Legal & Industry Updates - July 2019
SPECIAL EVENTS
Interactive Session on Union Budget 2019-2020 with Ministry of Finance, New Delhi, July 10, 2019
Kaveri Kumar, Founder and Head of Corporate Practice and Astha Sehgal, Associate participated in an interactive session on the new union budget organized by Confederation of Indian Industry. The session was addressed by eminent speakers such as:
Mr. Pramod Chandra Mody (Chairman, Central Board of Direct Taxes)
Mr. SM TATA (Principal Commissioner, Central Board of Direct Taxes)
Mr. Sandeep Bhatnagar (Member- GST, Central Board of Direct Taxes)
Mr. Vishal Malhotra and Mr. Abhishek Jain (Tax Partners at EY India) and Joint Secretaries of Central Board of Direct Taxes.
Some of the key aspects of the new budget highlighted and discussed in the session were:
Special provisions introduced in the budget for startups with respect to angel tax benefits, carrying forward of losses and vesting of the voting power with the shareholders.
Introduction of E-invoicing from January 1, 2020.
Rationalization of tariff lines and promotion of the Make in India initiative.
Ability to reduce errors in tax calculation and collection by way of pre-filling of returns.
Promoting ease of living via ease of tax compliance, both at the policy and process levels.
The Sabka Vishwas Legacy Dispute Resolution Scheme which intends to provide relief against the dispute issues relating to taxes, which have been subsumed in GST.
LEGAL & INDUSTRY UPDATES
Proposed Measures in the Union Budget 2019-20 for Foreign Direct Investment (“FDI")
The Ministry of Finance, on 5th July, 2019, proposed reforms while presenting the Union Budget relating to the FDI. Some of the key reforms are highlighted as follows:
Local sourcing norms will be eased in single brand retail sector. Currently, 30 per cent mandatory local sourcing is required, preferably from MSMEs.
Foreign portfolio investors ("FPIs") to be permitted subscription to listed debt securities issued by Real Estate investment trusts ("ReITs") and infrastructure investment trusts ("InvITs").
The Government will examine suggestions of further opening up of FDI in aviation, media and insurance sectors in consultation with all stakeholders.
100% FDI is to be permitted for insurance intermediaries.
Amendment to the Companies (Significant Beneficial Owners) Rules, 2018
The Ministry of Corporate Affairs ("MCA"), on 1st July, 2019, has notified the Companies (Significant Beneficial Owners) second Amendment Rules, 2019, to revise Form BEN 2 (Return to the Registrar in respect of declaration under Section 90 of the Companies Act, 2013 (“Act”). The time limit for filing the revised form BEN-2 as per the notification issued on 29th July, 2019 by MCA, is extended upto 30th September, 2019 without payment of additional fee, and thereafter fee and additional fee will be payable.
The Banning of Unregulated Deposit Schemes Bill, 2019 ("Banning Bill”)
The Rajya Sabha, on 29th July, 2019 passed the Banning Bill which seeks to prevent unregulated entities from collecting deposits and to tackle the menace of illicit deposit taking activities. The proposed legislation provides adequate provisions for punishments and disgorgement/repayment of deposits in cases where such schemes manage to raise deposits illegally.
The Occupational Safety, Health and Working Conditions Code, 2019 ("OSH Code”)
The Lok Sabha, on 23rd July, 2019, introduced the OSH Code which seeks to merge 13 labour laws into one code on occupational safety, health and working conditions that would apply to all establishments with 10 or more workers. The main aim of the OSH Code is to enhance the provisions related to safety, health and working conditions of the workers by making it mandatory for employers to provide free annual medical check-ups and to issue appointment letters to all employees.The main reforms introduced by the OSH Code are:
Constitution of the “the National Occupational Safety and Health Advisory Board” and the State Occupational Safety and Health Advisory Board for giving recommendations to the central/state government on policy matters, relating to occupational safety, health and working conditions of workers and upon administration of the OSH Code.
To allow women workers to work in an establishment before 6 a.m. and beyond 7 p.m. with their consent.
Enabling courts to give a portion of monetary penalties upto fifty per cent (50%) to the worker who is a victim of an accident or to the legal heirs of such victim in the case of his/herdeath.
The concept of a “common license” instead of multiple licenses for factory, contract labour and beedi and cigar establishments and the concept of a single all India license for five years for engaging contract labour.
New Delhi International Arbitration Centre Bill, 2019 ("NDIAC Bill")
The Rajya Sabha, on 18th July, 2019, passed the NDIAC Bill which replaces an ordinance issued in March 2019 and provides for the establishment of the New Delhi International Arbitration Centre ("Centre") for the purpose of creating an independent and autonomous regime for institutionalised arbitration and for acquisition and transfer of the undertakings of the International Centre for Alternative Dispute Resolution. The Centre will be headed by a Chairperson, who has been a judge of the Supreme Court or a High Court or an eminent person, having special knowledge and experience in arbitration proceedings and related administrative activities. The key objects under the NDIAC Bill are:
To promote academic activities.
To maintain panels of accredited arbitrators, conciliators, mediators and specialists both at national and international level.
To collaborate with other national and international institutions for maintaining the credibility of the Centre as a specialised institution in arbitration and conciliation.
To lay down parameters for different modes of alternative dispute resolution mechanisms.
Constitution of Working Group to Review Regulatory & Supervisory Framework for Core Investment Companies ("CICs")
The Reserve Bank of India ("RBI"), on 3rd July, 2019, constituted the working group to review regulatory and supervisory framework for CICs. The working group will suggest changes to RBI towards registration of CICs, measures for strengthening corporate governance and disclosure requirements of CICs, undertaking appropriate measures to enhance RBI’s off-sight surveillance and on-sight supervision over CICs and also examining the terms of adequacy, efficiency and effectiveness in the current regulatory framework for CICs.The working group will submit its first report on 31st October, 2019.
Amendment to Arbitration & Conciliation Act, 1996
The Rajya Sabha, on 18th July, 2019, passed the Arbitration and Conciliation (Amendment) Bill, 2019 ("A&C Bill"). The A&C Bill seeks to provide domestic and global settlement of commercial disputes. The key reforms undertaken through the bill include the following:
Constitution of an Arbitration Council of India for grading of arbitral institutions, stating norms, monitoring quality, training of the arbitrators etc.
The appointment of arbitrators through ‘arbitral institutions’ designated by the Hon’ble Supreme Court in cases of international commercial arbitration or by the Hon’ble High Courts in cases of arbitration other than international commercial arbitration. Prior to the amendment the term 'arbitral institutions' was not defined under the act.
The period of completion of statements of claims and defence to be six months from receipt of notice by the arbitrator for its appointment. Prior to the amendment, such period was determined as agreed between the parties or as stated by the arbitral tribunal.
The A&C Bill provides for the arbitrator, the arbitral institutions and the parties to maintain confidentiality relating to arbitral proceedings and also seeks to protect the arbitrator(s) from any suit or other legal proceedings for any action or omission done in good faith in the course of arbitration proceedings.
Amendment to Insolvency & Bankruptcy Code, 2016 ("IBC 2016")
The Rajya Sabha, on 29th July, 2019, notified the Insolvency and Bankruptcy Code (Amendment) Bill, 2019 (“IBC 2019”). The amendments proposed by IBC 2019 aim to fix gaps in the existing law while simultaneously ensuring speedier resolution of cases involving corporate debtors. The key reforms proposed through IBC 2019 are as follows:
Resolution Plan -The resolution plan to provide clarity regarding alternative restructuring schemes (mergers, demerger, amalgamation) as part of the resolution plan. At present, IBC 2016 mandates that a company may be rehabilitated within 270 days or face liquidation in absence of a resolution plan. IBC 2019, presently does not provide for the inclusion of any alternative restructuring plan.
Extension of time limit -The completion of the insolvency resolution processto be extended from 270 days to 330 days, including time spent on judicial process or litigation after the resolution plan is admitted
Commercial considerations by Committee of Creditors ("CoC") - CoC to decide on commercial considerations regarding manner of funds distribution aspart of the resolution process.
Distribution of assets - Operational creditors and the unsecured financial creditors not to be treated equally with the secured financial creditors.
Universally Binding- The approved resolution processwill be binding on all stakeholders including the central, state and local government authorities to whom the insolvent company owes dues.
Liquidation decision of CoC - CoC may take decisions to liquidate the corporate debtor, any time after constitution of the CoC and before preparation of the information memorandum.
The Code on Wages, 2019 ("Wages Code")
The Lok Sabha, on 30th July, 2019, passed the Wages Code to amend and consolidate the laws relating to wages, bonus and related matters. Once enacted, the Wages Code would subsume the (i) Payment of Wages Act, 1936, (ii) the Minimum Wages Act, 1948, (iii) Payment of Bonus Act, 1965 and (iv) the Equal Remuneration Act, 1976. The major reforms stated under the Wages Code are as follows:
The central government to make all wage-related decisions for employment in establishments such as railways, mines, oil field, major ports, air transport service, telecommunication, banking and insurance company or a corporation or other authority established by a Central Act or a central public sector undertaking or subsidiary companies set up by central public sector undertakings or autonomous bodies owned or controlled by the Central Government and State Government.
The central government and state governments (“Government”) may take the skills and difficulty of work into account for determining the minimum wages.
The central government will be entitled to fix minimum floor wage based onthe minimum living conditions.The Government cannot fix minimum wages below such floor wages in their respected sectors.
The overtime pay of a workman to be twice the normal rate of wage.
The deduction in wages on grounds of fines, absence from duty, accommodation by employer, etc. not to exceed the limit of 50% of the total wage.
Penalties are specified relating to offenses committed by an employer, such as (i) paying less than the due wages, or (ii) for contravening any provision of the Wages Code. Penalties will vary depending on the nature of offense, with the maximum penalty being imprisonment for three months along with a fine of up to one lakh rupees.
Companies (Amendment) Bill, 2019 ("Amendment Bill")
The Rajya Sabha, on 30th July, 2019, introduced the Amendment Bill which aims to tighten the Corporate Social Responsibility ("CSR") provisions and extend the punishments in case of default in meeting CSR requirements. The major amendments stated under the Amendment Bill are as follows:
Unspent corporate social responsibility amount to be transferred within a period of thirty days from the end of the financial year to a special account namely Unspent Corporate Social Responsibility Account opened by a company with a scheduled bank.
Such amount shall be spent by the company in pursuance of its obligation towards the CSR Policy within a period of three financial years from the date of such transfer, failing which, the company shall transfer the same to a Fund specified in Schedule VII (Activities which may be included by companies in their CSR policies), within a period of thirty days from the date of completion of the third financial year. A penalty has been introduced between Rs 50,000 and Rs 25,00,000 and every defaulting officer may be punished with imprisonment of up to three years or fine between Rs 50,000 and Rs 25,00,000 or both. Prior to the amendment, no fine was imposed if a company failed to meet CSR compliance instead such company was required to specify the reasons for not spending the amount in its board report which is laid before the general meeting.
Central Government can apply to the National Company Law Tribunal ("NCLT") for relief against mismanagement of the affairs of the company and may also make a case against an officer of the company on the ground that he is not fit to hold office in the company, for reasons such as fraud or negligence. If the NCLT passes an order against the officer, he will not be eligible to hold office in any company for five years.
The maximum penalty that a Regional Director can levy on compounding of offences has been increased to up to Rs 25 lakhs from Rs.5 lakhs.
Amendment to Right to Information Act, 2005 (RTI Act, 2005)
The Rajya Sabha, on 25th July 2019, passed the Right to Information (Amendment) Bill, 2019, which seeks to amend the provisions relating to the Information Commissioners (ICs) at the Centre and State. The key amendments proposed under the bill are stated below:
The central government will determine the ‘term of office’ for the Chief IC and ICs at Centre and State, prior to amendments the term of 5 years was stated under the RTI Act, 2005.
The central government will be able to make decisions regarding the pay, allowances and other service conditions of the Chief IC and ICs. Prior to amendment the salary was equivalent to the salary of Chief Election Commissioner and Election Commissioner (EC) for Centre, and EC and Chief Secretary for the State.
The Bill has removed the provisions from the RTI Act 2005 which states that if the Chief IC and ICs receive retirement benefits from previous government, their salaries are to be reduced by an amount equal to such pension.
The Consumer Protection Bill, 2019 ("The Bill")
The Lok Sabha, on 30th July, 2019, passed the Bill to establish authorities for timely and effective administration and settlement of the consumer disputes. The main features of the Bill are:
The Bill seeks to establish a Central Consumer Protection Authority for efficient and speedier disposal of consumer grievances.
The Bill binds the manufacturer, seller or service provider for defect of goods or deficiency in service to compensate the consumer against harm or injury caused under the new provisions of ‘product liability’.
The Bill imposes a penalty on the manufacturer or service provider of up to Rs 10 lakh and imprisonment for up to two years for false or misleading advertisement which is prejudicial to the interest of the consumers. In case of a subsequent offence, the fine may extend to Rs 50 lakh and imprisonment of up to five years and can also prohibit the endorser of a misleading advertisement from endorsing that particular product or service for a period of up to one year. For every subsequent offence, the period of prohibition may extend to three years. Prior to the amendment, a trader or a person against whom a complaint was made, was liabile for punishment with imprisonment for a term of one month to three years, or with fine of not less than two thousands rupees but which may extend to ten thousand rupees, or with both.
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.