Legal & Industry Updates - May 2022
LEGAL & INDUSTRY UPDATES
Companies (Share Capital and Debentures) Amendment Rules, 2022 (source)
The Ministry of Corporate Affairs (“MCA”) through a notification dated May 4, 2022, has notified the Companies (Share Capital and Debentures) Amendment Rules, 2022 (“SCDA Amendment Rules”). The SCDA Amendment Rules amend the Companies (Share Capital and Debentures) Rules, 2014, wherein in the Annexure, in Form No.SH-4, before the enclosures, the following declaration has been inserted, namely “Declaration: Transferee is not required to obtain the Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 prior to transfer of shares; or Transferee is required to obtain the Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 prior to transfer of shares and the same has been obtained and is enclosed herewith.” The SCDA Amendment Rules requires the transferee to give a declaration regarding the compliance of Foreign Exchange Management (Non-debt instrument) Rules, 2019, for transfer of shares and the companies are required to ensure compliance of the same before approving transfer of shares.
Companies (Prospectus and Allotment of Securities) Amendment Rules, 2022 (source)
MCA through a notification dated May 5, 2022 has notified the Companies (Prospectus and Allotment of securities) Amendment Rules, 2022 (“PAS Rules 2022”) to amend the existing Companies (Prospectus and Allotment of securities) Amendment Rules, 2014. In the Companies (Prospectus and Allotment of Securities) Rules, 2014, in Rule 14(1) (Private Placement), a new proviso is inserted which stipulates that no offer or invitation of any securities under Rule 14, will be made to a body corporate incorporated in, or a national of, a country which shares a land border with India, unless such body corporate or the national, as the case may be, has obtained Government approval under the Foreign Exchange Management (Non-debt Instruments) Rules, 2019 and attached the same with the private placement offer cum application letter. Further PAS Rules, 2022 have further modified in the Annexure, Form No. PAS-4 (Private Placement Offer Letter), in line with the amendments stipulated above.
Companies (Incorporation) Second Amendment Rules, 2022 (source)
MCA, has notified the Companies (Incorporation) Second Amendment Rules, 2022 (“Incorporation Amendment Rules”), dated May 20, 2022, to further amend the Companies (Incorporation) Rules, 2014. The Incorporation Amendment Rules pertain to providing a declaration by first subscribers and directors of a company. MCA has revised the format of e-Form INC-9 (Declaration by Subscriber/First Director), pursuant to which the subscribers and directors will have to provide a declaration stating that during the previous five years, they have not been found guilty of a crime related to the promotion, establishment, or management of any organization. Further, for the previous five years, they have not been convicted of any fraud, willful misconduct, or breach of duty to any company under the Companies Act, 2013. All the documents are required to be filed with the registrar of companies, containing details that are correct, complete and true to the best of the subscribers and director’s knowledge.
Centre to Develop Framework to Check Fake and Deceptive Reviews on E-commerce Websites (source)
The Ministry of Consumer Affairs, Food and Public Distribution (“Consumer Ministry”), in a press release dated May 28, 2022, announced that the Centre will develop a framework to keep check over fake reviews on e-commerce websites. The Department of Consumer Affairs (“DoCA”) after studying the present mechanism being followed by the E-Commerce entities in India and best practices available globally, will develop these frameworks. DoCA in association with the Advertising Standards Council of India, along with various stakeholders like e-commerce entities, consumer forums, business and trade organizations deliberated on the magnitude and roadmap ahead for fake reviews on websites. The two main issues included traceability by ensuring the authenticity of the reviewer and the associated liability of the platform. Disclosure by e-commerce entities on choosing the most relevant reviews for display in a fair and transparent manner were also the key focus area. Paid reviews, unverifiable reviews and absence of disclosure in case of incentivised reviews which make it challenging for consumers to recognize genuine reviews were among the issues discussed as well. Further, the stakeholders from e-commerce companies claimed that they have frameworks in place by which they monitor fake reviews and would be pleased to take part in developing a legal framework on the issue.
DoCA Cautions Restaurants on Forced Charging of “Service Charges” on Consumers (source)
The Consumer Ministry, through a press release dated May 23, 2022, stated the scheduling of a meeting on June 2nd, 2022 with the National Restaurant Association of India (NRAI) to discuss the issues pertaining to service charge levied by restaurants. In a letter written by DoCA to NRAI, it has been pointed out that restaurants and eateries are collecting service charge from consumers by default, even though collection of any such charge is voluntary and at the discretion of consumers and not mandatory as per law. It has been pointed out in the letter that the consumers are forced to pay service charge, often fixed at arbitrarily high rates by restaurants. Consumers are also being falsely misled on the legality of such charges and harassed by restaurants on making a request to remove such charges from the bill amount. The following issues pertaining to complaints by consumers would be discussed during the meeting, (i) restaurants making service charge compulsory; (ii) adding service charge in the bill in the guise of some other fee or charge; (iii) suppressing from consumers that paying service charge is optional and voluntary; and (iv) embarrassing consumers in case they resist from paying service charge. DoCA has already published guidelines dated April 21, 2017 on charging of service charge by hotels/restaurants. The guidelines note that entry of a customer in a restaurant cannot be itself be construed as a consent to pay service charge. Any restriction on entry on the consumer by way of forcing her/him to pay service charge as a condition percent to placing an order amounts to ’restrictive trade practice’ under the Consumer Protection Act. The guidelines clearly mention that placing of an order by a customer amounts to his/her agreement to pay the prices displayed on the menu card along with the applicable taxes.
Central Consumer Protection Authority Issues notices to Cab Ride Sharing Aggregators for Unfair Trade Practices (source)
The Central Consumer Protection Authority (CCPA), on May 20, 2022 issued notices to cab aggregators (Uber and Ola) for unfair trade practices and violation of consumer rights. Lack of proper consumer grievance redressal mechanism, deficiency in service, unreasonable levy of cancellation charges and fairness of algorithm used to charge fares were among the major issues raised by CCPA. Ride-hailing companies like Ola, Uber, Rapido, Meru Cabs and Jugnoo have been directed to become convergence partners in the National Consumer Helpline, to enable better grievance redressal for consumers and also for better compliance with Consumer Protection Act, 2019 and E-commerce Rules. The primary issues raised in the notices include (i) deficiency in service; (ii) inadequate consumer grievance redressal mechanism in absence of both customer care number and details of grievance officer as required to be mentioned on the platform; (iii) unreasonable levy of cancellation charge wherein users are not shown the amount of time, within which cancelling a ride is permitted; (iv) lack of any information on the algorithm or method used by the company to charge different fares for the same route from two individuals; and (v) inclusion of charges for add-on services by pre-ticked boxes for including add-on services without obtaining consent by explicit and affirmative action before each ride.
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.