Legal & Industry Updates - June 2020
SPECIAL EVENTS
Webinar on ‘Impact of Recent Changes in the Insolvency and Bankruptcy Code and Regulatory Provisions: Creditors' Perspective’, June 4, 2020
The team at Ivy Law participated in a webinar, conducted by Lawyered and Lawyers Club India. The webinar gave insights on the impact of the recent reforms announced by the Government of India, on the Insolvency and Bankruptcy Code due to Covid-19. The webinar highlighted the impact of the reforms on debtors, financial creditors and operational creditors. Aspects pertaining to the stimulus package announced by the Reserve Bank of India were also emphasized.
National Governance Virtual Summit, June 19, 2020
The team at Ivy Law participated in a summit organized by Economic Times. The summit focused on the government's multi-pronged strategy around smart cities development, digital initiatives in healthcare, education, transport, future road maps for e-governance, continuity of public services in the time of a pandemic, digital transformation of government departments, innovations in e-Governance & m-Governance, and securing a digital frontier of digital economy. The highlight of the summit was deliberating on the digital platforms for rendering public services, in the age of artificial intelligence and machine learning. The summit also provided an opportunity to virtually interact with top decision makers from the government.
LEGAL & INDUSTRY UPDATES
Ministry of Micro Small & Medium Enterprises (MSME) Implements Classification Norms for MSMEs (source)
The Ministry of MSME’s, on June 1st, 2020, issued a gazette notification to pave way for the upward implementation of the definition and criteria of MSMEs. The notification will come into effect from July 1st, 2020. As per the revised definition of ‘MSME’, (i) an entity is classified as a ‘micro-enterprise’, where the investment in plant and machinery or equipment, does not exceed more than One Crore Rupees and the turnover is not more than Five Crore Rupees; (ii) an entity is classified as a ‘small enterprise’ where the investment in plant and machinery or equipment does not exceed more than Ten Crore Rupees and the turnover is not more than Fifty Crore Rupees, (iii) an entity is classified as a ‘medium enterprise’, where the investment in plant and machinery or equipment does not exceed more than Fifty Crore Rupees and the turnover is not more than Two Hundred And Fifty Crore rupees.
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 (source)
As per the Insolvency and Bankruptcy Code (Amendment) Ordinance 2020 (“Ordinance”) issued by the Ministry of Law and Justice on June 5th, 2020, a new Section 10A is inserted in the Insolvency and Bankruptcy Code, 2016 (“IBC 2016”). The new Section 10A allows suspension of sections 7, 9, and 10 of IBC 2016, for six months and the suspension time can be extended up to one year (starting March 25th, 2020). Sections 7, 9, and 10 of IBC 2016, account for the initiation of corporate insolvency resolution proceedings against defaulters. Further, a sub-section (3) has been inserted in Section 66 of IBC 2016, stating that no application will be filed by a resolution professional under sub-section (2) in respect of defaults against initiation of the corporate insolvency resolution process, which is suspended as per section 10A.
‘Country of Origin’ Made Mandatory on Government E-Marketplace (GeM) Portal (source)
As per the press release issued by the Ministry of Commerce and Industry, on June 23, 2020, GeM, a special purpose vehicle of the above stated ministry, has made it mandatory for sellers to enter the ‘Country of Origin’ while registering all new products on GeM. Sellers, who have already uploaded their products before the introduction of this new feature on GeM, are being reminded regularly to update the Country of Origin, with a warning that their products will be removed from GeM, if they fail to update the same. GeM has also enabled a provision for indication of the percentage of local content in products. Buyers can choose to buy only those products that meet the minimum 50% local content criteria. In case of bids, buyers can now reserve any bid for Class I Local suppliers (Local Content > 50%). For those Bids below INR 200 Crores, only Class I and Class II Local Suppliers (Local content > 50% and > 20% respectively) are eligible to bid, with Class I supplier getting purchase preference.
Union Cabinet Approves Private Sector Participation in Space Activities (source)
As per the press release issued by the Press Information Bureau, on June 24th, 2020, the cabinet has approved far-reaching reforms in the ‘space sector’, that aim at boosting private sector participation in the entire range of space activities. The reforms are said to accelerate the growth of this sector and also enable the Indian private industry to be an important player in global space economy. The newly created Indian National Space Promotion and Authorization Centre (IN-SPACe) will provide a level playing field for private companies to use Indian space infrastructure. IN-SPACe will also hand-hold, promote and guide private industry in space activities through encouraging policies and a friendly regulatory environment. The public sector enterprise ‘New Space India Limited’ will endeavour to re-orient space activities from a ‘supply driven’ model to a ‘demand driven’ model, thereby ensuring optimum utilization of space assets. Some of the planetary exploration missions will also be opened up to private sector through an ‘announcement of opportunity’ mechanism.
Amendments to the Essential Commodities Act, 1955 (source)
As per the Essential Commodities (Amendment) Ordinance, 2020, issued by the Ministry of Law and Justice on June 5th, 2020, a new sub-section 1(A) was inserted in section 3 of the Essential Commodities Act, 1955, which provides that agricultural food products such as cereal, pulses, oilseeds, edible oils, onions, and potatoes may be regulated only under extraordinary circumstances, like natural calamities of grave nature, such as war, famine and surge in prices. Stock limit will be imposed if there is (i) hundred percent increase in the retail price of horticultural produce; or (ii) fifty percent increase in the retail price of non-perishable agricultural foodstuffs. No such stock limit shall apply to processors or value chain participants, subject to their installed capacity or any exporter subject to the export demand. Further, the government will no longer be controlling the production, supply, and distribution of these commodities, thus empowering farmers to directly engage with processors, aggregators, large retailers, and exporters to ensure free trade.
Companies (Share Capital and Debenture) Amendment Rules 2020 (source)
The Ministry of Corporate Affairs (MCA) on June 5th, 2020 notified the Companies (Share Capital and Debenture) Amendment Rules, 2020 by virtue of which, a startup can issue sweat equity shares up to 50% of its paid-up capital for upto 10 years (the prior period being upto 5 years) from the date of its incorporation or registration.
Extension on Passing of Ordinary and Special Resolutions under the Companies Act, 2013, by Video Conferencing (VC) or Other Audio-Visual Means (OAVM) (source)
As per the general circular (No.22/2020) issued by MCA, on June 15th, 2020, companies are allowed to conduct their extra ordinary general meetings (EGMs) through VC or OAVM or transact items through postal ballot in accordance with the procedures provided in the previously issued circulars on the subject, up to 30th September, 2020. Prior to this extension, the use of VC or OVAM for holding EGM’s was permitted until June 30, 2020.
Judicial Examination on the Operational Validity of Google Pay (source)
As reported by Economic Times, Google Pay is ordered by a two-member bench of the Delhi High Court to undergo a judicial examination of its operational validity, as a third-party application provider (TPAP) in India’s digital payment system sector. A detailed hearing is ordered by the Hon’ble High Court, on whether the payment platform can operate as a TPAP or a full-fledged payment service provider, in which case it would be violating the Payment Systems Settlement Act, 2007. The court observed that the ruling on the matter would likely affect the operational status of some other TPAPs, whose names were mentioned in the petition.
Government to Set-Up Empowered Group of Secretaries & Project Development Cells to Attract Foreign Investment (source)
As per the press release issued by the Ministry of Commerce and Industry, dated June 3rd, 2020, the above stated ministry has approved setting up of an empowered group of secretaries (EGoS) and project development cells (PDCs) in ministries/department for attracting investments in India for companies looking to relocate locations to India. EGoS objective includes (i) bringing synergies between Ministries/Departments and among the Central and State Governments in investment and related incentive policies (ii) to attract increased investments into India and provide investment support and facilitation to global investors, (iii) to facilitate investments of top investors in a targeted manner and to usher policy stability and consistency in the overall investment environment, (iv) to evaluate investments put forward by the departments based on their project creation and actual investments that come. The cell is aimed at (i) creating projects with all approvals, land available for allocation, and with the complete Detailed Project Reports for adoption/investment by investors and (ii) to identify and resolve issues to attract and finalize the investments and put forth these before the Empowered Group.
New Interpretation of ‘Workplace’ Under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013 (POSH) (source)
As reported by Times of India, despite employees working remotely from home through virtual mediums, several cases of sexual harassment have been reported under POSH. These cases account for calls at odd hours, unwarranted requests for video calls, gender-biased comments and inappropriate language being used in virtual team meetings. Questions are being raised as to whether POSH can apply to a person’s ‘home’ as a ‘workplace’. A certain view taken is, as ‘home’ is the new ‘workplace’, in the present situation attributable to the pandemic, a person’s home can be considered as workplace. Section 2(o) of POSH defines a workplace to include ‘any place visited by the employee arising out of or during employment’, by virtue of which even a person’s home can be construed as a workplace.
Food Delivery Companies Redraw Exclusivity Contracts with Restaurants (source)
As reported by Economic Times, by invoking the force majeure clause, several top online food delivery companies, are redrawing ‘exclusivity’ and ‘minimum guarantee’ clauses in their contracts, with local restaurants, as well as national chains. On the application of the ‘Force Majeure’ clause, both the contracting parties are exempted from their liabilities and obligations, due to the occurrence of an extraordinary event. Force majeure is a contractual provision, allocating the risk of loss, if performance becomes impossible or impracticable, especially as a result of an event that the parties could not have anticipated or controlled.
Government Rejects Flipkart’s Application to Enter Food Retail (source)
As reported by Times of India, Department for Promotion of Industry and Internal Trade (DPIIT) has rejected Flipkart’s application, seeking approval to enter into food retail, citing regulatory issues. DPIIT communicated to the company, that it cannot be allowed into food retail as an entity that runs a marketplace and will not also be allowed to sell products on its platforms. Besides the above reason, DPIIT stated that Flipkart Farmer-Mart’s memorandum of association does not permit it to undertake food retail. A few years ago, the government had allowed 100% FDI in food retail, to sell produced or made-in-India goods, through the approval route, as it sought to push tie-ups with domestic manufacturers as well as farmers.
‘Local Preference Clause’ in State Government’s Procurement Contracts & Domestic Manufacturing Push (source)
As reported by Economic times, States are likely to be directed by the Central Government to expeditiously adopt the 2017 DPIIT’s Public Procurement (Preference to Make in India) Order. This move will require States to amend their procurement contracts to incorporate a ‘local preference clause’ to include provisions ensuring that local suppliers get preference. Government contracts up to Rupees 200 Crores, have already been channelized to procure locally manufactured goods. The Central Government’s objective is to ensure that State contracts are in sync with national policy. Quality clauses are also proposed to be included, to bar goods from certain countries as notified by the government. In supply contracts, in order to limit the reliance on imported goods, procurement of local products will be encouraged and Indian service providers will be discouraged from partnering with foreign partners from certain countries. The focus is on motivating States to undertake policies to encourage local businesses.
Online Food Delivery Platform ‘Swiggy’ not in Abuse of its Dominant Position (source)
As per the CCI order dated June 19, 2020, the country’s competition watchdog Competition Commission of India (CCI), has disposed of a complaint alleging that ‘Swiggy’ abused its market dominance through unfair pricing. The CCI order stated that Swiggy acts only as an intermediary and its role is limited to providing access to a communication system, over which information made available by third parties (restaurants), is transmitted. Hence, there is no contravention under Section 4 of the Competition Act, 2002 which relates to the abuse of dominant position. Swiggy was however directed to give sufficient disclosures on its platform, that it is not involved in fixation of price of the products/menus of the restaurants on its platform, so as to allay misgivings, if any, in the minds of any stakeholders including the consumers.
CCI Approval for Jio-Facebook Deal (source)
As per the press release issued by MCA, on June 24 2020, CCI has approved the acquisition of 9.99% stake in Jio platforms by Jaadhu Holdings LLC (JHL). Reliance Industries-owned Jio platforms and social media giant Facebook wholly owned subsidiary JHL, had filed their application with CCI, citing that the $5.7 billion deal is ‘pro-competitive’, benefits consumers, Kirana store owners, and other small and micro local Indian businesses. The application was filed to get approval from CCI, as these two companies jointly hold massive consumer and trade data that can lead to disruptions and foreclosure of multiple businesses in the country.
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.