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Advaya Speaks

Our team actively contributes their views and opinions on current issues, legal updates, economic developments, new laws, amendments in existing legislations as also landmark judgments. Read on the published Articles containing quotes and observations of some of our firm members on varied issues.

Corporate and Commercial
January 11, 2015: Does the Indian Contract Act need a re-look?

January 02, 2014: 2013- Corporate Law Wrap!

December, 2014: startups Nurturing Growth published in THE WEEK
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December 24, 2014: Faber-Castell files Rs 75-crore damages against former managing director Anup Bhaskaran Rana

December 3, 2014: India Inc may get a breather on related party deals:

July 19, 2014: M&A deals, de-mergers not to attract related party provision in new company law

June 29, 2014: The game has changed for gold saving schemes

Foreign Direct Investment (FDI)
October 29, 2014: Indian laws involve unique risks: Amazon

July 26, 2014: Riding the hope rally as the markets run up nearly 30% run-up-nearly-30-2005318

July 26, 2014: IndiGo approaches FIPB in run-up to IPO

July 10, 2014: Budget pushes for reforms in insurance, defence

January 8, 2015: How e-retailers such as Flipkart, Amazon are keeping fake products at bay

March 6, 2015: Civil aviation ministry to advocate informal anti-poaching arrangement between airlines

Civil Aviation ministry mulling ‘anti-poaching’ deal

July 27, 2014: How do air crash victims get compensated?

July 8, 2014: Greenfield airports within 150 km of existing ones soon

March 8, 2015: Why Jaitley decided to scrap wealth tax:

July 11, 2014: Budget 2014 - Retrospective tax amendment stays, Vodafone to go ahead with arbitration

July 10, 2014: Vodafone to continue international arbitration on tax case

Securities Law
March 4, 2015: Subrata Roy: A year in custody

July 9, 2014: SAT dismisses Financial Tech’s plea against SEBI order

Coal Mining and Nationalization Act
September 25, 2014: SC Cancels all but 4 Coal Blocks: but-four-coal-block-allocations-114092500006_1.html

September 25, 2014: SC Does a 2G, Cancels 204 Coal Block Allocations:

January 25, 2015: Uber seeks radio taxi licence, claims it is back

December 16, 2014: GenNext Lawyers Strike Out on their own:

November 28, 2014: India Inc takes baby steps on gender sensitisation, women’s safety at workplace:

November 11, 2014: Cautious Japan Inc reaches out via lawyers:

July 27, 2014: Saving PPP Projects

Simplification of the DIN Rules (Update: April 20, 2011)

Due to the present process being cumbersome and time consuming, the Ministry of Corporate Affairs has re-examined the process of allotment of Director Identification Number (DIN) to be obtained under section 266B of the Companies Act, 1956. The application for DIN shall now be made in e-Form and no physical submission of documents shall be accepted for the same. Instead, scanned documents with verification by the applicant shall be attached along with the e-Form. Only online payment and no challan payment shall be allowed henceforth for DIN application. The application can also be submitted online by the applicant himself using his Digital Signature Certificate (DSC).

DIN 1 e-Form can be digitally signed by the professional, who shall also confirm that he has verified the particulars of the applicant given in the application. Where the DIN 1 is verified by the professional, the DIN will be approved by the system immediately online. In other cases the DIN cell will examine the application and same shall be disposed of within one or two days.

Penal action against the applicant and professional certifying the DIN application in case of false information / certification as per provisions of section 628 of the Companies Act, 1956 will be taken in addition to action for professional misconduct and revocation of DIN, allotted on false information.
No prior approval in case of existing joint ventures/ technical collaborations in the "same field" (Update: March 31, 2011)

The Department of Industrial Policy and Promotion (DIPP) has issued Consolidated Foreign Investment Policy, whereby the requirement of prior approval in case of existing joint ventures/ technical collaborations in the “same field”, which was imposed by Press Note 1 of 2005 has been removed. Keeping in view the need to reduce the levels of State intervention in the commercial sphere, DIPP has decided to abolish the condition to obtain prior approval in case of existing joint ventures/ technical collaborations in the “same field”.
Change in Stamp Duty on Equity Transaction (Update: March 23, 2011)

Maharashtra’s Deputy Chief Minister, Ajit Pawar, presented the state budget for the year 2011-12 on March 23, 2011. One of the important changes brought about under the state budget include changes in the stamp implications in equity transactions.

To simplify the process of collecting the duty, a uniform duty of 0.005% on all equity transactions was proposed in the budget. It is proposed to charge a uniform stamp duty of 0.005% on all the transactions of securities, futures, delivery and non-delivery based transactions for clients as well as on own accou
Listing Agreement for Securitised Debt Instruments
(Update: March 16, 2011)

In order to develop the primary market for securitised debt instruments in India, Securities and Exchange Board India (SEBI) has notified the Securities and Exchange Board of India (Public offer and Listing of Securitised Debt Instruments) Regulations, 2008 (the “Regulations”). The Regulations provide for a framework for issuance and listing of securitised debt instruments. With a view to enhance information available in the public domain on performance of asset pools on which securitised debt instruments are issued, SEBI has put in place a Listing Agreement for securitised debt instruments. The Listing Agreement for securitised debt instruments as set out by SEBI shall come into force with immediate effect for all ‘securitised debt instruments, as defined under regulation 2(1)(s) of the Securities and Exchange Board of India (Public Offer and Listing of Securitised Debt Instruments) Regulations, 2008, seeking listing on the Stock Exchange.
FIPB approves 19 FDI proposals worth Rs. 1,358 crore
(Update: February 25, 2011)

According to the data provided by the Ministry of Commerce, Foreign Direct Investment (FDI) inflows into the country went down by almost 23 per cent to USD 16 Billion in April-December 2010 from USD 20 Billion in the same period the previous year. A silver lining has been provided by the Foreign Investment Promotion Board (FIPB), which has approved 19 proposals worth INR 1,358 Crore, including one from Sistema Shyam Teleservices and Reliance Broadcast Network.

The FIPB approved Reliance Broadcast Network’s proposal of INR 45 Crore seeking to induct investment by Foreign Institutional Investors (FII) and Non-Resident Indians (NRI) among others. The decision was deferred on 21 proposals including that of Essar Capital Holdings (India) and 9 proposals were rejected. Hero Investments Pvt. Ltd., Reckitt Benckiser Plc and GMR Airports Holding Ltd. had their proposals referred to Cabinet Committee on Economic Affairs as the investment involved in each was over INR 1,200 Crore. Also, Shriram Capial, which is a financial and insurance service provider, wants to introduce foreign equity in an investing company in an INR 1,180 Crore proposal.

Furthermore, the Government has allowed the FIPB, under the Ministry of Commerce and Industry, to clear FDI proposals of up to USD 258.3 Million. Earlier all project proposals that involved investment of above USD 129.2 Million were put up before the Cabinet Committee of Economic Affairs (CCEA) for approval.
32 Bills to be tabled during Budget Session (Update: February 21, 2011)

The budget session of the Indian Parliament kicked off on February 21, 2011. Financial business - presentation, discussion and passage of the railway budget and general budget are the major issues on the agenda of the session. The session will continue till April 21, 2011 with an 18-day recess from March 17 to April 3, 2011.

66 bills are scheduled for the session – 32 bills for introduction, 31 for consideration and passing and 3 for introduction, consideration and passing. The three bills for introduction, consideration and passing are - the Finance Bill, the Labour Laws and the National Capital Territory of Delhi Laws. Among the economic bills, the government proposes to introduce the Constitution Amendment Bill to pave the way for introduction of the long-awaited Goods and Services Tax (GST).

The other important economic legislations slated to be taken up by the government in Parliament include the Companies (Amendment) Bill 2009 and the Chartered Accountants (Amendment) Bill 2010. While the Railway Budget 2011-12 will be presented on February 25, 2011, the Economic Survey will be tabled on the same day.

The other bills to be tabled include Mines and Minerals (Development and Regulation) Bill, Recovery of Debts due to Banks and Financial Institutions (Amendment) Bill, National Highways Authority of India (Amendment) Bill, Cinematograph Bill, Banking Laws (Amendment) Bill, Bank of India (Subsidiary Banks) Amendment Bill and Prevention of Torture Bill.

In all, 75 items have been listed in the budget session's agenda, which includes 66 bills, 8 financial items and a motion of thanks to the President's address.
Implications of SCRR amendments on Insurance Joint Ventures
(Update: June 13, 2010)

In order to abide by the recent amendments introduced to Securities Contracts (Regulation) Rules, 1957 (SCRR), whereby the threshold for non-promoter public shareholding for all listed companies has been raised from 10% (ten per cent) to 25% (twenty five per cent), foreign partners may have to dilute their stake in insurance joint ventures (JVs), in case the JVs decide to get listed.

As per the existing FDI Policy, FDI upto 26% (twenty six per cent) is permitted in insurance sector. In the current scenario the Indian promoters of insurance JVs would want to hold minimum 51% (fifty one per cent) of the stakes in the JVs, which would leave only 23% (twenty three per cent) for dispersed shareholding. In such a situation foreign partners will have to reduce their stake so as to allow 25 % (twenty five per cent) for public shareholding as per the SCRR diktat.

As per the Insurance Act, 1938, the insurance companies may tab public market only after a period of ten years from the date of the commencement of their business. The insurance regulatory and development authority (IRDA) is working on the modalities of the initial public offer by insurance companies. IRDA has suggested that both, Indian and foreign partners should dilute their stake proportionally after they go public so as to conform to the minimum public shareholding requirement under SCRR.
Change in public shareholding requirement for listed companies
(Update: June 4, 2010)

The Ministry of Finance has announced amendments to Securities Contracts (Regulation) Rules, 1957 (SCRR), where the threshold for non-promoter public shareholding for all listed companies has been raised from 10% (ten per cent) to 25% (twenty five per cent). The amendments have been introduced to ensure a dispersed shareholding structure, which is essential for the sustenance of a continuous market for listed securities to provide liquidity to the investors and to curb price manipulation. Key features of the amendments introduced to SCRR are follows:
  • All listed companies shall maintain minimum public shareholding of 25% (twenty five per cent).
  • Existing listed companies having less than 25% (twenty five per cent) shareholding by public have to reach the minimum cap of 25 % (twenty five per cent) by an annual addition of not less than 5% (five per cent) to public shareholding.
  • For new listing, if the post issue capital of the company calculated at offer price is more than INR 40,00,00,00,000 (Indian Rupees Forty Billion), the company may be allowed to go public with 10% (ten per cent) public shareholding and comply with the 25% (twenty five per cent) public shareholding requirement by increasing its public shareholding by at least 5% (five per cent) per annum.
  • For companies whose draft offer document is pending with SEBI on or before the enforcement of these amendments are required to comply with 25% (twenty five per cent) public shareholding requirement by increasing its public shareholding by at least 5% (five per cent) per annum, irrespective of the amount of post issue capital of the company calculated at offer price.
  • A company may increase its public shareholding by less than 5% (five per cent) in a year if such increase brings its public shareholding to the level of 25% (twenty five per cent) in that year.
  • In case the public shareholding in a listed company falls below 25% (twenty five per cent) at any time, the company shall rectify the same within a maximum period of 12 (twelve) months from the date of such fall.
Telecom sector norms to be revised (Update: June 1, 2010)

Indian Government is likely to revise existing telecom sector norms issued in March, 2010 (Telecom Norms) that impose requirement on foreign network vendors to make all core communication equipment locally or compulsorily transfer technology to Indian manufacturers within a period of 3 (three) years. The Telecom Norms also provide that foreign vendors, who fail to comply with the requirement with respect to transfer of technology, would be liable to penalty and criminal proceedings.

The Government has decided to review the Telecom Norms after concerns have been raised by several telecom vendors that such mandatory requirements under the Telecom Norms are not in conformity with India’s commitment with respect to intellectual property rights in global forums including World Trade Organisation (WTO).
FDI in Defence Sector: Discussion paper by DIPP (Update: May 17, 2010)

In a landmark move, DIPP has recently published a discussion paper where it has suggested increase in cap for FDI in defence sector upto 74% (seventy four per cent). DIPP has proposed that the established players in the defence industry should be encouraged to set up manufacturing facilities and integration of systems in India with FDI upto 74% under the Government route. As per the proposal, there will not be any commitment on procurement and these players will have to participate in the request for proposal (RFP) to technically qualify and also compete in the financial bid.

DIPP has also suggested that for future RFPs by Ministry of Defence, a condition may be imposed that the successful bidder would have to set up the system integration facility in India with a certain minimum percentage of value addition in India. The successful bidder should be allowed to bring equity upto the proposed sectoral cap.

DIPP has made this proposal considering that the present cap of 26% (twenty six per cent) in FDI in defence sector has failed to attract the state of art technology and as per the Company Law, increase of cap from 26% (twenty six per cent) to 49% (forty nine per cent) will not give any additional rights to the foreign investors in the matters of the Indian company. Therefore, in order to allow Indian defence industry players to attract the best technology partners to invest in India, it is necessary to raise the FDI cap above 50% (fifty per cent).
Transfer of Shares: Revised Pricing Guidelines (Update: May 4, 2010)

The Reserve Bank of India (RBI) has vide its circular dated May 4, 2010 (RBI Circular) revised pricing guidelines for transfer of shares/ preference shares/ convertible debentures of an Indian company, from a resident to a non-resident and vice versa.

As per the RBI Circular pricing guidelines for transfer of equity instruments stand as follows:

Transfer by resident to non-resident

  • Where shares are listed on a recognised stock exchange in India, the price of shares shall not be less than the price at which a preferential allotment of shares can be made under the SEBI Guidelines, provided that the same is determined for such duration as specified therein, preceding the relevant date, which shall be the date of purchase or sale of shares.
  • Where shares are not listed on a recognised stock exchange in India, the transfer of shares shall be at a price not less than the fair value to be determined by a SEBI registered Category-I-Merchant Banker or a Chartered Accountant as per ‘the discounted free cash flow method’.
  • The price per share arrived at should be certified by a SEBI registered Category-I-Merchant Banker/ Chartered Accountant.

Transfer by Non-resident to Resident

  • Price of shares transferred by way of sale, by non-resident to resident shall not be more than the minimum price at which the transfer of shares can be made from a resident to a non-resident as per the new pricing guidelines prescribed under the RBI Circular.

Note: Insurance Regulatory and Development Authority (IRDA) has clarified that these revised pricing guidelines will not apply to insurance companies.

Warrants to foreign entity: Proposed amendment to FDI Policy
(Update: May 1, 2010)

The Department of Industrial Policy and Promotion (DIPP) has indicated that the Foreign Direct Investment Policy (FDI Policy) will soon be amended so as to allow Indian companies to issue warrants to foreign investors. DIPP has also proposed stringent terms for such issuance of warrants to foreign entities, which include the requirement to make an upfront payment of 25% (twenty five per cent) of the total conversion value.

Issue of warrants to foreign investors will also be subject to prior approval of Foreign Investment Promotion Board (FIPB), so that the Government can keep a track of funds raised.

With respect to the period of conversion, the Ministry of Finance and DIPP are considering to keep it at 1 (one) year, whereas as per the guidelines on issue of warrants issued by the Securities and Exchange Board of India (SEBI), the prescribed period of conversion is 18 (eighteen) months. This new proposal is seen as restrictive and may make warrants less preferred instrument for foreign investors.