quite bloated. The CS may adopt different methods to convey his / her point of view like passing a handwritten note or whispering to the Chairman queitly regarding the negative aspects of the proposed decision which is not likely to be compliant with the law and is best subject to further discussions. Further, it has been noticed that fresh CS who pass out to enter the profession has it in them to quickly catch up with these tricks to do what is right without rocking the boat and that is what makes a typical CS unique among other professionals.

A person becomes the Chairman or Chairman & Managing Director (C&MD) of a company because he is primarily the best candidate to take the company on a path of growth and profitability. While he may be the best person for that position, it does not mean that he is knowledgeable about every aspect of the company and especially the Companies Act 2013 (Act) with its ever-changing procedural requirements which keeps changing to suit the times and circumstances. The Chairman therefore needs a trusted person to handhold on issues of compliance and conduct so that he/she can focus on the key deliverables for which he /she is responsible for.

The Board invariably makes important decisions, and these decisions are conveyed to the management team through the Minutes of the Meeting (MoM). The drafting of the MoM is the responsibility of the CS as this is the document that posterity would go by. As part of the process, the draft MoM is circulated to all Board members for their concurrence and the timelines for this activity are clearly stated in the Act. This is an important process both for the CS and the Board members as they will be held responsible if posterity or any statutory agencies find mala-fide motives or intentions in the decisions and Board members are held accountable for the same.


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Therefore, it is necessary that the minutes should contain a fair and correct summary of the proceedings that took place and should accurately reflect the decision that has been arrived at and clearly indicate if it was a unanimous decision of the Board or if one or more members had dissented the decision. There have been instances where some Directors or the CEO/ Chairman would want the MoM in such a way that loopholes are built in for the interested persons to take advantage. While it may be a tough call to resist the powerful or dominating Board members, the CS as a KMP should stand up to such pressures and put in place strategies to neutralise any backlash. Whatever position that one may be in; it is best that the right path be taken and values are not compromised. Respect is gained over a fairly long period of time, if the CS is strict about adherence to the standards set for recording the content in the minutes book and if a CS shows his / her firmness by not making any exceptions, the Board members will start respecting the CS and best of all refrain from expecting that CS will make compromises. This is perhaps the best contribution that a CS would make by ensuring that the MOM always conforms to the best standards and is made in accordance with the provisions of law. MOM prepared thus would make the CS a MOM as well (Man of the Match).

The importance of accuracy of the MoM has become of greater relevance during these pandemic times as Board meetings are held online, and the statute requires that they be recorded using audio-visual software with the added requirement of preserving the recordings for a specified period. Fortunately, there are several high-quality software that make virtual meetings quite comfortable for all concerned and especially

for recording. Some CS convert these into ‘YouTube’ format which makes retrieval also easier.

The CS is also responsible for ‘institutional memory’. It is the remit of the CS to preserve all Board papers and MOM almost for eternity. The legal requirements may be less onerous, but the evolution of the corporate from a start-up to an A-Lister would lie in the cabinets (electronic or otherwise) of the CS. A tech savvy CS will have search and retrieve software that can retrieve the history of major strategic interventions or mergers and acquisition that would have made or destroyed profitability. There are a number of instances where current CEO’s have blamed his predecessors for faulty decisions only to have tarnished reputations repaired by vigilant CS’s who place the facts of the case on the table backed by signed documents.

The question which always come to mind is can the CS be part of the decision - making process. The CS should refrain from active participation excepting to draw the attention of the Chairman if the proposed decision violates any statute or any past decision is inaccurately quoted to support an argument for or against the agenda item for approval. An experienced and seasoned CS would over the years have developed the ability to judge Board members who are prone to exaggeration and therefore keep a close watch on the data presented to support his or her case. To sum it up, while the CS keeps an active interest in the discussion, there is no attempt on the part of the CS to influence the decision one way or the other with the only exception of keeping a hawk’s eye on the sanctity of data. For this purpose, young CS who may be the

CS: The Corporate Board’s Anchor


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second in line in the secretarial department should not only be permitted to be in the Board room as an understudy to learn the finer points for a future independent role, but also through this experience learn the importance of keeping confidential the discussions that take place, which will contribute to the making of a more mature CS with experience that will anyway come along. This practice is already prevalent in some professionally managed companies.

Proper conduct of the Annual General Meeting (AGM) and the occasional Extraordinary General Meeting (EGM) are also the responsibility of the CS. This would also include the choice of a venue that is suitable for the shareholders to convene as a wrong choice could be an unwanted source of disharmony amongst them. This problem has been mitigated to a great extent with virtual AGM’s and EGM’s being permitted by the Ministry of Corporate Affairs (MCA). Shareholders have many demands in this regard as the month of September is when most companies schedule the AGM’s, and quite a few shareholders may also be members of quite a few other companies as well. An experienced CS would do a fine balancing act in this regard to keep all interested parties pleased. Fortunately, with online voting, or e-Voting software available, passing of resolutions have been

A person becomes the Chairman or Chairman & Managing Director (C&MD) of a company because he is primarily the best candidate to take the company on a path of growth and profitability. While he may be the best person for that position, it does not mean that he is knowledgeable about every aspect of the company and especially the Companies Act 2013 (Act) with its ever-changing procedural requirements which keeps changing to suit the times and circumstances. The Chairman therefore needs a trusted person to handhold on issues of compliance and conduct so that he/she can focus on the key deliverables for which he /she is responsible for.

simplified with independent practising CS’s taking the final call on the voting results.

The “Performance Appraisal” of the CS of listed companies is played out during the AGM. The normal parameters are whether the printed / soft copy of the Annual Report has reached the shareholder well before the AGM; Whether promises made (like site visits) in the previous AGM has been implemented; whether complaints of share transfers or ‘Demat’ issues have been resolved; whether shareholder queries have been attended to promptly and graciously. In most AGM’s which are well conducted, the maximum shareholder complements are for the CS than for the Chairman. Unhappy shareholders can tear apart the CS as has been the case sometimes.

Related to the AGM is the Annual Report of the company that needs to be circulated prior to the AGM. A well drafted Report is a pleasure to read as it would cover, apart from statutory Financial Statements, the Directors Report and many other details that are essential material for investors. A good report will not only reflect the activities of the company and the awards it has won, but also indirectly be a testimony for the quality of managerial personnel. Though the CS may not be the author of all that forms part of the Annual Report, there is great scope for ensuring superior standards for design and presentation.

Secretarial Audit is something which would bring out the best of the CS though sometimes it can be quite challenging particularly where the CS has to report something which is adverse. However, generally the CS always put their best foot forward when they deal with Secretarial Audit and rightly get their due respect for their forthrightness. It is for this reason that not only the Ministry of Corporate Affairs, but Securities and Exchange Board of India (SEBI) has also through their recent initiative of Annual Compliance Report introduced through an amendment to the SEBI (Listing Obligations and Disclosure) Regulations, 2015 sought to use the secretarial audit as a tool to assure the investors that the recommended practices have been followed by the listed companies and the various SEBI regulations are adhered to. From the perspective of the CS profession, Secretarial Audit becomes an additional parameter for his / her performance appraisal. In this sense, Secretarial Audit could be called a peer review of the work of the whole-time secretary. CS

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1. INTRODUCTION

“Atmanirbhar Bharat”campaign does not require any introduction. Almost every Indian knows about the

“Atmanirbhar Bharat” campaign. Certain words cannot be translated into english or there is no proper english word showing the complete and correct meaning of the word. Even though we say “self-reliant India”, “self-sufficient India”, the word “Atmanirbhar” cannot be satisfactorily translated. That is why we will just say it as is, “Atmanirbhar Bharat”. The title is “Atmanirbhar Bharat – role of intellectual property”. In this article, we will try to discuss three questions. First, whether there is any link between “intellectual property and Atmanirbhar Bharat”? Second, can we become Atmanirbhar by creating and exercising intellectual property rights? The third question is, which are the potential areas in IP domain that need attention by finance and compliance professionals who can contribute in Atmanirbhar Bharat campaign?

Atmanirbhar Bharat-Role of Intellectual Property in Finance

Dr. Gouri Gargate Assistant ProfessorRG School of IP Law Indian Institute of Technology [email protected]

In knowledge economy, intellectual property plays a crucial role. At present more than 80% of the assets of an organisation are intangible in nature. In this scenario, identifying, protecting and exploring intellectual property, a type of intangible property, prudently is indispensable. Economy is now becoming dependent and driven by innovations and inventions. In this competitive scenario, where we are pushed in technology war like situation, rights over creation can be secured by protecting it using intellectual property as an instrument. Intellectual property is explored by multinational corporations (MNCs) from developed nations extensively and many of these organisations are at 4th and 5th level of “IP value Hierarchy”, whereas most of the Indian organisations are at 2nd or 3rd level of “IP value hierarchy”. Now at this stage, when India is visioning to be “Atmanirbhar”, the challenge is how systematically in precise time, Indian organisations can move from their current level to higher level of “IP value hierarchy? How various sections of economy as industrial organisations; micro, small, medium enterprises (MSMEs); academic organisations; and research organisations play crucial role to achieve this vision? How intellectual property audit, intellectual property valuation and intellectual property evaluation processes can be strengthened? In this article, attempt is made to find answers to these questions. Literature review, practical experience and exploratory case study methodology is applied.

2. INTELLECTUAL PROPERTY- CURRENT SCENARIO

Most of us are aware about intellectual property (IP). There are eight types of IPs. Patent, copyright, industrial design, trademark, and Trade Secrets are the five most important types of IP as shown in Fig. 1, that most of the organisations are exploring for wealth creation. There are various opinions about “Trade secret” as whether “Trade secret” to be considered as type of IP or not. Without entering into an argument here, it would still be worthwhile to consider trade secret as type of IP and it is to be noted that it is extensively explored by multinational corporations (MNCs). In addition to these five types, there are three more types of IP namely “Geographical Indication”, “Protection of Plant varieties and Farmers’ Rights”, and “Semiconductor Layout design”. We deal with all these types of IP every day. As a child, we learn in the school that “air is everywhere”. Today in this knowledge economy, we can say and experience “intellectual property is everywhere”. The advantage of IP is that anyone can create IP by adopting the proper process and planning for its protection.

Figure 1- IP types IP types extensively explored by corporates


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LEIn this fast moving technology world, reading about IP disputes in the news just like other news is very common.A few examples of such news are like- Apple accused Qualcomm for patent infringement in countersuit on Nov, 29, 2017; “Apple copied our patented dual camera technology”, Says Israeli start-up, Nov, 8, 2017; Apple’s $120 million patent award from Samsung upheld by US Supreme Court, Nov, 7, 2017; Twitter accused of patent infringement by IBM ahead of IPO, Nov, 5, 2013;Micromax sued by Ericsson for Rs. 100 crore over patent infringement, Mar, 26, 2013. The latest news is about the dispute between Samsung and Ericsson over IPR licensing issues, December 2020.

The careful examination of these aforesaid news provides various insights including the huge money involved in these litigations. It can be appreciated that these organisations will not invest so much time, money, energy, human resource to handle these litigations unless there is a value. These disputes are worth billions of rupees. These are mostly big corporates who are trying to assert their rights over intellectual inputs put by their human capital. These intellectual inputs are protected by IP as an instrument. This IP is providing competitive advantage to the owner.

Indian scenario about the IP exploration can be reflected through a few examples.“Roshans pay Rs 2 crore for pinching music”, Apr 11, 2008; Bajaj, TVS Motor settle all cases related to patent infringement, Oct 31, 2019; FIR against ShareChat for Copyright Infringement: Time to Introspect the ‘Safe Harbour’ Provision?, Apr 6, 2020; Dettol Hand wash advertisement claimed to disparage Lifebuoy Soap Trademark, Mar 28, 2020; DainikJagran sues Telegram for Copyright Infringement, Jun15, 2020. So these are a few news about IP. These are litigations related to copyright, trademark and patent. Famous Rasgulla dispute between W. Bengal and Orissa is known to everybody as it was in the news for many days. Now the question is if this much litigation is initiated at international or national level, how much fortune is involved in this IP. Whether there are any examples of wealth creation using IP. Whether along with big corporates micro, small, medium enterprises (MSMEs), Individual professionals are aware about intellectual property.

A few examples related to IP and wealth creation of MSMEs can be cited here. The first example is of the MSME from Maharashtra working on earthworm manure. This MSME built a device for which this MSME received IP protection in the form of “patent”. This MSME also patented the device in about 26 countries. Single device, protected by patent, selling of that in India brought a huge fortune to this MSME. This MSME have still not explored the business in 26 countries, where the protection is sought. The second example of MSME is where the owner is just 4th standard pass out, and working in drip irrigation domain for the last 30 years. This MSME have developed the new technology in this drip irrigation and protected it by “patent”. Today, this MSME is market leader in irrigation domain.Overall, these above mentioned examples reveal the following. First definitely there is a huge benefit if anyone creates and protects the intellectual outcome in the form of patent or copyright or any suitable type of IP. The second point which can be inferred is that there is no connection between education and creation of IP. If one is very proficient and passionate about the subject, he/she can be the first in the world to develop that technology or any creation. By applying instrument, IP Acts provisions, anyone can get rights

over intellectual property and can benefit from it for the next 20 years or 15 years or 25 years etc. based on the type of IP owned. Thus the possibility of theft of intellectual knowledge can be eliminated by taking IP rights. No one can imitate this intellectual knowledge. It can be a crime by law and the offender can face civil or criminal actions which may lead to imprisonment or fine.As mentioned, there is a huge benefit if we create IP. How much fortune is involved in IP? A few well-known examples are as follows. “Harry Potter”, “Mickey Mouse” these characters are known to almost everyone. The author of “Harry Potter”, J. K. Rowling, received about 1.15 billion in royalties. Brand value of a few giants is like IBM $ 28.2 billion, Microsoft $162.9, and Google $ 207.5 billion. A few examples from film industry can be considered. In India almost every Friday, the news about the numbers of the box office are released such as the particular film grossed a whopping rupees some crores.Also the news about the deal among the cricket match organisers and TV channels is very common. So this film and broadcasting industry example exhibits that “copyright” and related marketing skills can raise billions.

3. INTELLECTUAL PROPERTY- INDIA IP FILING A quick look how much IP as a country India own? According to Indian patent office annual report, 2018-19, out of total 50,659 applications filed in Indian patent office, Indian resident filing is 17,005 and non- resident filing is 33,654. Just a quick comparison with USA can give more insights about the IP filing status. According to USA patent & Trademark office (USPTO) annual report, 2018-19, out of total 6,45,534 applications filed in USA patent office, USA resident filing is 3,10,416 and non-resident filing is 3,35,118. Although, we have to appreciate differences in IP system in these jurisdictions, number speaks loud.Now let us check another quick comparison with giant organisations’ IP filing. IBM alone holds patent portfolio of approx. 1.5 lakh and is top patent filing organisation for almost a decade. IBM, in 2016 filed approx. 9043 patents and in 2017 filed approx. 8090 patents; Samsung, in 2016 filed approx. 8894 patents and in 2017 filed approx. 8470 patents; and LG in 2016 filed approx. 4469 patents and in 2017 filed approx. 4013 patents. This number is as good as half of the Indian resident filing. So, the country with approx. billion residents file the patent just the double of the single MNC patent filing. It is to be appreciated that the focus cannot be only on number. The quality of patent filed along with commercialisation status of these patents is also important.



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LE4. INTELLECTUAL PROPERTY AND ADVANCED DOMAINSNow the next query is which are the IP areas extensively explored by these giant organisations for this outstanding performance in IP portfolio building. A few to mention are IP audit, IP Valuation, Patinformatics, IP portfolio management, IP & Bank loan, IP insurance, IP management, IP strategy, technology transfer and so on.

5. INTELLECTUAL PROPERTY AND INDIAIf the IP domain is as vast as this, then how this IP system can be utilised effectively is the question that would be asked. The first thing to appreciate is that we are in knowledge economy where technology is playing a crucial role and we can hold rights over technology only through IP protection. Second thing to understand is that IP is for wealth creation or there will be some strategic benefit which indirectly help in wealth creation. So, the next step is how to explore it. Here we will examine the status of IP in four different sections of economy as Indian industrial organisations, MSMEs, Research organisations and Academic organisations.5.1 Intellectual property & Industrial organisations

With reference to industrial organisations, our research in electrical engineering sector provides various insights. The research explicitly shows that there is a scope to work on IP management by Indian industrial organisations. Just to give an example, top Indian organisations in this sector in India hold patent portfolio of 2000 to 4000 patents, whereas Siemens, Philips and like organisations from developed nation hold patent portfolio of 60,000+. There is such a huge gap. Again to note, we appreciate quantitative v/s qualitative difference, jurisdictions differences such as utility patent, design patent, and we also appreciate industrial design registrations by Indian organisations. We are aware about effective usage of Industrial design registration by top Indian electrical engineering organisations for competitive advantage and for grabbing major market share.During our research on IP audit of organisations, we found that there are major 160+ processes in IP management and several sub-processes. The observation is that Indian organisations are following average of 20 or 30 processes out of these 160+ processes of IP management.Our study further shows that in IP value hierarchy, which classifies organisations in five categories, Indian organisations are in the lowest two categories. Only a few are able to move to third level while the organisations from developed nations are at 4th and 5th level of IP value hierarchy. IP management performance audit is a good way to start which will help in understanding current status of IP management and accordingly organisations can aim their next level and can formulate business strategies.5.2 Intellectual property & MSMEs

The next sector is MSMEs. There is a mixed scenario in MSME. There are examples as how only single patent helped the MSME to create huge wealth and there are also examples as very good research done by MSMEs, however they are not able to diffuse the technology in the market. So here,our study shows that there is a need to help MSMEs in technology diffusion. The focus can be on market diffusion of technology rather than IP awareness. Our study in Maharashtra, shows

there is fair IP awareness is exhibited by MSMEs especially from metro areas. However, there is a need to help MSMEs in market diffusion of technology.

5.3 Intellectual property & research organisations

Next section is “Research organisations”. This is another important section other than Indian industrial organisations, which can contribute in IP generation and exploitation extensively. When dealing with IP, it is expected to see how much fortune IP, e.g. patent created or what strategic advantage that patent has given to the organisation. There are research organisations like “Council of Scientific and Industrial Research” (CSIR), “Defence Research and Development Organization” (DRDO) which are contributing in knowledge pool. However, lot of work is required in this section to select and plan the project and timely IP protection along with technology transfer. Hence, 100 % IP awareness in research organisations is mandatory. These “Research organisations” are engaged in research work 24*7*365 days. Hence, their research needs to be translated in intellectual property efficiently and timely for wealth creation. As it is known that, IP audit exercises help in this process and hence yearly audit is to be routine practice by this research organisations.

5.4 Intellectual property and academic organisations

Now another more important sector of society namely academic organisations are also worth looking at. Academic organisations exhibit, a huge intellectual capital of the nation. Students and teachers along with associated research staff mainly exhibit this intellectual capital (IC).

So what probable role will be of academic organisations with reference to IP? Academic organisations have major responsibility to create IP trained human resource who can gauge the potential of creation and innovation to develop IPR. Creating this IP awareness among this IC of the nation is the important task. This will help to make IP trained human resource available for industrial organisations as well as research organisations. This will further help in saving of time of these Indian industrial organisations and research organisations on IP training and these organisations can focus more on IP creation and its commercialisation.

It is appreciated that there is a practical difficulty faced by academic organisations in creating this IP awareness due to lack of authentic IP trained human resources. Hence online IP training of students through IP courses is the quick and easy way. The advantage of online training is that the knowledge will be imparted correctly without any distortions so that there will not be any misconceptions about the subject.

"Swayam" platform is developed by MHRD for on-line training and almost dozens of courses on IP are available freely. We have done our small contribution by offering two courses on IP, one dedicated on patent creation and research planning which will be helpful to research organisations, R & D personnel of industrial organisations, PhD scholars and faculty of science & technology. The course is titled as "Roadmap for patent creation". The second course is dedicated for entrepreneurs and start ups as "Entrepreneurship & IP strategy" which will help to know details about various types of IPs, their registrations and their application in business.



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6. INTELLECTUAL PROPERTY AND FINANCEAs mentioned in the earlier section, various sub-domains within IP domain are explored effectively by MNCs for wealth creation. Out of these subdomains, IP valuation domain especially needs attention by finance related professionals. Our research in IP valuation domain reflects that overall IP valuation is the challenge due to volatile nature of IP in the sense that if any activity of the organisation goes wrong it will immediately affects the brand value in turn trademark valuation. With reference to various types of IPs, it is observed that the TM valuation affects maximum along with effect on valuation of patent, industrial design. Again, it should be noted that technology strength which protected by patent may not have that big blow like trademark if anything goes wrong in business. Kingfisher trademark valuation case is well-known. Motorola- Google case is another interesting example where IP played a very important role.

IP valuation, a process to determine the monetary value of subject IP, is really challenging. As per our research in the domain, the probable sequence of IP related activities is like IP audit, IP evaluation and then IP valuation. IP, a subset of non-monetary assets of an organisation plays major role in various business transactions. These business transactions, mergers, acquisitions, bankruptcy, divestments, fund raising, purchase, licensing and so on, acts as triggers for IP valuation.

However, it is observed that much attention is not provided by valuators on IP. Insolvency and Bankruptcy Board of India (IBBI) have categories like Land and Building, Plant and Machinery, Securities or Financial Assets. We are not sure how much weightage is given to intangible assets-IP. When IP portfolio provides substantial competitive advantage in knowledge economy, it is necessary to revisit the valuation process. The role of international bodies and their guidelines are important to study and adapt for Indian system and we are working on it. International Accounting Standards Board (IASB), International Valuation Standards Council (IVSC), Royal Institution of Chartered Surveyors (RICS), Financial Accounting Standards Board (FASB) are extensively active and are continuously publishing updates about IP valuation.

IP taxation is another important sector to look into. Generally Accepted Accounting Principles (GAAP), International Public Sector Accounting Standards (IPSAS) have provided guidelines. Indian Accounting Standard 26 (India) IAS38

(International), GAAP-350 (USA), FRS 10 (UK), Section 3064(Canada) are dedicated for IP. However, there is much more work is needed in these Sub-domains.

7. CONCLUSIONThus, in this technology driven era, individual, small businesses, industrial organisations, research organisations and academic organisations are all own intellectual property in one or the other form. However, there is a lot to research further in this domain. Google and Genentech started with a single patent and become giants. There are many such examples. If all stakeholders take advantage of IP instrument, there is a possibility that IP can help and contribute in building up trillion-dollar economy, and make India –Atmanirbhar. CS

REFERENCES:1. Annual report, India patent office, 20182. Annual report, USPTO, 20183. Hanel, P. (2006), Intellectual property rights business management

practices: a survey of the literature, Technovation, 26, 895-9314. Gargate G, “Intellectual property and entrepreneurship: Indian

experience”, 8th AMRC, UAE, 24-26 March 20195. Gargate G, “Innovation and Intellectual Property Management -

Integrative approach for competitiveness”, IAMOT 2018, Birmingham, UK, 25 April 2018

6. Gargate, G., Rautela, S., “IP management of educational institute – linking people, process and performance, Book of Abstracts: 2017 IIM Indore- INDAM Conference, December 18-20, 2017

7. Gouri, G., Jain, K., “Intellectual property audit for efficient intellectual property management of an organization,”, PICMET, Canada, 2012 Proceedings of PICMET ‘12 , pp.894,906, July 29, 2012-Aug. 2, 2012

8. Gargate, G., Jha S.K., “IP for development: The emerging paradigm”, ISBN:978-93-5107-203-4, Elsevier, Delhi, India, 2014

9. Gargate, G., Wingkar, C., Qutbuddin, S., “Intellectual property audit of an organization-Indian experience”, JWIP, Volume 22, Issue1-2, March 2019, Pages 16-35

10. Gargate, G., Momaya K., “Developing Your Intellectual Property Management System: Self-Assessment and Building up using IPM model”, WPI, Issue 52, pp 29-41, March 2018

11. Gargate, G., “Comparative study of intellectual property management practices- firm, industry and national level”, Law Quest, Issue 1, pp 76-86, Jan-June, 2017

12. Gargate, G., Jain, K., “A framework to comprehend the position of intellectual property rights in complex organizational capital”, Int. J. Intellectual Property Management, Vol. 6, No. 3, pp. pp.201–216, 2013 (ABDC Listed)

13. Gargate, G., Jain, K., “Role of IP policy in innovation and entrepreneurship development: case study of HEI in India”, Udyogpragati, July-September, Vol. 37, No. 3, pp.19-29, 2013Granstrand, O. (1999), The economics and management of IP: towards intellectual capitalism, first edition, Edward Elgar, Cheltenham

14. Granstrand, O. (2000), Corporate management of intellectual property in Japan, International journal of technology management, 19(1/2), 121-152

15. Idris, K. (2003), Intellectual property: a power tool for economic growth, second edition, WIPO publication no. 888, Switzerland

16. Rivette, K. and Kline, D. (2000), Discovering new value in intellectual property, Harvard business review

17. Singh P., Gargate G., “Development of intellectual property evaluation system to aid intellectual property valuation in an academic institution”, IAMOT 2019, Mumbai, India , pp286-300, 7-11 April 2019

18. Steffens P. and Waterhouse M. (2000), A holistic audit of managing IP: IPM in the Queensland department of primary industries, Management of innovation and technology, Proceedings of the 2000 IEEE international conference, 2, 720-725

19. Stewart, T.A. (1997), The wealth of knowledge: intellectual capital and the twenty-first century organization, Random House

20. Yin, R.K. (2009) Case Study research-design and methods, 4th edition, SAGE publication, New Delhi

The first thing to appreciate is that we are in knowledge economy where technology is playing a crucial role and we can hold rights over technology only through IP protection. Second thing to understand is that IP is for wealth creation or there will be some strategic benefit which indirectly help in wealth creation. So, the next step is how to explore it. Here we will examine the status of IP in four different sections of economy as Indian industrial organisations, MSMEs, Research organisations and Academic organisations.



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Labour Reforms Agenda–Perspectives of The New Labour Codes

Anupam Malik*#

Senior AdvisorCentrum [email protected]

Jorawer Singh*Startegic Consultant -HROlympus Management Consultancy Services Pvt. [email protected]

The new labour codes not only extends the protection to those who needed it the most, but also helps in deciding the quantum of benefits available in much simpler unambiguous terms. The subjective interpretation by officers and middlemen is getting curtailed, ushers in a transparent and collaborative work environment in the organisation, which is further assisted by local level bi-partite dispute resolution mechanisms being promoted under the codes. Simpler, consolidated law no doubt will help in easy understanding, implementation, compliance, reporting and record keeping for compliance professionals. The organisations stuck at 99 “on-role employees” for fear of stringent exit /retrenchment /closure conditions can now add on 200 more people and can test their potential to expand without fear, reaping in benefits of the “economies of scale”. The inclusion of “sales promotion employees”, “inter state migrants”, “gig /unorganised employees” marks a major step towards the “universal social security” for all. The Finance Minister while presenting Union Budget 2021-22 in Parliament, signalling the Centre’s resolve to go ahead with the labour law reforms, indicated that the four Labour Codes will be implemented this fiscal year.

INTRODUCTION

It has been quite a trend to criticize labour laws in the country and blame the same for all the ills afflicting the industry as

if law and management mean the same. Anyone on a stage

* The views expressed are the personal views of the authors#Former Additional Labour Commissioner, Govt. of Haryana and Member, Central Board of Trustees,Provident Fund Organisation, Ministry of Labour and employment, Govt. of India

addressing an audience from the industry would acquire the right to use the best adjectives to describe the malady. Absence of right to “Hire and fire” was the easiest to say; with least knowledge of what is “hiring” and what is “firing” on what grounds is not explained.Whereas, it is a well-known fact that the labour laws have been applicable on a faint minority of the working population of the country, the pandemic was a sore eye opener to the practical reality that the labour laws did not exist. The painful deprivation of rights of majority of the working population became visible. The trade unions were prominent by their absence of any association with this large majority of working population. The authorities were blank about any data about these poor workers to enable any structured relief.Now, with the passing of the new codes on labour laws by the Parliament we start hearing sound of the critics who have the least contribution to the development in seven decades. The present Government deserves all the credit and appreciation for the bold steps in this regard. To be able to appreciate the professional implications and understand the true perspective of labour laws and reforms thereof, it is necessary to understand the factual background of the entire matter.Historically, the labour laws were not enacted by the British to secure any employment rights for the workers or regulate the employment in the industry in this regard. They enacted the Workmen’s Compensation Act, 1923, The Trade Unions Act, 1926 and Payment of Wages Act, 1936 only to serve the interest of the administration of the British. On the contrary, quite a few laws like the Trade Unions Act was directed at sabotaging the textile industry in South India, which the British industry failed to defeat in the open competition in terms of cost and quality.Since the early labour laws were not oriented to serve the industry, the amendments made from time to time were a poor patchwork. These amendments did serve the immediate need of the times but were not the least futuristic in vision of industrial development or the futuristic needs of workers. As a result, the definitions in each law were at variance or even in conflict with each other. Politics played its own spoil sport when the recommendations of the Second National Commission on Labour were kept in the cold storage for


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years on, just to prevent a credit to the ruling party of that time. Obviously, the national interest was of no consequence.

It would surprise even those with rudimentary knowledge of law that the various labour laws were not only at variance with each other but hardly provided protection of basic rights guaranteed under the provisions of the Constitution of India. Consider a direct example –What is the simplest definition of relationship of an employer and employee…? Job done – wages paid - But if the job is done – are the wages secured and protected…?

The Constitution of India provides as under :

In Article 38 –To secure and protect Social Order – Economic and Political. The Payment of Wages Act, 1936 did not protect/ secure payment of wages to employed persons beyond a limit of wages; did not protect workers in the service sector at all. did not protect payment of wages in the entire unorganised sector. Even in the Organised Sector the declared bonus under the Payment of Bonus Act, 1965, held to be wages was difficult to be recovered in case of illegal withholding.

Article 39 (d) provides for securing equal pay for equal work for men and women – The Equal Remuneration Act was the most ineffective law and ignored for its implementation just because it was separate and provided for poor penalties and meaningless paper work separate from main register of wages.Article 43–The State must secure Living wage, etc for workers –The Minimum Wages Act, 1948 had a basic flaw of being restricted to application only on “Scheduled employment” which means even the organised sector was not fully covered; it obviously excluded the entire 90% population employed in the unorganised sector. The law was too weak on the non performing States. There was no hand of the Central Government to secure a national level minimum wages to prevent exploitation. There were several lacunae obstructing securing minimum wages.

Article 21 - Right to life and liberty –The lame and ineffective laws on wages promoted economic bondage of the workers.Now the new labour codes can be easily described by saying that all business establishments are covered for the purpose of definitions and rights, occupational safety, single definition

of wages, minimum wages, social security and most of all, securing the rights of those engaged in the unorganised sector or the gig economy – truly aimed at securing the rights assured under the Constitution of India for all the citizens of the country. Maladies like the exploitation of contract labour, women labour, gender discrimination in employment and wage rates have been targeted.

Thanks to the social media, we keep getting pdfs on “key changes” happening due to the new Labour Codes ticking in, however, most of them are same with only cosmetic variations of what PRSI site reports or is there in the annexure to the bills when they were presented. Before explaining that how big the impact is going to be, a brief conceptual understanding is desirable.

When situations change, societies too need to change in ways that can lead to higher levels of development, else they stagnate and remain stuck in a low-level equilibrium trap. Schumpeter’s process of “creative destruction” of the old and inefficient is a fundamental law behind the development of countries around the world. India is not an exception, however, we are fully aware that politics is a short game, more like a T20 cricket match, while reforms are long term, like a five-day test match.

Because of this mismatch, it is not only difficult to bring reforms in a democracy, but balancing sometimes dilutes it and delays the intended results. India’s reformers, being politicians first, have failed so far and we continue with almost century old laws. India still reforms by stealth and Indians cannot distinguish between being pro-market and pro-business, It is a fact that at every opportunity, people are misled into believing that reforms make the rich richer and poor poorer, despite so much evidence to the contrary.

With every brainstorming it is becoming clear and clearer that focus must shift from Management to Strategy, from managing records to straightening records, from short term measures to a long-term HR planning, and the Codes are all set to hit from April 2021.

The new codes are for sure in the right direction and intend to streamline the grey areas in Labour laws, which were not only the cause of the majority of the litigation in the last couple of decades but were also providing with desired loop holes to the interested parties. Though there are lots of conceptual changes in the new Codes, the ten most relevant ones are being discussed.

1. Uniformity in defining wages and calculation of benefits: The definition of Wage is very simple now, and also uniform. It has to be understood as the new “Base Wage” for all purposes and becomes the “operative part of wage” which has to be used to check eligibility for Bonus, pay Gratuity, encashing earned leaves, calculating Overtime, contributing to EPF and ESI or for notice pay or retrenchment compensation. Remunerations now comprise of two parts, “Wage” (as above) and “anything else payable to an employee including Employer’s share of EPF, Bonus, incentive, commission, overtime, et all”, with just one simple rider, that Wage has to be 50% of this total payable. For Example, in the current structure, if Basic is 15,000/-, HRA is 10,000/-, Conv is 10,000/-,



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LEtotal of 35,000/- the Base Wage shall be (35,000/- + EPF Contribution of 1800/- + Bonus of 1250/- = 38050/-)*50% = 19,025/- approx. This change surely points us to revise the “payables” in our Balance Sheets, where we have accounted for projected Gratuity, Leave encashments to name a few.

2. Expanding the ambit of coverage of the working population of the country under various employment laws - employee, employer & establishment. The benefits and protection now stand extended to everyone in the organised and unorganised sector. There are no more specific scheduled employments for entitlement of minimum wages or previous limits of wage ceilings for seeking protection against non-payment of wages, minimum wages, or illegal deduction therefrom. The service sector, shops and offices of professionals also get covered as an establishment, though registration is mandated only upon having 10 or more employees. The principal employer, the contractor, and the owner of premises where employee was working for which the claims are to be made, each one is jointly and severally responsible as if an “employer”. Worker is the person employed “in” the establishment implying to include third party role employees, while employee is the person employed “by” the establishment, expanding to people who remain in field, like Sales Promotion, Representatives, Commission based employees. The concept of “out-workers” being excluded from the definition of contract-workman in existing law, stands dropped in the new Code.

3. The new labour codes have eliminated the need for duplicity of record keeping and provided maintenance of electronic records. The electronic fund transfers have been mandated and since now the electronic track must be created for all payments; simplified record keeping, electronic or otherwise, has been allowed; provided all the heads prescribed for all covered and the record is such that it is not alterable. The special staff being used to fill attendance registers, leave registers, and for maintaining of blank or sparsely populated registers for accident, fines, damages, whitewash, EPF/ ESI records, adult registers, etc, can now be put to more productive use. The hard copies of records have to be retained at the most for one/two year from date of last entry. The Codes surely eliminates needs for expert clerks and compliance consultants for creating records in varied manner to satisfy varied liabilities across the enactments, provided a proper electronic trail for work done and related payments has to exist.

4. The Industrial Relations Code promotes bi-partite resolution of grievance and disputes through collective bargaining and consensus between employer and workers. All establishments now need to have effective grievance redressal committees at 20 workers and works committees at 100 workers, and along with the concept of arbitration and conciliation, it is intended to move parties from the industrial litigation-based approach to more one to one conciliatory solution finding. To encourage dialogue, employees have been prohibited to go on flash strikes, a notice of 14 days is required before any intention to strike work. Even the mass casual leave by 50% or more employees, has been brought into the ambit of a strike.

5. The Industrial Relations Code provides uniformity of service conditions across industry. The process of certification of standing orders has been greatly simplified; It is enough that an establishment has to just pick and propose to adopt the relevant Model Standing Order, and a simple intimation shall suffice under the new Code. It is expected that the government will formulate a separate Model Standing Order based on the needs of various types of industry. The Standing Orders were earlier applicable only for Factories employing 50 or more employees; and are now applicable to service sector, shops, and offices too. However, the limit has also been increased to 300 workers (both direct and indirect roll workers need to be considered.) The Supreme Court has also once noted that in many industrial establishments, the conditions of employment were not always uniform, and sometimes were not even reduced to writing which led to considerable confusion which ultimately resulted in industrial disputes. The letter of appointment is now required to be issued to everyone, and it needs to specifically mention “avenues of growth” which is quite futuristic.

6. For the purpose of deployment of contract labour, the codes provide for use only in non-core functions, which therein have been listed out as auxiliary activities like housekeeping, gardening, security, watch and ward, loading, unloading, courier, transport maintenance and canteen have by specific mention been permitted; besides, there is no provision for engaging contract labour, except in such traditional vocations so permitted by the Government. Therefore in a way contract Labour has been prohibited in core process of the establishment. Exception has also been provided for activities where full time employees are not usually required and also in an event of sudden increase of work in core activity for a specified period. The limit for registration and licencing for employing contract Labour “in” an establishment has been increased from 20 to 50 now.

7. Facility and option of Fixed Term Employment of employees has been provided. To provide for the business continuity, and to address the vacuum, on account of prohibition of Contract Labour in core activities, an option of Fixed Term Employment has been provided as an alternative. Though, a fixed term contract employee has to be paid equal remuneration, gratuity upon completion of one year, bonus, and all other benefits being availed by regular employees, but shall not be entitled to any retrenchment compensation, or lien on the job beyond the terms of the contract. The earlier limit of 100 workers, for seeking permission before retrenchment now stands extended to 300 workers. Therefore, the industry needs to tap this opportunity to add more on roll employees in the core activities. To boost this further, “AtmaNirbhar Scheme of EPF” seeks to provide subsidies of full 24%

With every brainstorming it is becoming clear and clearer that focus must shift from Management to Strategy, form managing records to straightening records, from short term measures to a long-term HR planning, and the Codes are all set to hit from April 2021.



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of EPF employee and employer’s contribution for next two years, where establishment generates fresh employment. Only those employees who have never been members of EPF before, or have left jobs between March to September 2020, are eligible for this subsidy. The subsidy has been limited only for the employees share of 12% where establishment size is already 1000 plus.

8. Extending Health, Safety and Welfare for Service Sector is the most positive step provided in the new law. The Code aims to provide hazard free workplace with specified standards for manufacture as well as service industry alike, and not only allows employees, right to information on safety and health standards, but also empowers them to report unsafe conditions to inspector. The rules demand ergonomic workplace like minimum room per employee, provision for sitting, rest rooms, wash rooms, lockers, and the expected temperature, lighting and humidity in work areas. Establishments also need to provide canteen for 100 employees and free crèche for 50 employees irrespective of gender. The establishment is also required to display publicly, records related to serious accidents that happened during the last five years.

9. Conditions for Employment of Females has been made elaborate. The Code takes away gender disparity and allows working of females between 7 p.m to 6 a.m which earlier required permissions and exemptions. However, the law provides for a consent from the employee for working at night and on overtime. Adequate pick up and drop to residence, compliance with The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, and all passages and areas of work well lit, as a precondition, have been

mandatory part of the law.

10. Provision for earned leave has been elaborated. An employee is now entitled to earned leave in the same calendar year, upon completing 50% of possible working days at the rate of one per 20 days of work. The employee can now carry forward up to 30 un-availed leaves to the next calendar year. However, as per the new Code, the remaining leaves would not lapse but can be encashed, and the employee can even seek to encash any number of accrued leaves even if they are below 30. The organisations which have a policy of higher levels of accumulation, need to budget for this additional leave encashment flow.

CONCLUSIONThe rules to the new codes are still under finalisation, therefore, some further aspects are expected to emerge. However, the intent of principal codes would continue to prevail. It is a right time for every business organisation to strategically revisit their human resource structuring in terms of operational hierarchy for the purpose of costing and economic value in addition to the business process.

Now that the labour laws are demystified, would compliances more simplified and mechanised there under. There has emerged a new scope for an intellectual approach for balancing between compliance, strategic operations and economic value addition. This is the most appropriate time for Company Secretaries to take charge as Compliance Officers to separate the chaff of confusion from the grain of business. CS



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Corporate Governance in India – Concept, Compliance and the way forward

P. Raju Iyer*, ACSPractising Cost [email protected]

Rakesh Shankar RavisankarAssistant ProfessorPG & Research Department of CommerceDwaraka Doss Goverdhan Doss Vaishnav College [email protected]

Good Corporate Governance aims at the protection of stakeholder’s interests and enhances the wealth and value of the organisation concerned. It promotes efficiency, effectiveness, transparency, accountability, responsibility and enforceability of better practices in the corporate world that would promote the best possible branding in the minds of the investors. The board of directors and the management is vested with the formulation, implementation and adoption of sound Corporate Governance [CG] practices. Such CG practices shall strive to fulfil the expectations of all stakeholders concerned. While the CG practices aim at compliance with laws and regulations, in the long run this shall pave way for effective ethical compliance in all aspects thus helping to become a socially and ethically responsible citizen in the corporate world.

BACKGROUND

Corporate Governance is a system of management’s accountability towards the stakeholders for all their

morals, ethics, values, parameters, conduct and behaviour. The principles of Corporate Governance revolve around a quadrangular structural segment integrating fairness, transparency, accountability and responsibility. It involves a long-term functional and business relationship in the corporate activities.

* Vice President, The Institute of Cost Accountants of India

Figure 1: Pillars of Corporate Governance

Source: Conceptualized by Author

CHANGING DIMENSIONS FROM “COMPLIANCE” TO “COMPETITIVE ADVANTAGE”

Good Corporate Governance is a key driver of sustainable growth and long-term value and wealth creation. Effective Corporate Governance practices present opportunities to manage risks and add value to business operations thereby these practices are rightly viewed as a differentiator in promoting sustainable competitive advantage. An increasing amount of empirical evidence throws into light that good corporate governance contributes to competitiveness and long-term value creation. Corporate Governance rating is positively associated with financial performance measures like Tobin’s Q.

The level of Corporate Governance practices implemented by regulators’ focus on “Compliance” with the set of rules and regulations prescribed in the statutes. In sum and substance the focus should strive beyond what is currently required by statutes and regulators. Introspection should be conducted with the reasonable question “What does the company stand to gain through an enhanced level of corporate governance?”. It is to be concluded that enhanced competitive advantage and better economies of scale and operations should be the only result of such effective and enhanced Corporate Governance practices in terms of:


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LE1. Effectively managed company;2. Increased management credibility and integrity;3. Prospective long-term investors;4. Improved access to capital requirements and lower cost

of capital and5. The realization of a company’s true underlying value to its

stakeholders.It is evident that focus of the CG practices shall be on the following aspects: - Ownership Structure and Influence;Financial Stakeholder Rights and Relations;Financial Transparency and Information Disclosures andBoard Structure and Processes.

GLOBAL PERSPECTIVES OF CORPORATE GOVERNANCEThere is a global consensus about the objective of ‘good’ Corporate Governance - maximizing long-term shareholder value to all stakeholders. The tests of Corporate Governance should address the following aspects:1. Whether the funds of the company have been deployed

for pursuing the objects of the company as enshrined in the Memorandum?

2. Whether the funds acquired from financial institutions and the capital markets have been utilized for the purpose for which they were intended?

3. Whether the provisions of the Companies Act and other other applicable laws are complied with in letter and spirit?

4. Whether the practices adopted by the company and its Management towards its shareholders, customers, suppliers, employees and the society at large are ethical and fair?

5. Whether the directors are provided with the information on the working of the company and whether the institutional and non-executive directors play an active role in the functioning of the companies?

6. Whether the internal controls in place are effective?7. Whether the company's financial reporting is transparent,

it has followed all the applicable accounting standards, secretarial standards and tax standards and its audit has been carried out in accordance with the applicable audit standards?

PROMOTING ETHICAL COMPLIANCE ACROSS MULTI-TRANS CULTURALLY BASED ORGANISATIONSGone are the days when, the company’s operations are restricted to a territory. With markets expanding beyond domestic boundaries, internationalisation of their local products, globalization has found new space, first in vision and then very swiftly in mission statements of corporates and all these have impacted the operations to be on “Global Quality”. The result of the multi-national corporates operating across the globe for cutting-edge advantages, has not only made these new global corporates rich but also brought citizens from every corner of world to contribute and become

part either as employees or as valuable stakeholders. This wave of globalization led to the amalgamation of different cultures under the ambit of leadership which itself varied in terms of cultures and richness of moral values.

Indian belief and practice of “Vasudhaiva Kutumbakam” [Entire Globe is a single Family] has have invited multi-national corporates from all spheres of the business operations right from agriculture to the tertiary or service sector to operate from India and out of India. Our Hon’ble Prime Minster’s call for “Vocal for Local” under the “Atma Nirbhar Bharat” is also based on promoting and projecting India as a “Global Leader” It is high time that we adapt to the principles of Vasudhaiva. Kutumbakam that requires us to inherit, replicate and practice age old principles of commerce and trade ensuring competition in healthy sense while maintaining ethics and integrity in entire range of decision-making process. The principle of Vasudhaiva Kutumbakam will inherit leadership traits required in tough competitive market and incorporate an ethical dimension into the values they stress upon. The practice of "Ethical" Corporate Governance fosters a sense of trust and confidence among all stakeholders and they feel less stressed while investing money.

PRINCIPLES OF SOUND CORPORATE GOVERNANCETo promote sound corporate governance the management has to adhere to strict compliance standards :1. Governance structure;2. Structure of Board and its committees;3. Appointment of KMP’s, roles and responsibilities;4. Risk Governance and Internal Control;5. Reporting and Integrity;6. Audit and Accountability and7. Relationship with stakeholders and other external parties.

To guide corporates to ensure compliance with the above-mentioned principles, Corporate Governance Standards are prescribed by the regulatory bodies across globe.

CORPORATE GOVERNANCE STANDARDSThese Standards of Corporate Governance set out more closely the mechanisms for functioning and protection of interests in inter-relationship among different stakeholders in a company.

Effective Corporate Governance practices present opportunities to manage risks and add value to business operations thereby these practices are rightly viewed as a differentiator in promoting sustainable competitive advantage. An increasing amount of empirical evidence throws into light that good corporate governance contributes to competitiveness and long-term value creation.



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LEThe standards of Corporate Governance are set on the basis of the following principles of Corporate Governance, adopted by the Organisation for Economic Co-operation and Development (OECD):

v Ensuring the basis for an Effective Corporate Governance Framework;

v The Rights of Shareholders and Key Ownership Functions;v The Equitable Treatment of Shareholders;v The Role of Stakeholders in Corporate Governance;v Disclosure and Transparency andv The Responsibilities of the Board.

The Standards include recommendations and suggestions, as well as the provisions that are binding, as they ensue from existing regulation for a specific field.

The following figure illustrates the components of CG standards and practices

Figure 2: Components of CG Standards and practices

Source: Conceptualized by Authors

REGULATORY FRAMEWORK ON CORPORATE GOVERNANCE IN INDIAThe Indian statutory framework has, by and large, has been aligned with the best international practices of corporate governance. Broadly speaking, the corporate governance mechanism for companies in India is enumerated in the following enactments/ regulations/ guidelines/ listing regulations:

1. The Companies Act, 2013 regulations: It contains provisions relating to board constitution, board meetings, board processes, independent directors, general meetings, audit committees, related party transactions, disclosure requirements in financial statements, etc.

2. Securities and Exchange Board of India [SEBI]guidelines: SEBI is a regulatory authority having jurisdiction over listed companies and which issues regulations, rules and guidelines to companies to ensure protection of the investors. LODR issued stresses more on the above-mentioned principles.

3. Accounting Standards issued by the Institute of Chartered Accountants of India (ICAI): Section 129 of the Companies Act, 2013 inter alia provides that the financial statements shall give a true and fair view of the state of affairs of the company or companies and comply with the accounting standards notified under Sec. 133 of the Companies Act, 2013. It is further provided that items contained in such financial statements shall be in accordance with the accounting standards.

4. Secretarial Standards issued by the Institute of Company Secretaries of India (ICSI): ICSI issues secretarial standards in terms of the provisions of the Companies Act, 2013. So far, the ICSI has issued Secretarial Standards on “Meetings of the Board of Directors” (SS-1) and Secretarial Standards on “General Meetings” (SS-2). These Secretarial Standards have come into force w.e.f. July 1, 2015. Section 118(10) of the Companies Act, 2013 provide that every company (other than a One Person Company) shall observe Secretarial Standards specified as such by the ICSI with respect to general and board meetings.

WAY FORWARD FOR CORPORATE GOVERNANCE STANDARDS IN INDIAIn June 2017, the Securities and Exchange Board of India had set up a committee under the chairmanship of Uday Kotak, Kotak Mahindra Bank to advise it on issues relating to corporate governance in Indian companies. The committee has recommended the following suggestions and made the observations:

(i) more active ‘role’ and greater ‘autonomy’ for independent directors;

(ii) at least half of the board of a listed entity be constituted of independent directors and increase in their number in the board to a minimum of six in every listed entity, with at least one woman independent director;

(iii) promote ‘transparency’ in their functioning via listing ‘competencies’ of every independent director and disclosure of the detailed ‘reasons’ for their resignation;

(iv) make formal induction of a new independent director mandatory;

The principle of Vasudhaiva Kutumbakam will inherit leadership traits required in tough competitive market and incorporate an ethical dimension into the values, they stress upon. Practice of Ethical Corporate Governance, fosters a sense of trust and confidence among all stakeholders and they feel less stressed while investing money.



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LE(v) top 500 companies by market capitalization to undertake

D&O [Directors and Officers] Insurance for them;(vi) board of directors be updated on regulatory and

compliance changes at least once in a year; (vii) frequent interaction between non-executive directors and

senior management, at least once a year; (viii) splitting the Chairman and MD-CEO roles of the listed

firms; (ix) increase in Audit Committee meetings to minimum five

every year; (x) discussion on succession planning and risk management

at least once a year and(xi) establishment of a framework/institutionalized mechanism

for sharing of information on deliberations in the board meeting with the promoters in a transparent manner.

The recommendations of the committee have to be viewed in terms of integrating with the regulations and standards, thus it shall pave way for “Ethical” Compliance by the corporate world.

PROMOTING COMPANY DIRECTORS CORPORATE GOVERNANCE FRAMEWORKAustralian Institute of Company Directors has formulated and implemented the “Directors Corporate Governance Framework”, The framework is designed as a wheel that has four quadrants depicting the four key areas of focus and engagement applying to every individual director, individual, board, organisation and stakeholder. Each quadrant is divided into a number of slices representing director practices essential to the quadrant focus.

Figure 3: Company Directors Corporate Governance Framework

Source:http://www.companydirectors.com.au/director-resource-centre/corporate-governance-framework/framework

The framework provides the basis for a common language regarding director practices. With increased use over time and broad take-up, it has the capability to improve communications

about governance and director matters within and between a range of stakeholder groups. The above structure can be implemented in the Indian scenario with such carve-outs as may be considered necessary.

CONCLUSIONTo conclude, with the dip in corporate governance in recent years, it is time for the newer generations to take charge and at the same time, be guided by the age-old moral and ethical norms to present a truly transformative leadership in the future. Further measures such as improvement of minority shareholders' protection, promoting higher level of transperancy, disclosure and asserting the concept of accountability among the KMP’s should be the need of the hour. Corporate Governance should not only monitor the company’s performance and compliance but should also fulfil certain key functions including monitoring and managing potential conflicts of interest of management, board members and other stakeholders concerned. Although these activities can be achieved through more stringent regulations, to a greater extent, the momentum will come from the market forces and industry best CG practices.

“Good corporate governance is about ‘intellectual honesty’ and not just sticking to rules and regulations, capital flowed towards companies that practiced this type of good governance.”

- Mervyn King, Chairman, King Report CS

REFERENCES:1. Vallabh, G. and Dadhich, G. (2016) Corporate Governance

and Ethical Compliance—Deriving Values from Indian Mythology. Theoretical Economics Letters, 6, 1128-1144.

2. Shleifer, A. and Vishny, W. (1986) Large Shareholders and Corporate Control. The Journal of Political Economy, 94, 462.

3. Brink Alexander, Corporate Governance and Business Ethics: An Introduction, Springer, 2011.

4. Metzger, M., Dalton, D. and Hill, J. The Organization of Ethics and the Ethics of Organizations: The Case for Expanded Organizational Ethics Audit. Business Ethics Quarterly, 3, 27-43. http://dx.doi.org/10.2307/3857380

5. Amato, A.D., Henderson, S. and Florence, S. (2009) Corporate Social Responsibility and Sustainable Business: A Guide to Leadership Tasks and Functions. Center for Creative Leadership, United States.

6. Nainawat, R. and Meena, R. (2013) Corporate Governance and Business Ethics. Global Journal of Management and Business Studies, 3, 1085-1090.



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Listed Companies Under CIRP / Liquidation – Remedy for Shareholders

Milind B. Kasodekar*, FCSPartner KMDS & Associates Company [email protected]

Amar R. Kakaria, ACSDirector Fusion Advisors Private [email protected]

Government of India has introduced the Insolvency and Bankruptcy Code (IBC) in 2016 with an objective to provide resolution process in a timebound manner for ailing companies and revive them. With successful implementation of IBC during last 5 years, hundreds of ailing companies including many listed companies have been revived which created value for all the stakeholders. Large corporate houses like Tata, Reliance, Patanjali, etc have already acquired ailing companies through this route and also turned them around successfully. Given the ongoing economic slowdown due to Covid-19 outbreak, there could be an increasing demand for ailing listed companies with proven track record. In this article, the authors have made an attempt to highlight distinct legal provisions under different corporate laws as well as SEBI Regulations which are applicable to listed companies undergoing CIRP / liquidation proceedings and perhaps, continuous listing status can be helpful for revival of such companies.

*Former Council Member, ICSI

BACKGROUND

Corporate sector has always played a pivotal role in economic development of all countries across the world and India is

also not an exception. Besides quite a few large & diversified business houses from Pre-Independence regime, many dynamic and emerging corporates have been consistently working towards steady development of different industries across our grand country while positively supporting Indian Government for nation building.

With the awareness about benefits of accessing capital markets, increasing number of companies have been regularly getting listed on different stock exchanges domestically in order to tap investments from public shareholders in the past. Over a period, thousands of companies across India have successfully tapped capital markets and raised equity funding to consolidate their position in the industry and also created huge value for their shareholders. However, some companies incurred major losses, became sick and subsequently landed in corporate insolvency resolution process (CIRP)/ winding up. However, with strong regulatory framework alongwith effective resolution mechanism, there are improved chances of revival as more potential buyers are coming forward to take over such ailing companies.

VIBRANT CAPITAL MARKETSSecurities & Exchange Board of India (SEBI) is regulating Indian capital markets and it is regarded as one of the best regulators in the world. Due to SEBI’s structured moves to develop capital markets by taking various initiatives, large number of investors are getting attracted to invest in listed companies with increasing awareness. There are nearly 4.50 crore demat accounts opened with both the depositories which demonstrates fantastic level of interest among fellow Indians to invest in the shares and securities of listed companies. As per information available on their portals, combined value of securities in demat custody is around Rs 215 lakh crores (nearly 3 Trillion USD).Once upon a time, there used to be more than 2 dozen stock exchanges in India, however, currently there are only 4 recognised stock exchanges ~ National Stock Exchange (NSE), BSE Limited (BSE), Metropolitan Stock Exchange of India (MSEI) and Calcutta Stock Exchange (CSE). BSE is the oldest stock exchange of India while MSEI is the newest stock exchange and accordingly, BSE has the highest number of listed companies (approx. 4700+) while MSEI has the lowest (approx. 300+). Maximum trading in equity segment happens on NSE and BSE with over 99% of the market share. However, investment strategy of Indian investors, particularly from retail segment is still evolving. Being a developing nation, India is heavily dependent on agriculture, which is cyclical in nature and besides it, there are many other challenges including evolution of technology. Despite having proven track record, often many good companies had found it difficult to survive due to alternate


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LEreasons and subsequently went for CIRP/liquidation due to which extremely large number of shareholders have got stuck up in them. Getting an exit in such cases used to be very rare historically, but the situation has been improving with changes in regulations over last few years.

REVIVAL OF SICK COMPANIES IS GAINING MOMENTUM WITH IBCSick Industrial Companies Act, 1985 (SICA) was enacted with a view to secure the timely detection of sick and potentially sick companies owning industrial undertakings followed by speedy determination by a Board of experts of the preventive and remedial measures which needs to be taken with respect to such companies. Board for Industrial & Financial Reconstruction (BIFR) was empowered to take various decisions for revival of sick companies. However, SICA was applicable only for a company having industrial undertaking and further, section 22 which dealt with moratorium was often misused to defer action by creditors. SICA was repealed w.e.f. 1-12-2016 with dissolution of BIFR and all ongoing proceedings stood abated. However, it was provided that in respect of a reference or enquiry stood abated could make a reference to the Adjudicating Authority, i.e. Hon’ble National Company Law Tribunal (NCLT) within 180 days.There were certain other enactments in the past viz. Recovery of Debts Due to Banks and Financial Institutions Act 1993, Violation and Reconstruction of Financial Provision and Security Interest Act, 2002, etc. which proved to be ineffective because there was a spiral increase in the quantum of loans falling in the category of non-performing assets. It not only impacted financial institutions as well as banking sector adversely but also had negative fiscal repercussions on Indian economy besides adversely damaging India’s rating on ease of doing business and investments.Under SICA, resolving insolvencies was a long process that did not offer an economically viable arrangement and

hence, need was felt to replace the said enactments with the Insolvency and Bankruptcy Code, 2016 (IBC), having improved and practical provisions with strict and fixed time lines. The objective of IBC is to consolidate and amend the laws relating to insolvency resolution of corporate persons, as per preamble of IBC, in a time bound manner for maximization of value of assets of such persons, to promote entrepreneurship, availability of credit and balance the interest of stakeholders including alteration in the order of priority of payment of government dues and to establish an Insolvency and Bankruptcy Board of India (IBBI).With IBC, Indian Government took a positive step by introducing one stop solution for insolvency resolution process in order to speed up revival of sick companies. While giving exclusive powers to the NCLT, an effort has been made to complete resolution process in a time bound manner with definitive timelines. Besides simplification of process, waterfall mechanism has also been prescribed under IBC to outline priority of payment to creditors in the event of liquidation which provided more visibility to all the stakeholders for avoiding any confusion. As a result, there has been rising trend of revival of companies under CIRP in the recent past.

Comparison between CIRP vis-à-vis Liquidation Proceedings

Parameters Under CIRP Under Liquidation

Applicable legal provisions Section 7, 8 and 10 of Insolvency & Bankruptcy Code

Chapter III and V of Insolvency & Bankruptcy Code andChapter XX of Companies Act, 2013

Objective Usually, providing a resolution for ailing company instead of winding it up

Usually, liquidating assets and winding up the company unless there are buyers

Sequential stage CIRP is a stage before initiating liquidation Liquidation follows if, CIRP fails

Normal period to complete process

180 days + Additional 90 days subject to maximum of 330 days

1 Year

Management control To the Creditors through the Resolution Professional (RP)

Liquidator

Continuation of employees / staff

RP may decide about retaining selective employees and relieve others

Order of liquidation u/s 33 is deemed to be notice of discharge to all the employees.

Moratorium on pending suits / legal proceedings

Under section 14, Adjudicating Authority shall by order declare moratorium for prohibiting new suits / legal proceedings or continuation of existing suits

Subject to section 52, no suit / legal proceedings can be initiated without approval of Adjudicating Authority




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Part VII of the Companies Act, 1956 had originally dealt with various provisions related to companies under liquidation till 2013 and thereafter, Chapter XX of the Companies Act, 2013 (Chapter XX) has covered all provisions related to liquidation.As per Section 279 of the Companies Act when a winding up order has been passed or a provisional liquidator has been appointed, no suit or other legal proceeding can be commenced, or if pending at the date of the winding up order, can be proceeded with, by or against the company, except with the leave of the NCLT and subject to such terms as the NCLT may impose.Given the flimsy financial health of company after commencement of winding up proceedings and in order to protect interests of all stakeholders, this special protection is provided under the Companies Act to all companies under liquidation and so, prior approval of the NCLT is mandatory before initiating new legal proceedings under any regulations.(B) Under Insolvency & Bankruptcy Code, 2016

Under section 14 of IBC, on the insolvency commencement date, the Adjudicating Authority i.e. NCLT shall by order declare moratorium for prohibiting the institution of suits or continuation of pending suits or proceedings against the company including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority. Therefore, on initiation of CIRP, consent of the NCLT is essential to initiate new legal proceedings against company under CIRP. Further, as per section 60 of IBC, the NCLT shall have jurisdiction to entertain or dispose of any application or proceeding by or against the company.(C) Under SEBI (Listing Obligations & Disclosure) Regulations, 2015

As per Regulations 30 of LODR, every listed company has to make disclosures of material events as specified in Schedule III in a timely manner. Accordingly, if any party/creditor files winding-up petition then it is considered as a material event for which disclosure needs to be given to stock exchanges. Similarly, disclosure needs to be made towards CIRP proceedings launched against the listed company under IBC.

(D) Under SEBI (Delisting of Equity Shares) Regulations, 2009

There is no provision under any regulations in India to initiate proceedings to delist company from stock exchanges merely because winding up proceedings have been initiated after an appointment of the liquidator. Further, as per Regulations 28(1) of SEBI (Delisting) Regulations, in case of a winding up proceedings of a company whose equity shares are listed on a recognised stock exchange, the rights, if any, of the shareholders of such company shall be in accordance with the laws applicable to those proceedings.Through Regulation 28(1), SEBI has specifically re-emphasised rights of shareholders and further, no exemption has been given to stock exchanges from following legal process under Chapter XX. So, prior approval from NCLT will be needed to initiate delisting proceedings for companies under liquidation.

(E) Multiple Relaxations by SEBI to Companies under CIRP

SEBI has taken variety of measures to support revival of companies under CIRP and following are key initiatives:

1) Consolidation of holding beyond 75% is permitted while acquiring financially distressed listed companies.

2) Exemption has been given for delising of equity shares for companies under CIRP pursuant to an IBC resolution plan.

3) Relaxations had been given from complying with the provisions of the SEBI LODR dealing with composition and roles and responsibilities of board of directors and committees. Instead, few other disclosures related to resolution process had been recommended.

4) Pre-clearance from stock exchanges won’t be required for any scheme of arrangement and it is a welcome step for acquirers.

5) Exemption for scheduled commercial banks and financial institutions from making open offer under Takeover Code in the event of conversion of their loans into equity as a part of debt restructuring scheme.

TRANSFERABILITY OF SHARES OF COMPANIES WHICH ARE UNDER CIRP/LIQUIDATIONIBC was introduced by the Indian Government to protect interests of various stakeholders of ailing companies under CIRP / liquidation and facilitate their speedy resolution. As per section 238, the provisions of IBC shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time being in force or any instrument having effect by virtue of any such law. There are several judgements by different courts to uphold overriding effect of provisions of IBC over other laws and it was reiterated by Hon’ble Securities Appellate Tribunal while quashing an order by SEBI against Monnet Ispat & Energy Limited towards Appeal No. 238 of 2020.1) Listed Companies Under CIRPOn commencement of CIRP, entire management control vests with the Resolution Professional who works in consultation with the Committee of Creditors. There are no restrictions on transfer of shares after initiation of CIRP process under the Companies Act, 2013. Further, neither IBBI nor SEBI has restricted transfer of shares of companies under CIRP and so, stock exchanges allow trading in their equity shares.When the company is insolvent and unable to pay its liabilities, technically its shares have zero value because under waterfall structure, shareholders have last priority for payment. But, some shareholders believe that if the debt is rescheduled then equity value will go up which creates demand for shares of some companies.Examples of listed companies under CIRP (with active trading): Jet Airways, Videocon, Indosolar, Tantia Constructions, etc 2) Listed Companies Under Liquidation

The Board of directors cease to exist on commencement of liquidation proceedings and entire management control vests with the liquidator.However, if the company is under liquidation and no final “Winding-up/Liquidation Order” is passed then prior approval



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LE When the company is insolvent and unable to pay its liabilities, technically its shares have zero value because under waterfall structure, shareholders have last priority for payment. But, some shareholders believe that if the debt is rescheduled then equity value will go up which creates demand for shares of some companies.

is needed from the liquidator u/s 334 of the Companies Act for dealing in its shares. Given the restrictions on transfer of shares for companies under liquidation, the stock exchanges usually suspend trading in them as per procedural reasons. Further, stock exchanges can initiate delisting proceedings against such companies either on completion of liquidation process or by obtaining specific approval from NCLT by following due process under Chapter XX.

Examples of listed companies under liquidation (with suspended trading): SBI Home Finance, Scindia Steam Navigation Company, Nachmo Knitex, Gujarat Perstorp, etc

(3) Delisting of Companies Under SEBI Delisting Regulations, 2009:

It is mandatory for all listed companies to do compliances as prescribed under the SEBI LODR and stock exchanges regularly monitor them. In the event of any non-compliance by listed companies, stock exchanges levy penalties as prescribed by SEBI but if it is a recurring default, trading in their shares can get suspended. If the company does not take any steps within reasonable time to revoke suspension by complying with LODR, stock exchanges can compulsorily delist such companies after initiating delisting proceedings under SEBI (Delisting) Regulations and transfer them to their own Dissemination Boards for a period of 5 years where investors are permitted to deal in shares of delisted companies. As there are hardly any options for shareholders of delisted companies, it is recommended to take help of registered brokers and use platform of Dissemination Boards for selling delisted shares.

From 2016, BSE has transferred 1109 companies to BSE Dissemination Board after compulsorily delisting them and currently, there are 809 suspended companies on its platform. Similarly, NSE has transferred 219 companies to NSE Dissemination Board after compulsorily delisting them and currently, there are 51 suspended companies on its platform. Given the past trend, these suspended companies may face risk of delisting and so, they need to quickly do compliances for getting suspension revoked.

Companies under CIRP / liquidation and their shareholders have been granted special protection under IBC as well as Companies Act and it has been well supported by specific provisions under Regulation 28(1) of SEBI Delisting Regulations. However, as per Chapter XX, stock exchanges are entitled to approach the NCLT and seek their prior approval to initiate delisting proceedings against the companies under liquidation. Similarly, in case of companies under CIRP, the NCLT can permit stock exchanges to initiate proceedings under SEBI Delisting Regulations, 2009 after following due procedure as per IBC.

REVIVAL OF COMPANIES UNDER CIRP / LIQUIDATION IS BENEFICIAL TO SHAREHOLDERSMajority of promoters who accessed capital markets had taken pains to get their businesses listed with an intention to create value for all stakeholders, however, delisting of companies often results in collapse of business by affecting all stakeholders badly. After globalisation in 1991, many blue

chip companies had gone under liquidation due to varied reasons including tough competition but still there could be chances of revival due to good set-up, track record or such other factors.

Globally, there had been many prominent cases of revival of companies after filing for bankruptcy and some of them include giants like General Motors, Marvel Entertainment (acquired by Disney), Converse (acquired by Nike), etc.

Just before COVID-19 pandemic, Patanjali Group had acquired Ruchi Soya Industries Limited and it drew attention of masses when its share price went up from Rs 16 in January 2020 to Rs 1535 in June 2020 resulting in market valuation in excess of Rs 45,000 crores. Besides revival of business, Ruchi Soya could enjoy such huge valuation due to its continuous listing. Similarly, after takeover by Reliance Group through CIRP, Alok Industries Limited. has also been a multibagger stock where public shareholders got upside. There are many other success stories of companies under CIRP like Essar Steel, Bhushan Power, etc. Even prior to IBC, SEBI had permitted acquisition of a company under liquidation through Takeover Code wherein public shareholders got an opportunity to tender shares in open offer with Liquidator’s approval. So, it would be proper to say that every company under CIRP / liquidation can have a chance to revive until it is liquidated.

CONCLUSIONCompulsory delisting may be end of the tunnel for listed companies under CIRP / liquidation, however, with continuous lising status - albeit in suspended mode, there could be a possibility to have some light at the end of a tunnel. By turning around Ruchi Soya, Patanjali Group has definitely started a new trend of value creation through listed companies under CIRP / liquidation and given the scarcity of funds in ongoing economic slowdown due to COVID-19, there could be surge in demand from buyers who are on constant look out for value bargains. Let us positively hope for more such revival stories in future since each of them can create substantial value for all stakeholders - enhanced loan repayment to banks, new job vacancies for staff, better business in economy, higher taxes for government, more listing fees revenue for stock exchanges and finally, an exit opportunity for public shareholders.For companies under CIRP / liquidation which are suffering with business failure, continuity in listing status can give more courage to promoters for successful revival and it can have positive impact on all stakeholders, more particularly on public shareholders. Afterall, Mr Winston Churchill has rightly said -“Success is not final. Failure is not fatal: it is the courage to continue that counts.” CS



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Some important aspects of The Negotiable Instruments Act

Vadapalli Srinivas, FCSNavi [email protected]

The Negotiable Instruments Act, 1881 (NI Act) is an important legislation. In one of the Judgments, the Apex Court, inter alia, observed: “So as to see that due to delay tactics by the unscrupulous drawers of the dishonoured cheques due to easy filing of the appeals and obtaining stay in the proceedings, an injustice was caused to the payee of a dishonoured cheque who has to spend considerable time and resources in the court proceedings to realize the value of the cheque and having observed that such delay has compromised the sanctity of the cheque transactions, the Parliament has thought it fit to amend Section 148 of the NI Act.” In another case, the Apex Court held: “Chapter XVII containing Sections 138 to 142 was introduced with the object of inculcating faith in the efficacy of the banking operations and giving credibility to negotiable instruments in business transactions. These provisions were intended to discourage people from not honouring their commitments by way of payment through cheques. The court should lean in favour of an interpretation which serves the object of the Statute.” An attempt is made to examine some of the important judgments under the NI Act as also the amendments made in 2018.

The Negotiable Instruments Act, 1881 (NI Act) is perhaps among the very important old legislations that have stood

the test of time except for some consequential amendments over more than a century. The only tweaking that became necessary are the ones dealing with penalties in case of dishonour of cheques.

The discussion and analysis of some important aspects of the said NI Act are in three parts namely1. Analysis of certain important sections;2. Analysis of important judgements of Supreme Court and

High Court and3. Analysis of the amendments to the NI Act.

ANALYSIS OF CERTAIN IMPORTANT SECTIONS

A. Presumption under section 118 of the Negotiable Instruments Act: Until the contrary is proved, the following presumptions shall be made with reference to Consideration: -

that every negotiable instrument was made or drawn for consideration and that every such instrument, when it has been accepted, indorsed, negotiated or transferred,

was accepted, indorsed, negotiated or transferred for consideration;

B. Presumption under Section 139 of the N. I. Act: Presumption in favour of the holder: - It shall be presumed, unless the contrary is proved, that the holder of a cheque, received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability.

C. As per Section 3 of the Indian Evidence Act, 1872, “a fact is said to be PROVED when, after considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.”

D. Section 140 of the NI Act deals with the defence which may not be allowed in any prosecution under Section 138. The relevant Section reads: “It shall not be a defence in a prosecution of an offence under Section 138 that the drawer had no reason to believe when he issued the cheque that the cheque may be dishonoured on presentment for the reasons stated in that section.”

E. Section 141 deals with the Offences by Companies Whereby if the person committing an offence under section 138 is a company, every person who, at the time the offence was committed, was in charge of and was responsible to the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence. However, a person shall not be liable to punishment if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence. A Nominee Director who is holding any office or employment in Central or State Government or a financial corporation owned or controlled by the Central or the State Government, as the case may be, shall not be liable for prosecution under this chapter.


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ANALYSIS OF IMPORTANT JUDGEMENTS OF SUPREME COURT AND HIGH COURTSAfter having examined some of the important sections, it is necessary to examine some of the important judgments of the High Courts and Hon'ble Supreme Court to understand the relevant sections thoroughly. Some of the Judgments are mentioned hereunder:

A. The Hon’ble High Court of Madhya Pradesh Bench at Gwalior in Misc. Criminal case no. 2235/15 in Manoj Kumar Goyal vs. Vikas Gupta & Anr [along with other Miscellaneous criminal cases] considered the singular question involved in all the cases as to whether return of cheque/s by the bank on the ground that the account of the drawer is closed, falls within the ambit of Section 138 of the Negotiable Instruments Act in their order dated 03 September, 2015. The Hon’ble Court held that “account closed’ also falls within the ambit of Section 138 of NI Act.

In their Judgment, the Hon’ble Court held: “As analyzed above, Section 138 of NI Act needs to be interpreted in order to ensure credibility of negotiable instruments in business transactions. The attempt should be to curb the mischief. It is also settled in law that in view of Section 118 and 139 of NI Act, there is presumption of issuance of cheque. However, this presumption is rebuttable one. The drawer may rebut it at appropriate stage by filing reply and leading evidence. Initially, there exists a presumption of issuance of a valid cheque. If argument of the petitioner is accepted, it will amount to give stamp of approval to a new method of mischief. As per this methodology, one may issue cheque to the other party and prior to or subsequent

to it close his account. This device to wriggle out of Section 138 NI proceedings is impermissible because this eventuality is also covered under section 138 of NI Act. In order to give full effect to the legislative intent, the Apex Court opined that “account closed” also falls within the ambit of Section 138 NI Act.”

In this case, the Hon’ble Bench relied on the judgment dated 26.04.1999 of the Hon’ble Supreme Court in NEPC Micon Limited and Others Vs Magma Leasing Ltd and Others. In this case, the Hon’ble Apex Court held: “In view of the aforesaid discussion, we are of the opinion that even though Section 138 is a penal statute, it is the duty of the Court to interpret it consistent with the legislative intent and purpose so as to suppress the mischief and advance the remedy. As stated above, Section 138 of the Act has created a contractual breach as an offence and the legislative purpose is to promote efficacy of banking and of ensuring that in commercial and contractual transactions, cheques are not dishonoured and credibility in transacting business through cheques is maintained…………. Hence, when the cheque is returned by a bank with an endorsement account closed, it would amount to returning the cheque unpaid because the amount of money standing to the credit of that account is insufficient to honour the cheque as envisaged in Section 138 of the Act.”

B. A Criminal Appeal No. 271 of 2020 [APS Forex Services Pvt. Ltd. Vs Shakti International Fashion Linkers & ORS] with Criminal Appeal No. 272 of 2020 was allowed by the Hon’ble Apex Court vide their order dated 14.02.2020.



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LE The Hon’ble Supreme Court ruled: [a] once the accused

has admitted the issuance of cheque which bears his signature, there is a presumption that there exists a legally enforceable debt or liability under Section 139 of the NI Act. [b] However, such a presumption is rebuttable in nature and the accused is required to lead the evidence to rebut such presumption [c] The accused was required to lead evidence that the entire amount due and payable to the complainant was paid. [d] Section 139 of the Act is an example of reverse onus clause and therefore once the issuance of the cheque has been admitted and even the signature on the cheque has been admitted, there is always a presumption in favour of the complainant that there exists legally enforceable debt or liability and thereafter if it is for the accused to rebut such presumption by leading evidence.

C. In D.K. Chandel vs. M/S Wockhardt Ltd.& ANR [Criminal Appeal no. 132 of 2020], in their Judgment dated 20.01.2020 upheld the Ruling of the Hon’ble High Court of Punjab and Haryana at Chandigarh and held: “As rightly observed by the High Court, production of the account books/cash book may be relevant in the civil court; but may not be so in the criminal case filed under Section 138 of the NI Act. This is because of the presumption raised in favour of the holder of the cheque.”

D. In a judgment reported as Bir Singh vs. Mukesh Kumar [Criminal Appeal Nos. 230-231 of 2019], the Hon’ble Apex Court held that presumption under Section 139 of the NI Act is a presumption under law. The Hon’ble Apex Court observed in their Judgment dated 06.02.2019: “A meaningful reading of the provisions of the Negotiable Instruments Act including, in particular, Sections 20, 87 and 139, makes it amply clear that a person who signs a cheque and makes it over to the payee remains liable unless he adduces evidence to rebut the presumption that the cheque had been issued for payment of a debt or in discharge of a liability. It is immaterial that the cheque may have been filled in by any person other than the drawer, if the cheque is duly signed by the drawer. If the cheque is otherwise valid, the penal provisions of Section 138 would be attracted.”

It is further held:

“If a signed blank cheque is voluntarily presented to a payee, towards some payment, the payee may fill up the amount and other particulars. This itself would not invalidate the cheque.”

“The existence of a fiduciary relationship between the payee of cheque and its drawer, would not disentitle the payee to the benefit of the presumption under section 139 of the Negotiable Instruments Act, in the absence of evidence of exercise of undue influence or coercion.”

“Even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt.”

E. In another Judgment dated 15.03.2019, reported as Rohitbhai Jivanlal Patel vs State of Gujarat and Another (Criminal Appeal No.508 of 2019), the Hon’ble Apex Court held: “On the aspects relating to preponderance of probabilities, the accused has to bring on record such fact and such circumstances which may lead the Court to conclude either that the consideration did not exist or that its non existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that the consideration did not exist …………….. though there may not be sufficient negative evidence which could be brought on record by the accused to discharge his burden, yet mere denial would not fulfil the requirements of rebuttal as envisaged under Section 118 and 139 of the N I Act…….”

F. In their Judgment dated 17.10.2019 in Criminal Appeal No. 1545 of 2019 [Uttam Ram vs. Devinder Singh Hudan & Anr, the Hon’ble Apex Court held: “Once the cheque is proved to be issued it carries statutory presumption of consideration. Then the onus is on the respondent to disprove the presumption….”

AMENDMENT OF THE NEGOTIABLE INSTRUMENTS ACT

The Negotiable Instruments Act was amended in 2018 and was published in Gazette on 02nd August, 2018 whereby two new sections have been inserted under the Act, viz., Section 143 [A] and Section 148.

As per Section 143 A, the court trying an offence under Section 138 may order the drawer of the cheque to pay interim compensation to the complainant –

[a] in a summary trial or a summons case, where he pleads not guilty to the accusation made in the complaint; and

[b] in any other case, upon framing of charge

It is further stated in the said Section 143 A, inter alia, that

the interim compensation shall not exceed twenty percent of the amount of the cheque;

the interim compensation should be paid within sixty days from the date of the order or within such further period not exceeding thirty days as may be directed by the Court;

if the drawer of the cheque is acquitted, the Court shall direct the complainant to repay to the drawer the amount of interim compensation with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order or within such further period not exceeding thirty days as may be directed by the Court;

the interim compensation payable under this section may be recovered as if it were a fine under section 421 of the Code of Criminal Procedure, 1973; and



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amount of compensation awarded under section 357 of the Code of Criminal Procedure, 1973, shall be reduced by the amount paid or recovered as interim compensation under this section.

As per Section 148 inserted after Section 147 under this amendment, in an appeal by the drawer against conviction under section 138, the Appellate Court may order the appellant to deposit such sum which shall be a minimum of twenty percent of the fine or compensation awarded by the trial Court and the amount payable under this section shall be in addition to any interim compensation paid by the Appellant under section 143 A.

This section 148 further provides, inter alia, that –

The amount shall be deposited within sixty days from the date of the order or within such further period not exceeding thirty days as may be directed by the Court;

The Appellate Court may direct the release of the amount deposited by the appellant to the complainant at any time during the pendency of appeal and

If the appellant is acquitted, the Court shall direct the complainant to repay to the appellant the amount so released, with interest at the bank rate as published by the Reserve Bank of India, prevalent at the beginning of the relevant financial year, within sixty days from the date of the order or within such further period not exceeding thirty days as may be directed by the Court.

The Hon’ble Supreme Court examined the above two sections in two different cases

A. In an order dated 30.07.2019 in Criminal Appeal No. 1160 of 2019 (GJ Raja vs. Tejraj Surana), the Apex Court took the view that Section 143A is prospective in nature and is confined to cases where offences were committed after the introduction of Section 143 A, [i.e., after 01.09.2018] in order to force an accused to pay interim compensation. In this case, the Hon’ble Supreme Court observed:

“22. In our view, the applicability of Section 143A of the Act, must therefore, be held to be prospective in nature and confined to cases where offences were committed after the introduction of Section 143 A, in order to force an accused to pay interim compensation.”

“23. ………………………… As against Section 143A of the Act which applies at the trial stage that is even before the pronouncement of guilt or order of conviction, Section 148 of the Act applies at the appellate stage where the Accused is already found guilty of the offence under Section 138 of the Act…………………….”

B. In an order dated 29.05.2019 in Criminal Appeal Nos. 917-944 of 2019 (Surinder Singh Deswal @ Col. S.S. Deswal and others vs. Virender Gandhi), the Hon’ble Supreme Court has rejected the submission of the appellants that Section 148 of the NI Act shall not

be made applicable retrospectively. The court held that considering the Statement of Objectives and Reasons of the amendment in Section 148 of the NI Act, on purposive interpretation of Section 148 of the NI Act as amended, Section 148 shall be applicable in respect of the appeals filed against the order of conviction and sentence for the offence under section 138 of the NI Act, even in a case where the criminal complaints for the offence under Section 138 of the NI Act were filed prior to amendment Act, i.e., prior to 01.09.2018. In this case the Hon’ble Apex Court observed:

“8.1 Having observed and found that because of the delay tactics of unscrupulous drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings, the object and purpose of the enactment of Section 138 of the N.I Act was being frustrated, the Parliament has thought it fit to amend Section 148 of the NI Act, by which the first appellate Court, in an appeal challenging the order of conviction under Section 138 of the NI Act is conferred with the power to direct the convicted Accused – Appellant to deposit such sum which shall be a minimum of 20% of the fine or compensation awarded by the trial Court. By the amendment in Section 148 of the NI Act, it cannot be said that any vested right of appeal of the Accused – Appellant has been taken away and / or affected. Therefore, submission on behalf of the Appellants that amendment in Section 148 of the NI Act shall not be made applicable retrospectively and more particularly with respect to cases / complaints filed prior to 1.9.2018 shall not be applicable has no substance and cannot be accepted, as by amendment in Section 148 of the NI Act, no substantive right of appeal has been taken away and / or affected. ………”

The above orders have been quoted and relied upon by the Hon’ble Supreme Court in their Judgment dated 08 Jan, 2020 while dismissing the Criminal Appeal Nos. 1936 – 1963 of 2019 in (Surinder Singh Deswal @ Col. S.S. Deswal and others vs. Virender Gandhi).

Thus, it may be concluded that Section 143 A of the NI Act is applicable prospectively, that is, with effect from 01.09.2018 and Section 148 of the NI Act is applicable retrospectively. CS



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Competition Law and Health Care Sector: Contemporary Perspective

Dr. Susmitha P. MallayaAssistant Professor Faculty of Law University of Delhi Delhi [email protected]

This article focuses the role played by CCI to regulate the anti-competitive practices under Competition Law in India in the health care system. It suggests the need to strengthen the competition policy and requirement for stringent vigilance mechanism to prevent such practices especially cartels, if any formed in post COVID scenario.

INTRODUCTION

Competition Law aims to foster fair competition to balance the growth of economy on one hand and maximise the

welfare of the consumer on the other. Assuredly, a robust competition policy and law will have a positive impact on economic development as well as public interest. Presently, health emergency is faced world over due to COVID-19 pandemic outbreak and India is not an exception to this scenario. Infact, the situation is worst in the developing countries like India where public health sector is not strong. Public health sector consists of pharmaceutical companies, hospitals, doctors, diagnostic centres etc. In this sector, anti-trust law can play a major role to curb the abuses that may arise due to emergent situation of health crisis faced by people. People are eagerly waiting for effective vaccine and proven cure for the disease. Both ‘innovation’ in and ‘access’ to healthcare (including pharmaceuticals) are crucial for the survival of the human kind. Thus, the pandemic has brought healthcare as top policy priority. Competition policy is also responding to this health crisis. Considering the present situation, Competition Commission of India (CCI) allowed rivals in various healthcare product sectors to engage in greater coordination without the fear of any adverse action provided such arrangements result in increasing efficiencies relying on Section 19(3) which allows coordinated conduct to increase efficiency of the industry. It is expected that this measure is likely to help essential sectors including healthcare and pharmaceuticals to coordinate and provide better services. However, it has also warned the companies not to take advantage of the pandemic to contravene any of the provisions of competition laws. The Competition Act prohibits conduct that causes or is likely to have a significant

adverse effect on competition, with Section 3(3) of the law presuming certain concerted actions between competitors as being anti-competitive.

Pharmaceutical market in India consists of large number of players which results in high competition. While competition law promotes competition in the market which will result in the reasonable cost of quality drug and improve the health care sector, anti-competitive practices become a hindrance. Although there are laws governing the sale of drugs and safe medication, there is no law specifically to restrict or regulate healthcare anti-competitive practices. Generally, in the public health market, major pharmaceutical companies raise the cost of medicines under protection of patent rule which could make drug unaffordable to the public This privilege increased in the liberalised economy and as the foreign pharmaceutical companies enjoy the monopoly of patented drugs, the cost of medicines has become too high for common man to afford it, thus jeopardising the basic aspect of the public health system of the country. Nonetheless, the State cannot ignore its constitutional obligation to provide adequate medical aid to the people, citing reasons such as financial constraints. Later, in order to prevent the decline in the growth of domestic pharmaceutical companies, one of the major stake holder in the Health Care system, the courts in India under patent law regime in the case of Bayer v. NATCO (2012) recognised the concept of compulsory licencing to produce generic medicines and sell life-saving drugs at affordable prices. The aim of compulsory licensing is to protect competition and provide welfare of the consumers. Thus the concept of compulsory licensing and the intervention of CCI synchronize to an extent to promote availability of goods to the public at adequate quantity and reasonable price.

PRIVATE HEALTHCARE vis a’ vis PUBLIC HEALTHCARE

There is a tremendous growth of healthcare facilities in the private sector in the recent times especially after adopting the globalised policies when the concept of traditional health care facilities shifted towards the commercial oriented health service providers apart from Foreign Direct Investment in the health sector. There are corporate investment in hospitals which are more in number with high fees. Multi-speciality/Super-speciality hospitals became the household names. Small Clinics and independent health care providers found it difficult to survive whereas the common man found it difficult to meet the cost of those hospitals and deprived of treatment. It is a sad reality that the public sector health care sector remained neglected by the States both with regard to the enhancement of infrastructure as well as expertise of the specialised doctors and diagnostic test.


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Pharmaceutical market in India consists of large number of players which results in high competition. While competition law promotes competition in the market which will result in the reasonable cost of quality drug and improve the health care sector, anti-competitive practices become a hindrance. Although there are laws governing the sale of drugs and safe medication, there is no law specifically to restrict or regulate healthcare anti-competitive practices.

One of the reasons for the augmentation of private healthcare facilities is the increase of health awareness among consumers and the lack of essential facilities in the public healthcare sector. This visible disparity has been reflected during the COVID pandemic outbreak. The common man is not able to afford the cost of hospitals and the State facilities provided are not sufficient to take care of their lives. Even for normal surgery and services, hospitals started charging more pointing at the COVID risk they are undertaking. There is lack of level playing field which makes the role of CCI inevitable to check the abuse of anti-competitive practices the private healthcare sectors may indulge in.

Another area is related to the dominant position enjoyed by the pharma companies. The Competition law is not against dominance of any enterprise but only if it abuses its position which is unfortunately very difficult to prove. It is an objective concept relating to behavior of an undertaking which is in a dominant position. Therefore, to prove the abuse of dominant position by the pharmaceutical companies is very difficult. This results in more and more pharmaceutical companies colluding with each other. The assessment of “dominance” and “abuse” would be determined in the relevant market.

REGULATION OF ANTI-COMPETITIVE PRACTICES IN RETAIL PHARMACY

A large share of retail sale of medicines are in the private sector. Pharmacy owners join together to form powerful cartel in the guise of a trade association, frequently by utilising its position as a member of the larger All India Organisation of Chemists and Druggists and indulge in collusive practices. CCI brought under its scanner certain anti-competitive practices which were practiced in gross violation of section 3(3) of the Competition Act, 2002. It even penalised several chemist and druggist associations in the pharmaceutical sector for indulging in anti-competitive acts. For instance, in M/s. Santuka Associates v. AIOCD (2013), CCI resolved long-pending problems in pharmaceutical distribution in India and held that AIOCD was abusing its dominant position and influencing the level of prices of drugs and pharmaceutical products through its mandates and directions which amounted to anti-competitive practices. However, later COMPAT set aside the order of CCI by stating that there is lack of evidence to prove the existence of anti-competitive agreement. Apart from this, in many cases the CCI has directed the parties to modify or delete the anti-competitive clauses from the

agreements, MOUs etc. and passed cease and desist order from indulging in anticompetitive activities. This shows that in case of abuse of dominant position by pharmaceutical companies in the manufacture and distribution of generic medicines, CCI has powers to intervene and resolve such abuses.

In M/s Suman Distributors v. Bengal Chemists and Druggists Association (2020), CCI held that the Alkem and Macleods, pharmaceutical companies had entered into anti-competitive arrangements with a stockist and druggist association whereby the prospective stockists needs to obtain the consent of Association prior to being appointed by pharmaceutical companies. The Association's interference with the pharmaceutical companies' distribution system was found to cause an AAEC and contravene the Competition Act, 2002 (Act). Accordingly, CCI in terms of Section 27 (a) of the Act and under the provisions of Section 48 of the Act, directed to cease and desist from indulging in such practices in future, which have been found to be in contravention of the provisions of Section 3 of the Act. This is perhaps, the first instance where CCI considered the fact that such arrangements were made by the pharmaceutical companies under duress or coercion from the Association and considered it as a mitigating factor and did not imposed any penalty on the pharmaceutical companies. This approach of CCI may provide the pharma companies to invoke the element of “coercion/duress” whenever any complaint is raised before the CCI for indulging in anti-competitive practices by them or vice-versa.

ANTI-COMPETITIVENESS IN HEALTH SERVICESGenerally, it is alleged that there is a hidden alliance between doctors, chemists and manufactures to make profits at the expense of patients. Inspite of institutionalization of unethical and illegal drug promotional practices have been put under strict guard, collusion of different kinds exists. Though, CCI is looking at the possible anti-competitive practices like hospitals referring the patients to a particular service entity only, these activities are not brought within the purview of CCI. Of course, they cannot interfere in fixing of price and the actual movements in the market place. Another anti-competitive practice in the pharmaceutical industry is the collusions. Collusions can range from cartelization, and for cross licensing to bidding. For instance, doctors prescribing expensive



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Another form of anti-competitiveness by pharmaceutical companies is patent pooling and cross licensing. Patent pooling is a consortium of at least two companies agreeing to cross license patents and other intellectual property rights relating to a particular technology. This is done mainly to save time and money of a patentee or licensee. This is having more significant in the present times when the research for anti-COVID vaccine is going on and the pharmaceutical companies are waiting eagerly to grab the opportunity to manufacture the same. The competition policy measures can be used to check if any large consortium is formed which might set market and control unwarranted market prices. This kind of anti–competitiveness in the pharmaceutical sector can affect the economy. Manipulating this sector by a few dominant players can result in adverse impact on the health sector. Therefore, regulations are absolutely necessary in this sector and the role of CCI cannot be overlooked.

CONCEPT NOTE ON AFFORDABLE HEALTH CARE

CCI, in the year 2018 published a policy note on“Making Market work for affordable Healthcare”. In their report, it highlighted the presence of unreasonably high trade margin as one of the major factors that contribute to high drug prices in India. Similarly, it also observed that there is the presence of vertical agreements in health care sectors where hospitals often have exclusive arrangements with in-house pharmacies, diagnostic labs etc. Apart from this, several instances were pointed out where the patients were forced to purchase the medicines, syringes etc at printed MRP from the in-house pharmacy of the hospital while the same is easily available at lower prices outside the hospital premises. In some cases, hospitals reject even recent reports of diagnostic tests conducted outside the hospital and mandates repeated tests from their in-house diagnostic labs. In the absence of well-implemented regulations ensuring transparency and ethical practice, competition between hospitals on the parameters of price, quality or choice is almost non-existent in India. This calls for a need for the Commission to look into health care sector and in particular the unorganized cartels between the doctors and chemists. This is more required in present times where hospitals are utilising the COVID situation to maximise their profit. It can use its instrument of enforcement and advocacy in this sector.

CONCLUSION

Health sector in India can be expected to undergo substantial change and accordingly, there is a need to bring changes in the policy decisions pertaining to Competition Law as well. There are chances of more mergers and acquisitions in the pharmaceutical sector to withstand the market pressure. For

instance, CCI has approved the proposed combination of Max Healthcare, Radiant Life Care and KKR Group-backed Kayak Investments Holding. This marks the second in-depth analysis in this sector, following the IHH Healthcare Berhad / Fortis deal. It has also approved the proposal of a new joint venture to be formed by bringing together certain consumer healthcare products of GSK and Pfizer by GlaxoSmithKline/ Pfizer combination. These combination reflects the pre-COVID situation. Post- COVID scenario, CCI should be more vigilant while approving any combinations in the health care sector. Moreover, there are chances of political climate becoming more nationalistic and in turn the growth of generic medical industry can be anticipated. Many companies may seek merger or joint ventures with competitors to survive the crisis. In this scenario, there is a need to reframe the competition advocacy measures as well create awareness of the measures that are initiated to provide health care services at affordable means to all. The CCI is relying on the provisions of Competition Act stating that it has built-in safeguards to allow for a certain degree of cooperation among the competing firms and that it is required in the present scenario. It has not so far taken any specific action against enterprises, though it has demonstrated an active interest in the past in the healthcare sector. It is time to analyze the market situation and prevent the abuse which are unreported in the health care sector.

The Ayurveda drug industry played a vibrant role during this pandemic by advertising the need to boost immunity to fight against pandemic and many companies made considerable profits in this period. CCI cannot stand as a watchdog in this area as well. It is also necessary to pause the merger and acquisition applications if filed by the Companies as a result of the crisis. For instance, it is reported that EU is delaying merger filing. Apart from this, the EC issued the first formal comfort letter under its Temporary Framework to Medicines for Europe, formerly the European Generics Medicines Association, addressing a specific voluntary cooperation project among pharmaceutical producers, both members and non-members of the association that targets the risk of shortage of critical hospital medicines for the treatment of coronavirus patients. All these highlight the need for the intervention of the Competition Commission of India to regulate the anti-competitive practices allegedly engaged by pharmaceutical companies and other players in health care sector. In order to achieve the objective of affordable health care for all, CCI has suggested for Public Procurement of drugs.

Furthermore, there is major issue in respect of fixing of cost with regard to the innovative drug by the pharmaceutical companies. Pharmaceutical innovation stands quite different from electronic and mechanical innovations. Most of the investment in new drug includes ‘research and development’, pre-clinical stage, clinical test stage, and information on whether the drug actually works in human beings and whether it is safe. This necessitates huge investments in this industry. Most of the hundred million dollar investment in screening

One of the reasons for the augmentation of private healthcare facilities is the increase of health awareness among consumers and the lack of essential facilities in the public healthcare sector.



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and testing yields a pure public good, spilling over at close to zero cost to others. Introduction of generic drugs will severely undermine the reputational advantage and recovery of the investment made by those pharma companies. This calls for protection of monopoly rights enjoyed by them through patents. It is true that Competition Law is not against monopoly rights, but definitely it cannot ignore its objective to see that they are not abused by charging abnormal price and keeping high profit margin as well as creating a hindrance for other companies to enter the market. Moreover, cartels, if formed in the health sector, needs strict observation, absence of which will weaken the philosophy of Competition Law and call for rethinking the earlier provisions under Monopoly Restrictive Trade Practices Act considering the fact that it would be difficult to prove abuse of monopoly or exercise some control effectively on the ground reality prevailing in the sector at local level. CS

REFERENCES :

1. Kevin E. Noonan, “ The Anatomy of a Compulsory License: Natco Pharma Ltd. v. Bayer Corp. (Indian Patent Office)”,

2. https://www.patentdocs.org/2012/03/the-anatomy-of-a-compulsory-license-natco-pharma-ltd-v-bayer-corp-indian-patent-office.html

3. Nobhojit Roy, Neha Madhiwalla and Sanjay A Pai, “Drug promotional practices in Mumbai: A Qualitative Study” https://ijme.in/articles/drug-promotional-practices-in-mumbai-a-qualitative-study/?galley=html

4. Pradeep S Mehta (Ed.), Competition & Regulation in India, CIRC, Jaipur (2007)

5. Yang-Ching Chao, Gee San (Eds), International and Comparative Competition Law and Policies, (Walter Kluwer, 2008).

6. India’s Marketing Regulations of Drugs, https://www.farmavita.net/documents/Indias-marketing-regulations-of-drugs.pdf

7. Policy Note on “Making Markets Work for Affordable Healthcare”, https://www.cci.gov.in/node/4184

8. “Impact of Competition law on Pharmaceutical & Healthcare Sectors in India,

https://www.competitionlawyer.in/webinar-on-impact-of-competition-law-on-pharmaceutical-healthcare-sectors-in-india/

9. Surinder Singh, “Clinical Trials New Horizon-India”, https://www.who.int/medicines/areas/quality_safety/regulation_legislation/icdra/1_India_ClinicalTrialsNewHorizon.pdf

10. Eugene Buttigieg, Competition Law: Safeguarding the Consumer Interest, (Kluwer Law International, 2009).

11. Administrative Structure and Functions of Drug Regulatory Authorities in India,https://icrier.org/pdf/Working_Paper_ 309.pdf

12. M/s Suman Distributors v Bengal Chemists and Druggists Association CCI, Case No 36/2015) of 12 March 2020 available on https://www.cci.gov.in/sites/default/files/36of2015-31of2016-58of2016.pdf.

13. CCI Combination order available on https://www.cci.gov.in/sites/default/files/Notice_order_document/Order635.pdf.

14. CCI Combination order available on https://www.cci.gov.in/sites/default/files/Notice_order_document/C-2019-03-654O.pdf.

15. Radiant Life Care Private Limited (Radiant), Kayak Investments Holding Pte. Limited (Kayak), Max Healthcare Institute Limited (MHIL) and Max India Limited (MIL), CCI Combination order available on https://www.cci.gov.in/sites/default/files/Notice_order_document/FinalOrder629.pdf



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Role of Independent Directors – “Bhishma Way or Jatayu Way”

Sudhakar Saraswatula*, FCS Vice-President (Corporate Secretarial) Reliance Industries Limited Mumbai [email protected]

Independent Director is neither defined under the Companies Act, 2013 (‘the Act’) nor under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’). However, both the Act and the Listing Regulations provides the framework to determine the qualifications to become an Independent Director. To appoint an Independent Director, an individual has to be appointed as a Director first then to be designated as an Independent Director. Therefore, an Independent Director is a Director first then an Independent Director and not vice-versa. An independent director is supposed to be a non-executive director and independent of promoters and management. He may receive sitting fee and profit linked commission as remuneration, but he should not have any other material pecuniary relationship with the company, unless so permitted.

CONCEPT OF AN INDEPENDENT DIRECTOR

Independent Director is given a very significant importance both under the Act and Listing Regulations. Independent

Directors are seen as catalysts of change and have to facilitate the corporates to navigate through the growing complexities and ever-increasing compliances of law. They are expected to bring an independent judgement to the Board room and are expected to safeguard the interests of shareholders, in particular the minority shareholders and all other stakeholders. Independent Directors are supposed to be the real guardians, custodians and gate keepers of Corporate Governance and protects the interests of various stakeholders of the Company.Increasing competitive business environment has enhanced the role and responsibilities of Directors and in particular the Independent Directors. Independence of the Board is critical in ensuring that the board fulfils its oversight role objectively and holds the management accountable to all stakeholders. Considering that Independent directors have an extremely crucial role to play in ensuring the quality of Corporate Governance, the Act and the Listing Regulations have prescribed a greater role and importance to Independent Directors by mandating their presence in various Committees and have ensured that they have a say in the Governance of the Company.

*The views expressed are the personal views of the author

MANDATORY PRESENCE OF INDEPENDENT DIRECTORS IN COMMITTEES AND BOARD MEETINGSConsidering the importance of Independent Directors both the Act and Listing Regulations mandated the presence of Independent Directors at Board and Committee meetings as under:

1) Pursuant to the provisions of Section 173 of the Act, Board meetings may be called at a shorter notice to transact any urgent business provided at least one Independent Director, if any, shall be present at that meeting. In case of absence of Independent Director from such a meeting, the decisions taken thereat shall be final only on ratification thereof by at least one Independent Director, if any.

2) As per Secretarial Standard 1 on Meetings of Board of Directors, to transact any urgent business, the Notice, Agenda and Notes on Agenda may be given at shorter period of time than the prescribed time, if at least one Independent Director, if any, shall be present at such Meeting. If no Independent Director is present, decisions taken at such a Meeting shall be circulated to all the Directors and shall be final only on ratification thereof by at least one Independent Director, if any

3) Pursuant to the provisions of Section 177 of the Act, the audit committee shall consist of a minimum of three directors with Independent Directors forming majority. Under Regulation 18 of the Listing Regulations, two-third of members of the audit committee shall be Independent Directors and the Chairperson shall be an Independent Director. Presence of at least two Independent Directors shall form part of the quorum

4) Pursuant to the provisions of Section 178 of the Act, the nomination and remuneration committee shall consist of three or more non-executive directors out of which not less than one-half shall be Independent Directors. Under Regulation 19 of the Listing Regulations, at least fifty per cent of the members of the nomination and remuneration committee shall be Independent Directors and the Chairperson shall be an Independent Director. Presence of at least one Independent Director shall form part of the quorum


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5) Pursuant to the provisions of Section 135 of the Act, the corporate social responsibility committee shall consist of three or more directors out of which at least one director shall be an Independent Director.

ROLE AND OBLIGATIONS UNDER THE COMPANIES ACT, 2013While playing the role as Independent Directors, they are obligated to comply with the following statutory provisions

DUTIES OF DIRECTORSFor the first time under the Companies Act, 2013, the duties of the Directors have been prescribed. Prior to this the Directors who are in a fiduciary position were presumed to have certain duties. The duties prescribed under the Act are as under

1) Subject to the provisions of the Act, a director of a company shall act in accordance with the Articles of the company.

2) A director of a company shall act in good faith in order to promote the objects of the company for the benefit of its members as a whole, and in the best interest of the company, its employees, the shareholders, the community and for the protection of environment.

3) A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment.

4) A director of a company shall not involve in a situation in which he may have a direct or indirect interest that conflicts, or possibly may conflict, with the interest of the company.

5) A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.

6) A director of a company shall not assign his office and any assignment so made shall be void.

7) If a director of the company contravenes the provisions of this section such director shall be punishable with fine which shall not be less than one lakh rupees, but which may extend to five lakh rupees.

CODE FOR INDEPENDENT DIRECTORS – SCHEDULE IV In addition to the above duties, Independent Directors are obligated to comply with and abide by the Code prescribed under Schedule IV of the Act. This Code is a guide to professional conduct for Independent Directors and adherence to this Code promote confidence of the Regulators, investment community, particularly minority shareholders, and all other stakeholders. The Code prescribes

1. Guidelines of Professional conduct2. Role and functions of an Independent Director3. Duties of an Independent Director4. Manner of appointment and re-appointment of an

Independent Director5. Resignation and Removal of an Independent Director6. Independent Directors meetings and business to be

conducted thereat7. Review of performance of Chairperson, Board and other

Directors by the Independent Directors8. Review of performance of Independent Directors by the

BoardIt is not only the Independent Directors but also the companies who have appointed the Independent Directors shall abide by the Code prescribed under Schedule IV of the Act

ROLE AND OBLIGATIONS UNDER THE LISTING REGULATIONS While playing the role as Independent Directors of a listed entity, they are obligated to comply with the following provisionsResponsibilities of a Director

Regulation 4 (2) (f) prescribes the responsibilities of a director which an Independent Director has to ensure compliance as under:Disclosure of information:

(1) shall disclose to the board of directors whether he, directly, indirectly, or on behalf of third parties, has a material interest in any transaction or matter directly affecting the listed entity

(2) shall conduct so as to meet the expectations of operational transparency to stakeholders while at the same time maintaining confidentiality of information in order to foster a culture of good decision-making

Key functions of the board of directors

(1) Reviewing and guiding corporate strategy, major plans of action, risk policy, annual budgets and business plans, setting performance objectives, monitoring implementation and corporate performance, and overseeing major capital expenditures, acquisitions and divestments.

(2) Monitoring the effectiveness of the listed entity’s governance practices and making changes as needed.



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(3) Selecting, compensating, monitoring and, when necessary, replacing key managerial personnel and overseeing succession planning.

(4) Aligning key managerial personnel and remuneration of board of directors with the long-term interests of the listed entity and its shareholders.

(5) Ensuring a transparent nomination process to the board of directors with the diversity of thought, experience, knowledge, perspective and gender in the board of directors.

(6) Monitoring and managing potential conflicts of interest of management, members of the board of directors and shareholders, including misuse of corporate assets and abuse in related party transactions.

(7) Ensuring the integrity of the listed entity’s accounting and financial reporting systems, including the independent audit, and that appropriate systems of control are in place, in particular, systems for risk management, financial and operational control, and compliance with the law and relevant standards.

(8) Overseeing the process of disclosure and communications. (9) Monitoring and reviewing board of director’s evaluation

framework. Other responsibilities: (1) The board of directors shall provide strategic guidance

to the listed entity, ensure effective monitoring of the management and shall be accountable to the listed entity and the shareholders.

(2) The board of directors shall set a corporate culture and the values by which executives throughout a group shall behave.

(3) Members of the board of directors shall act on a fully informed basis, in good faith, with due diligence and care, and in the best interest of the listed entity and the shareholders.

(4) The board of directors shall encourage continuing directors training to ensure that the members of board of directors are kept up to date.

(5) Where decisions of the board of directors may affect different shareholder groups differently, the board of directors shall treat all shareholders fairly.

(6) The board of directors shall maintain high ethical standards and shall take into account the interests of stakeholders.

(7) The board of directors shall exercise objective independent judgement on corporate affairs.

(8) The board of directors shall consider assigning a sufficient number of nonexecutive members of the board of directors capable of exercising independent judgement to tasks where there is a potential for conflict of interest.

(9) The board of directors shall ensure that, while rightly encouraging positive thinking, these do not result in over-optimism that either leads to significant risks not being recognised or exposes the listed entity to excessive risk.

(10) The board of directors shall have ability to ‘step back’ to assist executive management by challenging the assumptions underlying: strategy, strategic initiatives (such as acquisitions), risk appetite, exposures and the key areas of the listed entity’s focus.

(11) When committees of the board of directors are established, their mandate, composition and working procedures shall be well defined and disclosed by the board of directors.

(12) Members of the board of directors shall be able to commit themselves effectively to their responsibilities.

(13) In order to fulfil their responsibilities, members of the board of directors shall have access to accurate, relevant and timely information.

(14) The board of directors and senior management shall facilitate the independent directors to perform their role effectively as a member of the board of directors and also a member of a committee of board of directors.

Obligations under the Listing Regulations

Regulation 25 of the Listing Regulations prescribes the following obligations with respect to independent directors. (1) No person shall be appointed or continue as an alternate

director for an independent director of a listed entity (2) The maximum tenure of an independent director shall be

in accordance with the Companies Act, 2013 and rules made thereunder, in this regard, from time to time.

(3) The independent directors of the listed entity shall hold at least one meeting in a year, without the presence of non-independent directors and members of the management and all the independent directors shall strive to be present at such meeting.

(4) The independent directors in the meeting referred in sub-regulation (3) shall, inter alia-

a) review the performance of non-independent directors and the board of directors as a whole;

b) review the performance of the chairperson of the listed entity, taking into account the views of executive directors and non-executive directors;

(c) assess the quality, quantity and timeliness of flow of information between the management of the listed entity and the board of directors that is necessary for the board of directors to effectively and reasonably perform their duties.

(5) An independent director shall be held liable, only in respect of such acts of omission or commission by the listed entity which had occurred with his knowledge, attributable through processes of board of directors, and with his consent or connivance or where he had not acted

A director of a company shall not achieve or attempt to achieve any undue gain or advantage either to himself or to his relatives, partners, or associates and if such director is found guilty of making any undue gain, he shall be liable to pay an amount equal to that gain to the company.



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(6) The independent director should get familiarised through various programmes about the listed entity, including the following:

(a) nature of the industry in which the listed entity operates;

(b) business model of the listed entity; (c) roles, rights, responsibilities of independent directors;

and (d) any other relevant information(7) Every independent director shall, at the first meeting of the

board in which he participates as a director and thereafter at the first meeting of the board in every financial year or whenever there is any change in the circumstances which may affect his status as an independent director, submit a declaration that he meets the criteria of independence as provided in clause (b) of sub-regulation (1) of regulation 16 and that he is not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact his ability to discharge his duties with an objective independent judgment and without any external influence

(8) The board of directors of the listed entity shall take on record the declaration and confirmation submitted by the independent director under sub-regulation

(9) after undertaking due assessment of the veracity of the same.

Other obligations as a Director

Regulation 26 of the Listing Regulations prescribes the following obligations with respect to directors which an Independent Director has to comply with(1) Shall not be a member in more than ten committees or act

as chairperson of more than five committees across all listed entities subject to the exceptions .

(2) Shall inform the listed entity about the committee positions he occupies in other listed entities and notify changes as and when they take place.

(3) Shall affirm compliance with the code of conduct of board of directors and senior management on annual basis.

(4) Shall disclose shareholding, held either by him or on a beneficial basis for any other persons in the listed entity in which he is proposed to be appointed as a director

(5) Shall make disclosures to the board of directors relating to all material, financial and commercial transactions, where he has personal interest that may have a potential conflict with the interest of the listed entity at large.

(6) Not to enter into any agreement for himself or on behalf of any other person, with any shareholder or any other third party with regard to compensation or profit sharing in connection with dealings in the securities of such listed entity, unless prior approval for the same has been obtained from the Board of Directors as well as public shareholders by way of an ordinary resolution

(7) The independent director shall undertake appropriate induction and regularly update and refresh their skills, knowledge and familiarity with the company. They shall also keep themselves well informed about the company and the external environment in which it operates.

LIABILITY OF AN INDEPENDENT DIRECTOR As per Section 149(12), an Independent Director shall be held liable, only in respect of such acts of omission or commission by a company which had occurred with his knowledge, attributable through Board processes, and with his consent or connivance or where he had not acted diligently. This effectively means that the Independent Directors are liable only for contraventions which have occurred with their consent/ connivance or where they have not taken enough steps to avoid the contravention. Since the independent directors do not involve in the day-to-day running of company’s business, they shall not be held liable for operational issues and have been given some kind of an immunity. However, in accordance with the duties, responsibilities and obligations of independent directors prescribed both under the Act and the Listing Regulations, the Independent Directors are expected to exercise reasonable care, skill and diligence while discharging their responsibilities in safeguarding the interest of all stakeholders. Ministry of Corporate Affairs issued a General Circular No 1, dated March 02, 2020 clarifying that civil or criminal proceeding should not unnecessarily be initiated against Independent Directors unless enough evidence exists to the contrary, and, if already initiated, must be reviewed. This gives a great comfort to the Independent Directors who discharge their responsibilities diligently, as also a direction on how they are expected to act.

THE DILEMA OF INDEPENDENT DIRECTORS There is always a perennial question that how independent an Independent Director is supposed to be and how to measure his independence, that troubles the minds of all concerned. Independent Directors are often to be appointed by the Promoters of the company who effectively control the ownership and management of the company. In such a scenario how, such Directors are regarded as and can be independent in the real sense and how they are expected and can play an independent role dispassionately is a big question mark. An Independent Director should always protect his independence and has to establish the same when the need arises, which may happen quite often. Whenever any mishap takes place in any company, the Regulator, shareholders, proxy advisory firms and all other stakeholders look towards the Independent Directors and question them on their role. Hence playing the role of an Independent Director is very complex and is to be played with great responsibility, reasonable care and diligence. As Martin Luther King Jr said, “the ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy”. By drawing an inference from this, we may say that “the ultimate measure of an Independent Director is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy”.



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CHALLENGES TO INDEPENDENT DIRECTORS Ownership dominated Indian corporate sectorBoard can’t be at loggerheads with majority shareholder(s) Familiarity between the promoter and the Independent

DirectorBusiness is dynamic and can’t be run on static principles

set by the foundersMaturity and independence of Independent Directors The ability of Independent Directors to question the

managementConflict of interest

In the light of the above dilemmas and challenges faced by the Independent Directors, let’s see the role played by the great Bhishma in the epic Mahabharata and Jatayu in the epic Ramayana, when they faced the same situation of rescuing a hapless woman. No two people react to the same situation in a similar way. This is a comparative study between Bhishma and Jatayu. Both, of them were confronted with character defining assault on womanhood. One chose to die protecting the victim, while the other chose to be a mute spectator of the crime. We can draw some lessons from this episode that how an Independent Director has to play his role.

1) POWERFUL OR POWERLESS

Bhishma was a powerful and capable warrior and if he wanted, he could have stopped the disrobing of Draupadi - the Queen, but he chose to be a silent witness of this act whereas Jatayu was old and invalid and knew that in all probability, Ravana would kill him but still, he chose to try his best to protect Sita - the Queen. Bhishma was powerful yet acted powerless, whereas Jatayu was powerless yet acted powerful. “Real power is not about physical strength but about the deep desire to help”. In the similar way when a situation like this arises, an Independent Director is expected to rise to the occasion and has to put his foot down in the best interest of the company, rather than remaining as a mute spectator to the happenings. In case he is indecisive he puts not only the company in trouble but also himself.

2) ALIVE OR DEAD

Bhishma lived on but died every day to his conscience whereas Jatayu died once but lived eternally true to his conscience. “Our only constant companion is our conscience - better to be true to it.”. In the similar way whenever an Independent Director faces a situation that what is right and what is wrong, he has to act according to his conscience.

3) FAME OR INFAME

Bhishma’s name and fame went down in history because of this one act of not stopping the disrobing of Draupadi but Jatayu’s name and fame went high in history because of his act of trying to save Sita. “We are all going to be mere names in history, sooner or later. Will we be equated with the bad or the good - is our choice”. When a person is considered to appoint as an Independent Director, he certainly has name and fame and an established image in the society. It is up to him to decide in which way he wants his name gets associated.

4) CULTURE OR VULTURE

Bhishma was supposed to be a highly cultured human but acted in a highly insensitive manner and compromised in values, whereas Jatayu was supposed to be a lowly uncultured vulture but acted in a highly sensitive manner and soared the skies in values like an evolved human. Who would you call as a human - Bhishma or Jatayu? “One doesn’t become a human being by being born as a human - one becomes a human being by being a human.”. In several corporate scams the minority shareholders were vulnerable and have lost their lifetime earnings / savings. In such companies had the Independent Directors played a timely and efficient role they would have saved the minority shareholders.

5) SPOKEN OR UNSPOKEN WORDS

Draupadi begged and pleaded protection from Bhishma because she knew if someone could protect her it was only him but still Bhishma didn’t protect her whereas Sita didn’t even ask Jatayu for protection - she just wanted him to inform Rama about her kidnapping by Ravana because she knew Jatayu was not powerful, but still Jatayu tried to protect Sita. Bhishma being a human couldn’t even understand the spoken words of Draupadi what to speak of understanding her unspoken words, whereas Jatayu even though was a mere bird, understood not only the spoken words of Sita but also her unspoken words. “The language of heart is more powerful than the language of words”. Bhishma tried to escape his duty of protecting a hapless woman, by expressing his helplessness that he is a slave to the throne and shown his loyalty to the throne. Similarly, when an Independent Director face a situation of whom to protect? The Promoter, who has appointed him and because of whom he is an Independent Director or the Company where in he is an Independent Director or the shareholders towards whom he has a fiduciary duty. He should certainly choose to act in the best interest of the company and of the shareholders and in particular minority shareholders.

6) CLARITY OR CONFUSION

Bhishma was confused regarding his royal duty and forgot that he had a higher duty - a moral duty whereas Jatayu was so clear about his moral duty that no other duty was a consideration for him. “When caught up in dilemmas like this, best is to follow the higher principles - to follow our heart because it always knows the truth.” Independent Directors when they face such dilemma have to act with clear conscience.

The independent director shall undertake appropriate induction and regularly update and refresh their skills, knowledge and familiarity with the company. They shall also keep themselves well informed about the company and the external environment in which it operates.



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7) GOOD OR BAD EXAMPLE

Bhishma set a very bad precedent for generations to come whereas Jatayu set the most ideal precedent for generations to come. “If we can’t be a great example at least let us not be a bad one.” Independent Director while acting in turbulent times have to set an example in protecting the Corporate, as well as the Corporate Governance.

8) RELATIVE OR STRANGER

Another interesting point is that Bhishma was an elderly relative of Draupadi but acted as a total stranger in this episode, whereas Jatayu was not at all related to Sita, he was a stranger but acted more than a dearest relative. “True relationships is based on heartily connections not just bodily connections.” Independent Directors though may have relationship or friendship with the promoters and have no relationship with the shareholders, when a question of morality comes, its moral relationship which is of importance and not physical relationship.

9) THE SAINTLY OR THE WICKED

Both, Bhishma and Jatayu had a few moments to decide what to do. Life sometimes puts in situations where in a few moments we need to take crucial decisions. What we decide very much depends on the kind of inner integrity we have cultivated by the association we keep. Bhishma’s intelligence was clouded and it failed the test of life because he was associated with the wicked minded, selfish Kauravas whereas Jatayu’s intelligence was crystal clear and it passed the test of life because he associated with the saintly, selfless Lakshman and “Maryada Purushottam” Lord Ram. “After all, who we are solely depends on whom we associate with.”. Whenever as an Independent Director a crucial decision is to

be taken, he has to think and act with heart and conscience i.e. ‘antaratma’.

10) EMBRACE OR NEGLECT

The Supreme Lord as Sri Krishna was not at all happy with this attitude of Bhishma so much so that when he came as a peace messenger to Hastinapur, he didn’t even bother to look at Bhishma, what to speak of respecting him. Whereas the Supreme Lord Sri Rama was so happy with the attitude of Jatayu that he embraced him and personally did his final rites - a honour that even king Dasharath - his father didn’t receive. “The scriptures explain that the ultimate test of any activity is, if the Supreme Lord is pleased with us.”. While lying on the ‘ampassayya’ (the bed of arrows), Bhishma asked Lord Sri Krishna that throughout his life he never committed any sin and why he was to suffer towards the end of his life. Lord Sri Krishna replied that the only sin he committed was “ignoring the pleadings of a hapless woman”.

CONCLUSIONThis recount shows us the way we have to conduct ourselves. It is not meant to criticize Bhishma - he was undoubtedly a great personality in Mahabharata, but history also vehemently criticises his inaction. From this episode we can learn a great lesson that one wrong decision of ours may ruin our life. Hence while taking decisions which impact the lives of many and who have trusted us, we should act with clear conscience, integrity and morality. Our ‘antaratma’ always tells us what is right and what is wrong. We only have to listen and act according to its advice. When we see some injustice or some problem, and take a decision, we have only two options - either close our eyes to it or do something about it - follow “the Bhishma way” or “the Jatayu way” and whichever way we choose remember there will also be a result - “the Bhishma result” or “the Jatayu result”. CS



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Uniform Face Value for Listed Equity Shares – Need of the Hour

Janak M. Shah Former Professor Department of Accounting & Financial ManagementThe Maharaja Sayajirao University of [email protected]

The Indian equity market is flooded with 5000+ listed companies, each having its own freedom in deciding the Face Value of its equity shares. As a result, in most industries, there are number of companies having different Face Values of their equity shares. Such a high degree of heterogeneity in Face Value does not allow investors, a true and fair inter-company comparison by using some of the basic market and financial statistics. Investors expect the market to provide at least basic comfort level in making meaningful comparisons and facilitating thereby in taking right ‘buy-hold-sell’ decisions. This calls for adopting a uniform Face Value for all listed companies.

INTRODUCTION

A ‘share’ means a part in the share capital of a company. It is one of the equal parts into which each class of the share

capital of a company is divided. (Eric Kohler) It includes both equity and preference shares with all their variants, if any. The fixed assigned value of each such equal part is known as the Face Value (FV) of the share. It is also sometimes called the Nominal Value or the Par Value. The focus of this article is on the FV of listed equity shares only.

Initially at the time of incorporation, as per Section 4 of The Companies Act, 2013 (here onwards, the Act), a company not only decides the amount of share capital with which it wants to be registered, but it also decides about the division of the share capital into number of shares by fixing the FV of its shares. This freedom in deciding the FV continues even after the incorporation. S.61 of the Act, inter alia, empowers a company to alter the number of shares by increasing or decreasing the FV. For listed companies also, this freedom in deciding or changing the FV of equity shares is available to companies subject to SEBI (ICDR) Regulations, 2018. Is this freedom, in deciding or changing the FV of equity shares of a listed company, in the interests of investors?

This article is an attempt:

i. to study the impact of different FVs of equity shares on some key market and financial statistics which are commonly used by investors;

ii. to examine whether these key market and financial statistics derived on the basis of different FVs are really comparable within the same industry; and,

iii. to suggest changes in the larger interests of investors. FV is an important base number in determining the following key market and financial statistics of listed companies: 1. Market Price (MP),2. Volume traded (Qty.)3. Book Value Per Share (BV),4. Earnings Per Share (EPS), and5. Dividend Per Share (DPS).

ANALYSISBefore analysing the data of some currently listed companies for comparison, it will be useful to first take four imaginary listed companies with different FVs to study the impact and examine the comparability of the above 5 market and financial statistics.

It is assumed that A, B, C, and D are four listed companies having four different FVs of their fully paid equity shares and are engaged in the same line of business with more or less on the same scale. 1. Market Price (MP)

Market price of an equity share is the outcome of the constant interplay of demand and supply forces in the market. While, these forces are influenced by so many factors including fundamental and technical, the FV is an important initial basis in determining the MP of shares in the market. The Table-1, with two parts, a) and b), highlights the MP comparison, both under different FV and under uniform FV (i.e. different FVs restated for fair comparison).

Comments:a) Inferences about the 4 companies merely based on same

MP of Rs.100 can be misleading, thanks to different FVs.


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LEIf their MPs are adjusted to a uniform FV base of Rs.10, then contrast is quite clear. For example, A’s MP is 10 times the MP of D, 5 times the MP of C, and 2 times the MP of B.

b) All 4 companies showing different MP is also an illusion, thanks to different FVs. If their MPs are adjusted to a uniform FV base of Rs.10, then it is clear that all 4 companies have the SAME MP of Rs.100.

2. Volume / traded (Qty.)

Volume, in general, refers to the number of shares transacted/changing hands per day in a listed security. Pulse of the price movements can be better understood, if daily volume of traded shares – the indicator of momentum or force – is also kept in mind simultaneously. Other things remaining same, FV influences the total number of shares available in the market for trading, and therefore, it puts an upper limit on the volume of trading possible on any day in the market. Look at Table-2 a) and b) highlighting the Volume traded comparisons under different FVs and harmonised FVs:

Comments:a) Inferences about the Volume of shares traded in this case

can be misleading, thanks to different FVs. If their Volumes traded are restated on a uniform FV base of Rs.10, value of traded shares respectively remaining same, then contrast is quite clear. For example, D’s Volume traded is 10 times the Volume traded of A, 5 times the Volume traded of B, and 2 times the Volume traded of C.

b) All 4 companies showing different Volume of shares traded do not mean that their data is comparable. As FVs are different, data is not comparable. If their Volumes traded are adjusted to a uniform FV base of Rs.10, value of their traded shares respectively remaining same, then we notice that all 4 companies have the same Volume traded of 10 lakh shares.

3. Book Value Per Share (BV)

Book Value per share, though an accounting measure, is a popular market tool, used with an appropriate multiplier, to get a handle on the fair value of an equity share. It is the net worth of a company (i.e. Paid-up Equity Capital + Net Reserves & Surplus) divided by the number of equity shares outstanding. FV influences the size of the denominator of this ratio, and hence, it influences the BV. Look at Table-3 a) and b) highlighting the BV comparisons under different FVs and standardised FVs:

Comments:

a) All 4 companies showing apparently the same BV of Rs.20 is illusionary, thanks to different FVs. If their BVs are adjusted to a uniform FV base of Rs.10, then real comparable picture emerges. For example, A’s BV is 10 times the BV of D, 5 times the BV of C, and 2 times the BV of B.

b) All 4 companies showing different BV is again not a comparable picture, thanks to different FVs. If their BVs are adjusted to a uniform FV base of Rs.10, then it is pretty clear that all 4 companies have the same comparable BV of Rs.100.

4. Earnings Per Share (EPS)

Basic EPS, though a measure of accounting earnings as against economic earnings, is one of the most widely used statistics in the market by investors and also by other stakeholders across the spectrum. It is “calculated by dividing profit or loss attributable to ordinary equity holders of the parent entity (the numerator) by the weighted average number of ordinary shares outstanding (the denominator) during the period” (Ind AS 33). FV influences the denominator of this ratio, and hence, it influences the EPS. Look at Table-4 a) and b) highlighting the EPS comparisons under different FVs and uniform FVs:

Comments:

a) All 4 companies have same EPS of Rs.5 is a wrong inference, as FVs of all companies are different. If their EPSs are attuned to a uniform FV base of Rs.10, then quite a different picture emerges. For example, A’s EPS is 10 times the EPS of D, 5 times the EPS of C, and 2 times the EPS of B.

b) All 4 companies showing different EPS cannot neutralise the impact of different FVs. If their EPSs are revised on the basis of a uniform FV of Rs.10, then it is clear that all 4 companies have the same EPS of Rs.5.

5. Dividend Per Share (DPS)

DPS is simply a per share payment made to equity shareholders (once or more in a year) out of the profits belonging to equity shareholders. It is usually a portion of the EPS which is distributed to shareholders as dividend. Put differently, DPS = EPS × Dividend Payout Ratio. FV influences EPS number, and EPS can influence the DPS number. Look at Table- 5 a) and b) highlighting the DPS comparisons under different FVs and uniform FVs:



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a) All 4 companies have same DPS of Rs.2 is a deceitful comparison, in view of the fact that FVs of all companies are different. If their DPS numbers are aligned to a uniform FV base of Rs.10, then quite a different picture emerges. For example, A’s DPS is 10 times the DPS of D, 5 times the DPS of C, and 2 times the DPS of B.

b) All 4 companies showing different DPS cannot eliminate the impact of different FVs. If their DPSs are reworked on the basis of a uniform FV of Rs.10, then it is clear that all 4 companies have the same DPS of Rs.10.

In the next two tables, the inter-company comparisons of some leading listed companies from two industries, Banking and IT have been made to find out whether their market and financial statistics, as enumerated above, are truly comparable or not.

Comments:

Comparing statistics of HDFC Bank with Kotak Bank under different FV (upper part of the table) may lead investors to infer that:

1. MP of HDFC Bank share is 26% cheaper than that of Kotak Bank, but in reality (under the lower part of the table) it is clear that on restated basis (uniform FV Re.1), the MP of HDFC Bank share is not cheaper but 268% more costly than Kotak Bank.

2. Volume traded in HDFC Bank on NSE on 15-04-2020 is 3.2 times the volume traded in Kotak Bank on that day. But, if the lower part is compared, the Volume traded in HDFC Bank, on restated basis, is only .64 times the volume traded in Kotak Bank. It may be noted that Value traded (in Rs.) will not be affected by the FV changes.

3. BV of HDFC Bank, is around 6.91% lower than that of Kotak Bank, but the same, when made comparable with uniform FV in the lower part, it is noticed that the restated BV of HDFC Bank is not less, but in fact more by a whopping 365% than that of Kotak Bank. What a topsy-turvy turn!

4. Per share profitability, i.e. EPS, of both the banks is almost the same. But, from a look at the lower part of the table, it can be noticed that the comparable restated EPS of HDFC Bank is 5.25 times the comparable restated EPS of Kotak M. Bank.

5. DPS of HDFC Bank is 9.38 times the DPS of Kotak Bank as per the upper part, but, as per fair comparison in the

lower part of the table, DPS of HDFC Bank is a whopping 46.88 times the DPS of Kotak Bank!

Similar comparisons can be made between HDFC Bank and ICICI Bank, or ICICI Bank and Kotak Bank, wherein the magnitude of change will vary, but, the broader message would remain the same i.e. comparison is inequitable or unfair between any two companies in an industry, if the base i.e. FV is different. To facilitate comparison, there is need for a common base. Different FVs distort the intrinsic power of comparability of the above statistics.

Now, consider comparison between two frontline leaders of the IT industry, TCS and Infosys in the following Table - 7:

Comments: Comparing statistics of TCS with Infosys under diff. FV and uniform FV reveal the following:

1. Unfair Comparison: MP of TCS > MP of Infosys by Rs.1096.10 i.e. 171.52% higher.

Fair Comparison: MP of TCS > MP of Infosys by Rs.1607.34 i.e. 1257.60% higher.

2. Unfair Comparison: Vol. of TCS < Vol. of Infosys by 72.02 lakh i.e. 60.20% lower.

Fair Comparison: Vol. of TCS < Vol. of Infosys by 550.56 lakh i.e. 92.04% lower.

3. Unfair Comparison: BV of TCS > BV of Infosys by Rs.87.04 i.e. 57.06% higher.

Fair Comparison: BV of TCS > BV of Infosys by Rs.209.07 i.e. 685.25% higher.

4. Unfair Comparison: EPS of TCS > EPS of Infosys by Rs.48.00 i.e. 125.03% higher.

Fair Comparison: EPS of TCS > EPS of Infosys by Rs.78.71 i.e. 1024.87% higher.

5. Unfair Comparison: DPS of TCS > DPS of Infosys by Rs.8.50 i.e. 39.53% higher.

Fair Comparison: DPS of TCS > DPS of Infosys by Rs.25.70 i.e. 597.67% higher.

Once again, our broader conclusion remains the same i.e. comparison is inequitable or unfair between any two companies in an industry if the base i.e. FV is different. To



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facilitate comparison, there is need for a common base. Different FVs distort the intrinsic power of comparability of the above statistics.Now, let us take the broader market picture of FV variations in SENSEX, Nifty 50, and all NSE listed equity shares:

The Table -8 above clearly indicates the following :

1. There is no uniformity in the FV of Sensex, Nifty 50, and all NSE listed shares.

2. No share, in any group, has FV of Rs. 9 or above Rs.10. (Note: The data does not include BSE listed equity shares, and there can be some more variations in FVs, if BSE data is included.)

3. Sensex and Nifty 50 shares have, more or less, even distribution in terms of FV of Re.1, Rs.2, Rs.5, and Rs.10.

4. At NSE, 57.19% of all listed equity shares (931/1628) have FV of Rs.10, 17.94% have FV of Rs.2 (292/1628), 15.85% have FV of Re.1 (258/1628), 8.35% have FV of Rs.5 (136/1628), and only 0.67% have FV of Rs.3/4/6/7/8 (11/1628).

The message is loud and clear. Such a high degree of heterogeneity in Face Value does not allow investors to make a true and fair inter-company comparison by using some of the basic market and financial statistics. Investors expect the market to provide at least basic comfort level in making meaningful comparisons and facilitating thereby in taking right ‘buy-hold-sell’ decisions. It is true that some other important market and financial statistics like RONW, P/E multiple, P/BV

ratio, Beta, and CAGR are not affected by FV changes, but, those are not simple statistics or ratios for common investors to understand and use. It will be important here to note, how this issue of uniform FV was handled in the past by the market regulators. A compiled summary is in order in Table - 9:

CONCLUSION & SUGGESTION Equity markets, both primary and secondary, have been playing a very crucial role in the development of India’s economy, particularly after the economic liberalization of 1990s. The size of our population necessitates faster economic development on a sustainable basis for decades to uplift the standards of living of the people. For this to be possible, equity markets should remain attractive in the eyes of investors, notwithstanding the periodic ups and downs in the market. To make equity market more inclusive, fairer, and more attractive for small investors in particular, who are large in numbers, it is necessary to tilt some rules of the game in favour of the investors. One such rule that needs to change is the freedom given to companies to opt for any Face Value on their equity shares, albeit in multiple of Re.1. The analysis given above merits prompt action by concerned authorities and, therefore, it is hereby suggested that enabling changes in the Companies Act, 2013 and the SEBI Regulations be carried out at the earliest for ensuring uniform FV of either Re.1 or Rs.10 for all listed companies, and thereby end this lingering market distortion arising from lack of uniformity forever. CS

REFERENCES:1. Kohler Eric L. (1979). A Dictionary for Accountants, Prentice-

Hall of India Private Limited, New Delhi, 5th Edition, p. 424.2. http://ebook.mca.gov.in/default.aspx (The Companies Act, 2013)3. www.sebi.gov.in 4. https://resource.cdn.icai.org/23717IndAS-33.pdf5. http://www.sebi.gov.in/commreport/smacrep.html6. www.business-standard.com/article/markets/a-uniform-face-

value-needed-109060800098_1.html



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Anomalies in PIT Regulations intentional or un-intentional!

Makarand Joshi, FCS Practising Company Secretary Mumbai [email protected]

Study of Interpretation of statues tells us that unless literal rule is leading to some absurdity, that is the only rule which should be applied while interpreting any provisions. Judiciaries also do not apply any other interpretation principle unless it is really necessary. However, while interpreting provisions of SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations), from time and again purposive interpretation plays bigger role than literal rule. Further, some provisions of PIT Regulations appear to have been left open intentionally; whereas at some occasions, more specific words could have served the cause better.

INTRODUCTION

Objective of SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) has been clearly to protect

investors interest. PIT Regulations attempts to avoid impact on price discovery mechanism and to maintain equality of access to price sensitive information. For this, it is necessary to ensure that no insider takes leeway under provisions of PIT Regulations itself. Therefore, PIT Regulations are more principle based and less rule based. Industry and market players expect that some transactions should be excluded from gamut of PIT Regulations. However, PIT Regulations appear to have been worded in such a way that, SEBI should be able to do very effective enforcement. At many places, we find open-ended words in PIT Regulations. Many may be intentional however some provisions may need correction. We are discussing some anomalies in PIT Regulations - some anomalies appear intentional where some anomalies appear to be not meeting the objective.

Whether gift of securities are regulated under PIT Regulations?

Sodhi Committee1 says in order to charge someone with violation of PIT Regulations consideration is necessary in trade transaction; however, there is no specific mention about necessity of consideration in PIT Regulations. Literal reading of definition of term ‘trading’ tells us that, it is an

inclusive definition and it also covers word ‘dealing’ which is much wider and there may be consideration or there may not be consideration involved in the transaction2. That means if an Insider gifts some securities to his near one while the window is closed or while in possession of Unpublished Price Sensitive Information (UPSI), will it amount to trade and thereby will amount to violation of regulation 4(1) of PIT Regulations?

However, even if donor or donee has some UPSI, a gift by insider (donor) to his relative (donee) will not impact price discovery and thereby apparently it may not impact public investor. Sodhi Committee’s view was in line with these thoughts. This thought is substantiated when we read SEBI Adjudication order in the matter of Kavveri Telecom Infrastructure Ltd3, where there was a transfer of shares by way of gift from husband to wife during the period when they were in possession of UPSI. SEBI had held that these transfers cannot be termed as ‘trading’ as they are off-market transfers for no consideration and, therefore, do not fall under the category of ‘buy or sell transaction’. Transferee had subsequently sold/ pledged the shares. It was also held that the allegation of entering into opposite transactions within a duration of six months, has not been established.

The question which arises is, if gift is to be excluded from the term trade, why that has not been specifically mentioned in definition of ‘trading’? Further, there are 6 transactions mentioned under proviso to regulation 4(1) which are categorically worded as ‘defence’ and not as ‘exemption’. Gift does not form part of these defences either!!! Close reading of the provisions of PIT Regulations and above-mentioned SEBI Adjudication Order, it appears that SEBI has not given blanket exemption to gift from the term ‘Trading’ because otherwise this may be misused by some insiders. Eg: When trading window is closed for Designated Persons, he may gift it to a person who is not falling under immediate relative category and that person may sell shares further! This will be clear circumvention of PIT Regulations and therefore, gift is not excluded from the term ‘Trading’.

It appears that whether ‘consideration’ is necessary for term ‘trading’ or not is not clarified so that no insider misuse it!

1Para 35 which says “Trading” in the ordinary English meaning of the term would entail an act of getting something in return for something else i.e. entailing an element of consideration changing hands and Para 38 which says, “when one trades securities or interest in securities for something else, one would be trading in the security for consideration.”

2“Trading” is defined in Regulation 2(1)(l) as “trading” means and includes subscribing, buying, selling, dealing, or agreeing to subscribe, buy, sell, deal in any securities, and “trade” shall be construed accordingly3SEBI Adjudication Order No. KS/VC/2020-21/ 8459-8463 dated 31 July 2020 in the matter of Kavveri Telecom Infrastructure Ltd


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In SEBI (Prohibition of Insider Trading) Regulations,1992, promoters and promoter group entities were required to give disclosures about high value trades under erstwhile regulation 13. When these regulations got replaced with PIT Regulations 2015, promoter group was not specifically covered under regulation 6 and 7 of PIT Regulations. In fact trades of immediate relatives were required to be disclosed but the term ‘promoter group’ was not specifically covered under regulation 6 or under regulation 7. As a result of this, entities falling under promoter group definition, other than immediate relatives, were not making disclosure under regulation 7. For example group companies of promoter Companies, were neither promoters nor immediate relatives, neither directors nor KMPs, and therefore were not required to make disclosure with respect to high value trades under PIT Regulations! This got corrected on 21 January 2019 when regulation 7(1) and 7(2) both got amended and the term ‘members of promoter group’ was added in both the provisions, thereby making mandatory upon promoter group entities to make initial disclosure and continual disclosures!

Interestingly the term ‘designated person’ is explained under regulation 9(4) of PIT Regulations. Like other terms, SEBI has used two fold definition here, i.e. (1) it explains the concept as to who should fall under the term ‘designated persons’, i.e., who in opinion of the board of directors are discharging some function or role in the organisation which gives them access to UPSI, and (2) some category of individuals or entities who have to be covered under Designated Persons list (deeming fiction). The term ‘promoter’ is specifically covered under this list of deeming fiction, however ‘promoter group’ has not be covered. As a result of this, the board of directors has to mandatorily cover promoters in Designated Persons list, however promoter group entities could be covered under Designated Persons list only if they have any role or function in the organisation which gives them access to UPSI and not otherwise!!!

When PIT Regulations were amended on 21 January 2019, the term ‘promoter group’ was inserted under regulation 7(1) and 7(2), why it was not inserted under regulation 9(4) which was already notified at that time, though regulation 9(4) had not yet become effective then (it became effective from 1 April 2019)? Was it an omission or thoughtful decision? SEBI Agenda notes and Minutes for its meeting dated 12 December 2018 when it considered the said amendment is not giving us clue (it is silent). But it appears to be thoughtful as not every promoter group entity may have any function or role in the organisation which gives them access to UPSI, therefore the term ‘Promoter Group’ was not added in regulation 9(4).

Difference between regulation 7 and regulation 9(4) is that while disclosure requirement under regulation 7 is on promoter/ promoter group, whereas the responsibility to identify list of Designated Persons and collating relevant data from them is on the Company. Incidentally when SEBI decided to take the System Driven Disclosure under same regulations 7(2) to next level (vide its circular date 9 September 2020), it mandated all the listed companies to

provide details of Promoter Group entities with Designated Depositories!!! Now, updating list of promote group entities along with list of Designate Persons is on the Company. As a result of that, whether SEBI expects companies to cover all promoter group entities under list of Designated Persons or not is an ambiguity!

Whether transactions related to pledge of securities needs to be disclosed under regulation 7(2)?

Sodhi Committee had strongly recommended in 2015 that transactions like pledge should not be regulated under PIT Regulations. Sodhi Committee had acknowledged that there are chances that if pledge is excluded from the gamut of PIT Regulations it can be mis-used. However, it had suggested that it can be dealt with separately under Section 12A of SEBI Act, 1992. SEBI felt it appropriate to retain pledge as one mode of dealing and therefore should be considered as trading and thereby needs to be regulated under PIT Regulations. All across PIT regulations, the words ‘trade’, ‘trading’ have been used while regulation 7 (2) uses the word ‘acquisition and disposal’ and not ‘trading’!! And therefore question arises as to whether details of pledge are required to be disclosed under regulation 7(2) or not!

Supreme Court had held in Oriental Insurance case4 that if different words of different import are used in the same statute, there is a presumption that they are not used in the same sense. And therefore there is a view that only acquisition or disposal of securities would require disclosure under regulation 7(2) and other transactions which are not falling under acquisition or disposal but covered under trading eg. pledge, does not require disclosure under regulation 7(2).

In Tata Chemicals case5, the Supreme Court had held that it is cardinal principle of interpretation of Statutes that the words of a Statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning unless such construction leads to some absurdity or unless there is something in the context or in the object of the Statute to the contrary.

One cannot go to find the purpose of the law unless the literal rule is leading to absurdity. Pledge falls under agreeing to sale

4 Oriental Insurance Co Ltd v/s Hansraibhai V Kodala [2000] 105 Comp Cas 743 (SC)5Union of India v/s Tata Chemicals Ltd 2014(5) ABR698 (SC)



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but it is not actual sale. Therefore, it appears that transaction of pledge do not require disclosure under regulation 7(2). Whether, SEBI really wants to exclude pledge from this disclosure requirements is unknown, however if SEBI intends otherwise, this is one area which may require immediate correction.

Recently in case of Ms. Vandana Singh, a designated person in Biocon Limited6, SEBI clearly decided that invocation of pledge by lender will amount to trade and therefore will require pre clearance! There have been some instances where financing schemes are made available with respect to ESOP shares. If pledge is exempt from disclosure requirements, many times there can be an attempt to circumvent PIT Regulations.

In majority occasions, language of PIT Regulations have been kept open ended, so that wrong doer should not escape compliance of PIT Regulations, however this is the occasion where not using of word ‘trade or trading’ does not seem to meet the objective!

Why ‘relative’ definition under 1992 Regulations have been narrowed down to ‘Immediate Relative’ definition under PIT Regulations 2015?

If we look at legislative note below regulation 6 (2)7, it specifically casts responsibility on the person making disclosure under Chapter III of PIT Regulations, 2015 to include trading done by such person’s immediate relatives, and every other person for whom such person takes trading decisions!

Disclosure obligations under Chapter III is on promoter, promoter group, designated persons, directors, and while calculating thresholds for making disclosures, they have to take cognizance about the trades done by their immediate relatives and every person for whom these persons take trading decisions and accordingly make disclosures. This is a very important principle and which is very logical.

When we look at definition of immediate relative under regulation 2(1)(f) of PIT Regulations 2015, “immediate relative” means a spouse of a person, and includes parent, sibling, and child of such person or of the spouse, any of whom is either dependent financially on such person, or consults such person in taking decisions relating to trading in securities.” This definition says spouse of person is considered as immediate relative without applying any other principle. Further it includes parent, sibling, and child of such person or of the spouse if, such relative consults such person in taking decisions relating to trading in securities. If such relative is dependent financially on such person, it would be presumed that such relative is consulting or can be influenced by such person. Even from this principle it appears that relatives who depend on such person for taking trading decisions only needs to be covered under immediate relative category. And provisions of regulation 6(2) are going beyond immediate relative. If this is the principle, it is clueless as to why PIT Regulations have narrowed down the relative definition under Companies Act, 2013 to immediate relative? Whether these words serve the cause or actually hamper it! There have been instances where persons accused have argued on the definition of relative / immediate relative to say that from the context of Designated Person the person is not relative (although from the context of that person who is accused, Designated Person is relative!). Such arguments can be successful at appellate forum because regulations may seem to be supporting such arguments. Now it is interesting to note that immediate relative is an inclusive definition and therefore one may argue that the list of relatives is illustrative list and not exhaustive list, however it would be apt if SEBI considers changing the definition of immediate relative where first the principle is laid down and then definition may cover spouse as deemed immediate relative and other relatives if they meet either of two criteria’s i.e. (1) relative is dependent financially on the person OR (2) relative consults such person while making decisions about trading in securities!

Whether every sharing of UPSI require compliance of regulation 3(3)(ii) of PIT Regulations 2015?

Regulation 3 (1) casts responsibility on insiders not to share UPSI unless it is for legitimate purpose. Further regulation 3(3) starts with words – “Notwithstanding anything contained in this regulation” that means this is overriding provision over other regulations.

Further clause (ii) of Regulation 3(3) says- “(1) an unpublished price sensitive information may be communicated, provided,

One cannot go to find the purpose of the law unless the literal rule is leading to absurdity. Pledge falls under agreeing to sale but it is not actual sale. Therefore, it appears that transaction of pledge do not require disclosure under regulation 7(2). Whether, SEBI really wants to exclude pledge from this disclosure requirements is unknown, however if SEBI intends otherwise, this is one area which may require immediate correction.

6SEBI Adjudication Order No. AP/SK/2020-21/9436 dated 23 October 2020 in the matter of Biocon Ltd7Legislative note below Regulation 6(2) - “These regulations are primarily aimed at preventing abuse by trading when in possession of unpublished price sensitive information and therefore, what matters is whether the person who takes trading decisions is in possession of such information rather than whether the person who has title to the trades is in such possession”



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allowed access to or procured, in connection with a transaction that would not attract the obligation to make an open offer under the takeover regulations but (2) where the board of directors of the listed company is of informed opinion that sharing of such information is in the best interests of the company and (3) the information that constitute unpublished price sensitive information is disseminated to be made generally available at least two trading days prior to the proposed transaction being effected in such form as the board of directors may determine to be adequate and fair to cover all relevant and material facts.

This regulation 3(3)(i) specifically talks about sharing of UPSI with respect to transaction which entails / triggers open offer. However regulation 3(3)(ii) does not indicate which type of transactions are contemplated here. Plain reading appears that whenever company wants to share any UPSI for any transaction, it should be first approved by the board of directors of that listed company and second the UPSI shared in that transaction should be disclosed on stock exchange two trading days prior to giving effect to the said transaction. This would mean that, if any technological collaboration is being worked out, and for that purpose if Company shares any information which is not generally known and upon becoming public can impact price, such sharing of information requires approval of board of directors and that information also needs to be disseminated two trading days prior to entering into that technology collaboration agreement! Imagine a situation where every UPSI shared for legitimate purposes

if it is required to be disclosed on stock exchange, will it help business of that company? And then will it help the investors of that company? Will competitors not take advantage of this situation?

Upon reading para 47 of Sodhi Committee, it reveals that regulation 3(3) was proposed in the context of transaction where any acquirer or investor is undertaking any due diligence of the Company and based on due diligence findings, he is going to decide about investing in the Company! And therefore regulation 3(3) actually expects that when list company allows any due diligence to large investors, share same information with other investors as well! Neither this back ground nor reference of due diligence is appearing in regulation 3(3) of PIT Regulations. In an attempt to make provisions very wide, it has resulted into a situation where no one can comply with this in literal sense. If regulation 3(3) clarifies which transactions are contemplated under it, it will make job of compliance officer bit easy.

CONCLUSION

In last 7 months SEBI has passed more than 50 adjudication/ settlement orders. SEBI is right in its approach of not granting blanket exemptions from compliance with PIT Regulations so that no one mis-uses it. However at some places appropriate guidance or amendment may lead to appropriate practices which will help compliance officers and companies to meet the objective of investor protection. CS



The Institute organized the 21st National Conference of Practicing Company Secretaries at Inder Residency,

Udaipur during January 15-16, 2020 on the theme “Achieving Excellence through Digital Transformation”. For the first time, this Conference was organised by the Institute in hybrid mode, i.e., physical as well as virtual mode. The presence of more than 2500 delegates present both physically and virtually from different parts of the country, distinguished guests and invitees have made the Conference a grand success.

OPENING PLENARY

Shri Arjun Ram Meghwal, Hon’ble Union Minister of State in Ministry of Water Resources, River Development & Ganga Rejuvenation and Parliamentary Affairs, Government of India was the Chief Guest at the Opening Plenary. CS Manish Gupta, Council Member, ICSI & Chairman, 21st National Conference of PCS Organizing Sub-Committee delivered the welcome address. CS Deepak Kumar Khaitan, Council Member, ICSI & Chairman, PCS Committee, ICSI, introduced the Chief Guest.

CS Nagendra D. Rao, Vice President, ICSI introduced the theme of the Conference. He said that India is one of the fastest growing economies adopting digitization; and the country has unsurprisingly emerged as the upcoming leader in digital solutions. He emphasised upon the role of “Digital India Initiative” which was launched by the Hon’ble Prime Minister of India Shri Narendra Modi in the year 2015. He further stated that digital transformation enables the professionals to make qualitative contributions to the Corporates.

CS Ashish Garg, President, ICSI commenced his presidential address with verses from the Aryakya Kand of Valmiki Ramayana and expressed that the most important thing of the conference is that the profile of Practising Company Secretaries is dynamic and increasing day by day. Expressing pride, he added that the importance of the Conference can be understood from the fact that the first conference held 20 years ago was initiated under the aegis of National Conference of Practising Company Secretaries instead of the National Conference of Company Secretary in Practice even though the term PCS has no legal backing. The reason for the

same can be attributed to the dynamic role of PCS in the India Inc. which goes beyond the mandates of the law. He further shared that the Institute is continuously trying for Labour audit, GST audit and various audits under other statutes.

Shri Arjun Ram Meghwal while delivering his inaugural address appreciated the theme of the conference and linking it with ease of doing business expressed his views on artificial intelligence and robotics. He appreciated the efforts of the Institute in this pandemic situation towards the ‘new normal’. He further added that while the government is reiterating its commitment towards providing transparent, effective and accountable governance to the people of this country, ICSI embarks on its mission of developing high caliber professionals facilitating good governance by organizing such congregation.

The Online Certificate Course on Securities Laws, Guidance Note on Meetings of Board of Directors and Guidance Note on General Meetings were released at the session. A Memorandum of Understanding with IIM, Bodh Gaya under the ICSI Academic Connect initiative was also exchanged during the session.

CS Suresh Pandey, Chairman, NIRC & Programme Coordinator, ICSI proposed the vote of thanks and expressed his sincere thanks & gratitude to the Hon’ble Chief Guest for gracing the occasion and other dignitaries for their enthusiastic, energetic and inspiring words.

FIRST TECHNICAL SESSION: STRATEGIC OPTIONS IN THE NEW DECADEModerator: CS Devendra V Deshpande, Council Member, ICSI Panelists present in-person: CS Sandeep Madhusudan Nagarkar, Practising Company Secretary, Pune and CS Nitin Somani, Director & Founder, Sundae Capital Advisors Private Limited.Panelists connected virtually: CS (Dr.) Pundla Bhaskara Mohan, Former Member (Judicial), NCLT and CS Sathya Kumar, CEO and Founder, Tycoon+ Advisors.CS Sandeep Madhusudan Nagarkar deliberated on Labour Law reforms, stating that these laws mediates the relationship between workers, employing entities, trade unions and the government.

CS (Dr.) Pundla Bhaskara Mohan deliberated upon the role of Company Secretaries in commercial disputes. He stated that around 3 crore cases are pending in the courts out of which around 1 crore belong to commercial disputes. Most of the commercial disputes are referred to Arbitration and Conciliation. He further stated the Company Secretaries are fit for Commercial disputes cases given their knowledge of Commercial laws.

PROCEEDINGS OF THE 21ST NATIONAL CONFERENCE OF PRACTICING COMPANY SECRETARIES (JANUARY

15-16, 2021) HELD AT UDAIPURTHEME: ACHIEVING EXCELLENCE THROUGH DIGITAL TRANSFORMATION


CS Nitin Somani deliberated upon the opportunities of Company Secretaries under valuation. He stated about the two types of opportunities under valuation. First being Regulatory opportunity, which has been created by the valuation rules and second being circumstantial opportunity, under which along with the valuation of the client’s company, CS performs various other duties like representing client’s company in front of NCLT.

CS Sathya Kumar expressed his views on the Forensic audit stating that Company Secretaries should focus more in the field of forensic audit to curtail the frauds happening in India. CS being specialized in various laws can look into these frauds for greater diligence and control.

CS Devendra V. Deshpande and CS Praveen Soni, Council Members, ICSI along with the other dignitaries on the dais released the Online Certificate course on Forensic Audit.

SECOND TECHNICAL SESSION: CREATIVITY & INNOVATIONModerator: CS Praveen Soni, Council Member, ICSI Panellists present in-person: Mr. Abhishek Mishra, Manager, National Securities Depository Limited and CS (Dr.) Ahalada Rao V., Council Member, ICSI.Panellists connected virtually: CS Kiran Chitale and CS Sumit Pahwa, Co-Founder & CEO, Complinity Technologies.

The panelists shared their real life anecdotes and experiences witnessed in bringing about a dynamic change in the governance culture and the challenges faced by them during the course and the actions and initiatives undertaken.

CS Praveen Soni deliberated upon the topic of Artificial Intelligence (AI) with respect to Company Secretaries stating that AI reduces administrative work and provides support in diligence.

Mr. Abhishek Mishra discussing the topic of Innovation & Technology shared that NSDL has been able to win the trust of crores of investors and other intermediaries, thus standing true to its tag line −Technology, Trust and Reach. In the year 1996, process of dematerialization and also the e-Voting were introduced by NSDL, so as to assist the professionals in fulfilling their duties comfortably.

CS Kiran Chitale expressed his views on the topic of Artificial Intelligence (AI). He stated that AI can help in determining and searching anything with just a click of button.

CS (Dr.) Ahalada Rao V. deliberated upon the topic of virtual hearings stating that the virtual hearings save time and travelling cost of professionals. For young practicing Company Secretaries, virtual hearing is beneficial as they don’t have to directly meet with judges, they can calm themselves before any online hearing at their home or office.

CS Sumit Pahwa, shared his views regarding technology adoption. He stated that professionals have to adopt with the technology as everything is digital now-a-days. He further stated that Artificial Intelligence can be the game changer in everyone’s life.

ICSI Online Certificate Course on Commercial Contracts Management was released during the session.

INTERACTIVE SESSION WITH PRESIDENT AND CENTRAL COUNCIL MEMBERS

Day–1 of the 21st National Conference of Practicing Company Secretaries ended with an Interactive Session for the members. CS Ashish Garg, President, ICSI, CS Nagendra D. Rao, Vice President, ICSI, CS Ranjeet Pandey, CS Manish Gupta, CS Dr. Ahalada Rao V., CS B Narasimhan, CS Devendra V Deshpande, and CS Praveen Soni, Council Members, ICSI were present on the dais at the session in-person.

CS Ashish Garg, President, ICSI apprised all present about the initiatives, new chapters, new study centers and representations of the Institute and answered the queries from the members.

THIRD TECHNICAL SESSION: ENHANCING QUALITY AND GOVERNANCE

Moderator: CS B Narasimhan, Council Member, ICSI

Panellists present in-person: CS Deepak Sharma, Member, Auditing standard Board, ICSI and CS Ranjeet Pandey, Immediate Past President, ICSI.

Panellists connected virtually: CS (Dr.) Shyam Agrawal, Past President, ICSI and CS S Sudhakar, Vice President, Corporate Secretarial, Reliance Industries Limited.

CS S Sudhakar in his opening remarks deliberated upon how Secretarial Standards have enhanced Corporate Governance. The Malaysian Institute (MAICSA) has requested ICSI to allow them to adopt the Secretarial Standard issued by ICSI, India. He added that the Secretarial Standards take care of ambiguities in the law. Regulators and the stakeholders as well as NCLT have taken the Standards very seriously and have accorded them a lot of importance. Mr. Sudhakar emphasized upon the significance of applicability of Secretarial Standards on Private Companies and closely held Companies too.

CS Deepak Sharma spoke about the importance of harmonizing the processes and practices being adopted in audit practice by professional Company Secretaries. He explained about the principles being adopted in audit engagement process which includes Audit engagement, How to take it, How to draft the Audit engagement letter, How to negotiate and how to conduct Audit process. Detection of fraud and reporting thereof is important and with regard to it more cautious in digital world.

CS Ranjeet Pandey sharing his experience during his tenure as President, ICSI and as Member of the Disciplinary Committee felt that Peer Review mechanism and Orientation program for young members entering into practice are very important. He explained how Peer Review helps in maintaining and enhancing the level of excellence and quality of service apart from the performance of the members serving the industry.He spoke about the eCSIN and UDIN and other major initiatives taken by the Institute. He gave members a threefold advice of Knowledge, Processes, and Case laws in dealing with practical difficulties.

CS (Dr.) Shyam Agrawal deliberated on Code of Conduct and Governing Mantra – Speak the truth abide by the Law.


Sharing examples from ancient literature which can be guiding light for the professional in what needs to be done, he quoted scriptures like Sukrit Niti which says that without having the knowledge of substantive and procedure law if someone appears before the court of law, receives some remuneration, makes arguments and represents the client then that professional is liable to be punished.

Complimenting the theme of the session, as regards its fusion of Contemporary Governance as well as Ancient Governance, he gave six examples of the existence of high-end scientific developments in ancient India, i.e., Surrogacy (Birth of Balram), Stem Cell (Birth of Kauravs), Gene Transplantation (Head of an elephant on Lord Ganesh), Cell regeneration (Ten heads of Ravana), Brain Surgery (Harappan Civilization) and Genetic Engineering (Birth of Veerbhadra).

ICSI Online Certificate Course on PoSH (Prevention of Sexual Harassment) was launched during the session.

CS B Narasimhan summed up the discussions and proposed the Vote of Thanks.

FOURTH TECHNICAL SESSION: EMBRACING WINNING STRATEGIES

Moderator: CS Chetan Patel, Council Member, ICSI

Panellists present in-person: CS Ashok Mehta, Practicing Company Secretary, Indore, CA Sunil Nahta, Practising Chartered Accountant and CS Raveesh Bafna.

Panellists connected virtually: CS Manoj Gujaran, Company Secretary and Chief Compliance Officer, Poonawala Finance, CS Mahesh Athavale, Past President, ICSI and CS Vinod Kumar Kothari, Practicing Professional, Kolkata.

CS Ashok Mehta shared his experience on appearance before the tribunal. He spoke about the skills and strategies required to excel in the area of advocacy, representation and consulting services and how a professional can master the skills and art of advocacy to effectively present the case. He gave his advice on expectation of the clients and the tribunals from the Company Secretary members who represent the client before the tribunals.

CS Mahesh Athavale gave his initial remark on mega firms and multi-disciplinary partnership firms. He also shared his personal experiences highlighting the opportunities that mega firms offer with regard to leveraging upon man power, skill sets database and good infrastructure.

CS Vinod Kothari deliberated upon skills of advocacy, writing opinions and other aspects that professionals should keep in mind while writing legal opinion. He shared secret tools to become a successful corporate professional. He advised professionals on aspects of ethical conduct and ethics in court craft vis-à-vis skills.

CS Manoj Gujaran spoke on what professionals are required to do in order to manage their financial flows well and keep afloat in crisis. He stressed upon authenticity and focus on work. He further spoke on the kind of financial schemes available for Practising Company Secretaries and features that a PCS should look for while choosing a financial firm.

CS Raveesh Bafna opined that proper budgeting and monitoring were important in maintaining cash flows. CA Sunil Nahta gave practical insights for young professionals desirous of starting their own practice.

ICSI Online Certificate Course on Insolvency and Bankruptcy Code, 2016, a joint effort by ICSI and ICSI-IIP, was launched. This course is.

CS Chetan Patel, Council Member, ICSI summed up the discussions and proposed vote of thanks.

VALEDICTORY SESSION

CS Deepak Kumar Khaitan, Council Member, ICSI and Chairman, PCS Committee gave the welcome address.

CS Suresh Pandey, Chairman, NIRC of ICSI arranged for the launch of ICSI Online Certificate Course on Intellectual Property Rights.

CS Ashish Garg, President, ICSI during his Presidential Address appreciated the participation of members through physical as well as virtual mode just after a National Convention and after the pandemic situation of COVID-19. He said that members are the brand ambassadors of the CS profession and should think twice, thrice or hundred times when representing as a Company Secretary before the public. He complemented Chairman and the entire Managing Committee of Udaipur Chapter for making the event memorable and remarkable. He also congratulated CS Deepak Khaitan, Chairman, PCS Committee and CS Manish Gupta, Chairman, 21st National conference of PCS organizing Sub-Committee for the successful completion of the event.

CS Nagendra D Rao, Vice President, ICSI in his valedictory address said that with every passing year the Conference is witnessing wider attention and larger participation. It is the 21st PCS Conference of 21St century and 21st century is a digital era which requires us to adopt new technology to sustain in the corporate world. The intent of this was to demonstrate the ways in which the roles of professionals can be more automated in order to simplify, standardize and streamline various sets of activities that are performed by a professional. He acknowledged and praised CS Manish Gupta, Council Member, ICSI, CS Deepak Khaitan, Council Member, ICSI, CS Bharat Chaudhary, Chairman, Udaipur Chapter, CS Rahul Kumar Verma, Chairman, Bhilwara Chapter and team ICSI. He also proposed thanks to all members and participants.

CS Manish Gupta, Council Member, ICSI and Chairman, 21st National Conference of PCS Organising Sub-Committee proposed the vote of thanks for the grand success of the National PCS Conference.


ICSI SOCIAL CONNECT Together we can. Together we will.

The Institute of Company Secretaries of India (ICSI) has considered it to be their responsibility to undertake initiatives so as to benefit not just its own members but other stakeholders and the society at large. Over the years, various schemes have been initiated and collaborations been made by Members of ICSI using their good offices to get discounts for other members on either regional or pan India basis. We are pleased to inform you that all such schemes and initiatives have been brought under one umbrella of ICSI Social Connect and the same have been placed on the ICSI website. The ICSI Social Connect tab on the website attempts to provide an easy and single point access to information about several welfare schemes of the Institute and their various aspects including eligible beneficiaries, types of benefits, scheme details, etc. Continuing the trend of synergic advantage through collective bargaining, we would like to expand the benefit base for the members and students of the CS fraternity. Soliciting your wholehearted support in this endeavour of ours, we earnestly request our members pursuing business activities or providing professional services to realise the mutual benefit of this initiative and connect with us to not just expand their business base but simultaneously connect with this league of professionals. You may kindly share the details of such discounted deals/offers at [email protected] Please feel free to contact us for any other clarification and information. All the benefits and discounts under ICSI Social Connect are accessible at: https://www.icsi.edu/profile/social/ Medical Assistance Providers:

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LEGAL WORLD

2n MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD & ANR v. DATAR SWITCHGEAR LTD & ORS [SC]

n SKILLSTECH SERVICES PVT LTD v. REGISTRAR, NATIONAL COMPANY LAW TRIBUNAL & ANR [DEL]

n BHAVEN CONSTRUCTION v. EXE ENGINEER SARDAR SAROVAR NARMADA NIGAM LTD & ANR [SC]

n PADIA TIMBER CO. PVT. LTD v. THE BOARD OF TRUSTEES OF VISAKAPATINAM PORT TRUST. [SC]

n HARYANA SPACE APPLICATION CENTRE & ANR v. PAN INDIA CONSULTANTS PVT.LTD [SC]

n INTERDIGITAL TECHNOLOGY CORPORATION & ORS v. XIAOMI CORPORATION & ORS [DEL]

n THE STATE OF UTTARAKHAND v. SURESHWATI [SC]

n THUPILI RAVEENDRA BABU v. BAR COUNCIL OF INDIA & ORS [CCI]

n IREO GRACE REALTECH PVT. LTD. v. ABHISHEK KHANNA [SC]


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Landmark Judgement

LMJ 02:02:2021MAHARASHTRA STATE ELECTRICITY DISTRIBUTION CO. LTD & ANR v. DATAR SWITCHGEAR LTD & ORS [SC]

Criminal Appeal No.1979 of 2010 [@S.L.P. (Crl.) No. 7336 of 2007]

D.K. Jain & H.L. Dattu,JJ. [Decided on 08/10/2010]

Equivalent citations: (2010) 159 Comp Cas 545.

Offences & Prosecution under IPC & CRPC - offence committed by company- fabricating false evidence- company and chairman found guilty- whether proceeding against the chairman is tenable-Held, No. [ It has been held yes against the company]

Brief facts: In the arbitration proceedings, the Appellant Company filed certain fabricated false evidence, which has been disclosed in the award also. Therefore, a criminal complaint was filed against the Appellant Company and its chairman, which was taken cognizance by the Trial Court. The petition before the High Court to quash the proceedings was also dismissed. Hence the two accused i.e., appellant company and its chairman filed the present appeal before the Supreme Court.

Decision: Appeal partly allowed.

Reason: Thus, the question for consideration is whether or not in light of the allegations in the complaint against the appellants, the High Court was correct in law in declining to exercise its jurisdiction under Section 482 of the Code?

It is manifest that the allegation against the appellants herein is that appellant No.1 had, acting under the control and management of all the accused, including appellant No. 2 and in particular accused No. 6, superscribed an endorsement on Exhibit C-64 with an intention to support its case and tendered the same in the course of judicial proceedings before the Arbitral Tribunal, thereby committing offence of fabricating false evidence in terms of Section 192 and 199 read with Section 34 IPC.

A bare perusal of the complaint shows that the gravamen of the allegation is that a fabricated document containing the offending endorsement was tendered in evidence before the Arbitral Tribunal on behalf of MSEB by accused No. 6, who was in-charge of Shirpur section. It is evident from the afore-extracted paragraphs of the complaint that other accused have been named in the complaint because, according to the complainant, MSEB-accused No.1 was acting under their control and management. It bears repetition that the only averment made against appellant No. 2 is that appellant No.1, i.e., MSEB was acting under the control and management of appellant No. 2 along with other three accused. There is no denying the fact that appellant No. 2 happened to be the Chairman of MSEB at the relevant time, but it is a settled proposition of law that one cannot draw a presumption that a Chairman of a company is responsible for all acts committed by or on behalf of the Company. In the entire body of the complaint there is no allegation that appellant No. 2 had personally participated in the arbitration proceedings or was monitoring them in his capacity as the Chairman of MSEB and it was at his instance the subject interpolation was made in Exhibit C-64. At this stage, we may refer to the extract of a Board resolution, pressed into service by the respondents in support of their plea that appellant No. 2 was responsible for the conduct of business of appellant No. 1. The said resolution merely authorises the Chief-Engineer to file counter claim before the Arbitral Tribunal in proceedings between appellant No. 1 and respondent No. 1. It rather demonstrates that it was the Chief Engineer who was made responsible for looking after the interest of the appellant No. 1 in those proceedings.

In this regard, it would be useful to advert to the observations made by a three-judge bench of this Court in S.M.S. Pharmaceuticals Ltd v. Neeta Bhalla (2005) 127 Comp Cas 563 (SC) :-

“There is no universal rule that a director of a company is in charge of its everyday affairs. We have discussed about the position of a director in a company in order to illustrate the point that there is no magic as such in a particular word, be it director, manager, or secretary. It all depends upon the respective roles assigned to the officers in a company. A company may have managers or secretaries for different departments, which means, it may have more than one manager or secretary.”

It is trite law that wherever by a legal fiction the principle of vicarious liability is attracted and a person who is otherwise not personally involved in the commission of an offence is made liable for the same, it has to be specifically provided in the statute concerned. In our opinion, neither Section 192 IPC nor Section 199 IPC, incorporate the principle of vicarious liability, and therefore, it was incumbent on the complainant to specifically aver the role of each of the accused in the complaint.

Therefore, we are of the view that even the Board Resolution, adduced by the complainant, does not establish that appellant No.2 was involved in the alleged fabrication of false evidence or adducing the same in evidence before the arbitral tribunal. In the absence of any such specific averment demonstrating the role of appellant No.2 in the commission of the offence, we find it difficult to hold that the complaint, even assuming it to be correct in its entirety, discloses the commission of an offence by appellant No.2 under Sections 192 and 199 of IPC.


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However, in so far as the case of appellant No.1 company is concerned, bearing in mind the fact that Exhibit C-64 was submitted with the intention to support the averments in the written statement filed on their behalf, which could possibly influence the decision of the arbitral tribunal in relation to the conduct of the respondent No.1 while discharging their obligations under the contract between them and appellant No.1, we are unable to hold that prima facie, a case of offences under Sections 192 and 199 IPC is not made out against them. It is evident from the observations of the Tribunal quoted in para 9 (supra) that had the tribunal not doubted the veracity of the said document, it could have made a material difference to the result of the arbitral proceedings.

We shall now examine whether appellant No.2 could be made liable for the afore-mentioned offences by operation of Section 34 of IPC. It is trite that Section 34 IPC does not constitute a substantive offence, and is merely in the nature of a rule of evidence, and liability is fastened on a person who may have not been directly involved in the commission of the offence on the basis of a pre-arranged plan between that person and the persons who actually committed the offence.

It is manifest that common intention refers to a prior concert or meeting of minds, and though, it is not necessary that the existence of a distinct previous plan must be proved, as such common intention may develop at the spur of the moment, yet the meeting of minds must be prior to the commission of offence suggesting the existence of a pre-arranged plan. Therefore, in order to attract Section 34 of the IPC, the complaint must, prima facie, reflect a common prior concert or planning amongst all the accused.

In our opinion, in the present case, the complaint does not indicate the existence of any pre-arranged plan whereby appellant No.2 had, in collusion, with the other accused decided to fabricate the document in question and adduce it in evidence before the arbitral tribunal. There is not even a whisper in the complaint indicating any participation of appellant No.2 in the acts constituting the offence, and that being the case we are convinced that Section 34 IPC is not attracted in his case.

In the final analysis, we are of the opinion that no prima facie case has been made out against appellant No.2 in respect of offences under Sections 192 and 199 of the IPC, even with the aid of Section 34 of the IPC. Therefore, it was a fit case where the High Court should have exercised its powers under Section 482 of the Code by quashing the complaint against appellant No.2. For the afore going reasons, the appeal is dismissed qua appellant No.1; it is allowed in relation to appellant No.2.

LW 09: 02: 2021SKILLSTECH SERVICES PVT LTD v. REGISTRAR, NATIONAL COMPANY LAW TRIBUNAL & ANR [DEL]

W.P.(C) 474/2021 & CM APPL. 1227/2021

Prathiba M. Singh, J. [Decided on 13/01/2021]

Insolvency and Bankruptcy Act,2016- section 9- increase in the threshold limit to file complaint before NCLT- Registrar refusing to list the petition – whether tenable-Held, No.

Brief facts: The present petition has been filed by the Petitioner seeking listing of its petition, under Section 9 of the Insolvency and Bankruptcy Code, 2016, before the appropriate bench of the National Company Law Tribunal (hereinafter, “NCLT”).

The case of the Petitioner was that the Registrar of the NCLT has failed to even list the Petitioner’s matter before the appropriate bench of NCLT, on the ground that the threshold of the pecuniary jurisdiction of the NCLT has now been amended by a notification dated 24th November 2020, from Rs.1 lakh, to Rs.1 crore.

Decision: Allowed.

Reason:

Ld. Counsel the Petitioner, submits that the question as to whether the NCLT has the pecuniary jurisdiction or not, cannot be decided by the Registrar of the NCLT, but in fact the same ought to be looked into and determined by an appropriate bench of the NCLT, after appreciating the fact situation involved. Reliance is placed upon the view of the NCLT, Kochi in IA No. 175/KOB/2020 in IBA/34/KOB/2020 titled M/s Tharakan Web Innovations Pvt. Ltd. v. Cyriac Njavally, wherein the Tribunal has held that if disputes had arisen prior to the outbreak of the pandemic, the said notification may not apply, as the notification cannot be made applicable retrospectively. Ld. Counsel appearing for the Respondent submits that the said judgment of the NCLT, Kochi Bench has been stayed by the Kerala High Court.

This court is of the opinion that the question as to whether the NCLT has jurisdiction to entertain a particular case or not cannot be determined by the Registrar in the administrative capacity. The Registrar would have to place the matter before the appropriate bench of the NCLT, for the said question to be judicially determined. The appropriate bench of the NCLT would have to then, take a considered view as to whether notice is liable to be issued in the matter or not.

The question as to whether the notification dated 24th March 2020 applies to a particular petition that has been filed prior to the said notification or not is also a question to be determined by the Bench of the NCLT and not by the Registrar of the Tribunal.

Accordingly, it is directed that the petition under section 9 of the IBC, moved by the Petitioner before the NCLT, shall be placed by the Registrar, NCLT before an appropriate bench for proceeding further in accordance with law. The listing of the petition is directed to be done within a period of ten days from today. Advance intimation of listing of the said matter shall be given to the Petitioner’s counsel by the Registrar.


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General Laws

LW 10: 02: 2021BHAVEN CONSTRUCTION v. EXE ENGINEER SARDAR SAROVAR NARMADA NIGAM LTD & ANR [SC]

Civil Appeal No. 14665 of 2015

N.V. Ramana, Surya Kant & Hrishikesh Roy, JJ.[Decided on 06/01/2021]

Article 227 of the Constitution of India read with the Arbitration and conciliation Act,1996- arbitration proceedings- objection as to the jurisdiction of arbitrator was dismissed- proceedings continued and award passed- respondent filed writ petition to challenge the jurisdiction of the arbitrator- whether tenable-Held, No.

Brief facts: This Civil Appeal raises an important question of law concerning arbitration law in India and special enactments enacted by States concerning public works contract. Respondent No.1 entered into a contract with the Appellant to manufacture and supply bricks. The aforesaid contract had an arbitration clause. As some dispute arose regarding payment in furtherance of manufacturing and supplying of bricks, the Appellant issued a notice, seeking appointment of sole arbitrator in terms of the agreement. Respondent No.1 did not agree to the Appellant’s request. The Appellant appointed Respondent No.2 to act as a sole arbitrator for adjudication of the disputes. Respondent No.1 objected and disputed the jurisdiction of the sole arbitrator. The sole arbitrator held that he had jurisdiction to adjudicate the dispute. Respondent No. 1’s challenge in the High Court of Gujarat was dismissed by the Single Judge. On further appeal, the Division Bench allowed the appeal. Aggrieved, the Appellant filed this appeal by way of special leave petition.

Decision: Appeal allowed.

Reason: Having heard both parties and perusing the material available on record, the question which needs to be answered is whether the arbitral process could be interfered under Article 226/227 of the Constitution, and under what circumstance?

We may state that the Appellant acted in accordance with the procedure laid down under the agreement to unilaterally appoint a sole arbitrator, without Respondent No.1 mounting a judicial challenge at that stage. Respondent No.1 then appeared before the sole arbitrator and challenged the jurisdiction of the sole arbitrator, in terms of Section 16(2) of the Arbitration Act.

In the instant case, Respondent No.1 has not been able to show exceptional circumstance or ‘bad faith’ on the part of the Appellant, to invoke the remedy under Article 227 of the Constitution. No doubt the ambit of Article 227 is broad and pervasive, however, the High Court should not have used its inherent power to interject the arbitral process at this stage. It is brought to our notice that subsequent to the impugned order of the sole arbitrator, a final award was rendered by him on merits, which is challenged by the Respondent No.1 in a separate Section 34 application, which is pending.

The Division Bench further opined that the contract between the parties was in the nature of a works contract as it held that the manufacturing of bricks, as required under the contract, was only an ancillary obligation while the primary obligation on the Appellant was to supply the bricks. The Division Bench therefore held that the Gujarat Act holds the field, and not the Arbitration Act.

The Gujarat Act was enacted in 1992 with the object to provide for the constitution of a tribunal to arbitrate disputes particularly arising from works contract to which the State Government or a public undertaking is a party. A works contract is defined under Section 2(k) of the Gujarat Act. The definition includes within itself a contract for supply of goods relating to the execution of any of the works specified under the section. However, a plain reading of the contract between the parties indicates that it was for both manufacturing as well as supply of bricks. Importantly, a contract for manufacture simpliciter is not a works contract under the definition provided under Section 2(k). The pertinent question therefore is whether the present contract, which is composite in nature, falls within the ambit of a works contract under Section 2(k) of the Gujarat Act. This is a question that requires contractual interpretation, and is a matter of evidence, especially when both parties have taken contradictory stands regarding this issue. It is a settled law that the interpretation of contracts in such cases shall generally not be done in the writ jurisdiction. Further, the mere fact that the Gujarat Act might apply may not be sufficient for the writ courts to entertain the plea of Respondent No.1 to challenge the ruling of the arbitrator under Section 16 of the Arbitration Act.

In view of the above reasoning, we are of the considered opinion that the High Court erred in utilizing its discretionary power available under Articles 226 and 227 of the Constitution herein. Thus, the appeal is allowed, and the impugned Order of the High Court is set aside. There shall be no order as to costs. Before we part, we make it clear that Respondent No. 1 herein is at liberty to raise any legally permissible objections regarding the jurisdictional question in the pending Section 34 proceedings.

LW 11: 02: 2021PADIA TIMBER CO. PVT. LTD v. THE BOARD OF TRUSTEES OF VISAKAPATINAM PORT TRUST. [SC]

Civil Appeal No.7469 of 2008

Navin Sinha & Indira Banerjee, JJ. [Decided on 05/01/2021]

Indian Contract Act- section 7- acceptance of offer- offer and counteroffer between parties- no concluded contract – lower courts allowed the suit based on the contract- whether tenable- Held, No.


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Brief facts: The short question involved in this appeal is, whether the acceptance of a conditional offer with a further condition results in a concluded contract, irrespective of whether the offeror accepts the further condition proposed by the acceptor. This question does not appear to have been addressed by the High Court or the Court below.The Respondent-Port Trust floated a tender for supply of Wooden Sleepers. Pursuant to the aforesaid tender, the Appellant submitted its offer, with a specific condition of the offer of the Appellant that inspection of the Sleepers, as per the requirement of the Respondent-Port Trust, would have to be conducted only at the depot of the Appellant. The Appellant did not accept Clauses 15 and 16 of the Tender and rather made a counter proposal.After the tenders were opened certain discussions took place between the Appellant and the Tender Committee of the Respondent-Port Trust. The issue as to the place of inspection was not settled. Later, the Respondent Port Trust placed purchase order on the Appellant, but the place of inspection still remained a contentious issue as the appellant stuck to its stand. Respondent forfeited the earnest money deposit. Appellant did not supply any material.


Reason: With the greatest of respect, the High Court has cursorily dealt with the contentions of the Appellant and has not even discussed the cases that had been cited on behalf of the Appellant.The Trial Court relied on Section 4 of the Contract Act, but completely overlooked Section 7. The High Court also overlooked Section 7 of the Contract Act. Both the Trial Court and the High Court over-looked the main point that, in the response to the tender floated by the Respondent-Port Trust, the Appellant had submitted its offer conditionally subject to inspection being held at the Depot of the Appellant. This condition was not accepted by the Respondent-Port Trust unconditionally. The Respondent-Port Trust agreed to inspection at the Depot of the Appellant but imposed a further condition that the goods would be finally inspected at the showroom of the Respondent-Port Trust. This Condition was not accepted by the Appellant. It could not, therefore, be said that there was a concluded contract. There being no concluded contract, there could be no question of any breach on the part of the Appellant or of damages or any risk purchase at the cost of the Appellant. The earnest deposit of the Appellant is liable to be refunded.Since we hold that the Appellant was neither in breach nor liable to damages, it is not necessary for us to examine the questions of whether the compensation and/or damages claimed by the Respondent Port Trust was reasonable or excessive, whether claim for damages could only be maintained subject to proof of the actual damages suffered, and whether the Respondent Port Trust had taken steps to mitigate losses. We also need not embark upon the academic exercise of deciding whether prior approval of the Board of Trustees is a condition precedent for creation of a valid contract for supply of goods, or whether post facto ratification by the Board would suffice.

The Appellant was entitled to refund of earnest money deposited with the Respondent-Port Trust. The earnest money shall be refunded within four weeks with interest @ 6% per annum from the date of institution of suit till the date of refund thereof. The appeal is, accordingly, allowed.

LW 12: 02: 2021HARYANA SPACE APPLICATION CENTRE & ANR v. PAN INDIA CONSULTANTS PVT.LTD [SC]

Civil Appeal No. 131 of 2021[@ (SLP(C) No. 13503 of 2020]

L. Nageswara Rao, Indu Malhotra & Ajay Rastogi,JJ. [Decided on 20/01/2021]

Arbitration and Conciliation Act,1996- period to pronounce award- multiple extension of period to pronounce award- whether tenable- Held, Yes.

Brief facts: The Appellant No.1/HARSAC, invited Request for Proposal in September 2010 from qualified vendors for the modernisation of Land Record and awarded the contract to the Respondent and three other vendors for works specified in the allotment letter. In pursuance thereof, Service Level Agreements were executed between the parties.

Dispute arose between the parties and HARSAC invoked the arbitration clause contained in the Service Level Agreement. Parties appointed their respective arbitrators.

On 14.09.2016, the arbitral tribunal stood constituted. Despite many extensions the arbitral tribunal failed to pass the award. In 2020 the High court passed an order allowing extension for the arbitral tribunal to pass the award. Aggrieved by the said Order, HARSAC has filed the present Special Leave Petition.

Decision: Appeal disposed.

Reason: We find that even though a period of over 4 years has elapsed since the constitution of the tribunal on 14.09.2016, the Award has not been pronounced so far, even though the tribunal had on two occasions i.e., 03.08.2018 in its 28th sitting, and thereafter in the letter dated 08.02.2019 addressed by the arbitrators, recorded that the tribunal was ready to pronounce the Award forthwith.

We are of the view that the appointment of the Principal Secretary, Government of Haryana as the nominee arbitrator of HARSAC which is a Nodal Agency of the Government of Haryana, would be invalid under Section 12(5) of the Arbitration and Conciliation Act, 1996 read with the Seventh Schedule. Section 12(5) of the Arbitration Act, 1996 (as amended by the 2015 Amendment Act) provides that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties, or counsel, falls within any of the categories specified in the Seventh Schedule, shall be ineligible to be appointed as an arbitrator.

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on the Appellant Company being a nodal agency of the State. The Counsel for both parties during the course of hearing have consented to the substitution of the existing tribunal, by the appointment of a Sole Arbitrator to complete the arbitral proceedings.

In exercise of our power under Section 29A(6) of the Arbitration and Conciliation Act, 1996 (as amended), we hereby appoint Justice Kurian Joseph (Retd.), former judge of this Court, as the substitute arbitrator, who will conduct the proceedings in continuation from the stage arrived at and pass the Award within a period of 6 months from the date of receipt of this Order. The Arbitrator may direct the parties to address final arguments and take him through the entire record of the case.

LW 13: 02: 2021INTERDIGITAL TECHNOLOGY CORPORATION & ORS v. XIAOMI CORPORATION & ORS [DEL]

I.A. 6441/2020 in CS(COMM) 295/2020

C. Hari Shankar, J. [Decided on 16/12/2020]

Commercial Courts Act,2015 read with Delhi High Court Original Side Rules- commercial suit with respect to IPR infringement-evidence appreciation-Constitution of confidentiality club- plaintiff requesting for 2 tier club- defendant opposing the request- Court constitutes single tier club with directions.

Brief facts: Interdigital Technology Corporation has sued Xiaomi Corporation (hereinafter referred to as “Xiaomi”), alleging infringement, by Xiaomi, of Indian Patents. Plaintiff InterDigital sought, in its application, setting up of a “two-tier” Confidentiality Club, comprising an “outer tier” and an “inner tier”. The documents which would be open to the members of the “outer tier”, are denoted, in the application of InterDigital, as “Confidential Information”, whereas the documents, to which members of the “inner tier” alone would have access, had been denoted as “Legal Eyes Only (LEO) Confidential Information”. The difference between these two tiers, as visualised and suggested by InterDigital, was that the “outer tier” documents and material would be accessible to the advocates for both sides, experts appointed by them, as well as representatives of both parties, whereas the “inner tier” documents would be accessible only to the advocates for both sides (who would not be in-house counsel), and experts appointed by them. In other words, “inner tier” documents would not be accessible to representatives of the parties, other than “non-in-house” advocates and the experts appointed by them. More simply expressed, the parties, as well as their officials and employees, would have no access to the “inner tier” documents.

Defendant Xiomi objected to this.

Decision: Application disposed.

Reason: The prayer, of InterDigital, for setting up of a “two-tier” confidentiality club, with “inner tier” documents being shown

only to advocates (who are not in-house counsel) and external experts nominated by Xiaomi is, therefore, rejected. Instead, a single tier Confidentiality club is constituted, in the following terms:

(i) Each party shall nominate four advocates, six representatives and two experts, who would constitute the confidentiality club.

(ii) The members of the confidentiality club alone shall be entitled to inspect the confidential information. In the case of the advocates and experts, such inspection would be to the extent such inspection is required in order to perform their professional duties in relation to the present proceedings on behalf of the party by whom they are engaged.

(iii) The documents, regarded as “confidential information” would be filed in sealed cover, to be retained with the Registrar General of this Court under seal and in safe custody.

(iv) The members of the confidentiality club shall be entitled to inspect the confidential information before the learned Registrar General and, after the inspection is over, the documents and information shall be resealed and returned to the learned Registrar General. The members of the confidentiality club shall also be entitled to electronically transmit and receive copies of the confidential information so long as adequate safeguards are in place to ensure that such transmission shall only be available to members of the confidentiality club.

(v) The members of the confidentiality club shall be bound by confidentiality orders passed by this Court and will not be allowed to make copies, disclose, or publish the contents of the confidential information or documents anywhere else or to any individuals who are not privy to the confidential information, including in other legal proceedings or oral and written communications to the press, etc.

(vi) During the recording of evidence and other proceedings of this Court with respect to the confidential information, or when the confidential information is being looked at, only members of the confidentiality club shall be allowed to remain present. Such proceedings will be conducted in camera.

(vii) Any evidence, by way of affidavit or witness statement, containing confidential information shall also be kept in a sealed cover reflecting the confidential and designation, with the learned Registrar General, and would be accessible only to the members of the confidentiality club.

(viii) Neither party would be permitted to rely on any material which is not disclosed to the nominated representatives (as opposed to advocates and experts) of the opposite party. Should either party feel that any details, contained in any document, cannot be shown to the nominated representatives of the opposite party, it is at liberty to redact such details or particulars from the document(s)


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in question. Needless to say, the party that redacts any particular is, in any document or evidence, shall not be permitted to rely on such a redacted particulars. It shall, however, be open to the opposite party to plead that disclosure of such redacted material is necessary for its defence. In such a case, the court would decide, on a document-to-document basis, whether redacting of the “confidential” details, in the document, should, or should not, be allowed. This, in my view, is the maximum extent to which the plea, of InterDigital, for keeping away, from the representatives of Xiaomi, “confidential” details and documents, can be accommodated.

(ix) The confidential documents/information shall not be available for inspection after disposal of the matter, except to the parties producing the same.

This Court has constituted the aforesaid Confidentiality Club keeping in mind the objection, of Xiaomi, to a “two-tier” Confidentiality Club, as sought by InterDigital. Should, however, Xiaomi be agreeable to constitution of the Confidentiality Club in the manner suggested by InterDigital, this order would not stand in the way of any such agreement and, in such an event, the Confidentiality Club would be established in the manner agreed upon, between the parties. In such event, it would be open to either party to move this Court for appropriate orders.

It is clarified that all observations in this judgement are intended only for the purpose of disposing of the application, of InterDigital, for constitution of a Confidentiality Club. They should not be treated as an expression of opinion, even tentative, on the aspects discussed in this order, for any other purpose, and in respect of any other application or the main suit itself.

Labour Laws

LW 14: 02: 2021THE STATE OF UTTARAKHAND v. SURESHWATI [SC]

Civil Appeal No. 142 of 2021[@ SLP(C) No. 9864 of 2020)

L. Nageswara Rao, Navin Sinha & Indu Malhotra [Decided on 20/01/2021]

Employment law- respondent abandoned her job- after 9 years filed complaint that she had been dismissed- Labour Court dismissed the complaint – High Court reversed the judgement observing domestic enquiry was not conducted before dismissal- whether tenable- Held, No.

Brief facts: The State of Uttarakhand has filed the present Special Leave Petition to challenge the Judgment passed by the High Court of Uttarakhand , whereby the High Court has reversed the Award passed by the Labour Court and directed reinstatement of the Respondent. It was the case of the Appellants that the Respondent had abandoned her service as a clerk in the School since 1.7.1997 when she got married and shifted to Dehradun. On the contrary the case of the Respondent was that she was dismissed from services w.e.f 15.07.2006 when she filed her complaint before the Labour Court.


Reason: We have heard the learned Counsel for the parties and perused the record. We find that the High Court has set aside the Award passed by the Labour Court on the sole ground that no disciplinary enquiry was held by the School regarding her alleged abandonment of service.

This Court has in a catena of decisions held that where an employer has failed to make an enquiry before dismissal or discharge of a workman, it is open for him to justify the action before the Labour Court by leading evidence before it. The entire matter would be open before the tribunal, which would have the jurisdiction to satisfy itself on the evidence adduced by the parties whether the dismissal or discharge was justified.

We have perused the Award passed by the Labour Court and find that a full opportunity was given to the parties to lead evidence, both oral and documentary, to substantiate their respective case. The High Court has not even adverted to the said evidence and has disposed of the Writ Petition on the sole ground that the School had not conducted a disciplinary enquiry before discharging the respondent from service. The School has led sufficient evidence before the Labour Court to prove that the Respondent had abandoned her service from 01.07.1997 when she got married, and moved to another District, which was not denied by her in her evidence. The record of the School reveals that she was not in employment of the School since July 1997.

On the basis of the evidence led before the Labour Court, we hold that the School has established that the Respondent had abandoned her service in 1997 and had never reported back for work. The Respondent has failed to discharge the onus to prove that she had worked for 240 days’ in the preceding 12 months prior to her alleged termination on 8.3.2006. The onus was entirely upon the employee to prove that she had worked continuously for 240 days’ in the twelve months preceding the date of her alleged termination on 8.3.2006, which she failed to discharge. In view of the aforesaid discussion, we allow the present Appeal, and set aside the Judgment of the High Court. The Award is restored.


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Competition & Consumer Law

LW 15: 02: 2021THUPILI RAVEENDRA BABU v. BAR COUNCIL OF INDIA & ORS [CCI]

Case No. 50 of 2020

A.K.Gupta, Sangeeta Verma & B.S.Bishnoi.[Decided on 20/01/2021]

Section 4 of the Competition Act, 2002 read with the Advocates Act, 1961- Bar Council of India Rules- legal education-age restriction for pursuing legal education- whether BCI is an enterprise-Held, No. Whether the complaint is maintainable-Held, No.

Brief facts: The instant information was filed by the Informant alleging contravention of provisions of Section 4 of the Act by Bar Council of India and its office bearers, collectively referred to as ‘Opposite Parties’. The informant was 52 years old and could not pursue legal education post his retirement. As per the BCI Rules, candidates belonging to General category who have attained the age of more than 30 years, are barred from pursuing legal education. The allegations were based on this age restriction,

The BCI has allegedly imposed maximum age restrictions upon the new entrants to enter into the legal education and thus, created indirect barriers to the new entrants in the profession of legal service. The impugned Clause 28 [in he rules] has been incorporated by the BCI in contravention of Section 4 of the Act by ‘misusing its dominant position’. By having done so, the BCI has also allegedly indulged in colourable exercise of power.

The Informant has further alleged that the members of the BCI, by way of aforementioned Clause 28, conspired to reduce the competition to its electors and created indirect barriers in the profession of legal service. He has also alleged that the members of the BCI who are managing the affairs of the BCI are misusing the dominant position enjoyed by the BCI in controlling the legal education in India.

Decision: Dismissed.

Reason: The Commission has carefully perused the information, the documents filed by the Informant and the information available in public domain.

The Commission notes that the Informant has alleged contravention of the provisions of Section 4 of the Act, primarily, against the BCI. However, in order to appreciate the facts in the matter, it is imperative to examine the status of the BCI as an enterprise within the contours of the provisions of Section 2(h) of the Act before proceeding further with regard to the allegations raised in the information.

Thus, the primary question which falls for consideration is that whether BCI is an ‘enterprise’ within the meaning of Section 2(h) of the Act. The term ‘enterprise’ has been defined under Section 2(h) of the Act, inter alia, as a person or a department of the Government, engaged in any activity relating to provision of any kind of services.

In the present matter, the Commission notes that the BCI is a statutory body established under Section 4 of the Advocates Act, 1961. Section 7 of the said Act lays down the functions of the BCI which includes promotion of legal education in India and to lay down standards of such education in consultation with the Universities in India and the State Bar councils. Further, Section 49 of the Advocates Act, 1961 empowers the BCI to make rules for discharging its functions under the said Act such as prescribing qualifications and disqualifications for membership of a Bar Council, minimum qualifications required for admission to a course of degree in law in any recognised university, prescribing the standards of legal education for the universities in India, etc. Thus, it is noted that the BCI appears to carry out functions which are regulatory in nature in respect of the legal profession.

It is noted that that in Case No. 39 of 2014, In re: Dilip Modwil and Insurance Regulatory and Development Authority (IRDA), decided on 12.09.2014, the Commission had the occasion to examine the status of IRDAI as an ‘enterprise’ under the Act. The Commission had observed that any entity can qualify within the definition of the term ‘enterprise’ if it is engaged in any activity which is relatable to the economic and commercial activities specified therein. It was further observed that regulatory functions discharged by a body are not per se amenable to the jurisdiction of the Commission.

In the present matter, when the BCI appears to be discharging its regulatory functions, it cannot be said to be an ‘enterprise’ within the meaning of Section 2(h) of the Act and consequently, the allegations made in relation to discharge of such functions which appears to be non-economic in nature, may not merit an examination within the provisions of Section 4 of the Act.

In view of the foregoing, the Commission is of the opinion that there exists no prima facie case under the provisions of Section 4 of the Act and the information filed is directed to be closed forthwith against the Opposite Parties under Section 26(2) of the Act. Consequently, no case for grant for relief(s) as sought under Section 33 of the Act arises and the same is also rejected.


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LW 16: 02: 2021IREO GRACE REALTECH PVT. LTD. v. ABHISHEK KHANNA [SC]

Civil Appeal No. 5785 of 2019 with connected appeals

D.Y.Chandrachud, Indira Banerjee & Indu Malhotra, JJ.[Decided on 11/01/2021]

Consumer Protection Act,1986 read with RERA- housing project- delay in handing over flats by builder to the buyers- refund of money with interest allowed by National Commission- whether correct- Held, Yes.

Brief facts:

The present batch of Appeals had been filed by the Appellant-Developer, to challenge the judgment passed by the National Commission directing refund of the amounts deposited by the Apartment Buyers in the project ―The Corridors developed in Sector 67-A, Gurgaon, Haryana, on account of the inordinate delay in completing the construction and obtaining the Occupation Certificate. Aggrieved by the said Judgment, the Appellant-Developer has filed the present batch of Appeals. Since common issues have arisen for consideration, they are being decided by a common Judgment.

Decision: Appeals dismissed.

Reason: We have heard the learned Counsel for the parties. The issues which have arisen for consideration are :

(i) Determination of the date from which the 42 months period for handing over possession is to be calculated under Clause 13.3, whether it would be from the date of issuance of the Fire NOC as contended by the Developer; or, from the date of sanction of the Building Plans, as contended by the Apartment Buyers.

The first issue which has been raised by the Appellant - Developer as also the Apartment Buyers, is the relevant date from which the 42 months‘ period is to be calculated for handing over possession.

The point of controversy is whether the 42 months‘ period is to be calculated from the date when the Fire NOC was granted by the concerned authority, as contended by the Developer; or the date on which the Building Plans were approved, as contended by the Apartment Buyers.

The computation of the period for handing over possession would be computed from the date of issuance of fire NOC. The Commitment Period of 42 months plus the Grace Period of 6 months from 27.11.2014, would be 27.11.2018, as being the relevant

date for offer of possession. The aforesaid chronology for obtaining Fire NOC would indicate a delay of approximately 7 months in obtaining the Fire NOC by the Developer.

(ii) Whether the terms of the Apartment Buyer‘s Agreement were one-sided, and the Apartment Buyers would not be bound by the same.

The second issue which has been raised by the Apartment Buyers is that the Agreement in this case, contains wholly one-sided clauses, and would not be bound by its terms.

The aforesaid clauses reflect the wholly one-sided terms of the Apartment Buyer‘s Agreement, which are entirely loaded in favour of the Developer, and against the allottee at every step. The terms of the Apartment Buyer‘s Agreement are oppressive and wholly one-sided and would constitute an unfair trade practice under the Consumer Protection Act, 1986.

We are of the view that the incorporation of such one-sided and unreasonable clauses in the Apartment Buyer‘s Agreement constitutes an unfair trade practice under Section 2(1)(r) of the Consumer Protection Act. Even under the 1986 Act, the powers of the consumer fora were in no manner constrained to declare a contractual term as unfair or one-sided as an incident of the power to discontinue unfair or restrictive trade practices. An ―unfair contract‖ has been defined under the 2019 Act, and powers have been conferred on the State Consumer Fora and the National Commission to declare contractual terms which are unfair, as null and void. This is a statutory recognition of a power which was implicit under the 1986 Act.

In view of the above, we hold that the Developer cannot compel the apartment buyers to be bound by the one-sided contractual terms contained in the Apartment Buyer‘s Agreement.

(iii) Whether the provisions of the Real Estate (Regulation and Development) Act, 2016 must be given primacy over the Consumer Protection Act, 1986 ?

The Consumer Protection Act, 1986 was enacted to protect the interests of consumers, and provide a remedy for better protection of the interests of consumers, including the right to seek redressal against unfair trade practices or unscrupulous exploitation.

In a recent judgment delivered by this Court in M/s Imperia Structures Ltd. v. Anil Patni & Anr [See LW 90:12:2020], it was held that remedies under the Consumer Protection Act were in addition to the remedies available under special statutes. The absence of a bar under Section 79 of the RERA Act to the initiation of proceedings before a fora which is not a civil court, read with Section 88 of the RERA Act makes the position clear.


Mail to : [email protected]


FROM THE GOVERNMENT

3n RELAXATION ON LEVY OF ADDITIONAL FEES IN FILING OF E-FORMS AOC-4, AOC-4 (CFS), AOC-4 XBRL

AND AOC-4 NON-XBRL FOR THE FINANCIAL YEAR ENDED ON 31.03.2020 UNDER THE COMPANIES ACT, 2013

n COMPANIES(INCORPORATION) AMENDMENT RULES, 2021

n COMMENCEMENT NOTIFICATION DT 22.01.2021

n COMPANIES (CSR POLICY) AMENDMENT RULES, 2021

n COMMENCEMENT NOTIFICATION DT 22.01.2021

n SCHEME FOR CONDONATION OF DELAY FOR COMPANIES RESTORED ON THE REGISTER OF COMPANIES BETWEEN 01 DECEMBER 2020 AND 31 DECEMBER 2020. UNDER SECTION 252 OF THE COMPANIES ACT. 2013

n CLARIFICATION ON SPENDING OF CSR FUNDS FOR AWARENESS AND PUBLIC OUTREACH ON COVID-19 VACCINATION PROGRAMME


n CLARIFICATION ON HOLDING OF AGM THROUGH VC OTHER OAVM

n REVISION OF MONTHLY CUMULATIVE REPORT (MCR)

n RELAXATIONS RELATING TO PROCEDURAL MATTERS –ISSUES AND LISTING

n RELAXATION FROM COMPLIANCE WITH CERTAIN PROVISIONS OF THE SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015 DUE TO THE COVID -19 PANDEMIC

n NORMS FOR INVESTMENT AND DISCLOSURE BY MUTUAL FUNDS IN EXCHANGE TRADED COMMODITY DERIVATIVES (“ETCDS”)

n REVISION IN DAILY PRICE LIMITS (DPL) FOR COMMODITY FUTURES CONTRACTS

n REVIEW OF VOLATILITY SCAN RANGE (VSR) FOR OPTION CONTRACTS IN COMMODITY DERIVATIVES SEGMENT

n AMENDMENT TO REGULATION 20(6) OF SEBI (AIF) REGULATIONS, 2012

n MONTHLY REPORTING OF PORTFOLIO MANAGERS

n TRANSFER OF EXCESS CONTRIBUTION MADE BY STOCK EXCHANGES FROM CORE SGF OF ONE CLEARING CORPORATION TO THE CORE SGF OF ANOTHER CLEARING CORPORATION

n REFUND OF SECURITY DEPOSIT


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n CLARIFICATION ON HOLDING OF AGM THROUGH VC OTHER OAVM

n REVISION OF MONTHLY CUMULATIVE REPORT (MCR)

n RELAXATIONS RELATING TO PROCEDURAL MATTERS –ISSUES AND LISTING

n RELAXATION FROM COMPLIANCE WITH CERTAIN PROVISIONS OF THE SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2015 DUE TO THE COVID -19 PANDEMIC

n NORMS FOR INVESTMENT AND DISCLOSURE BY MUTUAL FUNDS IN EXCHANGE TRADED COMMODITY DERIVATIVES (“ETCDS”)

n REVISION IN DAILY PRICE LIMITS (DPL) FOR COMMODITY FUTURES CONTRACTS

n REVIEW OF VOLATILITY SCAN RANGE (VSR) FOR OPTION CONTRACTS IN COMMODITY DERIVATIVES SEGMENT

n AMENDMENT TO REGULATION 20(6) OF SEBI (AIF) REGULATIONS, 2012

n MONTHLY REPORTING OF PORTFOLIO MANAGERS

n TRANSFER OF EXCESS CONTRIBUTION MADE BY STOCK EXCHANGES FROM CORE SGF OF ONE CLEARING CORPORATION TO THE CORE SGF OF ANOTHER CLEARING CORPORATION

n REFUND OF SECURITY DEPOSIT

01 Relaxation on levy of additional fees in filing of e-forms AOC-4, AOC-4 (CFS), AOC-4 XBRL and AOC-4 Non-XBRL for the financial year ended on 31.03.2020 under the Companies Act, 2013

[Issued by the Ministry of Corporate Affairs Vide F.No. 01/34/2013 CL-V - Part-III dated 28.01.2021. To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (ii)] Keeping in view of various requests received from stakeholders regarding relaxation on levy of additional fees for annual financial statement filings required to be done for the financial year ended on 31.03.2020, it has been decided that no additional fees shall be levied upto 15.02.2021 for the filing of e-forms AOC-4, AOC-4 (CFS), AOC-4 XBRL and AOC-4 Non-XBRL in respect of the financial year ended on 31.03.2020. During the said period, only normal fees shall be payable for the filing of the aforementioned e-forms.2. This issues with the approval of the competent authority.

KMS NARAYANANAssistant Director

02 Companies(Incorporation) Amendment Rules, 2021

[Issued by the Ministry of Corporate Affairs F. No.1/13/2013CL-V, Vol.III dated 25.01.2021. To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (ii)]

In exercise of the powers conferred by section 3, sub-section (1) of section 7 and sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Incorporation) Rules, 2014, namely:-1. (1) These rules may be called the Companies (Incorporation)

Amendment Rules, 2021. (2)They shall come into force on the date of their publication

in the official Gazette.2. In the Companies (Incorporation) Rules, 2014, in Rule

41, (a) in sub-rule (6), (i) in clause (c), for the words, brackets and figure

"sub-rule (6)" the words, brackets and letter "clause (b)" shall be substituted;

(ii) clause (d) shall be omitted; (iii) the existing sub-rules (9), (10), (11) shall be

renumbered as sub-rules (7), (8) and (9) respectively;

(b) for sub-rule (7) as so renumbered, the following sub-rule shall be substituted with the following rule, namely:-

"(7) (i) Where an objection has been received or Regional Director on examining the application has specific objection under the provisions of the Act, the same shall be recorded in writing and the Regional Director shall hold a hearing or hearings within a period of thirty days as required and direct the company to flle an affidavit to record the consensus reached at the hearing, upon executing which, the Regional Director shall pass an order either approving or rejecting the application along with the reasons within thirty days from the date of hearing.

(ii) In case where no consensus is received as referred in clause (i), the Regional Director may approve the conversion, if he is satisfied having regard to all the circumstances of the case, that the conversion would not be against the interests of the company or is not being made with a view to contravene or to avoid complying with the provisions of the Act, with reasons to be recorded in writing:

Provided that the conversion shall not be allowed if any inquiry, inspection or investigation has been initiated against the company or any prosecution is pending against the company under the Act.".

K.V.R. MURTYJoint Secretary

03 Commencement Notification dt 22.01.2021

[Issued by the Ministry of Corporate Affairs Vide F. No.1/5/2019-CL.I dated 22.01.2021. Published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (ii)]

In exercise of the powers conferred by sub-section (3) of section 1 of the Companies (Amendment) Act, 2019 (22 of 2019), the Central Government hereby appoints the 22nd day of January, 2021 as the date on which the provisions of section 21 of the said Act shall come into force.


04 Companies (CSR Policy) Amendment Rules, 2021

[Issued by the Ministry of Corporate Affairs Vide F. No. CSR-05/3/2020-CSR-MCA dated 22.01.2021. Published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (ii)]

In exercise of the powers conferred by section 135 and sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Corporate Social Responsibility Policy) Rules, 2014, namely:-

1. Short title and commencement. - (1) These rules may be called the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.

CorporateLaws


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publication in the Official Gazette unless explicitly provided elsewhere in this notification.

2. In the Companies (Corporate Social Responsibility Policy) Rules, 2014 (hereinafter referred to as the said rules), for rule 2, the following rule shall be substituted, namely:-

“2. Definitions. - (1) In these rules, unless the context otherwise requires,-

(a) "Act" means the Companies Act, 2013 (18 of 2013);

(b) “Administrative overheads” means the expenses incurred by the company for ‘general management and administration’ of Corporate Social Responsibility functions in the company but shall not include the expenses directly incurred for the designing, implementation, monitoring, and evaluation of a particular Corporate Social Responsibility project or programme;

(c) "Annexure" means the Annexure appended to these rules;

(d) “Corporate Social Responsibility (CSR)” means the activities undertaken by a Company in pursuance of its statutory obligation laid down in section 135 of the Act in accordance with the provisions contained in these rules, but shall not include the following, namely:-

(i) activities undertaken in pursuance of normal course of business of the company: Provided that any company engaged in research and development activity of new vaccine, drugs and medical devices in their normal course of business may undertake research and development activity of new vaccine, drugs and medical devices related to COVID-19 for financial years 2020-21, 2021-22, 2022-23 subject to the conditions that;

(a) such research and development activities shall be carried out in collaboration with any of the institutes or organisations mentioned in item (ix) of Schedule VII to the Act;

(b) details of such activity shall be disclosed separately in the Annual report on CSR included in the Board’s Report;

(ii) any activity undertaken by the company outside India except for training of Indian sports personnel representing any State or Union territory at national level or India at international level;

(iii) contribution of any amount directly or indirectly to any political party under section 182 of the Act;

(iv) activities benefitting employees of the company as defined in clause (k) of section 2 of the Code on Wages, 2019 (29 of 2019);

(v) activities supported by the companies on sponsorship basis for deriving marketing benefits for its products or services;

(vi) activities carried out for fulfilment of any other statutory obligations under any law in force in India;

(e) "CSR Committee" means the Corporate Social Responsibility Committee of the Board referred to in section 135 of the Act;

(f) "CSR Policy" means a statement containing the approach and direction given by the board of a company, taking into account the recommendations of its CSR Committee, and includes guiding principles for selection, implementation and monitoring of activities as well as formulation of the annual action plan;

(g) “International Organisation” means an organisation notified by the Central Government as an international organisation under section 3 of the United Nations (Privileges and Immunities) Act, 1947 (46 of 1947), to which the provisions of the Schedule to the said Act apply;

(h) "Net profit" means the net profit of a company as per its financial statement prepared in accordance with the applicable provisions of the Act, but shall not include the following, namely: -

(i) any profit arising from any overseas branch or branches of the company, whether operated as a separate company or otherwise; and

(ii) any dividend received from other companies in India, which are covered under and complying with the provisions of section 135 of the Act: Provided that in case of a foreign company covered under these rules, net profit means the net profit of such company as per profit and loss account prepared in terms of clause (a) of sub-section (1) of section 381, read with section 198 of the Act;

(i) “Ongoing Project” means a multi-year project undertaken by a Company in fulfilment of its CSR obligation having timelines not exceeding three years excluding the financial year in which it was commenced, and shall include such project that was initially not approved as a multi-year project but whose duration has been extended beyond one year by the board based on reasonable justification;

(j) “Public Authority” means ‘Public Authority’ as defined in clause (h) of section 2 of the Right to Information Act, 2005 (22 of 2005);

(k) “section” means a section of the Act.

GYANESHWAR KUMAR SINGHJoint Secretary

Complete details are not published here for want of space. For complete notification readers may log on to mca.gov.in


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05 Commencement Notification dt 22.01.2021

[Issued by the Ministry of Corporate Affairs Vide F. No.1/3/2020-CL.I dated 22.01.2021. Published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (ii)] In exercise of the powers conferred by sub-section (2) of section 1 of the Companies (Amendment) Act, 2020 (29 of 2020), the Central Government hereby appoints the 22nd day of January, 2021 as the date on which the following provisions of the said Act shall come into force, namely:-

Sl. No.

Sections

1. Section 2;2. Section 11;3. Clause (c) of section 18;4. Clause (ii) of section 22;5. Section 25;6. Section 27;7. Section 53;8. Section 55;9. Section 58 to section 60 (both inclusive);10. Section 62; and11. Section 64 and section 65.


06 Scheme for condonation of delay for companies restored on the Register of Companies between 01 December 2020 and 31 December 2020. under section 252 of the Companies Act. 2013

[Issued by the Ministry of Corporate Affairs Vide F. No. 02/01/2021-CL-V dated 15.01.2021. To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (ii)] The Companies Fresh Start Scheme, 2020 [CFSS-2020]. operationalized vide General Circular No. 12/2020, dated 30.03.2020 and extended vide General Circular No. 30/2020, dated 28.09.2020 is no longer applicable for various filings done under the provisions of the Companies Act, 2013 [the Act].2. Representations have been received in this Ministry

requesting for relief as some companies had preferred appeals under section 252 of the Act against the orders of striking off the names of the companies before the respective Benches of the)/ National Company Law Tribunals [NCLTs] and the order(s) by NCLT Benches were issued during December, 2020. In view of this, such companies could not avail the benefit of filing under CFSS-2020 by 31st December, 2020 and are liable to be levied additional fees upon filing of overdue e-forms.

3. The matter has been examined and it has been decided that the aforementioned companies may be provided the benefit of waiver of additional fees in respect of overdue

filings to be made by them pursuant to the NCLT Order under section 252 of the Act, without any immunity from civil/criminal proceedings, etc.

4. Accordingly, the Central Government in exercise of its powers conferred under section 460 read with section 403 of the Act has decided to introduce the Scheme namely, "Scheme for condonation of delay for companies restored on the Register of Companies between 01 December 2020 and 31 December 2020, under section 252 of the Companies Act, 2013" for the purpose of condoning the delay in filing forms with the Registrar, insofar as it relates to charging of additional fees on account of delay in such filings.

5. The details of the Scheme are as under:-

(i) The Scheme shall come into effect from 01 February 2021.

(ii) Applicability: The Scheme shall be applicable in respect of companies in respect of whom the appeal filed under section 252 of the Act with the respective NCLT Bench for the restoration of the name of the company was disposed of between 01.12.2020 to 31.12.2020, with an order for restoration of the company.

(iii) Duration of the Scheme: The last date for filing of any overdue e-forms by such companies under the scheme shall be 31.03.2021.

(iv) Forms for which the Scheme shall be applicable: The Scheme shall be applicable in respect of filing of all e-forms [except where any increase in authorized capital is involved (e-Form SH-7) and charge related documents (e forms CHG-1, CHG-4, CHG-8 and CHG-9)] which are required to be filed with the Registrar.

(v) Applicable Fees: Every company shall be required to pay normal filing fees under the Companies (Registration Offices and Fees) Rules, 2014 on the date of filing and no additional fees shall be payable for the forms for which the scheme is applicable.

6. This issues with the approval of the Competent Authority.


07 Clarification on spending of CSR funds for Awareness and public outreach on COVID-19 Vaccination programme

[Issued by the Ministry of Corporate Affairs Vide F No. CSR-10/9/2020-CSR-MCA dated 13.01.2021. To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (ii)]

In continuation to this Ministry's General Circular No. 10/2020 dated 23.03.2020 wherein it was clarified that spending of CSR funds for COVID- 19 is an eligible CSR activity , it is further clarified that spending of CSR funds for carrying out awareness campaigns/programmes or public outreach campaigns on COVID-19 Vaccination programme is an eligible CSR activity under item no. (i),(ii) and (xii) of Schedule VII of the Companies Act, 2013 relating to promotion of health care, including preventive health care and sanitization, promoting education, and, disaster management respectively.


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subject to fulfillment of Companies (CSR Policy) Rules, 2014 and the circulars related to CSR, issued by this ministry from time to time.

3. This issues with the approval of competent authority.

SHOBHIT SRIVASTAVADeputy Director

08 Clarification on holding of AGM through VC other OAVM

[Issued by the Ministry of Corporate Affairs Vide F. No. 2/6/2020-CL-V dated 13.01.2021. To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-Section (ii)]

In continuation of this Ministry's General Circular No. 20/2020, dated 05th May, 2020 and after due examination, it has been decided to allow companies whose AGMs were due to be held in the year 2020, or become due in the year 2021, to conduct their AGMs on or before 31.12.2021, in accordance with the requirements provided in paragraphs 3 and 4 of the General Circular No. 20/2020.

2. It is clarified, that this Circular shall not be construed as conferring any extension of time for holding of AGMs by the companies under the Companies Act, 2013, and the companies which have not adhered to the relevant timelines shall remain subject to legal action under the Companies Act, 2013.

3. This issues with the approval of the competent authority.


09 Revision of Monthly Cumulative Report (MCR)

[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/HO/IMD/DF3/CIR/P/2021/014 dated 29.01.2021]

1. Please refer to SEBI Circular No. SEBI/HO/IMD/DF3/CIR/P/2019/020 dated January 22, 2019 prescribing the format for reporting of Monthly Cumulative Report (MCR).

2. Pursuant to introduction of a new scheme category and to bring transparency in reporting of segregated portfolios, it has been decided to modify MCR format from January 2021 onwards. The revised format of MCR is enclosed as Annexure A.

3. All other conditions specified in the above mentioned circular shall remain unchanged.

4. This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with Regulation 77 of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

BITHIN MAHANTAGeneral Manager

Annexure not published here for want of space. For complete notification readers may log on to www.sebi.gov.in

10 Relaxations relating to procedural matters –Issues and Listing

[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/HO/CFD/DIL1/CIR/P/2021/13 dated 19.01.2021]

1. SEBI vide Circular no. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 6, 2020 granted one time relaxations from strict enforcement of certain Regulations of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, pertaining to Rights Issue opening upto July 31, 2020.

2. Based on the representations received from the market participants, the validity of these relaxations, as provided by Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 6, 2020, was further extended for Rights Issues opening upto December 31, 2020.

3. The relaxation mentioned in point (iv) of the SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 6, 2020 is further extended and shall be applicable for Rights Issues opening upto March 31, 2021 provided the issuer along with the Lead Manager(s) shall continue to comply with point (v) of the SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated May 06, 2020.

4. This circular shall come into force with effect from the date of issue of circular

5. This circular is issued in exercise of powers conferred by Section 11(1) read with Section 11A of the Securities and Exchange Board of India Act, 1992 read with Regulations 299 and 300 of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

6. A copy of this circular is available on SEBI website at www.sebi.gov.in under the categories “Legal Framework/Circulars”.

RAJESH KUMAR DGeneral Manager

11 Relaxation from compliance with certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 due to the COVID -19 pandemic

[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/HO/CFD/CMD2/CIR/P/2021/11 dated 15.01.2021]

1. SEBI vide Circular no. SEBI/HO/CFD/CMD1/CIR/P/ 2020/79 dated May 12, 2020 had inter-alia relaxed certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”) related to general meetings, pursuant to relaxations by the Ministry of Corporate Affairs (MCA).

2. Subsequently, MCA vide Circular dated December 31, 2020 has further extended relaxations to companies to conduct their Extraordinary General Meeting (EGM) through Video Conferencing (VC) or through other


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audio-visual means (OAVM) (hereinafter referred to in this circular as ‘electronic mode’) upto June 30, 2021. Further, vide Circular dated January 13, 2021, MCA has also extended these relaxations to Annual General Meeting (AGMs) of companies due in the year 2021 (i.e. till December 31, 2021).

3. Accordingly, the relaxations in Paras 3 to 6 of the aforementioned SEBI Circular dated May 12, 2020 in respect of sending physical copies of annual report to shareholders and requirement of proxy for general meetings held through electronic mode, are extended for listed entities, till December 31, 2021.

4. This Circular shall come into force with immediate effect. The Stock Exchanges are advised to bring the provisions of this circular to the notice of all listed entities and also disseminate on their websites.

5. The Circular is issued in exercise of the powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with Regulation 101 of the LODR.

SURABHI GUPTAGeneral Manager

12 Norms for investment and disclosure by Mutual Funds in Exchange Traded Commodity Derivatives (“ETCDs”)


1. SEBI vide Circulars No. SEBI/HO/IMD/DF2/CIR/P/2019/65 dated May 21, 2019 and No. SEBI/HO/IMD/DF2/CIR/P/2020/96 dated June 05, 2020 permitted mutual funds to participate in ETCDs. It is hereby clarified that the following exposures shall not be considered in the cumulative gross exposure as specified in paragraph 4 (v) of SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2019/65 dated May 21, 2019:

a. Short position in Exchange Traded Commodity Derivatives (ETCDs) not exceeding the holding of the underlying goods received in physical settlement of ETCD contracts.

b. Short position in ETCDs not exceeding the long position in ETCDs on the same goods.

2. It is further clarified that mutual funds shall not write options, or purchase instruments with embedded written options in goods or on commodity futures.

3. All other conditions of the aforementioned circulars shall remain unchanged.

4. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

HRUDA RANJAN SAHOODeputy General Manager

13 Revision in Daily Price Limits (DPL) for Commodity Futures Contracts

[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/HO/CDMRD/DNPMP/CIR/P/2021/9 dated 11.01.2020]

1. The Daily Price Limits in commodity futures market serve an important function of defining the maximum range within which the price of a commodity futures contract can move in one trading session. The defined daily price limits protect investors from sudden and extreme price movements and provides cooling-off period to re-assess the information and fundamentals impacting the price of the commodity futures contract. Thus, DPLs can neither be too narrow nor too wide as it will restrict fair price discovery.

2. SEBI vide Circular no. CIR/CDMRD/DMP/2/2016 dated January 15, 2016 and Circular no. SEBI/HO/CDMRD/DMP/CIR/P/2016/83 dated September 07, 2016 had issued norms for Daily Price Limits (DPL) for agricultural and non-agricultural commodity derivatives. Continuing with SEBI’s endeavor to develop the commodity derivatives market and in consultation with the stock exchanges, the norms for DPL for commodity futures contracts (excluding Index Futures and options) are being revised. The revised norms are given below.

3. Base price for DPL: The base price for fixing the DPL slabs shall be the previous day’s closing price of the underlying contract on the respective stock exchange.

4. Order Acceptance: The stock exchanges shall ensure that their system should only accept those orders which are within the relevant prescribed slab at any point of time.

5. Breach of slab: A breach of the slab shall be considered when trading in a contract is executed at the upper or lower band of the prescribed slab.

NAVEEN SHARMAGeneral Manager

Complete details are not published here for want of space. For complete notification readers may log on to www.sebi.gov.in

14 Review of Volatility Scan Range (VSR) for Option contracts in Commodity Derivatives Segment

[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/HO/CDMRD/DRMP/CIR/P/2021/08 dated 11.01.2021]

1. SEBI vide circular No. SEBI/HO/CDMRD/DMP/CIR/P/2017/55 dated June 13, 2017 regarding ‘Option on Futures’ inter alia advised Exchanges to fix and determine the volatility scan range (VSR) values as below:

“Exchanges shall fix prudent price scan range, volatility scan range and/or plausible changes in any other parameters impacting options price. Exchange shall impose appropriate short option minimum margin, calendar spread charge and extreme loss margin for option contracts.”

Further, SEBI vide circular No. SEBI/HO/CDMRD/DMP/CIR/P/2020/05 dated January 16, 2020 on ‘Option on


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fix prudent VSR. 2. In light of the increased market volatility in the recent past, the

adequacy of current VSR values used by CCs in their margin framework was examined. This was done in the context of CPSS-IOSCO prescription for margin models which limits the need for destabilising and pro-cyclical changes.

3. It has, therefore, been decided, in consultation with CCs, to prescribe minimum VSR values for underlying commodities based on their volatility viz, high, medium and low as categorised in SEBI circular No. SEBI/HO/CDMRD/ DRMP/CIR/P/2020/15 dated January 27, 2020.

4. The VSR in respect of various categories of commodities shall be subject to following minimum values:

Volatility Category

Minimum VSR % Non Agri commodities

Minimum VSR % Agri

CommoditiesLow 4 5Medium 5 6High 6 7

5. CCs (providing clearing and settlement for options) shall review the value of VSR by back testing on a monthly basis using last 3 years’ data by 15th of every month and any change in VSR shall be implemented from 1st trading day of the following month.

6. The back testing shall be done by using appropriate models to extract volatility (such as EWMA (Exponentially Weighted Moving Average) volatility of the underlying futures contract, implied volatility of options, etc.) over the relevant MPOR (Margin Period of Risk) period.

7. The circular shall be effective from the first trading day of the month of April 01, 2021.

8. This circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

9. This circular is available on SEBI website at www.sebi.gov.in.

VISHAL V. NAIR Deputy General Manager

15 Amendment to Regulation 20(6) of SEBI (AIF) Regulations, 2012


1. In terms of the amendment to SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”), notified on January 08, 2021, exemption is granted from applicability of clause (i) and (ii) of the first proviso to Regulation 20(6), subject to certain conditions including each investor furnishing a waiver to the AIF in respect of compliance with these clauses, in the manner specified by SEBI. The said notification is available here.

2. The format for waiver to be furnished by the investors in this regard, is given at Annexure I.

3. This Circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities market and to promote the development of, and to regulate the securities market.

4. The circular is available on SEBI website at www.sebi.gov.in under the categories "Legal framework - Circulars" and "Info for - Alternative Investment Funds”.

SANJAY SINGH BHATIDeputy General Manager

16 Monthly Reporting of Portfolio Managers

[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/HO/IMD/DF1/CIR/P/2021/02 dated 08.01.2021] 1. Securities and Exchange Board of India (SEBI) had

mandated certain changes to the regulatory framework for Portfolio Managers vide circular no. SEBI/HO/IMD/DF1/CIR/P/2020/26 dated February 13, 2020. In terms of para no. D(11) of the said circular, Portfolio Managers are required to submit a monthly report regarding their portfolio management activity, on SEBI Intermediaries Portal within 7 working days of the end of each month, as per a prescribed format.

2. In order to broaden the information obtained under monthly reports, certain modifications are specified in the format enclosed in Annexure A.

3. The provisions of this circular shall be applicable for monthly reports submitted for January 2021 onwards.

4. This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 read with the provisions of Regulation 43 of the SEBI (Portfolio Managers) Regulations, 2020, to protect the interests of investors in securities market and to promote the development of, and to regulate the securities market.

5. This circular is available on SEBI website at www.sebi.gov.in under the categories “Circulars” and “Info for - Portfolio Managers”.

MANASWINI MAHAPATRAGeneral Manager


17 Transfer of excess contribution made by Stock Exchanges from Core SGF of one Clearing Corporation to the Core SGF of another Clearing Corporation

[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/HO/MRD2/DCAP/CIR/P/2021/03 dated 08.01.2021]

1. SEBI, vide Circular No.CIR/MRD/DRMNP/25/2014 dated August 27, 2014, prescribed norms for contribution by a


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Stock Exchange to Core SGF of a Clearing Corporation. Further, SEBI, vide Circular No. CIR/MRD/DRMNP/CIR/P/2018/145 dated November 27, 2018, prescribed broad guidelines for operationalizing the interoperable framework among Clearing Corporations.

2. SEBI has been receiving representations from Stock Exchanges, requesting to allow transfer of excess contribution made by Stock Exchanges from Core SGF of one Clearing Corporation to the Core SGF of another Clearing Corporation, in inter-operable scenario.

3. The above representations have been examined and it has been decided to allow transfer of excess contribution made by Stock Exchanges from Core SGF of one Clearing Corporation to the Core SGF of another Clearing Corporation, in inter-operable scenario. However, Stock Exchanges and Clearing Corporations are advised to ensure the following:

a) Upon receipt of request from an Exchange in this regard, the Clearing Corporation which receives such request shall transfer directly such excess contribution of the Exchange, in its Core SGF to the core SGF of another Clearing Corporation, under intimation to that Exchange.

For Example, if Exchange ‘A’ requests to transfer its excess contribution from Core SGF of Clearing Corporation ’B’ to Core SGF of Clearing Corporation ‘C’ then after receipt of such request from ‘A’, ‘B’ would transfer directly the excess contribution of ‘A’ from Core SGF of ‘B’ to Core SGF of ‘C’, under intimation to Exchange ‘A’.

b) The Clearing Corporations shall ensure compliance with requirements of Minimum Required Corpus (MRC) of Core SGF as prescribed by SEBI.

4. This circular is being issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market

SUDEEP MISHRA General Manager

18 Refund of security deposit

[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/HO/MIRSD/FCR/CIR/P/2021/01 dated 06.01.2021]

1. This is with reference to the letter MRD/DSA/OW/14347/4/2019 dated June 10, 2019 issued to NSE regarding refund of security deposit and arbitration mechanism after the surrender of membership of Trading Members (Annexure 1)

2. In this regard, following is advised to all exchanges regarding refund of security deposit on surrender of membership by Trading Members:

A. On approval of application for surrender of Trading Member’s registration by SEBI, the Exchange shall release Security Deposit of the Trading Member (engaged in trading on behalf of clients) after the period mentioned at point a) or b), whichever is earlier:

(a) Three years from the date of receipt of surrender application by Exchange from the Trading Member (in order to meet any investor claims), or

(b) Five years from the date of disablement of Trading Member’s trading terminals by the Exchange.

B. On approval of application for surrender of Trading Member’s registration by SEBI, the Exchange shall release Security Deposit of the Trading Member (engaged only in proprietary trading in last three years prior to the date of application) after the period mentioned at point a) or b), whichever is earlier:

(a) one year from the date of receipt of surrender application by exchange from the Trading Member, or

(b) three years from the date of disablement of Trading Member’s trading terminals by the Exchange.

3. The stock exchanges are advised to: -

(a) make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision immediately;

(b) bring the provisions of this circular to the notice of the members of the stock exchange and also to disseminate the same through their website; and

(c) communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Development Reports to SEBI.

4. This Circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 read with Section 10 of the Securities Contract (Regulation) Act, 1956 to protect the interests of investors in securities, to promote the development of, and to regulate the securities market.

5. This Circular is available on SEBI website at www.sebi.gov.in.

PRANJAL JAYASWAL Deputy General Manager



ICSI ORGANIZED WEBINAR FOR LAUNCHING “NEW TRAINING STRUCTURE” ON 03RD FEBRUARY 2021

The Institute organized a webinar on “Implementation of New Training Structure 2020” on 03rd February 2021 which was attended by thousands of CS students and members.

The new training structure for students, comprises of the following training which shall provide them a platform to develop their core competencies and harness their soft skills including managerial and leadership capabilities. Under New Training structure, the Executive passed students are required to undergo:

A) One month Executive Development Programme (EDP)

B) Students are required to undergo 21 months practical training, with Industry/Practicing Company Secretary and other entities after completion of their one month EDP.

C) Corporate Leadership Development Programme (CLDP)after completion of their Professional programme examination and long term practical training as per the guidelines of the Institute.

INTRODUCTION OF 15 DAYS EXECUTIVE DEVELOPMENT PROGRAMME (E-MODE)” (NEW TRAINING STRUCTURE) UNDER THE COMPANY SECRETARIES (AMENDMENT) REGULATIONS, 2020 In accordance with regulation 46BB of the Company Secretaries (Amendment) Regulations 2020, students are required to complete one month Executive Development Programme (EDP) prior to commencing 21 months Practical training. Out of one month, students may undergo 15 Days EDP through online mode (e-mode) and 15 Days EDP through classroom mode.

The Institute has introduced “EDP (15 Days) e-Mode” through its E-Learning Portal and the students may enroll for the same through ICSI Stimulate Portal i.e. https://stimulate.icsi.edu/. Eligible students can undergo “EDP

ICSI ACADEMIC CONNECT

ICSI ACADEMIC COLLABORATIONS WITH UNIVERSITIES AND ACADEMIC INSTITUTIONS

ICSI “Academic Collaborations with Universities and Academic Institutions” initiative of the Institute is aimed to establish a connect between ICSI and various Universities and institutions of national repute, through a memorandum of understanding (MoU) covering a number of schemes under one umbrella towards learning and development of students, academicians and professionals.

MoUs were signed with the following universities and academic Institutions under the Academic Collaborations with Universities and Academic Institutions initiative of ICSI.

MoU signed with various Universities in the Month of Jan, 2021 is as under:

Sl. No

Name of University Date of MOU

1 Xavier University, Bhubaneswar, Plot No:12(A) NijigadaKurki, Harirajpur, Dist-Puri, Odisha

07th January, 2021

2 Uttaranchal University, Arcadia Grant, Chandanwari, Prem Nagar, Dehradun, Uttarakhand

07th January, 2021

3 Moulana Azad National Urdu University, Urdu University Road, Near LNT Towers, Telecom Nagar, Gachibowli, Hyderabad,Telangana

12th January, 2021

4 TilakMaharastraVidyapeth , Mukund Nagar, Gultekdi , Pune

16th January, 2021

MOU WITH TILAK MAHARASHTRA VIDYAPEETH, PUNE

(15 Days) e-Mode” on anytime, anywhere basis within 90 days of their registration. In addition to the 15 Days EDP in e-Mode, students are required to complete remaining 15 days EDP through classroom mode as per the guidelines of the Institute.


1

ICSI/TRG/2021 01/02/2021

“Introduction of 15 Days Executive Development Programme (e-Mode)” (New Training Structure) under The Company Secretaries (Amendment) Regulations, 2020.

In accordance with regulation 46BB of the Company Secretaries (Amendment) Regulations 2020, students are required to complete One month Executive Development Programme (EDP) prior to commencing 21 months Practical training. Out of one month, students may undergo 15 Days EDP through online mode (e-mode) and 15 Days EDP through classroom mode.

The Institute has introduced “EDP (15 Days) e-Mode” through its E-Learning Portal and the students may enroll for the same through ICSI Stimulate Portal i.e. https://stimulate.icsi.edu/ . Eligible students can undergo “EDP (15 Days) e-Mode” on anytime, anywhere basis within 90 days of their registration. In addition to the 15 Days EDP in e-Mode, students are required to complete remaining 15 days EDP through classroom mode as per the guidelines of the Institute.

Eligibility: All Students who have passed Executive Programme and wish to start training under New Training structure as per the Company Secretaries CS (Amendment) Regulations, 2020. Date of Opening of Registration : 03rd February, 2021 (11:00 am on wards) Programme Fees : Rs. 2000/- (Rupees Two Thousand Only)

Modalities: 1. “EDP (15 Days) e-Mode” is on anytime, anywhere basis.

2. For registration, a student need to click on https://stimulate.icsi.edu/ ; Use their Smash Login id and Password for logging into the Stimulate Portal. Select Short Term Training – Apply for Training and then click on the grid showing particulars of training.

3. Students can access “EDP (15 Days) e-Mode” content via e-learning portal of the Institute. The User Id and Password for the same will be sent to registered e-mail id within 7 working days from the date of registration.


PAYMENT OF ANNUAL MEMBERSHIP FEE, UPDATING OF ADDRESS, UPLOADING OF PHOTOGRAPH AND SIGNATURE ON THE PORTAL OF THE INSTITUTE

One seat from Eastern India Regional Constituency (EIRC) in the 13th Council of the Institute of Company Secretaries

of India has become vacant due to resignation of one of the members. Election for filling casual vacancy from EIRC is scheduled to be held tentatively in September 2021.

In accordance with Rule 5 of the Company Secretaries (Election to the Council) Rules, 2006, a member, whose name is borne on the Register of Members on the 1st day of April 2021 shall be eligible to vote in the election from the Regional constituency within whose territorial jurisdiction his/her professional address falls on the said date, provided that his/her name has not been removed from the Register on the date of publication of the list of voters. If the professional address is not borne on the Register on the relevant date, the residential address borne on the Register shall determine his/her Regional constituency. In the case of members having their professional address outside India and eligible to vote, their Regional Constituencies shall be determined according to their professional addresses in India registered immediately before they went abroad or the residential addresses in India borne on the Register on the relevant date, whichever is later.

The names of the members, who have not paid the annual membership fee for the year 2020-21 and for previous years, stands removed from the Register. In order to exercise their franchise at ensuing election, such members are requested to get their names restored by 1st April, 2021. Restoration of membership is subject to receipt of duly filled and signed Form-BB alongwith the full payment due, inclusive of arrears (if any), restoration fee, entrance fee and GST as applicable on the date of receipt of Form-BB and/or payment (whichever is later).

The members are requested to check their professional and residential addresses and make changes, if any, online through Member Login following the given below steps:

Login to portal www.icsi.edu Click Online services in the Menu and then click on

Member Fill the User name: Enter your membership number (e.g.

A1234) and Password. In case a member does not have/remember his/her password, he/she can get the password by clicking on the “Retrieve Password” option. The password will be sent to his/her email/mobile registered with the Institute. Alternatively, he/she may send email at [email protected] from his/her email registered with the Institute to get the password on the said email id.

After login, go to Members Option then click on Manage Account

Then click on Change of Address and professional / residential option and click Go button

Then make changes required and Click on Submit.The members who have not downloaded the identity card may please download the same from Digilocker following the below-mentioned steps: Members may create an account on Digilocker using their

Aadhaar CardAfter logging in to the Digilocker website/App, go to

‘Issued Documents’ sectionThen go to Sub-head ‘Education’ and click on view allA list will open from which you can select ‘Institute of

Company Secretaries of India’After you click on ‘Institute of Company Secretaries of

India’, a screen will open which will have two options ‘Id card’ and ‘Membership certificate’

Click on ‘ID Card’Type your Membership Number and Click on generate.Members should also ensure that their scanned photograph and signature in .jpg format are uploaded on the online portal of the Institute.

Online steps for uploading of photo image. Login to portal www.icsi.eduClick Online services on the right top corner and then click

Member LoginFill the User name: Enter your membership number (e.g.

A1234) and Password. In case a member does not have/remember his/her password, he/she can get the password by clicking on the “Retrieve Password” option. The password will be sent to his/her email/mobile registered with the Institute. Alternatively, he/she may send email at [email protected] from his/her email registered with the Institute to get the password on the said email id.

After login, go to Members Option (from top menu) then click on Manage Account and then click on Manage Image.

Then upload your Photo (passport size) and Signature and click on Upload button.

In case of any difficulty, members may write at [email protected] from their e-mail registered with the Institute. In case, their e-mail id is not registered with the Institute, members may send a request alongwith photo identity proof i.e. Member ID card/PAN/Aadhaar to enable the Institute to make the necessary changes. Alternatively, members may raise a query on Support portal of ICSI i.e. http://support.icsi.edu under Membership Services and upload his/her photo ID proof.

Election for filling casual vacancy in the 13th Council of the Institute of Company Secretaries of

India from Eastern India Regional Constituency


4NEWS FROM THE

INSTITUTE

n MEMBERS RESTORED DURING THE MONTH OF DECEMBER 2020n CERTIFICATE OF PRACTICE SURRENDERED DURING THE MONTH OF DECEMBER 2020n ATTENTIONn ATTENTION MEMBERSn MEMBERS HOLDING CERTIFICATE OF PRACTICEnATTENTION LICENTIATESn RESTORATION OF MEMBERSHIPn RESTORATION OF CERTIFICATE OF PRACTICEnOBITUARIES


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InstituteNews

MEMBERS RESTORED DURING THE MONTH OF DECEMBER 2020

SL. NO. NAME MEMB NO. REGION

1 CS SUSHEELA Y GODBOLE ACS - 17907 SIRC2 CS AJAZ UL REHMAN DAR ACS - 20469 NIRC3 CS DEEPALI LALCHAND

MENGHWANIACS - 47044 WIRC

4 CS ASIT SHARMA ACS - 47290 WIRC5 CS VENKATA KIRAN RAVI ACS - 19155 SIRC6 CS ARUN KUMAR CHOMAL ACS - 38880 NIRC7 CS PREM PRAKASH JAIN ACS - 3950 SIRC8 CS SANJAY GORDHANBHAI

PATELACS - 7788 WIRC

9 CS HARMAN JOT ACS - 18072 NIRC10 CS ISHWARI DHANANJAY

NIRGUDKARACS - 41844 WIRC

11 CS KRITI JAIN ACS - 31979 NIRC12 CS RAVINDRA RAJARAM

DHUPKARACS - 15458 SIRC

13 CS M R SURESH ACS - 11695 SIRC14 CS DAMODAR RATHI ACS - 12400 WIRC15 CS ABHINAV TYAGI ACS - 42558 NIRC16 CS LATTERI GOPALAN

CHANDRASEKHARACS - 4424 SIRC

17 CS ASHA NARDIA ACS - 38648 SIRC18 CS NIMESH DEEPAK PADIA ACS - 26747 WIRC19 CS SANDEEP KUMAR JALAN ACS - 11021 NIRC20 CS VINOD P PATIL ACS - 12135 WIRC21 CS GANESH MAL TAWARI ACS - 12896 WIRC

CERTIFICATE OF PRACTICE SURRENDERED DURING THE MONTH OF DECEMBER 2020

SL. NO. NAME MEMB NO. COP

NO. REGION

1 CS SIDDHARTH DWIVEDI ACS - 59042 22905 WIRC2 CS ARPAN SENGUPTA FCS - 10599 14416 EIRC3 CS RANADHIS BANERJEE ACS - 9850 21660 EIRC4 CS SWATI SUBRAYA HEGDE ACS - 45690 17091 SIRC5 CS ABHISHEK KUMAR ACS - 60201 22729 NIRC6 CS RAJESH BABARAO

KADUACS - 55503 23723 WIRC

7 CS HEENA ARORA ACS - 44224 22877 NIRC8 CS SIDDHARTHA MURARKA FCS - 7527 15721 EIRC9 CS PRADEEP

GANSHYAMBHAI RATNANIACS - 41096 15428 NIRC

10 CS CHARU KEDIA ACS - 51225 20614 NIRC

11 CS PRASANJIT KUMAR BAUL

ACS - 34347 12981 SIRC

12 CS DEEPIKA BANGIA ACS - 28661 18723 NIRC13 CS KRUNAL SANJAY

KUMAR WALAACS - 42515 21328 WIRC

14 CS SATYANARAYANA VUTUKURI

ACS - 59470 22391 SIRC

15 CS MOHD SADIQUL MEHDI ACS - 36125 21452 NIRC16 CS SHASHI SHEKHAR ACS - 30145 18672 NIRC17 CS VISHNUMOLAKALA

JAHNAVIACS - 44311 22929 SIRC

18 CS JATIN BISWAKARMA ACS - 31174 19922 SIRC19 CS REEMA JAIN FCS - 9651 11898 NIRC20 CS ABHIJEET SINGH ACS - 52326 20089 NIRC21 CS DEEPA ACS - 45409 23782 NIRC22 CS NISHA NISHIT

NANDWANAACS - 49762 18443 NIRC

23 CS LEENA HARSHAL AGRAWAL

FCS - 6607 7030 WIRC

24 CS MAHESH MUKUNDRAI TANNA

ACS - 42692 23413 WIRC

25 CS PANDIYA RAJAN VIMAL KUMAR

FCS - 9548 11655 SIRC

26 CS SHIBBU KUMARI JAIN ACS - 57980 21961 NIRC27 CS KARUNA SHARMA ACS - 19328 14052 NIRC28 CS NITESH TANEJA ACS - 42670 20595 NIRC29 CS KARUNA GUPTA ACS - 48295 22266 NIRC30 CS GOURI DILIPRAO

DESHPANDEACS - 53699 20073 WIRC

31 CS MEGHA NEERAJ AGRAWAL

ACS - 23895 12792 WIRC

32 CS DHARA ALPESH MODI ACS - 31725 23398 WIRC33 CS VIPUL RAVJIBHAI

SORANIACS - 59041 23568 WIRC

34 CS SAMEER SHUKLA FCS - 10510 12078 NIRC35 CS NIBEDITA MAHAPATRA FCS - 10953 10975 EIRC36 CS BIRENDER SINGH

DHILLONACS - 36279 17239 NIRC

ATTENTION MEMBERSThe CD containing List of Members of ICSI as on 1st April, 2020 is available in the Institute on payment of Rs. 295/-* for members and Rs. 590/-* for non-members (*including GST@18%). Request along with payment may please be sent to Joint Secretary, Directorate of Membership, ICSI House, C-36, Sector-62, Noida - 201309. For queries if any, please write to [email protected] For specific assistance raise a ticket at http://support.icsi.edu

ATTENTION!

For latest admission of Associate and Fellow Members, Life Members of Company Secretaries Benevolent Fund (CSBF), Licentiates and issuance of Certificate of Practice, kindly refer to the link https://www.icsi.edu/member


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MEMBERS HOLDING CERTIFICATE OF PRACTICE

The Institute has brought out a CD containing List of Members holding Certificate of Practice of the Institute as on 31st March 2020. The CDs are available at Noida office of the Institute and will be provided free of cost to the members holding Certificate of Practice on receipt of request. Request may please be sent to the Directorate of Membership at e-mail id: [email protected]

ATTENTION LICENTIATES

The Annual Licentiate subscription can now be paid through online mode only using the link - http://stimulate.icsi.edu/ with your student login credentials.

The Licentiates who do not pay the annual licentiate subscription of Rs.1180/- (inclusive of GST@18%) by 28-02-2021 will be disentitled to use the descriptive letters “LICENTIATE - ICSI” and their names shall be published in the Chartered Secretary journal.

The members can restore their membership online only by making an application in Form BB (available on the website of the Institute www. icsi.edu) together with payment of the annual membership fee for the year 2020-2021 including GST@18% (Associates admitted on or after 1-4-2019 – Rs. 1770/-, Associates admitted till 31-03-2019 – Rs. 2950/- and Fellow – Rs. 3540/-) with the entrance fee of Rs. 2360/- and restoration fee of Rs. 295/- .

Particulars Associate (admitted till 31.03.2019)

Associate (admitted on or after 01.04.2019)

Fellow

Annual Membership fee* Rs. 2950 Rs. 1770 Rs. 3540

Entrance fee* Rs. 2360 Rs. 2360 Rs. 2360

Restoration fee* Rs. 295 Rs. 295 Rs. 295

* Fee inclusive of applicable GST@18%.MODE OF REMITTANCE OF FEE

The fee can be remitted through ONLINE mode only using the payment gateway of the Institute’s website www.icsi.edu through members’ login portal. Payment made through any other mode will not be accepted.Steps to make online payment for Retoration of Membership

Login to portal www.icsi.eduClick Online services in the Menu and then click on Member

Fill the User name: Enter your membership no. (eg. A1234)Password. Fill the password. In case you do not have a password, you may retrieve the password in case your

email id and mobile number is correctly registered (you can check at https://www.icsi.edu/member/members-directory/) in the Institute’s record.

After login, go to Members Option (from top menu) then click on Manage Account Restoration of Membership for FY2020-21 (on the left side under Place your Request)

Download and Upload the duly filled and signed Form BBThe amount payable will be auto filledClick on proceed for paymentFor specific assistance raise a ticket at http://support.icsi.edu

RESTORATION OF MEMBERSHIP


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Chartered Secretary deeply regrets to record the sad demise of the following Members:

CS P T Rangamani (26.08.1934 – 16.10.2020), a Fellow Member of the Institute from Chennai. He was the Past President of ICSI during the year 1992 and also the Past Chairman of SIRC during the year 1988. CS Madhavan Kumar Sampath (25.05.1960 – 03.01.2021), an Associate Member of the Institute from Mumbai.CS Bharat Bhushan (20.01.1964 – 05.12.2020), a Fellow Member of the Institute from Faridabad.CS Gaurav Arora (15.03.1977 – 19.12.2020), a Fellow Member of the Institute from Gurgaon.May the Almighty give sufficient fortitude to the bereaved family members to withstand the irreparable loss.May the departed souls rest in peace.

OBITUARIES

RESTORATION OF CERTIFICATE OF PRACTICE

The process of Restoration of Certificate of Practice is now enabled for the members who could not pay the COP fees by the due date i.e. 30-09-2020.

The certificate of practice fee and restoration fee payable is as follows:

Particulars Admitted as associate member till 31.03.2019)

Admitted as associate member on or after 01.04.2019)

Fellow

Certificate of Practice fee* Rs. 2360 Rs. 1770 Rs. 2360Restoration fee** Rs. 295 Rs. 295 Rs. 295

* Fee inclusive of applicable GST@18%.

** Fee inclusive of applicable GST@18% and applicable as certificate of practice fee is not received by 30th September, 2020

STEPS AND PROCEDURE OF REMITTANCE OF COP FEE

Procedure for filling Online Form D:

Kindly go to Manage Account. Select Online Form D. (Fill the form and keep a copy of the same for your records. Fill the form stepwise )

1. First at “Personal Details” tab (prefilled) click save as draft

2. Second fill ”Area of practice” tab, select at least one field of your area of interest and click save as draft

3. Third fill “Verification details “tab and click save as draft (this page is important) and please fill all the mandatory fields carefully.

4. Last page is “Declaration”, fill the place and date and click save as draft option.

5. At the end please click the ‘Final save & Print’ button and keep a copy of the Form-D for your records.

*(Please fill and submit the form in one go. Fill the form carefully. Once the form D is submitted, modifications cannot be done)

Procedure for payment of Restoration of COP fee:

Go to Manage Account and select the option “Requests relating to Certificate of Practice COP”

1. Select the button Restoration of COP

2. Select the button online form D (at the Top)

3. You will get a message “You have already submitted the declaration for the financial year”

4. Please write in the Comment box (mandatory box)

5. Fill your GSTIN to claim GST Input Tax Credit (If GST No is not given here, it will not be reflected in the receipt.)

6. Select Payment Gateway

7. Click on Proceed for Payment button and Remit the payment by online*

*(Members admitted on or after 01.4.2019 shall pay Rs. 2065/- while members admitted before 01.04.2019 shall pay Rs. 2655/- (all amount inclusive of GST @ 18%).

Please submit online Form D first and then pay the fee. Form D is mandatory for Issuance, Renewal and Restoration of Certificate of Practice.

For any support you may reach out to us at http://support.icsi.edu.


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LIST OF PRACTICE UNITS PEER REVIEWED DURING JANUARY 2021

Sl. No. Name of the PU City Year of

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1 M/s. Jayesh Parmar & Associates New Delhi 2019-20 1055/2021

2 M/s. SVVS & Associates Company Secretaries LLP

Mumbai 2019-20 1056/2021

3 Mr. Sushil Kumar Sikka Chandigarh 2019-20 1057/2021

4 M/s. ASR & Co. Bangalore 2019-20 1058/2021

5 M/s. Munish K. Sharma & Associates Ghaziabad 2019-20 1059/2021

6 Mr. Hansraj Jaria Kolkata 2019-20 1060/2021

7 M/s. Jayant Sood and Associates Gurgaon 2019-20 1061/2021

8 M/s. Shah Patel & Associates Mumbai 2019-20 1062/2021

9 M/s. Mihir Patra & Co. Bhubaneswar 2019-20 1063/2021

10 Mr. G. K. Ramakrishnan Chennai 2019-20 1064/2021

11 M/s. R M Mimani & Associates LLP Thane 2019-20 1065/2021

12 M/s. V. Shankar & Co. Hyderabad 2019-20 1066/2021

13 M/s. DPSP and Associates Bangalore 2019-20 1067/2021

14 M/s. PDS & Co. Delhi 2019-20 1068/2021

15 M/s. R. K. Rai & Co. Delhi 2019-20 1069/2021

16 M/s. Manasi Paradkar & Associates Pune 2018-19 1070/2021

17 M/S. GMVDR & Associates Hyderabad 2019-20 1071/2021

18 Mr. Arun Madhukar Deshpande Pune 2018-19 1072/2021

19 Mr. Jitender Singh New Delhi 2019-20 1073/2021

20 M/s. Vikash Sethi & Associates New Delhi 2019-20 1074/2021

21 M/s. M Siroya & Co. Mumbai 2019-20 1075/2021


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Documents downloadable from the DigiLocker Platform

The National Digital Locker System, launched by Govt. of India, is a secure cloud based platform for storage, sharing and verification of documents and certificates. In the wake of digitization and in an attempt to issue documents to all the members in a standard format and make them electronically available on real-time basis, the Institute of Company Secretaries of India had connected itself with the DigiLocker platform of the Government of India. The initiative was launched on 5th October, 2019 in the presence of the Hon’ble President of India.

In addition to their identity cards and Associate certificates, members can also now access and download their Fellow certificates and Certificates of Practice from the Digilocker anytime, anywhere.

How to Access:

• Go to https://digilocker.gov.in and click on Sign Up• You may download the Digilocker mobile app from mobile store (Android/iOS)How to Login:

• Signing up for DigiLocker with your mobile number.• Your mobile number is authenticated by an OTP (one-time password).• Select a username & password. This will create your DigiLocker account.• After your DigiLocker account is successfully created, you can voluntarily provide your Aadhaar number (issued

by UIDAI) to avail additional services.

How to Access your Documents digitally:

On successful validation of credential go to “Pull Documents” in the Issued document section, select the partner name “The Institute of Company Secretaries of India” & document type “Identity Card” and enter the document details asked for to fetch the same.We believe that this initiative shall go a long way in providing ease of access of all documents of our members and rendering them just a click away.


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NOTIFICATION NO. 01/2021- CENTRAL TAX DATED 1ST JANUARY, 2021

In exercise of the powers conferred by section 164 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby makes the following rules further to amend the Central Goods and Services Tax Rules, 2017, namely: -

1. Short title and commencement - (1) These rules may be called the Central Goods and Services Tax (Amendment) Rules, 2021.

(2) These rules shall come into force on the date of their publication in the Official Gazette.

2. In the Central Goods and Services Tax Rules, 2017 (hereafter in this notification referred to as the said rules), in rule 59, after sub-rule (5), the following sub-rule shall be inserted namely:-

“(6) Notwithstanding anything contained in this rule, -

(a) a registered person shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1, if he has not furnished the return in FORM GSTR-3B for preceding two months;

(b) a registered person, required to furnish return for every quarter under the proviso to sub-section (1) of section 39, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility, if he has not furnished the return in FORM GSTR-3B for preceding tax period;

(c) a registered person, who is restricted from using the amount available in electronic credit ledger to discharge his liability towards tax in excess of ninety-nine percent of such tax liability under rule 86B, shall not be allowed to furnish the details of outward supplies of goods or services or both under section 37 in FORM GSTR-1 or using the invoice furnishing facility, if he has not furnished the return in FORM GSTR-3B for preceding tax period.”.

Source: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-01-central-tax-english-2021.pdf

NOTIFICATION NO. 02/2021- CENTRAL TAX DATED 12TH JANUARY, 2021

In exercise of the powers conferred under section 3 read with section 5 of the Central Goods and Services Tax Act, 2017 (12 of 2017) and section 3 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), the Government, hereby makes the following notification further to amend the notification of the Government of India, Ministry of Finance, Department of Revenue No. 2/2017-Central Tax, dated the 19th June, 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide number G.S.R. 609(E), dated the 19th June, 2017, namely: -

In the said notification, -

(I). in Table I, -

(a) against Sl. No. 7, in column (4), for 7.4.2 and the entries relating thereto, the following shall be substituted, namely:-

(4)“7.4.2 Commissioner (Appeals I) Delhi and Additional

Commissioner (Appeals II) Delhi”;

(b) against Sl. No. 14, in column (4), for 14.4.1 and the entries relating thereto, the following shall be substituted, namely:-

(4)

“14.4.1 Commissioner (Appeals II) Mumbai and Additional Commissioner (Appeals I) Mumbai”;

(II). in Table III, the following shall be inserted at the end, namely: -

“Note 1: The Commissioner (Appeals I) Delhi mentioned in Column (4) for entries at SI. No. 7.4.1 and 7.4.2 shall have jurisdiction over Delhi I and Delhi II mentioned in Column (2) at SI. No. 13 and 14 of Table III;

Note 2: The Commissioner (Appeals II) Mumbai mentioned in Column (4) for entries at SI. No. 14.4.1 and 14.4.2 shall have jurisdiction over Mumbai I and Mumbai II mentioned in Column (2) at SI. No. 31 and 32 of Table III.”

Source: https://www.cbic.gov.in/resources//htdocs-cbec/gst/notfctn-02-central-tax-english-2021.pdf


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CODE OF CONDUCT FOR MEMBERS

Professionals are expected to conduct themselves in such a manner so as to uphold the grace, dignity and professional

standing of their respective Institutes. Any commitment to complete a particular assignment as agreed by the person himself should be completed in a professional manner.Professionals, with their rigorous education and training belong to a class of people who have to uphold public good and serve wider public interest.The study of what values a society ought to have is the subject of a branch of philosophy known as ethics. Ethics is about what is morally correct or acceptable. Being ethical is doing what the law requires. Accordingly, the ethics of a Company Secretary would signify his conduct and behaviour.A code of professional conduct is also referred to as code of professional ethics. Code of conduct which also goes by the synonym ‘Professional ethics’ encompasses professional’s conduct towards his peers, the clients, the employer and the people at large. World over, the professions have accorded highest priority to professional ethical standards. The fundamental principles which should govern the conduct of a professional with others have been broadly identified as to encompass integrity, independence, competence, objectivity, ethical behavior, conformance to the prescribed technical standards and confidentiality of information acquired in the course of professional work.In order to evoke the necessary interest and awareness among the members and to create the necessary climate for laying down the right type of conduct which should govern the profession, the Institute organised in February 1976,

a National Convention, primarily to evolve the necessary framework for a code of conduct. After the conclusion of that Convention, the Council of the Institute appointed a Code of Conduct Committee with the task of formulating a model code of conduct. The Council of the Institute accepted the recommendations of the Code of Conduct Committee which inter-alia prescribed - (a) Rules applicable to all members; and (b) Rules applicable to members in service or in practice.

In formulating the code of conduct, the Committee and the Council adopted a certain normative approach or value judgement. The codes evolved were rooted in the principles of Dharma stating positively what the profession stands for, what it expects from the members and what it cherishes as valued ideals of the society. The code also negatively laid down what constitutes a breach of the code in any given situation and the penal consequences for any violation or misconduct.

The code of conduct acquired statutory status with the conversion of the Institute into a statutory body under the Company Secretaries Act, 1980 (hereinafter referred to as ‘The Act’), with effect from 1st January, 1981. In the year 2006 substantial amendments were made to Act and also to the First and the Second Schedules to the Act which encompass in detail, various instances of professional misconduct on the part of the members of the Institute in practice as well as in service.

Section 2(24) of the Companies Act, 2013 provides that ‘Company Secretary’ or ‘Secretary’ means a Company Secretary as defined in clause (c) of sub section (1) of

“As per Cambridge Business English Dictionary, code of conduct is a set of rules about how to behave and do business with other people”


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ION Section 2 of the Company Secretaries Act, 1980 who is

appointed by a company to perform the functions of the Company Secretary under the Companies Act, 2013.

Section 2(25) of the Companies Act, 2013 provides that ‘Company Secretary in Practice’ means a Company Secretary who is deemed to be in Practice under sub Section (2) of Section 2 of the Company Secretaries Act, 1980.

The law in respect of matters of Misconduct has been provided in Chapter V of the Company Secretaries Act, 1980. The detailed provisions relating to misconduct and disciplinary mechanism are contained in 21, 21A, 21B, 21C, 21D, 22, 22A, 22B, 22C, 22D & 22E and the First and the Second Schedules to the Company Secretaries Act, 1980 and the Company Secretaries (Procedure of Investigations of Professional and Other Misconduct and Conduct of Cases) Rules, 2007 (as amended).

Ac per section 22, for the purposes of the Company Secretaries Act, 1980, the expression “professional or other misconduct” shall be deemed to include any act or omission provided in any of the Schedules, but nothing in this section shall be construed to limit or abridge in any way the power conferred or duty cast on the Director (Discipline) under sub-section (1) of section 21 to inquire into the conduct of any member of the Institute under any other circumstances.

It is essential to know that for the purposes of disciplinary proceedings, ‘member of the Institute’ includes a person who was a member of the Institute on the date of alleged misconduct although he has ceased to be a member at the time of the inquiry.

CASE STUDY 1 The Complainant has inter-alia alleged that the Respondent has certified Form 32 pertaining to his cessation from the directorship of a company without excising due diligence as he has not resigned. His purported resignation letter is forged and fabricated and the Complainant has denied attending the Board Meeting wherein his alleged false resignation letter was considered.

The Respondent has denied the allegations and has stated that his client company had approached him to file resignation of the Complainant and provided original Board Resolution signed by two Directors and original resignation letter signed by the Complainant. The Respondent personally verified and found them to be legitimate, authentic, un-biased and in order.

The Disciplinary Committee held the Respondent ‘Guilty’ of Professional Misconduct under Clause (7) of Part-I of the Second Schedule to the Company Secretaries Act, 1980 for not exercising due diligence while certifying Form 32 pertaining to cessation of the Complainant from the directorship of the company as the circumstantial evidence shows that the signature of the Complainant is different on the purported resignation letter than on the other documents and the said resignation letter has a wrong DIN of the Complainant. The Respondent has not been able to give any satisfactory answer as to why the date of cessation of the Complainant has been left blank in the Annual return filed by the company. The Respondent has not been able to produce any substantial evidence in his defence before the

Disciplinary Committee. The Disciplinary Committee passed an Order of REPRIMAND and FINE of Rs. 10000/- against the Respondent.

CASE STUDY 2 The Complainant company has inter-alia alleged that the Respondent has not exercised due diligence while certifying Form 20B and Form 23 AC pertaining to two financial years and undertook the assignment on the basis of the allegedly false representations made by one person who was actually not the Managing Director and had, therefore, no authority to assign the work to the Respondent.

The Respondent has denied the allegations and has stated that there is a dispute in the management of the company. He has further stated that the Complainant is the Respondent in the CLB matter and is trying to create obstacles for his client. The documents were filed with the ROC for compliance of the company. It is in the domain of the ROC to decide or adjudicate that filing of Form 20B, 23AC for years 2012 and 2013 were wrong or not. The Respondent has further stated that he was not present at the AGM/Board meeting and, therefore, his certification is based on presumption of “Doctrine of Indoor Management”.

The Disciplinary Committee held the Respondent guilty of professional misconduct under clause (7) of Part I of Second Schedule to the Company Secretaries Act, 1980, for not exercising due diligence while certifying Form 20B and Form 23 AC. The Respondent has failed to verify the correctness of forms or documents from the records of the company and has proceeded to certify them to be correct on some presumptions without any basis, that too, when he was aware that there was a dispute in the company. The Respondent has also failed to ascertain as to whether the said person was a Director or Managing Director of the Complainant Company at the time of certification; and as to whether he has any authority from the Board of Directors to sign those forms or documents. The Disciplinary Committee passed an Order of REPRIMAND and FINE of Rs. 25000/- against the Respondent.

CASE STUDY 3 The Complainant has inter-alia stated that they are into the business of providing human resource and were professionally engaged by one company to arrange recruitment for their company; for which the Respondent was shortlisted and selected through internal process of recruitment and had joined the said company as a Senior Manager, Accounts. His employment was later terminated. Thereafter, they decided to verify the background of the Respondent and they found that the Respondent had submitted forged and fabricated documents related to his experience i.e. employment letter from two of his previous employments.

The Respondent admitted the allegations with clarifications and stated the circumstances. The Respondent has apologized to the Complainant and the Institute and requested to take lenient view in the matter.

The Board of Discipline held the Respondent guilty of misconduct and passed an Order of REPRIMAND and FINE of Rs. 500/- against the Respondent.


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Streamlining Energy & Carbon Reporting Framework for UK BusinessThe UK government’s Streamlined Energy

and Carbon Reporting (SECR) policy was implemented on 1 April 2019, when the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 came into force. The introduction of SECR coincides with the end of the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. The new regulations will require an estimated 11,900 companies incorporated in the UK to disclose their energy and carbon emissions - a far greater number than were required to act under the CRC.It is to be noted that SECR builds on but does not replace existing requirements that companies may face, such as mandatory greenhouse gas (GHG) reporting for quoted companies, the Energy Saving Opportunity Scheme (ESOS), Climate Change Agreements (CCA) Scheme, and the EU Emissions Trading Scheme (ETS). SECR extends the reporting requirements for quoted companies and mandates new annual disclosures for large unquoted and limited liability partnerships (LLPs).

NEED FOR SECRSECR aims to bring the benefits of carbon and energy reporting to more businesses. The reporting framework is intended to encourage the implementation of energy efficiency measures, with both economic and environmental benefits, supporting companies in cutting costs and improving productivity at the same time as reducing carbon emissions.Requiring companies to make disclosures on energy and carbon is also in line with the recommendations of the G20 Financial Stability Board’s Taskforce on Climate-related Financial Disclosures, by providing important information for investors and financial actors to help them navigate the transition to a sustainable, low carbon economy.

WHO NEEDS TO COMPLY WITH THE SECR FRAMEWORK?Three groups of businesses are affected by the new regulations. Companies that fall within the following definitions must comply unless they meet certain exemption criteria: Quoted companies of any size that are already

obliged to report under mandatory greenhouse gas reporting regulations.

Unquoted companies incorporated in the UK that meet the definition of ‘large’ under the Companies Act 2006 will have new reporting obligations. This applies to registered and unregistered companies. Note that the criteria for ‘large’ differs from the ESOS Regulations.

‘Large’ Limited Liability Partnerships (LLPs) will be required to prepare and file a ‘Energy and Carbon Report’.

Unquoted companies or LLPs are defined as ‘large’ if they meet at least two of the following three criteria in a reporting year:a turnover of £36 million or more;a balance sheet of £18 million or more; or250 employees or more.Public bodies do not fall under the new regulations, but they are subject to other legislation which requires carbon reporting.It is worth noting that charities, not-for-profit companies or others undertaking public

activities – such as companies owned by universities, academies or NHS Trusts will need to check whether they meet the above qualifying criteria.Private sector organisations which fall outside of the scope of the new regulations are encouraged to voluntarily report in a similar manner.

POINTS TO BE FOCUSED UPON FOR REPORTING UNDER SECRQuoted companies need to report on: Annual global emissions for which your company

is responsible, e.g. purchased electricity or gas, or emissions from boilers, furnaces and vehicles you own

The underlying global energy use Previous year’s figures (except in the first year) At least one intensity ratio Energy efficiency action taken during the financial year Methodology used What proportion of your total energy consumption

and emissions relate to the UK (including the UK offshore area)

Unquoted companies and LLPs need to report on:

Annual emissions from UK energy use (as a minimum electricity, gas and transport)

The greenhouse gas emissions associated with your energy use

Previous year’s figures (except in the first year) At least one intensity ratio Energy efficiency action taken during the financial year Methodology used UK offshore undertakings must disclose emissions

and energy use for the UK and the UK offshore area.

REFERENCE :1. https://www.carbontrust.com/news-and-events/insights/secr-

explained-streamlined-energy-carbon-reporting-framework-for-uk#:~:text=The%20introduction%20of%20SECR%20coincides,to%20act%20under%20the%20CRC.

2. https://conceptenergy.org/guide-to-streamlined-energy-and-carbon-reporting-secr/


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IA Prarambh: Startup India International Summit

Prarambh, as a noun, implies ‘an auspicious start’ and, as a verb, implies ‘to begin’. Aiming to bring India’s

entrepreneurial force onto the global map, the Department for Promotion of Industry and Internal Trade (DPIIT), Government of India hosted ‘Prarambh: Startup India International Summit’ on January 15 – 16, 2021. The summit brought together top policy makers, industry, academia, investors, startups and all stakeholders of the startup ecosystem in the country and across the globe on one platform. The summit celebrated 5 years of the launch of the Startup India Initiative, which has played a pivotal role in spurring the spirit of entrepreneurship in every corner of the country. In addition to deliberating good practices from the best of the ecosystems across the world, the sessions of the summit were designed to showcase the spread and depth of entrepreneurship based on innovation in India. The summit aimed to attain the attention of global capital for startups in India, mobilize domestic capital, provide opportunities for accessing international markets and evolve enabling policy provisions.

The two-day long virtual summit brought together over 200 marquee speakers from around the world and India, with over 1.2 lakh registrations from 56 countries. The speakers facilitated discussions on technologies, innovation, robust policies, and initiatives, enabled government and international organizations to share their views, to ignite the minds of young Indian entrepreneurs, driving them to solve the problems and challenges that matter, not just for India but also for the entire world.

THE OBJECTIVES OF THE SUMMIT: Encourage and inspire the youth for innovation and

entrepreneurship;Exchange knowledge on best practices on nurturing

startup ecosystems;

Develop capacities of entrepreneurial ecosystem;Mobilize global and domestic capital for investments into

startups. Provide opportunities to startups for entering domestic

(private and public) and international markets; Showcase high-quality, high technology and frugal

innovations from India; Enable ease of doing business for startups and investors;

The first day of the summit was inaugurated by Shri Piyush Goyal, Minister of Commerce and Industry and Consumer Affairs, Food and Public Distribution where he addressed a gathering of innovators, entrepreneurs, investors, regulators, industry leaders, and academic luminaries from India and across world.

Prarambh was brought to a close with the Grand Plenary session, which was graced by Shri Narendra Modi, Prime Minister of India The session saw the release of two key reports, ‘Evolution of Startup India’ and ‘Startup India: The Way Ahead’ covering the journey of Startup India till now and charting the path ahead for the organization and the ecosystem. A program to highlight and showcase India’s startup champions was also launched on Doordarshan, which will be a one-hour weekly program spread over the span of 12 weeks. The Prime Minister also announced the ‘Seed Fund Scheme’ which will help fledgling startups find funding at the seed stage. During the plenary session he interacted with some promising young entrepreneurs from India and the BIMSTEC countries. The Prime Minister also addressed all the startups in the country, applauding the work that has been done by the ecosystem in helping entrepreneurship being an aspirational career opportunity as compared to a few years ago. He also highlighted the key role that the ecosystem has played in India’s economic growth and addressing the


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social challenges faced by the country. He emphasized the possibilities present in India and the BIMSTEC region, with the collective strength of $ 3.8 trillion GDP and the enterprising young entrepreneurs bringing change through innovation.

KEY OUTCOMES:A. Launch of Rs 1,000 crore Startup India Seed Fund: The Startups India Seed Fund will offer financial assistance to selected startups and incubators in the country across five years, starting 2021. Eligible startups include those that have a business idea to develop a product and viable commercialisation plans, apart from having Indian promoters as majority shareholders. Additionally, incubators over two years old, which are assisted by central or state governments, can apply for the programme. Those not supported by the government must be at least three years old. These incubators must not have deployed capital from a third party as seed capital for incubated startups.

The Department for Promotion of Industry and Internal Trade (DPIIT) will manage the fund.

B. Startup Champions program launched on Doordarshan, a one-hour weekly program for the span of 12 weeks. C. Two key reports launched:

1. Evolution of Startup India: The report can be accesses at https://www.startupindia.gov.in/content/dam/invest-india/Templates/public/5_years_Achievement_report%20_%20PRINT.pdf

2. Startup India: The Way Forward: The report can be accessed at https://www.startupindia.gov.in/content/dam/invest-india/Templates/public/StartUp%20India_Way%20Ahead.pdf

STARTUP INDIA AND THE WAY FORWARD: 1. Foster a culture of innovation amongst citizens and

students in particular.2. Promote innovation in all sectors of economy across the

country, including semi-urban and rural areas.3. Support creative and innovative ideas through incubation

and research and development to transform them into valuable products, processes or solutions to improve productivity and efficiency.

4. Create an environment of absorption of innovation in industry.

5. Facilitate public organizations to assimilate innovation with a view to improving public service delivery.

6. Promote creation, protection and commercialization of intellectual property rights.

7. Make it easier to start, operate, grow and exit businesses by reducing regulatory compliances and costs.

8. Promote ease of access to capital for startups.9. Incentivize domestic capital for investments into startups.10. Mobilize global capital for investments in Indian startups.11. Keep control of startups with original promoters.12. Provide access to global markets for Indian startups.

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Special insolvency resolution framework for MSMEs under Section 240A of the IBC will be notified soon.. Suspension of fresh initiation of insolvency proceedings up to one year, depending upon the pandemic situation. Empowering Central Government to exclude COVID 19 related debt from the definition of “default” under the Code for the purpose of triggering insolvency proceedings.

Lower penalties for all defaults for Small Companies, One-person Companies, Producer Companies & Start Ups.

II. Employee Provident Funds (EPFs):

EPF contribution from government extended for 3 months: This support will be extended by another 3 (three) months to salary months of June, July and August 2020.

EPF contribution reduced for business and workers for 3 months: Statutory PF contribution of both employer and employee reduced to 10% each from existing 12% each for all establishments covered by EPFO for next 3 months.3

III. Tax reforms:

Reduction in Rates of Tax Deduction at Source (TDS) and Tax Collected at Source (TCS): The TDS rates

for all non-salaried payment to residents, and TCS rate has been reduced by 25% of the specified rates for the remaining period of FY 20-21.4

All pending refunds to charitable trusts and non-corporate businesses and professions including proprietorship, partnership, LLP and cooperatives will be issued immediately: Central Board of Direct Taxes (CBDT) has issued tax refunds worth Rs. 26,242 crore to 16,84,298 assessees since 1st April, 2020 to 21st May, 2020.5

The due date of all income tax return for FY 2019-2020 extended from 31st July, 2020 and 31st October, 2020.

Date of assessments getting barred as on 30th September 2020 extended to 31 December, 2020 and those getting barred on 31st March 2021 will be extended to 30th September, 2021.

The period of ‘Vivad se Vishwas’ scheme for making payment without additional amounts will be extended to 31st December, 2020. CS

3 https://www.epfindia.gov.in/site_docs/PDFs/Circulars/Y20202021/FAQ_Reduced_rate_of_contribution_20052020.pdf

4 https://www.incometaxindia.gov.in/Lists/Press%20Releases/Attachments/834/Press-Release-Reduction-in-TDS-TCS-Rates-dated-14-05-2020.pdf5 https://www.incometaxindia.gov.in/Lists/Press%20Releases/Attachments/835/PressRelease_Refunds_amounting_26242cr_issued_22_5_20.pdf

ICSI PUBLICATIONS

You can order for Hard copy of the ICSI publications at e-cart- https://smash.icsi.in/Scripts/ECart/ Default/ECartSearchOnlineBooks.aspx

Also, available on Amazon website - https://www. amazon.in/

CHARTERED SECRETARY | JUNE 2020 139FEBRUARY 2021 | 153 CHARTERED SECRETARY

CS Vinita Nair Dedhia and CS Abhirup Ghosh, under the mentorship of CS Vinod Kothari, have brought out a new book ‘Law and Practice relating to the Corporate Bonds and Debentures’.

The topic is of great relevance in the wake of turbulence in the debt market in the country for the last couple of years. Due to multiple defaults by giant financial entities, investors’ confidence is shaken. Regulators have toughened the compliance requirements. The more the defaults, the tougher and complex will be the regulations. Many times, even professional advisers find it challenging advising their clients / Boards in the matters of corporate Bonds and Debentures.

As rightly pointed out by CS Vinod Kothari in his preface, rulemaking shall not be based on these exceptional situations. On one hand, the government keeps on propagating its achievements in creating ease of doing business, on the other hand, the rules are made more and more complicated and stringent. Will these measures help the debt market? Time only has to tell!

On a sample basis, I checked a couple of chapters relating to the topics that have given rise to multiple complexities and contradicting interpretations. The stamp duty on debt instruments is one such topic. The 19th Chapter in this book deals with the Stamp Duty on the issue and transfer of debentures. This chapter starts with the provisions relating to the power of levying of the stamp duty. Authors explain the recent amendment to the Indian Stamp Act which is effective 01st July 2020. A brief analysis of the effects of the amendments has come out very well and to the point. As we know, the definition of the ‘Debenture’ stands wider under the Indian Stamp Act than its definition under the Companies Act 2013. The explanation makes a mention of the landmark judgment in Bhagwati Developers vs. Peerless General Finance and how the recent amendments plug the loophole created by the said judgment by expressly making even the non-marketable debentures dutiable. The said chapter also deals with duty on reissued debentures. Clear mention is made on which value the duty to be charged and the rate of duty to be charged under various circumstances. When it comes to explaining the procedure for the issue of debentures, this book provides charts and tables to make it amply clear on the important aspects to be complied with. The charts and tables have made it very easy for the readers to understand the concepts, coverages, impacts, and many related aspects.

Given the fact that the subject has got a very wide ambit and deep impact, the authors have fixed a framework for the aspects to be covered in this book. While reading the book, they keep us reminded of this framework quite frequently as well!

As mentioned above, the authors have rightly created tables and charts in abundance for facilitating easy understanding of the complex regulations. The legal provisions, applicable forms, documents, procedures, compliance requirements are brought together in one place. Authors have refrained from getting into a detailed discussion on any of the practical complexities, rather given importance for the systematic execution part of the law. Thus the book has taken the shape of a compendium and a manual. This is both the strength and the weakness of the book. Strength, because it has remained handy for those in need of execution and weakness since it does not throw light on practical issues (except for the exceptions, though) that may come-up and probable solutions for taking precautions. It is pertinent to note here that had the authors tried doing that, the book would have bulged into multiple volumes.

Authors have tried to keep the book as updated as possible by including many latest updates till the last minute of taking the book into the press. The impacts of the Circular issued by SEBI dated 12th September 2020 relating to the disclosure requirements for the Debenture Trustees is also given effect to at the appropriate places. For books on the topics like this, the threat of losing shelf life is very high due to frequent changes in the legal provisions. The authors may organize to provide suitable updates to this book for its readers maybe for a year or so from the date of its publication, to increase the utility of the book for its readers.

We wish all the success for the future research and publications of the authors in furtherance of professional development.

CS Dattatri H MMember, Editorial Advisory Board

Authored by: CS Vinita Nair Dedhia and CS Abhirup GhoshPublished by: TaxmannHard BoundPrice : ` 1595/-

Law & Practice Relating to Corporate Bonds and Debentures

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