Legal & Industry Updates - May 2019
MCA Notifies Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2019
MCA through Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2019, notified on 16th May 2019, has inserted new Rule 12B in the Companies (Appointment and Qualification of Directors) Rules, 2014 (“Director Rules 2014”). Pursuant to new Rule 12B of the Director Rules 2014, where a company governed by Rule 25A (Active Company Tagging Identities and Verification (ACTIVE)) of the Companies (Incorporation) Rules, 2014, fails to file the e-form ACTIVE within the prescribed period, the Director Identification Number (DIN) allotted to its existing directors, shall be marked as “Director of ACTIVE non-compliant company.
Supreme Court In-House Committee Dismisses Sexual Harassment Complaint Against the Chief Justice of India (“CJI”)
The complaint against the CJI was dismissed by the Supreme Court In-House Committee (“In-House Committee”) on account of not finding any substance in the allegations. The In-House Committee was lead by Hon'ble Justice S.A. Bobde along with Justice Indira Banerjee and Justice N.V. Ramana who was later replaced by Justice Indu Malhotra to make the composition of the In-House Committee, a women majority panel. Further, the In-House Committee on May 6th 2019, relied on the Indira Jaisingh vs Supreme Court judgment wherein it was held that a report based on a Supreme Court inquiry panel is confidential and not for disclosure to any other person. Thus, basis the above judgment the In-House Committee decided not to make the In-House Committee report public.
Ministry of Corporate Affairs (“MCA”) Notifies Companies (Incorporation) Fifth Amendment Rules, 2019 for Company Name Determination
The MCA on 13th May 2019, notified the Companies (Incorporation) Fifth Amendment Rules, 2019 (“Company Amendment Rules”). Pursuant to the Company Amendment Rules, Rule 8 (Names which resemble too nearly with name of existing company) of the Companies (Incorporation) Rules 2014 (“Principal Incorporation Rules”) is substituted. The new substituted Rule 8 provides clarity on the process of determining a company name and is further bifurcated in two parts (i) Rule 8A (Undesirable Names) which stipulates the criteria by virtue of which an applied company name will be considered undesirable and (ii) Rule 8B pursuant to which certain company names can only be used after obtaining previous approval of the central government.
IBM Lays of 300 Employees
As reported, IBM has recently laid off 300 employees primarily engaged in software services division in India. Indicatively, the move is for IBM to reinvent itself and meet the changing needs of customers. The employees are reported to have let go, as IBM is focusing on emerging technology capabilities and intends to reduce exposure to traditional services. IBM plans to reduce dependence on conventional software services and rather focus on technologies like cloud services, artificial intelligence etc.
Business to Business ("B2B") Tech Startup Growth at its Peak
As reported by a joint study, between 2014 and 2018, the growth of B2B startups in India has tripled from 900 to 3,200. This was possible because of various factors like increase in B2B ventures, development of technology and increased use of technologies like artificial intelligence (AI), robotics process automation (Rpa), internet-of-things (IoT) and also increased corporate involvement. The presence of over 50 corporate accelerators and incubators in the Indian market which provide market access and technology support to B2B startups is also one of the major reasons for the rapid increase.
MCA Notifies National Company Law Tribunal (Second Amendment) Rules, 2019
MCA on 8th May 2019, notified the National Company Law Tribunal (Second Amendment) Rules, 2019 (“NCLT Amendment Rules”) to amend Rule 84 of the National Company Law Tribunal Rules, 2016. Pursuant to the amendment, in case of a company having share capital: (1) the requisite number of members to file a class action suit (Section 245 of the Companies Act, 2013) shall be - (i) (a) at least five per cent of the total number of members of the company; or (b) one hundred members of the company, whichever is less; or (ii) (a) member(s) holding not less than five per cent of the issued share capital of the company, in case of an unlisted company; (b) member(s) holding not less than two per cent of the issued share capital of the company, in case of a listed company; (2) the requisite number of depositor(s) to file a class action (Section 245 of the Companies Act, 2013) suit shall be - (i) (a) at least five per cent of the total number of depositors of the company; or (b) one hundred depositors of the company, whichever is less; or; (ii) depositor(s) to whom the company owes five per cent of total deposits of the company.
National Consumer Dispute Redressal Commission ("NCDRC") Orders Refund from Builders
NCDRC in the matter of Shalabh Nigam vs Orris Infrastructure Pvt. Ltd and Anr., held that a homebuyer has the right to ask for a refund or compensation from the builder if there is an inordinate delay in getting possession of the property and particularly if the possession is delayed beyond one year. The rationale behind this order is homebuyers cannot be made to wait for infinite time to get possession of their property. NCDRC directed the builder to pay interest on the amount deposited by the claimant and in the event the deadline for possession set by NCDRC not being met, the builder to refund the entire amount with 10% interest.
Competition Commission of India ("CCI") to Probe Google’s Abuse of Dominant Position
As reported, CCI has ordered an investigation into Alphabet Inc’s unit Google for allegedly abusing the dominant position of its popular android mobile operating system to block rivals. The details about the complaint are not disclosed; however, it is based on the same lines of a case filed in EU wherein the regulators had observed that the company had forced manufacturers to pre-install Google Search and Chrome browser, together with its Google Play store, on android devices, giving it unfair advantage. CCI has powers to impose penalty upto ten percent of the average of the turnover for the last three preceding financial years.
National Company Law Tribunal (" NCLT") Admits Reliance Communications ("RCom") Insolvency Proceedings
As reported, bankruptcy proceedings against Reliance Communications (“Rcom”) have been initiated. NCLT superseded Rcom’s board and appointed a new resolution professional to run operations. Further, as directed by NCLT SBI led consortium of thirty-one banks were allowed to form a committee of creditors. Rcom could not meet any of the several publicly made promises to pay back the lenders by monetizing real estate and spectrum assets.
Honourable Bombay High Court Orders Owners of Dilapidated Buildings to Be Made Accountable for Civil and Criminal Liability
In the matter of Rukhsana Yusuf Harianwala vs. Maharashtra Housing Area Development Authority (“MHADA”), MHADA and Saifee Burhani Upliftment Trust approached the Hon’ble Bombay High court to take down three dilapidated adjoined buildings before monsoon as the buildings seemed to be irreparable. The owners of the building contented that the building can be repaired and made habitable. On 16th May 2019, the court ruled that, the owners of the buildings will be made accountable for civil as well as criminal liability, if any untoward act or mishap happens to the buildings, regarding their structures that results in loss to human life or property.
Fund Diversion Probe Against Jet Airways Founder
As reported, the Immigration Authority on May 25th, 2019 detained the Founder of Jet Airways at the Mumbai Airport on the basis of an alert, as the Enforcement directorate ("ED") is making a an inquiry into the diversion of funds and the source of equity of the company since it owes over Rs 8500 Crores to the lenders, led by State Bank of India. ED is making investigations for possible violation of FDI norms by Abu Dhabi carrier Etihad, which made investment into a company that ran Jet's frequent flyer programme. The agency is investigating if the funds were routed out of the grounded airline, the liabilities of which are estimated to be in excess of Rs 20,000 Crore, including dues to vendors. The company has also defaulted in depositing the provident fund money deducted from the employees pay and also some of the taxes that the company had collected.
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.