e-zine

Editorial BoardCA Mayur Agrawal (Chairman)

CA Niraj Agrawal (Co-Chairman)

CA Kabindra Choudhary (Co-Chairman)

CA Vikash Kumar Banka (Member)

CA Ayush Goel (Member)

Ex-Officio

CA Rajesh Singhania

CA Bajrang Lal Agrawal- 1 -

Indirect Tax

Updates

Pg No. 2-5

Direct Tax

Updates

Pg No. 6-10

Corporate Law

Updates

Pg No. 11-15

IBC

Updates

Pg No. 16-17

August 2019

Vol - 2 l 2019-20

Dates Event Details

31st Aug GST CMP 08 for the quarter Apr-Jun, 19 l

for Composite Supplier.

Income Tax Return for all assessees l

other then those liable for Audit under

any law.

7th Sept TDS/TCS Payment for the Month of l

August' 19.

11th Sept GSTR 1 for the Month August' 19 for l

assessees with turnover of over 1.5 Cr.

15th Sept Deposi�ng Contribu�on toward PF/ESI l

for the Month of August' 19.

15th Sept Second installment of Advance tax for l

the FY 2019-2020

UPCOMING DUE DATESDates Event Details

20th Sept GSTR 3B For all regular assessees,l

GSTR 5 for Non Residentsl

GSTR 5A for persons providing online l

informa�on and database access or

retrieval services for the Month of

August' 19.

21st Sept Profession Tax payment for the month l

of August' 19.

30th Sept Income Tax Return for assessees whose l

account is liable for Audit under any

law.

Tax Audit Report for assessees, liable to l

be filled u/s 44AB for the F.Y 2018-2019

Filling of Form BEN-2 with MCAl

Filling of Form DIR-3 KYC with MCAl

INDIRECT TAX UPDATES

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DIRECT TAX UPDATES

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NOTIFICATIONS

No�fica�on No. 53/2019, Dated: 16-07-2019M/S Na�onal Centre For Cell Science, Pune Approved For Purpose Of Sec�on 35(1)(Ii) Read With Rules 5c And 5d Of The Income-Tax Rules, 1962

No�fica�on No. 54/2019, Dated: 17-07-2019Protocol Amending Agreement Between India And China For Avoidance Of Double Taxa�on And Preven�on Of Fiscal Evasion With Respect To Taxes On Income

No�fica�on No. 55/2019, Dated: 26-07-2019Class Of Persons Exempt From Requirement Of Furnishing A Return Of Income Under Sec�on 139(1) From Ay 2019-20 Onwards

No�fica�on No. 56/2019, Dated: 02-08-2019Bangalore Water Supply And Sewerage Board, Bengaluru No�fied For Purpose Of Sec�on 10(46)

CIRCULARS

Circular No. 18/2019, Dated: 08-08-2019Clarifica�on In Respect Of Filling-Up Of The Itr Forms For The Assessment Year 2019-20

Circular No. 17/2019, Dated: 08-08-2019Further Enhancement Of Monetary Limits For Filing Of Appeals By The Department Before Income Tax Appellate Tribunal, High Courts And Slps/Appeals Before Supreme Court - Amendment To Circular 3 Of 2018 - Measures For Reducing Li�ga�on.

RECENT CASE LAWS

Principal Commissioner of Income Tax Vs Maru� Suzuki India LimitedSUPREME COURT OF INDIA, Jul 25, 2019

The appeal is dismissed in terms of the signed reportable judgment. Pending applica�on(s), if any, shall stand disposed of.

Principal Commissioner Of Income Tax Vs Maru� Suzuki India LimitedSUPREME COURT OF INDIA, JUL 25, 2019

When AO did not subs�tute the name of the amalgamated company and proceeded to make an assessment in the name of a non-existent company same is a jurisdic�onal defect.

Legisla�on Referred to: Sec�on 143(2)In Favour Of : Assessee

Prashan� Medical Services & Research Founda�on Vs Union Of India & Ors.SUPREME COURT OF INDIA, Jul 25, 2019

The cons�tu�onal validity of any provision and especially taxing provision cannot be struck down only on the plea based on equity or/and hardship.

Legisla�on Referred To: Sec�on 35AC (7)In Favour Of : Revenue

Prashan� Medical Services And Research Founda�on Vs Union Of India & Ors.SUPREME COURT OF INDIA, Jul 25, 2019

Leave granted. The appeal is dismissed in terms of the signed Reportable judgment. Pending applica�ons shall also stand disposed of.

Principal Commissioner Of Income ... vs Ankit Metal & Power Ltd on 9 July, 2019CALCUTTA HIGH COURT

This case does not help the revenue/appellant. In this case Supreme Court has made it clear that its decision was restricted to the power of the Assessing authority to entertain a claim for deduc�on otherwise than by a revised return, and did not impinge on the power of the Appellate Tribunal under Sec�on 254 of the Income Tax Act, 1961. The Hon'ble Supreme Court in the said decision held as follows:

"..........In the circumstances of the case, we dismiss the Civil Appeal. However, we make it clear that the issue in this case is limited to the power of the Assessing Authority and does not impinge on the power of the Income Tax Appellate Tribunal under Sec�on 254 of the Income Tax Act, 1961." This judgment was followed by our Court in the case of CIT Vs. Britannia Industries Ltd. (Cal.) page 677 holding

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that Tribunal has the power to entertain the claim of deduc�on not claimed before the Assessing Officer by filing revised return. Respec�ully following the aforesaid decision as well as the view already taken by us in this case that the aforesaid subsidies are capital receipt and not an 'income' and not liable to Tax Tribunal in exercise of its power under Sec�on 254 of the Income Tax Act jus�fied this claim though no revised return under Sec�on 139 (5) of the Act was filed before the Assessing Officer. We answer both the ques�on Nos. 1 and 2 in nega�ve and in favour of assessee .

Commissioner Of Income Tax Vs V.S. Dempo & Co. Pvt. Ltd.HIGH COURT OF BOMBAY, Jul 20, 2019

Interest income earned by the assessee which has a direct nexus with its business ac�vity has to be treated as business income.

Legisla�on Referred To: Sec�on 40(a)(i), 172, 195In Favour Of : Assessee

S.1234 Udayapa� Paccs Ltd. Vs Income Tax OfficerHIGH COURT OF MADRAS, Jul 22, 2019

The assessee is en�tled for deduc�on under Sec�on 80P(2) of the IT Act in respect of the income earned from the sale under the PDS.

Legisla�on Referred To: Sec�on 260A, 80P(2)(a)(i), 143(3), 254(2)

Principal Commissioner Of Income Tax Vs Indian Sugar Exim Corpora�on Ltd.HIGH COURT OF DELHI, Jul 22, 2019

Even for the purposes of the penalty order u/s 271(1)(c) r/w s. 275(1)(a), the limita�on begins to run from the date the order of the ITAT was served upon the CIT (Judicial).

Legisla�on Referred To : Sec�on 271(1)(c), 275(1)(a)In Favour Of : Assessee

New White Rose Chs Ltd. Vs Appropriate AuthorityHIGH COURT OF BOMBAY, Jul 23, 2019

Where an order under sub-sec�on (1) of sec�on

269UD is made by the appropriate authority in respect of an immovable property referred to in sub-clause (i) of clause (d) of sec�on 269UA, such property shall, on the date of such order, vest in the Central Government in terms of the agreement for transfer referred to in sub-sec�on (1) of sec�on 269UC

Legisla�on Referred To: Sec�on 269UE

Principal Commissioner Of Income Tax Vs Paramshak� Distributors Pvt. Ltd.HIGH COURT OF BOMBAY, Jul 25, 2019

Where AO has not rejected either the purchases or the sales made out of the said purchases, it is allowed to apply the principle of taxing the profit embedded in such purchases covered by the bogus bills, instead of disallowing the en�re expenditure

L e g i s l a � o n R e f e r r e d T o : S e c � o n 6 8In Favour Of : Assessee

Gemini Film Circuit Vs Commissioner Of Income Tax & Anr.HIGH COURT OF MADRAS, Jul 29, 2019

It is statutorily impera�ve to give a personal hearing, while disposing of an appeal under Sec�on 250 of IT Act.

L e g i s l a � o n R e f e r r e d To : S e c � o n 2 5 0In Favour Of : Assessee(Partly)

Surendra Kumar Jain Vs Principal Commissioner Of Income Tax (Central)HIGH COURT OF DELHI, Jul 29, 2019

Reassessment—Assessee filed present Writ Pe��on contending that whether AO could have proceeded to finalise reassessment pursuant to no�ces issued u/s 147/148 without procedure laid down by Supreme Court in GKN Drivesha�s (India) Ltd. v. ITO being complied with—Held, where in response to a no�ce issued u/s 147 by AO, assessee sought reasons to believe that prompted re-opening, and files objec�ons thereto, those objec�ons had to be considered on their merits and only a reasoned order had to be passed thereon by AO—Importantly, this had to happen prior to AO proceeding with re-assessment—AO had not chosen to dispose of

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objec�ons, filed by assessee against reopening of assessment but had proceeded to stage of passing reassessment order itself—Court had therefore, no hesita�on in se�ng aside reassessment order dated

t h29 December, 2018 for AY 2011-12—Thus, reassessment order was set aside—Assessee's Writ Pe��on allowed.

Legis la�on Referred To : Sec�on 147, 148In Favour Of : Assessee

Bent ly Nevada L l c Vs Income Tax Officer (Interna�onal Taxa�on)HIGH COURT OF DELHI, Jul 29, 2019

Decision which is quasi-judicial in nature, has to be taken by the AO under Sec�on 197(1) of the Act on objec�ve criteria and must be supported by reasons available on the file which conform to the requirement of Sec�on 197 of the Act read with Rule 28AA of the Rules and those reasons must be communicated to the applicant

L e g i s l a � o n R e fe r r e d To : S e c � o n 1 9 7 ( 1 )In Favour Of : Assesse

Principal Commissioner Of Income Tax Vs Parabolic Drugs Ltd.HIGH COURT OF DELHI, Jul 29, 2019

The Court finds that no convincing explana�on has been given by the Appellant for the extraordinary delay in filing and refiling the present appeal. The applica�ons are dismissed. Accordingly, the appeal is dismissed.

Principal Commissioner Of Income Tax Vs Transcend Me Ser�ves Pvt. Ltd.HIGH COURT OF DELHI, Jul 30, 2019

The Assessee filed its return of income for the AY in st

ques�on on 31 October 2007. The return was picked up for scru�ny under Sec�on 143 of the Income Tax Act, 1961 ('Act'). As the Assessee had entered into interna�onal transac�ons with its AEs, the Assessing Officer (AO) referred the ma�er to the Transfer Pricing Officer (TPO) for determina�on of their Arm's Length Price ('ALP'). Subsequently, a final assessment

ndorder was passed on 22 February, 2011 wherein in

addi�on to the Transfer Pricing (TP) adjustment, the Assessee's claim for deduc�on under Sec�on 10A of the Act was rejected.

Legisla�on Referred To : Sec�on 10A, 144-C, 143, 292B

Commissioner Of Income Tax Vs Narcissus Investments Pvt. Ltd.HIGH COURT OF BOMBAY, Jul 31, 2019

Once an issue is squarely considered by AO at the stage of finaliza�on of assessment, it was not open to the Revenue to indulge into further hair-spli�ng by urging that some facet of this issue remained to be considered.

Legisla�on Referred To : Sec�on 80HHC, 80HHC(3)(c), 142, 142(1), 143(1)(a), 143(2), 143(3), 147, 148, 260A

Dabur Invest Corp Vs Addi�onal Commissioner Of Income Tax & Anr.HIGH COURT OF DELHI, Jul 31, 2019

In the absence of opinion formed by AO about the reasonable likelihood of the recovery becoming difficult due to inadequacy of the assets of the assesse, the order passed by Revenue under Sec�on 281B is not sustainable

Legisla�on Referred To : Sec�on 281BIn Favour Of : Assessee

Commissioner Of Income Tax & Anr. Vs Rajiv Gupta & Anr.HIGH COURT OF DELHI, Jul 31, 2019

The AO can reject the assessment u/s 145(3) if he finds that there are defects in the books of accounts and where bogus purchases are shown by the assessee in order to reduce gross profit.

Legisla�on Referred To : Sec�on 145(3)In Favour Of : Revenue

Principal Commissioner Of Income Tax Vs Kesoram Industries Ltd.HIGH COURT OF CALCUTTA, Aug 02, 2019

Commissioner could exercise his jurisdic�on u/s 263

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only in cases where no enquiry is made by the AO.

Legisla�on Referred To : Sec�on 263In Favour Of : Assessee

Chetan Sabharwal & Ors. Vs Assistant Commissioner Of Income Tax & Ors.HIGH COURT OF DELHI, Aug 06, 2019

Every a�empt to bring to tax income that has escaped assessment cannot be absorbed by judicial interven�on on an assumed change of opinion even in cases where the order of assessment does not address, itself to a given aspect sought to be examined in the reassessment proceedings.

Legisla�on Referred To : Sec�on 147, 148In Favour Of : Revenue

Commissioner Of Income Tax Vs Akzo Noble India LimitedHIGH COURT OF CALCUTTA, Aug 09, 2019

Sec�on 45 of Income Tax Act would not apply where the transfer of undertaking in ques�on was a transfer of a collec�on of almost en�re assets of undertaking including intangibles and their cost of acquisi�on could not be determined.

Legisla�on Referred To : Sec�on 45, 48, 50, 50B, 260A

Deputy Commissioner Of Income Tax Vs Ganesh R e a l t y & M a l l D e v e l o p m e n t P v t . L t d .KOLKATA TRIBUNAL, Jul 22, 2019

Rental and u�li�es income received by assessee through unsold stock forming its main business ac�vity should be considered as business income.

Legisla�on Referred To : Sec�on 143(3)In Favour Of : Assessee

Deputy Commissioner Of Income Tax Vs Yaduka Financial Services Ltd.KOLKATA TRIBUNAL, Jul 19, 2019

The power under sec�ons 147/148 comes into existence if AO had reason to believe that income has escaped assessment.

Legisla�on Referred To : Sec�on 147, 148, 151In Favour Of : Assessee

Deputy Commissioner Of Income Tax & Anr. Vs Turner Morrison Limited & Anr.KOLKATA TRIBUNAL, Jul 26, 2019

In the absence of any evidence to establish the nature of services provided so as to establish it as a business ac�vity, the service charges received by the assessee from its tenants are chargeable under the head “income from house property”.

Legisla�on Referred To : Sec�on 46(2)In Favour Of : Ma�er Remanded

Asish Kumar Ghosh Vs Deputy Commissioner Of Income TaxKOLKATA TRIBUNAL, Aug 02, 2019

This assessee's appeal for assessment year 2014-15 arises against the Commissioner of Income Tax (Appeals)-6 Kolkata's order dated 10.04.2019 passed in case No....

Legisla�on Referred To : Sec�on 68, 10(38), 260A, 143(3)

Deputy Commissioner Of Income Tax Vs Ansal Urban Condominium Pvt. Ltd.DELHI TRIBUNAL, Aug 07, 2019

There is no prohibi�on on powers of ITAT to entertain an addi�onal ground which according to ITAT arose in ma�er and for just decision of case.

Legisla�on Referred To : Sec�on In Favour Of : Assessee

Tejinder Singh Vs Assistant Commissioner Of Income TaxIndore Tribunal, Aug 07, 2019

In the absence of the proof that assessee has made repayment of loan in cash, imposi�on of penalty u/s 271E will not be jus�fied.

Legisla�on Referred To : Sec�on 271EIn Favour Of : Assessee

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Vrl Logis�cs Ltd. And Anr. Vs Deputy Commissioner Of Income Tax And Anr.BANGALORE TRIBUNAL, Aug 08, 2019

When the log books are available, it should be possible to segregate the use of aircra� for business purposes and personal purposes and make disallowance propor�onately.

Legisla�on Referred To : Sec�on 115JBIn Favour Of : Assessee(Partly)

Hyundai Motor India Engineering Private Limited Vs A s s i s t a n t C o m m i s s i o n e r O f I n c o m e Ta xHYDERABAD TRIBUNAL, Aug 02, 2019

Func�onally different companies cannot be a good comparables.

Legisla�on Referred To : Sec�on 92C(3)In Favour Of : Assessee(Partly

Assistant Commissioner Of Income Tax Vs T & T Projects Ltd.GAUHATI TRIBUNAL, AUG 02, 2019

When primary facts are already disclosed with the AO at the �me of original assessment u/s 143(3), AO has no power to review and reopen that assessment.

Legisla�on Referred To : Sec�on 143(3), 147, 148In Favour Of : Assessee

Shobha Sardana Vs Deputy Commissioner Of Income TaxDELHI TRIBUNAL, JUL 31, 2019

If the assessee fails to sa�sfy any one of the condi�ons of s. 271AAA(2), the assessee cannot escape the penalty u/s 271AAA(1) of the Act.

Legisla�on Referred To : Sec�on 271AAA(2)In Favour Of : Revenue

Deputy Commissioner Of Income Tax & Anr. Vs Mahesh Timber Pvt. Ltd. Anr.DELHI TRIBUNAL, Aug 01, 2019

When assessee has sufficient interest free funds available to jus�fy the interest free advance given to the par�es, no disallowance can be made u/s 36(1)(iii).

Legisla�on Referred To : Sec�on 36(1)(iii)In Favour Of : Assessee

Deputy Commissioner Of Income Tax Vs B.P. Edible Oil Pvt. Ltd.AGRA TRIBUNAL, JUL 30, 2019

For the purpose of bringing home the addi�on u/s 68 of the Act, it is necessary that the onus shi�ed to the AO to prove that share applica�ons made by assessee were not in accordance with law, is required to be discharged by the AO, as the primary onus had already been discharged by the assessee.

Legisla�on Referred To : Sec�on 68In Favour Of : Assessee

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CORPORATE LAW UPDATES

Reference

S. O. 2651 (E)

General Circular No. 08-2019

S. O. ____ (E)

Date

25/07/2019

29-07-2019

14/08/2019

Topic

Establishment of RO C Gu wah a� Under Sec�on 396

R e l a x a � o n o f addi�onal fees and extension of last dateof filing of Form BEN-2

Commencement of few sec�ons of the Companies ( A m e n d m e n t ) Act, 2019 w.e.f. 1 5 t h A u g u s t , 2019

Simplifica�on of p r o c e s s o f Incorpora�on of S e c � o n 8 Companies:

Descrip�on

In exercise of the powers conferred by sub-sec�ons (1) and (2) of sec�on 396 of the Companies Act, 2013 (18 of 2013), the Central Government hereby establishes the office of the Registrar of Companies at Guwaha� consequent to re-loca�on of the said office from Shillong, having territorial jurisdic�on in whole of the States of Assam, Meghalaya, Manipur, Tripura, Mizoram, Nagaland and Arunachal Pradesh and appoints the Registrar of Companies at Guwaha� for the purpose of registra�on of companies and discharging the func�ons under the aforesaid Act in the said States.h�p://mca.gov.in/Ministry/pdf/No�fica�on396_25072019.pdf

It is hereby, informed that the �me limit for filing e-form No. BEN-2 is extended upto 30.09.2019 without payment of addi�onal fee and therea�er fee and addi�onal fee shall be payable.h�p://mca.gov.in/Ministry/pdf/GeneralCircular_29072019.pdf

In exercise of the powers conferred by sub-sec�on (3) of sec�on 1 of the Companies (Amendment) Act, 2019 (22 of 2019), the Central Government hereby appoints the 15th day of August, 2019 as the date on which the provisions of sec�ons 6, 7 and 8, clauses (i), (iii) and clause (iv) of sec�on 14, sec�on 20, sec�on 31, sec�ons 33, 34 and 35 and sec�ons 37 and 38 of the said Act shall come into force.h�p://mca.gov.in/Ministry/pdf/CommencemntNo�fica�on_14082019.pdf

1) With a view to simplify the process for i n c o r p o r a � n g S e c � o n 8 C o m p a n i e s , requirement of prior filing of INC-12 for new sec�on-8 companies is being dispensed with vide the Companies(Incorpora�on) Sixth Amendment Rules, 2019 dated 7th June, 2019.2) Henceforth, Sec�on 8 Companies can be

COMPANY LAW UPDATES

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incorporated by either reserving names through Run and filing SPICe therea�er or by directly filing SPICe. Licence No. for a sec�on 8 company shall henceforth be allo�ed at the �me of incorpora�on itself.3) In view of the above, all pending INC-12 SRNs for new Companies pending at respec�ve ROCs would be marked as ‘Rejected’ on 15th August 2019. Such applicants may therea�er directly file SPICe for obtaining License Number and for incorpora�on of Sec�on 8 Companies.4) Stakeholders who have already obtained License Numbers and are yet to file SPICe form for incorpora�ng Sec 8 companies may do so at their convenience but may please note that the forms shall be processed only a�er a certain �me lag to allow for work flow changes to take effect.5) Those stakeholders who have already filed SPICe forms which are pending at CRC may kindly await processing of these forms a�er the work flow changes take effect.

The Central Government has made further amendments to Schedule III to the Companies Act, 2013 vide No�fica�on dated 11th October 2018. As per the said no�fica�on, Division III has been inserted in respect of Financial Statements for a Non-Banking Financial Company (NBFC) whose financial statements are drawn up in compl iance of the Companies ( Ind ian Accoun�ng Standards) Rules, 2015. The changes to AOC-4 Non-XBRL form necessitated by inser�on of Division III in Schedule III of CA 2013 are under development and the revised form exclusively for such class of companies would be made available for filing purposes soon. Stakeholders may kindly take note and plan accordingly.

IEPF Second Amendment Rules, 2019 have been no�fied and are available on www.iepf.gov.in. Accordingly IEPF-1, IEPF-2 and IEPF–4 forms shall be revised, new IEPF–1A shall be available and IEPF–6 shall be deprecated from 20th August 2019. Stakeholders are requested to plan accordingly.

Changes in AOC-4 Non-XBRL form for NBFC

Changes in forms related to IEPF

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It is hereby clarified that:(a) The provision of sec�on 232(6) of the Act enables the companies in ques�on to choose and state in the scheme an 'appointed date'. This date may be a specific calendar date or may be �ed to the occurrence of an event such as grant of license by a competent authority or fulfillment of any precondi�ons agreed upon by the par�es, or mee�ng any other requirement as agreed upon between the par�es, etc., which are relevant to the scheme.(b) The 'appointed date' iden�fied under the scheme shall also be deemed to be the 'acquisi�on date' and date of transfer of control for the purpose of conforming to accoun�ng standards (including Ind-AS 103 Business Combina�ons).(c) Where the 'appointed date' is chosen as a specific calendar date, it may precede the date of filing of the applica�on for scheme of merger/amalgama�on in NCLT. However, if the 'appointed date' is significantly ante-dated beyond a year from the date of filing, the jus�fica�on for the same would have to be specifically brought out in the scheme and it should not be against public interest.(d) The scheme may iden�fy the 'appointed date' based on the occurrence of a trigger event which is key to the proposed scheme and agreed upon by the par�es to the scheme. This event would have to be indicated in the scheme itself upon occurrence of which the scheme would become effec�ve. However in case of such event based date being a date subsequent to the date of filing the order with the Registrar under sec�on 232(5), the company shall file an in�ma�on of the same with the Registrar within 30 days of such scheme coming into force.h�p://mca.gov.in/Ministry/pdf/GeneralCircular_21082019.pdf

C l a r i fi c a � o n under Sec 232(6) o f C o m p a n i e s Act, 2013

21-08-2019General Circular No. 09-2019

st ndThe Companies (Amendment) Act, 2019, Dated 31 July 2019, Effec�ve from 2 November, 2018 except few

All the provisions of companies Amendment Bill, 2018 has become part of the Act now. Few new amendments have been made related to provisions of CSR, Demat of Shares, Inves�ga�on by SFIO etc.

h�p://mca.gov.in/Ministry/pdf/AMENDMENTACT_01082019.pdf

The Investor Educa�on and Protec�on Fund Authority (Accoun�ng, Audit, Transfer and Refund) Second Amendment th

Rules, 2019, Dated 14 August 2019th thEffec�ve from 20 August, 2019 except rule 6 which is effec�ve from 20 September, 2019

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SEBI UPDATE

Reference

SEBI/HO/MRD/DOP2DSA2/CIR/P/2019/87

SEBI/HO/CFD/DCR1/CIR/P/2019/90

SEBI/HO/CFD/DIL2/CIR/P/2019/94

RBI/2019-20 /20

Date

01/08/2019

07/08/2019

19/08/2019

30/07/2019

Topic

D a t a b a s e f o r D i s � n c � v e Number (DN) of Shares - Ac�on a g a i n s t n o n -c o m p l i a n t companies

D i s c l o s u r e o f r e a s o n s f o r encumbrance by p r o m o t e r o f listed companies

Non-compliance w i t h c e r t a i n provisions of SEBI ( I C D R ) R e g u l a � o n s , 2018

E x t e r n a l C o m m e r c i a l Borrowings (ECB) P o l i c y – Ra�onalisa�on of E n d - u s e Provisions

Descrip�on

It is noted that, despite follow-ups by Depositories, certain companies are yet to comply with aforemen�oned circular no. CIR/MRD/DP/10/2015 dated June 05, 2015. Hence, in order to protect the interest of investors enlisted ac�ons shall be taken.h�ps://bit.ly/2Zo2GtS

In order to bring greater transparency regarding reasons for encumbrance, par�cularly when significant shareholding by promoter along with persons ac�ng in concert (PACs)with him is encumbered, it has been decided to prescribe addi�onal disclosure requirements under Regula�on 31(1) read with Regula�on 28(3) of Takeover Regula�onsh�ps://bit.ly/2YSfcG2

Fines for non-compliance with certain provisions of ICDR Regula�ons shall be imposed on the listed en��es by stock exchanges is re-imposed.h�ps://bit.ly/2KTh740

RBI has liberalized the restric�on on end use of External Commercial Borrowings. As per the no�fica�on, eligible borrowers who sa�sfies certain condi�ons men�oned therein, will now be permi�ed to raise ECBs for specified purposes from recognized lenders, except foreign branches/ overseas subsidiaries of Indian Banks.h�ps://bit.ly/2zsmmm9

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Based on the representa�ons made by the stakeholders, MCA has revised the aforesaid Rules with respect to transfer of shares. The revised rules has further made the process of transfer of dividend/shares to and claiming of refund from the Investor Educa�on and Protec�on Fund (“the Fund”) effortless.

h�p://mca.gov.in/Ministry/pdf/IEPFRules_19082019.pdf

thThe Companies (Share Capital and Debentures) Amendment Rules, 2019, Dated 16 August 2019

The Ministry of Corporate Affairs has amended the provisions rela�ng to issue of shares with Differen�al Vo�ng Rights (DVRs) and Employee Stock Op�ons (ESOPs) vide this amendment rules.

h�p://mca.gov.in/Ministry/pdf/ShareCapitalRules_16082019.pdf

RBI UPDATE

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The Arbitra�on and Concilia�on (Amendment) Act, 2019, Dated 9th August 2019

The Arbitra�on and Concilia�on (Amendment) Bill, 2019 was introduced in Rajya Sabha by the Minister for Law

and Jus�ce, Mr. Ravi Shankar Prasad, on July 15, 2019. It seeks to amend the Arbitra�on and Concilia�on Act,

1996. The Act contains provisions to deal with domes�c and interna�onal arbitra�on, and defines the law for

conduc�ng concilia�on proceedings.

The Act seeks to establish an independent body called the Arbitra�on Council of India (ACI) for the promo�on

of arbitra�on, media�on, concilia�on and other alterna�ve dispute redressal mechanisms. Under the Act, the

Supreme Court and High Courts may now designate arbitral ins�tu�ons, which par�es can approach for the

appointment of arbitrators.

h�ps://bit.ly/31XZrLq

OTHER UPDATES

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1. New monitoring forms: In order to facilitate submission of records and informa�on submi�ed by the Insolvency Professionals to the Insolvency and Bankruptcy Code, 2016 as well as for monitoring of the process and performance of IPs, a set of forms has been introduced in pursuance of mandate and in synchroniza�on with the provision of the Code.

2. CPE for IPs: The Insolvency and Bankruptcy Code, 2016 has issued guidelines on con�nuing profess ional educa�on for insolvency professionals. The main objec�on is to improve the performance of professionals, upgrade professional knowledge and skills to render competent service. The new guidelines shall enable an IP to con�nuously upgrade himself through Con�nuing Professional Educa�on (CPE).

3. Insolvency And Bankruptcy Code (Amendment) Act, 2019 - Key Changes

(a) Clarity on al lowing comprehensive corporate restructuring through merger, amalgama�on and demerger under a resolu�on plan

(b) Time-bound disposal of the resolu�on

applica�on (c) Timeline for comple�on of CIRP increased to

an overall limit of 330 days (d) Vo�ng by an authorised representa�ve on

behalf of certain classes of financial creditors (e) Distribu�ons under the Resolu�on Plan (f) Resolu�on Plan binding on all Stakeholders:

The Amendment aims to capture this spirit by specifically providing that a resolu�on plan will also be binding on the Central Government, State Governments or any local authority to whom a debt in respect of payment of dues is owed.

(g) Liquida�on by the CoC: The Amendment

clarifies that the CoC may take the decision to

IBC Updates

liquidate the corporate debtor any �me a�er the CoC is cons�tuted and before the confirma�on of the resolu�on plan, including at any �me before the prepara�on of the informa�on memorandum.

(h) Powers of the CoC: Amendment has

empowered the CoC to commercially consider the manner of distribu�on proposed in the resolu�on plan while deciding its feasibility and viability. The CoC can evaluate such manner of distribu�on by taking into account the order of priority amongst creditors as per the liquida�on waterfall in sec�on 53 of the Code, including the priority and value of the security interest of a secured creditor.

4. Voluntary liquida�ons under the Insolvency and Bankruptcy Code (IBC) are becoming popular for promoters to close down 'unviable' companies. The Quarterly Newsle�er (April-June 2019) i ssued by Inso lvency and Bankruptcy Board of India (IBBI), the insolvency regulator, shows as many as 452 companies have filed for voluntary liquida�on �ll 30 June 2018. Of that, 56 firms have so far been dissolved, final reports have been submi�ed in 114 cases and 338 are at different stages of the process.

5. The Delhi High Court has held that moratorium u/s 14 of the IBC will not bar trial of suit by the Corporate Debtor and a counter claim in such suit if issues and facts in both are intertwined.

The plain�ff company SSMP Industries had ins�tuted the suit against Perkan Foods I n d u s t r i e s P L t d fo r re c o v e r y o f R s . 1,61,47,336.44. The defendant made a counter claim in the suit for Rs. 59,51,548/-. Meanwhile the plain�ff company went into insolvency.

Therefore the issue arose whether the counter

claim was hit by Sec�on 14 of IBC. Deciding the issue, Jus�ce Pra�bha Singh

observed that all proceedings against the corporate debtor are not barred by Sec�on 14 moratorium.

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Un�l and unless the proceeding has the effect of

endangering, diminishing, dissipa�ng or adversely impac�ng the assets of the Corporate Debtor, it would not be prohibited under Sec�on 14(1)(a) of the Code” observed the Court based on an earlier decision of Delhi High Court in Power Grid Corpora�on of India vs Jyo� Structures Ltd.

6. Liquidated damages are an es�mate of hard-to-define losses, whereas opera�onal debt is claim in respect of goods supplied, or services rendered as defined under sec�on 5(21); therefore c la im of damages , ne i ther ascertainable nor crystallized is out of ambit of opera�onal debt, hence, same was not maintainable. [2019] 107 taxmann.com 371 (NCLT - Mum.)

7. Where par�es had se�led ma�er prior to cons�tu�on of CoC, applica�on filed under sec�on 9 was to be dismissed as withdrawn. [2019] 107 taxmann.com 190 (NCL-AT)

8. Once moratorium is declared, FDRs lying with financial creditor-bank as guarantee can't be

adjusted against debt: Where claim of bank to appropriate FDRs lying with it as corporate guarantee was disallowed by Adjudica�ng Authority on ground that once moratorium had been declared it was not open to any person to recover any amount from account of corporate debtor, since, corporate debtor had undergone liquida�on and bank had filed its claim before liquidator also, which was accepted, appeal against impugned order passed by Adjudica�ng Authority was to be dismissed

9. IBHC couldn't be said to be financial creditor of builder as it had disbursed loan to home buyers: Where a tripar�te agreement was executed between appellant, respondent/builder and borrower and in terms of said tripar�te agreement, borrower and respondent were jointly and severally liable for repayment, since appellant disbursed amount for considera�on of �me value of money in favour of borrower, Adjudica�ng Authority had rightly held that respondent was not corporate debtor to appellant and therefore, applica�on under sec�on 7 against respondent was not maintainable

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VIPCA E-ZINE : VOL – 2

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