RBI proposes fresh Regulations under Foreign Exchange Management Act, 1999 for Cross Border Mergers and Acquisitions

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The Reserve Bank of India (RBI) on Wednesday, April 26, 2017,  proposed a fresh set of regulations regarding Mergers and Acquisitions (M&A) which seek reporting of all deals which are not on the automatic route, to be more stringent, time-bound and provide for mandatory permission

The RBI Regulations followed the new regulations notified by Ministry of Corporate Affairs (MCA) under the Companies (Compromises, Arrangements and Amalgamation) Amendment Rules of 2017 issued on 13 April, 2017.

The MCA notified Section 234 of the Companies Act 2013 (2013 Act) which permits cross border mergers with effect from 13 April 2017. Further, in consultation with the Reserve Bank of India (RBI), the MCA has also notified corresponding amendments to the Companies (Compromises, Arrangements and Amalgamations) Rules 2016 (Merger Rules) by inserting a new Rule 25A effective from 13 April 2017, which deals with cross border mergers.

The proposed Regulations by RBI will be under the Foreign Exchange Management Act, 1999 (FEMA) in order to address the issues that may arise when an Indian company and a foreign company enter into Scheme of merger, demerger, amalgamation, or rearrangement. These Regulations stipulate conditions that should be adhered to by the companies involved in the Scheme. The Regulations shall be named Foreign Exchange Management (Cross Border Merger) Regulations.

The Draft Regulations make (reporting) rules for the company in relation to,

  1. Issue/ transfer of securities in case of inbound M&A /holding of securities in case of outbound mergers;
  2. Repayment of (overseas) borrowings, as the case may be;
  3. Acquisition/holding of assets in or outside India as the case maybe;
  4. In the event the Foreign Exchange Management Act does not permit holding/acquisition of securities, repatriation of their sale proceeds to/outside India, as the case maybe.


Additionally, the valuations for both companies for the purpose of cross border merger shall be done as per internationally accepted pricing methodology, certified by a chartered accountant/ public accountant/merchant banker authorized to do so in either jurisdiction.

The RBI is accepting public comments till May 9, 2017.

Taruna Verma

Senior Associate

The Indian Lawyer



The Central Information Commission on 23rd April 2017 made it clear that ‘missing files’ is no defence and it cannot be used as an excuse to deny information.

Under the Right to Information Act, it is mandatory to publish all relevant facts while formulating important policies or announcing the decisions which affect public. When information is being sought, non-traceability of the file cannot be used to deny information.

The Commission noted that no public authority can deny the right of the applicant to the information sought. A file being non-traceable is a reflection of the inefficient and pathetic management of files by the public authority. If despite best efforts the file cannot be traced, then efforts should be made to reconstruct the file and provide information.

If these files are a part of the public record and form evidence in any case, their destruction would be seen as a destruction of evidence and will invite sanctions under the Public Records Act, 1993 and the Right to Information Act, 2005.

Further, those documents which are no longer to be used by the public authority, but are of a permanent nature, are to be shifted to the national or state archives for safekeeping. Loss of records of a permanent nature would invite penal sanctions under The Indian Penal Code. Appropriate action in case of a missing file would be recovering the file, finding out which employee was responsible for the file being missing, taking suitable disciplinary actions against that employee and addressing the problems which arose due to the file being missing. If despite these efforts the file could not be traced, then the public authority has a moral and legal duty to sincerely address the grievance of the applicant.

The Commission, having the power to direct disclosure of information provided, has the jurisdiction to direct enquiry against the Public Information Officer (PIO) or Central Assistant Public Information Officer (CPIO) claiming that the information sought by the applicant is not traceable.

Sanchayeeta Das

Legal Associate

The Indian Lawyer




The Government of India has recently passed the Central Goods and Services Tax (CGST) Act 2017 and the Integrated and Services Tax (IGST) Act 2017 and has announced that the Goods and Services Tax (GST) regime will tentatively be implemented from July 2017. Upon implementation, it would be a dual GST with the Centre and States simultaneously levying it on a common tax base:

  1. The CGST shall be levied by the Centre on intra-State supply of goods and/or services.
  2. The SGST shall be levied by the States on intra-State supply of goods and/or services.
  3. The IGST shall be levied and collected by Centre on inter-state supplies of and/or services in the course of inter-State trade or commerce.

The GST will be charged for the supply of goods and/or services made for consideration in the course or furtherance of business. Moreover, if a dealer transports business assets to his residence for private or non-business use without consideration, it will also be considered as a supply for the purpose of levy of GST.

With the introduction of GST regime, the trade and industry sector may encounter the following advantages and disadvantages:

Advantages of GST to the Trade/Industry:

  • Single tax system would subsume multiple taxes.

For instance, the direct-to-home (DTH), film producers and multiplex players will be saved from levy of multiple taxes such as high rates of service tax and entertainment tax. It may also lower the average ticket price, and increase the footfalls in multiplexes;

  • This single tax system would solve the issue of cascading/double taxation;
  • This system would help to create a single unified national market;
  • The one nation one tax system would facilitate companies to generate savings in logistics and distribution costs as there would be free movement and supply of goods in every part of the country without the need to depend on multiple sales depots across the country.

For instance, companies manufacturing mobile handsets may no longer need to set up and invest in specific entities and warehouses state-wise and transfer goods and stocks to them. This will not only yield ease of doing business for the companies, but also reduce the handset prices across the states. Manufacturers may also pass on the cost benefits, to the consumers, which they would get from consolidating their warehouses and efficiently managing inventory.

  • The tax transparency and ease of doing business, as resulted from the implementation of GST, is expected to lead to increased tax compliance and attract more foreign direct investments across sectors.
  • This simpler tax regime will levy fewer rates of tax and allow fewer cases of exemptions.

Disadvantages of GST to the Trade/Industry:

  • The companies which enjoy concessional rate of excise may see increase in effective tax.
  • The tax collection at source (TCS) guidelines in the GST regime may discourage doing business in India as it will burden the ecommerce companies with increased administration and documentation workload. According to the GST regime, an ecommerce operator has to collect tax at source in respect of each and every supply of the supplier; therefore, such operator will be burdened with the tracking of each supply of goods/services against each of the sellers, state-wise which will be voluminous in nature.
  • Imposition of high rates of GST in certain sectors like aviation may result in services becoming expensive.

The implementation of GST across the country will have diverse effects on various stakeholders including trade and industry. Therefore, public outreach and knowledge sharing programs for all the stakeholders will be conducted by Central Board of Excise and Customs (CBEC), a part of the Ministry of Finance, to popularize and familiarize GST to the trade and industry who are the crucial stakeholders in successful implementation of this reform.

Daliparthy Harini

Legal Associate



The Goods and Services Tax (GST) Bill has been passed by both Houses of the Parliament (Rajya Sabha and Lok Sabha) and will be effective from 1st July, 2017. The new GST regime is expected to lead to disruption in small businesses and payment cycles.

Under GST, all firms micro, small and big would have to move to a new and more advanced digital technology to facilitate audit reports, tax credits and payments among other things. Many companies will have to make several entries and chalk out the entire chain of business transactions and processes.

All central taxes, including excise duty and service tax besides state levies such as sales tax, value-added tax, entertainment and purchase taxes, would be subsumed into one, once the GST is implemented, thus creating one national market. It is also expected to further boost economic growth by about 1.5 percentage points.

Increased compliance under GST will benefit firms in the long run by providing them access to cheaper capital and lower input costs. However, in the short term, the switch from the unorganized to organized sector will make them less competitive. Thus, this may result in some job losses in the initial phase and some may become less competitive due to higher compliance costs.

Under GST, all firms micro, small and big would have to move to a new and more advanced digital technology to facilitate audit reports, tax credits and payments among other things. Many companies will have to make several entries and chalk out the entire chain of business transactions and processes.

All central taxes, including excise duty and service tax besides state levies such as sales tax, value-added tax, entertainment and purchase taxes, would be subsumed into one, once the GST is implemented, thus creating one national market. It is also expected to further boost economic growth by about 1.5 percentage points.

Increased compliance under GST will benefit firms in the long run by providing them access to cheaper capital and lower input costs. However, in the short term, the switch from the unorganized to organized sector will make them less competitive. Thus, this may result in some job losses in the initial phase and some may become less competitive due to higher compliance costs.

In current proposed form of GST, it exempts small businesses having the turnover below Rs 20 lakh from registering for the GST network (GSTN) unless they want to avail of the benefit of input credit. Small business will be in the Rs 20- 50 lakh bracket, according to GST, due to which family owned business worth around Rs 80- 90 lakh annual turnover may  be tempted to re-structure separate business entities in a manner that they fall within a lower tax bracket under the GST.

According to the latest annual report (2015-2016) of the Ministry of Micro, Small and Medium Enterprises (MSME), there are estimated to be about 51 million MSME business, employing more than a 117 million people and having combined fixed asset value of nearly Rs 15 lakh crore. Under the new GST regime entering the formal sector can provide smaller business access to cheaper capital as well as legal recourse in case of disputes.

However, businesses which are making a switch to the organized sector and moving towards formalization will eventually gain in their business. Ultimately, registered entities will only want to do business with other registered entities because of the reverse charge, the whole purpose of the reverse charge is to increase tax compliance, generate higher revenue and bring transparency into the tax system.


Taruna Verma

Senior Legal Associate

The Indian Lawyer




India is creating a liberal mechanism that would allow all taxpayers to determine their liabilities beforehand. It is planning a significant shift towards a litigation free environment under the GST regime.

The advance ruling mechanism will allow all categories of taxpayers to approach the authority, unlike the existing system that restricts the facility to proposed transactions before the start of a business.

The advance ruling infrastructure will also ensure that every commissionerate has an authority, with a joint commissioner level officer as a member. This is modeled after global best practices in which advance ruling is treated as a revenue function, and carried out directly by revenue authorities without being passed on to any quasi – judicial entity.

At present, advance ruling can be sought for customs, excise duty and service tax for any proposed transaction. It cannot be sought for any existing transaction for central taxes, although the state value added tax regime permits even existing transactions.

This move is the first step toward bringing down litigation.

Advance ruling norms provide that an application for advance ruling or appeal has to be filed online, with fees of Rs. 5,000 or Rs. 10,000 respectively.

The Government has released another set of rules dealing with advance ruling, and those deals with accounts, record, appeals and revision. The proposed GST Council meeting on May 18-19 will take up the final set of rules.

Rules for accounts and records propose to make mandatory the maintenance of separate accounts and records for each activity, including manufacturing, trading and provision of services.

The Government proposes to roll out the new tax regime, which seeks to replace multiple state and central taxes with a single levy, on July 2017.


Sanchayeeta Das

Legal Associate

The Indian Lawyer




The Supreme Court inquired about the reasons for which the Government chose to close the window allowing all categories of people to deposit old notes of Rs 500 and Rs 1,000 after December 31, 2016, under some special circumstances in the month of March’17 to which the Centre informed the Supreme Court that there is no need to open the window allowing all categories of people to deposit old notes of Rs 500 and Rs 1000 after December 31, 2016 under some special circumstances.

Chief Justice of India (CJI) JS Khehar’s bench asked Attorney-General Mukul Rohatgi to file an affidavit within two weeks explaining if the Government intends to open the window to deposit demonetised currency for all, if not then to explain the reasons.

The affidavit has mentioned about malpractices and irregularities committed by people during the demonetisation period from November 9, 2016 to December  31, 2016 and said  the income tax department has initiated verification drive named “Open Clean Money” to leverage technology and data analysis for verification of cash deposits.

More than 3.78 lakh out of 18 lakh, high risk cases have been detected and have been taken up for assessment and investigation.

It further revealed seizure of undisclosed assets worth Rs 2890 crore. More than 15000 surveys which resulted detection of undisclosed income of more than Rs. 33,000 Crore.

The option for opening the window was closed after finding misuse of the money by some segment of people.

The court heard a group of Public Interest Litigation or PILs against the RBI and other banks for not accepting any deposits of old notes after December on either medical ground or any other unavoidable circumstances. The petitioners pointed out that Prime Minister in his speech had assured and subsequent RBI notification had also mentioned about deposit of old notes after December 2016 under special circumstances but that clause was taken away by the Government in the Specific Bank Notes (Cessation of Liabilities Act).

The Court will take up the Government affidavit on April 11, 2017.

Sanchayeeta Das

Legal Associate

The Indian Lawyer






In a major boost for anti-death penalty jurisprudence, the Supreme Court of India on Friday, 7th April, 2017 observed that death penalty breaches the reformative theory of punishment under Criminal Law.

A Bench of Justices Pinaki Chandra Ghose and Rohinton F. Nariman made this observation in an appeal filed by the State of Maharashtra against a verdict of the Bombay High Court in a double-murder case. The Trial Court had found the Accused Nisar Ramzan Sayyed guilty of murdering his three year old son Sayej and pregnant wife Summayya, thus was sentenced to death by Additional Sessions Judge, Shrirampur. The Bombay High Court had, however, acquitted the Accused. The incident was the culmination of a series of ill-treatment episodes made by the convict to the deceased wife from whom he was demanding Rs. 50,000 for purchasing an Auto Rickshaw as Dowry. Summayya’s father being a poor man was unable to fulfil the demand.

On29thOctober, 2010, the Accused set the his wife on fire by pouring kerosene oil and also threw his three year old son on the  burning body of his wife because of which Summayya and their son sustained burn injuries resulting in the death of the son on the spot. Later Summayya was taken to the hospital, but she succumbed to her injuries on 3rd November, 2010, after giving birth to a dead baby fetus.

The Apex Court, setting aside the Bombay High Court Judgment of acquittal, restored the conviction under Section 302 and 498A of Indian Penal Code. The Supreme Court of India goes on to consider whether death penalty should be awarded in this case. It then relies on the 262nd Report of the Law Commission and states:

“…the Law Commission of India has submitted its Report No.262 titled “The Death Penalty” after the reference was made from this Court to study the issue of Death Penalty in India to “allow for an up-to-date and informeddiscussion and debate on this subject”. We have noticed that the Law Commission of India has recommended the abolition of death penalty for all the crimes other than terrorism related offences and waging war (offences affecting National Security).”

The Supreme Court of Indiaproceeded bydeciding against upholding the Bombay High Court order imposing death sentence on the Accused, the Bench made the most interesting observation regarding Death Penalty andheld:


“We have noticed that the Law Commission of India has recommended the abolition of death penalty for all the crimes other than terrorism related offences and waging war (offences affecting National Security). Today when capital punishment has become a distinctive feature of death penalty apparatus in India which somehow breaches the reformative theory of punishment under criminal law, we are not inclined to award the same in the peculiar facts and circumstances of the present case.”


The Apex Court, after taking note of the dying declaration of his wife and other circumstantial evidence, held that Sayyed’s guilt was proved beyond reasonable doubt but this was not a “rarest of the rare case” that warranted Sayyed to be sentenced to death. The Apex Court therefore, imposed the death sentence of the convict to imprisonment till his natural life.

Taruna Verma

Senior Legal Associate

The Indian Lawyer



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The Bombay High Court has disposed off a public interest litigation petition seeking for directions to be issued to the Bar Councils of Maharashtra and Goa for withdrawing their resolutions of a one-day strike on 31st March 2017, to protest against the amendments proposed to the Advocates Act 1961 by the Law Commission of India. It was argued that the Supreme Court (SC) has held that lawyers do not have a right to go on a strike and boycott their work. On the other hand, the counsel on behalf of the Bar Council of India (BCI) has argued that the Law Commission has not considered the suggestions of the BCI and the retired SC judges while making such recommendations. Therefore, they are impelled to go on strike. The Court, however, held that lawyers have a significant role in the system of delivery of justice and that they must understand their responsibility and call off the strike.

The Law Commission’s 267th Report makes various recommendations for amending the Advocates Act 1961 in the following manner:

  • Lawyers can call for a strike only in compelling circumstances, for which an approval has to be obtained from BCI.
  • BCI to make rules for verification of certificates, periodical verification of antecedents, conduct and place of practice of Advocates.
  • BCI to make rules for pre-enrollment training and apprenticeship of a person before he/she is inducted as an advocate.
  • Compulsory common entrance test for admission into any law college in India.
  • The term ‘advocate’ to include a lawyer working in a law firm and also those working with foreign law firms.
  • The term ‘misconduct’ to include an act of an advocate whose conduct is found to be in breach of or non-observance of the standard of professional conduct or etiquette required to be observed by the advocate; or forbidden act; or an unlawful behavior; or disgraceful and dishonorable conduct; or neglect; or not working diligently and criminal breach of trust; or any of his conduct incurring disqualification under section 24A.
  • The Disciplinary Committee to consist of five members: two elected by the State Bar Council from among its members; two eminent persons from fields other than law; and one person nominated by the High Court.
  • As a punishment for misconduct, fine extending to rupees three lakhs may be imposed on an advocate.


In response to this Report and the proposed changes, Advocate Rajiv Chavan, President of the Advocates Association of Western India (AAWI), has opined that the Report redefines misconduct by making the definition so wide and stringent that no lawyer will be able to practice law any longer. Also, that the amendments are anti-advocate, unconstitutional, undemocratic and against the interests of the general public. He added that if the Bar Councils would comprise of non-advocates who will be in majority, and the BCI would comprise of chartered accountants, architects, politicians and doctors, it will take away the autonomy, independence and transparency of the Council. Various Bar Councils have also expressed their opinion over the Report saying that the proposed changes are undemocratic and anti-lawyer.  On the contrary, Justice BN Shrikrishna, a retired Supreme Court Judge has stated that considering the slow system of delivery of justice and the loads of cases pending in the courts, lawyers and BCI should not go on strike.

However, the advocates across the country had observed the strike on 31st March 2017 as a token protest.


Harini Daliparthy

Legal Associate




As a recent development in the Goods and Services Tax (GST) regime, the Lok Sabha, on 29th March 2017, has passed four key GST Bills, i.e. Central GST (CGST) Bill, Integrated GST (IGST) Bill, Compensation GST Bill and Union Territory GST (UTGST) Bill, by negating the amendments recommended by the Opposition Party. Now, for rolling out the new tax system the State GST laws have to be enacted by each state within 3 months.

The GST is an indirect taxation which will subsume most of the existing taxes such as Centre-level taxes like sales tax, service tax, excise duty, additional customs duty, surcharges, etc, and state-level taxes like value-added tax (VAT), entertainment tax, luxury tax, etc.

The CGST Bill will enable the Central Government to levy and collect tax, a maximum of 20 per cent, on the intra-state supply of goods and services. A similar tax will be levied by states through the State-GST law.

The IGST Bill provides for levy and collection of tax, a maximum of 40 per cent, on the inter-state supply of goods and services.

The Compensation GST Bill will provide for compensation to the states for the loss of revenue they may incur due to the implementation of the GST law.

The UTGST Bill will enable levy and collection of tax, a maximum of 20 per cent, on intra-state supply of goods and services or both by union territories.

Therefore, the new tax regime is expected to benefit the entire nation including the common people as they will have to pay only one tax, instead of multiple taxes, for the purchase and sale of any type of goods and services.


Harini Daliparthy

Legal Associate





Adoption Regulations, 2017 is framed by ‘Central Adoption Resource Authority’ (CARA) became effective from 16 January 2017. The Adoption Regulations find their basis in the Juvenile Justice (Care and Protection of Children) Act, 2015 which was notified on 4th January 2017. The new Adoption Regulations replace the Adoption Guidelines, 2015.

The Adoption Regulations have been framed keeping in mind the issues and challenges faced by CARA and other stakeholders including the Adoption Agencies and Prospective Adoptive Parents (PAPs). This change will streamline the adoption process. Transparency, early deinstitutionalisation of children, informed choice for the parents, ethical practices and strictly defined timelines in the adoption process are the salient aspects of the Adoption Regulations.

Some of the salient features of the Adoption Regulations, 2017 are:-

  1. Procedures related to adoption by relatives both within the country and abroad have been defined in the Regulations.
  2. Validity of Home Study Report has been increased from two to three years.
  3. The time period available to the domestic PAPs for matching and acceptance, after reserving the child referred, has been increased to twenty days from the existing fifteen days.
  4. District Child protection Unit (DCPU) shall maintain a panel of professionally qualified or trained social workers.
  5. There are 32 Schedules annexed to the Regulations including model adoption applications to be filed in the Court and this would considerably address delays prevalent in obtaining the Court order.
  6. CARA shall be facilitating all adoptions under the Juvenile Justice Act, 2015 through Child Adoption Resource Information & Guidance System (CARINGS) and all kinds of adoptions, including adoptions by relatives shall be reported to CARA which would enable safeguards for all adopted children by maintaining their record and ensuring post adoption follow up.


The Adoption Regulations proposes to streamline and bring transparency to the process of adoption which hither to was misused by some anti social elements for monetary consideration.


Sanchayeeta Das

Legal Associate

The Indian Lawyer