tag:blogger.com,1999:blog-65604936750547625032024-03-16T06:39:33.764+05:30EquiCorp AssociatesEqui Corp Associates (ECA) is a multispecialty law firm based in Delhi/NCR, India for providing affordable access to legal counsel benefitting start-ups, small and growing businesses, social business enterprises, impact investors and non-profit organizations. ECA boutique service offerings are primarily at the intersection of start-up, sustainable development, social enterprise and investment sectors, designed to help clients wade through laws that were not originally designed with them in mind.equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.comBlogger46125tag:blogger.com,1999:blog-6560493675054762503.post-49302146465181702142023-07-18T11:06:00.000+05:302023-07-18T11:06:28.631+05:30An Overview of Family Offices in India<p> </p><p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Family Offices, a
wealth management entity created for asset protection, investment and
succession planning vehicles tailored to the specific needs of high net worth individuals
and family specific to the needs and preferences of the family to protect its
legacy and wealth from generation to generation.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">A. Why to form a Family Office (FO):-<o:p></o:p></span></b></p>
<p class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l6 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Ease of Collective Investment:- To allow family
members to invest collectively with reduced investment costs and access to wide
range of investment opportunities. Provided opportunities to young family
members for exposure to ever evolving financial world and part of critical
decision making process.<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l6 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Tax Savings:- Been structured in a manner to get
benefit under tax schemes and permissible to <span style="mso-spacerun: yes;"> </span>deduct investment management fees and other
administrative expenses that are generally non-deductible by individuals. <o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l6 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;"><span style="mso-spacerun: yes;"> </span>Ease of
Co-ordination and Management with external advisors:- Enjoy shared services for
tax, legal, accounting & investment by external advisors to all the family
members.<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l6 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">d.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">In addition to the above, the additional reasons to
form a Family Office are:<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l1 level1 lfo6; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">i.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">A long term investment horizon, perhaps spanning
generations;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l1 level1 lfo6; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">ii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Unencumbered by regulatory constraints placed on
institutional investors;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l1 level1 lfo6; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">iii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Diverse and non-traditional asset allocation;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l1 level1 lfo6; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">iv.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Significant interest in private equity direct invest
and co-invest opportunities;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l1 level1 lfo6; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">v.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Focus on wealth preservations vs. growth. The more
generations served, the stronger the focus on preservation;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l1 level1 lfo6; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">vi.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Liquidity preference driven by the relative cash needs
for the family;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpLast" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l1 level1 lfo6; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">vii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Use of family pooled investment vehicles to promote
co-investment.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">B. <span style="mso-tab-count: 1;"> </span>Types
of Family Offices:-<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">In general, there
are 3 types of Family Offices as listed below:<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpFirst" style="line-height: 150%; margin-left: 54.0pt; mso-add-space: auto; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">i.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Embedded Family Office:- When there is no formal
family office been incorporated, but a senior employee (such as CEO, CFO etc.)
of the family business shall provided services to the many family owned
businesses<span style="mso-spacerun: yes;"> </span>as they are under a single
family office.<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 54.0pt; mso-add-space: auto; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">ii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Single Family Office:- An entity that provide services
to one family.<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpLast" style="line-height: 150%; margin-left: 54.0pt; mso-add-space: auto; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">iii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Multi-family Office:- An entity that provides services
to multiple families.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">C.<span style="mso-tab-count: 1;"> </span>Legal
structure of Family Offices in India:-<o:p></o:p></span></b></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">For setting up a
Family Office, various factors are taken into considerations which includes but
not limited to long-term investment objectives, vision of the family concerned,
the risk appetite, future requirements of different family members, applicable
legal, regulatory and tax regime of various jurisdictions involved, etc. <span style="mso-spacerun: yes;"> </span>In India, a Family Office can be set up as
following legal entities:<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpFirst" style="line-height: 150%; margin-left: 54.0pt; mso-add-space: auto; mso-list: l0 level1 lfo2; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">i.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Private Limited Company;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 54.0pt; mso-add-space: auto; mso-list: l0 level1 lfo2; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">ii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Limited Liability Partnership;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpLast" style="line-height: 150%; margin-left: 54.0pt; mso-add-space: auto; mso-list: l0 level1 lfo2; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">iii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Private Trust<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; margin-left: 18.0pt; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">A
recommended legal structure is where the exposure and liability of family
members is limited. Based upon the vision and requirement of family members,
the incorporation documents of Family Office is structured. Further, tax
liability is an important factor to be contemplate for the jurisdiction and
structure of Family Office. <o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; margin-left: 18.0pt; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Post
incorporation, for proper governance of the Family Office, a family council is
been constituted consists of family members and trusted advisors to oversee the
operations of the Family Office. In addition to the family council, a Chief
Investment Officer is also appointed who shall be responsible to identify and evaluate
strategic investments and manage the investments including but not limited to
engage the external advisors for investment allocation, accounting, tax and
legal compliance.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">D.<span style="mso-tab-count: 1;"> </span> Common
Business Activities of Family Office (FO):-</span></b><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;"> In general, the Family Office,
provide following services:<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l3 level1 lfo4; mso-text-indent-alt: -18.0pt; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";">
</span>i.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Financial reporting, accounting and tax preparation
services;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l3 level1 lfo4; mso-text-indent-alt: -18.0pt; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";">
</span>ii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Investment management services which includes to
create a large investment pools that can be accessed by multiple family
members;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l3 level1 lfo4; mso-text-indent-alt: -18.0pt; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";">
</span>iii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Direct investment in operating companies, financial
instruments, real states and other direct investment as agreed in the family
council;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l3 level1 lfo4; mso-text-indent-alt: -18.0pt; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";">
</span>iv.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Asset Management, Insurance, Family Education,
Co-ordination, Succession Planning and Risk Assessment;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l3 level1 lfo4; mso-text-indent-alt: -18.0pt; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;"><span style="font: 7.0pt "Times New Roman";">
</span>v.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Philanthropy<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">As Family Office(s)
have witnessed enormous growth among high net worth (HNW) individuals and
families to invest in India and cross border among various sectors including
but not limited to technology, real estate, financial instruments etc., the
legal, tax and regulatory framework for Family Offices can be complicated,
requiring the expertise of competent advisers. The following are common
considerations to be contemplated prior to incorporate and operate the Family
Office (FO):<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpFirst" style="line-height: 150%; margin-left: 54.0pt; mso-add-space: auto; mso-list: l5 level1 lfo5; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">i.<span style="font: 7.0pt "Times New Roman";">
</span></span></span></b><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Legal
Considerations:-<o:p></o:p></span></b></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l7 level1 lfo7; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Should the Family Office be structured as a company,
partnership, trust or some other legal entity?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l7 level1 lfo7; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Who shall own and control the Family Office?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l7 level1 lfo7; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">What is the appropriate legal jurisdiction for the
Family Office?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l7 level1 lfo7; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">d.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">What other legal agreements are necessary such as
employment agreements and service agreements?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l7 level1 lfo7; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">e.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">How to settle the dispute among the family members,
exit of any family member(s) and succession planning?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 54.0pt; mso-add-space: auto; mso-list: l5 level1 lfo5; text-align: justify; text-indent: -36.0pt;"><!--[if !supportLists]--><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">ii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span></b><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Tax Considerations:<o:p></o:p></span></b></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l4 level1 lfo8; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">For tax purposes, how should the family Office be
structured?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l4 level1 lfo8; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Will the Family Office activities rise to the level of
a trade or business?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l4 level1 lfo8; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Are there gift or estate tax issues concerning Family
Office ownership and successions?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l4 level1 lfo8; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">d.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Will there be tax impact for family members?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l4 level1 lfo8; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">e.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">How will the role of the Family Office impact
international family members and/or structures?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpLast" style="line-height: 150%; margin-left: 72.0pt; mso-add-space: auto; mso-list: l4 level1 lfo8; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">f.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Is there sufficient flexibility to cater for change in
tax and regulatory rules as well as family circumstances?<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">This article
is for information purpose only and should not be taken as legal advice.
To know further details, clarification, assistance or any advice on Family
Office, its structure, operations, regulatory compliance, or any legal issues
on Family Office, you may connect with us at </span><a href="mailto:admin@equicorplegal.com"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">admin@equicorplegal.com</span></a><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;"> <span style="mso-spacerun: yes;"> </span>/ 08448824659 and visit </span><a href="http://www.equicorplegal.com/"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">www.equicorplegal.com</span></a><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;"> <span style="mso-spacerun: yes;"> </span><o:p></o:p></span></p>equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-60112931552115661442023-06-19T18:50:00.000+05:302023-06-19T18:50:14.456+05:30The Online Gaming Intermediaries Regulations: Future Road Ahead<p> </p><p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">On April 6<sup>th</sup>,
2023, a new regulations for Online Gaming was ben introduced </span><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;">under section 87 of the Information Technology Act,
2000 ( hereinafter referred to as the “<b style="mso-bidi-font-weight: normal;">IT
Act</b>”)<span style="mso-spacerun: yes;"> </span>by Ministry of Electronics and
Information Technology ( hereinafter referred to as the “<b style="mso-bidi-font-weight: normal;">MeITY</b>”) via amendment of The Informational Technology, 2021
(Intermediary Guidelines and Digital Media Ethics Code) (hereinafter<span style="mso-spacerun: yes;"> </span>referred to as the “<b style="mso-bidi-font-weight: normal;">Online Gaming Regulations</b>” ), which has significant impact on
Online Gaming in India. This Gaming Regulations is a welcome step to clarify uncertainties
and to reign certain activities such as betting and gambling which have plagued
the online gaming sector. The online gaming sector is in its nascent stage in
India and to curve its growth on innovative track, there are few additional
checks and balances have been imposed via Online Gaming Regulations which
includes but not limited to the introduction of Self-Regulatory Body
(hereinafter referred to as the “<b style="mso-bidi-font-weight: normal;">SRB</b>”)
to ensure compliance under Online Gaming Regulations and to keep the Online
Gaming companies under checks and balances.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;">In this article we have analysed the impact of Online
Gaming Regulations on the gaming companies and the sector itself.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Before moving
further, few important definitions are listed out below for a better
understanding: <o:p></o:p></span></p>
<p class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Online Game: - means a game that is offered on the Internet
and is accessible by a user through a computer resource or intermediary.<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Online Gaming Intermediary: - means any intermediary
that enable the users of its computer resources to access one or more online
games.<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Online Real Money Game: - means on an online game
where a user makes a deposit in cash or kind with the expectation of earning
winnings on that deposit.<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">d.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Permissible Online Game: - means a permissible online
real money game or any other online game that is not an online real money game.<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">e.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Permissible Online Real Money Game: - means an online
real money game verified by an online gaming self-regulatory body.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">The most
significant and welcome change in Online Gaming Industry though the Online
Gaming Regulations is introduction of Self-Regulatory Bodies or SRBs.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><u><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Self-Regulatory Bodies / SRBs</span></u></b><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">: - To be approved
by MeITY for verification and permission of the online real money games who
shall be incorporated as Section 8 company under the Companies Act, 2013. Prior
to grant permission, SRB need to satisfy itself that such online real money
game does not involve wagering on any outcome. <o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">The obligations to
the Online gaming Companies shall not come into force until the expiry period
of 3 months from the date on which at least three online gaming SRBs have been
designated by MeITY.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><b style="mso-bidi-font-weight: normal;"><u><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Online Gaming Intermediaries: -</span></u></b><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;"> They need to carry
out their obligations under Online Gaming Regulations with diligence while
discharging its duties. <o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Any permissible
online real money game shall display a demonstrable and visible mark of
verification of such online game by SRBs. <o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">An online gaming
intermediary shall account for <span style="mso-spacerun: yes;"> </span>the
following:<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">The rules and regulations for the said online game,
privacy policy, terms of services and user agreement along with policy related
to withdrawal or refund of the deposit made with the expectation of earning
winnings, the manner of determination and distribution of such winnings, and
the fees and other charges payable by the user;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">To verify the KYC of user for identification of such
user before accepting any deposit in cash or kind from any user for permissible
online real money game;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">The measures taken for protection of deposit made a
user for such online game;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">d.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Shall not itself finance by way of credit or enable
financing to be offered by third party for the purpose of playing permissible online
real money game by users;<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">e.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">To publish and maintain on its website, mobile based
application or both, at all times, an updated list of all permissible online
real money games verified by SRBs along with details of such online games
including the details of applicant, the dates and period of validity of the
verification, the reasons of such verification and the details of the
suspension or revocation, if any.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; margin-left: 18.0pt; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-size: 11.0pt;">Viewpoint:
- The Online Gaming regulations is a welcome step to bring clarity and having
one single regulation instead of having several state regulations over online
game. In coming days, the compliances w.r.t. online gaming intermediaries are
expected to have more clarity w.r.t. KYC of users, approval of permissible
online real money games, and clarification over kind as deposit in online real
money game etc.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; margin-left: 18.0pt; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">This article is for information
purpose only and should not be taken as legal advice.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; margin-left: 18.0pt; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">To know further details,
clarification, assistance or any advice on Online Gaming regulations, its
compliance, refund or acceptance of cash from the users, settlement of
grievances with the users over money or any legal issues on online/fantasy
games, you may </span><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%;">connect with us at </span><a href="mailto:admin@equicorplegal.com"><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%;">admin@equicorplegal.com</span></a><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%;"> /
08448824659 and visit </span><a href="http://www.equicorplegal.com/"><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%;">www.equicorplegal.com</span></a><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%;"> .<o:p></o:p></span></p>equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-89819274929518247122023-05-11T13:13:00.002+05:302023-05-13T11:28:05.197+05:30Is your Arbitration Agreement/Clause valid enough and enforceable?<p> </p><p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">Today in high octane and complex business relationship
runs on contractual relationship and at times the strain on such relationship
results in disputes among the parties in commercial relationship which makes it
difficult to continue together in business. Arbitration is an efficient and
effective manner to resolve such disputes among the parties.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">Arbitration often try to preserve or protect the
existing relationship amongst the parties, unlike court procedures where
sometimes the final outcome can result in the relationship coming to an end
between both parties. To protect their rights, the parties enter into
agreements and include the arbitration agreement /clause as part of their commercial
transactions. In recent few years, the enforceability of such agreements had
been challenged on ground of no-payment of stamp duty or insufficient stamp
duty.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">In 2021, in the matter<span style="mso-spacerun: yes;">
</span></span><em><span style="background: white; color: #333333; font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: Arial;">N.N. Global Mercantile Private Limited v. Indo Unique Flame Limited
& Ors.</span></em><a href="file:///E:/EquiCorp%20Associates/Legal%20Update%20&amp;%20Articles/Article%202023/Is%20your%20Arbitration%20Agreement%20Enforceable.docx#_ftn1" name="_ftnref1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><i><span style="background: white; color: #333333; font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: Arial;"><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><b style="mso-bidi-font-weight: normal;"><span style="background: white; color: #333333; font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-IN; mso-bidi-font-family: Arial; mso-bidi-language: AR-SA; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;">[1]</span></b></span><!--[endif]--></span></span></i></span></a><em><span style="background: white; color: #333333; font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: Arial;"> </span></em><span style="background: white; color: #333333; font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: Arial;"> (“<strong><span style="font-family: "Book Antiqua","serif"; mso-bidi-font-family: Arial;">NN
Mercantile Case</span></strong>”), it was been held by the hon’ble Supreme
Court that- “<strong><i><span style="font-family: "Book Antiqua","serif"; font-weight: normal; mso-bidi-font-family: Arial; mso-bidi-font-weight: bold;">that
the non-payment of stamp duty on the commercial contract would invalidate even
the arbitration agreement, and render it non-existent in law, and
unenforceable, is not the correct position in law</span></i></strong><strong><span style="font-family: "Book Antiqua","serif"; font-weight: normal; mso-bidi-font-family: Arial; mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">”</span></strong><strong><i><span style="font-family: "Book Antiqua","serif"; mso-bidi-font-family: Arial;"> </span></i></strong><strong><span style="font-family: "Book Antiqua","serif"; font-weight: normal; mso-bidi-font-family: Arial; mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">and
the matter was referred to </span></strong></span><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">While in NN Mercantile Case, it was been held by
Hon’ble Supreme Court<span style="mso-spacerun: yes;"> </span>that – “<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">non-payment
of stamp duty would not invalidated the arbitration agreements and are
enforceable</i></b>”, where as in its earlier judgements in SMS Tea Estates (P)
Ltd. v. Chandmari Tea Co. (P) Ltd.<a href="file:///E:/EquiCorp%20Associates/Legal%20Update%20&amp;%20Articles/Article%202023/Is%20your%20Arbitration%20Agreement%20Enforceable.docx#_ftn2" name="_ftnref2" style="mso-footnote-id: ftn2;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;">[2]</span></span><!--[endif]--></span></span></a> (“<b style="mso-bidi-font-weight: normal;">SMS Tea Case</b>”) where it was been held
by the hon’ble Supre Court that- “<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">An unstamped arbitration clause in an
agreement that is compulsorily registrable or chargeable to stamp duty cannot
be the basis for the appointment of an arbitrator</i></b>” and the same was
upheld in the matter of Garware Wall Ropes Ltd v. Coastal Marine Construction
& Engineering Ltd.<a href="file:///E:/EquiCorp%20Associates/Legal%20Update%20&amp;%20Articles/Article%202023/Is%20your%20Arbitration%20Agreement%20Enforceable.docx#_ftn3" name="_ftnref3" style="mso-footnote-id: ftn3;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;">[3]</span></span><!--[endif]--></span></span></a> <span style="mso-spacerun: yes;"> </span>("<b style="mso-bidi-font-weight: normal;">Garware
Case</b>"), <span style="mso-spacerun: yes;"> </span>and<span style="mso-spacerun: yes;"> </span>Vidya Drolia v. Durga Trading Corporation<a href="file:///E:/EquiCorp%20Associates/Legal%20Update%20&amp;%20Articles/Article%202023/Is%20your%20Arbitration%20Agreement%20Enforceable.docx#_ftn4" name="_ftnref4" style="mso-footnote-id: ftn4;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin;">[4]</span></span><!--[endif]--></span></span></a> (“<b style="mso-bidi-font-weight: normal;">Vidya Drolia Case</b>”).<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">Due to such conflicting judgements by the Apex Court,
the NN Mercantile matter was been referred to the constitutional bench of the
Supreme Court for final adjudication of the burning issue- “<b style="mso-bidi-font-weight: normal;">Enforcement of arbitration agreement
without payment of stamp duty</b>?”<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">This review was necessitated to address the court's
jurisdiction to adjudicate issues at the pre-appointment stage, which has been
the subject matter of numerous cases before the hon’ble Supreme Court as well
as various High Courts in India. Different benches of the Supreme Court have
rendered conflicting decisions on this issue.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><strong><span style="background: white; color: #333333; font-family: "Book Antiqua","serif"; font-size: 12.0pt; font-weight: normal; line-height: 150%; mso-bidi-font-family: Arial; mso-bidi-font-style: italic; mso-bidi-font-weight: bold;">The constitutional bench
of the Supreme Court which has</span></strong><b style="mso-bidi-font-weight: normal;"><span style="background: white; color: #333333; font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: Arial;"> </span></b><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;"><span style="mso-spacerun: yes;"> </span>ruled in 3:2
that – “</span><em><span style="background: white; color: #333333; font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: Arial;">an instrument which is exigible to stamp duty may contain an arbitration
clause and which is not stamped cannot be said to be a contract enforceable in
law within the meaning of S. 2(h) of the Contract Act and is not enforceable
under S 2(g) of the Contract Act”, </span></em><em><span style="background: white; color: #333333; font-family: "Book Antiqua","serif"; font-size: 12.0pt; font-style: normal; line-height: 150%; mso-bidi-font-family: Arial; mso-bidi-font-style: italic;">which
in essence means that- </span></em><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">If
an Agreement is unstamped or insufficiently stamped, the arbitration clause is
not enforceable.<o:p></o:p></span></p>
<p class="MsoNormal" style="line-height: 150%; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">With the ramifications and impact on the future
arbitrations as it’s now a settled law that any agreement without payment of
stamp duty or insufficient stamp are not enforceable, <span style="mso-spacerun: yes;"> </span>there are few issues which need to review by
the parties, litigants etc. to avoid any future settlement of conflict among
the commercial transactions via arbitration :<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">The impact on ongoing arbitration with unstamped
agreement?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">The parties who already have an arbitration agreement/clause
but no stamp duty has been paid on such agreements? Would their disputes to be
settled through civil court or is there any way <span style="mso-spacerun: yes;"> </span>for them to enforce the arbitration
agreements?<o:p></o:p></span></p>
<p class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -18.0pt;"><!--[if !supportLists]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 150%; mso-ansi-language: EN-US;">Are there any precautionary measures which the parties
should opt for it, to avoid any non-enforcement issues w.r.t. arbitration
agreements/clause in future?<o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left: 18.0pt; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">This article is for information purpose only and
should not be taken as legal advice.<o:p></o:p></span></p>
<p class="MsoNormal" style="margin-left: 18.0pt; text-align: justify;"><span lang="EN-US" style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%; mso-ansi-language: EN-US;">To know further details, clarification, assistance or any
advice on arbitration <span style="mso-spacerun: yes;"> </span>or legal issues on
arbitration, you may </span><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%;">connect with us at </span><a href="mailto:admin@equicorplegal.com"><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%;">admin@equicorplegal.com</span></a><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%;"> /
08448824659 and visit </span><a href="http://www.equicorplegal.com/"><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%;">www.equicorplegal.com</span></a><span style="font-family: "Book Antiqua","serif"; font-size: 12.0pt; line-height: 107%;"> .<o:p></o:p></span></p>
<div style="mso-element: footnote-list;"><!--[if !supportFootnotes]--><br clear="all" />
<hr align="left" size="1" width="33%" />
<!--[endif]-->
<div id="ftn1" style="mso-element: footnote;">
<p class="MsoFootnoteText"><a href="file:///E:/EquiCorp%20Associates/Legal%20Update%20&amp;%20Articles/Article%202023/Is%20your%20Arbitration%20Agreement%20Enforceable.docx#_ftnref1" name="_ftn1" style="mso-footnote-id: ftn1;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 10.0pt; line-height: 107%; mso-ansi-language: EN-IN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[1]</span></span><!--[endif]--></span></span></a> <span lang="EN-US" style="mso-ansi-language: EN-US;">(2021) 4 SCC379<o:p></o:p></span></p>
</div>
<div id="ftn2" style="mso-element: footnote;">
<p class="MsoFootnoteText"><a href="file:///E:/EquiCorp%20Associates/Legal%20Update%20&amp;%20Articles/Article%202023/Is%20your%20Arbitration%20Agreement%20Enforceable.docx#_ftnref2" name="_ftn2" style="mso-footnote-id: ftn2;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 10.0pt; line-height: 107%; mso-ansi-language: EN-IN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[2]</span></span><!--[endif]--></span></span></a> (2011)
14 SCC 66<span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span></p>
</div>
<div id="ftn3" style="mso-element: footnote;">
<p class="MsoFootnoteText"><a href="file:///E:/EquiCorp%20Associates/Legal%20Update%20&amp;%20Articles/Article%202023/Is%20your%20Arbitration%20Agreement%20Enforceable.docx#_ftnref3" name="_ftn3" style="mso-footnote-id: ftn3;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 10.0pt; line-height: 107%; mso-ansi-language: EN-IN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[3]</span></span><!--[endif]--></span></span></a> (2019)
9 SCC 209<span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span></p>
</div>
<div id="ftn4" style="mso-element: footnote;">
<p class="MsoFootnoteText"><a href="file:///E:/EquiCorp%20Associates/Legal%20Update%20&amp;%20Articles/Article%202023/Is%20your%20Arbitration%20Agreement%20Enforceable.docx#_ftnref4" name="_ftn4" style="mso-footnote-id: ftn4;" title=""><span class="MsoFootnoteReference"><span style="mso-special-character: footnote;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-family: "Calibri","sans-serif"; font-size: 10.0pt; line-height: 107%; mso-ansi-language: EN-IN; mso-ascii-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-language: AR-SA; mso-bidi-theme-font: minor-bidi; mso-fareast-font-family: Calibri; mso-fareast-language: EN-US; mso-fareast-theme-font: minor-latin; mso-hansi-theme-font: minor-latin;">[4]</span></span><!--[endif]--></span></span></a> (2021)
2 SCC 1<span lang="EN-US" style="mso-ansi-language: EN-US;"><o:p></o:p></span></p>
</div>
</div>equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-38540639199327741182020-07-26T15:35:00.000+05:302020-07-26T15:35:40.365+05:30Unlockdown, COVID-19 & Opening of Business: Legal Risks & Considerations<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif;">With the initiation of
“Unlockdown” for opening of business in India, to navigate the challenges
brought<span style="mso-spacerun: yes;"> </span>on by the rapid spread of
COVID-19 (coronavirus) is now more complicated than ever as the companies are
been forced to confront the way of doing business with the continuous spread of
COVID-19 and to be more vigilante and preparation is requisite by the companies
to address the business risks as they arise.<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif;">COVID-19 has caused
serious disruptions for every businesses, where some have had direct commercial
impacts along with interruptions to supply chains, challenges in meeting
contractual obligations, payment of commercial leases, whereas there are some
universal impacts on each and every business- workplace health and safety
obligations, travel restrictions, increased burden of data protection with the
implement of work from home policy.<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-top: 0in; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif;">As business risks, legal,
regulatory and other commercial implications due to COVID-19 will continue and
evolve in coming days with further disruption, we have summarized following
business & legal risks & key considerations:<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l2 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><b><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "Times New Roman";"> </span></span></span></b><!--[endif]--><b><u><span style="color: black; font-family: "book antiqua" , serif;">Employment & Workplace
Safety: -</span></u></b><span style="color: black; font-family: "book antiqua" , serif;"><o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif;">The employers are required
to maintain a safe working place for its employees, which includes taking steps
to reduce the risks associated with the COVID-19 outbreak but not limited to
the followings:<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">The Central and State
Government have issued various notifications w.r.t. COVID-19 and workplace
safety, hygiene and training materials. Has your organization carried out such
awareness training to your employees?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Most of the companies have
adopted work from home policy. Has your organization assessed the nature and
requirement of your employees to work from office/home depending upon the
organization’s requirement and the said employee’s role in the organization?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Does your organization
have analyzed & assessed the impact w.r.t. compliance and accountability
with a greater number of employees working from home?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">d.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Does your organization
have a data protection policy in place and taken necessary steps to protect client’s
data as most of the employees to work from home would access the client’s<span style="mso-spacerun: yes;"> </span>confidential data through their private
broadband connection?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">e.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Have you made sufficient
arrangement for quarantine facilities for your employees working from office
premises/ manufacturing facilities and preventive measures to prevent the
spread of COVID-19?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-bottom: 5.0pt; margin-left: .5in; margin-right: 0in; margin-top: 0in; mso-list: l3 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">f.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Do the health plans offered to the employees cover COVID-19
testing or treatment? If yes, under what cost sharing arrangement?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">g.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Restriction on business
travels for some time may be somehow feasible but cannot continue for a long
duration and when employees visit on need basis for official work, do the
company have implemented any self-quarantine facility for such employees and
COVID-19 test as safeguard measures? <o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">h.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Does your organization has
created a mechanism of self-declaration and reporting by any employees who has
traveled (business/personal) for any reasons and health monitoring for such
employees?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">i.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">If any of the employee
fails to attend the office work due to pandemic, is there any policy in your
organization to consider such absence of work- paid holiday or leave without
pay?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">j.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Due to loss of business,
most of the organizations throughout the world has failed to meet the salary
expenses for last few months. Does the management have discussed the deduction
in salaries with employees and taken them in confidence for future payments?
Has the organization shared its framework policy w.r.t. employees’ salaries?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<br /></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l2 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><b><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">2.<span style="font: 7.0pt "Times New Roman";"> </span></span></span></b><!--[endif]--><b><u><span style="color: black; font-family: "book antiqua" , serif;">Supply Chain: -</span></u></b><span style="color: black; font-family: "book antiqua" , serif;"><o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif;">As the global economy has
been impacted due to continuous spread of COVID-19, the organizations are
facing disruptions in supply chain due to various factors such as lack of
staff, suppliers/vendors; transportation is disrupted; regulatory restrictions
on cross border controls with additional inspection; lack of cash
flow/financial crunch etc. The organizations need to assess their supply chain
function and need to address issues which includes but not limited to the
followings:<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: 1.0in; mso-list: l1 level2 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Have your organization
analyzed your rights and obligations due to any disruption in supply chain?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: 1.0in; mso-list: l1 level2 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">On the event, where the
“Time is Essence” for supply of materials/finished goods, has your organization
assess the availability of an alternative vendor/cancellation of contract and
its impact on it’s supply chain?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: 1.0in; mso-list: l1 level2 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Have you reviewed the
government restrictions imposed due to COVID-19 and its impact on your supply
chain?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: 1.0in; mso-list: l1 level2 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">d.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">What are your rights and
obligations in case of your failure to deliver/receipt of goods/services?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: 1.0in; mso-list: l1 level2 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">e.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">What are the challenges
for induction of new supplier/vendor due diligence from supply chain compliance
perspective?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: 1.0in; mso-list: l1 level2 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">f.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">What are the additional
liabilities which your organization may be exposed due to any failure/default
in the supply chain?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<br /></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l2 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><b><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">3.<span style="font: 7.0pt "Times New Roman";"> </span></span></span></b><!--[endif]--><b><u><span style="color: black; font-family: "book antiqua" , serif;">Contracts: -<o:p></o:p></span></u></b></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif;">The organizations need to
review each and every one of its contracts as the outbreak of COVID-19 is
likely to have a profound impact on all the commercial contracts. <o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif;">The disruptions in the
economic and business sector may cause either the organizations or their
counter party or any of vendors to default or fail to perform under an existing
commercial contract. Therefore, the parties to existing contracts that are or
may be disrupted by the outbreak of COVID-19 should promptly assess their legal
rights and obligations along with damages that could happen because of any
breach of contract/s, for their existing contracts or currently negotiating
which includes but not limited to the followings:<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l4 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Have you analyzed your
rights and obligations under ongoing contracts and under what circumstances, it
can be frustrated or events which can lead to force majeure?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l4 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Does the COVID-19 is an
event of force majeure and you or your counter party can excuse itself for
performance of commercial contracts?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l4 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">When should a force
majeure notice be issued and what steps should be taken in response to a force
majeure notice received from the counter party? <o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l4 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">d.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">What will be the impact of
any trade restriction & regulatory changes as announced by the
Central/State government authorities in recent times?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l4 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">e.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Who is responsible for
loss due to disruption cause of COVID-19 and what’s the most efficient way to
resolve the disagreement with the other party?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l4 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">f.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Have you assessed the
risks, damages and impact on your organization on failure to deliver
goods/services? <o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l4 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">g.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Have your organization
devised an alternative means of performance under the contract?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l4 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">h.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Do the payment terms in
your contracts needs a revision and if yes, what’s the best way to revise the
payment terms?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l4 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">i.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">What steps your
organization should take if it’s been threatened with litigation over breach of
contract?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l2 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><b><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">4.<span style="font: 7.0pt "Times New Roman";"> </span></span></span></b><!--[endif]--><b><u><span style="color: black; font-family: "book antiqua" , serif;">Financing & Credit
Management: -</span></u></b><span style="color: black; font-family: "book antiqua" , serif;"><o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif;">The COVID-19 has severely
impacted the cash flow and finance of most of the organizations throughout the
world and as a result, many of the organizations may default in their existing
loan/debt financing obligations.<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif;">You need to assess your
finance situation and cost control mechanism which shall include but not
limited to the followings:<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l5 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Whether your loan
agreements covenants need to be review and may result into triggering of
default?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l5 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Have your organization
review and reassess the material adverse change on your payment terms with
third parties?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l5 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Do your organization need
to seek waivers or extension of time to comply with your commitments and
obligations?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l5 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">d.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Have your organization
assessed whether is there any need to review and revise the warranties and
representations?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l5 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">e.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Have you reviewed the
corporate guarantees given on behalf of related party and ensure that you may
not become an easy target for early recovery in case of default by the related
party?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l5 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">f.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Do your organization need
to renegotiate the terms of loan/finance/credit facility arrangement and to
ensure the liability pass on your counter party for delayed payment?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .5in; mso-list: l5 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">g.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">Have your organization
analyzed the payment terms from the counter parties and on event of default, to
recover with minimum hassle and legal routes for the earliest recovery?<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif;">In conclusion, we can
expect disruption in business to continue and it will take some time to reach
normalcy in the business and it’s advisable to consider seeking proper legal
advice which includes but not limited to the following:<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .75in; mso-list: l0 level1 lfo6; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">i.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">To get your contracts reviewed and take prior legal advice on any
new contracts or addendums to be executed and understand the impact of COVID-19
on your existing contracts, restrictions imposed due to government
notifications or to protect yourself from any claim or untimely termination of
the contract by the other party;<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .75in; mso-list: l0 level1 lfo6; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">ii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">The obligations towards your employees and any action including
termination/lay off/ reduction in salary due to current pandemic/ loss of
business;<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .75in; mso-list: l0 level1 lfo6; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">iii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">To review your contractual/commercial obligations and mitigate
your risks associated with any failure to achieve the agreed business target;<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .75in; mso-list: l0 level1 lfo6; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">iv.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">To ensure your payment terms should not be impacted by COVID-19
and recover the due payment hassle free with minimum delay;<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .75in; mso-list: l0 level1 lfo6; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">v.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">To execute an effective business plan in coherence with the new
norms of business operations as instructed by the government; and <o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .75in; mso-list: l0 level1 lfo6; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">vi.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: black; font-family: "book antiqua" , serif;">To review the application of force majeure events and performance
of specific contracts and reliefs which can be claimed/availed under the
circumstances.<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-left: .75in; text-align: justify;">
<br /></div>
<br /></div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-5111330919413341152020-03-28T17:20:00.000+05:302020-03-28T17:20:45.850+05:30COVID-19:How Does It Impact Your Commercial Leases?<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk36292299"><span style="background: white; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;">Given the disruption caused by
Covid-19 pandemic, the performances under many contracts will be delayed, interrupted
or even suspended.<o:p></o:p></span></a></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="mso-bookmark: _Hlk36292299;"><span style="background: white; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;">Many of the corporate
tenants in commercials lease may seek to delay and/or waive the commercial rentals
for the duration especially during the 21 days lockdown. This unprecedented
Covid-19 has legitimately prevented them from carrying out their business.<o:p></o:p></span></span></div>
<span style="mso-bookmark: _Hlk36292299;"></span>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk36292369"><span style="background: white; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;">With the outbreak of Covid-19
and government lockdown, commercial property landlords and corporate tenants should
carefully review the following sections of their leases in particular to
identify the impact of Covid-19 and help mitigate risk:<o:p></o:p></span></a></div>
<span style="mso-bookmark: _Hlk36292369;"></span>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; vertical-align: baseline;">
<a href="https://www.blogger.com/null" name="_Hlk36292398"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">a)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b><i><u><span style="border: none windowtext 1.0pt; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;">“Force Majeure” </span></u></i></b></a><span style="mso-bookmark: _Hlk36292398;"><b><u><span style="border: none windowtext 1.0pt; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;">Provisions
Effect on Rent Payment:</span></u></b></span><span style="mso-bookmark: _Hlk36292398;"><i><span style="border: none windowtext 1.0pt; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;"> </span></i></span><span style="mso-bookmark: _Hlk36292398;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"> Force majeure
refers to a legal doctrine under which a party may be relieved from liability
for non-performance if circumstances beyond the party’s control prevent the
party from fulfilling its obligations under a contract. Force majeure
provisions are standard in retail & commercial leases but can vary greatly
depending on how they were drafted by the parties. While most force majeure
provisions are unlikely to list disease, epidemics, or quarantine specifically,
many include general provisions covering such things as natural disasters,
“acts of God,” acts of government, or “other circumstances beyond the parties’
control.” </span></span><a href="https://www.blogger.com/null" name="_Hlk36292902"></a><span style="mso-bookmark: _Hlk36292902;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">The Covid-19 presents
a somewhat unique situation in that it includes both a naturally occurring
component (the virus itself) and a government action component (including the
quarantines and other measures put in place in response to the outbreak).</span></span><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"> <a href="https://www.blogger.com/null" name="_Hlk36292955">Commercial landlords
and corporate tenants should carefully review the force majeure provisions in
their leases to determine whether they apply. Many commercial leases expressly
exempt “payment of rent” from the force majeure clause. That means many corporate
tenants may be required to continue to pay rent even if they otherwise would
have had a valid force majeure claim.</a><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; vertical-align: baseline;">
<a href="https://www.blogger.com/null" name="_Hlk36292983"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">b)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">If the force majeure clause does not cover an event such as the
COVID-19 outbreak (or there is no force majeure clause at all), consider the
question of whether the contract has been frustrated. A contract will terminate
automatically when a frustrating event occurs, i.e., one which is: (1)
unexpected; (2) beyond the parties’ control; and (3) makes performance
impossible or radically different from that which the parties contemplated at
the time of entering into the contract.<o:p></o:p></span></a></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; text-align: justify; vertical-align: baseline;">
<span style="mso-bookmark: _Hlk36292983;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">If a claim of force majeure will not lie, the
next consideration is whether any of the following established grounds to
founding a successful claim of frustration apply:<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 1.0in; mso-add-space: auto; mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.5in; vertical-align: baseline;">
<span style="mso-bookmark: _Hlk36292983;"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">i.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Temporary unavailability – e.g., a person or object that is
essential for performance of the contract is temporarily unavailable.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 1.0in; mso-add-space: auto; mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.5in; vertical-align: baseline;">
<span style="mso-bookmark: _Hlk36292983;"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">ii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Method of performance impossible – e.g., 21 days lockdown by the
government makes it impossible to enter into the premises of the property. However,
a contract will not be frustrated where performance is possible by a different
method, and the difference between the two methods of performance is not
sufficiently fundamental.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 1.0in; mso-add-space: auto; mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.5in; vertical-align: baseline;">
<span style="mso-bookmark: _Hlk36292983;"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">iii.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Failure of a specific source – e.g., to conduct business during
21 days of lockdown is government restriction.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 1.0in; mso-add-space: auto; mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.5in; vertical-align: baseline;">
<span style="mso-bookmark: _Hlk36292983;"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">iv.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Illegality – e.g., a contract for airline services that are now
subject to a flight ban. Consider also whether the illegality clause of the
contract is invoked.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; text-align: justify; vertical-align: baseline;">
<span style="mso-bookmark: _Hlk36292983;"><a href="https://www.blogger.com/null" name="_Hlk36293119"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">If
successful, the effect of frustration is automatic termination of the contract.
Parties can recover amounts paid under the contract before it was frustrated
(less the other party’s expenses).<o:p></o:p></span></a></span></div>
<span style="mso-bookmark: _Hlk36292983;"></span>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; vertical-align: baseline;">
<span style="mso-bookmark: _Hlk36293119;"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">c)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b><i><u><span style="border: none windowtext 1.0pt; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;">Payment of Rent as an Independent Covenant</span></u></i></b></span><span style="mso-bookmark: _Hlk36293119;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">: Many retail & commercial leases expressly provide that the
corporate tenant’s obligation to pay rent is independent from any of landlord’s
covenants or obligations under the lease. That means that even if a landlord is
clearly in breach of the lease due to Covid-19 outbreak, the corporate tenant
may be required to continue to pay rent. Tenants should carefully review their
retail leases to see if they contain this provision.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in; vertical-align: baseline;">
<span style="mso-bookmark: _Hlk36293119;"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">d)<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b><i><u><span style="border: none windowtext 1.0pt; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;">Covenant of Quiet Enjoyment</span></u></i></b></span><span style="mso-bookmark: _Hlk36293119;"><b><u><span style="border: none windowtext 1.0pt; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-border-alt: none windowtext 0in; mso-fareast-font-family: "Times New Roman"; padding: 0in;">:</span></u></b></span><span style="mso-bookmark: _Hlk36293119;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"> Most retail leases contain an express
covenant of quiet enjoyment where the landlord represents and warrants that the
corporate tenant will have quiet and peaceful enjoyment of the commercial leased
premises for the permitted use. Corporate tenants may be able to claim that the
Covid-19 impacts violate the covenant, in particular in the case of closing of
the premises. Depending on how the covenant is drafted, it may be expressly
limited by force majeure events.<o:p></o:p></span></span></div>
<span style="mso-bookmark: _Hlk36293119;"></span>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk36293227"><span style="background: white; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;">With the ongoing Covid-19, which
may result in disruption of the business, the parties may look for remedies
based upon the terms and covenants of their leases:<o:p></o:p></span></a></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l1 level1 lfo3; text-align: justify; text-indent: -.25in;">
<span style="mso-bookmark: _Hlk36293227;"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="background: white; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;">Immediate
termination of the lease, as Covid-9 is the force majeure event;<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l1 level1 lfo3; text-align: justify; text-indent: -.25in;">
<span style="mso-bookmark: _Hlk36293227;"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="background: white; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;">To put the rentals
and other obligations to be waived off or temporarily suspended till Covid-19
and government lockdown is over and to restart once business commence as normal;<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l1 level1 lfo3; text-align: justify; text-indent: -.25in;">
<span style="mso-bookmark: _Hlk36293227;"><!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="background: white; color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;">If the lease may
provide for limitations time after which either party, landlord or corporate
tenant may terminate the lease with written <span style="mso-spacerun: yes;"> </span>notice to the other party, since the
performance and continuance of the lease is not possible any further.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="mso-bookmark: _Hlk36293227;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;">In summary, it is important for
the commercial lease industry, both landlords and corporate tenants, to
carefully review their leases now in order to mitigate their risk of suffering
negative impacts from the Covid-19 and government lockdown.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="mso-bookmark: _Hlk36293227;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;">To know further details,
clarifications or any advice on commercial lease, please connect with us at </span></span><a href="mailto:admin@equicorplegal.com"><span style="mso-bookmark: _Hlk36293227;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;">admin@equicorplegal.com</span></span></a><span style="mso-bookmark: _Hlk36293227;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 18.0pt; line-height: 150%;"> / +91 8448824659<o:p></o:p></span></span></div>
<span style="mso-bookmark: _Hlk36293227;"></span>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
<br /></div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com1tag:blogger.com,1999:blog-6560493675054762503.post-45487405556680670842019-06-01T11:08:00.000+05:302019-06-01T11:08:48.475+05:30Legal Obligations of Technology Service Providers as Intermediaries <div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">A database of
millions of customers including their contact details are found freely
accessible online and are available for sale at a very nominal price at various
online social media platforms has brought a serious and basic question in
focus- who all can be held responsible and accountable for such unauthorize and
illegal acts? <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<i style="mso-bidi-font-style: normal;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Prima facie</span></i><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">, the person who is selling the
database is responsible under the eyes of law, but do the technology services
providers or the platform where such database is been listed, owes any
obligation to the customers and can be held responsible for unauthorize acts by
a third party on their platform?<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">The technology
service providers or the online platform operators are commonly known as “<b style="mso-bidi-font-weight: normal;">Intermediaries</b>”.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">In India, these
technology service providers or Intermediaries are governed by the provisions
of Information Technology Act, 2000 (“<b style="mso-bidi-font-weight: normal;">IT
Act</b>”) along with Information Technology (Intermediaries Guidelines) Rules,
2011 (“<b style="mso-bidi-font-weight: normal;">Intermediary Rules</b>”) <o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Section 2 (1) (w) of
the IT Act define intermediary as follows:<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Intermediary with
respect to any electronic messages means any person who on behalf of another
person receives, stores or transmits that messages or provides any service with
respect to that messages and includes:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="margin-left: 38.4pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: Wingdings; font-size: 14.0pt; line-height: 107%; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Telecom
service providers;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 38.4pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: Wingdings; font-size: 14.0pt; line-height: 107%; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Network
service providers;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 38.4pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: Wingdings; font-size: 14.0pt; line-height: 107%; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Internet
service providers;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 38.4pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: Wingdings; font-size: 14.0pt; line-height: 107%; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Web
hosting service providers;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 38.4pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: Wingdings; font-size: 14.0pt; line-height: 107%; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Search
engines;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 38.4pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: Wingdings; font-size: 14.0pt; line-height: 107%; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Online
payment sites;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 38.4pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: Wingdings; font-size: 14.0pt; line-height: 107%; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Online
auction sites;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 38.4pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: Wingdings; font-size: 14.0pt; line-height: 107%; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Online
market places; and<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 38.4pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: Wingdings; font-size: 14.0pt; line-height: 107%; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Cyber
cafes<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">The intermediaries
play a very important role in the enforcement of various provisions under the
IT Act. In any technology services, there are multiple players involved in
provision of services such as setting up web page or website, ISP providing
internet connectivity, service provider for registration of domain name and
hosting the domain, different service provider for uploading the web pages etc.
The present definition of intermediaries is broad enough to encompass every
technology service provider involved in any manner in transmission, retention
or hosting of electronic records. The IT Act places substantial burden on the
intermediaries as briefed below:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Section
67C:</span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;"> Intermediaries to preserve and retain the information as
prescribed under the IT Act and any intentional or knowingly contraventions are
punishable with 3 years’ imprisonment and fine;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">2.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Section
69:</span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;"> Intermediaries are required to comply with an order passed by
the Central or State Government directly or through designated agency for
granting access or securing access to the computer resource containing the
information or intercepting, monitoring or decrypting encrypted data or provide
information stored in a computer resource. Failure to assistance to the said
Government or its designated agency is punishable with 7 years’ imprisonment
and fine;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">3.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Section
69A:</span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;"> An intermediary may be directed by the order of the Central
Government to block access by the public or cause to be blocked for access by
public, any information generated, transmitted, received, stored or hosted in
any computer resource, which such intermediary has to comply with. Failure to
do so would entail maximum imprisonment of 7 years’ and fine;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">4.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Section
69B:</span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;"> The Central Government may direct an intermediary to provide
technical assistance and extend all facilities to its designated agency or authority,
to enable online access or to secure and provide online access to the computer
resource generating, transmitting, receiving or storing such traffic data or
information, as required by such agency and non-compliance with such order may
be prosecuted and the intermediary may be punished with 3 years’ imprisonment
and fine;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">5.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Section
70B:</span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;"> CERT-IN may call for information or give directions to
intermediaries and any intermediary fails to comply with such directions may be
punished with 1 year imprisonment and fine;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">6.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Section
72A:</span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;"> An intermediary who discloses personal information obtained
while providing services under the terms of lawful contract, with the intent to
cause or knowing that he is likely to cause wrongful loss or wrongful gain,
without the consent of the person concerned, or in breach of a lawful contract,
may be punished with 3 years’ imprisonment or fine of maximum Rs. 5 lakhs or
with both. With respect to compliance with Section 72A, the intermediary is
required to comply with the guidelines set out in the IT (Reasonable Security
Practices And Procedures And Sensitive Personal Information) Rules 2011, which
sets out the procedure for collection, retention, use and dissemination of
sensitive personal information pertaining to users.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Section 79 of the IT
Act exempts the intermediary from any liability under the IT Act from
prosecution for third party actions, on fulfillment of the following requisite:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l1 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">That the intermediary’s role is
limited to providing access to a communication system, which is used by third
parties to transmit, store or host information; <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">That the intermediary did not
initiate the transmission, and did not select the receiver of transmission and
also did not select or modify the information forming part of such
transmission;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">c.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">That the intermediary observed due
diligence and complied with the guidelines set out by the Central Government,
while discharging its duties under the IT Act<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">However, the
intermediary cannot claim exemption under Section 79 of the IT Act on the
following conditions:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">a.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">An intermediary is involved in the
commission of an unlawful act, either through conspiring, abetting or aiding
such act or had induced, whether through threats or promises or otherwise the
commission of the unlawful act;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">b.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">An intermediary, after having received
actual knowledge, by itself or through notification from the appropriate
Government or its agency, that any information, data or communication link
residing in or connected to a computer resource controlled by the intermediary,
is being used to commit an unlawful act, fails to expeditiously remove or
disable access to that material on that resource, without vitiating the
evidence in any manner.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">An intermediary is
required to act on information received about violation of any laws within 36
hours of such receipt and the intermediary is required to ensure that removal
of content from a website or computer resource would not affect the evidentiary
value of such content.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">Moreover, the
intermediary is requisite to demonstrate <b style="mso-bidi-font-weight: normal;">due
diligence and publish rules & regulations, data privacy & protection, usage
policy and user agreement for access or usage of the intermediary’s online
platform or computer access along with details of grievance officer </b>who has
to dispose of the matter within one month from date of receipt of complaint.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">With ongoing
evolution in the business world, the technology service providers are part and
parcel of each and every business & their role as intermediary has
increased manifold.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">To know further
details and other legal aspects of intermediaries including the data privacy
& usage policy, user rights, compliance under IT Act & Regulations,
please connect with us at </span><a href="mailto:admin@equicorplegal.com"><span style="font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;">admin@equicorplegal.com</span></a><span style="font-family: "Vijaya",serif; font-size: 14.0pt; line-height: 107%;"> <span style="color: #002060;">/ +91 8448824659</span><o:p></o:p></span></div>
<br /></div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-76241903813909117932019-05-31T11:31:00.000+05:302019-05-31T11:38:26.062+05:30NCLT has Exclusive Jurisdiction for all the Company Matters<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">In
deciding an appeal in the matter of <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">MAIF Investment India PTE Ltd. v/s
Ind-Barath Power Infra Limited & Ors</i></b>., Company Appeal (AT) No. 334
of 2018, NCLAT has reviewed and decided on the issue of exclusive jurisdiction
of NCLT in all the company matters and to bar the jurisdiction of civil courts
including <span style="mso-spacerun: yes;"> </span>complex and contentious one.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The
appeal was against the order given by NCLT, Hyderabad, where the NCLT,
Hyderabad bench declined to entertain the petition under Section 59 of the
Companies Act, 2013 for seeking a rectification in the register of members.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The
alleged dispute involved conversion of compulsory convertible debentures
without requisite consent and quorum.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">NCLT,
Hyderabad dismissed the petition stating the reason that issue raised were
complex or contentious issue which required the examination of the Arbitration
Act, 1996 & Insolvency & Bankruptcy Code, 2016.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">While
dismissing the petition, NCLT, Hyderabad had relied on Supreme Court’s 1998 judgement<span style="mso-spacerun: yes;"> </span>in <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">Ammonia Supplies Corporation (P) Ltd. v.
Modern Plastic Containers Pvt. Ltd. & Ors.</i></b>, where the Supreme Court
has held that- “<i style="mso-bidi-font-style: normal;">if the rectification
petition raises serious disputes relating to title, matter has to be examined
by civil courts.”</i><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">However,
on reviewing the appeal, NCLAT in its order relied on Supreme Court order in
case of <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">Shashi Prakash Khemka v. NEPC Micon & Ors</i></b>., 2014, where the
Supreme Court <span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>has held that- “<i style="mso-bidi-font-style: normal;">if a<span style="mso-spacerun: yes;"> </span>dispute had emerged after
the 2013 Act, the civil suit remedy would be completely barred and the power
would be vested with the National Company Law Tribunal (NCLT) under Section 59
of the said Act.</i>”<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Further,
in an earlier case of <b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">Smiti Golyan & Ors. v. Nulon India
Limited & Ors.,</i></b> NCLAT has already held that – “<i style="mso-bidi-font-style: normal;">Ammonia Supplies decision was no longer applicable in the context of
changed law.</i>”<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">In
the present matter, while deciding the appeal, NCLAT it was been held by
Justice A I S Cheema that- <span style="mso-spacerun: yes;"> </span><span style="background: white; color: black;">"<i style="mso-bidi-font-style: normal;">we
are of the view that with change of law now under Section 59 of the Act, NCLT
can deal with rectification and all questions including incidental and
peripheral questions raised with regard to rectification for the purpose of
deciding legality of the rectification" "NCLT which exercises widest
possible powers in a matter under Section 241, 242 of the Act; which even
otherwise is expected to always keep interest of the Company in forefront,
cannot be treated as unequipped only because the Petition is under Section 59
of the Act</i>."<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The NCLAT allowed the appeal and held that there were
no complex or contentious issues involved and allowed the rectification as
sought by the appellant.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The
said decision of NCLAT has reaffirmed the provision of Section 430 of the
Companies Act, 2013 which bars the jurisdiction of civil courts in the matters
which are assigned to NCLT or NCLAT.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">To know further details and other legal aspects for
corporate litigation, bankruptcy & insolvency, NCLT or any other matter
under Companies Act, 2013, please connect with us at </span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><a href="mailto:admin@equicorplegal.com"><span style="mso-bidi-font-family: Vijaya;">admin@equicorplegal.com</span></a></span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"> / +91 8448824659<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><br />
<br />
<br style="mso-special-character: line-break;" />
<!--[if !supportLineBreakNewLine]--><br style="mso-special-character: line-break;" />
<!--[endif]--></span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></div>
<br /></div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-17944043291513590222019-05-03T11:46:00.000+05:302019-05-03T11:46:35.494+05:30Investment Frauds by Investment Advisers<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="line-height: 150%; tab-stops: 52.2pt; text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Today driven by the promise of higher
returns than the saving accounts or fixed deposits, most of the small and
retail investors are moving their investments under the guidance of Investment
Advisers.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">“<b>Investment Advisers</b>” means any
person, who for consideration, is engaged in the business of providing
investment advice to clients or other persons or group of persons and includes
any person who holds out himself as an investment adviser, by whatever name
called.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Investment Advisers who make public
appearance or make recommendations or offer an opinion concerning securities or
public offers through public media while making recommendations through public
media are required to comply with the relevant applicable laws.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">What is an Investment Advice: - “<b>Investment
Advice”</b> is an advice relating to investing in, purchasing, selling or
otherwise dealing in securities or investment products, and advice on
investment portfolio containing securities or investment products, whether
written, oral or through any other mean of communication for the benefit of the
client and shall include financial planning.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Failure to accomplish returns and
events like ponzi schemes, dubious high return schemes etc. have sharply
focused attention once again on fiduciary duties investment advisers owe to the
retail & small investors.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">In 2013, to regulate the provision of
investment advisory services, SEBI (Investment Advisers) Regulations 2013 (“<b>IA
Regulations</b>”) was enacted where every person who acts as an investment
adviser to register itself under the IA Regulations unless the person is
exempted from the registrations under the IA Regulations which includes but not
limited to insurance agents, registered stock brokers etc.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Investment Advisers are the fiduciaries
and decision-making authority, on behalf and for the benefit of their customers
i.e. beneficiaries, and are subject to highest standard of care. The fiduciary
relations involve transfer of discretionary power and investment of funds on
behalf of the customers. Retail & small investors usually rely on
transactional decisions made by the Investment Advisers, as they attribute
significant value to the trust and good faith shared in such relationships.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Due to current technical and financial
nature of the market, the dependency of the retail & small investors has
grown large on their Investment Advisers which raise the question of
accountability & regulatory policy, as any fault on the part of the
Investment Adviser can impact or loose the hard-earned money of the retail and
small investors.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">With the emergence of fintech based
Investment Advisers such as Robo Advisers, Discount Brokers, Online Financial
Advisers etc. have created a larger vacuum for the accountability, as they are
been viewed as specialist in providing services of an ‘execution only’ & do
not influence their clients’ decision making process.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Beside the registered Investment
Advisers, there are several companies which are neither registered nor approved
by SEBI or any other Regulatory Body, had come up like mushrooms in different parts
of India. They are giving their ‘so called expertise’ without having requisite
qualification & experience which results only in losing money by the retail
& small investors.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Few common frauds by the fraudulent
investment advisers:</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">a. <b><u>Tips & Recommendation
Fraud: -</u></b> One of the most widely used and most common fraud, where
the fraudulent investment adviser tries to attract the investors by convincing
them that they can provide a profit as much as 25% per month or double the
investment in a year or so. Also, they confirm the investors over 90% accuracy
on their tips & recommendation and claim to give more than 25%-30% monthly
return to their previous clients. And, to gain confidence of the clients, these
fraudulent investment advisers give 3 days’ trial period, where during the
trial period, results are 100% accurate. Seeing these trial period, the
investors subscribe to the recommendation plan of these fraudulent investment
advisers. Now let us see how these fraudulent investment advisers are able to
provide 100% accurate recommendations during the trial period. Suppose these
fraudulent investment advisers agree to give a trial period for 3 trading day.
That is, they agree to give 1 recommendation to buy or sell a stock for 3
trading day. But there is a hidden side to this scheme that the investors do
not know. During these 3 days, the fraudulent investment advisers don’t send
tips to just 1 person but to thousands of people.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.0in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -.5in;">
<b><span style="color: #070707; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">i.</span></b><span style="color: #070707; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"> <b>Day1:</b> On
day 1, this fraudulent investment adviser sends messages to sell a stock to 500
people and to buy to other 500 people for the same stock. Obviously, either the
stock will go up or go down (they generally choose a volatile stock so that the
probability of stock not changing price is zero). Therefore, on day 1, they
have sent a successful tip to 500 people. They, discard the other 500 people
for whom the tip didn’t worked.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.0in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -.5in;">
<b><span style="color: #070707; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">ii.</span></b><span style="color: #070707; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"> <b>Day2:</b> On
day two, they again send message to sell another stock to 250 people and buy
the stock to other 250 people. Obviously, again one group will receive correct
recommendation. They again discard the other group whom they sent wrong tip.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.0in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -.5in;">
<b><span style="color: #070707; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">iii.</span></b><span style="color: #070707; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";"> <b>Day3:</b> On
last day of tip, they send buy suggestion to 125 people and sell suggestion to
other group of 125 people. Hence, 125 people will receive a correct tip for
three consecutive days.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: black; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Now, these 125 people will
now think that all the recommendations provided by these fraudulent investment
advisers for 3 continuous days are correct and most of the people out of 125
will subscribe to the tips and recommendation plan and become victim of one of
the most common fraud in Indian investment market. Soon, after subscribing to
the tips from these Investment Advisers, the investor starts losing money. The
tips aren’t working anymore. Overall, these people lose money apart from paying
a heavy registration fee for taking tips & recommendations.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<b><span style="color: black; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">b. <u>Pump &
Dump:- </u></span></b><span style="color: #070707; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Pump and Dump is a
micro-cap stock (penny stocks) fraud, where the investment advisers try to
inflate the price of these micro-cap stocks by providing misleading information
to investors. They try to increase the price of these penny stocks by giving
the fake news.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 15.0pt; text-align: justify;">
<span style="color: #070707; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">For example, If the
investment advisers want to increase the price of XYZ microcap stock, then they
will send messages like a big company is taking over a that stock; or that
micro-cap stock is giving a bonus of 1:1; or A large-cap is buying 50% stake of
that micro-cap stock etc.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 15.0pt; text-align: justify;">
<span style="color: #070707; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">The investment
advisers want the retail & small investors to buy the shares of
these stocks as much as possible. Let us see what the main aim of these
investment advisers is.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="background: white; color: #070707; line-height: 150%; margin-bottom: 7.5pt; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">First, these investment
advisers buy a cheap penny stock at a large volume.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></li>
<li class="MsoNormal" style="background: white; color: #070707; line-height: 150%; margin-bottom: 7.5pt; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Then they send fake messages or
emails to millions of investors recommending them to buy that stock.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></li>
<li class="MsoNormal" style="background: white; color: #070707; line-height: 150%; margin-bottom: 7.5pt; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Those who take this news as true,
start buying stocks of these companies.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></li>
<li class="MsoNormal" style="background: white; color: #070707; line-height: 150%; margin-bottom: 7.5pt; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Because of this increased demand,
the price of that stock starts increasing.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></li>
<li class="MsoNormal" style="background: white; color: #070707; line-height: 150%; margin-bottom: 7.5pt; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">When the share price reaches a
good price, then these investment advisers sell their stocks and
get good returns.</span><span style="font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></li>
</ul>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 15.0pt; text-align: justify;">
<span style="color: #070707; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">After selling their
stocks at high prices, these investment advisers then stop sending
email/messages to the people. Moreover, the price of these stocks becomes very
volatile, as they are not worth that high price. Hence, soon the price of these
stocks falls heavily and the retail investors lose their money.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: black; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">SEBI has time and again
taken action against Investment Advisers to protect the interest of small &
retails investors. Few of the leading cases are:</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<span style="color: black; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">i. SEBI has issued
order against three illegal investment advisors –Rishabh Jain, Ubaidur Rahman
and G. Kadar Hussain. The trio has been alleged for a fraud of over INR 10 Cr
and SEBI has directed them to cease and desist from acting as an investment
advisor. The action comes after SEBI received an email complaint on December
18, 2015 from National Stock Exchange of India Ltd. (NSE). The trio lure small
and retail investors by promising assured monthly income with unbelievable
returns of 300-800% on buying and selling of securities based on the tips
provided by them.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<span style="color: black; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">ii. SEBI has imposed a
penalty of ₹10 lakh on two individuals- Mansoor Rafiq Khanda and
Firoz Rafiq Khanda for providing unregistered investment advisory services
through WhatsApp messages while promising guaranteed returns.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: black; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">At present, hundreds of the
retail & small investors, have already lost their investments on false hope
& mirage shown by their Investment Advisers. They are still waiting for the
recovery of their dues.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: black; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Now the most important
question which arises before retail & small investors:-</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<b><i><span style="color: black; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Do the retail & small
investors who invest under the guidance of such Investment Advisers has any
legal right against any wrong/loss making advisory?</span></i></b><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: black; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">Under the present IA
Regulations and other applicable laws, the small and retail investors can
approach SEBI for recovering of its losses or they may move to Consumer
Disputes Redressal Commission (depending upon the facts of the dispute).
However, depending upon the nature of investment advisory, there are several
other legal recourses which can be initiated against such fraudulent investment
advisers.</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: black; font-family: "Georgia",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: "Times New Roman"; mso-fareast-font-family: "Times New Roman";">To know further details
about investment frauds & for recovery of your investment from the
Investment Advisers, and for any other legal query, please connect with us
at <a href="mailto:admin@equicorplegal.com"><span style="color: blue;">admin@equicorplegal.com</span></a> / +918448824659</span><span style="color: black; font-family: "Times New Roman",serif; font-size: 12.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
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equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-44902666393988394242019-01-22T12:06:00.000+05:302019-01-22T14:13:02.827+05:30PSARA License: To Start a Private Security Agency Business in India<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjy3_A_wa1AnQktBpo-sHnKKmUZlR9tk2otdC6aqp-WFU8kgC2ztX_eXGQtW2RYrUtRH3-6hLiosyJSIulTCoyYSXffiCXy2XmNGuaK_1KPGusymko-hlaah_KOwJaI7saWwXATf4ecov0/s1600/Security+guard+business.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1068" data-original-width="1600" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjy3_A_wa1AnQktBpo-sHnKKmUZlR9tk2otdC6aqp-WFU8kgC2ztX_eXGQtW2RYrUtRH3-6hLiosyJSIulTCoyYSXffiCXy2XmNGuaK_1KPGusymko-hlaah_KOwJaI7saWwXATf4ecov0/s320/Security+guard+business.jpg" width="320" /></a></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Private
Security Agency business is one of the most sought and rapid growing business
in India with huge demand and potential. Due to ever evolving demand for
private security by industry & business segments, the Private Security
Agency business is growing for more than 20% and there is still huge untapped market still wide open for the future ventures. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Today
in any and every aspect, private security has an important role to play,
whether its transfer of cash to ATM, transportation of valuables or protection to key members of business conglomerates.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Any
Private Security Agency cannot commence its business and operations in India without
procurement of license under Private Security Agencies (Regulation) Act, 2005 also
known as <b>PSARA License</b>.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">PSARA
License is obtained state wise & is valid for 5 years and had to be renewed
after every 5 years. The government fees for PSARA License is as following:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">1.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">For one (1) District- Rs. 5,000/-<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">2.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">For more than one (1) and upto five (5)
Districts- Rs. 10,000/-<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">3.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">For the entire State- Rs. 25,000/-<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">PSARA
License can be procured by only an Indian Company, Firm or Association of
People.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The
Private Security Agency need to start or commence its operations within six (6)
months after procurement of PSARA License.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The
Private Security Agency beside providing security guards can also impart
training & skill development to the security guards. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The
Private Security Agency need to work in collaboration with local police and
need to be in compliance with laws, so that they should not violate any
applicable laws while providing security to their clients.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The
Private Security Agency needs to appoint supervisors as per the applicable laws
and qualification requisite.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 22.5pt; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif;"><span style="font-size: 16pt;">To know further details about Doing Business of Private Security
Agencies in India or any other legal aspects including legal structure, </span><span style="font-size: 21.3333px;">compliance</span><span style="font-size: 16pt;">, licenses, approvals, tax and for any other query w.r.t. private security
agency business/PSARA License, please connect with us at </span></span><a href="mailto:admin@equicorplegal.com" style="color: #002060; font-family: Vijaya, serif; font-size: 16pt;"><span style="color: #002060;">admin@equicorplegal.com</span></a><span style="color: #002060; font-family: "vijaya" , serif;"><span style="font-size: 16pt;"> / +918448824659<o:p></o:p></span></span></div>
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equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-16746293833227786592019-01-08T19:43:00.000+05:302019-01-08T19:43:02.952+05:30Key Legal Developments of 2018 in India<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 16pt; line-height: 150%;">This
article is a summary of the key legal developments in the last 12 months, covers
some of the major legal changes brought in 2018. The changes are vast &
therefore, we focus on some of the key changes, which broadly impact the
corporates for their “<b>Way of Doing
Business</b>” in</span><span style="font-size: 16pt; line-height: 150%;"> India <span style="color: #002060;">which dominated
the headlines and we can expect 2019 to continue in the same way</span>. <o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 16pt; line-height: 150%;">It’s
important for any business owner to be aware of the changes affecting their
business & put in place suitable safeguards. Failing to be prepared is
often costly in terms of money, resource & time.</span><span style="font-size: 16pt; line-height: 150%;"><o:p></o:p></span></span></div>
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<td style="background: #FFC000; padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">Sector<o:p></o:p></span></span></b></div>
</td>
<td style="background: #FFC000; padding: 0in 5.4pt 0in 5.4pt; width: 481.25pt;" valign="top" width="642">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">Update<o:p></o:p></span></span></b></div>
</td>
</tr>
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<td style="padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">Investment in India <o:p></o:p></span></span></b></div>
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</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 481.25pt;" valign="top" width="642">
<div style="background: white; line-height: 150%; margin-bottom: 6.75pt; margin-left: .5in; margin-right: 0in; margin-top: 6.75pt; mso-list: l2 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><strong><span style="color: #002060; font-size: 14.0pt; font-weight: normal; line-height: 150%;"><span style="mso-list: Ignore;">1.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span></strong><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%;">Single Master Form:</span></b><span style="color: #002060; font-size: 14.0pt; line-height: 150%;"> <span style="background: white;">On
June 7, 2018, the Reserve Bank of India (the "<strong>RBI</strong>")
issued a circular RBI/2017-18/194 A.P. (DIR Series) Circular No. 30 (the
"<strong>Circular</strong>"), introducing a single master form
(the "<strong>SMF</strong>") to integrate the existing reporting
norms for various types of foreign investment in India with an objective- </span>To
subsume all foreign investments related reporting requirements, irrespective
of the mode or instrument through which the foreign investment is made. <strong><span style="background: white; mso-bidi-font-style: italic;">All Indian entities which
do not comply with this pre-requisite will not be permitted to receive any
foreign investment (including indirect foreign investment) going forward and
will be declared non-compliant with FEMA. </span></strong><strong><span style="mso-bidi-font-weight: normal;"><o:p></o:p></span></strong></span></span></div>
<div style="background: white; line-height: 150%; margin-bottom: 6.75pt; margin-left: .5in; margin-right: 0in; margin-top: 6.75pt; mso-list: l2 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%;"><span style="mso-list: Ignore;">2.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%;">Cross Border Mergers:</span></b><span style="color: #002060; font-size: 14.0pt; line-height: 150%;"> The Reserve Bank of India has
notified The Foreign Exchange Management ( Cross Border Merger) Regulations,
2018 (“<b style="mso-bidi-font-weight: normal;">Regulations</b>”) w.e.f. March
20<sup>th</sup>, 2018. With notification of S.234 of the Companies Act, 2013,
both inbound and outbound mergers are been permitted, as earlier only inbound
merger was permitted under Companies Act, 1956. Government has also amended
the Companies ( Compromise, Arrangement and Amalgamations) Rules, 2016 and
inserted Rule 25 A which deals with cross border mergers. The notification of
these Regulations along with amendments in the Companies Act, 2013 has opened
door for cross border mergers in India. This will now give flexibility and
options for MNCs in structuring their merger deals involving Indian companies
as India has allowed outbound mergers. The provision of automatic approval of
RBI subject to compliance with requisite conditions will save time and fasten
the restructuring process which will in turn help in achieving the commercial
objectives. Outbound merger which has now permitted can also be seen as a
better option for MNCs to exit India instead of going for liquidation of its
Indian JV/WOS. Such exit also such MNCs to continue to treat the Indian
office as its branch office if it so desires.<b style="mso-bidi-font-weight: normal;"><o:p></o:p></b></span></span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 2;">
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">Company Matters<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 481.25pt;" valign="top" width="642">
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">1.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">Commencement of
Business- </span></b><span style="color: #002060; font-size: 14pt; line-height: 150%;">At present, there is no
minimum paid up capital requirements for incorporating the private as well as
public companies in India. Also, it is now mandatory for every company having
share capital to file a declaration that the subscribers have paid the value
of shares subscribed by them within 180 days from the date of incorporation
along with a verification of its registered office. No company is now
permitted to commence its business or exercise its borrowing powers without
complying with this requirement.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">2.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">Significant
Beneficial Ownership</span></b><span style="color: #002060; font-size: 14pt; line-height: 150%;">- With the
implementation of Section 90 of the Companies Act, 2013, the Central
Government has also issued new Companies (Significant Beneficial Owners)
Rules, 2018 ("<b style="mso-bidi-font-weight: normal;">SBO Rules</b>")
to implement the provisions of Section 90. The SBO Rules define the
expression 'Significant Beneficial Owner' to mean every individual, who
acting alone or together with one or more persons or trust, including a trust
and persons resident outside India, holds beneficial interest, of at least
10%, in shares of a company or the right to exercise, or the actual
exercising of significant influence or control as defined in Section 2(27) of
the Companies Act, 2013, but whose name is not entered in register of members
of a company as the holder of such shares. SBO Rules have been made
applicable even to cases where the shareholders/members of the Indian company
are persons other than individuals and natural persons. The term 'Beneficial
Interest' in a share has been defined to include the right or entitlement of
a person (without being a registered owner of such a share) to (i) exercise
or cause to be exercised any or all the rights attached to the share; or (ii)
receive or participate in any dividend or other distribution in respect of
such a share. Further, the definition provides that such rights may arise out
of any contract, arrangement or otherwise and may be exercised by such a
person directly or indirectly, either alone or together with any other
person. <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">3.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">Maternity Leaves for
female employees</span></b><span style="color: #002060; font-size: 14pt; line-height: 150%;">- The maternity leave to
eligible female employees under the Maternity Benefit Act, 1961 has been
extended from 12 weeks to 26 weeks. The Act is applicable on establishments
having 10 or more employees. Also, the Ministry of Labour & Employment is
working on an incentive scheme wherein 7 weeks’ wages would be reimbursed to
employers who employ women workers with wage ceiling upto Rs.15,000/- and
provide the maternity benefit of 26 weeks paid leaves, subject to certain
conditions.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">4.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">Daycare Facilities-</span></b><span style="color: #002060; font-size: 14pt; line-height: 150%;"> In establishments where 50 or more employees are employed,
employers must provide daycare facilities for employees' children.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">5.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">Remuneration of
Independent Directors</span></b><span style="color: #002060; font-size: 14pt; line-height: 150%;">- Earlier any person
having any pecuniary relationship with the company cannot be appointed as
Independent Director which has been revised that an independent director
cannot have any pecuniary relationship with the company other than (i)
remuneration payable to such person, and (ii) transactions with the company,
which do not exceed 10% of his total income.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">6.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">Corporate Social
Responsibility</span></b><span style="color: #002060; font-size: 14pt; line-height: 150%;">- With the recent
amendments to the provisions governing Corporate Social Responsibility (<b style="mso-bidi-font-weight: normal;">CSR</b>) which is mandatory for
prescribed classes of companies to spend at least 2% of their 3-year annual
average net profit on social activities. Prior to the amendment, if the
company fails to spend the requisite amount, it can specify the reason for
the same and no further action was requisite. However, with the amendment,
the amount which are to be allocated towards CSR activities, but which remain
unutilized in a given financial year is required to be transferred a special
account called “Unspent CSR Account” to be opened by the company with any
scheduled bank and the amount therein will have to spent by the company within
a period of 3 financial years from the date of such transfer. <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">7.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">Changes in Penal
Provisions of the Companies Act, 2013</span></b><span style="color: #002060; font-size: 14pt; line-height: 150%;">:<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-list: l1 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">Ø<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">Non- compliance with provisions relating to issue of shares at
discount would amount only to a penalty, instead of imposition of fine, imprisonment
or both;<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-list: l1 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">Ø<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">Furnishing false/incorrect information at the time of creating
charge would be liable to action for fraud under Section 477 of the Companies
Act, 2013;<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-list: l1 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">Ø<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">Failure to file an annual return would result in a penalty
instead of a fine or imprisonment.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">8.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">Additional Ground for
disqualification for appointment of Director</span></b><span style="color: #002060; font-size: 14pt; line-height: 150%;">- Under S.164 of the Companies Act, 2013, provides the
conditions for the disqualifications for a person to be appointed as
director:<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-list: l4 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">a.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">The person is of
unsound mind;<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-list: l4 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">b.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">He/she is an undischarged
insolvent and<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-list: l4 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">c.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">And order
disqualifying him/her for appointment as a director has been passed by a
court or tribunal and the order is in force.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;"><span style="mso-spacerun: yes;"> </span>Further
under S.165, a director is not permitted to hold office for more than 20
companies for<span style="mso-spacerun: yes;"> </span>private
limited companies ( 10 companies for public limited companies) at the same
time.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">With the amendment, the additional ground to be inserted in
S.164 is - if the person holds office as director, including any alternate
directorship, in more than 20 companies for private limited companies ( 10
companies for public limited companies) at the same time, that person would
be ineligible to be appointed as a director of a company.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14.0pt; line-height: 150%; mso-bidi-font-family: Calibri; mso-bidi-theme-font: minor-latin;"><span style="mso-list: Ignore;">9.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">With the amendment to the Companies ( Prospectus &
Allotment of Securities) Rules 2014 effective from October 2<sup>nd</sup>,
2018, it makes mandatory for every unlisted public company to (i) issue the
securities only in dematerialized form and (ii) facilitate the dematerialization
of all its existing securities.<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 3;">
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">Specific Relief<o:p></o:p></span></span></b></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 481.25pt;" valign="top" width="642">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">With effective from August 1<sup>st</sup>, 2018, the civil
dispute resolution under Specific Relief Act, 1963 has been changed. Some of
the major changes which will impact your business are highlighted below:<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo8; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">i.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">Courts must grant
specific performance of a contract when claimed by a party unless such remedy
is barred under the limited grounds contained in the statute.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo8; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">ii.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">If a contract is
broken due to non-performance of a promise by a party, the party suffering
the breach has the option of substituting performance through a third party
or through its own agency.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo8; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">iii.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">A suit filed under
the Specific Relief Act must be disposed of by the court within 12 months
from the date of service of summons to the defendant. Such period can be
extended by 6 months after recording written reasons by the court.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-add-space: auto; mso-list: l5 level1 lfo8; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">iv.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">No injunction can be
granted by the court in relation to an infrastructure project if such
injunction would cause delay or impediment in the progress or completion of
the infrastructure project.<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 4;">
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">Negotiable
Instruments<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 481.25pt;" valign="top" width="642">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">For cheque bouncing matters, it the complainant is been
compensated, then the case can be set aside and the same has been clarified
by the Supreme Court in the case of M/s Meters & Instruments Pvt. Ltd v.
Kanchan Mehta, Criminal Appeal No. 1731 of 2017, where it has been held that
an accused in a case u/s 138 of Negotiable Instruments Act, 1881 can be
discharged even without the consent of the complainant, if the Court is
satisfied that the complainant has been duly compensated. It was also held
that the normal role of criminal law that compensation of offence is possible
only with the consent of complainant/victim is not applicable for the cases
u/s 138 of Negotiable Instruments Act.<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 5;">
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">Data Protection<o:p></o:p></span></span></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 481.25pt;" valign="top" width="642">
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-add-space: auto; mso-list: l7 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">1.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">EU’s General Data Protection Regulation (GDPR) effective from
May 25, 2018 to impact companies doing business in Europe, which includes the
corporates from India doing business in Europe. The liability is 4% of annual
global revenue or € 20 millions, whichever is greater. For a detailed note,
please click on the following link:<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify;">
<span style="font-family: Times, Times New Roman, serif;"><span class="MsoHyperlink"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><a href="http://www.equicorplegal.com/uploads/knowledge/5653EquiCorp%20Newsletter%20GDPR%20and%20Impact%20on%20Your%20Business.pdf"><span style="color: #002060;">http://www.equicorplegal.com/uploads/knowledge/5653EquiCorp%20Newsletter%20GDPR%20and%20Impact%20on%20Your%20Business.pdf</span></a></span></span><span style="color: #002060; font-size: 14pt; line-height: 150%;"><o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify;">
<br /></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-add-space: auto; mso-list: l7 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">2.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">Following on the lines of<span style="mso-spacerun: yes;">
</span>EU’s<span style="mso-spacerun: yes;"> </span>GDPR, India has also
proposed its own Data Protection Bill, 2018 prepared by the SriKrishna
Committee- to protect the autonomy of individuals in relation with their
personal data, to specify where the flow and usage of personal data is
appropriate, to create a relationship of trust between persons and entities
processing their personal data, to specify the rights of individuals whose
personal data are processed, to create a framework for implementing
organizational and technical measures in processing personal data, to lay
down norms for cross-border transfer of personal data, to ensure the
accountability of entities processing personal data, to provide remedies for
unauthorized and harmful processing, and to establish a Data Protection
Authority for overseeing processing activities.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify;">
<span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">For a detailed note, please click on the following link:<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify;">
<span style="font-family: Times, Times New Roman, serif;"><span class="MsoHyperlink"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><a href="http://www.equicorplegal.com/uploads/knowledge/755EquiCorp-%20India's%20Data%20Protection%20Law%202018-%20Future%20Road%20Ahead.pdf"><span style="color: #002060;">http://www.equicorplegal.com/uploads/knowledge/755EquiCorp-%20India's%20Data%20Protection%20Law%202018-%20Future%20Road%20Ahead.pdf</span></a></span></span><span style="color: #002060; font-size: 14pt; line-height: 150%;"><o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify;">
<br /></div>
</td>
</tr>
<tr style="mso-yfti-irow: 6;">
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">E- Commerce<o:p></o:p></span></span></b></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 481.25pt;" valign="top" width="642">
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-list: l3 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">1.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">E-commerce players to
get GST registration for each state in India of their operations.<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-list: l3 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">2.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">With effective from
October 1<sup>st</sup>, 2018, E-commerce players shall be liable to:<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-list: l0 level1 lfo6; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">i.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">Tax Deducted at
Source (TDS) at the rate of 1% from the payment made or credited to supplier
of taxable goods or services or both, where the total value of such supply,
under a contract, exceeds INR 2,50,000/-;<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; mso-list: l0 level1 lfo6; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">ii.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">Tax Collected at Source
(TCS) at such rate not exceeding 1%, of the net value of taxable supplies
made through it by other suppliers where the consideration with respect to
such supplies is to be collected by the operator. However, no TCS liability
would accrue in respect of the E- commerce entities based outside India.<o:p></o:p></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; mso-list: l3 level1 lfo7; text-align: justify; text-indent: -.25in;">
<a href="https://www.blogger.com/null" name="_Hlk533670057"><span style="font-family: Times, Times New Roman, serif;"><!--[if !supportLists]--><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">3.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">W.e.f February 1<sup>st</sup>, 2019, the FDI policy for
e-commerce shall be revised and it shall impact the way of doing business of
Ecommerce in India, which mainly covers:<o:p></o:p></span></span></a></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.0in; margin-right: 0in; margin-top: 0in; mso-list: l6 level1 lfo9; text-align: justify; text-indent: -.5in;">
<span style="mso-bookmark: _Hlk533670057;"><span style="font-family: Times, Times New Roman, serif;"><!--[if !supportLists]--><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">i.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">Related entity can no
longer sell on an ecommerce platform;<o:p></o:p></span></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.0in; margin-right: 0in; margin-top: 0in; mso-list: l6 level1 lfo9; text-align: justify; text-indent: -.5in;">
<span style="mso-bookmark: _Hlk533670057;"><span style="font-family: Times, Times New Roman, serif;"><!--[if !supportLists]--><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">ii.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">Ecommerce platform
cannot discriminate among vendors including giving favourable treatment to
big vendors;<o:p></o:p></span></span></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.0in; margin-right: 0in; margin-top: 0in; mso-list: l6 level1 lfo9; text-align: justify; text-indent: -.5in;">
<span style="mso-bookmark: _Hlk533670057;"><span style="font-family: Times, Times New Roman, serif;"><!--[if !supportLists]--><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="mso-list: Ignore;">iii.<span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #002060; font-size: 14pt; line-height: 150%;">Single Vendors cannot
sell more than 25% to one ecommerce portal;<o:p></o:p></span></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="mso-bookmark: _Hlk533670057;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">The new revised norms
in FDI for ecommerce could impact-exclusive launches or sale of products;
cashback/ big & deep discounts/faster delivery at sites. <o:p></o:p></span></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: Times, Times New Roman, serif;"><span style="mso-bookmark: _Hlk533670057;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">The purpose of the
revised norms to ensure: - level playing field for brick & mortar retail;
smaller domestic ecommerce players can compete with big Ecommerce giants with
surplus money chest; smaller sellers on ecommerce platforms to get equal
treatment with big sellers/vendors.</span></span><span style="color: #002060; font-size: 14pt; line-height: 150%;"><o:p></o:p></span></span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 7;">
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">E-Pharmacies<o:p></o:p></span></span></b></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 481.25pt;" valign="top" width="642">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">A Delhi High Court has put a stay on the online sale of medicines
by e-pharmacies. And, in subsequent development, at first a Single Judge
Bench of Madras High Court put a ban on sale of medicines by e-pharmacies,
however, the same was revoked by a Double Judge Bench of Madras High Court
which leads to allow the sale of medicines by e-pharmacies and Central
Government has been asked to frame the rules for the operations of
e-pharmacies. Central Government has already issued draft rules for operation
of e-pharmacies, where it is a requisite to acquire only one license to
operate in the country and they cannot sell tranquillisers, psychotropic
drugs, narcotics and habit-forming drugs. However, the two different rulings
on the same issue by two different High Court has created a confusion which
would be clear once the rules for e-pharmacies are in place by the Central
Government.<o:p></o:p></span></span></div>
</td>
</tr>
<tr style="mso-yfti-irow: 8; mso-yfti-lastrow: yes;">
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 112.5pt;" valign="top" width="150">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">Usage of Aadhaar Card
as E-KYC <o:p></o:p></span></span></b></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 481.25pt;" valign="top" width="642">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">On September 26, 2018, a 5 judge bench of Supreme Court upheld
the validity of Aadhaar, however impose certain restriction on the corporates
to use the 12 digit number to validate the identities of customers, which may
force the corporates to going back to old ways for customer verification and
may impact on the financial viability of the business models especially for
startups in financial & technology services Moreover, this judgement has
now questioned electronic signatures ( eSigns) validation through Aadhaar and
now eSigns used by consumers to sign legal documents digitally could be
stopped. For a detailed note, please click on the following link:<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;"><a href="http://www.equicorplegal.com/uploads/knowledge/1875ECA%20Newsletter%20-%20Decoding%20SC%20Judgement%20on%20Aadhar%20&%20Impact%20on%20Business%2001.10.2018.pdf"><span style="color: #002060;">http://www.equicorplegal.com/uploads/knowledge/1875ECA%20Newsletter%20-%20Decoding%20SC%20Judgement%20on%20Aadhar%20&%20Impact%20on%20Business%2001.10.2018.pdf</span></a><o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-size: 14pt; line-height: 150%;"><span style="font-family: Times, Times New Roman, serif;">The Central Government is considering to amend telegraph and
other applicable laws, to allow QR code as offline mechanism for KYC. This
move would ease the pressure on Fintech & telcos post-Aadhaar judgement,
however, it’s advisable to wait till further actions are implemented in place
to resolve the issue. <o:p></o:p></span></span></div>
</td>
</tr>
</tbody></table>
<span style="font-family: Times, Times New Roman, serif;"><br /></span><br />
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: Times, Times New Roman, serif;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">To know further details of recent
changes in law and impacts on your business or for more information, please
connect with us on <b style="mso-bidi-font-weight: normal;">+91 8448824659 or
email- </b></span><span class="MsoHyperlink"><b style="mso-bidi-font-weight: normal;"><span style="font-size: 14pt; line-height: 150%;"><a href="mailto:admin@equicorplegal.com">admin@equicorplegal.com</a></span></b></span><b style="mso-bidi-font-weight: normal;"><span style="color: #002060; font-size: 14pt; line-height: 150%;">.<o:p></o:p></span></b></span></div>
<br /></div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-55389422427604400952018-08-03T13:19:00.000+05:302018-08-03T14:55:07.179+05:30India’s Data Protection Law 2018: Future Road Ahead<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">With the submission of SriKrishna Committee report on
data protection, the final countdown for India’s own Data Protection Regime has
finally begun. <span style="mso-spacerun: yes;"> </span>A detailed legal
framework on data protection is to be implemented in the coming days. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Purpose of Data Protection Bill 2018- To protect the
autonomy of individuals in relation with their personal data, to specify where
the flow and usage of personal data is appropriate, to create a relationship of
trust between persons and entities processing their personal data, to specify
the rights of individuals whose personal data are processed, to create a
framework for implementing organizational and technical measures in processing
personal data, to lay down norms for cross-border transfer of personal data, to
ensure the accountability of entities processing personal data, to provide
remedies for unauthorized and harmful processing, and to establish a Data
Protection Authority for overseeing processing activities.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The key Highlights are as following:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The term Data means
and includes a representation of information, facts, concepts, opinions or
instructions in a manner suitable for communication, interpretation or
processing by humans or by automated means. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">2.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Personal Data means
data about or relating to a natural person who is directly or indirectly
identifiable, having regard to any characteristic, trait, attribute or any
other feature of the identity of such natural person, or any combination of
such features, or any combination of such features with any other information.
The Sensitive Personal Data as it existed under SDPI Rules has been expanded to
include passwords; financial data; health data; official identifier; sex life;
sexual orientation; biometric data; genetic data; transgender status; intersex
status; caste or tribe; religious or political belief or affiliation<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">3.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Application- Applies
to both government and private entities. The applicability of the law will
extend to data fiduciaries or data processors not present within the territory
of India, if they carry out processing of personal data in connection with (i)
any business carried on in India, (ii) systematic offering of good and services
to data principals in India, or (iii) any activity which involves of data principals
within the territory of India ;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">4.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Data Fiduciary means
any person including the State, a company, any juristic entity or any
individual who alone or in conjunction with others determines the purpose and
means of processing personal data;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">5.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Data Processor means
any person, including the State, a company, any juristic entity or any
individual who processes personal data on behalf of a data fiduciary, but does
not include an employee of the data fiduciary;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">6.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Processing means any
form of processing of personal data that analyses or predicts aspects concerning
the behavior, attributes or interest of a data principal<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">7.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Grounds for Processing
Personal Data- includes (a) consent, (b) functions of state, (c ) compliance
with law or order of court/tribunal, (d) for prompt action incase of emergencies,
(e) purposes related to employment and (f) reasonable purposes of the data
fiduciary.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">8.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Grounds for Processing
Sensitive Personal Data- includes (a) explicit consent, (b) functions of state,
(c ) compliance with law or order of court/tribunal, (d) for prompt action in case
of emergencies for passwords, financial data, health data, official
identifiers, genetic data and biometric data.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">9.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Personal and
Sensitive Personal Data of Children: Processing of personal and sensitive
personal data of children by data fiduciaries should be done in a manner that
protects and advances the rights and best interests of the child. Data fiduciaries
are required to establish mechanisms for age verification and parental consent.
Fiduciaries that operate commercial websites or online services directed at
children or process large volume of children personal data would be classified
as guardian data fiduciaries and barred from certain processing operations.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">10.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-spacerun: yes;"> </span>Transparency and Accountability measures includes-
(a) Privacy by design, (b) data protection impact assessment, (c ) record
keeping, (d) appointing a data protection officer, and (e ) data audits.
Practices inscribed in (b) to (e ) are to be carried about by data fiduciaries
which can be classified as “significant data fiduciaries” <span style="mso-spacerun: yes;"> </span>by the Data Protection Authority. Technology
companies including but not limited to BFSI <span style="mso-spacerun: yes;"> </span>processing huge amounts of personal data will
have to register as data fiduciaries and undergo government audits.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">11.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Transfer of Personal
Data Outside India- There is a restriction on cross border data flows. There is
a mandate to store one serving copy of all personal data within the territory of
India. Also, the Government is empowered to classify any sensitive personal
data as critical personal data and mandate its storage and processing
exclusively within India. Any cross border transfer of data is made subject to
standard contractual clauses or inter group schemes that have been approved by
the Data protection Authority, prescribed that transfer to a particular country,
or to a sector within a country or to a particular international organization is
permissible by the Central Government, transfers permissible due to a situation
of necessity, consent with respect to personal data and explicit consent with
respect to sensitive personal data. However, would not be applicable or extend
to critical personal data. This will impact and put a check on technology
service providers, credit scoring, insurance, lending & financial companies,
etc. which forces ‘take it or leave it’ contracts from customers. This provision
is to deal with non-negotiable contracts, wherein the data controller uses its
market power to force people to give up personal data. And, now only the data
which is necessary for the service or product being provided;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">12.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Penalties- range from
2-4% of the world wide’s turnover, or fines between </span><span style="font-family: "times new roman" , serif; font-size: 12.0pt; line-height: 150%;">₹</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"> 5 crores and </span><span style="font-family: "times new roman" , serif; font-size: 12.0pt; line-height: 150%;">₹</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"> 15 crores,
whichever is higher. There are certain offences which punishable with
imprisonment.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">13.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Data Protection Authority
to be established by Government of India and a data protection fund to be set
up through proceeds from the penalties and the fines;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="mso-list: Ignore;">14.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Overriding Effect –
The provisions of this law shall have an overriding effect to the extent that such
provisions are inconsistent with any other law for the time being in force or
any instrument having effect by virtue of any such law. Existing Acts, such as
Right to Information, Aadhaar and Information Technology will have to be amended.
<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; tab-stops: 70.8pt;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">To know further details and other legal aspects of India’s
forthcoming Data Protection Law and its impact on your business or get your
company compliant or any clarification, please feel free to connect with us at <a href="mailto:admin@equicorplegal.com">admin@equicorplegal.com</a> <span style="mso-spacerun: yes;"> </span>/ 08448824659.<o:p></o:p></span></div>
<br /></div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-39309811938585331022018-06-26T14:25:00.000+05:302018-06-26T14:33:40.393+05:30Post Employment Restrictive Covenants- How Much Enforceable?<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The legislations
governing several aspects of the employer-employee relationship are so
complicated and ambiguous, that they yield in litigation rather than to provide
clear way out. Moreover, the most important bone of contention w.r.t.
protection of confidential information, non-disclosure and non-solicitation
have not yet been addressed through legislation in India, thus warranting recourse
to judicial interpretation and common law.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">In
an attempt to protect their interests, trade secrets, confidential information,
every employer execute employment agreement and impose post employment restrictive
covenants pertaining to manner in which the employees are required to serve the
notice period, comply with the exit formality, non-solicitation, non-compete
and others before finally exit from the employer.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">However,
to enforce post employment restrictive covenants had become a challenging task
for the employers. In our this article- “ <b><i>Post Employment Restrictive Covenants- How
Much Enforceable?</i></b>” we seek to provide an overview of the steps to be
adopted by the employer and how to address a conflict situation with its
employees and to enforce post employment covenants.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The legal recourse for employer and future course
of action are discussed as below: <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l5 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">1.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Pre-
Conflict/Litigation- Course of Action</span></b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">At
this stage, following documentation and course of action to be adopted to
prevent/reduce any future conflict or issue with the present/future employees:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: .75in; mso-add-space: auto; mso-list: l0 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">a.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Execution
of Employment Letter</span></b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"> which includes but not limited to exit
mechanism; post-employment restriction and covenants; non-compete;
non-solicitation; confidentiality obligation, IP protection. The post
employment restrictive clause need to be draft with a balance keeping in view of
Section 27 of Indian Contract Act and recent judicial approach. As Section 27
of the Indian Contract Act, prohibits any kind of unreasonable restraint on
trade, employment and profession. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: .75in; mso-add-space: auto; mso-list: l0 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">b.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Non-Circumvention
& Non-Disclosure Agreement</span></b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">- An Additional protection layer
for securing the interest of the Company including confidentiality,
non-solicitation, IP and data protection.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: .75in; mso-add-space: auto; mso-list: l0 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">c.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Service
Bond</span></b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">-
To include additional penalty clause for violation of IP; non-compete;
non-solicitation; confidentiality; data; trade secret; client details.; post
employment covenants; to join/engage any company or indulge in any competitive
business only after no dues clearance and formal exit from the employer.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: .75in; mso-add-space: auto; mso-list: l0 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">d.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Employee
Handbook</span></b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">- Beside general employment conditions it shall include
but not limited to exit mechanism; imposing garden leave; post employment
covenants; clearance of any investigation prior to exit from the Company. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l5 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">2.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Upon
Breach of Terms of Employment</span></b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">: Separate Legal Notice to employee
& new employer for breach of terms of conditions including but not limited
to non-compete & non-solicitation. Also, a Cease & Desist Letter for tortious interference in business to new
employer for “<b><i>using the ex-employee”</i></b> for violation of breach of terms
including but not limited to non-compete; non-solicitation, data & IP.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l5 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">3.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Litigation</span></b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">: On
the event of failure of the above-mentioned course of actions, the employer should
initiate a litigation with keeping mind of the following points:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: .75in; mso-add-space: auto; mso-list: l4 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">a.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">File a criminal/civil suit against the
ex-employee depending upon the breach of terms and violations along with filing
a police complaint depending upon the facts of the conflict;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; margin-left: .75in; mso-add-space: auto; mso-list: l4 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">b.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">File a criminal/civil suit against the new
employer of ex-employee:<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">In
general, a question is always raised by the
companies/employers that- whether a suit or any action can be initiated against
the new employer of the ex-employee of the Company, who had breached the terms
of his employment & post employment covenant with the Company. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">On review
of past decisions made by Supreme Court and other High Courts, in several adjudicated
matters, new employer had been successfully sued in Court of Law, where the new
employer is aware of the breach of terms & violations by its new employee
(ex-employee of the Company). The new employer can be sued for tempting, luring
and assisting ex-employee to breach a contractual obligation and shall be held
liable for interference of contractual relationship between ex-employee &
the Company. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><u><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Enforceability of Notice Period<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">For
serving notice period, in one of the case, </span><i><span style="color: #222222; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Chairman
and Managing Director, India Airlines vs. Binod Kumar Sinha and ors</span></i><a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftn1" name="_ftnref1" title=""><span class="MsoFootnoteReference"><i><span style="color: #222222; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><b><span style="font-size: 12pt; line-height: 107%;">[1]</span></b></span><!--[endif]--></span></i></span></a><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">
hon’ble Supreme Court has held that – “</span><b><i><span style="color: #222222; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">An employee when joins
service is subject to certain terms and conditions of service and he cannot
quit the employment without giving requisite notice to the employer. But what
should be the duration of a reasonable notice in such circumstances is a matter
to be decided in each case depending upon the exigencies, needs or necessities
and the essentiality of the service concerned</span></i></b><span style="color: #222222; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">.”</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 19.5pt; text-align: justify;">
<span style="color: #222222; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Other decisions by hon’ble Supreme Court:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="background: white; line-height: 150%; margin-bottom: 19.5pt; mso-add-space: auto; mso-list: l2 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #222222; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">1.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #222222; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Thus, if an employee
does not serve the notice period by working for the duration of the notice
period, the employer may not have a decree from the court asking specific performance
of the covenant to the effect that the employee would have to work for the
notice period duration. But instead as a remedy to the employer, the court may
grant damages for breach of contract.<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftn2" name="_ftnref2" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: #222222; font-size: 12pt; line-height: 107%;">[2]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="background: white; line-height: 150%; margin-bottom: 19.5pt; mso-add-space: auto; mso-list: l2 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #222222; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">2.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #222222; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Since enforceability
of the notice period is not an option available with the employers, and they
may only claim damages in case of illegal termination of employment contract by
the employee, it is pertinent to understand the extent of damages that can be
claimed.<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftn3" name="_ftnref3" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: #222222; font-size: 12pt; line-height: 107%;">[3]</span></span><!--[endif]--></span></a><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 19.5pt; text-align: justify;">
<b><u><span style="color: #222222; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Compensation for not
serving Notice Period<o:p></o:p></span></u></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l1 level1 lfo6; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">1.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">In relation to employee abruptly leaving the
Company (without serving the notice period), Andhra Pradesh High Court<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftn4" name="_ftnref4" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 12pt; line-height: 107%;">[4]</span></span><!--[endif]--></span></a> held
that- “<b><i>such action by the employee did not cause any damage or loss to the
Company and it would be unreasonable to acquire </i></b></span><b><i><span style="font-family: "times new roman" , serif; font-size: 12.0pt; line-height: 150%;">₹</span></i></b><b><i><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">
2,00,000/- from employee. An amount of </span></i></b><b><i><span style="font-family: "times new roman" , serif; font-size: 12.0pt; line-height: 150%;">₹</span></i></b><b><i><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">
1,00,000/- was fixed by the Court as reasonable damages taking into
consideration the period of work and the fact that no actual loss was caused to
the Company</span></i></b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">.”<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l1 level1 lfo6; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">2.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">In one of the leading case, <b><i>Union
of India and Anr. vs. Tulsiram Patel and Ors.<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftn5" name="_ftnref5" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><b><span style="font-size: 12pt; line-height: 107%;">[5]</span></b></span><!--[endif]--></span></a></i></b>
w.r.t. compensation & enforceability of notice period, the hon’ble Supreme
Court has held that- “<b><i>Whether the contract of service is for a
fixed period or not, if it contains a provision for its termination by notice,
it can be so terminated. If there is no provision for giving a notice and the
contract is not for a fixed period, the law implies an obligation to give a
reasonable notice. Where no notice in the first case or no reasonable notice in
the second case is given, the contract is wrongfully terminated and such
wrongful termination will give rise to a claim for damages</i></b>.”<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">To
prove tortious interference against the new employer, following points need to
prove:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">a.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">A valid non-compete exists between former
employer and employee;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">b.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The hiring employer had knowledge of the
non-compete;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">c.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The hiring employer caused a breach of the
non-compete by hiring the employee;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">d.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The hiring employer has no legal
justification for causing the breach;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">e.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The former employer has realized the damages<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="color: #303030; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">In one of the
landmark cases<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftn6" name="_ftnref6" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="color: #303030; font-size: 12pt; line-height: 107%;">[6]</span></span><!--[endif]--></span></a>, the accused, an
ex-employee of Company A had resigned & joined Company B after final
clearance from Company A. During his course of exit interview, he had
continuously maintained that he would not be joining any company which was in
direct competition with Company A. He also agreed that all the confidential
information acquired by him during his tenure of work shall be kept
confidential at all times. However, two weeks later, it came to the knowledge
of Company A that he had joined Company B, which was its direct competitor.
Later it was also discovered that the accused had transferred or downloaded
various confidential information of Company A into his personal email id.
Screenshots of the email id of the accused was produced by Company A which
showed that such information was passed on to Company B. Thus, the Court was of
the view that such act amounted to hacking under S.66 of the IT Act along with
cheating, dishonestly inducing of property & breach of trust under penal provisions.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="color: #303030; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="color: #303030; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="color: #303030; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Moreover, in some
of the earlier cases adjudicated at High Courts & Supreme Court, it has
been held by the learned Courts that- “</span><b><i><span style="color: red; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">A reasonable restriction on
non-solicitation for carrying on business or employment with new employer by
utilizing the list of clients/customer is valid</span></i></b><span style="color: red; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">.”</span><span style="color: #303030; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="color: red; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><br /></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 7.5pt; text-align: justify;">
<b><span style="color: #333333; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">In addition to the above options,
what steps can employer take in advance to protect against a breach by an
employee?</span></b><span style="color: #333333; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 8.4pt; margin-left: .5in; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #333333; font-family: "symbol"; font-size: 10.0pt; line-height: 150%;"><img alt="*" height="17" src="file:///C:/Users/AASHISH/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="17" /><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #333333; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Review your standard contractual documentation to ensure that it
operates as effectively as it can to protect your business.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 8.4pt; margin-left: .5in; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #333333; font-family: "symbol"; font-size: 10.0pt; line-height: 150%;"><img alt="*" height="17" src="file:///C:/Users/AASHISH/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="17" /><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #333333; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Consider amending restrictive covenants to be sure (i) that they
apply both during and after the employment and (ii) that they go no further
than is reasonably necessary to protect your legitimate business interests. If
they go further than is reasonably necessary, employer will not be able to
enforce them.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 8.4pt; margin-left: .5in; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #333333; font-family: "symbol"; font-size: 10.0pt; line-height: 150%;"><img alt="*" height="17" src="file:///C:/Users/AASHISH/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="17" /><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #333333; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Review confidentiality restrictions to ensure that they
specifically protect the types of confidential information which are key to
your business.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 8.4pt; margin-left: .5in; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #333333; font-family: "symbol"; font-size: 10.0pt; line-height: 150%;"><img alt="*" height="17" src="file:///C:/Users/AASHISH/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="17" /><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #333333; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Consider whether to include within the contracts of employment
of your senior employees an express duty of disclosure of matters which are
adverse to your interests. An express duty tends to be easier to enforce and
will act as more of a deterrent to employees.<o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 8.4pt; margin-left: .5in; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #333333; font-family: "symbol"; font-size: 10.0pt; line-height: 150%;"><img alt="*" height="17" src="file:///C:/Users/AASHISH/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="17" /><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #333333; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Check that your standard contracts of employment include a
garden leave provision. A garden leave clause can give the employer the right
to put an employee who is on notice of termination on garden leave and to
prevent him from attending premises, contacting clients or undertaking any
business activity. <o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; margin-bottom: 8.4pt; margin-left: .5in; mso-list: l0 level1 lfo1; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "symbol"; font-size: 10.0pt; line-height: 150%;"><img alt="*" height="17" src="file:///C:/Users/AASHISH/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="17" /><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #333333; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Ensure that the contract makes clear that the length of any
post-termination </span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">restrictive
covenants inclusive of garden leave clause.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">For any </span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">further details and other legal aspects of enforcement of restrictive
post employment covenants and to get your employees to serve the notice period
along with compliance of non-compete & non-solicitation or any
clarifications<b>,</b></span><b><span style="font-family: "vijaya" , serif; font-size: 27.0pt; line-height: 150%;"> </span></b><span style="background: white; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">please feel
free to connect with us at <a href="mailto:admin@equicorplegal.com">admin@equicorplegal.com</a>
/ 08448824659.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="background: white; line-height: 150%; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="color: red; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">
</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
</div>
<div>
<!--[if !supportFootnotes]--><br clear="all" />
<hr align="left" size="1" width="33%" />
<!--[endif]-->
<br />
<div id="ftn1">
<div class="MsoFootnoteText">
<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftnref1" name="_ftn1" title=""><span class="MsoFootnoteReference"><span style="font-family: "book antiqua" , serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 10pt; line-height: 107%;">[1]</span></span><!--[endif]--></span></span></a><span style="font-family: "book antiqua" , serif;"> AIR 2001 SC 3988<o:p></o:p></span></div>
</div>
<div id="ftn2">
<div class="MsoFootnoteText" style="text-align: justify;">
<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftnref2" name="_ftn2" title=""><span class="MsoFootnoteReference"><span style="font-family: "book antiqua" , serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 10pt; line-height: 107%;">[2]</span></span><!--[endif]--></span></span></a><span style="font-family: "book antiqua" , serif;"> </span><span style="color: #222222; font-family: "book antiqua" , serif; mso-fareast-font-family: "Times New Roman";">Nandganj Sihori Sugar
Co. Ltd. v. Badri Nath Dixit, (1991) 3 SCC 54</span><span style="font-family: "book antiqua" , serif;"><o:p></o:p></span></div>
</div>
<div id="ftn3">
<div class="MsoFootnoteText">
<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftnref3" name="_ftn3" title=""><span class="MsoFootnoteReference"><span style="font-family: "book antiqua" , serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 10pt; line-height: 107%;">[3]</span></span><!--[endif]--></span></span></a><span style="font-family: "book antiqua" , serif;"> S.S. Shetty V. Bharat Nidhi Ltd.AIR
1958 SC 12<o:p></o:p></span></div>
</div>
<div id="ftn4">
<div class="MsoFootnoteText">
<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftnref4" name="_ftn4" title=""><span class="MsoFootnoteReference"><span style="font-family: "book antiqua" , serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 10pt; line-height: 107%;">[4]</span></span><!--[endif]--></span></span></a><span style="font-family: "book antiqua" , serif;"> Satyam Computer Services Limited v.
Ladella Ravichander, MANU/AP/0416/2011<o:p></o:p></span></div>
</div>
<div id="ftn5">
<div class="MsoFootnoteText">
<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftnref5" name="_ftn5" title=""><span class="MsoFootnoteReference"><span style="font-family: "book antiqua" , serif;"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-size: 10pt; line-height: 107%;">[5]</span></span><!--[endif]--></span></span></a><span style="font-family: "book antiqua" , serif;"> AIR 1985 SC 1416<o:p></o:p></span></div>
</div>
<div id="ftn6">
<div class="MsoFootnoteText" style="text-align: justify;">
<a href="https://www.blogger.com/blogger.g?rinli=1&pli=1&blogID=6560493675054762503#_ftnref6" name="_ftn6" title=""><span class="MsoFootnoteReference"><!--[if !supportFootnotes]--><span class="MsoFootnoteReference"><span style="font-family: "calibri" , sans-serif; font-size: 10.0pt; line-height: 107%;">[6]</span></span><!--[endif]--></span></a> <span style="font-family: "book antiqua" , serif;">Abhinav Gupta v. State of Haryan 2008
Cr LJ 4356</span><o:p></o:p></div>
</div>
</div>
</div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-40987511753105632612018-05-31T20:48:00.000+05:302018-05-31T20:48:03.011+05:30Sachin Bansal’s Exit form Flipkart- Lessons for Founders<div dir="ltr" style="text-align: left;" trbidi="on">
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhc2wuMsku3VvKI8D3vXZjfZ6CZNZAhRGMDzmkPQV6Gsour94IrCKX9E8_nkOk-lScJFOpNQkKZ-g4mlZ2bFJuEDvJpChje3H4Qsc4iverD3kQAxLil4qSC68gb6y-WYTDZlH_Xn4mjQvw/s1600/sachin_bansal.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="400" data-original-width="800" height="160" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhc2wuMsku3VvKI8D3vXZjfZ6CZNZAhRGMDzmkPQV6Gsour94IrCKX9E8_nkOk-lScJFOpNQkKZ-g4mlZ2bFJuEDvJpChje3H4Qsc4iverD3kQAxLil4qSC68gb6y-WYTDZlH_Xn4mjQvw/s320/sachin_bansal.jpg" width="320" /></a></div>
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<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">US
retailer Wallmart Inc. acquired a 77% stake in India’s largest online retailer for
almost US$ 16 billions in its biggest acquisition to date. With this
acquisition, brings an end to journey of Poster Boy- Sachin Bansal & <span style="mso-spacerun: yes;"> </span>Flipkart.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Though
it s a moment of ecstasy and celebrations for startups especially Flipkart,
there are few questions which must have to looked seriously by the
Founders/Startups.<o:p></o:p></span></div>
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<br />
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<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;"><b><u>Sachin
Bansal- Exit from Flipkart-</u></b><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Sachin
was involved in talks with Wallmart from the beginning and it was expected that
he could get a bigger role at Flipkart after the sale then the Executive Chairman.
However, a last minute disagreement with Lee Fixel and Krishnamurthy over hos
role and rights after the sale led to a bitter ouster. It’s the final
affirmation of who controls the Company.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Sachin
being a Founder of Flipkart wanted stronger rights such as preferential ‘founder
rights’ & guarantees that he would have<span style="mso-spacerun: yes;">
</span>a lot more say in Flipkart’s operations, however this was strongly
refuted by Krishnamurthy who later on been retained as CEO by Wallmart. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">“<b><i>Since
the start of Flipkart, Sachin’s life has revolved around it. For him every
conversation is about Flipkart & everything is about Flipkart.</i></b>” – Abhishek Goyal,
Co-founder of Traxcn and early investor of Flipkart.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">It
has also been confirmed that with this ouster, there would be certain restriction
on Sachin professional life as part of his exit from Flipkart:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l1 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Restriction on starting any business
that directly or indirectly competes with Flipkart for a minimum period of 18
months;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l1 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">2.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Not to make nay investments or take
management role in any competing business for atleast next 36 months.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">At
first Sachin Bansal is been forcefully exit from Flipkart and now cannot do any
business as per his expertise. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;"><b><u>Questions
for Founders:</u></b><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Why couldn’t Binny Bansal or Sachin
Bansal be able to stop the unenviable exit of Sachin Bansal from Flipkart?<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">2.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Sachin Bansal is the most important energy
and reason for the Flipkart’s success. However, his exit form Flipkart shows
that it’s the investor who takes all decisions and not the Founders. In Indian
ecosystem, this kind of incident had happened earlier also- Forced exit of Mr.
Rahul Yadav from Housing.com on disagreement with investor- Sequoia Capital. <span style="mso-spacerun: yes;"> </span>Do this undue advantage can be checked at the beginning
by the Founder’s themselves?<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l2 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">3.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">The restrictive clause after the exit
would make Sachin as spectator for a time period and there is a possibility
that he may loose his spot in business world or atleast he would lag behind his
competitive founders and may have to start fresh. Is there any way out for
Founders to protect themselves or are they on the mercy of investors?<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;"><b><u>Way
out-</u></b><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">At
the time of execution of idea and starting of startup journey, most of the
Founders are focused on the success of their startups, however, they forget to
protect themselves. And, by the time their startup reached to the milestones as
desired by the Founders, they need more partners to grow, especially investors
and at alter stage of startup when investor join hands with Founders, they are
very straight forward objective- to make more profit and to secure the money
even at the cost of Founders. Though, investors have rights to protect their investment,
does this protection extent beyond the point that for more profit, Founders can
be forced out of their own startup and that to without their own consent. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Now,
with growing awareness, most of the Founders are executing Founders Agreement,
which not only protect the Founder’s interest but also enable them to negotiate
the rights with investors instead of being cowed. <span style="mso-spacerun: yes;"> </span>Therefore, it is very necessary to build a
solid foundation before taking next step with your business. And, when you are
having more than one founder for a startup, its wiser to execute a Founders
Agreement among themselves. It will act as baseline for the relationship among
the Co-Founders during the high & low of their professional journey. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">In
similar situation like of Sachin Bansal, Ola’s Founder, Bhavish Aggarwal had
acted smartly and blocked his rights from the very beginning through Founders
Agreement and the same has been agreed in the Investors Agreement.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">To
put it simply Founders Agreement is an agreement between founders of a company
on number of issues they may face. It categorically states what is expected out
of them and how decisions will be made.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">There
can be no perfect timing but one can say the sooner the better, but late is
better than never. A good rule of thumb for when to think about a founders’
agreement is that point at which you start thinking about a company instead of
merely an idea. If you have passed that point and have not yet created a
founders’ agreement, better late than never.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">As
an old proverb -“<b><i>Prevention is better than cure</i></b>”, it would be wiser for Founder’s
to execute a Founder’s Agreement which should govern the followings:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Founders’ Objectives;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">2.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Relationship & Obligation of each
Founders;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">3.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Decision making powers;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">4.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Investment & contributions;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">5.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Equity Holdings & Entrenchment
Rights;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">6.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Limitation & liabilities;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">7.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Protection of intellectual property <span style="mso-spacerun: yes;"> </span>& IP assignment<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">8.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Vesting Clause for the shares of the
Founders;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">9.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Appointment & removal of Key
Managerial Personnel;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">10.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Entry of Investor/third parties in
the Company;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">11.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Exit Mechanism;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l0 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%; mso-fareast-font-family: Vijaya;"><span style="mso-list: Ignore;">12.<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Non-Compete;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">As
a startups grows, you may discover that there are differences among co-founders
on the future of startup or its mission. So, its better to execute a Founders
Agreement inclusive of the terms mentioned herewith to create a mutually accepted terms for resolve the differences and grow together.</span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">For
any clarification, please feel free to connect with us at
admin@equicorplegal.com / 08448824659.<o:p></o:p></span></div>
<br /><br />
</div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-29772082371480307282018-05-23T11:30:00.000+05:302018-05-23T17:25:36.331+05:30Taxation of Damages- “Damages paid for Breach of Contract to attract GST”<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div style="background: white; line-height: 150%; margin-bottom: 7.5pt; margin-left: 0in; margin-right: 0in; margin-top: 0in; text-align: justify;">
<span style="font-family: "Book Antiqua",serif;">Performance is the essence of a contract and hence
parties to contract generally incorporate their expectation in terms of damage
caused by failure of either party to perform its obligations completely or as
per the agreed terms.<o:p></o:p></span></div>
<div style="-webkit-text-stroke: 1px rgba(0, 0, 0, 0); background: white; box-sizing: border-box; font-variant-caps: normal; font-variant-ligatures: normal; line-height: 150%; margin-bottom: 7.5pt; margin-left: 0in; margin-right: 0in; margin-top: 0in; orphans: 2; text-align: justify; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">
<span style="font-family: "Book Antiqua",serif;">The
contract may prescribe damages for deficiency in the performance of contract
known as ‘liquidated damages’. It is to dissuade unsatisfactory performance or
non-performance. For instance, contracts state that time is the essence of
contract, and any delay invites say, 1% of the value of the contract for every
week of delay and the like. Similarly, it is common to forfeit earnest money
deposit (EMD) from a bidder in case he wins the bid but fails to act
thereafter. This forfeiture clause is a deterrent for non-serious bidders
entering the fray. Other examples may be rent for delay in lifting goods;
agreeing to shoulder testing charges for samples to meet standards; cost of
removing rejected goods, etc.<o:p></o:p></span></div>
<div style="-webkit-text-stroke: 1px rgba(0, 0, 0, 0); background: white; box-sizing: border-box; font-variant-caps: normal; font-variant-ligatures: normal; line-height: 150%; margin-bottom: 7.5pt; margin-left: 0in; margin-right: 0in; margin-top: 0in; orphans: 2; text-align: justify; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">
<span style="font-family: "Book Antiqua",serif;">Payment
of damages or the forfeiture of deposit does not restitute the person to whom
loss or damage is caused. Liquidated damages are in nature of a measure of
damages to which parties agree, rather than a remedy. By charging damages or
forfeiture, one party does not accept or permit the deviation of the other
party. It is an expression of displeasure. Liquidated damages cannot be said to
be the desired income or result of the contract.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Book Antiqua",serif; font-size: 12.0pt; line-height: 150%;">However,
the Authority for Advance Rulings (AAR) has ruled that payments in respect to
non-performance of a contract would be liable for Goods & Service Tax
(GST). <span style="background: white;"> This view is based on the
provisions under the erstwhile Service Tax Law, </span><em style="-webkit-text-stroke: 1px rgba(0, 0, 0, 0); box-sizing: border-box; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;"><span style="font-family: "Book Antiqua",serif; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi;">“agreeing to the obligation to refrain
from an act, or to tolerate an act or a situation, or to do an act” </span></em><span style="-webkit-text-stroke: 1px rgba(0, 0, 0, 0); float: none; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">was a declared service under Section 66E(e) of Finance Act,
1994. Similar provision has been incorporated in Central Goods and Services Tax
Act, 2017 (CGST Act) also under Schedule II. Under GST law, the taxable event
is supply which has been defined widely and includes all forms of supply for a
consideration which is made in course of or in furtherance of business. The act
of tolerance or agreeing to refrain from an act is treated as supply of service
under the CGST Act. As per these provisions there should be an agreement
between the parties to either refrain from doing an act, or to tolerate an
act/situation or to do an act.</span></span><o:p></o:p></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Book Antiqua",serif; font-size: 12.0pt; line-height: 150%;">The
Maharashtra Authority for Advance ruling (AAR) has stated that liquidated
damages paid on operation & maintenance and erection & commissioning contracts.
Entered by the applicant- Maharashtra State Power Generation Company- shall be
taxable under GST @ 18%. The Authority has concluded liquidated damages to be a
deemed service, covered under the phrase ‘agreeing to tolerate an act or
situation’ under Para 5 of Schedule II of GST Act.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Book Antiqua",serif; font-size: 12.0pt; line-height: 150%;">Any
activity to be taxable under GST, requirement of<span style="mso-spacerun: yes;"> </span>‘supply’ and the consequent ‘consumption’ should
be met. <o:p></o:p></span></div>
<div style="background: white; line-height: 150%; margin-bottom: 7.5pt; margin-left: 0in; margin-right: 0in; margin-top: 0in; text-align: justify;">
<span style="font-family: "Book Antiqua",serif;">However, liquidated damages may hardly satisfy the
essentials of supply or service. As discussed above the purpose of agreeing to
payment of liquidated damages is to ensure performance. It cannot be said to be
a consideration for tolerating non-performance. The provisions of law cited
above thus cannot be applied to situations where the contract does not want
delay in performance rather says that time is the essence of the contract. When
the aggrieved party receives damages from the defaulting party it cannot be
said that the aggrieved party is tolerating the non-performance or delayed
performance.<o:p></o:p></span></div>
<div style="-webkit-text-stroke: 1px rgba(0, 0, 0, 0); background: white; box-sizing: border-box; font-variant-caps: normal; font-variant-ligatures: normal; line-height: 150%; margin-bottom: 7.5pt; margin-left: 0in; margin-right: 0in; margin-top: 0in; orphans: 2; text-align: justify; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">
<span style="font-family: "Book Antiqua",serif;">The
view supporting Service Tax liability on liquidated damages and forfeiture was
based on the premise that the party had ‘tolerated’ the non-performance. A
contract cannot be read to be agreeing to a breach of a contract. A breach of
contract is not tolerated and that is why an amount is imposed to deter breach.
The contract is for execution and not for the breach<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: "Book Antiqua",serif; font-size: 12.0pt; line-height: 150%; mso-bidi-font-family: Arial;">Damages for breach of contract can
be considered as business expenditure in commercial transactions. If a contract
is not executed because its execution would result in loss, damages paid for
its breach are deductible as business expenditure.</span><span style="font-family: "Book Antiqua",serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Book Antiqua",serif; font-size: 12.0pt; line-height: 150%;">There
has to be a distinction between amount payable for breach of contractual terms,
or delay in performance, and something specifically agreed upon for forbearance
or tolerance of an act like a noncompete fees.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Book Antiqua",serif; font-size: 12.0pt; line-height: 150%;">Though
rulings by the AAR are case specific, they have a persuasive impact on tax assessment
in cases of other firms under similar circumstances.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: "Book Antiqua",serif; font-size: 12.0pt; line-height: 150%;">It is high time that the Government clarifies the issue with
an illustrative list of what constitutes tolerance of an act, as the present
ruling of AAR</span><span style="font-family: "Book Antiqua",serif; font-size: 12.0pt; line-height: 150%;"> can lead to lot of litigation, particularly has made
multinational companies, especially<span style="mso-spacerun: yes;">
</span>those executing infrastructure projects, and the mining sector jittery,
and it could have implications on mergers & acquisitions along with franchise
arrangements too.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Book Antiqua",serif; font-size: 12.0pt; line-height: 150%;">For
any clarification, please feel free to connect with us at <a href="mailto:admin@equicorplegal.com">admin@equicorplegal.com</a> / 08448824659.<o:p></o:p></span></div>
<br /></div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-21694238290605562162018-04-02T14:31:00.000+05:302018-04-02T14:31:15.920+05:30SUPREME COURT FIXES SIX MONTHS AS LIMITATION PERIOD ON STAY OF TRIAL PROCEEDINGS<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%;">The
Hon’ble Supreme Court of India in a very significant judgment has ruled that
stay of proceedings in a pending trial, whether civil or criminal, will
automatically lapse after six months from the date of grant of stay order
unless extended, in an exceptional circumstance, by a speaking order. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%;">The
Hon’ble Supreme Court comes up with this significant direction in a judgment,
dated March 28, 2018, arising out of Prevention of Corruption Act, in <i style="mso-bidi-font-style: normal;">Asian Resurfacing of Road Agency Pvt. Ltd.
& Anr. Versus Central Bureau of Investigation</i>, by a bench comprising of
Hon’ble Mr. Justice Adarsh Kumar Goel and Hon’ble Mr. Justice Navin Sinha. The
said judgment was concurred by Hon’ble Mr. Justice Rohinton Fali Nariman in a
separate but concurring judgment. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%;">The
Hon’ble Supreme Court with an objective of remedying the situation of
proceedings remaining pending for long on account of stay considered it
appropriate to direct that: “<i style="mso-bidi-font-style: normal;">in all
pending cases where stay against proceedings of a civil or criminal trial is
operating, the same will come to an end on expiry of six months from today
unless in an exceptional case by a speaking order such stay is extended. In
cases where stay is granted in future, the same will end on expiry of six
months from the date of such order unless similar extension is granted by a
speaking order. The speaking order must show that the case was of such
exceptional nature that continuing the stay was more important than having the
trial finalized. The trial Court where order of stay of civil or criminal
proceedings is produced, may fix a date not beyond six months of the order of
stay so that on expiry of period of stay, proceedings can commence unless order
of extension of stay is produced</i>.”<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%;">The
Hon’ble Court observed that the mandate of speedy justice applies to all cases
where at trial stage proceedings are stayed by the higher court, i.e. the High
Court or a court below the High Court, as the case may be and directed that in
all pending matters before the High Courts or other courts, where stay of
proceedings in a pending trial is operating, stay will automatically lapse
after six months from the date of the judgment unless extended by a speaking
order. The Hon’ble Supreme Court further held that: “<i style="mso-bidi-font-style: normal;">same course may also be adopted by civil and criminal
appellate/revisional courts under the jurisdiction of the High Courts. The
trial courts may, on expiry of above period, resume the proceedings without
waiting for any other intimation unless express order extending stay is
produced</i>.” <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%;">The
timeline fixed by the Hon’ble Court is applicable to all trial proceedings, for
both, pending and future matters. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span lang="EN-IN" style="font-family: "Arial",sans-serif; font-size: 12.0pt; line-height: 150%;">For
any clarification, please feel free to connect with us at <a href="mailto:admin@equicorplegal.com/">admin@equicorplegal.com/</a> 08448824659
<o:p></o:p></span></div>
<br /><br />
</div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-55835608691926964152018-03-17T14:13:00.000+05:302018-03-17T14:14:55.348+05:30Regulate the Unregulated Deposit Schemes<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif;">With
its ongoing mission to curb the unregulated deposit & Ponzi scheme and<span style="color: #333333;"> to protect the savings of the investors, the Union
Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval
to introduce the</span> </span>“Banning the Unregulated Deposit Scheme Bill
2018” (“<b style="mso-bidi-font-weight: normal;">Bill</b>”). <span style="color: black;">The Bill is aimed at tackling the menace of illicit deposit
taking activities in the country. Companies/ institutions running such schemes
exploit existing regulatory gaps and lack of strict administrative measures to
dupe poor and gullible people of their hard-earned savings. The Bill may cover:<o:p></o:p></span></div>
<ol start="1" type="a">
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">complete
prohibition of unregulated deposit taking activity;</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">deterrent
punishment for promoting or operating an unregulated deposit taking
scheme;</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">stringent
punishment for fraudulent default in repayment to depositors;</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">designation
of a Competent Authority by the State Government to ensure repayment of
deposits in the event of default by a deposit taking establishment;</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">powers
and functions of the competent authority including the power to attach
assets of a defaulting establishment;</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">designation
of Courts to oversee repayment of depositors and to try offences under the
Act; and</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l0 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">listing
of Regulated Deposit Schemes in the Bill, with a clause enabling the
Central Government to expand or prune the list.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
</ol>
<div style="line-height: 150%; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><span style="color: #333333; font-family: "book antiqua" , serif;">Salient
Features of the Bill:<o:p></o:p></span></b></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">A
substantive banning clause which bans Deposit Takers from promoting,
operating, issuing advertisements or accepting deposits in any Unregulated
Deposit Scheme. The principle is that the Bill would ban unregulated
deposit taking activities altogether, by making them an offence ex-ante,
rather than the existing legislative-cum-regulatory framework which only
comes into effect ex-post with considerable time lags.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">To
create three different types of offences, namely, running of Unregulated
Deposit Schemes, fraudulent default in Regulated Deposit Schemes, and
wrongful inducement in relation to Unregulated Deposit Schemes.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">It
provides severe punishment and heavy pecuniary fines to act as deterrent.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">To
have adequate provisions for disgorgement or repayment of deposits in
cases where such schemes nonetheless manage to raise deposits illegally.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">It provides
for attachment of properties/ assets by the Competent Authority, and
subsequent realization of assets for repayment to depositors.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Clear-cut
time lines have been
provided for attachment of property and restitution to depositors.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">To create
an online central database, for collection and sharing of information on
deposit taking activities in the country.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Defines
"Deposit Taker" and "Deposit" comprehensively.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">"Deposit
Takers" include all possible entities (including individuals)
receiving or soliciting deposits, except specific entities such as those incorporated
by legislation.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">"Deposit"
is defined in such a manner that deposit takers are restricted from
camouflaging public deposits as receipts, and at the same time not to curb
or hinder acceptance of money by an establishment in the ordinary course
of its business.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; line-height: 150%; mso-list: l1 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><span style="background: white; color: black; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Being
a comprehensive Union law, the Bill adopts best practices from State laws,
while entrusting the primary responsibility of implementing the provisions
of the legislation to the State Governments.</span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></li>
</ul>
<div style="line-height: 150%; text-align: justify;">
<span style="color: #333333; font-family: "book antiqua" , serif;">This Bill will be a step closer to – “<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;">Anything which is regulated is
legitimate activity, if it is not regulated, it is illegitimate</i></b>”.<o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: Arial;">And,
to ban unregulated deposits, by making even the act of running such Ponzi
schemes an offence.<o:p></o:p></span></div>
<div style="-webkit-text-stroke-width: 0px; background: white; box-sizing: border-box; font-variant-caps: normal; font-variant-ligatures: normal; line-height: 150%; orphans: 2; text-align: justify; text-align: start; text-decoration-color: initial; text-decoration-style: initial; widows: 2; word-spacing: 0px;">
<span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: Arial;">The current investor protection
framework kicks in only after such schemes go bust. <o:p></o:p></span></div>
<div style="background: white; line-height: 150%; text-align: justify;">
<span style="color: black; font-family: "book antiqua" , serif; mso-bidi-font-family: Arial;">A
Ponzi scheme is defined as a fraudulent investment operation, where
the operator generates returns for older investors through revenue paid by new
investors, rather than from legitimate business activities or profit from
financial trading. This Bill should be a welcome step towards protection of
small investor’s interest.<o:p></o:p></span></div>
<div style="line-height: 150%; text-align: justify;">
<span style="color: #333333; font-family: "book antiqua" , serif;"><o:p> For any further details or query, please contact at admin@equicorplegal.com/08448824659</o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
<br /></div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-33991364608851539712018-03-16T21:02:00.000+05:302018-03-16T21:02:34.011+05:30A Structured Overview of Corporate Insolvency Regime in India<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
</div>
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<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">What is the purpose of <span style="mso-bidi-font-weight: bold;">Insolvency and Bankruptcy Code 2016?<o:p></o:p></span></span></div>
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<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">1. Th consolidate &
amend the laws relating to insolvency & bankruptcy;<o:p></o:p></span></div>
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<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">2. To fix the time
periods for execution of the law in a time bound manner;<o:p></o:p></span></div>
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<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">3. To increase the
availability of credit;<o:p></o:p></span></div>
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<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">4. To balance the
interests of all stakeholders including alteration in the order of priority of
payment;<o:p></o:p></span></div>
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<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">5. To establish an
Insolvency & Bankruptcy Board of India as a regulatory body for insolvency
& bankruptcy law.<o:p></o:p></span></div>
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<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">With
the recent changes in the legal landscape of India, the Insolvency &
Bankruptcy Code, 2016 (“Code”) is the biggest and major legal reforms in the
recent times, which has curtailed the earlier extensive process of debt
recovery and insolvency. The Code has repealed around eleven laws and provides
a comprehensive and time bound mechanism to either put a distressed entity on a
firm revival path or timely liquidation of assets.<o:p></o:p></span></div>
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<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">The
Adjudication Authority for companies shall be National Company Law Tribunal
(NCLT) and National Company Law Appellate Tribunal (NCLAT) and Supreme Court
shall be the highest order of appeal or having jurisdiction to grant any stay
or injunction in respect of matters within the domain of the NCLT and NCLAT.<o:p></o:p></span></div>
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<span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Legislative journey so far!!!</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfgvTjHxDu3Qs8igU370zx1XUXstnjEc9mzAuiFOxOEEa7AtPDU7P1mGD6Nv4zPA2ynooDvOCXbY638p0tPQqnswMrj2FEPjTnNGLWHB20eRtXm5I47iw-cur7gWGmWbgZYlw89rJeYPk/s1600/main-qimg-f7ce93db8c420edd3be07418dceab4f7-c.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="314" data-original-width="546" height="230" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjfgvTjHxDu3Qs8igU370zx1XUXstnjEc9mzAuiFOxOEEa7AtPDU7P1mGD6Nv4zPA2ynooDvOCXbY638p0tPQqnswMrj2FEPjTnNGLWHB20eRtXm5I47iw-cur7gWGmWbgZYlw89rJeYPk/s400/main-qimg-f7ce93db8c420edd3be07418dceab4f7-c.jpg" width="400" /></a></div>
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<b><span style="font-size: 12pt; line-height: 150%;">Parties- Who can initiate Corporate Insolvency
Process<o:p></o:p></span></b></div>
<o:p></o:p><br />
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l0 level1 lfo1; mso-text-indent-alt: -.25in; text-align: justify; text-indent: -.5in;">
<!--[if !supportLists]--><b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;"> </span>i.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;"> </span></span></b><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Financial
Creditor- Any person to whom a
financial debt is owed & includes to whom such debts has been legally
assigned or transferred. Financial debt means a debt along with interest, if
any which is disbursed against the consideration for the time value of money.<o:p></o:p></span></div>
<br />
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<!--[if !supportLists]--><b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;"> </span>ii.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;">
</span></span></b><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Operational
Creditor- Any person to whom a
operational debt is owed & includes to whom such debts has been legally
assigned or transferred. Operational debt means a claim in respect of the
provision of goods or services including employment or a debt in respect of the
repayment of dues arising under any law for the time being in force and payable
to the Central Government, any State Government or any local authority <o:p></o:p></span></div>
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<!--[if !supportLists]--><b><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;"> </span>iii.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; font-weight: normal; line-height: normal;">
</span></span></b><!--[endif]--><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Corporate
Debtor- Any corporate person who owes a
debt to any person. Corporate person means a Company as defined in S.2 (20) of
the Companies Act, 2013; a limited liability partnership as defined in S. 2 (1)
(n) of LLP Act, 2008 or any other person incorporated with limited liability
under any law for the time being in force but shall not include any financial
service provider by themselves can initiate the corporate insolvency process.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><u><span style="font-family: "book antiqua" , serif;">Admission
by NCLT-</span></u></b><span style="font-family: "book antiqua" , serif;"> The Code
provides that the insolvency resolution shall have to be completed within 180
days (maximum one-time extension of 90 days allowed) from the date of admission
of application for insolvency resolution. Once the application is admitted by
the NCLT, the following consequences immediately will take place in respect of
the corporate debtor:<o:p></o:p></span></div>
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<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 1.0in; mso-add-space: auto; mso-list: l4 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">a)<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Moratorium- The NCLT would declare a
moratorium prohibiting any suits against the debtor, execution of any judgement
of a court or authority, any transfer of assets by the debtor, recovery of any
property against the debtor. The moratorium will continue till the resolution
process is completed.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 1.0in; mso-add-space: auto; mso-list: l4 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">b)<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><b style="mso-bidi-font-weight: normal;"><span style="font-family: "book antiqua" , serif;">Power
to manage the affairs of the corporate debtor rest with interim resolution
professional (IRP)-<span style="mso-spacerun: yes;"> </span></span></b><span style="font-family: "book antiqua" , serif;">An interim Resolution Professional
would be appointed by NCLT to manage the affairs of the corporate debtor within
14 days of the commencement of the resolution process. Board of Directors shall
remain suspended and affairs of the company shall come under the control of the
Resolution Professional. And, then a public announcement would be issued by the
Insolvency professional giving details of the commencement of the process,
asking all the creditors to submit their claims in the prescribed form along
with proof of their claims.<o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span style="font-family: "book antiqua" , serif;">However, erstwhile Board of Directors
who are no longer in management, cannot even maintain an appeal on behalf of
the corporate debtor. <o:p></o:p></span></i></b></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">1.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Process in the Corporate Insolvency
Resolution<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Collating
Claims- The IRP has to collate all claims of creditors and determine the
financial position of the corporate debtor and constitute a Committee of
Creditors within 30 days of his appointment.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Committee
of Creditors- It has to be formed within 7 days of its constitution and has to
meet and appoint a resolution professional. It may continue with the IRP or
appoint a new Insolvency Professional (“<b style="mso-bidi-font-weight: normal;">IP</b>”).
For this purpose, majority of at least 75% votes of the Committee should be
obtained.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Role
of IP and Operational Creditor- <span style="mso-spacerun: yes;"> </span>The IP
so appointed would act as chair person of the Committee, conduct the meetings
of the Committee of Creditors. IP can raise interim finance for the corporate
debtor and conduct the entire corporate insolvency resolution process and
manage the operations. Operational creditors may attend the meetings of the
Committee of Creditors but cannot vote. For the purpose of creating any
security interest, changing the capital structure of the corporate debtor,
appointing auditors or internal auditors, the IP can carry out these decisions
only with the prior approval of 75 % of the Committee of Creditors.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Information
Memorandum and Resolution Plan-<span style="mso-spacerun: yes;"> </span>The IP
should prepare the Information Memorandum which contain all financial and other
details of the corporate debtor along with the liquidation<span style="mso-spacerun: yes;"> </span>value of the assets, i.e. their realizable
value if the corporate debtor to be liquidated. This should be done by two
registered valuers after physical verification of the stock and the fixed
assets of the corporate debtor. The resolution plan should provide for the
payment of all costs associated with the insolvency resolution, i.e. repayment
of debts, management of affairs, transfer of assets, reduction in amount
payable, issuing securities, modifying any security interest, etc. Further the
resolution plan should provide for specific sources of funds which would be
used to pay all costs of the insolvency resolution process, liquidation value
due to financial creditors who dissented to the plan. The resolution plan must
also be approved by a 75% vote of the financial creditors.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Exemption
from SEBI Regulation & Takeover Code- Takeover Code has been amended to
permit issue of shares and takeover of listed companies under a resolution
plan. Also preferential allotment provision and open offer process do not apply
to a resolution plan formulated under the Code.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Submission
of Plant to NCLT- After the approval of the Committee, the plan must be
submitted to the NCLT for tis plan approval. If approved by NCLT, then it
becomes binding on the corporate debtor, creditors and the employees etc.
Further, the moratorium order<span style="mso-spacerun: yes;"> </span>shall come
to an end. On the other hand, if the plan is rejected by the NCLT, then a liquidation
process is triggered.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Circumstances
under which NCLT will pass liquidation order- In the event NCLT rejects the
resolution plan or if a resolution plan has not been submitted to the NCLT
within the maximum period of 180 days plus any extension, thereof it must order
the liquidation of the corporate debtor or if the Committee of Creditors decide
to liquidate the debtor, then also NCLT must pass a liquidation order.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">2.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Duties & Power of the Resolution
professional- If liquidation order is passed by the NCLT, the resolution
professional becomes the liquidator for the liquidation purposes provided, NCLT
does not replace him. The liquidator has various powers and duties under the
Code and he can appoint professionals to assist him in the discharge of his duties.
He must verify all the claims of the creditors and take custody of all assets
of the debtor. The other duties of the resolution professional are as follows:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; text-indent: -0.25in;">Ø<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><span style="font-family: "book antiqua" , serif; text-indent: -0.25in;">He
must form a liquidation estate comprising of all assets owned by the corporate
debtor and holds them in fiduciary capacity for the benefit of all the
creditors.</span><span style="font-family: "symbol"; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;"><span style="mso-list: Ignore;"><img alt="*" height="15" src="file:///C:/Users/AASHISH/AppData/Local/Temp/msohtmlclip1/01/clip_image001.png" width="15" /></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">He
must collect all creditors claims within 30 days of the commencement of the
liquidation process and verify the same within 30 days from the last date for
the receipt of claims.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">He
must determine the value of the claims admitted.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">If
the liquidator is of the opinion that a corporate debtor has given a preference
to a particular creditor, then he must apply to NCLT for avoiding the same. He
also has the power to disclaim any onerous property by applying to the NCLT.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">He
can also investigate the affairs of the corporate debtor to determine whether
there have been any undervalued or preferential transactions which have led to
ne creditor being preferred over the other.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">The
window of determining preferential treatment is 2 years before the insolvency
commencement date for related parties and one year for other persons. Also
during this period if certain transactions were undervalued, then the
liquidators can apply to the NCLT for having the set aside.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">He
can also apply to the NCLT for setting aside any extortionate credit
transactions entered into by the corporate debtor within 2 years preceding the
insolvency commencement date.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">The
liquidator may make an itemized sale of the assets of the liquidation estate or
make a slump sale or in proceeds or in parcels. The usual practice is to sale
by auction.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">3.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Priority for distribution of proceeds
according to the Code- In the Code it has been mentioned that the priority
would apply notwithstanding anything to the contrary contained in any other
Central/State law as well as any contract to the contrary between the debtor
and the recipients. The priority schedule is as follows:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Insolvency
resolution process costs and the liquidation costs in full.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Workmen
dues for 24 months preceding <span style="mso-spacerun: yes;"> </span>the
liquidation commencement date and debt<span style="mso-spacerun: yes;">
</span>owed to a secured creditor<span style="mso-spacerun: yes;"> </span>if he
has relinquished his security shall among themselves rank equally.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Wages
and any unpaid dues owed to employees other than workmen for the period of 12
months preceding the liquidation commencement date.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Financial
debts owed to unsecured creditors.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">The
following dues shall rank equally between themselves:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; text-align: justify;">
<span style="font-family: "book antiqua" , serif;">Any
amount due to the Central Government and the State Government for a period of 2
years preceding the liquidation commencement date, and debts owed to a secured
creditor for any amount unpaid following the enforcement of security interest.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Any
remaining debts and dues.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Preference
shareholders if any and<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; margin-left: 74.8pt; mso-add-space: auto; mso-list: l3 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "wingdings"; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;"><span style="mso-list: Ignore;">Ø<span style="font: 7.0pt "Times New Roman";">
</span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Equity
Shareholders or partners, as the case may be.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify;">
<span style="font-family: "book antiqua" , serif;">The above priority
distribution should be made within 6 months from the receipt of the proceeds
after deducting the associated costs. If certain assets could not be sold, it
may be given to the stakeholders after getting the approval from NCLT.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">4.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Progress Report by the Liquidator- The
liquidator shall submit progress reports to the NCLT starting from within 15
days from the end of his appointment and thereafter within 15 days from the end
of every quarter of his tenure. It will also contain asset sale report, in case
if any asset is sold.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "book antiqua" , serif; mso-bidi-font-family: "Book Antiqua"; mso-fareast-font-family: "Book Antiqua";"><span style="mso-list: Ignore;">5.<span style="font: 7.0pt "Times New Roman";"> </span></span></span><!--[endif]--><span style="font-family: "book antiqua" , serif;">Completion of Liquidation- The
liquidator shall liquidate the corporate debtor within 2 years. If he is not in
a position to complete the same within the time period, then he must apply to
the NCLT to continue the process. For getting additional time, he should submit
the reasons and after completion, he must submit a Final report to the NCLT
explaining how the liquidation was conducted and the process of how the assets
have been liquidated. After all the assets have been completely liquidated, the
liquidator must apply to the NCLT for dissolution of the corporate debtor. Once
the NCLT passes an order, the body corporate would be dissolved from the date.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "book antiqua" , serif;">The Code is a step in right direction
and while there will be nuances and controversies in dealing with the process,
it is appreciated that during the short span of time, various landmark and
unique decisions are delivered by NCLT, NCLAT and Supreme Court. It is
premature to comment whether the Insolvency professional will be able to run
and manage a corporate debtor (sick company) while its promoters could not run
the same. However, in the time to come, these professionals will become experts
in dealing with the process, as the Code has given full power and duties are
assigned to the Insolvency Professionals. Though most of the creditors,
banks/financial institutions bank upon on the process of this Code, certain
creditors may invoke the Insolvency and Bankruptcy Code as a last resort.<o:p></o:p></span></div>
<br /></div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-30163391953814844832017-12-28T13:09:00.000+05:302018-01-09T13:02:27.912+05:30Insolvency Proceedings and Time Barred Debt<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">In<i> <b>Neelkanth Township &
Construction Private Limited v. Urban Infrastructure Trustees Limited</b></i><b> [2017] 140 CLA</b>, a</span><span style="color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">n appeal was filed by a corporate debtor (Neelkanth Township
& Construction Pvt. Ltd.) against the order of the National Company Law
Tribunal (“<b>NCLT</b>”) allowing commencement of insolvency proceedings on the
action of the financial creditor (Urban Infrastructure Trustees Ltd.). in National
Company Law Appellate Tribunal (“<b>NCLAT</b>”). The financial creditor had
subscribed to optionally convertible debentures (“<b>OCDs</b>”) issued by the
corporate debtor. OCDs carried nil or 1% p.a. interest rate and matured in
years 2011, 2012 and 2013.<o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "wingdings"; font-size: 12.0pt; line-height: 150%;">Ø<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="background: white; color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">One of the issues
for consideration before the NCLAT was whether the application under Section 7
of the Insolvency & Bankruptcy Code (“<b>Code</b>”)
is time barred, as the debt claim related to the years 2011, 2012 and 2013.</span><o:p></o:p></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">Section 3 of the Limitation Act,
1963 governs the time period within which unless a ‘civil suit’ must be filed
in respect of recovery of monetary dues i.e. within 3 (three) years of the date
the loan of the money is made, the ‘civil suit’ shall be dismissed for want of
limitation.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">It should be noted that the monetary
due is not extinguished from the expiry of the said period of three years from
the date the money is lent and the debtor is free to repay the amount without
claiming protection under the Limitation Act, 1963 and that the creditor has no
legal remedy to recover the money lent. Nowhere in the Code it has been stipulated
that for preferring any application to the adjudicating authority to initiate the
corporate resolution process, the debt which gives rise to preferring the
application should not be time barred by limitation.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"> The National Company Law Appellate Tribunal,
has observed that Code is not an Act for recovery of money claim, it relates to
initiation of corporate insolvency resolutions process. If there is a debt
which includes interest and there is default of debt and having continuous curse
of action, the argument that the claim of money respondent is barred by
limitation cannot be accepted.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"> <b><i>“It would be clear that the law of
limitation would not apply to an application made to the Adjudicating Authority
under the Code and such an application could be made in respect of even a debt
barred by limitation.”<o:p></o:p></i></b></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">However, the judgement can lead to
conflict between Section 238 of the Code and Section 433 of the Companies Act,
2013.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">S.238 of the Code, provides for overriding
provisions of any other law for the time being in force, where <span style="background: white;">Section 433 of the Companies Act, 2013 provides that
the Limitation Act, 1963 is applicable to proceedings before NCLT and NCLAT.</span><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">In the previous Companies Act, 1956,
<span style="background: white;">a winding up petition was considered
maintainable only against a debt which was legally recoverable i.e. not barred
by limitation. However, the recent judgement of NCLAT has change the position
and may open the floodgates for the recovery of old debts which were barred by
the limitation.</span> <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">It is advisable that
parties should be cautious before relying on this judgment of NCLAT, as NCLAT
has not referred to Section 433 of the Companies Act, 2013 in its judgment and
parties should continue initiating insolvency proceedings within the limitation
period for the recovery of the original debt.</span><o:p></o:p></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;">For any query
w.r.t. NCLT, NCLAT, Corporate Litigation and other legal aspects including corporate
insolvency, liquidation, winding up and for any other query w.r.t. Insolvency
& Bankruptcy Code, please contact us at </span><span style="font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><a href="mailto:admin@equicorplegal.com"><span style="background: white; color: #002060;">admin@equicorplegal.com</span></a></span><span style="background: white; color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"> / +918448824659</span><span style="color: #002060; font-family: "book antiqua" , serif; font-size: 12.0pt; line-height: 150%;"><o:p></o:p></span></div>
</div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0EquiCorp Associates, Filmcity, Sector 16A, Noida India25.165173368663929 76.2890625-16.278010131336075 -6.328125 66.608356868663932 158.90625tag:blogger.com,1999:blog-6560493675054762503.post-67128693818315088492017-12-26T15:32:00.000+05:302018-01-09T13:14:10.770+05:30Doing Business of Cyrptocurrency w.r.t. Indian Legal Perspective<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="text-align: center;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Cryptocurrency has been called as the
greatest technological breakthroughs since the Internet. However, a
parallel warning from the Reserve Bank of India as a caution against bitcoin
and other cryptocurrency, with no guidelines or order to prohibit cryptocurrency
may puzzled you to ponder over –Is it legal to do business of cryptocurrency in
India? There may be several questions which you may encounter w.r.t.
applicable laws of India, as there are no specific guidelines issued by any
Government Authority including Reserve Bank of India or Ministry of Finance.</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The main stream adoption of
cryptocurrency is becoming a reality despite sceptics who compare the boom to
the 1636 tulip mania. The issue is not whether cryptocurrency will survive, but
rather how it will evolve. The article aims to clarify certain major aspects
which may be encountered for- “<b>Doing Business of Cryptocurrency w.r.t.
Indian Legal Perspective</b>” under the evolving legal structure.</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">There are growing number of business
and individuals using cryptocurrencies as trading platforms or exchanges and with
this new growing phenomenon of cryptocurrency in India, at present, the current
state of applicable laws needs to be review to provide insight as to what the
proper treatment of these cryptocurrency transactions should be. At
present, there are more than 4,543 kinds of confirmed cryptocurrencies in the
world and the market capitalization of the whole is about US$ 567 billion.</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">"<b>Cryptocurrency</b>" is
a medium of exchange created and stored electronically, and using
encryption techniques to control the creation of monetary units and to verify
the transfer of funds.</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501979778"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Cryptocurrency can be obtained mainly by the followings:</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -.5in;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">i. Mining
new ones;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -.5in;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">ii. Buying
on an exchange; and<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -.5in;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">iii. Accepting
them for goods and services<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501980194"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">‘Mining’ is discovering new cryptocurrency such as Bitcoin. In
reality, it’s simple the verification of Bitcoin transaction. In order to make
sure a Bitcoin is genuine, miners verify the transaction. There are many
transactions that individuals are trying to verify and just one. These
transactions are gathered into boxes with a virtual padlock on them which make
up the ‘blockchains’. ‘Miners’ run software to find the key to open that
padlock. Once the computer finds it, the box pops open and the transactions are
verified. Hence, it can be said that while Bitcoins are “mined” by individuals,
they are issued by the software.</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501980393"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">At present, in India real currency is being used to purchase and
sell Bitcoin and other cryptocurrency at the current exchange value. Once the
purchase has been made the value of the particular amount of Bitcoin is
transferred from one wallet to another. Since every wallet has its own unique
33 characters and all Bitcoin wallets are synchronized, thus a false entry by
any single person being made is almost impossible. Although pseudonyms are used
for trading purposes, the history of every transactions in the form of
continuously updated block-chain is stored in the wallets.<o:p></o:p></span></a></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxSK2wnh5hml4K1uQCNjltloNblNyiz1ceH1peRzjYv7CH7XMM4AcX4yYSMFOdcLza5MDEnI9bK1kkXORGG6jf1BknSq1oZd7gkYHvD36CJ6QeCO3ozCehCaSGCv-poeLGSQCg_4x5Oiw/s1600/Bitcoin+CHart.PNG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="750" data-original-width="481" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjxSK2wnh5hml4K1uQCNjltloNblNyiz1ceH1peRzjYv7CH7XMM4AcX4yYSMFOdcLza5MDEnI9bK1kkXORGG6jf1BknSq1oZd7gkYHvD36CJ6QeCO3ozCehCaSGCv-poeLGSQCg_4x5Oiw/s1600/Bitcoin+CHart.PNG" /></a></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501980393"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><br /></span></a></div>
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<a href="https://www.blogger.com/null" name="_Hlk501980393"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><br /></span></a></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501980617"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Bitcoin creation and transfer are based on an open source
cryptographic protocol managed in a decentralized manner, and, if harnessed
properly, Bitcoin and other cryptocurrencies could deliver many benefits to the
Indian economy.</span></a></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Applicable Laws for Doing Business of
Cryptocurrency in India:<o:p></o:p></span></div>
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<br /></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">1.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The Foreign
Exchange Management Act, 1999</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">2.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The reserve
Bank of India Act, 1934</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">3.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The Coinage
Act, 1906</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">4.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The
Securities Contract Regulation Act, 1956</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">5.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The Sale of
Goods Act, 1930</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">6.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Indian
Contract Act, 1872</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">7.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The
Specific Relief Act, 1963</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">8.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The Income
Tax Act, 1961</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">9.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The
Information Technology Act, 2000</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">10.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The Payment
and Settlement Systems Act, 2007</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoListParagraph" style="line-height: 150%; margin-left: 0in; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">11.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;">
</span></span><!--[endif]--><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The
Constitution of India, 1950</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
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<br /></div>
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<b><u><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Cryptocurrency as “legal Currency” in India <o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501983489"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The “legal currency” are issued by government/banking
authorities, whereas cryptocurrency such as Bitcoin are '<i>issued and usually
controlled by its developers, and used and accepted among the members</i>, and
which relies on cryptography for its creation and management. </span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Unlike the “Legal currency” which each country
centralizes and manages and issues, the crypto currency generally indicates
those (1) of which value is not guaranteed by the nation or the central bank,
(2) dispersed as electronic data on the network, (3) and its management is
decentralized.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">“Currency “has been defined under Foreign Exchange Management
Act,1999 (FEMA) to include all currency notes, postal notes, postal orders,
money orders, cheques, drafts, travelers cheques, letters of credit, bills of
exchange, promissory notes, credit cards or such other similar instruments as
notified by Reserve Bank of India. And, as of now, there is no such declaration
in respect of cryptocurrencies in general, therefore under the provisions of
existing laws of India, cryptocurrencies are not legal currency in India.<o:p></o:p></span></div>
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<br /></div>
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<b><u><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Cryptocurrency as Pre-paid Instrument<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501984611"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Any cryptocurrency such as Bitcoin or any other are being
generated by a ‘Miner’ or user to himself by the use of Software. These
Bitcoins issued by the software will not fall in any of the three permitted
categories of pre-paid instruments in India. Moreover, prepaid instruments can
be issued either by- Banks, NBFC or a ‘person’, who are authorised and
registered with Reserve bank of India.</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
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<br /></div>
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<b><u><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Know Your Customers & Cryptocurrency<o:p></o:p></span></u></b></div>
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<a href="https://www.blogger.com/null" name="_Hlk501985114"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">In India, KYC norms are set by the RBI that require banks to
continuously monitor their transactions, keep an up-to-date record of their
identity, and take steps simply in case any of the transactions of a customer
break from his or her usual pattern of behavior. The KYC requirements are also
being followed by some Cryptocurrency exchanges before allowing customers to
open accounts with them. It must be kept in mind that the structure of the
cryptocurrency system is designed to bypass this particular measure, by
ensuring that customers could not be identified by any means. Hence, one needs
to have sufficient KYC norms in place as its not as simple as in the banks or
other financial institutions and leaving the Cryptocurrency exchange system
vulnerable to abuse.<o:p></o:p></span></a></div>
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<br /></div>
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<b><u><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">FDI & Cryptocurrency Business in India<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501986117"></a><a href="https://www.blogger.com/null" name="_Hlk501985880"></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Whether a foreign
Investor can invest in a company which provides cryptocurrency like Bitcoin
related services relates to whether foreign investment is allowed in
cryptocurrency under the Foreign Direct Investment Policy.</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
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<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Under the prevalent FDI policy of India,
foreign investment in most sectors, other than certain restricted sectors, is
permitted upto 100%. The restricted sectors include sectors such as insurance,
telecom, banking, real estate, retail and defense related industries, where
either no foreign investment is permitted, specific approval of one or more
regulators is required or foreign investment is capped.<o:p></o:p></span></div>
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<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Companies which only provide online services
may be categorized under the automatic route (since they would be providing
only software platform for purchase/sale of Bitcoin or other cryptocurrency).<o:p></o:p></span></div>
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<b><u><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Taxation & Cryptocurrency</span></u></b><b><u><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></u></b></div>
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<a href="https://www.blogger.com/null" name="_Hlk501986418"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Indirect
tax- Goods & Service Tax: Three possible scenarios:</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -.5in;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">i. Mining
of Cryptocurrency (similar to self generated goodwill);<o:p></o:p></span></div>
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<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">ii. Transfer
of Cryptocurrency (where cryptocurrency is either a capital asset or
stock-in-trade depending on the activity undertaken by the tax payer); and<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; margin-left: .75in; margin-right: 0in; margin-top: 0in; text-align: justify; text-indent: -.5in;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">iii. Transfer
of Cryptocurrency as consideration ( where cryptocurrency is either a capital
asset or stock-in-trade depending on the activity undertaken by the tax payer.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501986639"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Income
Tax : Under Income Tax Act, 1961, residents are subject to tax in India on
their worldwide income, where as non-residents are taxed only on income sourced
in India. However, non-residents, who are resident of a country with which
India signed a tax treaty, have the option of being taxed as per the tax treaty
or the Income Tax Act, 1961, whichever is more beneficial.</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501986755"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Cryptocurrency
may be considered to be capital asset or business income (where cryptocurrency
is either a capital asset or stock-in-trade depending on the activity
undertaken by the tax payer).</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">For capital assets, the income tax would be
levied as capital gains tax as following:<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">a. 20% tax
for long term capital gains tax (sale/transfer of cryptocurrency after 36
months);<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">b. 30% tax for
short term capital gains tax (sale/transfer of cryptocurrency within 36
months);<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">For stock-in-trade, the income tax would be
levied as regular income tax on the basis of income slab as prescribed by the
Government of India.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<u><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Initial Coin
Offerings</span></u><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">If crypto-currencies are the future of the
digital economy, then Initial Coin Offerings (“ICOs”), could be the future of
fund raising.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">An ICO, simply put, is a new way of
crowdfunding or raising capital by startups, where the regulators around the
world continue to struggle to create a framework for cryptocurrencies such as
bitcoin, Ethereum etc. The founders raise money by issuing digital tokens in
exchange for crypto-currency without the transfer of any equity. Investor can
use the tokens to avail the company’ future services.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">For instance, the token offered by XYZ, Rent
Coins, offers shared ownership of the fleet of cars that the startup will buy
in the event of a successful ICO. Investor who buy the Rent Coins can either
use the digital tokens for renting a car or receive payouts each time a car is
rented out by others. The tokens can also be traded. Essentially, Rent Coin is
proof of ownership of a shared asset-cars-making investors in the ICO
eligible for a portion of the money the company earns by renting vehicles.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"> ICO is gaining much popularity as a
viable means to raise capital then the regular means of raising capital, mainly
due to recent jump in prices of cryptocurrencies especially bitcoin. The
general query any investor come across – “is it safe?” or what are the legal
points to keep in mind to secure themselves? Do India have a framework or
guidelines for ICO? Is ICO an online version of IPO (Initial Public Offerings,
regulated by SEBI)<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501989059"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">In
layman terms, we may say that an ICO is similar to an IPO but it differs in
many ways including but not limited to offering of shares in IPO, where
as cryptocurrencies or crypto-tokens are offered at a pre-determined rate.
Both are means of raising public money. Unlike the IPO of shares by
company, ICOs are not formally regulated by any financial authority.</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">The crypto-tokens can be used in number of
ways to represent a variety of services such as payments, collateral etc. which
is not so in the case of IPO.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Legal & Regulatory perspective w.r.t.
Initial Coin Offerings:<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<a href="https://www.blogger.com/null" name="_Hlk501989701"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">1. Classification
of Crypto-currency or crypto-tokens- Digital Currency/ Security/ Payment
System/ Intangible Property/ Digital Assets. This classification shall be
crucial in determining the rate of taxation and require the
co-ordination/liasoning with Securities Exchange Board of India (SEBI), the
Reserve Bank of India (RBI) and other sectoral regulators for effective regulatory
oversight.</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<a href="https://www.blogger.com/null" name="_Hlk501989836"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">2. Compliance
requirements will also vary i.e. Know Your Customer norms; anti-money laundry
requirements; if cryptocurrency or crypto-token as securities, then companies
will be required to comply with SEBI Listing regulations.</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501990022"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">3. </span></a><a href="https://www.blogger.com/null" name="_Hlk501989932"></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">“Crypto-Regulations” will have to be enacted inter alia
governing issuance through ICOs, transfer & management of crypto-tokens,
which shall serve as the “Framework Guidelines” for intermediaries such as
“crypto-exchanges” and “crypto-brokers”, among others. While it will be task to
regulate a “crypto-token rating agency” primarily due to overlap of
jurisdiction, an effective rating agency could potentially aid a retail
investor in making an informed investment decision by conducting a reliable due
diligence exercise.</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"> <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<a href="https://www.blogger.com/null" name="_Hlk501990209"><b><u><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">Risks in Doing Business of Cryptocurrency</span></u></b></a><b><u><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">:<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<a href="https://www.blogger.com/null" name="_Hlk501993122"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">1. Cyber
Attacks & Hacking: Cryptocurrency being in digital form are stored in
digital/electronic media that are called electronic wallets, which may prone to
losses arising out of hacking, loss of password, compromise of access
credentials, malware attack etc. Since, they are not created by or traded
through any authorized central agency, the loss of the e-wallet could result in
the permanent loss of the cryptocurrency held by them</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<a href="https://www.blogger.com/null" name="_Hlk501993209"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">2. Fraud:
Payments by cryptocurrency, such as Bitcoin, take place on a peer-to-peer basis
without an authorized central agency which regulates such payment. As such,
there is no established framework for recourse to customer
problems/frauds/ponzi schemes/ disputes/charge backs etc.;</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<a href="https://www.blogger.com/null" name="_Hlk501993333"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">3. Price
Fluctuation & Inflation: There is no underlying or backing of any asset for
cryptocurrency. As such, their value seems to be matter of speculation. Huge
volatility in the value of cryptocurrency has been noticed recently with more
than 1700% in case of Bitcoin. Thus, the users are exposed to potential losses
on account of such volatility in value</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<a href="https://www.blogger.com/null" name="_Hlk501993412"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">4. Unclear
Government Policies: It is reported that cryptocurrency such as Bitcoin are
being traded on exchange platforms set up in various jurisdictions whose legal
status is also unclear. Hence, the traders of cryptocurrency on such platforms
are exposed to legal as well as financial risks</span></a><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify; text-indent: -.25in;">
<a href="https://www.blogger.com/null" name="_Hlk501993493"><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">5. Crimes
& Vulnerability: The cryptocurrency can be used for illicit and illegal
activities in several jurisdictions and absence of information of
counterparties in such peer-to-peer anonymous/pseudonyms systems could subject
the users to unintentional breaches of anti-money laundering and combating the
financing of the terrorism laws.<o:p></o:p></span></a></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: .0001pt; margin-bottom: 0in; text-align: justify;">
<span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;">To know further details about Doing
Business of Cryptocurrency in India, ICOs, incorporation of crypto-exchange,
crypto-trading platform and other legal aspects including legal structure, tax
aspects and for any other query w.r.t. Cryptocurrency, please contact us at <a href="mailto:admin@equicorplegal.com"><span style="color: #002060;">admin@equicorplegal.com</span></a> / +918448824659</span><span style="color: #002060; font-family: "vijaya" , serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
</div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-57439664276076376692017-06-11T13:24:00.001+05:302017-06-11T13:24:59.087+05:30GST- Impact on Ecommerce Business/ Online Marketplace<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "book antiqua" , "serif";">With
the rapid growth of e-commerce business & ever evolving regulatory
landscape in India had posed a very significant question on the twilight prior
to the enforceability of Goods & Service Tax (“GST”) which is to be
effective from July 01, 2017- What will be the impact of GST on e-commerce? Unlike,
brick & mortar business models, where e-commerce business are working on
various different business models, will the impact be same or differ for e-commerce
business- a question which is yet struggling to find answer and keep many of
the players hinged on the pivot.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "book antiqua" , "serif";">Growth
of any business is good news for the economy and it’s been expected that to
keep the same path of growth, there has to be clarity on taxation matters and
ease of doing business. Of lately, there are several apprehensions in business
world- Whether GST be a more hurdle rather than a catalyst for growth?<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "book antiqua" , "serif";">Present
issues under VAT & Service Tax faced by Ecommerce business:<o:p></o:p></span></div>
<div style="background: white; margin-bottom: 5.4pt; margin-left: .5in; margin-right: 0in; margin-top: 5.4pt; mso-list: l1 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="color: #333333; font-family: "book antiqua" , "serif"; font-size: 11.0pt;">1.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #333333; font-family: "book antiqua" , "serif"; font-size: 11.0pt;">Firstly, e-commerce sector
dealing in trading of goods have experimented with various business models.
Starting with the traditional 'stock-and-sell' model, the e commerce companies
have transformed into a multi-model platform over time by introducing 'market
place' and / or services model, thereby having to grapple with a more complex
tax framework involving VAT / CST, excise, and / or service taxes. However, the
indirect tax laws have not been able to recognize and accommodate the evolving
business models and hence have become an impediment in the operation of the
newer market place or services model.<o:p></o:p></span></div>
<div style="background: white; hyphens: none !important; margin: 5.4pt 0in 5.4pt 0.5in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="color: #333333; font-family: "book antiqua" , "serif"; font-size: 11.0pt;">2.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #333333; font-family: "book antiqua" , "serif"; font-size: 11.0pt;">Secondly, the e-commerce sector
is having a hard time categorising their offerings into 'goods' or 'services'
for charging either value added tax (VAT) / Central Sales Tax (CST) or service
tax. This situation aggravates in the case of digital downloads involving
software, music, e-books etc. wherein it becomes challenging to assess whether
the transaction is for sale of goods attracting VAT / CST or a provision of
service that should be charged to service tax. Both VAT and service tax
authorities exercise right over such digital transactions leading to disputes
and never-ending litigations.<o:p></o:p></span></div>
<div style="background: white; hyphens: none !important; margin: 5.4pt 0in 5.4pt 0.5in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="color: #333333; font-family: "book antiqua" , "serif"; font-size: 11.0pt;">3.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #333333; font-family: "book antiqua" , "serif"; font-size: 11.0pt;">Thirdly, inter-state movement of
goods from one state to another is a nightmare for an e-commerce operator. The
requirement of statutory forms, way-bills, road-permits etc. and the recently
contemplated imposition of local registration requirements for the e-commerce
market place entity by certain States under the VAT / CST legislations for
entry or sale of goods into the state has made the inter-state transaction an
awkward experience for the sector.<o:p></o:p></span></div>
<div style="background: white; hyphens: none !important; margin: 5.4pt 0in 5.4pt 0.5in; text-indent: -0.25in;">
<!--[if !supportLists]--><span style="color: #333333; font-family: "book antiqua" , "serif"; font-size: 11.0pt;">4.<span style="font-family: "times new roman"; font-size: 7pt; font-stretch: normal; line-height: normal;"> </span></span><!--[endif]--><span style="color: #333333; font-family: "book antiqua" , "serif"; font-size: 11.0pt;">Fourthly, the non-fungible VAT
and service tax results in significant non-recoupable tax cost impact for the
e-commerce sector.<o:p></o:p></span></div>
<div style="background: white; hyphens: none !important; margin: 5.4pt 0in;">
<span style="color: #333333; font-family: "book antiqua" , "serif"; font-size: 11.0pt;">In addition to the above, the tax
laws in India have also failed the e-commerce sector by not providing enough
clarity / guidelines on taxation and documentation management for typical
e-commerce sector transactions like e-wallet (advance deposits by consumers),
cash-on-delivery (payment collected at the door-step of the consumer), gift
vouchers, drop-shipment (direct delivery of goods from the e-commerce company
vendor to the e-commerce company customer) etc. Absence of specific direction
on treatment of the above transactions under various tax legislations has led
to diverse practice being adopted by the e commerce sector.<o:p></o:p></span></div>
<div class="MsoNormal" style="hyphens: none !important;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="color: #333333; font-family: "book antiqua" , "serif"; mso-bidi-font-family: Helvetica;">E-commerce sector is here to stay
and would be one of the pillars of the Indian economy in the near future.
Businesses can thrive and grow only in a tax conducive environment and it is
obvious that the above issues cannot continue forever and would need resolution
sooner than later. While the e-commerce sector is eagerly looking forward to
the upcoming budget to address the concerns and act as a business catalyst for
the sector, the Goods & Services Tax (GST) which would replace the current
indirect tax regime and expected to be implemented in India from 1 July, 2016,
could hold the key to unlock the issues faced by the e-commerce sector.<o:p></o:p></span></div>
<ol start="1" style="margin-top: 0in;" type="1">
<li class="MsoNormal" style="mso-list: l0 level1 lfo2; text-align: justify;"><span style="font-family: "book antiqua" , "serif";">Standardization of Taxes &
Pricing: Under the present tax structure, different states impose
different VAT rates on the same goods. For example, Karnataka has a tax
rate of 5% on mobile phones, whereas Maharashtra has 13.5%. Online
marketplaces list sellers who need to charge lower taxes thus making the
product cheaper than local retail prices. The e-tailers often enter
exclusive tie-ups to take advantage from tax arbitrage. Post GST, there
will be standard tax rates for each product and tax arbitrage will not be
possible, bringing e-tailers and offline sellers to the same level in
terms of costing and pricing.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo2; text-align: justify;"><span style="font-family: "book antiqua" , "serif";">Ecommerce & Working
Capital: </span><span style="background: white; color: #333333; font-family: "book antiqua" , "serif"; line-height: 107%;">Under GST, online marketplaces will have to deduct 2%
tax per transaction while making payments to sellers listed on their
portal. This Tax Collected at Source (</span>“<span style="background: white; font-family: "book antiqua" , "serif"; line-height: 107%;">TCS”<span style="color: #333333;">)
will be handed over as collection towards GST to the government. This rule
however does not apply to offline retailers. With TCS, capital will be
locked away for periods between 20-50 days depending on the transaction
date. The significant impact on the cash flow will force smaller firms to
seek additional working capital or ignore the e-commerce marketplace
altogether, as it may not offer envisaged convenience and benefits.</span></span><span style="font-family: "book antiqua" , "serif";"><o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo2; text-align: justify;"><span style="font-family: "book antiqua" , "serif";">Mandatory Registration: While
GST registration in normal case is mandatory where turnover is Rs. 20 lakh
or more, if a trader wishes to sell through online portals he needs to get
registered irrespective of turnover. Merchants without proper registration
will be forced to move out of the online system. Now, all sellers will be
required to be registered and charge taxes at standard rates creating a
level playing ground for all online sellers in terms of product pricing.<o:p></o:p></span></li>
<li class="MsoNormal" style="mso-list: l0 level1 lfo2; text-align: justify;"><span style="font-family: "book antiqua" , "serif";">Additional Liability on refund
& cancellation of orders: Majority of the products sold online carry a
return date of 30 days which translates to about 15 - 20 million
transactions per month and the returns and refunds for these have to be
done with utmost care. The returns are required to be filed monthly now by
both parties and refund adjustment will need special attention affecting
tax liability.<o:p></o:p></span></li>
</ol>
<div class="MsoNormal">
<span style="font-family: "book antiqua" , "serif";">There are
several other issues which may be faced by Ecommerce such as adjustment of
profit so not to fall under the net of
anti profiteering.<o:p></o:p></span></div>
<br />
<div class="MsoNormal">
<span style="background: white; color: #111111; font-family: "book antiqua" , "serif";">For further details w.r.t. GST and its
Impact on your Ecommerce business</span><span style="font-family: "book antiqua" , "serif";">,
please contact us at <a href="mailto:admin@equicorplegal.com/">admin@equicorplegal.com/</a>
09958709189.<o:p></o:p></span></div>
</div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-63965845981931976482014-09-12T14:15:00.000+05:302018-01-09T13:14:35.909+05:30Convertible Note- Ease of Raising Funds By Startup<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<div class="MsoNormal" style="line-height: 150%;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Today,
we are in the golden age of startups, where people are ready to take risks for
their dreams and passion. It takes more than just a great idea to run a
successful business. Entrepreneurs and existing business owners need capital to
pursue their dreams. New business ventures often have difficulty obtaining
capital (whether for starting up, or for expanding operations). Today during
economic downturns where standards for commercial investment are becoming water
tight, a number of investors often seek non-traditional investment
opportunities to enhance their portfolios. A convertible note (“<b>Note</b>”)
provides such an opportunity to serve the needs of both the startup business
needing capital and the investor seeking an opportunity.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<b><i><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">With
the latest RBI Notification dated Nov.07, 2017, FDI is also permissible by
means of Convertible Note<o:p></o:p></span></i></b></div>
<div class="MsoNormal" style="line-height: 150%;">
<b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">‘Convertible Note’</span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">
is an instrument issued by a startup company evidencing receipt of money
initially as debt, which is repayable at the option of the holder, or which is
convertible into such number of equity shares of such startup company, within a
period not exceeding five years from the date of issue of the convertible note,
upon occurrence of specified events as per the other terms and conditions
agreed to and indicated in the instrument.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">A
short-term debt that converts into equity or to be repaid in cash. In the context of a seed financing, the debt
typically automatically converts into preference or equity shares upon the
event of a Qualified Financing. In other words, investors loan money to a
startup as its first round of funding; and then rather than get their money
back with interest, the investors receive preference or equity shares based on
the terms of the Note.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Qualified
Financing:</span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;"> Most (if not all) Notes contain an automatic
conversion clause that dictates the automatic conversion of the convertible
debt upon a “Qualified Financing.” The Qualified Financing is typically defined
as an equity financing by the startup, for the purpose of raising capital, in
which the aggregate of pre-determined amount is purchased by investors. Thus,
the Qualified Financing event is the trigger by which the convertible debt will
automatically convert to equity. The conversion is considered “automatic”
because it does not require the vote of either the startup or the investor. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">As
a sweetener to the investor, Notes have a conversion discount feature by which
the Note holder will exchange the debt/investment for Qualified Shares at a
price per share equal to 80% (this amount can very per deal) of the price per
share paid by the Qualified Financing investors, so the Note holder gets more
shares for their investment. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">One
of the key advantages of Notes is that the valuation issue is kicked down the
road until the Qualified Financing – when there are a lot more data points and
thus it’s much easier to value the startup (i.e., price the round). Again, a Note is a loan (debt, not equity). A
valuation of the startup is thus unnecessary; and, if there is no valuation,
there are no problems of dilution, taxes and option pricing. With startups and
small companies, investors may not be financially savvy enough to properly
value a company. By using Notes, investors can forgo valuation until a later
date when more sophisticated investors value the company and inject additional
equity. Therefore, a Note allows companies to access potential equity financing
with the lower upfront costs and efforts of debt.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Recently
a lot of startups have been using more Notes in angel rounds as they make deals
close faster. By making it easier for startups to give different prices to
different investors, they help them break the sort of deadlock that happens
when investors all wait to see who else is going to invest.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Note
allows more flexibility in price as valuation caps for startups aren’t actual
valuations, and Notes are cheap and easy to do. So you can do high-resolution
fundraising: if you wanted you could have a separate Note with a different cap
for each investor.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Are
Notes an easy way or does it tout the startups?</span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Notes
have a maturity date upon which the company can be forced into bankruptcy if it
hasn’t closed a financing round. Convertible equity eliminates that
threat. This is true in theory but extremely rare in practice. Unless the
startup has been hoarding cash or investing it in hard assets in some unusual
way, calling the Notes won’t yield any proceeds to the investor. Sometimes
aggressive investors will ask to control the board of directors or other things
upon a payment default.<o:p></o:p></span></div>
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<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Notes
accrue interest from the date(s) they are issued. This adds cost and
administrative complexity, especially with multiple closings on different
dates. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">Yet
startups have cranked out thousands of Notes for startups over the past several
years, without any signs of the apocalypse (yet). Convertible equity strikes
largely as a solution in search of a problem. The primary reason is that
investors have every incentive to work with the startup to extent or
renegotiate the terms of the notes, because that represents their best shot at
seeing any return on their investment. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">There
can be different structures for raising funds by startup, however, a startup
should look into the options which is best suited for your business.</span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">To
know the further details about Convertible Note, Raising Funds by Startups and
other legal aspects of startups, contact us at <u><a href="mailto:admin@equicorplegal.com"><span style="color: #002060;">admin@equicorplegal.com</span></a></u></span></b><span style="color: #002060; font-family: "Vijaya",serif; font-size: 16.0pt; line-height: 150%;">
/ +<b>918448824659</b></span><o:p></o:p></div>
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</div>
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equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-359707220025706642014-08-25T15:43:00.000+05:302014-08-25T15:43:21.814+05:30SEBI VS PACL: Trouble in Paradise<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%;">In
its biggest-ever crackdown on a large-scale money pooling scheme estimated at
nearly Rs. 50,000 crore (<i>twice the amount
to be recover from SAHARA group</i>), regulator SEBI has ordered Pearls Agrotech Corporation Limited (“<b>PACL</b>”) <span style="background: white;">to refund investors </span>within three months<span style="background: white;"> and wind up operations</span></span>.<o:p></o:p></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%;">SEBI
had found PACL violating Collective Investment Scheme Regulations by mobilizing
the money without being registered with the regulator, SEBI. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">Besides, closure of PACL operations, SEBI is initiating further proceedings against PACL
and its nine promoters and directors for fraudulent and unfair trade practices,
as also for violation of SEBI's CIS Regulations, among others, as per a
direction from the Supreme Court.</span><o:p></o:p></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">At present, it is being estimated that PACL has
more than <span class="apple-converted-space"> </span>58.5 million
customers, more than twice the 22 million demat accounts in the entire country</span>
and has paid commission of<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%;"><br />
<span style="background: white;"><span style="text-align: start;">Rs 7,893.8 crore up to March 2012</span> to more than its 8 lakh agents who works as network
of chain system for collection of public deposit in return for attractive
commissions on deposits brought in by them and other agents linked to them in
chain. PACL is yet to allot land to 46.3 million investors where as PACL claimed
it was in the business of purchasing and developing land, adding the developed
land was transferred to investors, who could sell it for gains.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">SEBI will make a reference to the state governments and local
police to register civil or criminal cases against PACL, its promoters,
directors and managers for fraud, cheating, criminal breach of trust and
misappropriation of public funds if the money is not refunded. SEBI will also
initiate attachment and recovery proceedings if the money is not refunded to
the public within the deadline set by it</span>.<o:p></o:p></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><span style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">PACL Business Activities<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">PACL offered two kinds of plans to its customers—a cash-down
payment plan and an instalment payment plan. Under the former, it offered to
allot land to customers within 270 days of payment and under the latter within
90 days. In fact, business model of PACL isn’t very complicated. It collects
money from investors and invests in cheap land which is likely to see changes
in end use. Once that happens, the cheap land becomes a goldmine that PACL
monetizes to pay investors 12.5% interest.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">SEBI clamps down the business activities of PACL categorizing
the collection of public deposits under the garb of allotment of farm land to
depositors without any <span style="background: white;">maintenance of proper
records/data and without registration of its scheme with SEBI under Collective
Investment Scheme Regulations is a clear indication the activities of PACL are
in the nature of a Ponzi scheme</span>.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">Before moving further let us understand- What is
a PONZI Scheme??<o:p></o:p></span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAkiTbpte6cX3VlvbDoMCXQrEg6ZnPSt4aWU2sPUrdlfhD43CnsU1znO7rcIannA03csEaOnpILNHRH6cE3GvlDi5ukllDi3DMS-ZjPTIKSPMrX60Io8VS3R4-VF0B6aWjw86yr9e4eDA/s1600/article-2597936-1CDE3ABC00000578-598_964x955.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhAkiTbpte6cX3VlvbDoMCXQrEg6ZnPSt4aWU2sPUrdlfhD43CnsU1znO7rcIannA03csEaOnpILNHRH6cE3GvlDi5ukllDi3DMS-ZjPTIKSPMrX60Io8VS3R4-VF0B6aWjw86yr9e4eDA/s1600/article-2597936-1CDE3ABC00000578-598_964x955.jpg" height="396" width="400" /></a></div>
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<br /></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%;">Now,
the most basic questions which arises, has PACL been involved in Ponzi Scheme
or it was failure on part of PACL to get its scheme registered with SEBI under
Collective Investment Scheme Regulations? Has PACL cheated any of its investor
till date?<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">Though at this moment we may not have all
answers, however few things are very clear:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">1.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">The Collective Investment Scheme operated by PACL
was not registered with SEBI;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">2.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">There are more than 46.31 million customers to
whom PACL is yet to allot land<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">Today, many companies especially in semi-urban
and rural areas are accepting deposits in their firm’s name and also promising
two to three times returns in two to four years without taking any legal
permissions and there was cardinal mistakes by PACL group that often operated
in the regulatory twilight zone. A shadowy empire giving up closely monitored
financial services to slowly venture into real estate would not have
necessarily drawn the attention of unfriendly politicians and a no-nonsense
SEBI.<o:p></o:p></span></div>
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</div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">The timelines of battle between PACL and SEBI is
provided as below:</span><span style="background: white; font-family: Tahoma, sans-serif; font-size: 10.5pt; line-height: 150%;"><o:p></o:p></span></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRtupYixSyXu3dbIALfKRd8JAXAeplknw9yRNzrqiO3v4Ydyo1Hz5lzz1hBKfSxtrFMY0ygOLWTdLlET5Q_XkvGGf-r3nnR7pi9IjxDKfBQFOSY7xAK6upMetG2gxVtY0Bofh1p5USGWg/s1600/SEBI+vs+PACL+Timeline.PNG" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRtupYixSyXu3dbIALfKRd8JAXAeplknw9yRNzrqiO3v4Ydyo1Hz5lzz1hBKfSxtrFMY0ygOLWTdLlET5Q_XkvGGf-r3nnR7pi9IjxDKfBQFOSY7xAK6upMetG2gxVtY0Bofh1p5USGWg/s1600/SEBI+vs+PACL+Timeline.PNG" height="472" width="640" /></a></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;"><br /></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;"><br /></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;">After the first round of battle, where SEBI has ordered
PACL to refund Rs. 49,100 crore to its investors, PACL is getting ready for
second round and to knock on Securities Appellate Tribunal (“<b>SAT</b>”) against SEBIs order. </span><span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">The whole battle between SEBI and PACL is on the
issue that whether the business activities of PACL comes within the ambit of
CIS or not? However, in middle of this battle, there are millions of small
investors who had been exposed to high degree of risk, who may lose everything
if PACL shrinks.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">Collective
Investment Scheme (CIS)</span></b><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt;"><o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .5in; mso-list: l0 level1 lfo1; tab-stops: list .5in; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Wingdings; font-size: 10pt; line-height: 150%;">w<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><!--[endif]--><span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">An investment scheme wherein several individuals
come together to pool their money for investing in a particular asset(s) and
for sharing the returns arising from that investment as per the agreement
reached between them prior to pooling in the money and as per Collective
Investment Scheme Regulations, any company involved in CIS has to register with
SEBI . <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">Though on prima facie it seems that the business activities of PACL is
similar to CIS and we can expect further crackdown on other companies engaged in
similar activities like PACL.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">If you are
interested in further details and inclined to know the procedure of CIS
registration, click on the link below:<o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="line-height: 150%; text-align: center;">
<u><span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;"><a href="http://www.equicorplegal.com/Pdfs/ECA-%20Collective%20Investment%20Scheme.pdf">http://www.equicorplegal.com/Pdfs/ECA-%20Collective%20Investment%20Scheme.pdf</a></span></u><span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;"><o:p></o:p></span></div>
<div align="center" class="MsoNormal" style="line-height: 150%; text-align: center;">
<span style="background: white; font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">or contact us at <a href="mailto:admin@equicorplegal.com/+91">admin@equicorplegal.com/+91</a>
9958709189<o:p></o:p></span></div>
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equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com4tag:blogger.com,1999:blog-6560493675054762503.post-44146302368881389552014-08-22T20:39:00.001+05:302014-08-22T20:39:56.606+05:30REITs- A new KICK for Real Estate<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 115%;">On August 10, 2014, real
estate sector received a KICK to boost up the cash strapped industry a new
route to tap capital with the approval of setting up of Real Estate Investment
Trusts(REITs) by SEBI, market regulator.<o:p></o:p></span></div>
<div class="MsoNormal" style="text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 115%;">What is REIT?<o:p></o:p></span></div>
<table border="1" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; border: none; mso-border-alt: solid black .5pt; mso-border-insideh: .5pt solid black; mso-border-insidev: .5pt solid black; mso-padding-alt: 0in 5.4pt 0in 5.4pt; mso-yfti-tbllook: 1184;">
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<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">RE-
Real Estate<o:p></o:p></span></div>
</td>
<td style="border-left: none; border: solid black 1.0pt; mso-border-alt: solid black .5pt; mso-border-left-alt: solid black .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 383.4pt;" valign="top" width="511">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">To
construct homes, offices, townships<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid black 1.0pt; mso-border-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 95.4pt;" valign="top" width="127">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">I-
Investment<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .5pt; mso-border-left-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 383.4pt;" valign="top" width="511">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">All
investors are welcome<o:p></o:p></span></div>
</td>
</tr>
<tr>
<td style="border-top: none; border: solid black 1.0pt; mso-border-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 95.4pt;" valign="top" width="127">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">T-Trust<o:p></o:p></span></div>
</td>
<td style="border-bottom: solid black 1.0pt; border-left: none; border-right: solid black 1.0pt; border-top: none; mso-border-alt: solid black .5pt; mso-border-left-alt: solid black .5pt; mso-border-top-alt: solid black .5pt; padding: 0in 5.4pt 0in 5.4pt; width: 383.4pt;" valign="top" width="511">
<div class="MsoNormal" style="margin-bottom: 0.0001pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt;">Operated
by professional managers (similar to mutual fund managers)<o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
<div class="MsoNormal" style="text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%;">REIT
is an investment pool, which finds alternative means of financing real estate
through an initial public offering (IPO), which is then used to buy, develop,
manage and sell assets in real estate. This pool of real estate generates
income through renting, leasing and selling of property and distributes it
directly to the REIT holder on a regular basis.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-right: -8.25pt; text-align: justify;">
<span style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">REITs can be viewed as
mutual funds that invest in real estate properties and/or mortgages instead of
securities such as bonds and shares. REITs are financial intermediaries
specializing in real estate investments and channel funds from the financial
markets to the real estate sector. REITs raise the funds required through issue
of shares, borrowings from institutions such as banks and insurance companies
and issue a variety of debt instruments.
A major benefit of REITs is that they do not have to pay tax on the
income received by them, as 90% of the income is distributed to the
shareholders. This distributed income is taxed only in the hands of the
shareholders and double taxation is avoided. Smaller real estate investors are
offered certain important qualities through the modem REITs, which previously
were never accessible and available to them before:<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-right: -8.25pt; text-align: justify;">
<br /></div>
<ul style="margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 150%; margin-bottom: 6pt; margin-right: -7.9pt; text-align: justify;"><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">Liquidity:</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";"> The greatest advantage that REITs have in comparison
to other forms of real estate investment is the liquidity of the
investment. REITs have helped turn real estate liquid. Shares of publicly
traded REITs traded on the major stock exchanges. Illiquidity, the bane of
real estate investors, is gone.<o:p></o:p></span></li>
<li class="MsoNormal" style="line-height: 150%; margin-bottom: 6pt; margin-right: -7.9pt; text-align: justify;"><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">Security:</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";"> The security lies in the requirement that REITs pay
out 90% of their income. The hefty dividends provide a cushion when the
market falls.<o:p></o:p></span></li>
<li class="MsoNormal" style="line-height: 150%; margin-bottom: 6pt; margin-right: -7.9pt; text-align: justify;"><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">Performance:</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";"> Since their inception, REITs have provided
competitive investment performance. REIT market performance has exceeded
returns on fixed debt instruments or direct investment in real estate.<o:p></o:p></span></li>
<li class="MsoNormal" style="line-height: 150%; margin-bottom: 6pt; margin-right: -7.9pt; text-align: justify;"><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">Current income:</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";"> REITs annually pay out almost all their taxable
income; a significant component of total return reliably comes from
dividends.<o:p></o:p></span></li>
<li class="MsoNormal" style="line-height: 150%; margin-bottom: 6pt; margin-right: -7.9pt; text-align: justify;"><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">Professional management:</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";"> REIT managers are skilled,
experienced real estate professionals.<o:p></o:p></span></li>
<li class="MsoNormal" style="line-height: 150%; margin-bottom: 6pt; margin-right: -7.9pt; text-align: justify;"><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">Portfolio diversification:</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";"> REITs let conservative
investors add real estate to their portfolios without taking huge risks.<o:p></o:p></span></li>
</ul>
<div class="MsoNormal" style="line-height: 150%; margin-bottom: 6.0pt; margin-left: 0in; margin-right: -7.9pt; margin-top: 0in; text-align: justify;">
<b><u><span style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">Types of REITs<o:p></o:p></span></u></b></div>
<ul style="margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 150%; margin-bottom: 6pt; margin-right: -7.9pt; text-align: justify;"><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">Equity REIT Fund - </span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">It specializes in property ownership. By directly
owning, investing in or acquiring, managing, or developing real property.
An equity RE fund derives its regular revenue primarily from income
generated by rental and lease payments. An equity RE fund can benefit from
appreciation in its underlying real properties; its income can grow
through increases in rents from such properties; and cash in excess of
taxable income can be produced through property depreciation. <o:p></o:p></span></li>
<li class="MsoNormal" style="line-height: 150%; margin-bottom: 6pt; margin-right: -7.9pt; text-align: justify;"><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">Mortgage REIT Fund - </span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">It concentrates on financing
activities. A mortgage RE fund invests in the mortgages, mortgage-backed
securitization and whole or sub prime loans, or portions thereof, on real
property assets. In essence, mortgage RE funds loan money to real estate
owners and such RE funds generate their revenue from the interest earned
on such loans. <o:p></o:p></span></li>
<li class="MsoNormal" style="line-height: 150%; margin-bottom: 6pt; margin-right: -7.9pt; text-align: justify;"><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">Hybrid REIT Fund -</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";"> As the name suggests, owns a combination of equity
and mortgage interests in properties. <o:p></o:p></span></li>
</ul>
<h1 style="line-height: 150%; margin-bottom: 6.0pt; margin-left: .5in; margin-right: -7.9pt; margin-top: 0in; mso-layout-grid-align: none; mso-list: l0 level1 lfo2; tab-stops: list .5in; text-align: justify; text-autospace: none; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Symbol; font-size: 10pt; font-weight: normal; line-height: 150%;">·<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;"> </span></span><span style="font-family: Arial, sans-serif; font-size: 10pt; line-height: 150%;">Finite Life REIT Fund</span><span style="font-family: Arial, sans-serif; font-size: 10pt; font-weight: normal; line-height: 150%;"> - It sets forth in
the offering documents for its securities a termination date (seven to fifteen
years from the RE fund’s date of inception) and an investment strategy.<o:p></o:p></span></h1>
<ul style="margin-top: 0in;" type="disc">
<li class="MsoNormal" style="line-height: 150%; margin-bottom: 6pt; margin-right: -7.9pt; text-align: justify;"><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">Special Purpose or Dedicated REIT Fund - </span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Arial Unicode MS";">It invests in a single type of
property and may be tied to a particular developer or user of real estate.
Certain RE funds invest in a variety of property types (e.g., apartments,
hotels, self storage facilities, restaurants, golf courses, office
building).<o:p></o:p></span></li>
</ul>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="text-align: justify;">
<b><u><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 115%;">Structure
of REIT<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="background: white; line-height: 150%; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; text-align: justify;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">REITs in India are required to be set up as private trusts
under the purview of the Indian Trusts Act, 1882 and trust deed shall be registered under the
provisions of the Registration Act, 1908<o:p></o:p></span></div>
<br />
<ol start="1" type="i">
<li class="MsoNormal" style="background: white; line-height: 150%; mso-list: l1 level1 lfo3; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><b><i><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Parties</span></i></b><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">:</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";"> </span><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">The parties in the REIT include
the sponsor, the manager, the trustee, the principal valuer and the
investors / unit holders. Sponsor sets up the REIT, which is managed by
the manager. The trustee holds the property in its name on behalf of the
investors. The roles, responsibilities, minimum eligibility criteria and
qualification requirements for each of the abovementioned parties are
detailed in the Regulations. Sponsors are required to hold a minimum of
15% (25% for the first 3 years) of the total outstanding units of the REIT
at all times to demonstrate skin-in-the-game.<o:p></o:p></span></li>
<li class="MsoNormal" style="background: white; line-height: 150%; mso-list: l1 level1 lfo3; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><b><i><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Use of SPV</span></i></b><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">:</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";"> </span><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">REITs may hold assets directly
or through an SPV. All entities in which REITs control majority interest
qualify as an SPV for the purpose of the Regulations.<o:p></o:p></span></li>
<li class="MsoNormal" style="background: white; line-height: 150%; mso-list: l1 level1 lfo3; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><b><i><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Investment</span></i></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";"> <b>and
Listing:</b> </span><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">Units
of a REIT are compulsorily required to be listed on a recognized stock
exchange.<o:p></o:p></span></li>
<li class="MsoNormal" style="background: white; line-height: 150%; mso-list: l1 level1 lfo3; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><b><i><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Potential income streams</span></i></b><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">:</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";"> </span><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">REITs are principally expected
to invest in completed assets. Income would consist of rental income,
interest income or capital gains arising from sale of real assets / shares
of SPV.<o:p></o:p></span></li>
<li class="MsoNormal" style="background: white; line-height: 150%; mso-list: l1 level1 lfo3; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list .5in; text-align: justify;"><b><i><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">Distribution</span></i></b><b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";">:</span></b><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: "Times New Roman";"> </span><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%; mso-fareast-font-family: "Times New Roman";">90% of net distributable income
after tax of the REIT is required to be distributed to unit holders within
15 days of declaration.</span></li>
</ol>
<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-2mwbQEyDi8IH1qxKRKt-YRjDFE505AKZqWzaLPAzGhhknSjN6Ke-mX8nv9Zf7fS4vcnAglkytwTIkIfM3EU5ktQUzxgm_USyl_UHcvA8URXSHikMTfxnLIUFWMtODKWce58c007X1WE/s1600/REIt-structure.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg-2mwbQEyDi8IH1qxKRKt-YRjDFE505AKZqWzaLPAzGhhknSjN6Ke-mX8nv9Zf7fS4vcnAglkytwTIkIfM3EU5ktQUzxgm_USyl_UHcvA8URXSHikMTfxnLIUFWMtODKWce58c007X1WE/s1600/REIt-structure.jpg" /></a></div>
<div style="text-align: justify;">
<span style="font-family: Arial, sans-serif; font-size: x-small;"><span style="line-height: 20px;"><br /></span></span></div>
<div style="text-align: justify;">
<div class="MsoNormal" style="line-height: 150%;">
<b><u><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%;">Raising of Funds and Listing
of Securities of REIT<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%;">The
trust shall be registered with SEBI post which it can raise funds through an
initial offer and once listed, may subsequently raise funds through follow-on
offers. The value of REIT assets shall not be less than INR 500 Crores. This is
to ensure that only established players enter the market. The minimum initial
offer size and minimum public float of INR 250 crore and of 25% respectively
has been specified in order to ensure adequate public participation and float
in the units. Further, minimum size of one unit of REIT shall be INR 1 lakh and
minimum subscription size shall be INR 2 lakhs. It shall be mandatory for all
units of REIT to be listed on the exchanges and shall continue to be listed on
the exchange unless delisted under the Draft Regulations. Further, the funds
may be raised by REITs from resident or foreign investors.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%;">
<b><u><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%;">Investment Conditions and
Dividend Policy<o:p></o:p></span></u></b></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%;">It
has been mandated that 80% of the value of the REIT assets shall be in
completed and rent generating properties and 20% can be invested in other
assets as specified under the Draft Regulations. The investment by a REIT shall
only be in assets in India. The REITs are not permitted to invest in vacant
land/ agricultural land/ mortgages other than mortgage backed securities. REITs
have been allowed to invest in properties directly or through a SPV. REIT shall
invest in at least 2 projects with not more than 60% of the value of assets
invested in one project. Further, to ensure regular income to the investors, it
has been mandated to distribute 90% of the net distributable income after tax
of the REIT to the investors at least on a half yearly basis.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%;">
<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; line-height: 150%;">For
further details or clarification on REITs, contact us at <a href="mailto:admin@equicorplegal.com">admin@equicorplegal.com</a> /+919958709189<o:p></o:p></span></div>
</div>
</div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com0tag:blogger.com,1999:blog-6560493675054762503.post-21845201756444001212014-08-22T20:30:00.000+05:302014-08-22T20:30:06.933+05:30Nidhi Companies Rules 2014- An analysis w.r.t. Nidhi Company Registration<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<i><span style="font-family: "Arial","sans-serif";">“Nidhi
is a company formed with the exclusive object of cultivating the habit of
thrift, savings and functioning for the mutual benefit of members by receiving
deposits only from individuals enrolled as members and by lending only to
individuals, also enrolled as members”<o:p></o:p></span></i></div>
<div align="right" class="MsoListParagraph" style="line-height: 150%; mso-list: l4 level1 lfo1; text-align: right; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">-<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Section
406, Companies Act, 2013 & Companies Rules 2014<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Arial","sans-serif";">Nidhi Company are registered or formed
only for the benefit for its members only, an outsider i.e. who is not the
member of the Nidhi Company is not allowed to deposit any money or doing any
kind of business with the concerned Nidhi Company. In this article we will
analyze the impact of Nidhi Companies Rules 2014 on the registration of Nidhi
Company<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><span style="font-family: "Arial","sans-serif";">Incorporation
of Nidhi Company<o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l5 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">i)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">A
Nidhi Company to be incorporated under the Companies Act, 2013 (“<b>Act</b>”) shall be a public company and with
a minimum paid up equity share capital of five lakh rupees;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l5 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">ii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">On
and after the commencement of Companies Act, 2013, no Nidhi Company shall issue
preference shares;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l5 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">iii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Except
as provided under the provisions of Nidhi Companies Rules 2014, no Nidhi
Company shall have any object in its Memorandum of Association other than the
object of cultivating the habit of thrift and savings amongst its members,
receiving deposits from and lending to, its members only, for their mutual
benefit;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l5 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">iv)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Every
company incorporated as Nidhi shall have the last words “Nidhi Limited” as part
of its name.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><span style="font-family: "Arial","sans-serif";">Structure
of Nidhi Company<o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l9 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">i)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Within
a period of one year from the commencement of the Nidhi Companies Rules 2014,
every Nidhi Company shall ensure that it has:<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 1.75in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">a.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Not
less than two hundred members;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 1.75in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">b.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Net
Owned funds of ten lakhs or more;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 1.75in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">c.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Unencumbered
term deposits of not less than 10% of the outstanding deposits;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; margin-left: 1.75in; mso-add-space: auto; mso-list: l8 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">d.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Ratio
of Net Owned Funds to deposits of not more than 1:20<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l9 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">ii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">A
Nidhi Company shall not admit a body corporate or trust as member<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l9 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">iii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">A
minor shall not be admitted as a member of Nidhi Company;<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l9 level1 lfo4; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">iv)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Except
as otherwise permitted under the Nidhi Company Rules, 2014, every Nidhi Company
shall ensure that its membership is not reduce to less than two hundred members
at any time.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify;">
<b><span style="font-family: "Arial","sans-serif";">Opening
of Branches<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .75in; mso-list: l6 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">i)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Any
kind of public deposit business runs on its branch offices. A Nidhi Company may
open branches, only if it has earned net profits after tax continuously during
the preceding three financial years. A Nidhi Company may open up to three
branches within the district;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .75in; mso-list: l6 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">ii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">No
Nidhi Company shall open branches or collection centres or offices or deposit
centres or by whatever name called outside the State where its registered
office is situated;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .75in; mso-list: l6 level1 lfo5; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">iii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">A
Nidhi Company shall not close any of its branch unless it :-<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 130.5pt; mso-list: l2 level1 lfo6; text-align: justify; text-indent: -22.5pt;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">a.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Publishes
an advertisement in a newspaper in vernacular language in the place where it
carries on business at least thirty days prior to such closure, informing the
public about such closure;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 130.5pt; mso-list: l2 level1 lfo6; text-align: justify; text-indent: -22.5pt;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">b.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Inform
the Registrar within the thirty days of such closure<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .25in; text-align: justify;">
<b><span style="font-family: "Arial","sans-serif";">Deposits<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .75in; mso-list: l1 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">i)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">The
fixed deposits shall be accepted for a minimum period of six months and a
maximum period of sixty months;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .75in; mso-list: l1 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">ii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Recurring
deposits shall be accepted for a minimum period of twelve months and a maximum
period of sixty months;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .75in; mso-list: l1 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">iii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">The
maximum balance in a savings deposit account at any given time qualifying for
interest shall not exceed one lakh rupees at any point of time and the rate of
interest shall not exceed 2% above the rate of interest payable on savings bank
account by nationalized banks;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .75in; mso-list: l1 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">iv)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">A
Nidhi Company may offer interest on fixed and recurring deposits at a rate not
exceeding the maximum rate of interest prescribed by the Reserve Bank of India
which the Non-Banking Financial Companies can pay on their public deposits.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .75in; mso-list: l1 level1 lfo7; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">v)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">A
Nidhi Company shall not accept deposits exceeding twenty times of its Net Owned
Funds (NoF) as per its last audited financial statements<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify; text-indent: .25in;">
<b><span style="font-family: "Arial","sans-serif";">Loans<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">i)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">A
Nidhi Company shall provide loans only to its members;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .5in; mso-list: l3 level1 lfo8; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">ii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">A
Nidhi Company shall give loans to its members only against the following
securities namely:<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 2.0in; mso-list: l7 level1 lfo9; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">a.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Gold,
silver and jewellery<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 2.0in; mso-list: l7 level1 lfo9; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">b.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Immovable
property;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: 2.0in; mso-list: l7 level1 lfo9; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">c.<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">Fixed
deposit receipts, National Savings Certificates, other Government Securities
and insurance policies<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; tab-stops: 53.25pt; text-align: justify;">
<b><span style="font-family: "Arial","sans-serif";"> Dividend<o:p></o:p></span></b></div>
<div class="MsoNormal" style="line-height: 150%; tab-stops: 53.25pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif";">A Nidhi Company shall not declare dividend
exceeding 25% or such higher amount as may be specifically approved by the
Regional Director for reasons to be recorded in writing and further subject to
the following conditions, namely:-<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .5in; mso-list: l0 level1 lfo10; tab-stops: 53.25pt; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">i)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">An
equal amount is transferred to general reserve;<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .5in; mso-list: l0 level1 lfo10; tab-stops: 53.25pt; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">ii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">There
has been no default in repayment of matured deposits and interest and<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; margin-left: .5in; mso-list: l0 level1 lfo10; tab-stops: 53.25pt; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: "Arial","sans-serif"; mso-fareast-font-family: Arial;">iii)<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">It
has complied with all rules as applicable to Nidhi Companies<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; tab-stops: 53.25pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif";"> For further details on Registration of Nidhi
Companies, please click on the link below:<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; tab-stops: 53.25pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.equicorplegal.com/Pdfs/ECA-%20Nidhi%20Company%20Registration.pdf">http://www.equicorplegal.com/Pdfs/ECA-%20Nidhi%20Company%20Registration.pdf</a><o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; tab-stops: 53.25pt; text-align: justify;">
<span style="font-family: "Arial","sans-serif";">Or contact us at <a href="mailto:admin@equicorplegal.com">admin@equicorplegal.com</a> / +91
9958709189<o:p></o:p></span></div>
</div>
equicorplegal.blogspot.comhttp://www.blogger.com/profile/17280060641839177717noreply@blogger.com1tag:blogger.com,1999:blog-6560493675054762503.post-52949167397724264722014-07-29T19:04:00.000+05:302014-07-29T19:04:02.901+05:30Small & Payment Banks: Future of Local Banking<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Arial","sans-serif";">The Reserve Bank of India has proposed
major reforms in banking sector with issue of draft guidelines for setting up “<b><i>Small
and Payment Banks</i></b>” which will cater to marginalized sections of the Society,
including migrant laborers, for collecting deposits and remitting funds.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<span style="font-family: "Arial","sans-serif";">These banks will provide a whole suite
of basic banking products such as deposits and supply of credit, but in a
limited area of operation. The payments banks will offer a limited range of
products such as acceptance of demand deposits and remittances of funds. They
will have a widespread network of access points particularly in remote areas,
either through their own branch network or through Business Correspondents
(BCs)/agents or through networks provided by others.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">The
existing non-bank pre-payment instrument issuers, non-banking finance companies
(NBFCs), corporate BCs, mobile telephone companies, super-market chains,
companies, real sector cooperatives and public sector entities may apply to set
up a payments bank.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l0 level1 lfo1; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">In
case of small banks, resident individuals with 10 years of experience in
banking and finance, companies and Societies will be eligible as promoters to
set up small banks. NBFCs, micro finance institutions (MFIs), and Local Area
Banks (LABs) can also opt for conversion into small banks. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><u><span style="font-family: "Arial","sans-serif";">Small
Banks-<o:p></o:p></span></u></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Wingdings; mso-bidi-font-family: Wingdings; mso-fareast-font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="font-family: "Arial","sans-serif";">The
objective for these Small Banks is to increase financial inclusion by provision
of savings vehicles to under-served and un served sections of the population,
supply of credit to small farmers, micro and small industries, and other unorganized
sector entities through high technology-low cost operations. Local focus and
the ability to serve smaller customers will be a key criterion in licensing
such banks<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; font-family: Arial, sans-serif;">The area of operations would normally be
restricted to contiguous districts in a homogenous cluster of states of union
territories so that the Small Bank has a ‘local feel’ and culture. However, if
necessary, it would be allowed to expand its area of operations beyond
contiguous districts in one or more states with reasonable geographical
proximity.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l1 level1 lfo2; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; font-family: Arial, sans-serif;">In view of concentration of area of operations,
the Small Bank would need a diversified portfolio of loans, spread over it area
of operations.<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; text-align: justify;">
<b><u><span style="background: white; font-family: Arial, sans-serif;">Payment Banks-<o:p></o:p></span></u></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 150%; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; font-family: Arial, sans-serif;">Objective of payments banks is to increase
financial inclusion by providing small savings accounts, payment/remittance
services to migrant labour, low income households, small businesses, other
unorganised sector entities and other users by enabling high volume-low value
transactions in deposits and payments/remittance services in a secured
technology-driven environment.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; font-family: Arial, sans-serif;">Payments Banks can accept demand deposits (only
current account and savings accounts). They would initially be restricted to
holding a maximum balance of Rs 100,000 per customer. Based on performance, the
RBI could enhance this limit.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 150%; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; font-family: Arial, sans-serif;">No credit lending is allowed for Payments Banks<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 150%; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -.25in;">
<!--[if !supportLists]--><span style="font-family: Wingdings;">Ø<span style="font-family: 'Times New Roman'; font-size: 7pt; line-height: normal;">
</span></span><!--[endif]--><span style="background: white; font-family: Arial, sans-serif;">The float funds can be parked only in less than
one year Government Securities<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";"> <b>Brief Summary:<o:p></o:p></b></span></div>
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<b><span style="font-family: "Arial","sans-serif";">Particulars<o:p></o:p></span></b></div>
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<b><span style="font-family: "Arial","sans-serif";">Small
Banks<o:p></o:p></span></b></div>
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<b><span style="font-family: "Arial","sans-serif";">Payment
Banks<o:p></o:p></span></b></div>
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<b><span style="font-family: "Arial","sans-serif";">Eligible
Entity<o:p></o:p></span></b></div>
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<span style="font-family: "Arial","sans-serif";">NBFC,
MFI, Cos. Societies, resident individuals or professionals with 10 or more
years of experience<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">Pre-payment
issuers, NBFC, Corporates, telecom cos, super markets, real estate cos. &
co-operatives<o:p></o:p></span></div>
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<b><span style="font-family: "Arial","sans-serif";">Capital
<o:p></o:p></span></b></div>
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<span style="font-family: "Arial","sans-serif";">INR
100 Crore<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">INR
100 Crore<o:p></o:p></span></div>
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<b><span style="font-family: "Arial","sans-serif";">Permitted
Activity<o:p></o:p></span></b></div>
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<span style="font-family: "Arial","sans-serif";">Collect
deposits and lend to farmers, small businesses and industries, unorganized
sector<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">Payment
& remittance services, demand deposit products to small biz & low
income households<o:p></o:p></span></div>
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<b><span style="font-family: "Arial","sans-serif";">Statutory
Compliance<o:p></o:p></span></b></div>
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<span style="font-family: "Arial","sans-serif";">Maintain
CRR, SLR & 15% capital adequacy as per Basel I norms<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">Maintain
CRR and investment money in Government sector<o:p></o:p></span></div>
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<b><span style="font-family: "Arial","sans-serif";">Promoter
Holding<o:p></o:p></span></b></div>
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<span style="font-family: "Arial","sans-serif";">It
should be lowered to below 40% in 3 years and 26% in 12 years<o:p></o:p></span></div>
</td>
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<span style="font-family: "Arial","sans-serif";">It
should be lowered to below 40% in 3 years and 26% in 12 years<o:p></o:p></span></div>
</td>
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<b><span style="font-family: "Arial","sans-serif";">FDI<o:p></o:p></span></b></div>
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<span style="font-family: "Arial","sans-serif";">As
per FDI policy<o:p></o:p></span></div>
</td>
<td style="background: #D2EAF1; border-bottom: solid #78C0D4 1.0pt; border-left: none; border-right: solid #78C0D4 1.0pt; border-top: none; mso-border-left-alt: solid #78C0D4 1.0pt; mso-border-top-alt: solid #78C0D4 1.0pt; padding: 0in 5.4pt 0in 5.4pt; width: 153.9pt;" valign="top" width="205">
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<span style="font-family: "Arial","sans-serif";">As
per FDI policy<o:p></o:p></span></div>
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<br /></div>
<br />
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<span style="font-family: "Arial","sans-serif";">For further details, please contact at
<a href="mailto:admin@equicorplegal.com/">admin@equicorplegal.com/</a> +91
9958709189<o:p></o:p></span></div>
</div>
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