Tag Archives: LexCounsel Law Offices

ILN Today Post

Employees’ Provident Fund – Aftermath of Vidyamandir Case EPFO’S Caution

On February 28, 2019, the Hon’ble Supreme Court, vide its judgement in the case of The Regional Provident Fund Commissioner (II) West Bengal vs. Vivekananda Vidyamandir and Others (clubbed with other civil appeals) (“Vidyamandir Case”), re-affirmed the position concerning inclusion of certain allowances for determining the provident fund contribution.

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Shares With Differential Voting Rights in India – Amendments to The Regulatory Framework

In recent past, there has been a lot of debate around a proper regulatory framework being put in place to enable Indian companies issue shares with differential voting rights (“DVR(s)”) which would enable the promoters to continue retaining control over their companies. Pursuant to this ongoing debate, the Securities Exchange Board of India (“SEBI”) on March 20, 2019 issued a Consultation Paper on “Issuance of shares with Differential Voting Rights” for devising a structure for regulation of shares with DVR(s) under two broad heads, namely, issuance of shares by companies whose equity shares are already listed on stock exchanges; and companies with equity shares which have not been listed as on date but are proposed to be offered to public. Upon receipt of comments of the Primary Market Advisory Committee of SEBI and market participants including issuers and investors on the Consultation Paper, SEBI at its board meeting on June 27, 2019 approved a framework for issuance of shares with DVR vide a press release no. 16/2019.

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Foreign Portfolio Investors’ Regulations– Proposed Changes

As the fastest growing major economy in the world, India is an important participant in global investment flows. Overseas funds flow in India both through the Foreign Portfolio Investors (“FPIs”) and the Foreign Direct Investment (“FDI”) routes with substantial inflows into capital markets. In order to rationalize the investment routes and monitoring of FPIs, the SEBI (Foreign Portfolio Investors) Regulations, 2014 (“FPI Regulations”) were notified on January 07, 2014. Over the years, several clarifications, circulars and guidelines have been issued to the FPI Regulations and a need was felt to undertake an extensive review of the FPI regime to consolidate and rationalize the FPI framework.

SEBI therefore constituted a working group under the chairmanship of Shri. Harun R. Khan (Retd. Deputy Governor of Reserve Bank of India) (“Working Committee”), to review the FPI Regulations and operational guidelines and circulars issued thereunder to simplify the language and complexities in the FPI Regulations. The Working Committee submitted its report titled ‘Report of the working group on the SEBI (Foreign Portfolio Investors) Regulations, 2014’ (“Report”) and has, inter-alia, proposed the following key recommendations:

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Potential Tax Implications of Investment in Shares of a ‘For Profit’ Company by a Charitable Institution

India has a large number of ‘not for profit’ institutions in the form of public charitable trusts, societies and Section 8 companies. These institutions are not only engaged in socio-economic development activities for poor and economically backward classes but are also involved in education and health care sectors and have set up successful educational institutions and hospitals across India. Many of these charitable institutions have hugely profitable balance sheets and want to invest in share capital of other companies. The moot question that arises is whether these tax-exempt charitable institutions are entitled to participate and invest in other ‘for profit’ companies and continue to avail their tax exemptions.

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CYBERTURFING – SHROUDED PERILS IT POSES AND THE APPLICABLE LAW

‘Cyberturfing’ is the online equivalent of the off-line ‘astroturfing’, a term said to be coined by a US Senator back in 1985 and is understood to be a type of deceptive marketing or practice designed by marketers to create a false impression that a campaign has developed authentically and organically but in reality is powered by someone else behind the scenes1. Classic astroturfing involves the use of paid agents to falsely represent popular sentiment surrounding a product or a service2. As a result, consumers ‘follow the herd’3 as against the authentic grass root movements which operate at local level with community volunteers having a primary goal to support a local or a global cause considered good for the society or environment4.sumers ‘follow the herd’3 as against the authentic grass root movements which operate at local level with community volunteers having a primary goal to support a local or a global cause considered good for the society or environment4.

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Supreme Court of India Clarifies Retrospective Applicability of Amended Section 148 of Negotiable Instruments Act, 1881

The Negotiable Instruments Act, 1881 (“NI Act”) was amended last year and two new provisions, section 143A and section 148, were inserted in the NI Act, which were necessitated to deal with the delay tactics of drawers of dishonoured cheques due to easy filing of appeals and obtaining stay on proceedings, leading to frustration in enforcement of section 138 of the NI Act. The amendments came into force with effect from September 1, 2018 vide the Negotiable Instruments (Amendment) Act, 2018 (“NI Amendment Act”).

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Statutory Dues are ‘Operational Debt’ under Insolvency and Bankruptcy Code

The Insolvency and Bankruptcy Code, 2016 (“Code”) is one of the most dynamic legislations in the recent times and is being interpreted by the courts to expand the ambit of the Code and also possibly provide maximum benefit to both financial and operational creditors whose dues are long outstanding. One of the recent changes was to include home buyers within the definition of ‘financial creditors’. The National Company Law Appellate Tribunal (“NCLAT”) has now upheld the view that statutory dues are included within the definition of ‘operational debts’(though much to the despair of statutory authorities).

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Liability of Guarantors and Possible Strategies for Mitigation of Liability

Large unpaid debts and continuing defaults by borrowers require the banks and financial institutions to initiate proceedings for recovery of dues against the principal borrowers as well as the guarantors under various legislations and forums, including the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 for enforcement of security against the guarantors and under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 before the Debt Recovery Tribunals for recovery of debt against the guarantors. The Insolvency and Bankruptcy Code, which came into force on December 1, 2016, as a consolidated legislation to deal with insolvent and bankrupt persons, both natural and artificial, is also assisting the financial institutions to initiate corporate debt resolution process against guarantors.

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More Questions for Foreign NGOs/NPOs – FEMA Amendments

The Reserve Bank of India (RBI) on August 31, 2018 notified the Foreign Exchange Management (Establishment in India of a branch office or liaison office or a project office or any other place of business) (Amendment) Regulations, 2018 (Amendment Regulations).

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Payment of Gratuity to Teachers

The Hon’ble Supreme Court in its recent judgment pronounced on January 7, 2019 in the case of Birla Institute of Technology vs. State of Jharkhand [Civil Appeal No. 2530 of 2012] (“BIT Case”), has endorsed its earlier view taken in the case of Ahmadabad Pvt. Primary Teachers Association vs. Administrative Officer and Others [(2004) 1 SCC 755] (“APPTA Case”) that teachers are not employees for the purposes of Payment of Gratuity Act, 1972 (“PG Act”).

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