Index

Case Law Briefs

1) Electrans Shipping PTE Ltd. versus Pierre D’Silva & Anr.-NCLAT, New Delhi

2) Vasdeo R. Bhojwani versus Abhyuda Co-Operative Bank Ltd. &Anr.- Supreme Court.

3) SurinderKaur (D) Thr. Lr. Jasinderjit Singh (D) Thr. Lrs. v/s Bahadur Singh (D) Thr. Lrs. – Supreme Court.

4) Commissioner of Income Tax vs. Laxman Das Khandelwal- Supreme Court.

5) M/s Shree Daneshwari Traders Vs. Sanjay Jain and Another- Supreme Court.

6) Kamlesh & Anr. Appellant(S) versus the State of Rajasthan &Anr- Supreme Court.

Corporate Legal Updates

1) SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

2) Relaxation for the Promoters and Start-ups by MCA vide notification dated August 16th, 2019 by amending Companies (Share Capital and Debentures) Rules, 2014.

3) The Arbitration and Conciliation (Amendment) Act, 2019 (No.33 of 2019)

 

Article Of The Month

1) The Code on Wages, 2019

2) Companies (Amendment) Act, 2019: Part II – Highlights 

From The Pen Of The Partner – Adv. Nivedita R. Sarda

A) Legal Decisions:

Compiled by Adv. Nitesh Shrivastava

1. Insolvency & Bankruptcy Code 2016

Electrans Shipping PTE Ltd. versus Pierre D’Silva & Anr. Company Appeal (AT) (Insolvency) No. 754 of 2019 | decided by Three judge Bench NCLAT, New Delhi on 6th September 2019.

Held: Corporate Insolvency Resolution process u/s 7 or 9 of IBC, 2016 can be commenced against a company struck off u/s 248 of the CA, 2013.

Facts: This judgement has been passed by NCLAT, New Delhi in an appeal preferred by the Shareholders of the Appellant Co. challenging the order dated 10th April 2019 passed by NCLT, Mumbai, whereby CIRP was admitted against the Appellant Company. 

The contention of the Appellant was that the name of Appellant was struck off from the ROC u/s 248 of the Companies Act, 2013 and therefore, application u/s 9 of the IBC, 2016 is not maintainable against a struck off company and hence, NCLT erred in admitting petition u/s 9 of IBC filed by Respondent.

Rejecting the contentions of the Counsel of Appellant and relying upon the recent judgement dated 5th September, 2019 passed by NCLAT, New Delhi in the matter of Mr. Hemang Phophalia vs. The Greater Bombay Co-operative Bank Limited and Anr. – Company Appeal (AT) (Insolvency) No. 765 of 2019, the Hon’ble Appellate Tribunal held that the Insolvency Proceedings can be commenced against a company struck off u/s 248 of the CA, 2013. 

Hon’ble Appellate Tribunal observed that as per Section 248(6) of CA, 2013, the ROC has to satisfy himself that the company has realised all its dues and has discharged its liabilities. Further, Section 248(7) of CA, 2013 also makes it clear that liability of any Director, manager or officer in control of management or members shall continue and may be enforced 

as if the company is not struck off if not discharged and an application is filed in that regards. Also, Section 248(8) states the power of the Tribunal to wind up the company whose name is struck off. 

Appellate Tribunal further referred to Section 250 of the CA, 2013 which clearly stipulates that the company once struck off ceases to operate except for the purpose of realising the amount due to the company and for the payment or discharge of the liabilities or obligations of the company. Section 252 of CA provides for Appeal to Tribunal against the order of strike off. The tribunal u/s 252(3) is having power to restore the name of company so struck off. 

As per section 60(1) of the IBC, 2016, the NCLT is the Adjudicating Authority and therefore, if an application is filed by any creditor u/s 252(5) of CA, 2013, the NCLT is having power to reverse the position of struck off company as if it is never struck off. Considering all the provisions, the Appellate Tribunal in para 23 of judgement held that Adjudicating Authority who is also the Tribunal is empowered to restore the name of the Company and all other persons in their respective position for the purpose of initiation of ‘Corporate Insolvency Resolution Process’ under Sections 7 and 9 of the I&B Code based on the application, if filed by the ‘Creditor’ (‘Financial Creditor’ or ‘Operational Creditor’) or workman within twenty years from the date the name of the Company is struck off under sub-section (5) of Section 248. 

In the present case, application under Section 7 having admitted, the ‘Corporate Debtor’ and its Directors, Officers, etc. deemed to have been restored in terms of Section 252(3) of the Companies Act.

1. Vasdeo R. Bhojwani versus Abhyuda Co-Operative Bank Ltd. &Anr. Civil Appeal No. 11020 of 2018| Supreme Court of India dated September 2, 2019.  

Held: Limitation Act is applicable on the application filed u/s 7 and 9 of IBC, 2016. To determine limitation u/s 23 of the Limitation Act, it is the continuous wrong not a continuous right which is the essence to determine the limitation.

Facts: The Appeal was filed against the order dated 05.09.2018 passed by Hon’ble NCLAT, New Delhi whereby, the NCLAT upheld the order dated 05.03.2018, passed by NCLT wherein, the petition u/s 7 of IBC, 2016 filed by Respondent Bank against Appellant was admitted. 

Factually, the loan taken by the Appellant from Respondent bank had been declared as NPA on 23.12.1999 and a recovery certificate was issued on 24.12.2001 in favour of Respondent. The Respondent filed an application u/s 7 of IBC on 21.07.2017, before NCLT Claiming that the amount together with interest is payable since it is ticking and the default is continuing and no period of limitation is applicable and therefore, the petition u/s 7 has to be admitted. The Petition stands admitted. Appeal against the said order was filed by Appellant and which was also dismissed by NCLAT.

On an appeal before the Hon’ble Supreme Court, the SC relied upon the recent judgement of B.K Educational Services Pvt. Ltd. vs. Parag Gupta and Associates wherein, in para 27 it was held that limitation act is applicable on petition filed u/s 7 and 9 of IBC, 2016. Further, the Hon’ble Court relied on the judgement of Balakrishna Savalram Pujari & Ors. v/s Shree  Dnyaneshwar Maharaj Sansthan & Ors. [1959] Supp (2)  SCR 476, wherein, it was held that in order to determine limitation, reliance has to be placed on continuing wrong and not continuing right. If wrongful act is such that the injury caused is continuous then it constitutes continuing wrong and limitation doesn’t apply. It was held that recovery certificate issued on 24.12.2001 effectively determined the Appellant’s right and thus the limitation Act, would have begun ticking from that day onwards. Therefore, the present suit filed u/s 7 of IBC was held as time barred as the Petition was filed in 2017 and accordingly, the Order passed by NCLT and NCLAT was set aside.

Specific Relief Act, 1963

1. Surinder Kaur (D) Thr. Lr. Jasinderjit Singh (D) Thr. Lrs. v/s Bahadur Singh (D) Thr. Lrs. Civil Appeal No. 7424-7425/2011 | Supreme Court of India dated 11th September 2019. 

Held: Vendee who doesn’t perform one of his promises in a contract cannot obtain discretionary relief of specific performance of that very contract.  

Facts: The predecessor in interest Mrs. Mohinder Kaur of Appellant entered into an agreement for sale dated 13.05.1964 for sale of land to Respondent Mr. Bahadur Singh for a sale consideration of Rs. 5605/-. Out of sale consideration, an amount of Rs 1000/- was paid at the time of execution of the Agreement and the possession was also transferred. It was also agreed that the balance shall be paid at the time of registration of the Sale Deed.  

At the time of entering into agreement, a litigation w.r.t the said land was pending before Hon’ble High court of P&H; and the expected date for disposal of matter was next month. It was agreed that once the matter is disposed off, the parties will register the sale deed i.e. month of July, 1965. In case the litigation is not over, the Respondent was under obligation to pay rent as per clause 3 of Agreement. This fact is duly incorporated in the Sale Deed at clause 2 & 3.  

The litigation related to land was disposed on 17.01.1977 i.e. 13 years after Agreement to Sell was executed. After disposal of said civil appeal before High Court of P& H, Bahadur Singh approached Mohinder Kaur to execute the sale deed but since she failed to do so, a suit for specific performance was filed. It was also prayed that decree be passed for a sum of Rs. 5605 i.e 1000 paid as earnest money and Rs. 4605/- as damages.  

The suit was contested on various grounds interalia that the Appellant failed to pay the rent of that land as per clause 3 of the Agreement and hence suit is not maintainable. The court below decreed the suit. The Courts below have held that the Agreement contained several promises which may be reciprocal, contingent and separate. 

As per section 51 of Contract Act, 1872, no promisor is required to obey his promise unless promisee is ready and willing to perform his reciprocal promise. This provision has to be read with Section 16(c) of Specific Relief Act, 1963, which clearly lays down that specific performance of a contract cannot be enforced in favour of a person who fails to prove that he has performed or was ready and willing to perform the essential terms of the contract which were to be performed by him. 

The Court determined that the Appellant had only received 20% of the sale consideration and also transferred the possession in hope that the litigation pertaining with land would end in a month but the same was decided after 13 years. Clause 3 of the Agreement stipulated that if the litigation doesn’t end in a month, the Respondent shall pay rent on the land. Therefore, the possession was given on a clear cut understanding and hence it was reciprocal promise and was an essential term of the Agreement. Admittedly no rent was paid by the Respondent and had denied to pay and since the Appellant failed to pay his part of the promise, he is not entitled for suit of specific performance. The suit for specific performance was set aside.

 Income Tax Act, 1961

 Commissioner of Income Tax vs. Laxman Das Khandelwal Supreme Court 2019 SCC Online SC 1020  dated 13.08.2019. 

Held: Section 292BB of Income Tax Act, 1961 does not save complete absence of notice. According to Section 292 BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. 

The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. However, for Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. 

Facts: The assessee is an individual carrying a business of brokerage. Search and seizure operation was conducted under Section 132 of the Act of 1961 at his residential premises. The assessment was completed under Section 143(3) read with Section 153(D) of 1961 Act.  Aggrieved, the assessee filed an appeal wherein CIT (A) deleted the addition holding that apply the peak formula to determine tax. 

Aggrieved, Revenue filed an appeal. The Assessee filed cross objection before the Tribunal on the ground of jurisdiction of Assessment Officer regarding non issue of notice under Section 143(2) of the Act of 1961. The Tribunal vide impugned order upheld the cross objection and quashed the entire reassessment proceedings lack of jurisdiction in absence of notice under Section 143(2) of the Act of 1961.

 

In appeal with High Court, Appellant placed reliance on the provisions of Section 292BB of the Act to submit that the Respondent having participated in the proceedings, the defect, if any, stood completely cured. High court ordered in the favour of the Appelant. 

A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner.  

Hon’ble Apex Court dismissed the appeals holding that the scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. 

Negotiable Instrument Act, 1881

M/s Shree Daneshwari Traders Vs. Sanjay Jain and Another passed by Supreme Court under Criminal Appeal Nos.61-62 Of 2011 Vide Order Dated 21.08.2019.

Held: Section 292BB of Income Tax Act, 1961 does not save complete absence of notice. According to Section 292 BB of the Act, if the assessee had participated in the proceedings, by way of legal fiction, notice would be deemed to be valid even if there be infractions as detailed in said Section. 

The scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. However, for Section 292BB to apply, the notice must have emanated from the department. It is only the infirmities in the manner of service of notice that the Section seeks to cure. The Section is not intended to cure complete absence of notice itself. 

Facts: The assessee is an individual carrying a business of brokerage. Search and seizure operation was conducted under Section 132 of the Act of 1961 at his residential premises. The assessment was completed under Section 143(3) read with Section 153(D) of 1961 Act.  Aggrieved, the assessee filed an appeal wherein CIT (A) deleted the addition holding that apply the peak formula to determine tax. 

Aggrieved, Revenue filed an appeal. The Assessee filed cross objection before the Tribunal on the ground of jurisdiction of Assessment Officer regarding non issue of notice under Section 143(2) of the Act of 1961. The Tribunal vide impugned order upheld the cross objection and quashed the entire reassessment proceedings lack of jurisdiction in absence of notice under Section 143(2) of the Act of 1961.

 

In appeal with High Court, Appellant placed reliance on the provisions of Section 292BB of the Act to submit that the Respondent having participated in the proceedings, the defect, if any, stood completely cured. High court ordered in the favour of the Appelant. 

A closer look at Section 292BB shows that if the assessee has participated in the proceedings it shall be deemed that any notice which is required to be served upon was duly served and the assessee would be precluded from taking any objections that the notice was (a) not served upon him; or (b) not served upon him in time; or (c) served upon him in an improper manner.  

Hon’ble Apex Court dismissed the appeals holding that the scope of the provision is to make service of notice having certain infirmities to be proper and valid if there was requisite participation on part of the assessee. It is, however, to be noted that the Section does not save complete absence of notice. For Section 292BB to apply, the notice must have emanated from the department. 

Negotiable Instrument Act, 1881

M/s Shree Daneshwari Traders Vs. Sanjay Jain and Another passed by Supreme Court under Criminal Appeal Nos.61-62 Of 2011 Vide Order Dated 21.08.2019. 

Held: The Hon’ble Apex Court held that evidence adduced by the Complainant in Complaint under Section 138 of Negotiable Instruments Act, 1881 to raise statutory presumption under Section 139 cannot be discarded merely on the ground that there were no such averments in the complaint. 

The use of the phrase “until the contrary is proved” in Section 118 of Evidence Act and use of the words “unless the contrary is proved” in Section 139 of Negotiable Instruments Act read with definitions of “may presume” and “shall presume” as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over. 

Facts: The appellant had been supplying the commodities to the accused on his request for which the respondent-accused issued various cheques which when presented for collection were dishonoured. The appellant had filed two complaints under Section 138 of the Negotiable Instruments Act against the respondent-accused alleging that the cheques issued by the respondent-accused in lieu of payment owed to the appellant were dishonoured on presentation.  

Taking into account the receipts produced by the respondent-accused, the trial court acquitted the respondent-accused in both the cases and rejected the case of the appellant that the respondent sometimes used to purchase rice bags on credit and sometimes on payment of cash and the same being inconsistent with the documents produced by the appellant.  

In appeal, the High Court affirmed acquittal of the respondent-accused and dismissed the appeals filed by the complainant-appellant and held that by producing the relevant receipts, respondent has rebutted the presumption and that the respondent was able to prove that the cheques were issued by way of security towards the goods supplied to him for which he made the payment by cash holding that the case of the appellant was not consistent. 

The appellant filed Appeal before Hon’ble Apex Court submitting that the transaction between the parties was a mercantile transaction and during the course of business, running accounts were maintained when purchases were made at different times and payments were made by both modes i.e. cash and cheques.  

It was submitted that the courts below erred in not keeping in view the statutory presumption available under Section 139 of the Negotiable Instruments Act to the appellant and that the respondent-accused failed to rebut the presumption by leading cogent and consistent evidence.  

Applying the definition of the word “proved” in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under Sections 118 and 139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists. 

It is for the respondent – accused to adduce evidence to prove that the cheques were not supported by consideration and that there was no debt or liability to be discharged by him. The oral and the documentary evidence adduced by the complainant are sufficient to prove that it was a legally enforceable debt and that the cheques were issued to discharge the legally enforceable debt. With the evidence adduced by the complainant, the courts below ought to have raised the presumption under Section 139 of the Act. 

The Hon’ble Apex Court therefore, set aside the impugned judgment of High Court and convicted the accused under Section 138 of the Negotiable Instruments Act in both complaints. 

Criminal Procedure Court, 1973 

1. Kamlesh & Anr. Appellant(S) versus the State of Rajasthan &Anr. held by Hon’ble Apex Court under Criminal Appellate Jurisdiction in  Criminal Appeal No.1006 of 2019 (Arising out of Slp(Crl.) No.1530 Of 2018) vide Judgment/ Order dated 09.07.2019  

Held: Aticipatory Bail Application cannot be rejected solely on the ground that Criminal Petition under Section 482 Cr.P.C. (which deals with inherent powers of the High Court to make orders or to prevent abuse of the process of any Court or otherwise to secure the ends of justice),for quashing of the same F.I.R was dismissed earlier as the same was not conclusive and cannot be the reason for rejecting the application. 

Facts: The appellants are mother-in-law and father-in-law of the complainant. The appellants were accused in FIR No.269/2016. The Rajasthan High Court at Jodhpur in S.B. Criminal Misc. 

Bail No.9977/2017 vide order dated 05.02.2018 rejected the application for anticipatory bail only on the ground that petition under Section 482 Cr.P.C., praying for quashing of FIR, has already been rejected. The husband of the complainant had filed special leave petition before the Hon’ble Apex Court  in which notice had been issued, which is pending before the Hon’ble Court. The Hon’ble Apex Court had passed an order on 23.02.2018 not to arrest the appellants subject to their cooperation with the investigation. To which the State submitted that the appellants were not cooperating with the investigation which statement was denied. Submitting that appellants presented themselves before the Investigating Officer more than once and they were ready to appear as and when called by a notice.Therefore, The Hon’ble Apex Court held that the High Court order cannot sustain as it ought to have considered the application on merits and disposed the appeal providing that the appellants shall cooperate with the investigation and appear as and when they are called by a written notice. However, appellants shall not be arrested during investigation.

B) Legal Updates: 

Compiled by Adv. Kavya Mathur 

ICDR Regulations 

1. SEBI introduced stricter penalty for non-compliance of regulatory norms of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018. 

SEBI vide circular dated 19th August 2019, introduced a penalty of Rs.20,000/- per day on those listed companies which fail to comply with certain provisions of SEBI ICDR regulations such as:

• Delay in completion of a bonus issue as under Regulation 295(1)
• Listed entities not completing the conversion of convertible securities and allotting the shares, within 18 months from the date of allotment of convertible securities as under Regulation 162.
• Delay in making an application to the exchange/s for listing in case of further issue of equity shares from the date of allotment within 20  days by the Issuer.
• Delay in making  an  application for trading approval to the stock exchange/s within 7 working days from the date of grant of listing approval by the stock exchange/s

 Companies Act, 2013 

Relaxation for the Promoters and Start-ups by MCA vide notification dated August 16th, 2019 by amending Companies (Share Capital and Debentures) Rules, 2014. 

• Enhancement in the previously existing cap of 26% of the total post issue paid up equity share capital to a revised cap of 74% of total voting power in respect of shares with Differential Voting Rights of a company. 
• Removal of the earlier requirement of distributable profits for 3 years for a company to be eligible to issue shares with Differential Voting Rights. 
• Enhancement of time period for issuing ESOPs by Startups to their Promoters or Directors holding 10% or more of the shareholding of start-up, from present allowed time of 5 years to 10 years making it more lucrative for the promoters and directors to remain associated with the start-ups and to make them profitable. 

Arbitration and Conciliation Act, 2006 

1. The Arbitration and Conciliation (Amendment) Act, 2019 (No.33 of 2019) 

The Arbitration and Conciliation (Amendment) Act, 2019, received the assent of the President on Monday September 9th, 2019. 

Major Insertions and Modification under the Amendment Act of 2019: 

• Arbitral and related court proceedings commenced prior to 23rd October, 2015 (Section 87): Unless the parties otherwise agree, the amendments made to the Act by the Arbitration and Conciliation 

(Amendment) Act, 2015 will not apply to the arbitral proceedings which commenced before October 23, 2015. 

• Insertion of Schedule Eight which Specifically prescribe qualification and experience for being appointed as an arbitrator. 
• Introduction of Confidentiality of Arbitration Proceedings (Section 42 A) 
• Protection from suit or other proceedings for the actions taken by the arbitrator in good faith  (Section 42 B): 
• Insertion of New Independent Body called Arbitration Council of India (ACI).  
• Appointment of Arbitrators ( Section 11): Supreme court (in the case of an International commercial arbitration) and the High Court (in cases of Demotic arbitration) to designate arbitral institutions for the purpose of appointment of arbitrators.    
• Grading of Arbitral Institutions and Arbitrators

 

• Timeline for completion of arbitral proceedings (Section 23 and 29A): Statement of claim and defence must be completed within a period of 6 months from the date when the arbitrator or all the arbitrators, received notice in writing, of their appointment.

 

The Arbitral Award other than in the matters of international commercial arbitration, the award will be made by the arbitral tribunal within a period of 12 months from the date of completion of pleadings.

C) Article Of The Month: 

Written by Adv. Rachit Sharma 

1. The Code On The Wages, 2019  

The Code on Wages, 2019 received the assent of the President on 8th August, 2019 consolidating the following laws into one:

(i) the Payment of Wages Act, 1936, 

(ii) the Minimum Wages Act, 1948, 

(iii) the Payment of Bonus Act, 1965, and; 

(iv) the Equal Remuneration Act, 1976

 

• Scheduled Employment:

The Minimum Wages Act, 1948 applied to the organised sector as well as certain workers in the unorganised sector such as agricultural workers. The Code do away with the concept of bringing specific jobs under the Act, and mandates that minimum wages be paid for all types of employment – irrespective of whether they are in the organised or the unorganised sector. The central government shall make wage-related decisions for employments such as railways, mines, and oil fields, among others and State governments will make decisions for all other employments.  

• Inclusion of Contractor in the definition of the employer:

The code referred the ‘contractor’ in the definition of an ‘employer’, it clarifies that a contractor is primarily responsible for paying minimum wages. Further, ‘employee’ under the Wage Code now includes individuals appointed in managerial, supervisory and administrative roles. 

 

• Unification of the definition of Wages: 

This code has unified the definition of ‘wages’ solving the problems of interpreting different definitions under the four subsumed laws.  

• Payment of wages: 

The Wages can be paid in (i) current coin, (ii) currency notes, (iii) by cheque, (iv) by crediting the wages in the bank account of the employee, (v) by the electronic mode and further subjected to notifications from appropriate Government. The wage period will be fixed by the employer as either: (i) daily, (ii) weekly, (iii) fortnightly, or (iv) monthly. 

• Fixing the minimum wage: The Code prohibits employers from paying wages less than the minimum wages. 

While fixing minimum wages, the central or state governments may take into account factors such as: (i) skill of workers, (ii) difficulty of work, (iii) geographical location etc. 

• Floor wage: 

According to the Code, the central government will fix a floor wage, taking into account living standards of workers.  Further, it may set different floor wages for different geographical areas.  In case the existing minimum wages fixed by the central or state government is higher than the floor wage, then also the minimum wages cannot be reduced.

 

Thus, code will remove the disparity in the basic rate of wages across the States in India. If in case the existing minimum wage rate determined by the State Government is higher than the floor wage rate fixed by the Central Government, such minimum wage rate would continue to apply and in no case shall be reduced.  

 

• Overtime:

Increase in overtime rate to at least twice the normal rate of wages. 

• Deductions from the wages of worker:

It is clearly mentioned that the employer cannot make any deductions from the wages except as authorised under the code. Under the Code, an employee’s wages may be deducted on the following grounds only: (i) fines imposed, (ii) absence from duty, (iii) for damage to or loss of goods expressly entrusted to the employee for custody, or (iv) for loss of money for which he is required to account, (v) for house-accommodation supplied by the employer, (vi) for the value of the amenities and services supplied by the employer etc and more particularly as per Section 18 of the Code.  These deductions should not exceed 50% of the employee’s total wage.

 

• Gender discrimination:

The Code prohibits gender discrimination in matters related to wages and recruitment of employees for the same work or work of similar nature.  Work of similar nature is defined as work for which the skill, effort, experience, and responsibility required are the same.

Offences: 

The Code specifies the penalties for offences committed by an employer, such as (i) paying less than the due wages, or (ii) for contravening any provision of the Code.  Penalties vary depending on the nature of offence, with the maximum penalty being imprisonment for three months along with a fine of up to one lakh rupees. 

• Only when the employer fails to comply with the directions within the specified directions, the inspector can initiate for prosecution and not otherwise.
• Limitation period of filing Appeals: The limitation periods for filing claims has been raised to three years.

Analysis:

Apart from several benefits that can derived from the Code, the codification of labour laws has removed the multiplicity of definitions and interpretations, with the introduction of the concrete provisions for employee welfare and benefits for making the employer and employee/workers easier to understand and thereby comply the provisions of the Code. This code tries to figure out the complete clarity but as per our analysis there are few lacunas which should be clarified or amended to remove any ambiguous position on the following issues and should be focused upon in the future: 

 

1) Since minimum wage is a matter of right for every working person, a common and comprehensive definition of employee / worker should be given in the Code.

2) While fixing for the minimum wages additional factors viz. experience and length of service in an organization should also be taken into consideration.

3) The Upper limit of working hours as also suggested by Standing Committee on Labour should be specified i.e. the number of working hours in a day should not exceed eight hours.

4) The definition of wages should be more simplified so to avoid any doubt while interpretation.

1. Companies (Amendment) Act, 2019: Part II – Major Highlights of Changes made to Principal Act i.e. Companies Act, 2013

Written by CS Leena Jain 

In our newsletter of previous month, we discussed about amendments made in Section 135 of the Principal Act by Companies (Amendment) Act 2019. However, the changes in said Section are yet to be notified while all other provisions of the said Amendment Act have been notified on July 31, 2019 and August 14, 2019 [Section sub- sections 6, 7 and 8, clauses (i), (iii) and clause (iv) of section 14, sections 20, section 31, sections 33, 34 and 35, sections 37 and 38 of the Amendment Act].

 

In this Article we are putting forth the other major changes brought in by this Amendment Act. It is worth noting that all the amendments so made by the Amendment Act 2019 have been made effective from November 02, 2018 itself except Section sub- sections 6, 7 and 8, clauses (i), (iii) and clause (iv) of section 14, sections 20, section 31, sections 33, 34 and 35, sections 37 and 38 which have been made effective from August 15, 2019.

The major highlights of the amendments made in Principal Act are as under:

• Commencement of business: 

The Amendment Act has re-introduced the requirement of certificate of commencement of business. Now a company may not commence business, unless it (i) files a declaration within 180 days of incorporation, confirming that every subscriber to the Memorandum of the company has paid for the shares agreed to be taken by him, and (ii) files a verification of its registered address with the RoC within 30 days of incorporation.  If it fails to comply with these provisions and is found not to be carrying out business, the name of the company may be removed from the Register of Companies.

• Change in approving authority:

Under the Act, change in period of financial year for a company associated with a foreign company, has to be approved by the National Company Law Tribunal.  Similarly, any alteration in the incorporation document of a public company which has the effect of converting it to a private company, has to be approved by the Tribunal.  Under the Amendment Act, these powers have been transferred to Central Government. 

• Issuance of dematerialised shares: 

Under the Act, certain classes of public companies are required to issue shares in dematerialised form only. The term ‘public’ has been omitted under section 29(1)(b). Government would now prescribe the class of companies (not restricted to public companies), which would be mandatorily required to issue the securities only in dematerialised form.

 

• Registration of charges: 

The Act requires companies to register charges (e.g., mortgages) on their property within 30 days of creation of charge, extendable upto 300 days with the permission of the RoC.  The Amendment Act changes the deadline to 60 days (extendable by 60 days). 

• ‘Filing of Prospectus’ with ROC instead of ‘Registration of Prospectus’:

The requirement of registration of prospectus with ROC has been done away with. Changes have been made to Section 26, 35 and 398 to replace the word ‘Registration’ with the word ‘Filing’. So now the companies are required only to file the Prospectus with ROC which do not require approval of ROC by registration of the same with office of Registrar of Companies.

• Bar on holding office:

Under the Act, the central government or certain shareholders can apply to the NCLT for relief against mismanagement of the affairs of the company. The Amendment Act states that in such a complaint, the government may also make a case against an officer of the company on the ground that he is not fitperson to hold office in the company, for reasons such as fraud or negligence.  If the NCLT passes an order against the officer, he will not be eligible to hold office in any company for five years. 

• Beneficial ownership:

If a person holds beneficial interest of at least 25% shares in a company or exercises significant influence or control over the company, he is required to make a declaration of his interest.  However, the Amendment Act has put t and he onus of identifying the Significant Beneficial Owner on the company along with getting the declaration from the SBO regarding his beneficial interest in the company’s ownership. 

• Re-categorisation of certain Offences:

The 2013 Act contains 81 compoundable offences punishable with fine or with fine or imprisonment, or with both. These offences are heard by courts. The Amendment Act  re-categorizes 16 of these offences as civil defaults, where adjudicating officers (appointed by the central government) may now levy penalties instead. These offences include: (i) issuance of shares at a discount, and (ii) failure to file annual return.  Further the Amendment Act amends the penalties for some other offences.

• Penalty for Repeated Default: 

The Amendment Act introduces new provision through insertion of Section 454A to provide for penalties for repeated default under the CA 2013. It provides that where a penalty in relation to a default has been imposed on a person under the provisions of CA 2013, and the person commits the same default within a period of three years from the date of order imposing such penalty, passed by the adjudicating officer or RD as the case may be, it or he shall be liable for the second and every subsequent defaults for an amount equal to twice the amount provided for such default under the relevant provision of CA 2013. 

• Compounding: 

Under the Principal Act, a Regional Director can compound (settle) offences with a penalty of up to five lakh rupees.  The Amendment Act increases this ceiling to Rs 25 lakh thereby reducing the burden of cases on NCLT to some extent.

 

• CSR: 

Already discussed in the previous month’s Newsletter of VLC.

 

As is evident from the changes introduced in the Principal Act by the Amendment Act 2019 that the changes made are towards aligning the penalties with nature of offences along with introducing measures to reduce the burden of cases on NCLT. Further keeping in view the future  requirements, the Amendment Act has made way for introducing the requirement of dematerialisation of shares of private companies also.

Quote of the month:

“If you want to shine like a sun, first burn like a sun”  – A.P.J Abdul Kalam.