Legal & Industry Updates - December 2019
SPECIAL EVENTS
Conference on Reviving Investment Through Improved Ease of Doing Business, December 18, 2019
Monika Singhal, Senior Associate, Corporate Secretarial & Compliance, participated in a conference on 'Reviving Investment through Improved Ease of Doing Business' organized by the Confederation of Indian Industry. Some of the key focus points of the conference were reduction of compliances for Micro, Small and Mini Enterprises, need for urgent introduction of business reforms for quick revival of economic growth and support to potential investors with an aim to provide workable business environment.
LEGAL & INDUSTRY UPDATES
Directorate General of Health Services (“Drug Regulator”) Issues Orders Prohibiting Online Sale of Medicines Without a Valid License
As reported, the Drug Regulator has issued orders to state and union territory authorities to investigate and prohibit the sale of medicines through unlicensed online platforms, until the Drugs and Cosmetics (Amendment) Rules, 2018 are notified and the regulatory framework for online pharmacies is established. The present situation is a paradox for e-pharmacy operations, as the current legal framework does not specifically provide powers to the Drug Regulator or other authorities to issue licenses for e-pharmacies.
Amendment to the Insolvency & Bankruptcy Code, 2016 ("IBC 2016")
The Ministry of Finance, on 11th December, 2019 has notified the Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019 ("IBC 2019") to amend IBC 2016. IBC 2019 aims to promote ease of doing business by removing the difficulties faced during the insolvency resolution process. The key amendments are as follows:
IBC 2019 sets forth certain minimum thresholds for filing of applications seeking initiation of corporate insolvency resolution process ("CIRP") by certain classes of creditors. In case of real estate projects, if an allottee (person to whom a plot, apartment, or building has been allotted or sold) wants to initiate resolution, the application should be filed jointly by at least 100 allottees of the same real estate project, or 10% of the total allottees under that project, whichever is less. For other financial creditors, where the debt owed is either: (i) in the form of securities or deposits, or (ii) to a class of creditors, the application should be filed jointly by at least 100 creditors in the same class, or 10% of the total number of such creditors in the same class, whichever is less.
Any corporate debtor hit by any of the disqualifications in Section 11 (Persons not entitled to make application) of IBC 2016, shall not be prevented from initiating CIRP against another corporate debtor.
Continuation of the business operations of the corporate debtor, as a going concern, by not terminating, suspending or refusing to renew the government licenses, permits, concessions, clearances etc., during the moratorium period.
Companies Likely to Get 2 Years Period to Comply with New Data Protection Law
As reported, the Personal Data Protection Bill, 2019 ("PDP Bill"), slated to be presented in the current Parliament session, once becomes a law, will require compliance by companies within a period of 2 years from its enactment. Some of the provisions include, establishment of the Data Protection Authority, within 6 months of the PDP Bill coming into effect, introduction of mechanisms to respond to government and law enforcement agency requests within 24 to 72 hours, data localisation norms and other stipulations that would need time to be activated.
Bharti Telecom Limited ("BTL") Seeks INR 4,900 Crore Foreign Direct Investment ("FDI") Nod
As reported, BTL, a promoter of Bharti Airtel Limited has sought Government of India’s ("GoI") nod for the infusion of Rs 4,900 crore investment from Singapore Telecommunications Limited and other foreign entities, a move that will enhance foreign stakeholding in BTL to over 50% and make it a foreign-owned entity. The Department of Telecom is expected to approve this investment by the end of December.
Infosys Limited ("Infosys") Faces Another Lawsuit in United States
As reported, a US based law firm has stated to file a class action suit against Infosys for violation of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated by the US Securities and Exchange Commission to recover the losses incurred by investors in the wake of informant charges of "unethical practices" at Infosys. In October, Infosys had informed the stock exchanges of having received anonymous whistleblower complaints alleging certain unethical practices by the top management. Furthermore, another class action lawsuit is slated to recover the losses suffered by Infosys investors in US.
Essar Steel Limited (“Essar”) Promoters Face Challenge Under the Insolvency & Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 (“IBC Guarantor Rules”)
As reported, the promoters of Essar are still not relieved of their dues, despite the lenders receiving large parts of their dues back. ArcelorMittal S.A. (“Arcelor”), who has recently acquired Essar has already transferred over INR 39,000 crore to the lenders of Essar and INR 2,500 is stated to be repaid from internal accruals. However, the promoters face a fresh challenge due to coming into effect of the IBC Guarantor Rules, entitling the lenders to initiate insolvency proceedings against the guarantor to the extent of shortfall in the recovery, even if proceedings are instituted under the bankruptcy process separately.
Consultation with Industry & Lenders to Boost Investments & Economic Activity
As reported, in order to resolve issues pertaining to the industry and lenders, the GoI has begun consultations with the country’s 25 large corporates. The Commerce and Industry Minister, as part of the Project Management Cell, consulted with the industry and lenders to assess their investment plan and to also try and resolve issues that they may be facing in their bid to expand operations. Further, the GoI is also trying to boost investment and spur economic activity by further lowering the corporation tax.
Cyrus Mistry Reinstated as Executive Chairman of Tata Sons Private Limited ("Tata Sons")
As reported, on 18th December, 2019, the National Company Law Appellate Tribunal ("NCLAT") reinstated Cyrus P. Mistry as the executive chairman of the Tata Sons citing the action taken against the former Tata Sons chairman oppressive and illegal. Mistry, in his pleas, primarily argued that his removal was not in accordance with the Companies Act, 2013 and also there was rampant mismanagement of affairs across Tata Sons. The Tata Group, a multinational conglomerate company owned by Tata Sons is likely to challenge the order before the Supreme Court.
Cognizant Technology Solutions Corporation ("Cognizant") to Reduce Costs by Laying off Employees
As reported, Cognizant has decided to lay off around 350 of its employees earning an annual package ranging from INR 80 Lakhs to INR 1.2 Crores, aged 50-55 years. The aim underlying this decision is to reduce the cost and raise the profit margins. The company also seeks to shift its business towards digital technology services from traditional technology services.
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.