Legal & Industry Updates - December 2021
SPECIAL EVENTS
National Conference on Constitutional Law Interfacing with Commercial Laws, December 21, 2021
The team at Ivy Law participated in the National Conference on “Constitutional Law Interfacing with Commercial Laws”, organized by ASSOCHAM National Council on Legal Affairs and Regulatory Reforms. The conference focused on the constitutional empowerment of commercial laws, jurisprudence on constitutional provisions interfacing with commercial laws, and the cross-over between commercial laws and constitutional provisions in a foreign jurisdiction. The interface of power and constitutional roles between provincial and federal governments was also deliberated. The challenge of segregating such roles by one level of government versus the other was also a key point of discussion.
Webinar on Related Party Transactions - Analysis of Regulations including Other Recent SEBI Notifications, December 23, 2021
The team at Ivy Law participated in a webinar on “Related Party Transactions: Analysis of Regulations including other Recent SEBI Notifications” organized by the Corporate Affairs Committee of PHDCCI. The key highlights of the session included the new disclosure requirements to be placed by listed entities, the revised definition of related party transactions (RPT's), inclusion of leases, service agreements, and loan agreements in RPT's and the legal sanctity of the same. The governance structure pertaining to RPTs , directors’ liability under the Companies Act, 2013, role of the Audit Committee for ascertaining RPT's which are important for good corporate governance, the latest circulars issued by SEBI on RPT's and the interplay of RPT's between the provisions of the Companies Act, 2013 and SEBI Listing Regulations were also deliberated upon.
LEGAL & INDUSTRY UPDATES
Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2021 (source)
The Securities and Exchange Board of India (SEBI) on December 6, 2021 notified the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Third Amendment) Regulations, 2021 (“SAST Amendment Regulations”) to further amend the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Original Regulations”). The SAST Amendment Regulations have substituted Regulation 5A (Delisting Offer) of the Original Regulations. The substituted Regulation 5A provides for an acquirer to seek the delisting of the target company by making a delisting offer as per the prescribed conditions, which require the acquirer to declare its intention to delist the target company at the time of making such public announcement of an open offer, as well as at the time of making the detailed public statement. Additionally, where a delisting offer is not successful on account of non-receipt of prior approval from shareholders or in-principle approval of the relevant stock exchange, in such cases, the acquirer is required within two working days in respect of such failure, to make an announcement in all the newspapers in which the detailed public statement was made and comply with all the applicable provisions of the SAST Amendment Regulations.
Consumer Protection (Direct Selling) Rules, 2021 (source)
As per the press release issued by the Ministry of Consumer Affairs, Food & Public Distribution (“Ministry of Consumer Affairs”), dated December 28, 2021, the Consumer Protection (Direct Selling) Rules, 2021 (“Direct Selling Rules”) are notified. Existing direct selling entities need to comply with the Direct Selling Rules within ninety days from the date of publication of these rules in the Official Gazette. The Direct Selling Rules apply to all goods and services bought or sold through direct selling, all models of direct selling, all direct selling entities offering goods and services to consumers in India, all forms of unfair trade practices across all models of direct selling and also to a direct selling entity which is not established in India, but offers goods or services to consumers in India. Both direct sellers as well as the direct selling entities (“Direct Sellers”) using e-commerce platforms for sale are required to comply with the requirements of the Consumer Protection (e-Commerce) Rules, 2020. The Direct Sellers are prohibited from promoting pyramid schemes or money circulation schemes. The State Governments are required to set up a mechanism to monitor or supervise the activities of Direct Sellers. Direct Sellers will also be liable for grievances arising out of the sale of goods or services by its direct sellers.
Prompt Corrective Action (PCA) Framework for Non-Banking Financial Companies (NBFCs) (source)
The Reserve Bank of India (RBI) through a notification issued on December 14, 2021 has directed to put in place a PCA framework for NBFCs to further strengthen the supervisory tools applicable to NBFCs. RBI had introduced PCA in 2002 and the same has been reviewed from time to time based on the experience gained and developments in the banking system. The objective of the PCA framework is to enable supervisory intervention at appropriate time and require the supervised entity to initiate and implement remedial measures in a timely manner, so as to restore its financial health. The PCA framework is also intended to act as a tool for effective market discipline. The PCA framework does not preclude RBI from taking any other action as it deems fit at any time in addition to the corrective actions prescribed in the framework. The PCA framework for NBFCs, will come into effect from October 1, 2022, based on the financial position of NBFCs on or after March 31, 2022. In terms of extant regulations, Government NBFCs have been provided time upto March 31, 2022 to adhere to the capital adequacy norms provided for NBFCs. The PCA framework will be reviewed after three years of being in operation.
Amendment to the Minerals (Evidence of Mineral Contents) Rules, 2015 and the Mineral (Auction) Rules, 2015 (source)
The Ministry of Mines though a press release dated December 16, 2021 has reported the notification of the Minerals (Evidence of Mineral Contents) Second Amendment Rules, 2021 and the Mineral (Auction) Fourth Amendment Rules, 2021 to amend the Minerals (Evidence of Mineral Contents) Rules, 2015 (“MEMC Rules”) and the Mineral (Auction) Rules, 2015 (“Auction Rules”), respectively. Amendment in the MEMC Rules will enable any person, who is intending to participate in an auction, to propose suitable blocks for auction for composite licence where mineral potentiality of the blocks has been identified based on the available geoscience data. A committee constituted by State Governments shall assess the mineral potentiality of the blocks so proposed and recommend the block for auction. Further, the Auction Rules provide, that in case the blocks proposed by any person are notified for auction, the said person would be provided incentive of depositing only half of the bid security amount in auction of the blocks proposed. The Minerals (Evidence of Mineral Contents) Rules, 2015 were recently amended in June, 2021, inter alia, to provide for auction to grant a composite licence in respect of areas where at least reconnaissance survey (G4) level was completed or where mineral potentiality of the block had been identified based on the available geoscience data; however, resources are yet to be established. These amendments were aimed at identifying more mineral blocks for auction and thereby increasing pace of exploration and production resulting in improving the availability of minerals in the country and increase employment in the sector. Simultaneously, the Mineral (Auction) Rules, 2015 were amended, inter alia, to prescribe bid security, performance security and other eligibility conditions to enable auction of such blocks for composite licence.
Draft Mediation Bill, 2021 (source)
The Ministry of Law and Justice through a press release dated December 17, 2021 informed the placement of the draft Mediation Bill, 2021 (“Mediation Bill”) in public domain (on the website www.legalaffairs.gov.in) seeking comments of the public and all stakeholders, as a part of the pre-legislative consultation process. Mediation as an alternate dispute redressal offers an informal, simple, non-adversarial approach to resolve several types of disputes including civil, commercial and family disputes. The proposed Mediation Bill seeks to promote mediation, online or otherwise as preferred process of dispute resolution, consolidate and amend the laws relating to domestic mediation and provide an enforcement mechanism for Mediated Settlement Agreement.
National Litigation Policy (source)
The Ministry of Law and Justice through a press release dated December 17, 2021 has intimated the government’s objective to lay down guidelines for preventing, controlling and reducing litigation. Ministries and departments like the Railways and Department of Revenue, involved in a high number of litigations have been taking several measures for reducing the number of court cases. Ministry of Railways has issued instructions for effective monitoring of court cases at all levels. For achieving this, emphasis has been laid on having regular meetings with empanelled advocates, for briefing and necessary directions to be given at the highest level, besides ensuring timely submission of replies, counter replies and necessary documents to the advocates. The Central Board of Direct Taxes (CBDT) has issued circulars directing the field officers that pending appeals before Income Tax Appellate Tribunals/High Courts/Supreme Court with tax effect below the specified limits may be withdrawn/not pressed, and in the process facilitating a better and concerted focus on high demand litigations. Similarly, the Central Board of Indirect Taxes and Customs (CBIC) has been instructed to withdraw appeals pending in High Courts/Customs Excise and Service Tax Appellate Tribunal, where the Supreme Court has decided on an identical matter. Both CBDT and CBIC have also enhanced the threshold monetary limit for filing appeals. Further for facilitating quick disposal of disputes outside the court systems by way of alternate dispute redressal mechanism of mediation, the Mediation Bill, 2021 is being introduced in the Parliament inter-alia providing for pre-litigation mediation by the parties.
Start-up Industry Association Urges Government to Frame Rules for Mobile Gaming (source)
As reported by Business World, with a wide array of mobile games, the start-up industry association has urged the central government to draw up rules for online gaming in India, along with age- and genre-based classifications. It has been put forth to frame rules similar to the Entertainment Software Rating Board, a self-regulatory body that assigns age and content ratings to online video games in the United States (US), Mexico and Canada. Amid the addiction concern, the body also asked for the implementation of rules and regulations like AI-based interventions to monitor and restrict addictions and limits on the amount of money that gamers can spend and win. Meanwhile, the Ministry of Education has also circulated advisories amid the ongoing situation. The online gaming industry has also been under fire in several states, especially in Karnataka. The Karnataka Police (Amendment) Act, 2021, which came into effect on October 05, 2021 banned online games of chance. The association further stated that online skill-based games and sports-based games should be recognized predominantly as skill-based and non-addictive.
Notices Issued to E-tailers over flouting the ‘Country of Origin’ Rule (source)
As reported by Business World, for violations of declaration of the ‘country of origin’ rule by e-commerce companies, 200 notices during the period of January 1 to November 30, 2021, have been issued by the Legal Metrology Division, Department of Consumer Affairs and also about ₹ 38,70,000 were raised from e-commerce companies as compounding fees. The Legal Metrology (Packaged Commodities) Rules, 2011 have been amended, by virtue of which Rule 6 (1) (aa) requires that the country of origin, country of manufacture, or assembly of imported products is required to be stated on the packaging. The amendment was made with the purpose of helping consumers to make informed and conscious choices based on the country of origin of the product. The state governments are also empowered to take action in the event of a breach of the Legal Metrology (Packaged Commodities) Rules, 2011.
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.