Legal Aspect of New Cement Plant

8/11/2019 Legal Aspect of New Cement Plant

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INCORPORATING A CEMEN

MANUFACTURING UNITA LEGAL PERSPECTIVEACTS, LAWS AND


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AgendaCement Industry

Industry Overview

Incorporation of a Cement Company Private/Public Entities

Joint Ventures/Subsidiaries

Requests to RoC

Flow-chart view

Industrial Policies

Industrial Licensing, IEMs , Location Policies

Procedures for Approval for E0Us/EPZs/FTZs/SEZsList of approvals/clearances and departments

Government Involvement(Specific Acts and policies)

List of Applicable Labour Laws in the Sector

Legal Challenges to Cement Industry


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Industry overview

Cement industry

Large cement plants

Mini & White cement

plants

Cement plants: 139

Effective capacity: 234.3 mtpa

Cement plants: 365

Effective capacity: 11.1 mtpa

*Source : Amb

2ndlargest market in theworld , 78 per cent of

global production

Exports to more 30countries generating

employment for 50,000people

Annual production of morethan 1 mn tonnes

Per Capita consumptionaround170kg, world

average 430 kg


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Incorporation: An overviewCOMPANIES ACT 1956

Governs Incorporation of a company in India

Part II of the Act deal with the incorporation of a company and matters related there

* A public company is a private company which is a subsidiary of a company which is not a privat

Private CompanyPublic Company

Minimum Paid-up Capital- 100,000 Minimum Paid-up Capital- 50

Minimum number of members: 2 Minimum number of member

Maximum number of members: 50 Maximum number of membe

Transerferability of shares :

Complete restriction

Transerferability of shares :

No restriction

Issue of Prospectus : Cannot

issue prospectus

Issue of Prospectus : Can

issue prospectus

Number of Directors : < =2 Number of Directors : >=3


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Incorporation of a Cement Com

Getting the appropriate persons to subscribe to the Memorandum(Public compPrivate company: Min. of 2)

Drawing up the Articles of Association (Indian Stamp Act, 1899)

Drawing up the Memorandum of Association (Indian Stamp Act, 18

Obtaining approval for the proposed name of the company from the ROC (Form 1Improper Use, Act-1950)


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Incorporation of a Cement Com

Obtain a certificate of commencement of business from ROCcompany

Receipt of Certificate of incorporation

Payment of registration Fee to the ROC


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Starting Operations in Ind

Starting

operationsin India

As a Indiancompany

Joint VenturesWholly owned

subsidiaries

As a foreigncompany

Liaison Office

Project Office

Branch Office

Taxation

Corporate tax rate f40%. The net tax ra

deductions and exe

the tax laws. Tax ho

Special Economic zo

Sector Projects enjo

treatment/holidays

customs document

Investment Secretariat for Indu

Department of Indu

Promotion, Govern

single window serv

assistance, Investor

monitoring implem


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Joint Ventures

Wholly owned

subsidiaries

By forging strategic alliances with Indian partners foreign companies get following advantages.

Established distribution/ marketing set up of the Indian partner

Available financial resource of the Indian partners

Established contacts of the Indian partners which help smoothen the process of setting up o

100% FDI is allowed in cement industry

Application to be filed to registrar of companies

Department of Company Affairs under Ministry of Finance is the regulatory authority

Liaison Office

Branch Office

Project Office

Foreign Companies planning to execute specific projects in India can set up temporary project/site of

RBIs permission subject to specified conditions.

No activity other than the activity relating and incidental to execution of the project

Project Offices may remit outside India the surplus of the project on its completion

Not allowed to carry out manufacturing activities on its own ,subcontract these to an Indian manufa

Branch Offices established with the approval of RBI, may remit outside India profit of the branch, ne

applicable Indian taxes and subject to RBI guidelines

A channel of communication between the principal place of business or head office and entities in I

Cannot undertake any commercial activity directly or indirectly and cannot earn any income

Its role is to collect information about market opportunities and providing info about the company a

prospective Indian customers

It can promote export/import from/to India and also facilitate technical/financial collaboration

d l l


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Industrial PolicyReforms

Reduced IndustrialLicensing requirements

Removed restrictions oninvestment and expansion

Facilitatedforeign te

foreign dir

Industrial PolicyIndustrial Licensing

All industrial undertakings

are exempt from obtaining

an industrial license to

Manufacture, except for:

1. Industries reserved for the P

2. Industries retained under co

3. Items of manufacture reserv

scale sector

4. If the proposal attracts locat

Industrial Entrepreneurs Memorandum (IEM)

Industrial undertakings exempt

from obtaining an industrial

license are required to file an

IEM

1. In Part A with Secretariat of Industrial Assi

GOI, and obtain an acknowledgement

2. After commencement of commercial produ

the IEM has to be filled

I d i l li


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Industrial Policy

Industrial undertakings arefree to select the location of

a project

In the case of cities with population of more than

the 1991 census):

The proposed location should be at least 25 KM

Standard Urban Area limits of that city

Located in an area designated as an "industrial a

25thJuly, 1991

The location of industrial units is further regulated by the local zoning, land use reg

also the environmental regulations

Policy Relating to Small Scale Undertakings*

Locational Policy

Get registered with the Directorate of Industries/District Industries Centre in the

State Government

Also free from locational restrictions cited above

(An industrial undertaking is defined as a small scale uin fixed assets in plant and machinery does not exceed

I d i l P li


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Industrial Policy

A Notification issued under The Environment Protection Act 1986 has listed 29 pro

respect of which environmental clearance needs to be obtained from the MinistryEnvironment, GOI: Cement Industry is one of these.

Foreign Direct Investments Policy

Environmental Clearances

The GOI has allowed FDI up to 100% in the cement and gypsum products industr

FDI can be bought through:

AutomaticRoute

NewVentures

ExistingCompanies

GovernmentApproval

RBI has given permission to Indian Cement

companies to accept investment under this Route

without obtaining prior approval from RBI

Government approvals are accorded

recommendation of the Foreign Inv

Board (FIPB), chaired by the Secreta

Commerce and Industry) with the U

Secretary, Commerce Secretary, and

other key Secretaries of the Govern

I d t i l P li


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Industrial PolicyClearances and Approvals Required

Approvals/Clearances Required Department to be Approached and

Incorporation of Company Registrar of Companies

Registration/IEM/Industrial license DIC for SSI/SIA for large and medium

industries

Allotment of land State DI/SIDC/Infrastructure Corporation

Permission for land use a. State DI

b. Dept. of Town and Country

Planning

NOC and consent under Water and Air Pollution Control Acts State Pollution Control Board

Approval of construction activity and building plan a. Town and country planning

b. Municipal and local authorities

c. Chief Inspector of Factories

d. Pollution Control Board

Weights and Measures Inspector of Weights and Measures

Quality Marking Certificate Quality Marking Center of the State Gove

I d t i l P li


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Industrial PolicyRegulation

Problem:

Cartelizing of cement

firms

The Competition Commission of India says that cement fi

prices, control market share and hold back supply

The Commission claims that cement companies in India h

themselves in a cartel for a while now, colluding, during ind

to fix production levels as well as the price of a bag of cem

doubling it between 2004 and 2011 so they could make

Consequently, the CCI has slapped a fine totaling Rs 6,307

cement companies here and the industry body Cement Ma

Association

Competition Commission of Indiais a body of theIndia responsible for enforcing The Com

2002 throughout India and to prevent activitie

adverse effect on competition in India. It was es

October 2003


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Cement Control Order, 1967

Cement Cess Rule, 1993

Cement (Quality Control) Order,1995

Cement (Quality Control) Order, 2003

Site and Building Plan approval

Health clearance

Fire service clearance

Environmental clearance from State Pollu

Registration with Inspector of Factories u

Registration under Boilers Act (For Boiler

Safety Certificate from Chief Electrical In

Rules and Orders, DIPP

NODAL AGENCYDepartment of Industrial Policy and Promotion (DIPP), Ministry of Commerce

State Level Statutory Clearance

Government Involvemen


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Applicable Labour Laws

Promotion of new manpower at skills and improvement/refiskills

Apprenticeship AdvisorObligations of employers and apprentice

Offences and punishment

APPRENTICES ACT, 1961

To regulate the employment of contract labor and abolish it

Applicability

Revocation and amendment of licenses

Liability of principal employer

CONTRACT LABOUR ACT, 1970

Eligibility

Benefits

Applicability

EMPLOYEES PROVIDENT FUNDS &

MISC. PROVISIONS ACT, 1952

Applicability of the act

Benefits

Penalties

Contribution period

EMPLOYEES STATE INSURANCE ACT1948


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Applicability of the Act

Registration & Renewal of Factories

Welfare MeasuresEmployment of Young PersonsFACTORIES ACT, 1948

Provisions for investigation and settlement of industrial disputes and for c

Power of Labour Court to give appropriate Relief

Period of Operation of Settlements and Awards

Prohibition of Strikes & Lock Outs

INDUSTRIAL DISPUTES ACT, 1947

Applicability of the Act

Matters to be providedPENALTIESSTANDING ORDERS ACT, 1946

Provide for fixing minimum rates of wages in certain employments

Composition of Committee Penalties

Payment of Minimum Rates of WagesMINIMUM WAGES ACT, 1948


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To provide for fixing minimum rates of wages in certain empl

Fixing Hours for normal working

Composition of CommitteeMaintenance of registers and records

Claims, Penalties, Offence, Punishment

MINIMUM WAGES ACT,1948

To provide for the registration of Trade Union & define the laregistered Trade Unions

Minimum Requirement for membership of Trade Union

Registrations and Cancellation of Trade Unions

Penalties, Offence and Punishment

TRADE UNIONS ACT, 1926

To provide for the payment of equal remuneration to men anworkers and for the prevention of discrimination

Advisory Committee to regulate the process

Power of Government for appropriation

Penalties and Offence

EQUAL REMUNERATIONACT, 1972


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To regulate the payment of wages of certain classes of empl

Applicability and Coverage

Legal deductions

Offences and Penalties

PAYMENT OF WAGES ACT,1936

To provide workmen and/or their dependents some relief inaccidents, arising out of and in the course of employment aneither death or disablement of workmen

Applicability, Coverage and Employers Liability

Amount of Compensation

Report of Incidents and Penalties

WORKMENS

COMPENSATION ACT,

1923

To provide for a scheme for the payment of gratuity to emp

Applicability, Qualification, Nomination

Forfeiture of Gratuity

Protection of gratuity and Penalties

PAYMENT OF GRATUITYACT, 1972


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Environmental Laws and Ac

Stated in Constitution of

India

Referred by Directive

Principles of State Policy

Guided by F

Rights s

The Environment(Protection) Act -

1986

Hazardous Waste(Management andHandling) Rules -

1989

The Public LiabilityInsurance Act and

Amendment -1991 &

1992

The NationalEnvironmental

Tribunal Act1995

ThEn

Appe

A

The Forest(Conservation) Act

1981

The Water(Prevention and

Control of Pollution)Act1974

The Water(Prevention and

Control of Pollution)Cess Act1977

The Air (Preventioand Control of

Pollution) Act19

Practice required by law India China


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Standard work day 9 hours 8 hours

Severance pay for redundancy

dismissal of employee with 5 year

tenure

10.7 week salary 21.7 week salary

Severance pay for redundancy

dismissal of employee with 1 year

tenure

2.1 week salary 4.3 week salary

Premium pay for overtime 100% 50%

Minimum Wage (US$/month) 29.9 182.5

Minimum rest while at work 30 minutes per 5 hour None

Maximum overtime limit 200 hours per year 1 hour per day

Government approval required

for 9 person dismissalYes No

Government approval required

for 1 person dismissalYes No

Government approvalRarel Not a licable


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Legal Challenges to Cement Ind

Competition Act2002 ( Amendment in 2007)

Competition Commission of India

Competition Appellate Tribunal6300 Crore Rs Penalty on Cement Companies for cartelization

Orders for CMA

Obsolete Labor Laws World Bank Report on Indian Labor Laws- 2008Indias labor regulations - among the most restrictive and complex in the world- have constrained the groformal manufacturing sector where these laws have their widest application. Better designed labor regulations calabor- intensive investment and createjobs for Indias unemployed millions and those trapped in poor quality jocountrys momentum of growth, the window of opportunity must not be lost for improving thejob prospects fornew entrants who are expected to join the work force over the next decade..


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ReferencesLinks

http://www.cmaindia.org/Cement Manufacturers association

www.mhupa.gov.in- Ministry of Housing and Urban Poverty Alleviation

www.cidc.inConstruction Industry Development Council , set up by Planning Commission

www.ncbindia.comNational Council for Cement and Building Materials

www.dipp.nic.inDepartment of Industrial Policy and Promotion under Ministry of Commerce and Industry, Go

http://www.fipbindia.com/ - Foreign Investment Promotion Board

http://www.mca.gov.in/- Ministry of Corporate Affairs

http://finmin.nic.in/- Ministry of Financial Affairs

http://moia.gov.in/ - Ministry of Overseas Indian Affairs

http://envfor.nic.in/- Ministry of Environment and Forests

http://www.investindia.gov.in

Articles, Papers and Reports

FDI Circular for consolidated FDI policy 2012- Department of Industrial Policy and Promotion under Ministry of C

Govt of India

The Labour Laws Manual

Indian Cement IndustryCII

The Competition (Amendment) Act, 2007Competition Commission of India

Equal Remuneration Act, 1976

Ninety fifth report on performance of cement industryParliament Report ( Presented to Rajya Sabha & lok sab
http://www.cmaindia.org/http://www.mhupa.gov.in/http://www.cidc.in/http://www.ncbindia.com/http://www.dipp.nic.in/http://www.fipbindia.com/http://www.mca.gov.in/http://finmin.nic.in/http://moia.gov.in/http://envfor.nic.in/http://www.investindia.gov.in/http://www.investindia.gov.in/http://envfor.nic.in/http://moia.gov.in/http://finmin.nic.in/http://www.mca.gov.in/http://www.fipbindia.com/http://www.dipp.nic.in/http://www.ncbindia.com/http://www.cidc.in/http://www.mhupa.gov.in/http://www.cmaindia.org/

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Legal Aspect of New Cement Plant