Legal & Industry Updates - September 2022
SPECIAL EVENTS
Webinar on the Trends and Developments in Arbitration Practice - An Arbitral Institution's and a Counsel's Perspective - Key Takeaways, September 16, 2022
The team at Ivy Law participated in a webinar on the “Trends and Developments in Arbitration Practice: An Arbitral Institution's and a Counsel's Perspective” organized by the IMS Law College, Noida. The key highlights of the webinar included the guidelines for harmonizing ethical obligations of arbitrators with codes of conduct for adjudicators in international investment disputes, international arbitration after the COVID-19 pandemic and the impact of sanctions on international arbitration. Further, a few fundamental elements of arbitration, such as the appointment of an arbitrator, arbitration rules, challenging an arbitrator, managing disputes and drafting an arbitration agreement while keeping in mind the independence and impartiality of an arbitral tribunal were also deliberated upon.
Webinar on the Recent Developments in Regulatory Framework with Respect to Insolvency Professionals under the Code, September 29, 2022
The team at Ivy Law participated in a webinar on the “Recent Developments in Regulatory Framework with respect to Insolvency Professionals under the Code” organized by the Insolvency and Bankruptcy Board of India (“IBBI”). The key highlights of the webinar included the recent amendments to the Insolvency and Bankruptcy Code, 2016 (“IBC”) including promoting timely admission of new cases, fees of Insolvency Professionals (“IP”), balancing stakeholders’ rights in liquidation process, strengthening the role of Information Utilities, new complaints and grievance handling framework, among others. The recent development in the regulatory framework with respect to Corporate Insolvency Resolution Process (“CIRP”) was also a relevant matter of discussion. The main aim of the webinar was to focus on the emerging requirements and dynamics of the IBC for its effective implementation.
LEGAL & INDUSTRY UPDATES
The Ministry of Corporate Affairs (“MCA”) Extends the Tenure of Company Law Committee (“CLC”) by One Year (source)
The MCA, through a notification dated 5th September, 2022, has extended the tenure of the CLC by one year. CLC was established in September 2019 to promote Ease of Living in the country by providing Ease of Doing Business (“EODB”) to law abiding corporates and fostering improved corporate compliance for stakeholders at large. The 11 member CLC panel was set up under the chairmanship of the secretary of MCA for making recommendations to the Central Government (“CG”) on various provisions and issues pertaining to the implementation of the Companies Act, 2013 (“CA, 2013”) and the Limited Liability Partnership Act, 2008.
Amendment to the Companies (Specification of Definition Details) Rules, 2014 (source)
The MCA, on 15th September, 2022, has notified the Companies (Specification of definition details) Amendment Rules, 2022. Pursuant to the amendment, under Rule 2(1)(t) (Definitions), for any company to come under the ambit of small company under the CA, 2013, its paid up capital should be up to INR 4 crore as opposed to INR 2 crore prior to the amendment and turnover up to INR 40 crore as opposed to INR 20 crore prior to the amendment. The objective is to facilitate EODB, reduce compliance burden on small companies and to enable a larger number of companies to be treated as small companies.
Amendment to the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) (Fourth Amendment) Regulations, 2016 (“IBBI Regulations, 2016) (source
The IBBI, on 16th September, 2022, has amended the IBBI Regulations, 2016. The following amendments are stated hereunder:
With the objective to maximise value in resolution, the amendment enables the resolution professional and the committee of creditors (“CoC”) to issue request for resolution plan a second time for sale of one or more of assets of the corporate debtor (“CD”) in cases where no resolution plan has been received for the CD as a whole. Further, marketing of assets of the CD is also permitted subsequent to the amendment.
Timeline for filing application for preferential and other transactions is now on or before 130th day of insolvency commencement date (“ICD”) and submission of information memorandum to on or before 95th day from the ICD from the present 54th day with the aim to improve information availability to stakeholders.
With the intention to reduce delays in the CIRP and enhance efficiency of available time, the amendment enables the CoC to explore the option of compromise or arrangement and file such recommendation with the Adjudicating Authority ("AA") while applying to AA for liquidation order.
A common email address to be used throughout the CIRP and liquidation of a CD and this email will be handed over to the succeeding IP conducting the CIRP to make it more transparent and robust.
Amendments to the Companies (Corporate Social Responsibility Policy) Rules 2014 (source)
The MCA, on 20th September, 2022, has notified the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2022. Pursuant to the amendment:
Under Rule 3(1) (Corporate Social Responsibility {“CSR”}), any company having any amount in its unspent CSR account should set up a CSR committee to oversee the implementation of its CSR obligations and the said amount should be utilized within three financial years.
Under Rule 8(3)(c) (CSR Reporting), any company undertaking social impact assessment, may book the expenditure towards CSR, however, it should not exceed 2% of total CSR expenditure for the relevant financial year or INR 50 lakh whichever is higher as opposed to the earlier rule which allowed up to 5% of the total CSR spending or INR 50 lakh whichever is less. The change allows higher spending on impact assessment in case of large CSR projects.
The Prime Minister of India (“PM”) launches the National Logistics Policy (“NLP”) (source)
The PM, on 17th September, 2022, has launched the NLP with the objective to promote seamless movement of goods across the country as well as in global markets by ensuring quick last mile delivery, ending transport-related challenges, saving time and money of the manufacturers and preventing wastage of the agro-products. Focusing strongly on becoming globally competitive, the NLP aims to reduce the logistics cost from 13-14 % of Gross Domestic Product (“GDP”) to a single digit. The main constituents of NLP include:
Unified Logistics Interface Platform, which aims to unite all logistics and transport sector digital services into a single portal, thereby freeing manufacturers and exporters from the present tyranny of long and cumbersome processes.
Ease of Logistics Services (E-Logs), a new digital platform which will allow industry to directly take up operational issues with government agencies for speedy resolution.
The Comprehensive Logistics Action Plan comprising integrated digital logistics systems, standardisation of physical assets, benchmarking service standards, human resource development, capacity building, development of logistics parks, etc.
Union Cabinet Approves Expansion of Performance Linked Incentive (“PLI”) Scheme for Solar Photovoltaic (“PV”) modules (source)
The Union Cabinet, on 21st September, 2022, has approved the second tranche of the PLI scheme with the aim to achieve manufacturing capacity of 65 GW per annum of fully and partially integrated solar PV modules in India. A provision of INR 19,500 crores has been made by the CG for achieving the aforementioned capacity and thereby creating an eco-system for manufacturing high efficiency solar PV modules, generating multiple employment opportunities and reducing import dependence in the area of renewable energy.
The Department of Telecommunications (“DoT”) Puts Forward the Draft of Indian Telecommunication Bill, 2022 (“Telecom Bill, 2022”) for Public Consultation (source)
The DoT, on 21st September, 2022, announced to put the proposed Telecom Bill, 2022 draft, which seeks to consolidate and update three old acts i.e. Indian Telegraph Act, 1885, Indian Wireless Telegraphy Act, 1933, and The Telegraph Wires (Unlawful Protection) Act, 1950, out for public consultation. The draft seeks to:
Grant CG the ability to intercept messages beaming through internet-powered communication services in the event of any public emergency or in the interest of the public safety and also provides CG immunity against any lawsuit.
Request individuals using licensed communication applications such as Whatsapp Messenger to not furnish any false particulars, suppress any material information or impersonate another person.
Ensure that any message offering, advertising or promoting goods, services, interest in property, business opportunity, employment opportunity or investment opportunity must only be sent after users’ prior consent.
Establish a mechanism to enable users to report spam messages received and recommend ‘Do Not Disturb’ registers to record users’ consent for receiving specific promotional messages.
Supreme Court (“SC”): CIRP Can be Initiated Even Against Two Borrowers Falling Under the Ambit of CD (source)
The SC has asserted that if two corporate bodies fall within the ambit of CDs, there is no reason why insolvency proceedings cannot be initiated against both the corporate bodies under Section 7 (Initiation of CIRP by financial creditor) of the IBC. The SC also observed that approval of CIRP in respect of one borrower cannot discharge a co-borrower and if the dues are realised in part from one CD, the balance may be realised from the other CD being the co-borrower. The SC made these observations while upholding the order passed by the National Company Law Tribunal whereby it had upheld the order of admission of the petition against two CDs for the same set of loans arising out of the same loan documents.
Allahabad High Court (“Allahabad HC”): Maternity Benefits Act, 1961 (“Maternity Act”) Doesn't Provide for Time Difference Between First & Second Child for Grant of Maternity Benefits (source)
The Allahabad HC has opined that the Maternity Act does not contain any such stipulation regarding the time difference between the first and second child for the grant of maternity benefits while granting relief to a college lecturer (“petitioner”) whose application for maternity leave had been rejected by placing reliance on Rule 153(1) (Maternity Leave) of the Financial Handbook. The petitioner argued that she had applied for maternity leave for a period of 174 days which was duly sanctioned but unfortunately, the newborn passed away just a day after his birth and the petitioner again conceived for the second time and applied for maternity leave for a period of 24 weeks but the same was rejected. Consequently, the Allahabad HC held that once the provisions of the Maternity Act has been adopted by the State of Uttar Pradesh, the said act would apply with full force irrespective of the provisions contained in the Financial Handbook which is merely an executive instruction and would, in any case, be subsidiary to the legislation made by the Parliament.
An Initiative Supporting Entrepreneurs in Transformation and Upskilling (“SETU”) Launched to Help Connect Indian Startups with United State of America (“US”)-based investors (source)
The Union Minister of Commerce and Industry has launched the initiative SETU in the US which is designed to break the geographical barriers between US mentors willing to invest in entrepreneurship and sunrise startups in India. The initiative aims to provide mentorship and assistance to Indian startups in an array of areas, such as funding, market access and commercialization. The interaction between the stakeholders will be supported through the mentorship portal under the Startup India initiative MAARG (Mentorship, Advisory, Assistance, Resilience, and Growth) programme, which serves as a one-stop solution for startups in India.
CG Plans Massive Expansion of Green Hydrogen Production (source)
As reported by the Economic Times, CG is planning a massive expansion of green hydrogen production with the aim to curb its dependence on energy imports and to wean the economy off fossil fuels in order to meet climate targets. India being the world’s third-largest emitter of greenhouse gasses, has the potential to produce low-cost renewable energy, which has further fueled CG's hopes for carbon-free hydrogen and is thus being backed by numerous business tycoons as well as state-run energy behemoths. Further, the plan also includes measures to improve energy efficiency, overhaul power markets and expand manufacturing of renewable energy equipment.
Telecommunication (“telecom”) industry Demand a Single Act to Regulate Over-the-top (“OTT”) and Direct-to-home (“DTH”) Services (source)
As reported by the Economic Times, the telecom industry has appealed for a single act to govern various OTT and DTH services along with seeking regulatory certainty for EODB. It was highlighted that while telecom operators must comply with various rules and regulations, no such policy is prevalent for OTT players, which also offer the same set of services to consumers. Currently, content is administered by the Ministry of Information and Broadcasting while the Ministry of Electronics and Information Technology (“MietY”) governs the internet and DoT regulate the mobile services. Therefore, the telecom firms reiterated that since broadcast, content and telecom have merged to become one, a single Convergence Act should regulate all these services for better implementation of laws.
The Ministry of Finance (“MoF”) Contemplates Changes in Insurance Laws to Boost insurance Penetration in India (source)
As reported by the Economic Times, the MoF is deliberating changes in insurance laws, including reduction in minimum capital requirement, with a view to allow entry of differentiated insurance companies in the banking sector and thereby increasing the insurance penetration in the country. Insurance penetration is fundamentally measured as the percentage of insurance premium to GDP. The MoF is conducting a comprehensive evaluation of the Insurance Act, 1938 in order to make relevant changes to support the growth of the insurance industry.
Medical Device Companies Likely to Get Exclusion from the Legal Metrology (Packaged Commodities) Rules, 2011 (“Packaging Rules”) (source)
As reported by the Economic Times, licensed manufacturers of medical devices are likely to be exempted from the Packaging Rules, which requires that each package must display the name, address, phone number, and email of individuals or of offices that may be contacted in case of customer complaints. The National Medical Devices Promotion Council will hold a discussion on the same and the industry associations’ representatives and government officials are expected to attend the discussion. However, the forum coordinator of Association of Indian Medical Device Industry asserted that the move of doing away with the Packaging Rules will only benefit the importers whereas the paramount concern should be the patients’ safety.
MeitY Releases Draft Data Anonymisation Guidelines for Public Consultation (source)
As reported by the Economic Times, the draft data anonymisation guidelines for electronic governance (“e-governance”) projects released by MeitY, suggesting various techniques and Standard Operating Procedures that e-governance projects can adopt to anonymise the data they gather, was open for public opinion, however, the CG subsequently pulled down the said draft guidelines as, according to CG, they were released without adequate expert consultation. Data anonymisation is a process of removing or modifying personally identifiable attributes from data sets to eliminate or reduce identifiability of a person.
India's Electricity Grid to be More Future Ready and Insulated from Cyber-attacks (source)
As reported by the Economic Times, the Ministry of Power has made a provision for routine inspection and timely action of the national electricity grid for maintaining cyber hygiene in the network through the Electricity Amendment Bill, 2022 (“Bill, 2022”). The Bill, 2022 seeks to amend section 26 (National Load Dispatch Centre) (“NLDC”) of the Electricity Act, 2003 with the aim to ensure the safety and security of the electricity grid and for the economic and efficient operation of the power system in the country by strengthening the functioning of NLDC.
Competition Commission of India Chief - Settlement and Commitment Framework in the Competition (Amendment) Bill, 2022 (“Competition Bill”) will Help Ensure Faster Market Corrections (source)
As reported by the Economic Times, the Competition Bill, which was recently introduced in Lok Sabha, encompasses the settlement and commitment framework with the intention to reduce litigations and ensure faster market corrections since the entities concerned will now have the option to address the anti-competitive issues in a swifter manner, without undergoing lengthy investigations and inquiries. However, since the existing statutory framework already provides for lesser penalty for cartels on self-reporting, the said framework will not be applicable for such cases of cartelization. Further, the entity concerned will not be required to admit the alleged anti-competitive conduct under the settlement and commitment framework.
The Department of Consumer Affair (“DoCA”) Prepares Draft Norms to Counter Fake reviews on Electronic-commerce (“e-comm”) Platforms (source)
As reported by the Economic Times, the DoCA has finalised a robust draft framework of standards on how to counter fake reviews and unverified star ratings on e-comm websites as well as travel and hotel bookings websites, and is currently in consultation with various e-comm platforms for a consensus on the said matter. The main concern is traceability and legitimacy of the reviews and ratings i.e. whether the person who has written the review is actually a user as this rampant practice of fake or unverified reviews makes it difficult for customers to distinguish between genuine and paid reviews of products and services.
The Security and Exchange Board of India (“SEBI”) Seeks Startup Valuation Details from Indian Private Equity (“PE”) Houses and Venture Capital (“VC”) Funds (source)
As reported by the Economic Times, SEBI has requested PE houses and VC funds to share the calculation process for startup valuations along with the qualifications and position of the valuation agent. SEBI has sought these details after it received complaints from investors that the startups were going for lofty valuations via non-transparent accounting practices. Further, several highly valued startups underperforming on the stock market and significant retail investors’ wealth being wiped out also contributed into taking this crucial step since a propped-up valuation gives a rosy picture of the portfolio to a fund's investors and paves the way for the fund manager to attract more money from new as well as old investors when it goes for the next round of fund-raising.
An Eminent Indian Information Technology Company (“IT company”) Terminates 300 Employees for Moonlighting (source)
As reported by the Economic Times, an Indian IT company terminated the services of 300 employees for moonlighting wherein the company discovered that the employees were concurrently employed by competitors while still being on that company’s payroll. Moonlighting refers to pursuing more than one job at the same time and this practice has further gained momentum across the globe as many companies are incorporating work-from-home norms. Though, according to the IT company, moonlighting is an act integrity violation, however, technology and software companies in India are divided on whether to allow their employees to moonlight for other companies while still being on their payrolls.
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.