Legal & Industry Updates - January 2019
The Companies (Amendment) Ordinance, 2019
The Ministry of Corporate Affairs on 12th January, 2019 has notified the amendments to Companies Act, 2013 with an objective of promotion of ease of doing business with better corporate compliance by re-categorizing of offences, thereby reducing the burden on special courts and bringing down penalties for small companies. The main reforms undertaken through the Ordinance include the following:
A new section 10A (Commencement of business) has been inserted wherein any company incorporated after commencement of this ordinance shall not commence any business unless the director within 180 days makes a declaration which will be verified by the registrar that every subscriber to the memorandum has paid the value of shares agreed to be taken by him and any default in complying with the same shall invite a fine of INR 50,000 to be paid by the company.
In Section 14 (Alteration of Articles), any conversion of a Public Company to a Private Company will not be valid unless approved by an order of the Central Government. Previously, the power to issue such an order was with the Tribunal.
In Section 117 (Resolution and Agreements to be filed), if the company fails to file a resolution and agreement before the specified time, it shall be liable to pay INR 1,00,000 as penalty and in case of a continuing failure it will be extended further by INR 500 per day subject to a maximum penalty of 25 lakhs. For any officer who is liable, the penalty is of INR 50,000, and in case of a continuing failure it will be extended further by INR 500 per day subject to a maximum penalty of 5 lakhs.
In section 191 (Payment to director for loss of office, etc., in connection with transfer of undertaking, property or shares), the penalty is increased from a minimum of INR 25,000 to a minimum of one lakh rupees and in section 441 (Compounding of certain offences), the maximum amount of fine which may be imposed for such offence is increased from 5 lakh rupees to 25 lakh rupees.
New External Commercial Borrowings (ECB) Framework
Reserve Bank of India (RBI), on 16th January, 2019 has come out with a new policy for overseas borrowings, allowing all eligible entities to raise ECB upto $750 million or equivalent per financial year under the automatic route thereby replacing the existing sector wise limits and further improve the ease of doing business. Major liberalization/rationalization in the new framework are:
The list of eligible borrowers has been expanded. All entities eligible to receive foreign direct investment can borrow under the ECB framework.
Any entity who is a resident of a country which is Financial Action Task Force (FATF) or The International Organization of Securities Commissions (IOSCO) compliant will be treated as a recognized lender. This change increases the lending options and allows various new lenders in ECB space.
The minimum average maturity period (MAMP) has been kept at 3 years for all ECBs and late submission fee for delay in prescribed reporting under the ECB framework has been introduced to obviate the need for compounding these contraventions.
The Constitution (One Hundred And Third Amendment) Act, 2019
The Ministry of Law and Justice, on 12th January, 2018, has notified the Constitution (One Hundred and Twenty-Fourth Amendment) Act, 2019 which aims to provide reservation in public employment and higher education for economically weaker sections. The Constitution of India was amended for the 103rd time since its creation in 1950 and envisages giving upto 10% reservation in government jobs and education to the poor among the general category.
Ombudsman Scheme for Digital Transactions, 2019
RBI, on 31st January, 2019 has launched the Ombudsman Scheme for Digital Transactions (OSDT) under Section 18 of the Payment and Settlement Systems Act, 2007 which aims to provide a cost-free and expeditious complaint redressal mechanism relating to deficiency in customer services in digital transactions conducted through non-bank entities regulated by RBI. Any person may file a complaint free of cost with the Ombudsman for Digital Transactions on grounds alleging deficiency in Prepaid Payment Instruments and Mobile / Electronic Fund Transfers. The Ombudsman has the power to award compensation to the extent of the actual loss suffered or INR 20 lakhs whichever is lower and may also award INR 1 lakh to the complainant for loss of his time, expenses incurred and mental agony suffered by him.
The DNA Technology (Use and Application) Regulation Bill, 2019
The Lok Sabha on 8th January, 2019 passed the DNA Technology (Use and Application) Regulation Bill, 2019 that allows regulated use of DNA technology to establish the identity of certain defined categories of persons, including offenders, suspects, and undertrials and thereby support and strengthen the justice delivery system of the country. The main features of the Bill are:
The Bill regulates the use of DNA technology for establishing the identity of persons in respect of matters listed in a Schedule which include criminal and civil matters such as parentage disputes, emigration or immigration, and transplantation of human organs.
It seeks to establish a National DNA Data Bank, Regional DNA Data Banks and DNA Regulatory Board to accredit the DNA laboratories that analyze DNA samples to establish the identity of an individual.
It is mandatory to get written consent by individuals to collect DNA samples from them. The consent is not required for offences with the punishment of more than seven years of imprisonment or death.
The New Delhi International Arbitration Centre Bill, 2019
The Lok Sabha on 4th January, 2019 has passed the New Delhi International Arbitration Centre Bill (NDIAC) to set up a revamped International Arbitration Centre at New Delhi with the aim to make India the hub of arbitration. The Centre shall consist of 7 members including a Chairperson who shall hold the office for 3 years and be eligible for re-appointment.
The key objectives of the NDIAC include (i) promoting research, providing training and organizing conferences and seminars in alternative dispute resolution matters; (ii) providing facilities and administrative assistance for the conduct of arbitration, mediation and conciliation proceedings.
The key functions of the NDIAC include (i) facilitating conduct of arbitration and conciliation in a professional, timely and cost-effective manner; and (ii) promoting studies in the field of alternative dispute resolution.
Revival of suit against Nestle India for allegedly selling lead-laced Maggi
The Supreme Court on 3rd January, 2019 revived the Centre’s Rs 640-crore class action suit, lying dormant for over three years in the national consumer forum, against Nestle India for selling Maggi containing lead in it and a bench of Justices D.Y. Chandrachud and Hemant Gupta have asked the consumer forum to get on with the adjudication of claims. The Food Safety Standards and Safety Authority of India (FSSAI) had banned the sale of Maggi in June 2015 alleging that it contained harmful monosodium glutamate (MSG) and excess lead. Nestle, in its defense pointed out that lead is present everywhere and therefore a limit of 2.5 PPM is fixed as permissible limit and Nestle does not add any lead to the product and the miniscule quantities come purely from external sources like air, water etc.
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.