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The Law Tree

Edition 51

As the new year is right around the corner, what better way to finish off than legally enriching oneself with The Law Tree!

Happy 2020!

Insights

FSP’s Insolvency: IBC’s Nightmare

In the first week of December 2019, the RBI filed a case of insolvency against Dewan Housing Finance Limited (DHFL) under the IBC, which was admitted by the Mumbai bench of the NCLT. DHFL became the financial service provider to come under the purview of the Insolvency and Bankruptcy Code (IBC).

The case was necessitated due to default in repayment for various financial creditors. In particular, default in repayment of two tranches of external commercial borrowings (ECB) from State Bank of India (SBI) by DHFL to the tune of USD 240 million.

What's Brewing

Bills 2019: The Binge

From banning e-cigarettes, to addressing rights of transgenders, agricultural seeds and the all important chit funds, the government is approving legislations at break neck speed.

The National Capital Territory of Delhi (Recognition of Property Rights of Residents in Unauthorised Colonies) Bill, 2019

Debated / Passed in Lok Sabha: 28/11/2019
Debated / Passed in Rajya Sabha: –

The National capital, Delhi has probably witnessed the maximum influx of population in the last few decades. Large scale exodus from other parts of the country had resulted in several “unauthorized colonies” – place(s) with no proper government approval or registration for buildings and layouts. For the 40 lakh odd people living in almost 2000 unauthorized colonies in Delhi, this Bill would mean finally being granted ownership rights to such properties. Some of the salient features of this Bill:

  1. The Bill seeks to regularize the unauthorized colonies by registering properties in favour of their bonafide residents and grant relief from paying registration and stamp duty.
  2. The Bill seeks to secure ownership and or transfer / mortgage in favour of residents who are in possession of properties in such unauthorized by providing them by granting them title documents such the General Power of Attorney (GPA), Sale agreement and Letter of possession that is granted by the government in the process of regularizing such colonies. This creates ownership in favour of the resident on plot of land and or apartments.
  3. While the title documents will legitimately entitle the residents to procure loans from the banking sector, it will also politically pave the way for allocation of constituency developments funds for developing od basic amenities – roads, water, sewage lines, low cost housing and other civic amenities.
  4. The regularization of colonies is subject to satisfaction of certain precondition – establishment of registered welfare associations, submission of the entire list of residents and the colony layout plant /blueprint along with the application for regularization.
  5. It is proposed to digitally map such colonies within a given time frame. Separate portals are being proposed to be set up to address grievances of residents of such colonies which will eventually get authorized.

While the Bill is being viewed as a step in the positive direction, implementing it will infrastructural, technical and political ramifications. For now, the Bill has received mixed response – one of cautious joy.

The Prohibition of Electronic Cigarettes (Production, Manufacture, Import, Export, Transport, Sale, Distribution, Storage and Advertisement) Bill, 2019

Debated / Passed in Lok Sabha: 27/11/2019
Debated / Passed in Rajya Sabha: 02/12/2019

In September 2019 there was an ordinance passed that banned the production, transport, storage and trade of “E- cigarettes”. In November 2019, The Prohibition of Electronic Cigarettes (Production, Manufacture, Import, Export, Transport, Sale, Distribution, Storage and Advertisement) Bill, 2019 replaced the ordinance that bans the e-cigarette.

The “E-cigarette” or the Electronic Nicotine delivery system (“ENDS”) is a battery-operated device that emits vaporized nicotine for the user to inhale. It was intended to be a replacement to smoking tobacco and an aid to quit smoking. It provided a feeling like smoking a cigarette without smoking it! Having been introduced by China in 2006, “e-cigs” seem to have become an addiction by themselves especially amongst teens / youngsters across the world. Scientific research has now established that vaping could also severely damage lungs when inhaled with nicotine like substance(s). The salient features of the Bill:

  1. No person can produce, manufacture, import, export, transport, sell or distribute, or stock e-cigarettes.
  2. No person can store e-cigarettes in their possession. Violation of this provision shall attract penalty of upto Rs 50,000 and imprisonment of upto 6 months.
  3. A first-time offender will attract penalty of upto Rs. 1 lakh and imprisonment of upto 1 year while habitual offenders will be fined upto Rs. 5 lakhs and imprisonment of upto 3 years.
  4. The Authorized officer have power to enter premises, search and seize, if necessary, any quantity of such products.

While e-cigs were widely believed to have been the answer to eradicate smoking, it in turn became an addiction in itself. The government has pledged to eradicate tuberculosis by 2025. Banning e-cigarettes seems to be the first step before taking on the task of eradicating smoking itself. An end to “Ends”.

Seed Bill, 2019

India first introduced the Seed Act in 1966 to regulate the quality of certain seeds for sale, and for matters connected therewith. Based on the US model of seed governance, the Act was effective in regulating the seed industry, which was the base to ensure agriculture and effective crop production thus serving the interest of farmers. The primary objective of the Act was to establish seed committees and laboratories that could research and establish the quality of seeds. The legislation introduced the process of labelling of seeds. Labelling and providing Unique identification number to such seeds indicated a certain quality / standard. This ensured that only quality seeds were sold and cultivated. However, there was some lacunae in the legislation.

However, the 1966 Act did not cover effective licencing policy. There were Rules introduced in 1968 and 2002 successively, all with little impact. The Seed bill 2019 intends to plug all lacunae by making the Bill protect interests of farmers and enable them to sell their seeds for the best price.

The Seed Bill 2019 has taken its roots from the European Laws where registration is not voluntary(based on seed developer’s discretion). A look at the salient features of the proposed Bill:

  1. It is instead based on set parameters of registration and licencing of seed producers and seed processors separately.
  2. It is now proposed to make variety registration of seeds mandatory (which was hitherto discretionary). Such registration is based on ‘value for cultivation and use’.
  3. The seed producers / processors shall be subject to evaluation before being granted a licence.
  4. It is proposed to include a mechanism to monitor prices and thereby control price fluctuation and unreasonable profits.
  5. Effort has been made to clearly distinguish between Seed producer, Seed processor and Seed dealer (the one who deals with the packaged seeds). Consequently, their rights, duties and liabilities are also being streamlined.

Experts from the seed industry are very hopeful of the new Seed Bill addressing key issues – tenure of registration, varietal seed registration, and clearly distinguishing pricing. All this while safeguarding the farmer interest. It is up to the government to sow the seed for the farmer to reap the benefit.

Transgender Persons (Protection of Rights) Bill, 2019

Debated / Passed in Lok Sabha: 05/08/2019
Debated / Passed in Rajya Sabha: 26/11/2019

The government has re-introduced a Bill on protection of rights of transgenders. This is not the first time though that is a Bill addressing issues pertaining to transgenders. The Rights of Transgender Persons Bill, 2014 was first introduced and passed in the Rajya Sabha in 2015 as a Private members’ Bill. It has been pending in the Lok Sabha since. While the 2014 Bill was widely welcomed by one an all, there were some practical issues / anomalies. Pending this, there were some revisions made to the Bill which were introduced 2016. This Bill was widely criticized especially by the transgender community and activists. This was then sent to a committee for further revision. Thus, the Transgender Persons (Protection of Rights) Bill, 2018 was introduced.

However, this was also met with stiff opposition. Provisions such as criminalization of begging by transgenders and lesser punishments for crimes against transgenders were considered regressive and not in interests of queer community. It was then that the Transgender Persons (Protection of Rights) Bill, 2019 was introduced in the Lok Sabha in July 2019 and passed in August 2019. A look at the salient features of this Bill:

  1. The Bill is aimed at protecting the rights and interest of the transgender persons and offering welfare measures / schemes for them.
  2. The Bill has clearly laid down the definition of the term “transgender” which includes “hijra”, “kinnar”, “jogta” and “aravani”.
  3. The Bill seeks to prohibit discrimination of transgenders and offer fair opportunities for education, employment, living, access to healthcare and other public facilities and equal opportunity like other persons in the society. It seeks to criminalize denial of opportunity / facilities to transgenders.
  4. The Bill seeks to create a legal identity to transgender by providing a certificate of identity specifically indicating the gender as “transgender”.
  5. It is proposed to establish a National council for transgender persons consisting of people from various government departments. This is to ensure effective implementation of policies governing transgenders while also their grievance redressal forum.

This Bill also has been criticised for some of its basic features – the concept of certificate of “identity” itself is seen as discriminating and humiliating the transgenders from the rest of the society. The Bill must specifically address issues of sexual offences committed against transgenders. The Bill passed right after the J&K special status is seen as hope for the neglected and abused community of transgenders. Only time will tell how effectively this Bill will integrate transgenders with the mainstream.

The Chit Funds (Amendment) Bill, 2019

Debated / Passed in Lok Sabha: 20/11/2019
Debated / Passed in Rajya Sabha: 28/11/2019

The Central government recently introduced important amendments to the Chit Fund Act, 1982. While Chit funds is in the concurrent list, with most States having their own laws, the Union government introduced the Chit Fund Act in 1982. The primary objective of the Act was to enable create a fund only with the prior sanction of the government.

Despite State and Central government legislations governing the Chit fund businesses alike, there have been several instances of fraud, misuse and misappropriation of funds. The Saradha group scam being a recent case where in several lakh investors were duped of crores of rupees under the guise of a chit fund. This brought back into sharp focus the need to amend the Chit funds Act to make it more investor protective and friendly. A look at the key amendments:

  1. The Chit Funds were being operated under several names – “Chit”, “Chit Fund”. The Amendment Bill has proposed to include phrases such as ‘fraternity fund’ and ‘rotating savings’ and ‘credit institution’ as well to a Chit Fund. The phrases ‘chit amount’, ‘dividend’ and ‘prize amount’ have been revised to gross chit amount, ‘share of discount’ and ‘net chit amount’ respectively.
  2. The commission which a person managing the Chit Fund is entitled to has been increased to 7% from 5%.
  3. The Bill allows the operator of the Chit amount to allows a right to lien against the credit balance from subscribers.
  4. The Bill now proposes to draw a chit with at least two subscribers joining via conferencing. Presently, at least 2 subscribers have to be present in person to draw the chit.
  5. The maximum amount of chit amount that can be collected by an individual is proposed to be increased to Rs. 3 lakhs from the existing Rs. 1 lakh.
  6. The maximum amount of chit amount that can be collected by an individual in a firm or an association with 4 partners or less is proposed to be increased to Rs.18 lakhs from the existing Rs. 6 lakhs.
  7. The Bill enables the state governments to specify the base amount over which the provisions of the Act will apply.

The amendments to the Chit fund act seem to be the need of the hour with several companies functioning in the style of a chit fund and swindle money especially of the lower income groups who not only rely on chit funds as a way to save but also a method of future investments. A vigilant statutory mechanism will ensure that effective implementation of these amendments.

Circulars & Notifications

Learn about this month’s circulars and notifications brought out by the MCA, FEMA, SEBI & RBI.
demo

Circulars

November 04, 2019
Enhanced Governance Norms for Credit Rating Agencies (CRAs)

November 05, 2019
Enhanced Due Diligence for Dematerialization of Physical Securities

November 05, 2019
e-KYC Authentication facility under section 11A of the Prevention of Money Laundering Act, 2002 by Entities in the securities market for Resident Investors

November 05, 2019
Operational Guidelines for FPIs & DDPs under SEBI (Foreign Portfolio Investors), Regulations 2019 and for Eligible Foreign Investors

November 06, 2019
Reporting of changes in terms of investment

November 07, 2019
Creation of segregated portfolio in mutual fund schemes

November 08, 2019
Introduction of Cross-Margining facility in respect of offsetting positions in corelated equity Indices

November 08, 2019
Streamlining the Process of Public Issue of Equity Shares and convertibles- Extension of time lime for implementation of Phase II of Unified Payments Interface with Application Supported by Blocked Amount

November 13, 2019
Continuous disclosures and compliances by listed entities under SEBI (Issue and Listing of Municipal Debt Securities) Regulations, 2015

November 14, 2019
Modifications in the contract specifications of commodity derivatives contracts

November 15, 2019
Mapping of Unique Client Code (UCC) with demat account of the clients

November 19, 2019
Collection and reporting of margins by Trading Member (TM) /Clearing Member (CM) in Cash Segment

November 21, 2019
Disclosures by listed entities of defaults on payment of interest/ repayment of principal amount on loans from banks / financial institutions and unlisted debt securities – Disclosures by listed entities of defaults on payment of interest/ repayment of principal amount on loans from banks / financial institutions and unlisted debt securities

November 27, 2019
Guidelines for preferential issue of units and institutional placement of units by a listed Real Estate Investment Trust (REIT)

November 27, 2019
Guidelines for preferential issue of units and institutional placement of units by a listed Infrastructure Investment Trust (InvIT)

November 28, 2019
Investment Policy of Clearing Corporations

November 28, 2019
Framework for issue of Depository Receipts

November 29, 2019
Cut-off Time for Determining Minimum Threshold of Margins to be Collected from Clients

November 29, 2019
Norms for Debt Exchange Traded Funds (ETFs)/Index Funds

The Verdict

Apex Court nod
to Arcelor takeover of Essar Steel

An all important judgement by the Hon’ble Supreme Court that lays thread bare several road blocks in the Arcelor take over of Essar Steel thus smoothening the resolution process in other cases as well.

Go Figure

IBC statistics on
Resolution Plan

Did you know the number of companies across the countries that have been under the CIRP – resolution process ever since the inception of the IBCode?

Lawtitude

Singapore Convention:
A Step Forward

Alternative Dispute Mechanisms (“ADRs”) started having a huge influence in today’s world, thanks to Liberalisation, Privatisation and Globalisation (“LPG”) and its related commercial transactions. Historically, the world functioned only on Negotiations and mutual Settlements.

With more involvement of money, property and rights, people started preferring objective court proceedings to counter the subjectivity created between parties and authority. Again, to meet the delay and unnecessary technicalities embedded in litigation, we once again revert back to ADRs.

Hidden asset

Asset carried on the books at a substantially.

Give and bequeath

These words, in a will, import a benefit in point of right, to take effect upon the decease of the testator and proof of the willfulness it is made in terms to depend upon some contingency or condition precedent.

Edict

A formal decree, command, or proclamation. A very positive law promulgated by the sovereign of a country, and having reference either to the whole land or some of its divisions, but usually relating to affairs of state.

Factum probans

A probative or evidentiary fact; a subsidiary or connected fact tending to prove the principal fact in issue; a piece of circumstantial evidence.

Infographic

Let's Socialise With Laws

Social media and its growing tentacles form the crux of the Infographics. It captures all details from its origin and growth to its positive and negative fallout.  

Lawlipop

Important legal and other news having a bearing on society depicted in a fun quirky way!

Apex Transparency

CAA: Against the Tide

(P)Review
Your regular dose of a movie, TV show and a book all based on law to keep you entertained and thinking at the same time!
Movie

Reversal of Fortune (1990)

A 1990 movie based on a true story of a wealthy heiress  going into an inexplicable coma and the husband being perceived guilty. 

An American drama adapted from the Book of the same name written by the American Academic and celebrity criminal Lawyer, Alan Desrshowitz. The story deals with the life, inexplicable coma and death of socialite heiress Sunny Von Bulow. Married for the second time to Claus Von Bulow, they quickly developed differences and a divorce seemed imminent. However, after celebrating Christmas with the family in their home, Sunny was found unconscious state in her bathroom the following state. Doctors diagnosed her to be in a permanent vegetative state as a result of her suffering from hypoglycaemia. The focus turned sharply on Claus Von Bulow who was accused of administering an insulin overdose. It is then that Claus hired Alan to represent him. How Claus is acquitted from the attempted murder of this wife forms the rest of the story. The film was critically acclaimed with a host of nominations in the Academy and Golden Globes. Jeremy Irons won the Oscar for best actor for his restrained and haughty performance of Claus Von Bulow. A neat mix of family and law.

Book/Novel

The Lincoln Lawyer
by Michael Connelly

The novel by Michael Connelly delves into the life of an unscrupulous lawyer who suddenly finds that a client that he is defending is not so innocent after all.

From the stable of the one of the most successful American detective and crime fiction writer, the Lincoln Lawyer derives its name from the car that the protagonist, Mickey Haller uses and operates to do his legal work. Haller deals with all sorts of people – alcoholics, bikers, gangsters, drug dealers and the like. He believes that Law is all about the business of negotiation and manipulation and lesser about truth and justice. He is surprised when a wealthy playboy client approaches Haller to defend him from in an assault and attempt to murder case by a woman in a bar. At first Haller believes his client is innocent, until he slowly unravels the truth (for a change) and how he realizes that an innocent person is imprisoned for the same offence that did not commit. Probably using law and ethics for the first time in his legal career, Haller finds the real perpetrator and frees the innocent one. The novel published in 2005 was made into movie in 2011. A must read.

TV Series

Night Court (1984-1992)

A TV series in the early nineties that looks at night courts that are constituted to address the rising pile of cases in courts.

A situational comedy (sitcom) that showcases a Manhattan Night Court presided over by a very young Judge to deal with them. Harold T. “Harry” Stone is anything but the regular Judge. Young, unorthodox with a quirky way of perceiving life, Harry goes about disposing off cases that have piled on to the outgoing Judge who assigned the work to Harry. The sitcom aired for 4 years and total of 9 seasons.

The two most powerful warriors are patience and time – Leo Tolstoy

Readers' Corner

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