Legal & Industry Updates - September 2019
SPECIAL EVENTS
Annual Convention on Capital and Commodity Market, September 14, 2019
Ms. Parina Tyagi, Associate, participated in a convention on the issue pertaining to 'Impact of Capital and Commodity Market on the Indian economy', organized by the PHD Chamber of Commerce and Industry. Some of the key focus points of the session were, vision of new India in re-shaping capital markets, focusing on development of commodity markets, investment in new instruments introduced in the capital market to achieve market capitalization of USD 5 Trillion and the role of Securities and Exchange Board of India (“SEBI”) in nurturing capital and commodity markets.
National Conference on Legal & Regulatory Issues: Sectoral Reforms and Role of Legal Services, September 14, 2019
Mr. Anmol Sharma, part of the corporate team, participated in a conference on the issue pertaining to 'Sectoral Reforms and Role of Legal Services', organized by the Confederation of Indian Industry (CII). Some of the key focus points of the session were, addressing scientific and technological advancement reforms in healthcare sector, need to address ill-drafted legislations, introduction of 'sunset clause' to limit tax benefits, role of judiciary in interpreting state legislations and requirement to introduce reforms in banking and financial sectors.
LEGAL & INDUSTRY UPDATES
E-commerce Companies May Face a Repackaging Challenge
As reported, E-commerce companies will have to find alternatives for single-use plastic for packaging of their products, as the Central Government ("CG") is likely to restrict the usage of single-use plastics from 2nd October, 2019. Single use-plastics are plastic bags that can be used only once before they are thrown away. CG is also in the process of making E-commerce companies recycle the waste generated by them, in order to set up mechanisms for waste collection, ensure proper recycling and to come up with alternative packaging materials in order to create a sustainable eco-system.
Notification of a New Disclosure Form to be Submitted by Auditors
As reported, CG may soon notify a new disclosure form, which will require the auditors and audit firms to file key findings in respect of companies including adverse comments and observations related to the company’s accounts, to the National Financial Reporting Authority. The proposed disclosure form will be at par with the standards followed by the ‘Public Company Accounting Oversight Board’ of United States of America which requires annual disclosures by auditors to be made, including lists of companies audited and details of any past disciplinary action against members of the firm, along with disclosure of risk assessments of companies.
Securities Appellate Tribunal (“SAT”) Sets Aside SEBI’s Order Against PricewaterhouseCoopers (“PwC”)
SAT, on 9th September, 2019, quashed an order passed against PwC by SEBI wherein SEBI had barred PwC and its network entities from issuing audit certificates to any listed company in India for two years due to its alleged involvement in the ‘Satyam Scam’. SAT held that PwC had no involvement in the scam as there was no evidence that could prove that the auditors fabricated with the management of the company and SEBI lacked jurisdiction to bar audit firms from functioning.
Recommendation to Declare ‘Right to Health' as a Fundamental Right
As reported, a high-level group formed for the health sector (“HLG”), has recommended that ‘Right to Health’ be declared a fundamental right on the 75th Independence Day in 2022 and the Constitution should be amended to shift the subject of health from the state list to the concurrent list. HLG also suggested separate trainings for medical teachers, service providers and the prohibition of medical college faculties from professional private practice.
Jurisdiction of Supreme Court & High Court Confined to the Examination of Arbitration Agreement
The Hon’ble Supreme Court has held that, after introduction of Section 11(6A) (Appointment of an arbitrator), the jurisdiction of the Courts while considering a petition to appoint an arbitrator, should be confined to the examination of the existence of an arbitration agreement. It was observed that the courts are required to examine whether an arbitration agreement consists of a clause which provides for arbitration pertaining to the disputes between the parties to the agreement. The aim is to essentially minimize the intervention of the courts at the stage of appointing an arbitrator.
Insolvency & Bankruptcy Board of India ("IBBI") Mandates Valuation of a Company to be Done Only by Registered Valuers
IBBI, on 16th September, 2019, notified that any valuation of a company's assets to be done under the Companies Act, 2013 ("Act, 2013") and the Insolvency and Bankruptcy Code, 2016 ("IBC Code") will mandatorily be done by registered valuers only.
A list of the provisions of the Act, 2013 under which valuations are required to be conducted by a registered valuer include section 62(1)(c) (Further Issue of Share Capital), section 177(4)(vi) (Terms of reference of Audit Committee), and section 192(1) and 192(2) (Restriction on non-cash transactions involving directors, among others). A list of the provisions of the IBC Code under which valuations are required to be conducted by a registered valuer include section 59(3)(b)(ii) (Voluntary liquidation of corporate persons), and section 46(2) (Relevant period for avoidable transactions), among others.
Indian Healthcare Sector is Expected to Record a Threefold Rise, at a Compound Annual Growth Rate ("CAGR") of Twenty-Two per cent by 2022
As reported, the Indian healthcare sector is expected to record a threefold rise, at a CAGR of 22 per cent during 2016-2022 and is expected to reach USD 372 billion by 2022. There is immense scope for enhancing healthcare services penetration in India, thus presenting ample opportunity for development of the healthcare industry. At present, India ranks 145th among 195 countries in terms of quality and accessibility of healthcare.
Constitution of Company Law Committee ("CLC") to Improve Ease of Doing Business
The Ministry of Corporate Affairs (“MCA”), as per the press release dated 18th September, 2019, has decided to constitute a CLC for examining and making recommendations to the CG on various provisions and issues pertaining to implementation of the Act, 2013 and the Limited Liability Partnership Act, 2008. CLC has been set up in line with CG’s objective of providing ease of doing business to law-abiding corporates, fostering improved corporate compliance for stakeholders at large and analyze the decriminalization of certain offences under the Act, 2013.
Multiple Ministries to Frame their Own E-commerce Rules to Regulate E-commerce Companies
As reported, the Ministry of Electronics and Information Technology ("MeitY") and Ministry of Consumer Affairs, Food and Public Distribution ("MCAFP") have started their respective consultations to frame their own respective rules to regulate E-commerce companies. While MeitY has set up a panel to regulate non-personal data, MCAFP has floated draft guidelines for consumer protection. The Department for Promotion of Industry and Internal Trade has already framed the E-commerce draft guidelines, however, has made little progress in finalizing them.
Madhya Pradesh High Court Fines Medanta Hospital for not Having an Internal Complaints Committee ("ICC") under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH”)
As reported, the Hon’ble high court has imposed a fine of INR 50,000 on Medanta hospital for not constituting an ICC, required under Section 4 (1) of POSH. The court has also directed the hospital to pay compensation to the tune of INR 25 lakhs to the complainant in the case for failing to address her case of sexual harassment.
National Company Law Appellate Tribunal ("NCLAT") Upholds Maintainability of Proceedings for Struck off Companies
As reported, NCLAT has held that the corporate insolvency resolution process under the IBC Code can be initiated against any company whose name has been struck off by the Registrar of Companies (“ROC”) on an application filed under section 7 and section 9 (initiation of corporate insolvency resolution process by financial/operational creditor) of the IBC Code by any creditor or workman of such company. Any creditors or workmen who feel aggrieved by the removal of company's name from ROC, may move an application under Section 252(3) (Appeal to Tribunal) of the Act, 2013 before NCLT, prior to the expiry of twenty years from the publication in the official gazette of the notice to remove name of the company from ROC.
Collapse of British Travel Giant Thomas Cook Group ("Thomas Cook")
As reported, after 178 years of operation, British tour operator Thomas Cook, one of the world’s oldest travel brands, closed its business operations on 23rd September, 2019. Thomas Cook announced that it would be liquidating its assets and filed for bankruptcy despite attempts to rescue the brand. The key reasons which lead to the collapse of Thomas Cook have been deliberated by industry experts as follows:
Debt of about $2.1 billion, where the company had been in negotiations to obtain $250 million in emergency financing when it declared bankruptcy.
Struggle to pitch itself to a new generation of tourists by not moving to online travel bookings and facing stiff competition from online travel agents.
Factors beyond its control, particularly Brexit, which has cut the value of the pound, leading to discouragement in travel and squeezing of profits.
The IBC Code Overrides Prevention of Money Laundering Act, 2002 (“PMLA”) in Realization of Debts
The PMLA's Appellate Authority, on 16th September 2019, held that the IBC Code prevails over the provisions of PMLA to ensure realization of debts. The appellate authority in its decision, had distinguished the objectives of respective legislations, stating that while PMLA ensures taking over the rights in the illegally acquired property from the offender, the IBC Code on the other hand ensures reorganization and maximization of value of assets during the corporate insolvency resolution process.
Amendment to the Motor Vehicles Act, 1988
The Ministry of Road Transport and Highways, on 1st September, 2019, has notified the Motor Vehicles (Amendment) Act, 2019 to revise the penalties relating to the traffic violations. The penalties to be imposed are as follows:
Section 177: General provision for punishment of offences
Old Provision: First offence: Rs.100; Subsequent offense: Rs. 300
New Provision: First offence: Rs. 500; Subsequent offense: Rs.1,500
Section 177A: Penalty for contravention of regulations under section 118 (driving regulations)
Old Provision: N.A.
New Provision: Rs. 500 to Rs. 1,000
Section 181: Driving without license
Old Provision: Rs. 500
New Provision: Rs. 5,000
Section 182: Offences relating to licenses
Old Provision: Rs. 500
New Provision: Rs. 10,000
Section 183: Driving at excessive speed
Old Provision: First offence: Rs. 400; Subsequent offense: Rs.1,000
New Provision: Light Vehicle: Rs. 1,000 - Rs. 2,000; Medium passenger/goods vehicles: Rs 2,000 - Rs 4,000; Subsequent offence: impounding of driving license
Section 184: Dangerous Driving
Old Provision: First offence: Imprisonment : 6 months ; fine: Rs.1000; Subsequent offence: Rs.2000
New Provision: First offence: Imprisonment: 6 months – 1 year ; Fine: Rs. 5,000; Subsequent offence: Rs.10,000
Section 185: Driving by a drunken person or by a person under the influence of drugs
Old Provision: Rs. 2,000
New Provision: Rs. 10,000
Section 194B: Seat Belt
Old Provision: Rs 100
New Provision: Rs 1,000
Section 194C: Penalty for violation of safety measures for motor cycle drivers and pillion riders
Old Provision: Rs 100
New Provision: Fine: Rs 1,000 and disqualification of licence for 3 months
Section 196: Driving uninsured vehicle
Old Provision: Rs 1,000
New Provision: Rs 2,000
Section 199A: Offences by Juveniles
Old Provision: N.A.
New Provision: Penalty for juvenile’s guardian or owner of vehicle: Imprisonment: up to 3 years; Fine: Rs.25,000; cancellation of registration for 12 months. Juvenile to be tried under the Juvenile Justice (Care and Protection of Children) Act, 2015.
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.