Legal & Industry Updates - April 2024
SPECIAL EVENTS
Gender Neutral Laws: Need of an Hour, April 13, 2024
The team at Ivy Law participated in a webinar on “Gender Neutral Laws: Need of an Hour” organized by the National Legal Rights Consortium. The webinar addressed existing gender biases and inequalities while discussing real world case studies and experiences and illuminating the need for gender-neutral laws in India. Emphasis was placed on establishing various strategies for effective implementation of such laws along with a common consensus that the new criminal laws should also be made gender neutral and the concerned authorities should keep in mind the changing times while formulating the statutes. How the gender neutral laws should be administered via proper investigation and inquiry so that they are not misused by either women or men, was also discussed at length.
LEGAL & INDUSTRY UPDATES
The Ministry of Corporate Affairs (“MCA”) Seeks Inputs from Stakeholders to Revamp Insolvency and Bankruptcy Code, 2016 (“IBC”) Rules (source)
MCA has initiated a significant step toward enhancing the regulatory framework under the IBC, specifically relating to personal guarantors, financial service providers, and the pre-packaged scheme which is supposed to be a more compact resolution framework than the usual corporate insolvency resolution process and is currently applied to only Micro, Small and Medium enterprises (“MSMEs”). This move aims to streamline processes, ensure robust corporate governance, and facilitate business operations aligned with evolving legal and technological landscapes. MCA has sought feedback from stakeholders on proposed changes and engaged them in the review process with the endeavor to address emerging challenges, promote regulatory coherence, and reinforce the foundations of corporate insolvency resolution mechanisms.
Supreme Court (“SC”): Process for IBC Offences to be Issued by Sessions Court Despite the Companies Act, 2013 (“CA, 2013”) Amendment Vesting Jurisdiction On Judicial Magistrate (source)
SC has asserted that special courts presided over by sessions judges hold jurisdiction to adjudicate offences under the IBC, thereby overturning a Bombay High Court (“HC”) directive. SC found merit in the argument put forth by the complainant stating that the case in hand involves ‘legislation by incorporation’ rather than ‘legislation by reference’. Therefore, in such cases the effect of incorporating the original Section 435 (Establishment of Special Courts) of the CA, 2013 into section 236(1) (Trial of offences by Special Court) of the IBC has been in place since the enactment of the IBC. Consequently, any subsequent amendments to section 435 of CA, 2013 do not affect section 236(1) of IBC. Therefore, SC upheld the summons issued by the sessions judge despite subsequent amendments to section 435 of CA, 2013 authorizing judicial magistrates to issue summons for offences committed under IBC.
SC: Time Spent Contesting Bonafide Litigation At Wrong Forum to be Excluded While Computing Limitation (source)
In the case in hand, the appellant’s execution application seeking to enforce a decree issued in their favour was rejected by the trial court due to the time spent by the appellant in contesting the litigation for execution at the Tehsildar Court, a forum lacking jurisdiction. However, the appellant further appealed to the SC who finally ruled that the time spent by appellant in contesting bona fide litigation at a wrong forum under the belief that it was appropriate should be excluded when calculating the limitation period as under section 14(2) (Exclusion of time of proceeding bona fide in court without jurisdiction) of the Limitation Act, 1963, the period of limitation is to excluded when proceedings are pursued diligently and in good faith in a court due to defect of jurisdiction or similar cause.
SC: Childcare Leave for Women Employees a Constitutional Mandate (source)
SC, on 22nd April, 2024, has asserted that denying a woman employee two-year childcare leave, alongside the mandatory 180 days of maternity leave, thereby pressurizing her to resign, violates constitutional rights. SC's stance arose during a case involving the appellant in a government college in Himachal Pradesh (“HP”), who sought childcare leave due to her child's rare genetic disorder. Despite her plea, the HP government cited absence of the provision akin to Section 43 C (Child Care Leave) of the Central Civil Service (Leave) Rules, 1972 and denied her further leaves. SC, emphasizing the constitutional imperative of women's workforce participation, directed the HP government to form a high-level committee to reconsider childcare leave provisions and in the meantime consider granting her extraordinary leave to attend to her son.
Orissa HC: Employee Can be Dismissed After Retirement if Found to be Guilty in Disciplinary Proceedings Initiated During Service Period (source)
The Orissa HC has affirmed an employer's authority to dismiss an employee even after retirement, based on disciplinary proceedings initiated during their service. In the case in hand, disciplinary action was taken against the defendant prior to retirement. Despite being declared ex parte, he was found guilty of misconduct, leading to his dismissal upon retirement wherein the HC asserted that if departmental proceeding has been initiated against an employee before his retirement, and if the service rules of the employer provide so, the departmental proceeding can continue even after retirement of an employee and if the employee is found guilty, minor or major punishment, including the punishment of dismissal can be imposed by the employer, even after the employee has retired.
Startups in Queue for Insure License to Face Stricter Norms (source)
The Insurance Regulatory and Development Authority of India (“IRDAI”) is taking a closer look at venture-funded startups seeking to become insurance companies as the IRDAI is on the verge of implementing stricter guidelines for granting insurance licenses, following the recent financial irregularities in new-economy firms. As per IRDAI, the companies seeking a license would have to eliminate holding company structures and secure investor funding directly. Further, IRDAI would also prefer applicants to have backing from a large domestic investor and the promoter to have a substantial net worth.
Well Devised Framework in Works to Widen Local Funding Pool for Startups (source)
The Central Government (“CG”) is devising a risk framework to protect local pension funds and insurers investing in startups. The primary aim is to boost domestic capital and enhance funding mechanisms for startups. Indian pension funds and insurers that support local startups are currently allowed to invest 3-5% of their investable surplus via alternative investment funds route, yet, a proper framework would act as a safety net and may enable direct investments. However, the challenges that could be faced while drafting the framework include redefining startups criteria, educating investors, and amending regulations to facilitate investments by insurers and pension funds.
The Reserve Bank of India (“RBI”) Urges Banks to Exercise Caution on Unauthorised Foreign Exchange (“Forex”) Transactions (source)
RBI, on 24th April, 2024, has issued a cautionary notice to banks and customers regarding unauthorised entities offering forex trading using the banking channels. Highlighting the need for vigilance, RBI urged authorised dealers to promptly report any such illicit transactions to the Enforcement Directorate. In its investigation, RBI established that the said unauthorised entities often utilize local agents to open bank accounts under various guises to manage funds related to forex trading activities, and are frequently engaged in transactions inconsistent with their stated purposes. Thus, through the notice, RBI emphasized the importance of enhanced vigilance among authorised dealers, further urging them to exercise greater caution in their dealings.
Telecom Regulatory Authority of India (“TRAI”) Releases Recommendations to Help Startups Develop India-Made Products (source)
TRAI, on 12th April, 2024, has released recommendations on the ‘Regulatory Sandbox’ to assist startups and entrepreneurs in building indigenous solutions and products, facilitate the development of new original equipment manufacturers and boost investments. With advancements in 5G/6G, Artificial Intelligence, and Virtual Reality, the guidelines aim to accelerate live testing of innovative use cases while strengthening digital transformation and broadband proliferation in the country which could further bolster the startups and MSME ecosystem. Moreover, the cost reduction and investment influx anticipated from these recommendations could reshape the network services ecosystem, driving further growth and development.
TRAI Releases Consultation Paper on National Broadcasting Policy, 2024 (“NBP, 2024”) (source)
TRAI, on 2nd April, 2024, has released a consultation document for developing the NBP, 2024, with the aim to improve the broadcasting business, which is considered to be a flourishing industry in India. This document discussed important industry concerns while requested for consultation regarding promotion of Indian content on over the top platforms and parameters for measuring broadcasting revenue for the NBP, 2024. This consultation on the NBP, 2024 came after the draft Broadcasting Services Regulation Bill, 2023, which was introduced last year, was heavily criticised from multiple quarters, slamming it as vague, excessive and carrying the potential for censorship.
Merger & Acquisition (“M&A”) Deal Activity Set to Touch $75 billion in 2024 (source)
As per the reports, Indian companies are likely to step up M&As in 2024, with deals worth $75 billion estimated this year as opposed to about $60 billion last year. There have also been acquisition opportunities in areas where geopolitical volatility had rendered some industries uncompetitive. Further, the Indian companies are eyeing strategic acquisitions to bolster their market presence and enhance competitiveness amid global uncertainties. India's M&A activity rebounded in January 2024, led by telecommunications, industrials, and consumer staples. This resurgence marks a robust start compared to signaling optimism despite macroeconomic uncertainties.
Women Participation in Technology (“Tech”) Roles in Non-Tech Sectors to Grow by 24.3% by 2027 (source)
As reported, women's participation in tech roles in non-tech businesses is expected to grow by 24.3% by 2027 across various levels, i.e. from a fresher to C-suite. With only 0.5% of women currently engaged in tech roles in non-tech sectors, there's a critical need to enhance female participation. Despite challenges, Indian women's Science, Tech, Engineering and Mathematics participation stands at a global high of 43%, and expecting a further growth, fueled by CG’s efforts and women-centric programs supporting tech inclusion and childcare. However, the reports note a decline in women's representation as hierarchy levels rise, attributed to limited opportunities and support structures. Therefore, efforts from companies, policymakers, and governmental initiatives are crucial for fostering a more equitable future for women in India's digital landscape.
Financial Technology Companies ("Fintechs") Seek Clarity on Digital Currency Tie-Ups with Banks (source)
Fintech startups in India are seeking clarity from the RBI regarding the rules of engagement with banks to deploy central bank digital currency (“CBDC”) use cases. Even though operational guidelines and product constructs need to be structured, banks and fintechs have already started working together to investigate applications for CBDC and collaborate on a bigger scale to create creative solutions. Further, to support prospective use cases for retail CBDC, various corporate expenditure management software and large lenders are forming partnerships with startups. CBDC is an attractive proposition for CG as it boasts of programmability of money wherein the digital currency can be programmed to be used for certain merchants, helping authorities curb pilferage of social security schemes.
Disclaimer: The updates provided in this document is not a legal opinion and does not claim to capture all legal developments related to the subject matter stated herein. It is advisable to seek legal advice for accurate applicability, prior to relying on the updates for any legal matter.