MAJOR ISSUES ADDRESSED BY PRIME MINISTER NARENDRA MODI AT THE WORLD ECONOMIC FORUM, 2018 AT DAVOS

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Prime Minister Narendra Modi delivered the keynote speech at the World Economic Forum, 2018 at Davos, Switzerland. At the Forum, speaking of India’s incredible growth story, he mentioned issues that have affected India and also the growth that business, economy and technology have attained here.

Mr. Modi also suggested the business community to do business with India while speaking to global CEOs in the Forum.

Some of the major issues addressed by Prime Minister Narendra Modi in his keynote speech are:-

Prime Minister Narendra Modi on India’s future

India will be the world’s fastest-growing major economy in 2018, according to the International Monetary Fund’s latest World Economic Outlook update.

India’s GDP has been growing at around 7% per year since Prime Minister Narendra Modi’s Government and next year India’s economy will be one-third bigger than when he came to power. He also addressed major economic and social challenges such as income inequality, gender disparity and extreme levels of pollution.

Terrorism

Talking about terrorism, which is the next biggest problem in the world, Mr. Modi referred terrorism to be the second biggest challenge. All the Governments are aware of India’s concerns and the serious threats posed to the mankind. A greater danger is the artificial distinction created between good terrorism and bad terrorism. Another danger is that educated youth are being radicalized and getting involved in terrorism.

Technology

Addressing on technology and data in today’s world, Mr. Modi said that the Technology-driven world is changing lives.  Technology has impacted every aspect of our lives.

Technology is creating the greatest opportunities, but also huge challenges. He also addressed the problems faced by a technology-driven world, saying that “cyber security and nuclear security” are challenges faced by the world.

Democracy

Prime Minister Narendra Modi said that Indians are proud of their democracy and diversity. For a society with diverse religions, cultures, languages, attires and cuisines, democracy is not just a political system but a way of living. In India democracy, demography and dynamism are giving shape to development and destiny.

Growth in India

Narendra Modi’s Government implemented a one nation, one tax regime in the form of Goods and Services Tax for the first time in India and the business community from all over the world appreciated it.

FDI in India

Mr. Modi also talked about how working, travelling and manufacturing in India is way easier now and added that all sectors of India are open for FDI.

India’s GDP

Mr. Narendra Modi also noted that in 1997 when the then current Prime Minister visited Davos, India’s GDP was a little more than USD 400 billion, but now it has increased more than six times.

In conclusion, Prime Minister Narendra Modi impressed the audiences at the World Economic Forum in Davos. His speech was not just motivating and thought-provoking but also highlighted India as the country of the future.

 

Sanchayeeta Das

Legal Associate

The Indian Lawyer

EMERGENCE OF INDIA AS THE FIFTH MOST ATTRACTIVE INVESTMENT DESTINATION ACROSS THE GLOBE

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Around 3000 world leaders from the fields of business, politics, academics, etc had attended the 48th World Economic Forum (WEF) Annual Meeting from 23rd January 2018 to 26th January 2018 in Davos, Switzerland to discuss major global issues and to brainstorm on probable solutions to address those issues.

The Prime Minister of India, Shri Narendra Modi had also attended the Meeting and addressed the gathering of world leaders and global Chief Executive Officers (CEOs) to discuss about the three most significant challenges to civilization i.e. “climate change, terrorism and an increased self-centredness.” He also spoke about the growing opportunities and dangers of technology, and India’s efforts to adopt green technology, to attract foreign investments in India, etc. As reported by the WEF, India will be the world’s fastest growing major economy in 2018 (source: International Monetary Fund).

According to the 21st survey of CEOs conducted by PricewaterhouseCoopers Private Ltd (PwC), a global consultancy Company, during August to November 2017, India has emerged as the fifth most attractive destination for investments from across the world, leaving behind Japan. The CEOs covered under this Survey included CEOs, primarily, from the following companies:

The revenue of 40 per cent of the companies was at least $1 billion and 35 per cent of firms’ revenues ranged between $100 million and $1 billion. Around 20 per cent of the companies had revenues of up to $100 million while 56 per cent of the entities were privately owned.

As per the Survey, the structural reforms that have taken place in India in the past one year, the efforts of the Government to address serious concerns like infrastructure, manufacturing in India, cyber security, climate change, etc may have positively affected the minds of global CEOs.

Although the global CEOs seem to have some concerns about investing in India, such cyber threats, terrorism, climate change, availability of key skills and recruits, exchange rate volatility, changing consumer behavior, threat of over- Government regulations and increasing tax burdens, etc.

But in the Meeting, Shri Narendra Modi had stated that investing in India, manufacturing in India has become easier because India has pledged to end License Raj, remove red tapism, etc, thereby inviting global investors to invest in India. He further stated that India is poised to become $5 Trillion Economy by 2025. Moreover, the Government of India has made the following efforts to encourage increased foreign investments in India:

  • Reduced compliances and documentation for foreign investment in India,
  • Further relaxation of foreign direct investment (FDI) norms in Single-Brand Retail Trading, Civil Aviation, Construction Development and Power Exchanges, and other FDI reforms,
  • Implementation of Goods and Services Tax (GST) laws, whereby GST will subsume most of the existing multiple indirect taxes which may reduce the cost of tax compliance, logistics cost, transaction cost, etc and bring a stability and transparency in the tax regime making it easier to do business in India,
  • Enactment of Insolvency and Bankruptcy laws, to consolidate and amend the laws relating to reorganisation and insolvency resolution of corporate persons, partnership firms and individuals in a time bound manner,
  • Setting up of bodies/agencies such as the Securities Exchange Board of India (SEBI) to protect the interests of investors, to educate the investors to make informed investments, to address investor grievances, etc,
  • Creation of an investor facilitation cell in ‘Invest India’ to guide and assist the investors during the entire life-cycle of the business, etc.

Therefore, the Government of India has relaxed FDI norms and introduced other reforms in its efforts to make foreign investment in India less complicated, and to make India the most attractive investment destination across the globe.

 

Harini Daliparthy

Legal Associate

RTI INFORMATION CANNOT BE DENIED FOR LACK OF AADHAAR CARD

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Recently, in Vishwas Bhamburkar v. PIO, Housing & Urban Development Corporation Ltd., CIC/HUDCO/C/2017/164658, the Central Information Commission (CIC) was confronted with an issue relating to denial of information on lack of producing identity proof by the Applicant under the Right to Information Act (RTI), 2005.

In this case, the Applicant held misuse of funds of The Housing and Urban Development Corporation Limited (HUDCO) and therefore filed an RTI Application seeking information about the amounts spent from the funds of HUDCO on gifts for years 2013 to 2016, renovation of official residence of its Chairman and Managing Director, electricity bills of official residence. The Central Public Information Officer (CPIO) stated that information could not be furnished by them as the Applicant failed to provide proof of identity and proof of address by producing Aadhar Card, Voter’s ID Card or Passport as proof of citizenship.

The CIC criticized the CPIO’s act in not furnishing information to the Applicant and made the following observations:

  1. The Right to Information Act, nowhere prohibited ‘person’ from securing the information due to failure to prove citizenship. A person cannot be denied information on the pretext that he did not produce proof of citizenship.

 

  1. That the CPIO can deny information only under Section 8 (exemption from disclosure of information) and Section 9 (grounds for rejection to access in certain cases) of RTI Act. It cannot invent new grounds for denial like lack of Aadhar Card, Voter Id Card, and Passport etc.

 

  1. Section 6(2) of RTI Act says an applicant making request for information shall not be required to give any reason for requesting the information or any other personal details except those that may be necessary for contacting him.With reference to the facts of the present case the CIC observed that the Applicant gave address to which information could have been dispatched.

 

 

 

Sanchayeeta Das

Legal Associate

The Indian Law

 

EARLY ADOPTION OF E-WAY BILL IN THE GOODS AND SERVICES TAX REGIME

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The Government of India has planned for early implementation of the electronic way bill (E-Way Bill) System with effect from 01.02.2018, which is an important element of the goods and services tax (GST) regime in India.

Meaning:

The E-Way Bill is a bill generated from the GST Network (GSTN) which is mandatory for every transporter to carry, for inter-state and intra-state transportation of goods worth more than Rs 50,000 within the country, except in certain cases. The E-Way Bill need not be generated in cases where goods being transported by a non-motorised conveyance; goods being transported from the port, airport, air cargo complex and land customs station to an inland container depot or a container freight station for clearance by Customs; and when Consignment value is less than Rs 50,000 among others.

Advantages to the Government:

This Bill is an evidence of the movement of goods, a tool to check that goods being transported comply with the GST Laws, and to check tax evasion.

Validity of the E-Way Bill:

The E-Way Bill once generated would be valid for one day (24 hours) and in exceptional cases, the Commissioner of GST may, upon expiry of the E-Way Bill, generate another E-Way Bill with the details of goods.

Early adoption of the System:

The decision to adopt the E-Way Bill System early may be as a result of the decline in GST revenue in the past few months.

Countrywide E-Way Bill trials:

The Government had conducted nationwide E-Way Bill trials on 16.01.2018. Various industry experts have expressed concern about whether the IT infrastructure would be able to support the large volumes of E-Way Bills generated in the GSTN.

Portal for E-Way Bill:

The National Informatics Centre (NIC), Government’s premier Science and Technology Organisation had created a specific portal (ewaybill.nic.in/) (Portal) to generate an E-Way Bill, which the transporter has to carry along with the invoice of the goods. Reportedly, the E-Way Bill System has been designed to handle around 50 lakhs E-Way Bills per day. The CEO of GSTN has clarified that such online data is protected and that such data is accessible only to the tax payer and the tax officer.

Possible fallouts:

This System may have some fallouts including connectivity issues in small towns, difficulty in operations in case of System/Portal disruption, understanding of such complex mechanism and compliances by small traders and transporters, etc.

Public Reaction:

Many companies and traders have reacted to the early adoption of E-Way Bill System in India stating that a number of businesses are apprehensive that the nationwide implementation of this System may lead to delays in transportation and arbitrary inspections of consignments by the mobile squads; that the Portal may not be able to handle the huge volumes of E-Way Bills generated and so the implementation should be delayed until the Portal works smoothly; that the Government may use quick response (QR) codes to validate the goods being transported instead of E-Way Bills, etc.

Moreover, a few companies have supported this move of the Government stating that the organized section of the long-distance logistics industry may contribute towards the rapid growth of the Indian economy.

 

Harini Daliparthy

Legal Associate

 

CAN A REGISTERED TRADEMARK BE REMOVED WITHOUT PRIOR NOTICE TO THE REGISTERED PROPRIETOR?

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On 17th January 2018 in the matter of Keelnage Products (India) Private Limited vs. 1. The Registrar of Trade Marks 2. Union of India, the Bombay High Court heard the Petition seeking prohibition of removal of the Petitioner’s trademark ‘KLITOLIN’ from the records of the Register of Trademarks.

Kleenage Products Private Limited is a company engaged in manufacture and sale of washing and cleaning preparations. The Petitioner, as per the registration procedure, applied for registration of their trademark ‘KLITOLIN’ which was accepted by the Trade Marks Registry and in between 1988 to 2009, the qualified trademark was renewed multiple times.

The Petitioner failed to tender application for the renewal of the said trademark which was due for renewal on August 21, 2009. Thereafter, it was discovered by the Petitioner that the said trademark is likely to be removed from the Register of Trademarks due to non-renewal of the original or previous registration of the said trademark.

Advocate of the Petitioner, Hiren Kamod submitted that because Respondent No.1 has failed to issue the mandatory O-3 notice, restoration ought to be allowed. He placed reliance on the Judgement of a Division Bench of the Bombay High Court in Cipla Limited v Registrar of Trade Marks and Another, wherein it was held that “the Registrar must give prior notice in form O-3 to the registered proprietor or to each of the joint registered proprietors in writing, putting them to notice of the impending expiry of registration of the mark. The removal of the registered mark from the register entails civil consequences for the registered proprietor of the mark. The said removal of the registered trade mark, in the scheme of things, therefore, cannot be done without prior notice to the registered proprietor/joint proprietors in the prescribed form.”

The Judgement further stated that “The mere expiration of the registration by lapse of time, and the failure of the registered proprietor of the trade mark to get the same renewed, by itself does not lead to the conclusion that the same can be removed from the register by the Registrar of Trademarks without complying with the mandatory procedure prescribed in Section 25(3) of the aforesaid Act or read with Rule 67 of the aforesaid Rules.”

Section 25 in The Trade Marks Act, 1999- Duration, renewal, removal and restoration of registration:

(1) The registration of a trade mark, after the commencement of this Act, shall be for a period of ten years, but may be renewed from time to time in accordance with the provisions of this section.

(2) The Registrar shall, on application made by the registered proprietor of a trade mark in the prescribed manner and within the prescribed period and subject to payment of the prescribed fee, renew the registration of the trade mark for a period of ten years from the date of expiration of the original registration or of the last renewal of registration, as the case may be (which date is in this section referred to as the expiration of the last registration).

(3) At the prescribed time before the expiration of the last registration of a trade mark the Registrar shall send notice in the prescribed manner to the registered proprietor of the date of expiration and the conditions as to payment of fees and otherwise upon which a renewal of registration may be obtained, and, if at the expiration of the time prescribed in that behalf those conditions have not been duly complied with the Registrar may remove the trade mark from the register: Provided that the Registrar shall not remove the trade mark from the register if an application is made in the prescribed form and the prescribed fee and surcharge is paid within six months from the expiration of the last registration of the trade mark and shall renew the registration of the trade mark for a period of ten years under sub-section (2).

(4) Where a trade mark has been removed from the register for non-payment of the prescribed fee, the Registrar shall, after six months and within one year from the expiration of the last registration of the trade mark, on receipt of an application in the prescribed form and on payment of the prescribed fee, if satisfied that it is just so to do, restore the trade mark to the register and renew the registration of the trade mark either generally or subject to such conditions or limitations as he thinks fit to impose, for a period of ten years from the expiration of the last registration.

The Bombay High Court held that any such removal can only be possible if prior notice has been sent to the Registered Proprietor which is mandatory under Section 25(3) of the Trade Marks Act 1999 and allowed the Petition and directed the Registrar to consider the application tendered by the Petitioner for renewal of trademark along with the prescribed fee.

Therefore, the registered trademark cannot be removed from the Register of Trademarks by the Registrar of Trademarks without prior notice to the registered proprietor.

Taruna Verma

Senior Associate

UPHEAVAL IN THE SUPREME COURT OF INDIA

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In the most unprecedented events in the history of the Supreme Court (SC) of India, four senior most SC Judges, namely Justice Jasti Chelameswar, Justice Ranjan Gogoi, Justice Kurian Joseph and Justice Madan B Lokur have publicly aired, in a Press Conference dated 12.01.2018, their differences and grievances against the Chief Justice of India, Justice Dipak Misra (CJI) against the alleged allotment of important matters by the CJI to certain Benches of preference and the alleged formation of Constitution Benches by the CJI by including only certain Judges and ignoring Senior Judges of the Apex Court.

The 4 Judges, who are all members of the SC Collegium, have released a letter, which was earlier written to the CJI, to the media detailing their critique of the CJI which stated the following:

  1. Certain judicial orders passed by the SC have adversely affected the functioning of justice delivery system.
  2. It is a privilege of the Chief Justice to form a roster and assign cases to different judges/benches of a court. But it does not imply that it is recognition of any superior authority of the Chief Justice over his colleagues. Rather, the Chief Justice is only the first among equals.
  3. While determining a roster, there are well-settled and time honored conventions to guide a Chief Justice as to the strength of the Bench required to deal with a particular case or the composition thereof.
  4. Any departure from the aforesaid two rules is not desirable as it would create doubts about the integrity of the Institution.
  5. They have made allegations against the current CJI pertaining to his non-adherence to the twin Rules above-mentioned in preparing the roster and assigning important cases to benches of his preference without any rationale.
  6. They have referred to a two-Judge Bench SC matter of P. Luthra vs. Union of India, 2017, wherein a writ petition was filed before the SC challenging the recommendation of four names by the SC Collegium in May, 2016 for appointment as SC Judges, on certain grounds, one of which is that the Collegium should not have made the recommendation without finalizing the Memorandum of Procedure (MoP), which has to be complied with for appointment of judges to high courts and SC, as suggested by the Constitution Bench of the Supreme Court vide judgment dated 16.10.2015 in Supreme Court Advocates-on-Record Association & Anr. Vs. Union of India & Ors.
  7. The two-Judge Bench of SC in P. Luthra (supra) had rejected the Petition and held that the Memorandum of Procedure should be finalized soon, in view of larger public interest.
  8. But the four SC Judges objected to and stated that the issue about finalization of MoP was already dealt by the Constitution Bench of the SC in Supreme Court Advocates-on-Record Association & Anr. (supra). Later, the MoP was also finalized by the then CJI and the Collegium, and was sent by the then CJI to the Government, to which the latter never responded. So, the MoP should be deemed to be accepted by the Government. Therefore, there was no occasion for the two-Judge Bench in P. Luthra (supra) to make any observation about finalization of the MoP or that such issue should not linger on for an indefinite time. Thus, matter of such grave importance should be dealt with by none other than a Constitution Bench.
  9. The four SC Judges have asked the CJI to view this issue with serious concern and to rectify the situation and take remedial measures after discussing it with other members of the Collegium and if need be, with other Judges of the SC.

The four SC Judges further stated about the alleged preferential treatment by the CJI that unless this institution is preserved and it maintains its equanimity, democracy will not survive in this country or any country. For a survival of a democracy it is said that a hallmark of a good democracy is an independent and impartial judge. It has been speculated by some SC Advocates that the constitution of Benches and allocation of matters is being administratively done by the SC in a manner more palatable to the Government.

The 9-Judge Bench of the Apex Court in Supreme Court Advocates-on-Record Association & Anr vs. Union of India & Ors 1993 had held that independence of the Judiciary is a part of the basic structure of the Constitution of India. Further, the SC herein made the following observations and rulings:

  • The Judiciary, under the Constitution, is designed to act as an intermediary body between the people on the one side and the Executive on the other.
  • The role of the Judiciary, under the Constitution, is a pious trust reposed by the people. 
  • In the event that the Judiciary fails, the Constitution also fails and as a result, people might opt for some other alternative.
  • Independence of Judiciary is a sine qua non of democracy, i.e. so long as the Judiciary remains truly distinct from both the Legislature and the Executive, the general power of the people can never be endangered from any quarters.
  • That the judicial independence is inextricably linked and connected with the constitutional process of appointment of Judges of the higher courts. Therefore, there cannot be an independent Judiciary if the power of appointment of judges vests in the Executive. So, if the final say of the Executive in the process of appointment of judges is excluded; only then can the independence of Judiciary (i.e. independence of individual judges as well as of an institution as a whole) be maintained. That is because the Governments – Central or the State – are parties before the courts in a number of cases.
  • Moreover, the SC stated that the view of the Chief Justice of India is to be expressed in the consultative process as truly reflective of the opinion of the Judiciary, which means that it must necessary have the element of plurality in its formation. It implies that in actual practice, the final opinion expressed by the Chief Justice is not merely his individual opinion, but an opinion formed collectively by a body of Judges at the apex level in the Judiciary.

There have been mixed reactions across the country to this unprecedented move of the four SC Judges. The SC Bar Council has decided to form a 7-member delegation of the Council who will meet the 4 SC Judges to resolve the matter at the earliest.

 

Harini Daliparthy

Legal Associate

100% FDI IN SINGLE BRAND RETAIL TRADING SECTOR WILL BOOST INVESTMENTS IN INDIA

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The Government made a major move to attract more foreign direct investment(FDI) into the country by relaxing FDI norms in key sectors which are as follows:

  • 100 per cent FDI under automatic route in single brand retail trading (SBRT) on 10th January, 2018. It is also likely to benefit big foreign single brand retailers such as IKEA
  • It also allowed foreign airlines to invest up to 49 per cent under approval route in national carrier Air India. This move is expected to expedite the divestment process for Air India.
  • 100 per cent FDI in construction development via automatic route was also cleared.

The Government permitted foreign airlines to invest up to 49 per cent in disinvestment-bound Air India and liberalised rules for foreign investment in single brand retail, construction and power exchanges.

Chandrajit Banerjee, Director General, CII said: “India continues to attract high levels of foreign direct investment. Today’s announcement includes multiple measures targeted at specific sectors where opportunities exist……the decision to permit foreign airlines to invest up to 49 percent in Air India is expected to bring some capital to support a turnaround in the national carrier.”

The Union Cabinet has decided to allow foreign investments, including from foreign airlines, to up to 49 per cent in Air India but the relaxation of FDI norms for foreign airline investment in Air India is subjected to certain conditions such as the substantial ownership and effective control of Air India shall continue to be vested in an Indian national.

Anaindya Banerjee, Currency Analyst at Kotak Securities said that “The relaxed rules will give an additional push to the rupee, which is likely to gain this year.”

New FDI norms in a SBRT sector will gain further impetus due to the process of not being subject to regulatory scrutiny and approval process.

The relaxed FDI norms should lead to further increase in foreign investment inflows and to provide ease of doing business in India.

Taruna Verma

Senior Associate

 

DEBATE OVER TRIPLE TALAQ BILL IN RAJYA SABHA

 

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The Muslim Women (Protection of Rights on Marriage) Bill, 2017 also known as the Triple Talaq Bill (“the Bill”) failed to make any progress in the Rajya Sabha in the winter session of Parliament on Thursday, 4th January 2018.

The Bill seeks to outlaw talaq-e-biddat or instant triple talaq and punish offenders with up to three years in jail as punishment.

The Government placed the Bill in the bottom of priority in the list of business, to which the Opposition strongly objected. However, the Bill has now been pushed without any discussion to the Budget Session that begins on 29th January 2018.

The Bill was cleared by the Lok Sabha through a voice vote on 28th December 2017.  The Bill has to be cleared by the Rajya Sabha before it is made law. However, due to a deadlock over the Opposition’s demand seeking its reference to a Select Committee for close scrutiny, the Bill failed to be cleared by the Rajya Sabha.

The Leader of Opposition in the Rajya Sabha and Congress Member of Parliament, Mr. Ghulam Nabi Azad said that the Bill was not fit to be passed as it as it would “finish off Muslim women” instead of “empowering them.”

Leader of the House and Finance Minister of India, Mr. Arun Jaitley questioned the validity of the Opposition’s motion, stating that the statutory requirement of 24 hours advance notice was not given. He also stated that the work of a Select Committee was to improve the Bill. Further Mr. Jaitley said “A saboteur of a Bill can never be on the Select Committee. It is a Parliamentary proceeding. As such they would be disqualified from being a part of it,”.

Deputy Chairman of the House P. J. Kurien responded that the rule raised by Mr. Jaitley that a prior notice should be given is correct but said, “The Leader of the House is a very learned advocate himself and all points raised by him are of relevance…..However, the same rule adds that the Chairman of the House (Vice-President of India M Venkaiah Naidu) has the power to admit such a motion and which is why I cannot overrule it. It is now admitted and hence is the property of the House, only members can amend it,”.

The Rajya Sabha, which had 13 sittings during the winter session that started on 15th December 2017, saw the passage of nine Government Bills.

Only time will tell whether the rights of the Muslim women will be protected by the law.

Taruna Verma

Senior Associate

NCLT RULING ON NON-DEFAULTING PROMOTER/GUARANTOR IN INSOLVENCY PROCESS

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In a recent case of RBL Bank Limited vs. MBL Infrastructures Limited 2017, the National Company Law Tribunal (NCLT) Kolkata Bench has passed on Order with regard to non-defaulting promoters/guarantors who endeavor to save their companies. Herein, the RBL Bank (Creditor) had initiated a corporate insolvency resolution process against the corporate debtor, MBL Infrastructures under Section 7 of the Insolvency and Bankruptcy Code 2016, which was admitted by NCLT. Thereafter, a Resolution Applicant (Applicant), personal guarantor of the Corporate Debtor, submitted a Resolution Plan (Plan) in the meetings of Committee of Creditors (Meetings). After several deliberations and discussions about the Plan in the Meetings, the Applicant incorporated their feedback in the Plan and submitted it to the Resolution Professional, appointed by the NCLT to conduct the corporate insolvency resolution process, who in turn would submit the Plan to the Committee of Creditors for their voting.

Meanwhile, the Government of India had passed an Ordinance dated 23.11.2017 to amend the Code, and also introduced Section 29A that makes certain persons ineligible to be a resolution applicant including willful defaulters [Clause (b)], persons who have their accounts classified as non-performing assets [Clause (c)], promoters or those in management of control of the defaulting company, [Clause (g)], those who have an enforceable guarantee in favor of a creditor in respect of a corporate debtor under insolvency resolution process [Clause (h)], etc. Accordingly, such persons become ineligible to submit a resolution plan (specifying the details of restructuring a defaulter’s debt) as it may be considered undesirable to let them take charge of the company.

Consequently, the Applicant, claimed that the Guarantee it executed in favor of the Creditor in respect of the Corporate Debtor under Insolvency Resolution Process was not invoked by the Creditor, so as a result, it is not a defaulter under the Guarantee as given under Section 29A (h) and therefore, not ineligible to submit the Resolution Plan. On the other hand, the Committee of Creditors claimed that they had invoked the guarantee of the Applicant after the commencement of insolvency proceedings, which has not been satisfied by the Applicant, so disqualified under Section 29A (h) from submitting the Resolution Plan.

The NCLT passed the following Order:

  1. Firstly, the object behind introducing Section 29A by way of Ordinance was not to disqualify the promoters/guarantors of the corporate debtor as a class from submitting a resolution plan. In fact, they are the most natural persons who are likely to submit a resolution plan during insolvency proceedings, unless the insolvency is caused due to their act or omission, fraud, deceit, etc. Rather, the intent of the Legislature was to exclude those classes of persons from offering a resolution plan, who on account of their antecedents may adversely affect the credibility of the processes under the Code. Moreover, if the entire class of promoters/guarantors, etc would be disqualified, then the provision would amount to be discriminatory and violative of Article 14 of the Constitution of India.
  2. Secondly, after commencement of Insolvency Proceedings, the NCLT passed an order declaring moratorium for prohibiting the institution of any suit, proceeding, etc against the Corporate Debtor, the transfer of property of the Corporate Debtor, etc. The NCLT held that during the moratorium period, no guarantee can be invoked, thus, the Applicant cannot be held as a defaulter under the Guarantee and so, his case is not covered under the Clauses (c) and (h) of Section 29A and is eligible to submit the Resolution Plan.

Therefore, the NCLT held that Section 29A does not exclude all promoters/guarantors of a corporate debtor, etc as a class from submitting a resolution plan for the corporate debtor, but excludes only those, who on account of their antecedents may adversely affect the credibility or reliability of the insolvency process initiated under the Code such as willful defaulters, disqualified directors, etc.

 

Harini Daliparthy

Legal Associate

LAW MINISTRY OF INDIA APPROVES FUGITIVE ECONOMIC OFFENDERS BILL, 2017

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The Law Ministry of India has given its concurrence to a draft of Fugitive Economic Offenders Bill, 2017 (Bill)that will give powers to the Government to confiscate property of economic offenders and defaulters who flee India. The Bill aims to help confiscate assets of high-value economic offenders absconding from India till they submit to the jurisdiction of the appropriate legal forum. The provisions of the proposed Bill will override other legislations dealing with economic offences.

The Bill defines a ‘fugitive economic offender’ as any individual against whom a warrant for arrest in relation to a scheduled offence has been issued by any court in India, who (i) leaves or has left India so as to avoid criminal prosecution; or (ii) refuses to return to India to face criminal prosecution.

The proposed Bill has been drafted in pursuance of the Finance Minister Mr Arun Jaitley’s 2017–18 Budget speech promising legislative changes or even a new law to confiscate the assets of such fugitives. It seeks to deter economic offenders from evading the process of Indian law by fleeing the country.

The Bill entrusts the responsibility to hear such cases to the Courts under Prevention of Money Laundering Act, 2002 (PMLA).

The proposed Bill will be applicable in cases where the value of offences is over Rs. 100 Crores. It proposes to allow the Financial Intelligence Unit (FIU), the premier technical snoop wing under the Finance Ministry, to file an application for the declaration of fugitive economic offender for confiscation of their assets. Section 10, Declaration of Fugitive Economic Offender under its ambit directs the Special Court to confiscate the proceeds of the crime situated in India and any other proceeds of the offender. For that purpose, the Bill mentions under sub-section 10(2) that the confiscation order of the Special Court, to the extent possible, identify the property that constitutes the proceeds of the crime which are to be confiscated and, in case such properties cannot be identified, quantify the value of the proceeds of the crime. Additionally, the Special Court is barred from confiscating any property where any other person, apart from the economic offender, has an interest.

The Law Ministry of India has suggested that a “Saving Clause” be inserted since the provisions of the proposed Bill, Saving Clause provides for certain exception(s) in the statute. The proposed Bill provisions will have a bearing on the provisions of existing laws. The existing laws under which such offenders are tried include Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, (SARFESI), Recovery of Debts Due to Banks and Financial Institutions Act (RDDBFI) and Insolvency and Bankruptcy Code (IBC).

The proposed Bill will ensure prevention of corruption and the recovery of assets or proceeds of corruption. In the past, there have been instances of economic offender such as Vijay Mallya. The Government is making efforts to extradite Indian businessman Vijay Mallya from the United Kingdom. He owes over Rs. 9,000 Crore to various Indian Banks and had fled India to escape legal proceedings in connection with the loans.

The Government by adopting such legislation, envisages the proposed Bill to be economically viable and ensures to penalize defaulters of the financial system of India.

Taruna Verma

Senior Associate