[Peeyush Agarwal and Zarnaab Aswad are both 5th year law students at Dr. Ram Manohar Lohiya National Law University, Lucknow] Introduction Consider this: X is an employee of Y Corporation, which is a leading steel manufacturing company whose scrips are listed on stock exchanges. X, being an employee gets to know that Y Corporation has just discovered huge deposits of iron ore that, if extracted...
Invocation of Unmatured Corporate Guarantee during Moratorium under Bankruptcy Law
[Himanshu Handa is an Associate with UKCA and Partners, a Law Firm in New Delhi] Introduction In Axis Bank Limited v Edu Smart Services Private Limited, the National Company Law Tribunal (“NCLT”), Delhi had rejected a plea from the financial creditor i.e. “Axis Bank” against the corporate guarantor i.e. Edu Smart in respect of its claim pertaining to a corporate guarantee in the insolvency...
RBI’s Amendment to the Hedging Policy for ECBs: Reasoning and Impact
[Saher Fatima and Siddharth Tandon are III year students at the National Law University, Jodhpur] Introduction Over the years, external commercial borrowings (“ECB”) have become a preferred source of finance for Indian entities. ECBs refer to commercial loans in the form of bank loans, securitized instruments, buyers’ credit or suppliers’ credit availed of from non-resident lenders with a minimum...
SEBI Revisits the Settlement Mechanism
[Ambika Mehrotra is a Manager in the Corporate Law Services Division of Vinod Kothari & Company] Background to the SEBI Settlement Mechanism The settlement mechanism for violation of laws related to securities had been introduced in India in 2007. Further, in order to factor in various issues and aspects relating to its enforcement mechanism, the Securities and Exchange Board of India...
Creation and Operation of Tenancy Rights over Secured Assets under SARFAESI
[Samarth Saxena is a final year student at ILS Law College, Pune] The advent of Securitization and Reconstruction of Financial Assets and Enforcement of Security Interests Act, 2002 (“SARFAESI”) ushered in a new era of reforms for the Indian banking regime. These reforms were primarily aimed at facilitating the speedy recovery of defaulting loans and thereby controlling the rising levels of non...
The Threat of Unconstitutionality to Explanation II to Section 37 of the Income Tax Act
[Priya Garg is a 5th year student at West Bengal National University of Juridical Sciences (WBNUJS), Kolkata] Explanation II added to Section 37 of the Income Tax Act, 1961 (“IT Act”), which became effective from 1 April 2014, runs the risk of violating Articles 14 and 19 of the Constitution of India. This post explains the reason behind this proposition. Explanation II states that any...
Disclosure Regarding Significant Beneficial Owners: Another Stride from SEBI
[Ambika Mehrotra is a Manager at Vinod Kothari & Company in its Corporate Law Services Division] In the interest of investors in the securities market and with a view towards better corporate governance, the Securities and Exchange Board of India (“SEBI”) has taken steps to widen the scope of compliances for listed entities. Accordingly, to bring in more transparency for investors, SEBI has...
The ‘AMP Expenses’ Dilemma in Transfer Pricing: Can the Supreme Court Clear the Dust?
[Shannon Khalkho is a IV year B.A. LL.B. (Hons.) student at the National Law School of India University, Bangalore] Introduction The issue of advertisement, marketing and promotion (AMP) expenses incurred by a domestic entity for its foreign associate entity (foreign AE) has been mired in controversy since its entry into the realm of transfer pricing, essentially because of a lack of statutory...
The Importance of Determination of Seat under Indian Arbitration Law
[Saumitra Shrivastava is a IV year B.A. LLB (Hons,) student at HNLU, Raipur] Introduction In international commercial arbitration the concepts of place, seat and venue are of tremendous importance as they determine which law and whose jurisdiction would be applied in a case. The courts of a country could interfere in any arbitral proceedings only if they have jurisdiction to do so. For instance...
FAQs on Borrowing by Large Corporates: Unveiling the Perplexity
[Pammy Jaiswal is a Partner at Vinod Kothari and Company and can be reached at [email protected]] Background The untiring efforts of the Securities and Exchange Board of India (SEBI) as well as the Government in uplifting the bond market is quite commendable. SEBI has started taking major steps towards the accomplishment of the budget announcement by the Government for the year 2018-19...
Better Safe than Sorry: The Importance of Registering Lease Deeds
[Huzefa Tavawalla is a Leader, Aishwarya H a Senior Member and Anusha Reddy a Member, all at Nishith Desai Associates] The legal provisions which mandate registration of lease deeds are rarely explored. As a result, the law on registration of lease deeds is often misunderstood. While parties spend much time negotiating terms of a lease deed (lock-in period, security deposit, termination...
Increasing the Ambit of Rights Available to Voting by Proxy
[Vishal Hablani and Anirudh Goyal are 3rd & 4th Year B.A.L.L.B. (Hons.) students respectively at the West Bengal National University of Juridical Sciences, Kolkata] Under the proxy system of voting, a shareholder delegates his rights to attend and vote at a meeting to another person as his representative. This representative is known as the proxy. The system of proxy voting has statutory...
Corporate Insolvency and the Admission of a Debt under the Negotiable Instruments Act
[Siddharth Kumar is a III year BBA LLB (Hons.) student at Vivekananda School of Law and Legal Studies, New Delhi and can be reached at [email protected]] The National Company Law Appellate Tribunal (“NCLAT”) in Sudhi Sachdev v. M/s APPL Industries Ltd. held that the pendency of a case under sections 138 and141 of the Negotiable Instruments Act, 1881 (“NI Act”) amounts to an admission of...
Role of the Adjudicating Authority in Considering a Resolution Plan
[Richa Saraf and Ananya Raghavendra are with Vinod Kothari Consultants Pvt Ltd] The insolvency resolution process of Binani Cements has been through various twists and turns. On 19 November 2018, the Supreme Court in Rajputana Properties Pvt. Ltd. v. UltraTech Cement Ltd. & Ors. dismissed Dalmia Bharat’s plea to seek a stay on Ultratech’s bid for Binani Cement, thereby upholding the UltraTech...
Where We Stand On Shell Companies
[Tishya Saran and Aayush Grover are both 5th year students of Government Law College, Mumbai] Background Continuing its crackdown on shell companies, the Government has promulgated the Companies (Amendment) Ordinance, 2018 (the “Ordinance”), with effect from 2 November 2018. The Ordinance, amongst other things, seeks to enhance accountability for non-filing of charges, maintenance of documents...
Non-Dominant Enterprises’ Offers and Schemes: Predatory Pricing or Not?
[Muskan Agarwal is a 3rd-year B.A. LL.B. (Hons.) student of National Law Institute University, Bhopal] The Competition Act of 2002 [the “Act”] defines predatory pricing as the sale of goods or provision of services at a price which is below the cost of production, with a view to reduce competition or eliminate competitors. Predatory pricing is seen as abuse of dominant position under section 4 of...
Doctrine of Good Faith and Fair Dealing: Lacuna in Indian Contract Law
[Angad Singh Makkar is a 4th year BA LLB (Hons.) student at Jindal Global Law School in Sonipat, Haryana] Parties enjoying ample discretion to decide the ways of performance and enforceability of their mutual obligations is an inevitability within the realm of contract law.[1] And where there is discretion, there is an appreciable risk of it being exercised in a self-interested or opportunistic...
Inclusion of Non-signatory Third Parties in an Arbitration Proceeding
[Divyansha Agrawal is a B.A.LLB (Hons.) student at Jindal Global Law School] Introduction According to the principle of competence-competence, an arbitral tribunal in a given case has full authority to rule on its own jurisdiction. Articles 8 and 16 of the UNCITRAL Model Law re-affirm this principle. Article 16(3) of Model Law provides that the arbitral tribunal may rule on an...
Whether a Refund of Advance is an Operational Debt
[Richa Saraf and Shreya Jain are with Vinod Kothari Consultants Pvt. Ltd.] It is not an unusual business practice to collect advance monies from consumers before providing goods or services to them. In such a scenario, consumers constantly bear the risk of not being able to recover the advance amount in the event the provider of goods or services abruptly ceases operations and, as such, also...
Corporate Insolvency and the “Fitter Bidder”
[Jaskiran Kaur is an associate at IndusLaw] The National Company Law Appellate Tribunal (“NCLAT”) on 14 November, 2018 gave a go – ahead to the revised bid of Ultratech Cement Limited (“Ultratech”) for the acquisition of debt-ridden Binani Cement Limited (“Binani Cement”), while ruling that the resolution plan submitted by the competitor Dalmia Bharat through its group firm Rajputana Properties...
Filing of Return for Delayed Payment to MSMEs
[Simran Jalan is an Executive at Vinod Kothari & Co] The Government of India enacted the Micro, Small and Medium Enterprises Development Act, 2006 (the “Act”) to ensure timely and smooth flow of credit to micro, small, and medium enterprises (“MSMEs”) and minimize sickness among them. The Act strengthens the provisions relating to delayed payments to the MSMEs by specifying the maximum credit...
Filing of Form PAS-4 in Private Placements
[Deepansh Guwalani is a 5th year student at ILS Law College, Pune] Introduction Private placement in India is regulated by section 42 of the Companies Act, 2013 (the “Act”) and rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 (the “Allotment Rules”). The said laws have undergone a recent change by way of the Companies (Amendment) Act, 2017 and the Companies...
Relevant Market in E-commerce: The Dilemma Resolved?
[Samarth Saxena and Mohak Chikhale are Final Year students at ILS Law College, Pune] This post aims to critically analyse a constant conundrum in the Indian antitrust scenario, namely the relevant market analysis in the e-commerce sector. It does so in the context of the order (“Order”) of the Competition Commission of India (“CCI”) in All India Online Vendors Association (“AIOVA”) v. Flipkart...
Price Parallelism in Bid Rigging Arrangements
[Gunjan Garg is a 3rd year B.A LLB (Hons.) student of National Law Institute University, Bhopal] The Indian Competition Act in section 3 deals with ‘anti-competitive agreements’ which gives the Competition Commission of India (“CCI”) the power to prohibit any agreement between enterprises or persons engaged in identical or similar trade of goods and services, directly or indirectly resulting in...
Activation of Companies Struck Off under Companies Act
[Anirudh Singh is a 4thyear B.A LL.B (Hons) student of NALSAR University, Hyderabad] When a company is registered on incorporation, it is necessary that it should have a process of deregistration other than by way of winding up. This is so if, after registration, the company does not carry on business. Such process, known as “striking off”, is specified in section 248 of Companies Act...
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