What is Entertainment Law?

Any foreign investor contemplating to do business in India on its own or with an Indian partner must have a well thought out entry strategy in terms of business vehicle. Foreign investors have the option of setting up a company, branch/liaison office or a limited liability partnership (LLP).

The most commonly used vehicle is a private limited company. Indian companies are regulated under the Companies Act, 2013. LLPs, which are a comparatively new phenomenon in India, are governed by the Limited Liability Partnership Act, 2008.

FOREIGN INVESTMENT POLICY

The Department for Promotion of Industry and Internal Trade (DIPP), a department under the Ministry of Commerce and Industry, Government of India issues the country’s foreign direct investment (FDI) policy. For matters seeking urgent attention and intervention by the government, press notes are issued.

Inflow and outflow aspects of foreign exchange are regulated by rules, regulations and circulars issued by the Reserve Bank of India (RBI), which acts as the Central / Federal Bank of India as well as forex market regulator. RBI sets the financial norms, e.g., the valuation of securities of Indian entities for issue and transfer, eligibility norms for foreign investors, etc.

Most investment sectors are under the automatic route (i.e. no prior approval is required for foreign investment); only a few sectors such as insurance, real estate, non-banking financial corporations are regulated, and prior approval may be required from the concerned Ministry / Department at a Central Government level. FDI into LLPs is also permitted, subject to certain conditions. Indian Government has been liberalising India’s FDI policy from time to time.

PROHIBITED SECTORS

FDI in India is currently not permitted in broadly the following sectors:

Lottery Business including Government /private lottery, online lotteries, etc;

Gambling and Betting including casinos etc.;

Chit funds;

Nidhi company (borrowing from members and lending to members only);

Trading in Transferable Development Rights (TDRs);

Real Estate Business or Construction of Farm Houses;

Manufacturing of Cigars, cheroots, cigarillos and cigarettes, of tobacco or of tobacco substitutes;

Activities / sectors not open to private sector investment e.g. Atomic Energy.

Legal, accounting and architecture services

TAXATION

Personal and corporate Income tax in India is governed by a Central legislation, the Income tax Act, 1961, while most of the indirect taxes have been subsumed in the Goods and Services Tax (GST) introduced in 2017. Apart from these, India also has robust transfer pricing rules which apply to any related party transactions.

DISPUTE RESOLUTION

India follows the common law and has a single court system, i.e., the Courts administer both Central and State laws. The court system is three tiered, comprising the District courts, the High Courts (at State level) and the Supreme Court of India (at the Central level). In addition, there are subject specific tribunals too – e.g., National Company Law Tribunal (NCLT).

Considering the slow pace of litigation in India and a huge backlog of cases before Indian courts, parties to commercial relationships are increasingly relying on alternative modes of dispute resolution, such as arbitration.

An investor must be very careful about the choice of dispute resolution mechanism in any commercial transaction involving an Indian part as it can have very significant consequences. The investors must carefully discuss and examine the merits and demerits of different modes of dispute resolution, be it litigation before Indian / foreign courts or arbitration.

EMPLOYMENT LAWS

There are different Central and State laws on labour issues, and these vary at times depending on the Indian State where an investor has its operations. All appropriate registrations should be secured within prescribed deadlines and all HR records must be maintained as per mandated requirements.

The government has been introducing several reforms with respect to labour and employment laws to make these laws industry friendly and minimise the compliance burden for the private sector, particularly entities operating in the medium or small scale segment.

ANTI-TRUST REGULATION

Competition Act, 2002 governs the anti-trust issues in India. This legislation prohibits or regulates (a) anti-competitive agreements (b) abuse of a dominant position and (c) combinations.

Anti-competitive agreements are broadly defined as any agreement in respect of ‘production, supply, distribution, storage, acquisition or control of goods or provision of services, which causes or is likely to cause an appreciable adverse effect on competition within India’. For example, certain kinds of tie-in arrangements or bid-rigging are presumed to cause an appreciable adverse effect on competition and are subject to the legislation.

MODES OF ENTRY

There are two major entry routes for foreign entities into India: equity and non-equity. Under the equity route, a foreign investor can form a joint venture with an Indian partner or set up a wholly owned subsidiaries (allowed in most industry and service segments).The non-equity route would mean exports and contractual agreements.

Incorporating a private or public company or One Person Company (OPC) as a subsidiary in India involves paperwork for approvals and other formalities. In addition to the basic procedures, depending upon the sector and nature of business activities, companies may need to register with the relevant sector regulators.

For incorporation of an Indian company, a set of applications (name approval, incorporation) have to be filed with concerned Registrar of Companies (ROC) with details of directors, proposed capital, registered office, etc. The most common route is to incorporate a private limited company with 2 shareholders and 2 directors (at least 1 director has to be resident Indian).

Choosing the right market entry strategy for India requires careful consideration of the needs, capacities and format of each particular business. Whether you choose to set up a subsidiary, a liaison office or a joint venture, there are several options available, each with different implications and advantages.

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An injunction is an equitable remedy in the form of a court order that demands a party must do or must not do certain acts. A party that does not follow an order of injunction and fails to comply with it has to

1.      face both criminal and civil penalties and

2.      damages or accept sanctions for that.

Breach of injunction is considered serious criminal offenses in some cases which can result into arrest and possible prison sentences.

Emergency injunctions that are into effect only for less time and are known as temporary restraining orders. Courts can also grant preliminary injunctions to take effect immediately and effectively until a decision is made on a permanent injunction, which can stay in effect unconditionally or until certain conditions are met.

Every court is established for the purpose of providing justice to people all the courts has all such powers as may be required to do full and complete justices to the parties before it.

A court undoubtedly has the power to grant interim relief during the pendency of the suit. Temporary injunctions are thus injunctions issued during the pendency of proceedings.

DEFINITION

An injunction is a judicial process whereby a party is required to do, or is refrained from doing, any particular act. It is a remedy in the form of an order of the Court addressed to a particular person that either prohibits him from doing ‘or continuing to do a particular act (prohibitory injunction); or orders him to carry out a certain act (mandatory injunction).

OBJECT

Until legal rights and conflicting claims of the parties before the court are adjudicated by the grant of the interim relief an individual’s property can be preserved. Basically, the object of making an order regarding interim relief is to evolve a workable formula to the extent called for by the demands of the situation, keeping in mind the pros and cons of the matter and striking a delicate balance between two conflicting interests, i.e., injury and prejudice, which the plaintiff had to bear if the relief is refused; and same goes for defendant if the relief is granted. The court in the exercise of sound judicial discretion can grant or refuse to grant interim relief.

The main object of granting an individual temporary injunction is to maintain and preserve status quo at the time of proceedings institution and to avoid any change in it until the final determination of the suit. It is in the nature of protective relief granted in favour of a party to prevent future possible injury.

TYPES OF INJUNCTION

Section 52 to 57 of the Specific Relief Act govern injunction. Injunctions are of three kinds:

·         Temporary

·         Permanent

·         Mandatory

I. Permanent Injunction:

A permanent Injunction, also known by the name perpetual injunction, prohibits a party forever from doing the particular act and it can be granted only on merits at the end of the trial after hearing both parties to the suit.

Section 38 of the Specific Relief Act lays down the cases in which perpetual injunction can be granted.

Under Section 38(1),when breach of an obligation is to be prevented, then the Court can pass permanent injunction. Such obligation can exist either expressly or impliedly.

While under Section 38(3), perpetual or permanent injunction can be granted when the defendant invades or threatens to invade the plaintiff’s right to, or enjoyment of, property, the court may grant a perpetual injunction in the following cases:

I.                   where the defendant is trustee of the property for the plaintiff;

II.                where there exists no standard for ascertaining the actual damage caused, or likely to be caused, by the invasion:

III.             where the invasion is such that compensation in money would not afford adequate relief;

IV.             where the injunction is necessary to prevent a multiplicity of judicial proceedings.

II. Temporary or interim injunction:

This type of injunction stops a party for a while from doing the specified act and can be granted only until the suit is not over or until any other further order of the Court. Regulated by the provision of the Order 39 of the Code of Civil Procedure, 1908 and can be granted at any stage of the suit.

A temporary injunction is a provisional relief. The aim of such type of injunction is to protect the

• subject matter of the suit in the existing condition, without the defendant’s interference or threat.
• plaintiff from getting disposed off, or his property (subject matter) being destroyed or harmed, or from any injury to the plaintiff.

The primary reason behind granting temporary injunction is to protect the interests of an individual or the property of the suit, till the final judgement is passed. Th time period of such injunction is

1. A specified period of time; or
2. till the court deems fit.

A temporary injunction is granted after answers to the following questions are determined

1)      whether the plaintiff has a prima facie case?

2)      whether the balance of convenience is in favour of the plaintiff?

3)      whether the plaintiff would suffer an irreparable damage, if the injunction is not granted?

III. Mandatory Injunction:

The sole purpose of mandatory injunction is to rectify any wrong done. The acts are restored from their wrongful state to the right ones. The Court directs the defendant to do a certain thing.

The concept of mandatory injunction, though not directly but,  is given under Section 39 of the Act of 1963. the following elements have to be taken into consideration while deciding on whether to grant mandatory injunction or not:[1]

1. What acts are necessary in order to prevent a breach of the obligation
2. The requisite acts must be such as the court is capable of enforcing.

It is well accepted by the Courts that mandatory injunction is not to be granted in the following cases:

The Hon’ble Supreme Court of India laid down the following test to be taken before granting mandatory injunction:[2]

·         The plaintiff has must have a very strong case for trial. It should be of a standard higher than that of a prima facie case;

·         The plaintiff has to lay-bare that the grant of mandatory injunction is necessary to prevent irreparable loss or serious injury, which cannot be compensated in terms of money; and

·         The balance of convenience is in favour of the plaintiff as against the defendant.

When a suit for Injunction and Declaration would lie?

In the case of Anathema Sudhakar vs. P Buchi Reddy & amp; Ors, The Hon’ble

Supreme court clearly mentioned the general principles as to when just a suit for permanent injunction can proceed and when it is necessary to file a suit for

declaration and or possession with injunction as consequential relief which

reproduced as under:

·         When a Plaintiff has a lawful or peaceful possession of a property and the defendant disturbs or threatens such possession, then an injunction suit can be initiated. A person has a right to protect his possession against any person who does not prove a better title by seeking a prohibitory injunction. But a person in wrongful possession is not entitled to an injunction against the rightful owner.

·         When the Plaintiff’s title is not disputed, but he does not have the possession then his remedy would be to file a suit for possession and seek in addition, if necessary an injunction. without claiming the relief for possession, a person who is out of his possession can’t simply seek the remedy of injunction.

·         Where even after being in possession, Plaintiff’s title to the property is still in dispute, or under a cloud, or where the defendant asserts title thereto and there is also thereat of dispossession from the defendant, the Plaintiff will have to sue for declaration of title and consequential relief of injunction. Where the title of the Plaintiffs is under cloud or in dispute and he is not in possession or not able to establish possession, necessarily the plaintiff will have to file a suit for declaration, possession and injunction.

In view of the above judgment any person can file a suit for declaration and injunction with regard to any legal character or rights as to any property against any person who is denying or interested to deny his title or such character. In a suit for seeking declaration with regard to a right or title in respect of property along with consequential injunction the Plaintiff will have to pray for a declaration as contemplated under section 34 of the Specific Relief Act, 1963, an interim injunction during the pendency of the suit under order 39 of the Civil Procedure Code 1908 and a mandatory injunction under section 38 of the Specific Relief Act, 1963.

In the case of Dalpat Kumar Vs Prahlad Singh and Ors[3], the court held that:

In a suit for declaration of rights or character and injunction the Plaintiff will have to substantiate/prove his rights as claimed thereof. Accordingly the Court may in its discretion award the rights so prayed along with permanent injunction if deemed fit and necessary in the facts of the case.

Under section 35 of the Specific Relief Act, 1963 the declaration made under

section 34 by any court will only be binding on the parties to the suit or any

persons claiming through them respectively as a declaration under section 34

is a right in personam and not a right in Rem. (SNP Shipping Service Pvt

Ltd vs. World Tanker Carrier Corporation) AIR 2000 BOM 34.

Legal Provisions and Compliance For A Startup

A startup is a newly formed company or business. It comprises of only a few people who, in the starting, invest in their business/company. The initial stages of a startup require heavy investment. Sometimes, the size of a startup can be limited to only one person.

In the usual practice, the founder of a startup advertises his/her idea of starting a startup and tries to persuade the people to invest in it. Since the startups are very small, the founder seeks involvement of various persons as investors. The main purpose is to feed the growth of his business.

A startup may deal in offering a particular product or service. The founder of the startup chooses that product or service to deal in, which is new to the market and hence, which is non-existent till date.

The term ‘Compliance’ means to comply to: to conform to a particular law, rule, regulation etc. 

The term ‘Regulatory Compliance’ refers to the goals of an organization which it strives to achieve. It also includes the steps which are taken for achieving these goals.

In today’s world, we all strive for transparency in almost every aspect of life. Be it elections, or selection procedures etc. similarly the startups also adopt transparent methods to win over the trust of their probable customers/consumers and maintain their viability. Their object is to maximize transparency in processing and delivering the good/service concerned.

The concept of startups is growing speedily in India as well. The points to be kept in mind while starting a startup are as follows:

1.     The founder and investors must be aware of the existing laws which govern their business. For instance, if they think of making a website and working on it in the near future, then it is important for them to be familiar with the cyber laws.

2.     They also need to follow pre incorporation compliance. This includes

a.     Registration of the firm/company

b.     Name of the designation

c.      Allocation of the designation

d.     Approval of the designation

3.     The post incorporation compliances include

a.     Applying for PAN (Permanent Address Number)

b.     Applying for TAN (Temporary Address Number)

c.      Registering for

·        stock exchange

·        making payments of taxes levied on it

All startups must register themselves within 30 days of the applicability of act and must pay CGST (Central Goods and Services Tax) and SGST (State Goods and Services Tax) on goods and services after the applicability of GST ACT from 1^st July, 2017.

The next important question that bothers those who wants to do a startup is

How to comply?

A person must be familiar with the applicable regulations and their business

The most basic thing which a businessman must understand that he must have a knowledge of the legislation and Acts that are applicable to his business. There are many state, national and foreign regulations which will impact the business of a person immediately or in the near future if he/she will not consider these regulations.

Your investment of thought and efforts must be demonstrated into formulating a compliance plan

There must be written procedures and policies that must explain the mechanisms for effective regulation to all your employees and any auditors or regulators and control over these regulations will improve with time. Designate a compliance officer (required in some cases) to create a culture of compliance.

Maintain and document information related to key compliance.

There must be an effective and organised record keeping system in your company either hard or soft copy. These records must include all your written policies and protocols, records of all or any meetings with the authorities and case files if needed.

Your compliance programme should be growth ready

A person must start reviewing the companies that can impact you when your business will start to grow in other cities, states and countries. Your company must have a good legal department to understand the complex foreign regulations. A company has to face various obstacles during cross-border transactions, and those obstacles can come in any form either money, information, goods etc.

Every individual must follow this compliance list if he/she is willing to do a startup`.

·        Must open a bank account

·        Must share their capital deposition in the bank account

·        Must do GST registration

·        Must provide insurance of share certificates to shareholders

·        Must maintain a statutory register

·        The director must disclose the share holdings

·        Must file an income tax return

·        Must do annual return filling

IMPORTANT LEGISLATIONS GOVERNING STARTUPS

In India, if a person wishes to get into startup business, he/she must be familiar with the following legislations as they are the governing legislations.

I.                  Contract Law

The Indian Contract Act, 1872 provides guidelines as to the various aspects of a contract. These are competency, consideration, what agreements are contracts, void and voidable agreements etc. The person initiating a startup must be acquainted with all these provisions of the Act before entering into any sale agreement so that it is properly enforceable by law.

II.               Accounting and taxing Laws

Another important legislation by which the startup people are governed is Income Tax Act, 1960. This Act has a total of 300 Sections and lays down the rate and methods as to how the tax is to be calculated on the income of a person (resident of India). The main aim of getting into a startup is earn money by helping the society. Hence, the money earned through the startup is the income of the founder(s). so, they should know about the Act of 1960.

III.           Intellectual Property Laws

‘Intellectual’ means relating to intellect i.e. mind. In legal terms, it includes

1.     Copyright

2.     Patent

3.     Trademark

 Persons who wish to enter into startup which will deal in anything related to any of the above three, must know the rights and duties under the following Acts

1.     Indian Copyright Act, 1957

2.     Patents Act, 1970

3.     Trade Marks Act, 1999

HOW TO PROCEED AGAINST THE COMPANY UNDER IBC

(INSOLVENCY AND BANKRUPTCY CODE)

What is IBC?

The Insolvency and Bankruptcy Code, 2016 seeks to consolidate the existing legal framework concerning insolvency and bankruptcy. Considering the current pace of life of any individual in today’s time bankruptcy takes a long time to process. IBC   tends to resolve insolvencies by minimizing the time taken to resolve such cases.

This Code aims to protect the interests of small investors by taking into consideration their basic requirements. Hence, implementation of the Code will minimize the cost (in terms of both time and money) in attaining liquidation.

How IBC is helpful for Recovery of Debt by following Creditors:

·       Supplier of Goods/ Services:

Under this Act, if any person has supplied Goods or rendered services to any Corporate Debtor; and such corporate debtor makes default as non-payment of debt or any part of a debt, non-payment of installments due, then through NCLT, the creditor can take an action against the corporate debtor by the filing of a petition.

Time Period of Recovery:

If the creditor doesn’t receive payment due within 10 days he can issue a demand notice to the debtor, then it can file an application in NCLT for initiating the recovery (Corporate insolvency resolution) process. Within 14 days of application, NCLT will either accept the application or reject it.

·       Small Businesses:

Due to these following reasons the small business did not use to start a proceeding against the debtor:

1.       Due to lack of time-bound guidelines, it took a long time for the admission of the cases by the adjudicating authorities.

2. Filling a matter in courts in earlier times was not cheap.
3. Earlier the primary onus to initiate a resolution process lies with the debtor

Under this code within 24 days of issue of demand notice creditor will come to know whether his petition admitted or not. It is less costly then the application in the court as the fees for admission of an application by the operational creditor is Rs. 2,000/-.

·        Employee and workmen dues:

Employees and workmen are also considered as part of an operational creditor under IBC. If a Company fails to make salaries payment of employees or workmen and the value of the payment is more than Rs. 1 lac then employees can file the application against the Company with NCLT for initiation of the process of Recovery.

Cost of the application, process, time by the employees and workmen are same as the filing of an application by a creditor of supply of goods/services.

• The debtor of Loan:

If any person has taken a Loan from any Corporate Debtor; and such corporate debtor makes default as non-payment of interest, debt or any part of the debt, non-payment of installments due then the creditor can initiate the proceeding against the corporate debtor by the filing of the petition in NCLT.

Time Period of Recovery:

For initiating the recovery process, a financial creditor can file an application. The NCLT, will either accept the application or reject it within 14 days of filling the application.

The history

In December 2015, The Insolvency and Bankruptcy Code, 2015 was introduced in the Lok Sabha. The President of India gave his assent to the proposed Bill on 28^th May 2016.

The procedure for going against the Company

Under IBC, the employees and workmen are considered a part of the operational creditor. An operational creditor is any person to whom

1.     operational debt is owed

2.     Such debt has been legally assigned or transferred.

The IBC defines an operational debt as:

“A claim in respect of the provision of goods or services including employment or 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.”

Thus, the operational debt must fulfill the following pointers

1.     Debt arising out of professional goods; or

2.     Debt arising out of services provided; or

3.     Debt arising out of employment; or

4.     Any dues arising out of any law in force at that time payable to the Central Government, State Government or to any local Authority.

IBC recognizes employees and workmen as part of operational creditors. If a company fails to pay their salaries and the value of such non-payment exceeds Rs. 1 lakh, then the concerned employee or workmen can file an application against the company with the National Company Law Tribunal (NCLT) in order to recover their salary or wages, as the case may be.

Under Section 8 of the Code, the operational creditor has to first give notice to the debtor Company demanding a copy of the invoice or payment of the amount involved in the default. The Company has to furnish the thing demanded by the creditor within a period of 10 days.

If the Company fails to do so, then the operational creditor has an option under Section 9 to approach NCLT (adjudicating authority) and file an application for initiating a corporate insolvency resolution process.

The application shall be accompanied with

1.     a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor;

2.     an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt;

3.     a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of unpaid operational debt by the corporate debtor; and

4.     such other information as may be specified

The creditor can also propose a resolution professional to who will act as an interim resolution professional.

NCLT has to, by order, either accept or reject the application made by the creditor within a time period of 14 days from the receipt of such application.

Section 9(5)(i) provides for the grounds on which the application can be accepted. These grounds are as follows:

·        if the application is complete

·        if there is no repayment of unpaid operational debt

·        the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor

·        no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility

·        there is no disciplinary proceeding pending against any resolution professional proposed

Section 9(5)(ii) provides for the grounds on which the application can be rejected. These grounds are as follows:

·        if the application is incomplete

·        if there is repayment of unpaid operational debt

·        the invoice or notice for payment to the corporate debtor has not been delivered by the operational creditor

·        notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility

·        there is a disciplinary proceeding pending against any resolution professional proposed

When NCLT rejects an application if it is incomplete, then a notice is to be given to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice.

In the case of Punjab National Bank vs Divya Jyoti Sponge Iron Private Limited[1], NCLT, Kolkata Bench approved a resolution plan and took judicial notice of fixation of exaggerated insolvency resolution cost of a dying corporate debtor. The Tribunal has observed that legitimate guidelines and resolutions must be undertaken to guide and ensure the prospects of a revival of a dying corporate debtor not be at the highest cost which cannot be affordable by the corporate debtor.

In M/s Incredible Unique Buildcon Pvt Limited V/s M/s Clutch Auto Limited[2], two petitions were filed, one by the operational creditor under section 9 and the other under section 10.

The Corporate Debtor itself filed the petition for initiation of Corporate Insolvency Resolution Process against it. A list of financial and operation creditors has also been attached. The petitioner has further disclosed the details of property against which the loan of the corporate debtor is fully or partially secured along with details of the date of its creation.

The Hon’ble judge dismissed the operational creditor’s petition stating that  The Operational Creditor may file its claims before the Insolvency Resolution Professional in accordance with the public notice to be issued like all other claimants.

The Chennai bench of NCLT admitted the application filed by three employees for the commencement of the corporate insolvency resolution process and has appointed P Sriram as interim insolvency professional (IIP). Employees said that Aruna Hotels failed to pay arrears of salary, gratuity and leave salary of these employees. 

In the case of Aruna Hotels[3], the court referred to the case of an employee D Ramjees, who joined as a junior assistant and rose to the rank of company secretary. He had made a demand of Rs 2.6 crore but the respondent (the company) had denied the liability. What went in favor of the employee was that a day after the petition was filed before the NCLT on April 3, the MD, in a letter, acknowledged the liability of clearing these arrears. The court has directed the insolvency professional to take charge and declared moratorium of any legal action of recovery against the company until the completion of insolvency process. The court has also directed the other two employees N Krishnan and C Ganapathy to approach IIP with their claims. 

Since IBC has come into effect early in the year 2017, a variety of cases would set a precedent for future disputes. Earlier, in a case of Ms. Schweitzer Systemtek India versus Phoenix ARC[4],  M/s Schweitzer Systemtek India Pvt. Ltd. (“Schweitzer”) filed for initiation of corporate insolvency proceedings under Section 10 of the Insolvency and Bankruptcy Code. Schweitzer had availed of loans of Rs. 4.5 crores from Dhanlaxmi Bank. The bank, further assigned the debt to M/s. Phoenix ARC Pvt. Ltd. (“Phoenix”). In order to avail of the bank loan, the Promoters of Schweitzer had attached their personal properties. Phoenix attempted to recover these personal properties through other recovery proceedings.

Schweitzer objected to these recovery proceedings by bringing them to the notice of the NCLT. Schweitzer contended that the pendency of insolvency proceedings places a moratorium on initiation of other suits against it and hence the recovery proceedings initiated by Phoenix are unmaintainable. The NCLT in the instant case dismissed the contentions raised by Phoenix and clarified that the moratorium applied only to
properties owned by the Corporate Debtor Company. The NCLT also held that any personal property of the Promoters of the Corporate Debtor Company which have been furnished as security in order to avail loans for the Corporate Debtor Company will not be protected by the moratorium and can proceed against separately for recovery.

Recently the Bombay High Court, in Tayal Cotton (P.) Ltd. Vs. State of Maharashtra[5] discussed whether moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 (Code) includes criminal proceeding within its ambit. After considering the legislative intent behind introducing the provision for a moratorium in the Code, the Bombay High Court held that Section 14 of the Code, clearly excludes criminal proceedings. The section only prohibits a suit or legal proceedings of like nature including the execution of judgment; decree or order in any court of law, arbitral tribunal or other authority.

Conclusion

Hence, considering the intention of the Law, one can opine that Insolvency and Bankruptcy Code, 2016 is Game Changer for the corporate debtors. Powers are vested with the creditors also along with corporate debtors to initiate insolvency process against the corporate debtor. The Code promises to bring about far-reaching reforms with a thrust on creditor has driven insolvency resolution. The aim of the code is the early identification of financial failure and maximizing the asset value of insolvent firms.

[1] W.P.9519(W) of 2014

EWS reservation has been recently introduced by the Central Government of India. Now the general category candidates will be provided with 10% quota among their Economically Weaker Sections (EWS) in government jobs and educational institutions. This has been done by adding clauses in Indian Constitution (103rd Constitution Amendment Act, 2019)

The Rajya Sabha had passed the Constitution 124th (Amendment) Bill, 2019 that seeks to provide 10% reservation in jobs and educational institutions to economically backward sections in the general category. The legislation was passed in the upper house of the Parliament. 165 members voted in favour of it and 7 voted against it.

The share of seats that are accessible to you will be changed by this new quota act irrespective of the category- General, OBC, SC or ST and it will definitely affect your category.

The instructions were given by The Department of Personnel and Training yesterday for implementing quota for EWS in services and posts under central Government.

The quantum of EWS reservation will be 10% as declared by the government and the “scientific and technical” posts will not be included in EWS quota. The Bill was approved by the Parliament on 9th January, 2019.

The 10% reservation is in addition to the existing 50% reservation for the Scheduled Castes, Scheduled Tribes and the Other Backward Classes, taking total reservation to 60 per cent.

This scheme of reservation will be effective in respect of all direct recruitment vacancies to be notified on or after 01.02.2019.

A person whose gross annual income will be less than Rs.8 lakh will be considered in EWS quota and income from all the sources will be included whether salary, profession, business, agriculture etc.

The DoPT office memorandum issued on July 2, 1997 has general principles of applying roosters will be applied in case of EWS quota. 

EWS representation’s periodic reports Annual reports on EWS representation will be prepared by The Ministries and Department fortnightly. Unfilled EWS posts will not carry forward No vacancy will be filled in any recruitment year if there is no suitable candidate belonging to the EWS. Vacancies that will not be filled by the suitable candidate will not carry forward for next recruitment year as a backlog.

There must be an upliftment of EWS section no doubt about that. It must be done by the reservation as a tool or not is a question. But now is the time that some new reforms must be introduced in Reservation System of India.

This implementation is yet to be decided by The Supreme Court of India. The situation will come to what existed if the Supreme Court will declare this implementation as null and void. 

The detailed guidelines under the Scheme are as follows

I. GUIDELINES FOR THE CANDIDATES

Persons belonging to economically weaker sections shall get 10% reservation in direct recruitment in civil posts and services in the Government of India, provided that they are not covered under the scheme of reservation for Schedule Castes, Schedule Tribes and Other Backward Classes.

Persons who are not covered under the scheme of reservation for SCs, STs and OBCs and whose family has gross annual income below Rs 8 lakh (Rupees eight lakh only) can claim benefits.

The Scheme defines Economically Weaker Section (EWS) as one having:

1. Annual household income below Rs 8 lakh

2. Agriculture land below 5 acres

3. Residential house below 1000 sqft

4. Residential plot below 100 yards in notified municipality

5. Residential plot below 200 yards in non-notified municipality area

If the property is held by a family in different locations or at different

places/cities, then all of them would be clubbed while applying the land or property holding test to determine EWS status.

Under the scheme, a ‘family’ means and includes the

1. person who seeks benefit of reservation,

2. his/her parents and

3. siblings below the age of 18 years as also

4. his/her spouse and

5. children below the age of 18 years.

If any person gets an appointment on the basis of false claim, then her/his services are subject to termination invoking the conditions contained in the offer of appointment.

As a matter of right, any person belonging to EWS cannot be denied the right to compete for appointment against an unreserved vacancy.

II. REDRESSAL MECHANISM

A senior officer of the Department shall be appointed by every Government establishment who will act as the Grievance Redressal Officer.

Any person aggrieved with the instance of discrimination in employment against any EWS may file a complaint with the the ‘Officer’ of the respective Government establishment.

III. GUIDELINES FOR THE AUTHORITY

1. A person can avail the benefits under EWS only when he/she produces an Income and Asset Certificate issued by a Competent Authority. Such Certificate can be issued by any of the following:-

 District Magistrate/Additional District Magistrate/ Collector/

Deputy Commissioner/Additional’ Deputy Commissioner/ 1st

Class Stipendary Magistrate/ Sub-Divisional Magistrate/ Taluka

Magistrate! Executive Magistrate/ Extra Assistant Commissioner

 Chief Presidency Magistrate/Additional Chief Presidency

Magistrate/ Presidency Magistrate

 Revenue Officer not below the rank of Tehsildar and

 Sub-Divisional Officer or the area where the candidate and/or his

family normally resides.

2. The Officer issuing such certificate has to carefully verify all the relevant documents and follow the due process as prescribed by the respective State/Union Territory.

3. The date for submitting income and asset certificate by the candidate shall be treated as the closing date for receipt of application for the post.

4. The Income and asset certificate submitted by the candidate shall be verified by the appointing authority.

5. The offer of appointment to the candidate claiming to be belonging to EWS shall mandatorily include the following clause( The appointing authorities )

“The appointment is provisional and is subject to the Income and asset certificate being verified through the proper channels and if the verification reveals that the claim to belong to EWS is fake/false the services will be terminated forthwith without assigning any further reasons and without prejudice to such further action as may be taken under the provisions of the Indian Penal Code for production of fake/false certificate.”

BIBLIOGRAPHY

https://www.orfonline.org/expert-speak/who-will-gain-from-10-reservation-for-ews-47312/\

https://www.gservants.com/2019/02/03/reservation-criteria-for-ews-and-maintenance-of-roster/21749/

https://www.jagranjosh.com/current-affairs/union-cabinet-approves-10-per-cent-reservation-for-economically-weak-among-upper-caste-1546925703-1

https://www.clearias.com/ews-reservation/

https://www.livelaw.in/news-updates/economic-reservation-centre-issues-instructions-for-implementing-ews-quota-in-services-read-circular-142577

Investigation includes all the proceedings under the Cr.P.C for the collection of evidence conducted by the police officer or by any person (other than a Magistrate) who is authorized by a Magistrate in this behalf.

An investigation means search for material and facts in order to find out whether or not an offence has been committed. The Investigation of an offence consists of-

·       1.  Proceeding to the place of offence.

·       2.  Ascertainment of the facts and circumstances of the case

·       3.  Discovery and arrest of the suspected offender.

·         Collection of evidence relating to the commission of the offence which may consist of examination of various persons, including the accused and reduction of their statements into writing if police thinks fit. Also, the search of various places or seizure of things considered necessary for investigation.

·         Formation of the opinion as to whether the materials collected there is a case to place the accused before the Magistrate for trial and if so, taking the necessary steps for filing a charge-sheet.

Chapter XII of the Code of Criminal Procedure, 1973 (Cr.P.C.) deals with the Information to the Police and their Powers to Investigate. Such powers are related to all cognizable and non-cognizable matters as well as matters related to suicide, killed by animals or accidents etc. All the powers of police are inherent and are not to have encroached through any means

The investigation power of police starts as soon as FIR is lodged under Section 154 of the Code. The first information of a cognizable offence is given to the police. FIR is in relation to the commission of a cognizable offence and which is first in point of time and on the strength of which the investigation into that offence is commenced. The FIR should be in writing and shall be signed by the informant. The main object of the FIR is to set the criminal law in the motion and to set the investigation process in reference to the alleged offence. The FIR is an essential piece of any criminal trial in order to corroborate the evidence. The statement given to police after the investigation has commenced will not be included under FIR.

Under Section 155(1) When information is given to the police regarding the commission of a non- cognizable offence, the police must enter the information in a book to be kept in prescribed form and refer the informant to the Magistrate. According to section 155 (2), a police officer is not permitted to investigate a case relating to the non-cognizable offence without the order of the Magistrate who has the power to try such cases. A police officer acquires the power to investigate as soon as he receives the order and can exercise the investigating power same as he exercises in any cognizable matter. However, no police officer has the power to arrest any person in the non-cognizable offence unless he has the warrant to arrest. And under Section 155 (4) if any case involves 2 or more offences and among all, if one is the cognizable offence, the entire case shall be deemed to be a cognizable case. No defence would lie on such cases mere on the basis that other are non-cognizable offence and the police officer will have the power to investigate the manner as prescribed for the cognizable offence. In Pravin Chandra vs State of AP[1], it was held that while investigating a cognizable offence and submitting charge-sheet for the same, the police is not debarred from investigating any non- cognizable offence arising out of the same facts and including them in their final report

Under Section 156(1), Any police officer without the order of Magistrate, investigate any cognizable case the police officer can investigate the case only where the Court has the jurisdiction over the local areas. In Sohan Lal vs State of Punjab [2]it was held that the police can investigate even without a FIR, if any police officer has reason to suspect the commission of a cognizable offence. FIR is only a report about the commission of an offence and not the substantive evidence, as the police has yet to investigate an offence. The statutory right of a police to investigate cannot be interfered or controlled by the judiciary. The Magistrate has no authority to direct investigation officer any case in a particular manner. Under Section 156(2), an irregularity in investigation does not vitiate proceedings or trials.

Section 157 provides the manner in which the investigation is to be conducted where the commission of a cognizable offence is suspected and authorizes police not to investigate if he considers that there is no sufficient ground for such investigation. Further this section requires that immediate intimation of every complaint of the commission of cognizable offence shall be sent to the Magistrate having jurisdiction. The Magistrate is empowered to take the cognizance of such offence and order to any subordinate officer to investigate the spot, facts and circumstances of the case and take necessary measures for the discovery and the arrest of the accused. The report is sent to the Magistrate as to keep him abreast of the investigation so he may give appropriate directions. Delay in sending the report to Magistrate does not render the case doubtful but would put the Court on guard. Further, in case of rape offence, the recording of the statement of the victim shall be recorded by a woman police officer. All such statements shall be recorded at the residence of the victim or the place of her choice and in the presence of his parents or guardian or near relatives or social worker.

Under Section 160 for effective investigation the police need to obtain information from persons acquainted with the facts and circumstances relevant to the commission of the offence.  Thus, the police officer making investigation by order, in writing require attendance before himself of any person if the following conditions are satisfied-

·         1.The order must be in writing

·         2.The person to whom order is made is one who appears to be acquainted with the facts and circumstances of the case.

·         3.Such a person is within the limits of the police station of the investigating officer.

However, the police officer has no authority to use force for compelling the attendance, nor does he have any power to arrest or detain such a person.

As per section 161 of the Code the police officer who has the power to investigate will examine the witness and reduce their statements in writing. This section also empowers to record the stamen in audio-visual electronic means. Moreover, a woman police officer is required to record the statement of the woman against whom an offence is committed.

Under Section 162(1), No statement made by any person to police shall be signed by the person making it. This checks the abuse of power by the police, as in some cases the police might obtain the signature of a witness by compulsion. As per Section 162(2), the witness is not bound to answer any such question which might expose him to criminal charge, penalty etc.  

Section 163 ensures that statements made to the police during the investigation are not affected by fear or favour. It lays down an embargo on the investigating authorities to use any inducement, threat or promise which might influence the mind of the maker of the statement and lead him to suppose that thereby he would gain any advantage or avoid any evil reference to his conduct as disclosed in the proceedings

Section 165 authorises the police officer to make a search without warrant during investigation. However, there are few pre-conditions which needs to be fulfilled are-

·        1. Search must be necessary for investigation purpose

·        2. The offence must be a cognizable offence

·        3. Reasonable ground must exist for believing that the thing required will be found in a place

A person arrested without a warrant cannot be detained by the police for more than 24 hours. However, if the police consider it necessary to detain such a person for a longer period for the purpose of the investigation, he can do so only after obtaining special order from the Magistrate under the Section 167. Police are empowered to extend the custody of the accused up to 15 days when the investigation is not completed within 24 hours. Section 167(5) lays down that if any case triable by the Magistrate as summons case, the investigation is not concluded within a period of 6 months from the date on which the accused was arrested, the Magistrate shall make an order to stopping further investigation.

Section 173 lays down that, A police officer is empowered to submit a charge sheet post investigation. It includes a copy of FIR, statement of the complainant, witnesses, panchnama, dying declaration etc.

In the case of S.N. Basak  [3], it was held that the statutory right of the police to carry on an investigation under this chapter before a prosecution is launched, cannot be interfered with by the Courts either under section 401 or Section 482.

In Kari Chaudhary v. Sita Devi[4], it was held that the object of investigation is to find out whether the alleged offence has in fact been committed, and, if so, who have committed them. However, where there is the commission of any offence which is not of serious nature there is no need to proceed with the investigation on the spot. Also, where it appears to the police officer that there no sufficient reason for the investigation, he shall not proceed with it. All such information is required to be mentioned by the police officer furnishing the report that he will not conduct any investigation

Thus, the powers of the police to take statements of accused or suspects during investigation are quite wide as they can arrest and detain any person accused of an offence, they can interrogate him and record his and other eye witnesses’ statements and seek medical examinations of such person.

In an important judgement, the Supreme Court (SC) has upheld the constitutional validity of the Insolvency and Bankruptcy Code 2016 (IBC) under Article 14 of Constitution of India and dismissed that its provisions were discriminatory in nature.

IBC, enacted to eradicate the malice of massive NPAs ailing and crippling India’s banking sector was has been facing enormous challenges in its implementation, mostly from the promoters of delinquent companies. 

These promoters have been challenging IBC and the processes thereunder on one ground or the other, from time to time, as they have been quite used to render all the earlier modes of recoveries ineffective under the legal routes prior to IBC enactment. They challenged the IBC provisions by asserting that by barring promoters from bidding for their own companies, IBC forces the sale of the company to new bidders. This system, the promoters alleged, was against the fundamental rights of promoters.

Further, several operational creditors had also alleged IBC not making an intelligible differentia in classification of a financial creditor and operational creditor, thereby violating Article 14. Under IBC, the committee of creditors can only consist of financial creditors who assess and vote on resolution plans submitted by interested bidders.The operational creditors sought parity with secured creditors (e.g., banks and financial institutions) who have first claim over the money coming through the proceedings under IBC.

The SC dismissed both these arguments

A bench headed by Justice R F Nariman upheld the constitutional validity "in its entirety" and dismissed the pleas to give operational creditors' parity with financial creditors challenging the IBC. The SC also ruled that related parties in IBC should mean a person connected with the business. 

This decision has upheld Section 29A of IBC which bars promoters of a company facing insolvency proceedings from bidding to regain its control. 

The verdict would also be a set back for founders of delinquent companies like Essar Steel – the promoters had offered to clear all dues to regain control. This ruling is well in time before a decision by bankruptcy court on January 31. 

India needs to bring about a clean credit culture. Hope this verdict is a step towards that direction.  

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Nowhere to run, nowhere to hide ….

Indian taxmen are getting smarter and the days when filing income-tax return (ITR) was an exception than the norm are all but gone.

ITR filing is mandatory for individuals having income above the exempted income limit. It was usual for some individuals to file ITR only in the years when there was substantial income difficult to hide or get away with and then ignore / forget in later years.

Central Board of Direct Taxes has a Non-filers Monitoring System (NMS) to track persons who carry high value transactions but do not file tax returns. 

Now, with more than adequate PAN linkage within the Indian financial system and through data analysis, the finance ministry has identified a good number of individuals who have carried-out high value transactions in financial year 2017-18 but have still not filed ITR for the same financial year in the Assessment Year 2018-19, going by the recent tweets from the Finance Ministry’s twitter handle. 

Finance Ministry has advised such non-filers to assess their tax liability for Assessment Year 2018-19 and file their ITR or submit an online response explaining non-filing within 21 (twenty one) days. If the online response / explanation offered by a non-filer is found to be satisfactory, it will be end of the matter and the query will be closed online. However, in cases where no ITR is filed nor a response is received from a non-filer, the tax department may initiation appropriate legal proceedings. 

For the last couple of years, the government has been making efforts to bring the non-filers into the ITR filing system with decent amount of success.

It is better to have a wider net of tax payers. Otherwise, those already under the tax net tend to shoulder more burden on them and end up with less net disposable income - whereas those outside go scot-free despite having more income at their disposal.

Historically, widening of tax payers base results in reduction of taxes as there are more people to collect revenue from.

One can hope the government efforts bear fruits and are not mere hype.

*************** 

1. Justice K.S. Puttaswamy & Anr. V. Union of India & Ors. (Aadhaar Verdict)

 the SC has declared the Centre’s Aadhaar scheme as constitutionally valid, but with conditions. The five-judge Constitution Bench has ruled that there is no need to link Aadhaar with bank accounts and mobile phones, but is must be linked with a PAN card. The court further says that schools cannot insist on Aadhaar and read down Section 57 of the Aadhaar Act, barring sharing of information with corporate bodies.

2. Navtej Singh Johar & Ors. V. Union of India Thr. Secretary Ministry of Law and Justice( Homosexuality Decriminalised (Section 377))

The Supreme Court has declared the Section 377 of IPC as unconstitutional. The ruling re-examined a 2013 judgement that upheld Section 377 of the IPC, under which homosexuality is described as an “unnatural offence”. Now the homosexuals are now allowed to live as equal citizens in India and nobody can harass them on the basis of their sexual orientation. However, the apex court said that Section 377 would continue to be in force in cases of unnatural sex with children and animals.

3. Indian Young Lawyer’s Association Vs. State of Kerala (Women can enter Sabarimala)

The five judge bench of SC removed a ban that prevented women between 10 and 50 years of age from entering Kerala's Sabarimala temple.. The then CJI Dipak Misra, A M Khanwilkar,  Justices R F Nariman, and D Y Chandrachud ruled against the restriction, while Justice Indu Malhotra gave a different opinion, saying, “the religious practice of restricting the entry of women between the ages of 10 to 50 years is in pursuance of an ‘essential religious practice’” and “notions of rationality cannot be invoked in matters of religion by courts”

4. Union of India & Anr. V. Mohit Mineral Pvt. Ltd. (GST Validity)

In a verdict delivered by Justice AK Sikri and Justice Ashok Bhushant he Apex Court upheld the Constitutional validity of Goods and Services Tax (Compensation to States) Act, 2017, as well as the Goods and Services Tax Compensation Cess Rules, 2017, as framed under the Act.

5. Swapnil Tripathi V. Supreme Court of India( Live-Streaming Of Court Proceedings)

To make the legal proceedings transparent the Apex Court allowed live-streaming during a court proceeding. The Supreme Court bench headed by Chief Justice Dipak Misra said, "Sunlight is the best disinfectant." The bench believed this will bring more accountability and will also help in improving the rule of law.

6. Ashwini Kumar Upadhyay V. Union of India & Anr (Can’t Restrict MPAnd MLAs From Practicing Law)

The three-Judge Bench comprising Chief Justice of India Dipak Misra, Justice AM Khanwilkar and Justice DY Chandrachud dismissed the petition seeking a declaration that a person cannot be allowed to perform the double role of a lawyer and a legislator (MP/MLA).

7. Tehseen Poonawalla v. UOI; Tushar Gandhi v. UOI (Cow Vigilantism)

On 17th July 2018, the three-judge bench comprising Ex CJI Deepak Misra , Justice DY Chandrachud and Justice Ajay Manikrao Khanwilkar delivered its judgment, issuing guidelines to curb acts of cow vigilantism. The Court did not address the question of the constitutional validity of immunity provisions for cow vigilantes.

8. Mohd. Akhtar V. State of Jammu & Kashmir(Kathua Rape Case)

The trial of rape and murder of an 8-year-old girl in Kathuawas transferred from district of Jammu and Kashmir to District and Sessions Court, Pathankot in Punjab by the Supreme Court

9. Manohar Lal Sharma v. Narendra Damodardas Modi; Vineet Dhanda v. UOI; Sanjay Singh v. UOI; Yashwant Sinha v. CBI (Rafale Fighter Jet Deal)

The Supreme Court chose not to order a court monitored investigation of the Rafale Fighter Jet Deal, where the Central government purchased 36 Dassault Rafale fighter jets.

10. Joseph Shine v. UOI (Decriminalisation of Adultery)

On 27th September 2018, a five-judge Bench unanimously struck down Section 497 of the Indian Penal Code (IPC), thereby decriminalising adultery. It struck down Section 497 IPC on the grounds that it violates Articles 14, 15 and 21 of the Constitution. The Bench held that the section is an archaic and paternalistic law, which infringes upon a woman's autonomy and dignity. The Bench also read down Section 198 of the Code of Criminal Procedure Code (CrPC). 198(2) CrPC specifies that only a husband can file charges for offences under Section 497.

11. Dr. Subhash Kashinath Mahajan V. State of Maharashtra &Anr. (SC/ST Misuse)

Guidelines to avert the misuse of provisions of Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act 1989 (SC/ST Act) were issued by the Supreme Court. A Two Judge Bench comprising Justices AK Goel and UU Lalit was examining the question whether there can be procedural safeguards so that provisions of Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) (SC/ST) Act 1989 are not mistreated for inessentialdeliberations.

12. Govt. of NCT of Delhi V. Union of India & Anr. (LG Vs. Kejriwal)

The Constitution Bench of the SC held that the LG of the Delhi had to act as per the assistance and guidance of the Council of Ministers of Delhi Government except in matters of land, police and public order. LG cannot interfere in each and every matter of the Delhi Government. Although decisions of the Government have to be communicated to the LG, there is no need to obtain the concurrence of LG in all matters.

13. Public Interest Foundation & Ors. V. Union of India & Anr. (Verdict on Ban of Charge-sheeted Politician)

The Constitution Bench comprising CJI Dipak Misra, and Justices RF Nariman, AM Khanwilkar, DY Chandrachud, and Indu Malhotra observed that the Supreme Court did not have the capability to add new grounds of disqualifications, and thus, could not restrictcharge sheeted candidates from contesting elections. But, the court insisted the Parliament to enact a law to disqualify charge sheeted candidates.

14. Common Cause (A regd. Society) v. Union of India & Anr.( Passive Euthanasia Allowed)

The apex court made it legal for a terminally ill patient to decline use of life support system and opt for euthanasia. The court has taken into thought the suffering of a patient and permitted families of such patients in an incurable coma to withdraw such measures. The bench headed by then CJI Dipak Misra said that “smoothening” the process of death for terminally ill patients with no chance of recovery was integral to life with dignity

15. Common Cause (A regd. Society) v. Union of India &Anr. (Section 498A IPC)

Supreme Court of India has altered its guidelines issued in Rajesh Sharma case for preventing illuse of Section 498A of IPC. A three judge bench led by CJI has withdrawn the earlier guideline issued by two judges bench that complaints under Section 498A IPC should be inspected by Family Welfare Committees before additional legal action by police.