The Companies Act, 2013 partially replaced The Companies Act, 1956.The Ministry of Corporate Affairs has notified 183 sections of the new Companies Act, 2013, which have become effective from April 1, 2014. With this, 283 of 470 sections of the Act have gotten notified in a phased manner. The Ministry of Corporate Affairs has notified respective Rules related with the effective Sections of Companies Act, 2013.
- Section 309 IPC :Attempt to suicide decriminalized
The government has decided to decriminalize “attempt to suicide” by deleting Section 309 from the Indian Penal Code (IPC). Under the said Section, a suicide bid is punishable with imprisonment of up to one year, or with fine, or both. The Law Commission of India in 2008 had recommended the repeal of Section 309 stating that the act of taking one’s own life should be treated as a manifestation of “deep unhappiness” rather than a penal offence. 18 states and 4 Union territory administrations have supported the deletion of Section 309.
- FDI Policy 2014: 100% FDI in Railways infrastructure, 49% in defence
The government has notified an increase in the FDI limit to 49 per cent through approval route in the defence sector. FDI ceiling in the defence sector has been hiked from current 26 per cent, with the condition that the company seeking permission of the government for FDI up to 49 per cent should be an Indian company owned and controlled by Indians. Further the Cabinet cleared a 100 per cent FDI in railways infrastructure. In the railway segment, FDI will be allowed in construction, operation and maintenance of suburban corridor projects through PPP, high speed train projects and dedicated freight lines.
- Wage ceiling hiked under the Employees provident fund scheme
Ministry of Labour and Employment issued notifications dated 22 August 2014 enhancing statutory wage ceiling (for becoming a subscriber of Employees’ Provident Fund Organisation) from existing Rs. 6500/-to Rs. 15000/-, fixing minimum pension of Rs. 1000/-per month and 20% additional relief on the amount of assurance benefit admissible under EDLI Scheme, 1976.
- New land acquisition law comes into force:
The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 came into force from January 1, 2014, replacing the 120 year old, Land Acquisition Act, 1894. The new law stipulates mandatory consent of at least 70% of affected people for acquiring land for Public Private Partnership (PPP) projects and 80% for acquiring land for private companies. Compensation for the owners of the acquired land will be four times the market value in rural areas and twice in urban areas. It also stipulates that the land cannot be vacated until the entire compensation is awarded to the affected parties. The law has the provision that the companies can lease the land instead of purchasing it. Besides, the private companies will have to provide for rehabilitation and resettlement if land acquired through private negotiations is more than 50 acres and 100 acres in urban and rural areas, respectively.
FIVE SIGNIFICANT JUDGMENTS OF 2014
- No automatic arrests in dowry cases, due process to be followed
The Supreme Court, in this landmark judgment of Arnesh Kumar vs State Of Bihar & Anr has issued certain directions to be followed by the police authorities and the Magistrates while making arrests and/or authorizing detention of an accused. The Supreme Court stated that automatic arrests in cases under Section 498A of the IPC should be discouraged and discontinued. Examining the powers of the Police under Section 41 of the Code of Criminal Procedure, the Court held that no automatic arrests/detentions shall be made by the Police/Magistrates even in in dowry harassment cases unless the conditions precedent to making arrest/authorizing detention under the Code of Criminal Procedure, 1973 are satisfied.
- Supreme Court redefines territorial jurisdiction in cases of cheque dishonor
The Supreme Court in its decision in Dashrath Rupsingh Rathod v. State of Maharashtra & Anr., held that in cases of dishonour of cheque, only those courts will have the jurisdiction to try the case within whose territorial limits the drawee bank is situated i.e. where the cheque has been dishonoured. The Hon’ble Court, overruling an earlier decision made in K. Bhaskaran Vs. Shankaran Vaidhyan Balan, held that , an offence under Section 138 of the Negotiable Instruments Act is committed as soon as a cheque is returned unpaid to the drawee. Hence the place, place of judicial inquiry and trial of the offence must logically be restricted to where the drawee bank, is located.
- No transfer-pricing provisions if shares issued by domestic subsidiary to parent company
The Bombay High Court in the case of Vodafone India Services Pvt. Ltd. v. Union of India held that shares issued at premium by a resident entity to a non-resident entity didn’t give rise to income and there is no ‘international transaction’ to trigger transfer-pricing provisions as provided under the Income Tax Act, 1961. The Court added that ‘Income’ as defined under the Income Tax Act cannot be given a broader meaning to include notional income within its ambit. Transfer pricing provisions under the Act are not a code by itself but only a machinery provision to compute Arm’s Length Price.
4. No royalty on excavated earth for laying foundation
The Supreme Court in Promoters & Builders Association of Pune vs State of Maharashtra & Others has held that the government is not entitled to any mining royalty if a developer excavates land for laying foundation of a building. A Court ruled in favour of the Promoters and Builders Association of Pune, which had challenged Maharashtra government’s move to impose penalties on them claiming that the activity of digging up earth for any such concrete foundation is akin to mining operations. The Court held that Builders excavating “ordinary earth” to lay foundation of a building cannot be deemed to be carrying out “mining” of a minor mineral and hence no royalty was payable. The Builders had all the building sanctions and did not require special nod to excavate as they were not using the earth for levelling purposes in roads, railways, embankments, etc.
- New rules to adduce digital evidence in Courts:
The Supreme Court in Anvar P. K. vs. P.K Basheer & Ors redefined the evidentiary admissibility of electronic records. The court held that documentary evidence in the form of an electronic record can be proved only in accordance with the procedure under Section 65B of the Evidence Act. Thus, in the case of a CD, VCD, chip, etc., the same shall be accompanied by the certificate in terms of Section 65B obtained at the time of taking the document, without which, the secondary evidence pertaining to that electronic record, is inadmissible. Hence compliance with Section 65B is now mandatory for persons who intend to rely upon emails, websites or any electronic record in a civil or criminal trial.
FIVE DEVELOPMENTS AWAITED IN 2015
1. The Companies (Amendment) Bill, 2014
The Companies (Amendment) Bill, 2014 was passed in the Winter Session of the Lok Sabha. The Bill introduces amendments such as jurisdiction of special courts to try certain offences, making common seal optional, no approval required from non-related shareholders for transactions between holding companies and wholly-owned subsidiaries, fraud involving a lesser amount will no longer be reported to government but to the audit committee or to the board of the company, etc. The proposed amendments aim to ensure ease of business transactions and give some respite to Corporate India
- Labour Reform Bills
The Union Labour and Employment Ministry tabled two Labour Reform Bills in the Lok Sabha on 7 August 2014 namely the Factories (Amendment) Bill 2014 and the Apprentices (Amendment) Bill 2014. The purpose is to enable the government to make certain rules in consultation with the States to ensure safety and welfare of workers at workplace. Once passed, they are expected to make it easier to do business in India by allowing flexibility in both hiring and working hours.
- Securities Laws (Amendment) Bill, 2014
The Securities Laws (Amendment) Bill, 2014, was also introduced in the Lok Sabha in 2014. The Bill aims to empower the capital market regulator i.e. SEBI by giving powers such as authority to seek call data records and information “not only from the people or entities associated with the securities market but also from persons who are not directly associated with the securities market”. The objects and reasons listed by the government on the Bill said, “To protect the interests of investors and to ensure orderly development of securities markets, it has become necessary to enhance the powers of the Board”. Once the bill becomes an Act, SEBI would have powers to check fraudulent investment schemes, to call for documents on entities under probe and provide for constitution of special courts to expedite the cases.
- Insurance Laws (Amendment) Bill:
The Insurance Laws (Amendment) Bill raising the foreign direct investment (FDI) limit to 49 % was introduced in the Parliament in August 2014 The composite 49 per cent cap would include foreign direct investment, foreign institutional investments, foreign portfolio investments as well as all instruments that may be included as FII at a later date.The Bill also proposes a rider that management control rests in the hands of an Indian promoter alongside the eased FDI cap.
Ordinance to amend the Arbitration and Conciliation Act, 1996
The cabinet in December 2014, cleared an ordinance to amend the Arbitration and Conciliation Act, 1996 which would make settlement of contractual disputes between foreign companies and their Indian partners easier. The Ordinance is aimed at making it mandatory for commercial disputes to be settled within nine months and also putting a cap on fee of arbitrator. The arbitrator will be free to seek an extension from the High Court. But in case of further delays, the High Court will be free to debar the arbitrator from taking up fresh cases for a certain period.
Prepared By: The Team of Lawyers at Abhay Nevagi & Associates, Pune
Disclaimer: This circular provides general information and guidance as on date of preparation and does not express views or expert opinions of Abhay Nevagi & Associates. Contents of this Newsletter should neither be regarded as comprehensive nor sufficient for making any decisions. No one should act on the basis of information provided in this newsletter without obtaining proper expert professional advice. Abhay Nevagi & Associates disclaim any responsibility and hereby accept no liability for consequences of any person acting or omitting or refraining to act on the basis of any information contained herein