Legal & Industry Updates - October 2019
SPECIAL EVENTS
Program for Startups at Swadeshi Startup, October 12, 2019
Kaveri Kumar, Founder and Head of Corporate Practice, was invited as a speaker at a meet and greet event organized by Swadeshi Startup. The participants at the event were founders and management executives of various start-ups, engaged in healthcare, retail, branding, finance, power sector etc. The focus of the talk was on the legal eco system required for a start-up's operations and the basic statutory framework applicable to a start-up. The event provided a platform for start-ups to share information about their business and for enhancing their visibility in the present marketplace both offline and online.
Session on India's E-Commerce Sector, October 14, 2019
Kaveri Kumar, Founder and Head of Corporate Practice, participated in a session on 'India's E-Commerce Sector', organized by the Confederation of Indian Industry. Some of the key focus points of the session were, role of E-commerce in rapid technological advancements, need for a comprehensive policy to safeguard and promote the E-commerce sector and requirement of increased investments, improved logistics infrastructure, favourable demographics, digitization and government support to witness growth potential of E-commerce sector in the future.
LEGAL & INDUSTRY UPDATES
Competition Commission of India ("CCI") Approves the Acquisition of Shareholding in GMR Airports Limited ("GAL") by TRIL Urban Transport Private Limited ("TUTPL"), Valkyrie Investment Pte. Limited ("Valkyrie") & Solis Capital (Singapore) Pte. Limited ("Solis")
CCI, on 1st October, 2019, has approved the acquisition of upto 55.2% equity stake in GAL collectively by TUTPL, Valkyrie and Solis under section 31 (1) (Order of Commission on certain combinations) of the Competition Act, 2002 ("Competition Act"). GAL is engaged in developing, managing and operating airports in India and around the world, while also being engaged in associated business activities. TUTPL is a wholly-owned subsidiary of Tata Realty and Infrastructure Limited which in turn is an arm of Tata Sons Private Limited, Valkyrie is a special purpose vehicle organized as a private limited company in Singapore and is an affiliate of GIC Private Limited and Solis is an investment arm of the Hong Kong-based SSG group.
CG to Introduce a 'Commitment and Settlement' Clause in the Competition Act
As reported, CG will introduce a ‘commitment and settlement’ clause in the Competition Act in the upcoming winter session of Parliament, to allow quick settlement of anti-trust cases outside the otherwise lengthy adjudication procedure. The clause will allow those found in contravention of the competition law to ‘commit’ to correct its ways to avoid further action even before the investigation is completed. Businesses facing charges of anti-competitive practices such as exclusive supply deals and cases of abuse of dominance, will be able to resolve the case by paying a settlement amount. Competition Commission of India will also decide non-monetary terms while allowing settlement of such cases. The key aim is to rationalize regulatory framework and improve ease of doing business.
The Personal Insolvency Regime Expected to be Operational by Next Year
As reported, on 1st October, 2019, the already existing personal insolvency provisions under the Insolvency and Bankruptcy Code, 2016 are expected to be operational in a year's time and the debt recovery tribunals will be the main institutions for determining the matters under the personal insolvency regime. The Ministry of Corporate Affairs ("MCA") further announced introduction of an online based non-adjudicatory process for entities having small exposures. The framework for the cross-border insolvency based on United Nations Commission International Trade Law is also expected to be enacted in the upcoming winter session of Parliament.
Private Companies with Debts May Soon have to Undergo Mandatory Secretarial Audit
As reported, the MCA on 5th October, 2019, has stated that the Central Government ("CG") may soon make it mandatory for private companies with outstanding debts to undergo a secretarial audit. Mandatory secretarial audit may also be necessary in cases where private companies have heavily borrowed from banks beyond a threshold. The move is expected to improve compliance and corporate governance standards in India. At present, mandatory secretarial audit is only restricted to listed companies.
CG Sets up High-Level Panel to Check Money Laundering Activities
As reported, the CG, on 7th October, 2019, has set up a high-level Inter-Ministerial Co-ordination Committee ("IMCC"), chaired by the Revenue Secretary of India, for better coordination among various departments and law enforcement agencies to prevent money laundering activities. The 19-member IMCC has five secretaries, including members from ministries of finance and external affairs, and chiefs of various regulatory authorities and probe agencies. Besides ensuring operational cooperation among the CG, law enforcement agencies, the Financial Intelligence Unit-India and the regulators or supervisors, IMCC would also work on developing and implementing policies on anti-money laundering and countering the financing of terrorism.
Constitution of Working Group to Prepare Contours of New Industrial Policy
The Ministry of Commerce and Industry, on 3rd October 2019, has approved the constitution of a working group to prepare the contours of the new industrial policy and make India a manufacturing hub. The working group will comprise of members from CG, state governments and domestic industry. In order to prepare new industrial policy, the working group will:
Consult the stakeholders across the spectrum including domain experts, academia, think tanks and industry.
Identify the pain points of the industry.
Develop actionable solutions for short term and medium-term.
Delineate the role of the private sector in achieving the national targets.
Wipro Limited ("Wipro India") Sues Analog Devices Inc. ("ADI") for Alleged Breach of Contract
As reported, Wipro India has filed a case against ADI, a U.S. based multinational semiconductor company, for breach of an outsourcing contract wherein both the companies entered into a contract to jointly develop a high multi-media interface transceiver that integrated the receiver and transmitter function with the digital audio input/output onto a chip. Wipro also accommodated ADI’s repeated requests for additional services which were not included within the original scope of the statement of work, despite the fact that the actions of ADI caused delays in completion of the work. Moreover, Wipro alleged that ADI terminated the agreement over an email even though the contract mandated a 90-day notice period for any such termination as a result of which Wipro suffered damages and thereby ADI owes Wipro over $6.9 million under the contract termination payout schedule.
Ex-Promoters of Ranbaxi Enterprise Limited ("Ranbaxi") & Fortis Healthcare Limited ("Fortis") Held for Fraud
As reported, the Economic Offences Wing of the Delhi Police arrested ex-promoters of Ranbaxi and Fortis for alleged default in repayment of dues and causing wrongful loss of INR 2,397 crore to Religare Finvest Limited ("RFL"). RFL has alleged that the accused had pushed RFL into dire financial straits by disbursing loans to companies having no financial standing that were controlled by them. Earlier, Fortis had also written to market regulator Securities and Exchange Board of India seeking the initiation of legal proceedings against the ex-promoters to recover the dues amounting to INR 472 crore. A Japanese pharma company, Daiichi Sanyo, too, is fighting to recover the award from the ex-promoters and has urged the Delhi High Court ("Delhi HC") to attach their properties/assets which may be used to recover the dues.
Bhushan Power & Steel Limited's ("BPSL") Assets Worth INR 4,025.23 Crores Attached
As reported, the Enforcement Directorate ("ED") has attached assets including land, building, plant and machinery of BPSL located in Odisha worth Rs 4,025.23 crores under the provisions of the Prevention of Money Laundering Act, 2002, in connection with its money laundering probe linked to an alleged bank loan fraud. The ED alleged that an amount of INR 695.14 crore was introduced as capital by the then CMD of the company and his family members in BPSL out of artificially generated long term capital gains ("LTCG") by diversion of bank loans fund of BPSL and LTCG were exempted from income tax during the relevant time.
ED further revealed that another amount of INR 3,330 crore invested as equity by promoter companies was also found to have been routed out of the funds obtained as various loans and diverted from accounts of BPSL in the shape of advances shown to various shell companies operated by the different entry operators.
CG to Decriminalise 2/3rd of Offences Under the Companies Act, 2013 ("The Act")
As reported, CG is planning to do away with jail term in over 40 sections out of the 66 sections under the Act, where compounding is permitted. Further, CG is seeking to lower the penalty for small companies which is expected to benefit 8 lakh of the 11 lakh registered companies with a turnover of upto INR 2 crores and paid-up capital of less than INR 50 lakhs. The changes are being discussed by the Company Law Committee which is also looking at stringent deterrents for violators, without putting them in jail.
Ministry of IT & Electronics ("MeitY") Builds a Startup Hub for Stakeholders
As reported, MeitY has set up a hub for startups, which will act as a platform to connect with incubators, accelerators, mentors, angel funds and venture capitalists. The platform will be formally inaugurated by the end of October, 2019 wherein nearly 1,000 startups and 130 incubation centres have already gone live. The platform lists startups according to their area of expertise or the state they belong to, and will act as a facilitator to bring together all existing programmes and connect startups to the right talent, mentor or venture capital fund. Through the platform, startups will get a dedicated webpage to showcase their enterprise, connect to incubation centres, seek guidance from mentors, benefit from government schemes, access centres of excellence and avail R&D facilities.
Serious Fraud Investigation Officer ("SFIO") Asks India’s Law Firms to Disclose All Information Related to Infrastructure Leasing & Financial Services Limited ("IL&FS")
As reported, the SFIO has asked India’s law firms and consultants to disclose all information they have on debt-ridden IL&FS which collapsed a year ago. The SFIO served notices to the law firms under section 217(1) (Procedure, powers etc. of Inspectors) of the Act, that empowers the investigating officer to seek information from officers, other employees and agents of a company. Some law firms have reached out to their ex-client IL&FS for its consent as professional communication between attorney and clients is protected under various laws such as the Indian Evidence Act, 1872, the Advocates Act, 1962 and the Bar Council of India Rules, even after the termination of employment.
Infosys Limited ("Infosys") Starts Probe into Alleged 'Unethical Practices' by Chief Executive Officer ("CEO")
As reported, Infosys stated that it is investigating allegations of 'unethical practices' by its CEO after receiving whistleblower complaints in September 2019, sending its shares into a tailspin. The complaints dealt with allegations relating to the CEO's international travel to the U.S. and Mumbai, Infosys bypassing reviews and approvals for large deals and taking 'unethical' steps to boost short-term revenue and profit. As a result, Infosys shares plunged 16.21 percent, marking their worst intraday drop in 6 years.
Companies (Creation & Maintenance of Database of Independent Directors) Rules 2019 (“ID Rules, 2019”)
The MCA, on 22nd October, 2019, has introduced ID Rules, 2019 for creation and maintenance of an online databank of individuals willing and eligible to be appointed as independent directors, along with their details to be placed on Indian Institute of Corporate Affairs' ("IICA") website. IICA may provide such information to companies upon payment of requisite fees. Further, IICA will be responsible for conducting the online proficiency self-assessment test, preparation of study materials and option for advance tests for such individuals before they can be appointed to the companies' board.
Delhi HC Sustains Temporary Injunction in Favour of Make My Trip (India) Private Limited ("MMT")
In a suit for permanent injunction filed by MMT to restrain infringement of its trademarks by Make My Travel (India) Private Limited ("Make My Travel"), Delhi HC, on 18th October, 2019, upheld the temporary ad-interim injunction, restraining Make My Travel from using the trademark 'Make My Travel', 'MMT', tag line 'Dreams Unlimited', website 'www.makemytravelindia.com' and the logo 'Make My Travel'. MMT contended that Make My Travel's marks were phonetically, visually, structurally and conceptually similar to MMT's marks and even the nature of goods/services in respect of which trademarks were being used are similar.
Department for Promotion of Industry & Internal Trade ("DPIIT") & Ministry of Civil Aviation ("Aviation Ministry") Explore Options to Ease Foreign Direct Investment ("FDI") Norms to Attract Bidders for Air India
As reported, since national carrier Air India is sitting on a debt pile of around INR 58,000 crore, besides huge accumulated losses running into thousands of crores, DPIIT and Aviation Ministry are looking at the possibility of relaxing FDI norms to attract bidders for Air India. In the aviation sector, even though 100 per cent FDI is allowed under automatic route for MRO (Maintenance, Repair, Overhaul), ground handling, and aircraft purchase, DPIIT is looking at relaxing norms in those sectors where currently 100 per cent FDI is not permitted through automatic route as it will have a better effect on the Air India bidding prospects. The issue, among others, is expected to be raised in an inter-ministerial group meeting on 29th October, 2019.
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.