Monday, 2 October 2017

Court accepts Complaint Directs Registration of FIR against Religare Finvest and CITIFINANCE

The Metropolitan Magistrate, Saket Court recently allowed the complaint of an individual under Section 156(3) of the Code of Criminal Procedure, 1973 and directed the Ambedkar Nagar Police Station, Delhi to register FIR and start investigation in allegations of forgery against Religare Finvest Limited (“Religare”) and Citifinance Consumer Finance Limited (“Citifinance”).

By way of facts, the father of the Complainant had procured a loan from Citifinance sometime in the year 2007, however subsequently the said loan was assigned by Citifinance in favour of Religare. Interestingly, the loan was procured only by the father of the Complainant; was signed by the father of the Complainant and the loan amount was disbursed in favour of the father of the complainant. While procuring the loan collateral was offered and which as such belonged to the father. Thereafter, Certain disputes arose between the father of the Complainant and Religare.

After lapse of couple of years, the Complainant received summons from the District Courts in Delhi wherein allegations were made that the Complainant procured loan from Citifinance as a co-borrower and failed to repay the same.  It was only then that the Complainant became aware that the signatures of the Complainant were forged on the loan documents, which as such was only signed by the father of the Complainant.

The Complainant approached the local police, however, could not get the FIR registered. Eventually having failed after following all possible procedures, the Complainant approached the Court of Metropolitan Magistrate under Section 156(3) of the Code of Criminal Procedure, 1973 inter alia seeking directions to the effect that an FIR be lodged against the concerned employees of Religare and Citifinance for committing the offence of forgery. The Court while hearing called for Action Taken Report from the concerned police station.

After hearing extensive arguments and rejecting the reasons cited by the investigating agency for not registering an FIR, the Court accepted the application filed by the Complainant and directed registration of FIR.

Friday, 29 September 2017

Firm News

Alpha in News

Alpha Partners was ranked as one of the top 10 Most Promising Legal Consultants by Consultant Review


IIDL empanels Alpha 

Alpha Partners was recently empaneled as a law firm with IFCI Infrastructure Development Limited (IIDL). IIDL, a wholly owned subsidiary, was promoted by IFCI to leverage its expertise in the emerging infrastructure and real estate sector. Besides re-development, modernization, ownership and management of properties owned by IFCI, IIDL strategically develops properties acquired through NPA resolution from various Banks and FIs or directly obtained from the Development Authorities.

We are honored to be associated with IIDL. 





Internet Broadcasting Organisations to come within the ambit of statutory licenses

Section 31D of the Copyright Act, 1957 of India was introduced vide an amendment to the Act in 2012 which provides for Statutory licence for broadcasting of literary and musical works and sound recording. Section provides that any broadcasting organisation desirous of communicating to the public by way of a broadcast or by way of performance of a literary or musical work and sound recording which has already been published may do so subject to the provisions of the Section.

Various stakeholders raised queries as to whether ‘any broadcasting organisation’ includes internet broadcasting organisations as well or only includes conventional media such as radio or TV.

The Department of Industrial Policy and Promotion, Ministry of Commerce and Industry (Copyright Section) has, vide office memo dated 5.9.17 clarified that ‘any broadcasting organisation’ shall include internet broadcasting organisations as well. In clarifying the above, the authority made reference to the definition and meaning of the term ‘communication to the public’ and observed that the same means and includes any media. 

Peer-to-Peer Lending

Reserve Bank of India, vide notification No. DNBR. 045/CGM (CDS)-2017 has specified that an institution that carries on ‘the business of a peer to peer lending platform’ shall be a Non-Banking Financial Company.

The term “the business of a peer to peer lending platform” shall mean the business of providing under a contract, the service of loan facilitation, via online medium or otherwise, to the participants who have entered into an arrangement with that platform to lend on it or to avail of loan facilitation services provided by it.

RBI had earlier released a consultation paper on P2P lending platforms where the central bank had proposed certain minimum eligibility criteria for registration of such platforms which were necessary in public interest and for regulation of such platforms.

Recognition of the P2P platforms as an NBFC has been a long standing demand of the industry and it provides a lot of clarity on how to run the business.

Restriction on number of layers of Subsidiaries

Section 2(87) of the Companies Act, 2013 defines the term ‘subsidiaries’ and recently, the proviso to the sub-section which provides for prescribing a limit to number of layers of subsidiaries which a holding company may have, has been notified. Companies (Restriction on number of layers) Rules, 2017 (the ‘Rules’) provides that a company cannot have more than two layers of subsidiaries except in following cases:

a.       A banking company;
b.      A systematically important non-banking financial company;
c.       An insurance company;
d.      A government company;
e.      A company acquiring another company incorporated outside India with subsidiaries beyond two layers;
f.        In computing two layers, a holding company having one layer of more than one wholly owned subsidiaries will be taken as one.
g.       Those allowed under Section 186(1) of Companies Act, 2013.

Every company have more layers than prescribed are required to file a return with the Registrar of Companies and are restricted to add to the layers beyond two or such number as is existing as on the date of the Rules, whichever is more.

It may be noted that both J J Irani Committee report as well as the Companies Law Committee formed in 2015 recommended against having any restriction on number of layers of subsidiaries which a company may have, as it will significantly put Indian companies at a disadvantage vis-à-vis their international counterparts.

Monday, 4 September 2017

Alpha relocates to new office

Alpha, in a span of around 4 years, has once again outgrown itself and relocated its office to a commercial building in NOIDA. Our new office address is:


1208, Express Trade Tower-2, B-36, Sector 132 NOIDA

Employment law

    
Wage Ceiling enhanced

     The Ministry of Labour and Employment increased the wage ceiling under the Payment of Wages Act, 1936 from INR 18,000 per month to INR 24,000 per month vide notification S.O. 2806 (E) with effect from August 28, 2017. The Payment of Wages Act, 1936 will apply to a larger number of employees as a result of such increase.

FDI Updates

New FDI Policy

1.     The Department of Industrial Policy and Promotion recently released the consolidated FDI Policy vide circular no. D/o IPP F. No. 5(1)/2017-FC-1 dated August 28, 2017 (“New FDI Policy”). Under the New FDI Policy:

i.        Conversion of a LLP having foreign investment into a company and vice versa, is allowed under automatic route, where there are no FDI linked conditions;
ii.         Start-ups have been recognized under the New FDI Policy and have been allowed to issue equity shares, equity linked instruments or debt instruments to FVCI. Conditions for issue of convertible notes[1] by start-ups to a person resident outside India have also been prescribed;
iii.    The proposals requiring government approval will be dealt by the competent authority which has been defined under the New FDI Policy to mean the concerned administrative ministry/department empowered to grant government approval for foreign investment under the extant FDI Policy and FEMA Regulations;
iv.   The approval of Reserve Bank of India shall not be required for establishment of branch office, liaison office or project office or any other place of business in India if the applicant is engaged in the business of telecom, defence, private security or information and broadcasting and the applicant has been granted a license/permission by the concerned ministry/regulator.



[1] Convertible notes have been defined to mean an instrument, issued by a start-up against receipt of money repayable at the option of the holder, convertible into equity shares within a period not exceeding 5 years.

Company Law Updates

Provisions related to investigation of companies by by Serious Fraud Investigation Office notified.

1.     The Ministry of Corporate Affairs notified the provisions of sub-sections (8), (9) and sub-section (10) of Section 212 of the Companies Act, 2013 relating to investigation into the affairs of a company by Serious Fraud Investigation Office vide commencement notification dated August 24, 2017.  In this regard, the Companies (Arrests in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017 were also notified on August 24, 2017.

Revised secretarial standards released

2.     The Institute of Company Secretaries of India notified the withdrawal of Notification ICSI No.1 (SS) of 2015 with respect to secretarial standards 1 & 2 (“Secretarial Standards”) with effect from September 30, 2017, vide notification dated August 16, 2017. The Institute announced that the revised Secretarial Standards will be applicable for compliance by all the companies (except the exempted class of companies) with effect from October 01, 2017 and will supersede the text of earlier Secretarial Standards. The Institute of Company Secretaries of India has subsequently announced that the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) have been revised and the revised Secretarial Standards have received approval from the Central Government which shall be applicable for compliance by Companies from October 1, 2017

Companies Act to be amended again

3.     The Companies (Amendment) Bill, 2017 (“Amendment Bill, 2017”) introduced in the Lower House of the Parliament received its assent on July 27, 2017. The Amendment Bill, 2017 seeks to make the following amendments in the Companies Act, 2013 (“Existing Act”):

Ø  Officers in whole time employment of a company at one level below the board of directors are proposed to be included in the definition of key managerial personnel;
Ø  The process and timelines involved in the private placement of securities are proposed to be amended by substitution of Section 42 of the Existing Act with a new section;
Ø  Section 90 of the Existing Act is proposed to be substituted  by a new section to introduce the concept of significant beneficial owner, to mean an individual, holding beneficial interest not less than 25% in shares of a company, whether directly or indirectly;
Ø  The annual general meeting  are proposed to be allowed to be held at any place in India if the consent of members has been obtained;
Ø  Extraordinary general meetings of a wholly owned subsidiaries are proposed to be  allowed to be held at a place outside India as well;
Ø  The requirement of ratification of auditors at every annual general meeting of a company is proposed to be done away with;
Ø  Section 185 of the Existing Act relating to loan to directors is proposed to be substituted by a new section to provide the conditions of provision of loan to persons in which the directors are interested;
Ø  Provisions relating to forward dealing and insider trading of securities are proposed to be omitted; and
Ø  The requirement of obtaining the Central Government approval for payment of managerial remuneration by a company in terms of Section 197 of the Existing Act is proposed to be dispensed with.

Registered office - changes introduced in case of relocation from one state to another

4.     The Ministry of Corporate Affairs, on July 27, 2017 notified the Companies (Incorporation) Second Amendment Rules, 2017 to prescribe certain changes in the process of shifting of registered office:

i.           within the same state; and
ii.         from one state to another.

Sunday, 9 July 2017

Alpha celebrates its 5th anniversary. Ex-Alpha-ites joined to celebrate too...









SUMMARY JUDGEMENT IN COMMERCIAL CASES


It is not unheard of that a case when instituted in India seeking recovery of money may take several years before the party suing for recovery is actually able to receive the money claimed. Such scenario inevitably deters several companies from approaching the court, thus leading to settlements at far lesser amounts for which the company would have otherwise pursued.

Owing to growing concern for cost effective and faster resolution of commercial disputes, the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (“Act”) was introduced.

Post promulgation of the Act, the trade and commerce sector of the country has become very hopeful. This is because the Act has now put into place much needed processes to ensure that cases are decided in a time bound manner. The procedure for conducting a suit filed before a civil court is governed by the Code of Civil Procedure, 1908 (‘CPC’). To ensure that in commercial disputes where time is of essence, be it either for recovery of money basis a contract or for that matter intellectual property right cases for infringement of trademarks/copyright/patents, the CPC has been suitably amended to incorporate provisions which are likely to make delay and latches a thing of the past. 

One of the crucial amendments which have been brought into the CPC by the Act is the insertion of Order 13A for summary judgment. Order 13A of the amended CPC provides that disputes which are of commercial nature and as such recognized as commercial dispute under the Act, shall be disposed off by the commercial court established under the Act without a full-fledged trial. The provision entitles the plaintiff or the defendant in a suit, to show as to why the claim of the defense as the case may be, is not likely to succeed. Upon filing an application under this Order, the plaintiff shall have to establish that there are no triable issues and that the Defendant has no real prospect in successfully defending the claim. To such an application, the defendant then shall be afforded an opportunity to show to the court that there are triable issues which are required to be inquired into and for which evidence is necessary. Upon hearing the arguments of both the parties, if the court is of the opinion that the defendant is not likely to succeed in defending the claim of the plaintiff, the court shall pass a judgment in favour of the Plaintiff.

While Order 13 A introduces a new perspective for deciding commercial disputes, however, provisions such as Order 13 A existed much prior, in the CPC in the form of Order 37. A suit filed under Order 37 of CPC provides that if a suit for recovery is filed on the basis of admitted debt, the same shall be tried summarily. Similarly, in a suit under Order 37 of CPC, the defendant is given an opportunity to plead existence of triable issues and plead the leave to defend the suit. The only difference between Order 13A and Order 37 is such that an Order 37 suit is applicable only to debts which are admitted, while on the other hand Order 13A can be invoked and is available to all kinds of suit, subject to the fact that the dispute should be a commercial dispute recognized by the Act.
Provisions like Order 13 A is likely to be a game changer in suits filed for infringement of intellectual property rights. This is because, in a suit for enforcement of intellectual property rights, the plaintiff who usually claims to be the proprietor or owner of the intellectual property rights is more concerned with enforcement of its rights and restrain upon availability of spurious/counterfeit or infringing product/services. The newly inserted provision is likely to save the intellectual property rights owner from going through the entire ordeal of the trial and secure protection of its rights without delay.

Recently, the Delhi High Court in the case of ‘Ahuja Radios vs. A Karim bearing CS(COMM) 35/2017” passed a summary judgment upon an application filed in a suit alleging infringement of trademark. It is however interesting to note that in the said case, the plaintiff did not press for damages. A necessary understanding for releasing the claim for damages would be that in the event the plaintiff would have pleaded for damages, then it would have had to lead evidence to show the extent of loss which it suffered, thus negating the entire reasoning behind filing of such an application. While the judgment is worth appreciating and has been analyzed by many, the said cardinal aspect of release of damages was left out. Therefore, in a suit for infringement of intellectual property rights, claim for damages may have to be released when an application under Order 13A of CPC is filed, unless of-course the plaintiff has documentary evidence to prima facie establish the quantum of damages.

To conclude, the amendments brought about by the Act is a welcome move and abreast with the changing commercial scenario, which is likely to have far reaching benefits for trade and commerce of the country.

NOTE ON EXEMPTIONS TO PRIVATE COMPANIES

                               (As per MCA Notification dated 13-06-2017)




SECTION
POSITION BEFORE NOTIFICATION
POSITION AFTER NOTIFICATION
Chapter I Section 2 (40)
Earlier, only one person companies, small companies and dormant companies were exempted from including cash flow statement in their financial statements.
In addition to other classes of companies exempted under the Act, the notification exempts the private companies (if such private company is a start-up) from including the cash flow statements in its financial statements.

For the purposes of this document, start-up companies shall refer to the companies incorporated under the Companies Act, 2013 (“Act”) and recognized as a start up as per the notification issued by DIPP.

Chapter V
Section 73 (2) (a) to (e)
Vide notification dated June 05, 2015, private companies  accepting monies from its members not exceeding  100% of aggregate of paid up share capital and free reserves and filing the details of monies so received with the Registrar of Companies (“ROC”), were exempted from complying with the conditions listed in Section 73 (2) (a) to (e), listed below:

(a)      Issue of circular in the prescribed format;
(b)      Filing of circular in (a) above with the ROC;
(c)      Deposit of not less than 15% of the amount of deposits in a scheduled bank account;
(d)      Provision of deposit insurance;
(e)      Certification that the company has not committed any default in repayment of deposits;
(f)       Provision of security for due repayment of deposits and interest thereon.

The current notification substitutes the exemption provision in the notification dated June 05, 2015 with the current exemption provision which exempts the following classes of private companies from complying with the conditions listed in  Section 73 (2) (a) to (e) of the Act, provided that such companies file the details of monies so accepted with the ROC-

(A)   which accept monies from its members, not exceeding 100% percent of aggregate of the paid up share capital, free reserves and securities premium account; or

(B)   which is a start-up, for 5 years from the date of its incorporation; or

(C)   which fulfils all of the following conditions, namely:-

(a)    which is not an associate or a subsidiary company of any other company;

(b)    if the borrowings of such a company from banks or financial institutions or body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and

(c)    the company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under this section.

Chapter VII section 92 (1) (g)
Every company is required to prepare an annual return in the prescribed format containing inter alia the details of remuneration of directors and key managerial personnel (“KMP”).
By means of this notification, private companies which are small companies are required to disclose only the aggregate amount of remuneration drawn by directors instead of the details of remuneration of directors and KMP, in its annual return.

Chapter VII section 92 (1)
The annual return of a one person company and a small company are required to be signed by the company secretary or where there is no company secretary, by the director of such companies.
Proviso (1) to section 92(1) of the Act has been substituted to the following effect:

In addition to one person company and small company, a private company which is a start-up would also be required to get its annual return signed by the company secretary or where there is no company secretary, by the director of such company.

Chapter X
Section 143 (3) (i)
Section 143(3)(i) requires the auditor to comment upon the presence, adequacy and effectiveness of the internal financial controls system in the company, in his report.
The provision contained in section 143(3)(i) will not apply to the following classes of private companies:

A.     one person or a small company; or

B.     which has turnover of less than rupees 50 crores as per latest audited financial statement or which has aggregate borrowings, from banks or financial institutions or any body corporate, at any point of time during the financial year less than rupees 25 crores.

Chapter XII
Section 173 (5)
One person companies, small companies and dormant companies are deemed to have complied with the provisions of section 173 of the Act, if it has held at least one meeting of the board of directors in each half of the calendar year and the gap between the two meetings is not less than 90 days.
Section 173(5) of the Act has been substituted to include a private company (if such private company is a start-up) within its scope. Accordingly, a start up private company will be deemed to have complied with the provisions of section 173 of the Act, if it has held at least one meeting of the board of directors in each half of the calendar year and the gap between the two meetings is not less than 90 days.

Chapter XII
Section 174 (3)

Earlier, as per section 174(3) of the Act, only the uninterested directors present at the meeting, were counted towards the quorum of the meeting.
Section 174(3) of the Act will apply to the private companies with the exception that the interested director would also be counted towards quorum in such meeting after disclosure of his interest pursuant to section 184 of the Act.



The exceptions, modifications and adaptations provided in the above table will be applicable to private companies which have not committed a default in filing its financial statements or the annual return with the ROC.

COMPOSITE SUIT – A PATH LESS TAKEN

A composite suit essentially refers to a suit wherein different causes of action are joined in order to form a single suit. Order II Rule 3 of the Code of Civil Procedure, 1908 deals with joinder of causes of action i.e. a suit wherein the plaintiff can unite one or more causes of action against the same defendant. The second part of the rule deals with the case where several plaintiffs can join their causes of actions against the same defendant or defendants.

Typically, a composite suit could be referred to as a class action lawsuit in which one or more group of persons or plaintiffs file a case on behalf of a large number of injured parties, commonly referred to as the ‘class’. Class action suits are also known as multi-district litigation or mass tort litigation. Though class action suit is not understood or interpreted in the strictest sense in India, the Indian judiciary has relaxed the criterion or requirements for locus standi in certain types of suits especially those which are filed under Article 32 or 226 of Indian Constitution. A classic example of such a case was and more popularly known as the Bhopal Gas Tragedy case where the Government of India acting as parens patraie, aggregated all the claims of the victims and initiated a legal proceedings against Union Carbide Corporation (respondent).  With the advent of the Companies Act, 2013, class action suits have now been formally recognized in India. In terms of Section 245 of the Companies Act, 2013 the members, depositors of a company can file class action suits against the company, its directors, auditor, expert advisor, consultant etc.

The advantage of such type of suits is that primarily, the multiplicity of litigations is obviated. This, in turn, saves the time of the courts and facilitates accelerated dispensation of justice. Class Action Suits become desirable where the defendant party enjoys a higher status and it becomes impossible for the victim to file a suit against the other party in spite of suffering grave injuries.

However, like all good things, a composite suit also suffers from a number of disadvantages. Firstly for a composite suit to be maintainable, the cause of action has to be under the jurisdiction of the same court where the suit is supposed to be filed. For instance, if A has to file a composite suit against B with respect to matters ‘x’, ‘y’ and ‘z’, then all these three causes of action should come under the court’s jurisdiction to try such matter before which the suit is preferred. This has been highlighted in the case of Dabur India Ltd. v. K.R. Industries[1], where the Delhi High Court didn’t have the jurisdiction to try ‘passing off’  and hence, inclusion of that, lead to the appeal being dismissed.



[1] AIR 2008 SC 3123

Abolition of Foreign Investment Promotion Board



Foreign Investment Promotion Board (“FIPB”) was set up in early 1990s to consider the foreign direct investment (“FDI”) proposals requiring government approval. FIPB, housed in the Department of Economic Affairs (“DEA”), Ministry of Finance, offered a single window clearance system for disposing off the FDI applications falling under the approval route in India.

Abolition of FIPB was proposed in the budget of 2017-18 in light of the following circumstances and the proposal was finally approved by the government on May 24, 2017:

     i.        More than 90% of the foreign direct investments were under the automatic route; and
   ii.        Reduction in number of sectors requiring government approval. A total of 11 sectors under the approval route have been notified in this regard.

Subsequent to the abolition of FIPB:

1. The administrative ministries/departments will be entrusted with the responsibility of dealing with:

(a)       the foreign direct investment proposals requiring government approval;
(b)   monitoring of compliance of conditions subject to which such approvals would have been granted;
(c)        RTI applications and appeals pending with the FIPB Secretariat; and
(d)     all the past, present and future litigations and liabilities, in various courts and adjudicatory forums. An affidavit to this effect will be filed in all such pending and ongoing cases.

2.      Department of Industrial Policy and Promotion (“DIPP”) will majorly be responsible for the following:

(a)      FDI by non-resident investors (“NRIs”) and export oriented units (“EOUs”);
(b) applications relating to issue of equity shares for import of capital goods/machinery/equipment;
(c)      applications for issue of equity shares against pre-incorporation expenses;
(d)   identification of administrative ministry/department in case there is a doubt about the administrative ministry/department concerned;
(e)   oversight of FIPB portal; and
(f)  development of a standard operating procedure with detailed guidelines ensuring uniformity of approach across sectors in consultation with the administrative ministries/department.

3.      Applications involving investments from countries of concern would require approval from the Ministry of Home Affairs;

4.      Foreign investments into core investment companies or investment companies engaged in investment in capital of Indian companies will be processed by DEA, irrespective of the sector in which the investment is made;

5.      Any decision of a competent authority to reject or subject an application to conditions not provided in the FDI policy, would require the consent of DIPP;

6.      During the transition period, the Secretary, DEA and the Secretary DIPP will meet quarterly to discuss the pendency of proposals with the government.

7.      Procedurally:

(a)      The control of FIPB portal will be transferred by DEA to DIPP within four weeks;

(b)      All the pending cases on FIPB portal will be transferred to the respective administrative ministry/department by DIPP;

(c)      The aforesaid administrative ministry/department will be given an access to the FIPB portal for processing the applications pending before them;

(d)      The administrative ministry/ department will seek the approval of the Minister-in-charge / Cabinet Committee on Economic Affairs (CCEA);

(e)      Ordinarily FDI applications, including those related to NRls, EOUs, food processing, single and multi brand retail trading, should be decided in sixty days.