Monthly Update: May, 2019
This is only an attempt to keep in pace with the changes in Law. Keeping in mind the varied interest of individuals we have tried to cover as much as possible, however we do not holdout that this update covers all changes in the field of law affected during the period and the reader may exercise discretion in this regard.
The legal update is divided broadly into two sections:
- Important Decisions;
- New or Amendment to existing Legislation.
- Hindustan Sanitaryware and Industries Ltd. v. State of Haryana:
Supreme Court in the instant case partly quashed the notification dated 27.06.2007 issued under Section 5(2) of the Minimum Wages Act, 1948 and held that there is no power vested in the Government by the Act to make alterations to the terms of a contract. The Act only confers jurisdiction in Government to fix/revise the minimum rate of wages notwithstanding the contract. It was further stated that such categorization or classification by deeming workmen in one category to belong to another category is in direct contravention of the contract between the employer and the employee and is beyond the jurisdiction of the Government. Hence, the prohibition of segregation of wages into components in the form of allowances in the Notification was found to be impermissible.
- JK Jute Mill Mazdoor Morcha v. Juggilal Kamlapat Jute Mills:
In the instant case, Supreme Court held that the trade union represents its members who are workers, to whom dues may be owed by the employer, which are certainly debts owed for services rendered by each individual workman, who are collectively represented by the trade union and hence trade union would be an operational creditor under the Insolvency and Bankruptcy Code, 2016.
- SBI Insurance Company v. Madhubala:
Bombay High Court in the instant case held that in cases where the policy is cancelled before the accident occurs, then the insurer is not liable to pay compensation to the claimant. However, if the policy is cancelled after the accident happens, then he is so liable. But, in the latter category of cases, the insurer is entitled to recover the amount so paid to the claimant from the insured. It was further held that a contract of insurance between an insurer and an owner of the offending vehicle includes reciprocal promise by both the parties.
- State of Kerala v. Sugunan V.
Kerala High Court held that a retired employee having a criminal case pending against him in Vigilance court is entitled to payment of provisional pension only till such case id disposed off.
- Anjum Hussain v. State of J&K
J&K High Court in the instant case held that an employee can revoke/terminate the permission of resignation from the services during the continuation of service and not when the name was struck off from the list of employees. The Court relied on the judgment of the Supreme Court in Jai Ram v. Union of India, AIR 1954 SC 584 in which it was held that “It may be conceded that it is open to a servant, who has expressed a desire to retire from service and applied to his superior officer to give him the requisite permission, to change his mind subsequently and ask for cancellation of the permission thus obtained; but he can be allowed to do so long as he continue in service and not after it has terminated.”
- Rajesh Goyal v. Chandigarh Industrial Tourism Development Corporation Limited
Punjab and Haryana High Court held that under a license contract, a licensor is entitled to or has power to restrain licensee’s operation in order to make sure that the licensee carries out trade and business in accordance with terms and conditions of the original contract.
- Prayas Projects India Pvt. Ltd., In re
SEBI in the instant case held that if a company issues its shares to more than 50 members for various plans/policies/schemes/ and share/debentures would lead to public equity share. Reference was made to order dated April 28, 2017 of Securities Appellate Tribunal in Neesa Technologies Ltd. v. SEBI, 2017 SCC Online SAT 187 which lays down that “In terms of Section 67(3) of the Companies Act any issue to ‘50 persons or more’ is a public issue and all public issues have to comply with the provisions of Section 56 of Companies Act and ILDS Regulations. Accordingly, in the instant matter, the said provisions were violated and the argument that the appellants have issued the non-convertible debentures in multiple tranches and no tranche has exceeded 49 people has no meaning.
- Jagdish Chander v. Kapoor Jewel Mines (P) Ltd.
In this case, Delhi High Court held that under Section 9 of Negotiable Instruments Act, 1881 ascertaining how the holder of the subject cheques became a holder in due course is an aspect which cannot be pre- judged at the initial stage, and is required to be considered after the evidence is recorded. It was further said that Section 9 of the Negotiable Instruments Act, 1881 defines the ‘holder in due course’ and its import cannot be pre-judged.
- UTV Software Communication Ltd. v. 1337X.to
Delhi High Court, in the first of its kind decision in India, passed a permanent injunction against “rogue websites” from infringing, in any manner, the plaintiff’s copyrighted work. Internet Service Providers and the Government departments concerned were also directed to block access to such rogue websites and “hydra headed websites”. The Copyright Act, 1957 confers a bundle of exclusive rights on the owner of a work and provides for remedies in case the copyright is infringed. The Court was of the opinion that it had ample powers to mould the relief to ensure that the plaintiff’s rights were adequately protected.
- Subal Chandra Ghosh v. State of Tripura
Tripura High Court in the instant case held that the object of notice of dishonor of cheque under Section 138 of Negotiable Instruments Act, 1881 to endorser is not to demand payment, but to indicate to the party notified that his contract arising on the negotiable instrument has been broken and he is liable for payment.
New or Amendment to existing Legislation
- Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2019
The Central Government in exercise of its power by Section 125 sub-sections (1), (2), (3), (4), (8), (9), (10) and (11) and Section 124(6) read with Section 469 of Companies Act, 2013 notifies the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Amendment Rules, 2019 to come into force on the date of its publication in the official gazette.
- Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2019
SEBI has made the said regulations i.e. Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2019 to further amend the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 which amends the following:
- In Regulation 2, clause (md) is inserted after clause (mc) and before clause (mm) which defines “goods” as the goods notified by the Central Government under clause (bc) of Section 2 of the Securities Contracts (Regulation) Act, 1956 and forming the underlying of any commodity derivative;
- In Regulation 2(q), second proviso is inserted which reads as – “Provided further that mutual fund schemes investing in exchange-traded commodity derivatives may hold the underlying goods in case of physical settlement of such contracts”;
- In Regulation 7(g), the word “or goods” is inserted after the word “securities” and before the word “or”;
- In Regulation 26(1), second proviso is inserted which reads as – “Provided also that mutual fund schemes investing in exchange-traded commodity derivatives may appoint a custodian to have custody of the underlying goods in case of physical settlement of such contracts.”;
- In proviso to Regulation 44(1), the words “save clause 14” therein, after the word schedule is inserted;
- In Regulation 52(4)(b), a new clause (xiie) is inserted which reads – “in case of schemes investing in exchange-traded commodity derivatives, recurring expenses incurred towards storage and handling of the underlying goods, due to physical settlement of such contracts.”; and
- In the seventh schedule, the following clause is inserted – “14 A mutual fund scheme may invest in exchange-traded commodity derivatives subject to such investment restrictions as may be specified by the Board from time to time.”
- Securities and Exchange Board of India (Portfolio Managers) (Amendment) Regulations, 2019
SEBI has made the said regulations i.e. Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2019 to further amend the Securities and Exchange Board of India (Portfolio Managers) Regulations, 1993 which amends the following:
- In Regulation 2, clause (af) is substituted as – “(af) “custodian” means a person who has been granted a certificate of registration to carry on the business of custodian under the Securities and Exchange Board of India (Custodian) Regulations, 1996” and definition of “discretionary portfolio manager” was substituted to clause (ag);
- In Regulation 2, clause (ba) is inserted which defines “goods” as the goods notified by the Central Government under clause (bc) of section 2 of the Securities Contracts (Regulation) Act, 1956 and forming the underlying of any commodity derivative;
- In Regulation 2(cb), proviso is inserted which reads “Provided that the Portfolio Manager may also deal in goods received in delivery against physical settlement of commodity derivatives”;
- In Regulation 2, clause (ea) is substituted as – “(ea) “securities” mean securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956” and definition of “securities lending” was substituted to clause (eb); and
- In Regulation 16B, sub-regulation (3) is inserted as “Every Portfolio Manager who deals in commodity derivatives shall appoint a custodian.”.
- Insurance Regulatory and Development Authority of India (Appointed Actuary) (Amendment) Regulations, 2019
The Authority in exercise of its powers and in
consultation with the Insurance Advisory Committee, hereby makes the following
amendment to the IRDAI (Appointed Actuary) Regulations, 2017:
- These Regulations may be called the Insurance Regulatory and Development Authority of India (Appointed Actuary) (Amendment) Regulations, 2019; and
- In Regulation 6, sub-section © is inserted – “(c): For business continuance, the insurer may need exemption from Regulation 5 for a further period beyond one year. Upon request of the insurer and based on merits of the case, the Chairperson may grant extension for a further period not exceeding two years”.
- Companies (Appointment and Qualification of Directors) (Second Amendment) Rules, 2019
The Central Government in exercise of its power made Companies (Appointment and Qualification of Directors) (Second Amendment) Rules, 2019 to further amend the Companies (Appointment and Qualification of Directors) Rules, 2014 by inserting Rule 12B which reads as:
“12B. Directors of company required to file e-form ACTIVE– (1) Where a company is governed by Rule 25A of the Companies (Incorporation) Rules, 2014, fails to file the e-form ACTIVE within the period specified therein, the Director Identification Number (DIN) allotted to its existing directors, shall be marked as “Director of ACTIVE non-compliant company”.
- Where the DIN of a director has been marked as “Director of ACTIVE non-compliant company”, such director shall take all necessary steps to ensure that all companies governed by rule 25A of the Companies (Incorporation) Rules, 2014, where such director has been so appointed, file e-form ACTIVE.
- After all the companies referred to in sub-rule (2) file the e-form ACTIVE, the DIN of such director shall be marked as “Director of ACTIVE compliant company.”