Introduction & Disclaimer:

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 three sections:

1. Important Decisions;
2. New or Amendment to existing Legislation; and
3. Policy Announcement/guidelines.

PART-I

Important Decisions

• Union of India v. Parmar Construction Company:

Supreme Court in the instant case held that an arbitrator cannot be independently appointed by a Court in exercise of power under Section 11(6) of the Arbitration and Conciliation Act, 1996 unless the Parties to the dispute have exhausted all the remedies provided in the arbitration agreement. It was also held that the arbitrator so appointed by the Court undersection 11(8) of the Act has to be as per the qualifications required for the arbitrator by the agreement of the Parties and as per other considerations.

• Dharani Sugars and Chemicals Ltd. v. Union of India:

In the instant case, Supreme Court declared the RBI circular issued on 12th February 2018 as ultra vires as a whole and held that it has no effect in law. The said circular dealt with the restructuring process of borrower entities and stated that unless a restructuring process in respect of debts with an aggregate exposure of Rs. 2000 crore is fully implemented on or before 195 days from the reference date or from the date of first default i.e. from 01.03.2018, the lenders will have to file application as financial creditor under the Insolvency and Bankruptcy Code, 2016.

• Nagar Ayukt Nagar Nigam Kanpur v. Sri Mujib Ullah Khan:

The Supreme Court in this instant case held that liberal payment of gratuity is in the interest of the employees and thus gratuity will be payable to the employees of local bodies as well that are governed by state law. It also stated that under Section 1(3) © of the Payment of Gratuity Act, 1972 Central government has published a notification on 08.01.1982 which included Local Bodies with ten or more employees as an establishment to which the Act was applicable.

• Hiralal Govekar v. Sheela Surlakar

Bombay High Court held that simple handing over of cheque does not make a person liable for an offence under Section 138 of Negotiable Instruments Act, 1881 as in the present matter the cheques was merely handed over by the Petitioner and the account no. stated on the cheque did not stand in the name of the Petitioner. In other words, the Petitioner is neither a drawer nor the cheques was issued on his account hence was not liable under Section 138 of the Act.

• G. Dhanasekar v. T.A. Jayaprakash

Madras High Court in the instant case held that if there exists a principal agent relationship between the accused and the complainant, then the presumption under Section 139 of Negotiable Instruments Act, 1881 cannot be made available.

• Dredging Corporation of India Ltd. v. Visakhapatnam Port Trust

SEBI in this instant matter exempted a consortium of port trusts from making a public announcement of open offer for acquiring shares of a mini-ratna PSU on the basis that the takeover would cause no change in ultimate control of the said PSU. It was further held that the proposed acquisition would not be covered under automatic exemption under Regulation 10(1)(a)(iii) of the Takeover Regulations since the nature of control was being changed in the present case from direct to indirect control. However, since control of the target company continued to remain the same, hence exemption from such public announcement was allowed by the board.

• Nuruddin Latif Naik v. Mahindra and Mahindra Financial Services Ltd.

Bombay High Court held that the onus to show the proper notice of appointment of an arbitrator is on the respondent if it is disputed by the petitioner.

• Goyal Vegoils Ltd. v. Registrar of Companies

National Company Law Appellate Tribunal (“NCLAT”) in the instant case held that as per Section 147(1) of Companies Act, 2013 the company and its directors have to be treated equally when fine is imposed on the company for delay in filing cost audit report.

• Jayaswal Ashoka Infrastructure (P) Ltd. v. Pansare Lawad Sallagar

Bombay High Court in the instant case held that a contract wherein an advocate asks for the fee based on the outcome of the arbitration proceedings, in which the advocate acted in the capacity of a “counsel” for the party and did not appear as an “advocate” will be a valid contract as opposed to Section 23 of the Contract Act, 1872 which holds such contract for a contingent fee to be against public policy and hence void.

• Belarmina Gowda v. Ranjith Nath

Bombay High Court at Goa in the instant case held that the decree cannot be executed against any individual being a director or a person being responsible for the conduct of the business of the Company where the decree is against the Company.

• Kumar Spinning Mills (P) Ltd. v. Employees Provident Fund Appellate Tribunal

Madras High Court held that the provisions of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 is a beneficial legislation which protects the interest of the employees and hence provisions of the Act will necessarily be interpreted in favour of the employees whenever any interpretation is required.

• A.P. Abdul Kareem v. Om Industrial Corporation

National Company Law Appellate Tribunal (“NCLAT”) allowed the shareholder of a corporate debtor to pay the total dues of the operational creditor in discharge of corporate debtor’s liability towards it, after an application was filed against the corporate debtor under Section 9 of the Insolvency and Bankruptcy Code, 2016 and before the Committee of Creditors was constituted and accordingly set aside the order of NCLT admitting Section 9 application against the Corporate Debtor.

Part-II

New or Amendment to existing Legislation

• Companies (Indian Accounting Standards) Amendment Rules, 2019

The Central Government in exercise of its power by Section 133 read with Section 469 of Companies Act, 2013 notifies the Companies (Indian Accounting Standards) Amendment Rules, 2019 to come into force from 01.04.2019.

• Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2019

SEBI has made the said regulations i.e. Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2019 to further amend the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 which amends the following:

1. In Regulation 2(1)(x) definition of “innovators growth platform” was amended to mean the trading platform for listing and trading of specified securities of issuers that comply with the eligibility criteria specified in Regulation 283;
2. In Regulation 2(1)(y) definition of “institutional investor” was amended to include innovators growth platform instead of institutional trading platform;
3. In Regulation 3(i) which deals with the applicability of the regulations, the word  innovators growth platform was substituted in place of institutional trading platform;
4. In the heading of Chapter X, the word “institutional trading platform” was substituted with the word “Innovators growth platform”; and
5. In Regulation 282(3) which deals with applicability of chapter X of the regulations, the words “and not to retail individual investors” were deleted.

Part –III

Policy Announcement/Guidelines/Approvals

1. Insurance Regulatory and Development Authority of India

The IRDAI with approval of Central Government has made the notification dated 04.04.2019 namely “Obligatory Cession for the Financial Year 2019-20”. The salient features of the notification are:

• The notification will be applicable to Indian Re-insurers and other applicable insurers as per the provisions of Section 101A of the Insurance Act, 1938;
• The percentage cession of the sum insured on each General Insurance Policy to be reinsured with the Indian Re-insurer(s) shall be 5% (five percent) in respect of insurance attaching during the financial year beginning from 1st April, 2019 to 31st March, 2020, except the terrorism premium and premium ceded to Nuclear pool, wherein it would be made ‘NIL’. The entire Obligatory Cession is to be placed with General Insurance Corporation of India (GIC Re) only;
• Other terms and conditions include:

a) Notice of information on cession

• There would be no limit on sum insured applicable for the cessions made during the period from 1st April 2019 to 31st March, 2020.
• In view of the above, the Indian Re-insurer may require the ceding insurer to give immediate notice of underwriting information of any cession exceeding an amount as specified by the former. The ceding insurer shall inform the Indian Re-insurer at all times whenever the cession exceeds such specified limits.

b) Commission

Percentage of commission on obligatory cession for different classes of business shall be as follows:

• Minimum 5% for Motor TP and Oil & Energy insurance.
• Minimum 10% for Group Health insurance.
• Minimum 7.50% for Crop Insurance.
• Average Terms for Aviation insurance.
• Minimum 15% for all other classes of insurance business.

Commission over and above, can be as mutually agreed between Indian Re-insurer(s)and the ceding insurer.

c) Profit Commission

The Indian Re-insurer shall share the profit commission, on 50%:50% basis, with the ceding insurer based on the performance and surplus of the total obligatory portfolio of the ceding insurer, after factoring the following:

• Incurred loss % (to be worked at the end of 3 financial years).
• Management Expenses at 2%.
• Profit at 5%.
• Commission at 15%.
• Loss ratio at 50% to 78%.

No profit commission is payable if the loss ratio exceeds 78%. Profit commission shall not exceed 14%.

2. Ministry of Finance

The Central Government in exercise of its power under Section 139 AA sub-section (2) of the Income Tax Act, 1961 notified that every person who has been allotted permanent account number (“PAN”) as on the 1st day of July, 2017, and who is eligible to obtain Aadhaar number, shall intimate his Aadhaar number to the Principal Director General of Income-tax (Systems) or Principal Director of Income-tax (Systems) in the form and manner specified in Notification no. 7 dated 29th of June, 2017 issued by the Principal Director General of Income Tax (Systems) by 30-09-2019. The said notification will not be applicable to those persons or such class of persons or any State or part of any State who/which are/ is specifically excluded under sub-section (3) of Section 139 AA of the Act.

It is also made clear in Circular no. 6 of 2019 that w.e.f. 01.04.2019, it is mandatory to quote Aadhaar number while filing the return of income as required under Section 139 AA (1)(ii) unless specifically exempted as per any notification issued under sub-section (3) of Section 139 AA of the Act. It is also made clear that the returns being filed either electronically or manually cannot be filed without quoting the Aadhaar Number.