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CHARGE CREATION NOW REQUIRES IMMOVABLE PROPERTY DESCRIPTION

June 5, 2017
VOL II
ISSUE No. 12
June 05, 2017


CHARGE CREATION NOW REQUIRES IMMOVABLE PROPERTY DESCRIPTION

A Company raises funds by issue of shares, debentures, taking loans from banks and financial institution. When a bank provides loan to a company, it requires collateral to ensure the principal amount repayment and interest thereon. The amount is thus secured by creating interest or lien in favour of the bank on the property held by the company. The interest thus created is known as charge.

As per Section 2(16) of the Companies Act 2013 ―charge means an interest or lien created on the property or assets of a company or any of its undertakings or both as security and includes a mortgage.he following are the essential features of the charge which are as under:

The following are the essential features of the charge which are as under:

  • There should be two parties to the transaction, the creator of the charge and the charge holder.
  • There should be two parties to the transaction, the creator of the charge and the charge holder.
  • The subject-matter of charge, which may be current or future assets and other properties of the borrower.
  • The intention of the borrower to offer one or more of its specific assets or properties as security for repayment of the borrowed money together with payment of interest at the agreed rate should be manifested by an agreement entered into by him in favour of the lender, written or otherwise.

of the Companies Act, 2013 provides that it shall be the duty of every company creating a charge within or outside India, on its property or assets or any of its undertakings, whether tangible or otherwise, situated in or outside India, to register the particulars of the charge signed by the company and the charge-holder along with the instruments, if any, creating such charge, with the Registrar within thirty days of its creation.

 The Ministry of Corporate Affairs (hereinafter referred to as “MCA”) vide its notification GSR 339(E) dated April 07, 2017[1] has issued the Companies (Registration of Charges) Amendment Rules, 2017, thereby amending the Companies (Registration of Charges) Rules, 2014.

Now companies creating charge on immovable property are required to give complete particulars of the property or assets charged including latitudinal and longitudinal details of such property. To incorporate the required changes, forms CHG-1 and CHG-9 have been revised.

[1]https://www.mca.gov.in/Ministry/pdf/companiesRegistrationofCharges

AmendmentRules_08042017.pdf


ACCEPTANCE OF DEPOSITS (AMENDMENT) RULES, 2017

The Ministry of Corporate Affairs (hereinafter referred to as “MCA”) vide its Notification G.S.R 454(E) dated11 May, 2017[1] has amended Companies (Acceptance of Deposits) Rules, 2014 vide the Companies (Acceptance of Deposits) Amendment Rules, 2017.

Through this amendment MCA has brought following changes:

  • In rule 2(1), in clause (c), after the words “Domestic Venture Capital Funds” the wordsInfrastructure Investment Trusts shall be inserted.

Infrastructure Investment Trusts (InvITs) are similar to mutual fund companies that allow pooling of the infrastructure projects into a separate trust and allow investors to invest in units of InvITs.

Explanation:

Rule2 (1) clause c provides the definition of Deposits, according to which deposits include any receipt of money by way of deposit or loan or in any other form by a company, but does not includes-

Sum received from the Central Government/ the State Government/ Local Authority/ Statutory Authority/ Foreign Government/ International Banks/ Foreign Bodies Corporate/ Foreign Citizens/ Loans from Banks or Public Financial Institution/ Amount raised against issue of Commercial Paper/ Amount raised fom other company/ Amount received from Director of the company or Relative of director of the Private Company/ Amount received from an Employee of the company/ Amount for share subscription, pending allotment/ Amount received and held in trust/ amount received in course of business/ Amount brought by promoters in form of unsecured loans in pursuance of condition of financial institution/ Amount accepted by Nidhi Companies/ Amount received by Chit Fund Company by subscription of Chit/ Amount received by the company under Collective Investment Scheme/ Amount received by Startup Companies upto INR 25 lakhs by issue of convertible notes/ Any amount received by a company from Alternate Investment Funds, Domestic Venture Capital Funds, Infrastructure Investments Trusts and Mutual Funds registered with the Securities and Exchange Board of India.

  • In rule 5(1), the following proviso shall be substituted, namely: — “Provided that the companies may accept deposits without deposit insurance contract till March 31, 2018 or till the availability of deposit insurance product, whichever is earlier”.

Explanation

Section 73(2) of the Companies Act 2013, read with Rule 5 of the Companies (Acceptance of Deposit) Rules, 2014 requires every company inviting deposits to enter into a contract for providing deposit insurance at least 30 days before issue of circular or advertisement. Prior to this amendment, company were allowed to accept deposit without deposit insurance contract till March 31, 2017. However, because of non-availability of such deposit insurance products, companies have been allowed to raise deposits without any such deposit insurance till March 31, 2018 or till such deposit insurance product is available, whichever is earlier

[1]http://www.mca.gov.in/Ministry/pdf/CompaniesAcceptanceof

Deposits_12052017.pdf

 


REGULATED USE OF PET COKE BY INDUSTRIES

The National Green Tribunal (hereinafter referred to as “NGT”) has issued an order dated May 16, 2017 in the matter of People for Education Research Scholarship & Outward Nutrition v. Union of India and the Central Pollution Control Board, 471of 2016[1] wherein the NGT has:

  • directed State Governments to notify within two months from the date of the order whether pet coke is ‘an approved fuel or not’;
  • directed the Ministry of Environment, Forest and Climate Change (hereinafter referred to as “MoEF”) to notify within two months from the date of the order, whether pet coke is hazardous waste under Hazardous Waste Management Rules, 2016; and
  • issued guidelines on the use of Pet Coke as industrial fuel across the country.

Petroleum coke or Pet Coke is used by industries as fuel and contains various dangerous chemicals and heavy metals such as Chromium, Vanadium, etc. Pet coke also has high Sulphur contents which on burning releases large amounts of Sulphates into the atmosphere. These harmful chemicals cause air pollution and leads to various health risks and various studies have been conducted showing the effect such chemicals have on people.

  • FACTS OF THE CASE
  • The applicant, People for Education Research Scholarship & Outward Nutrition, a society registered under Societies Registration Act, 1860, had filed an application stating that burning of Pet Coke posed a significant health risk due to emission of high concentration of various air pollutants and therefore requested NGT-
    • To issue appropriate guidelines or direction for handling of pet coke to minimize damage to environment.
    • To issue direction for ban on usage of petroleum coke as fuel.
    • To direct respondents to conduct an inquiry into illegal usage of petroleum coke by industries.
  • The respondents, MoeF and the Central Pollution Control Board (hereinafter referred to as “CPCB”), had stated that they had notified emission standards of Sulphur for various categories of industries to take suitable steps to control emission with norm, even if they were lawfully using pet coke as a fuel. MoEF stated that norms have been notified for cement industries which are applicable even if Pet Coke is mixed with coal and used for clinker making. It was mandatory for the industries to take suitable steps to control its emissions well within norm, even if they are lawfully using pet coke as fuel.
  • The CPCB also stated that Pet Coke should not be used by any industry without any express permission of Pollution Control Committee/State Pollution Control Board.
  • CPCB requested the NGT to allow Technical Review Committee constituted by MoEF and Pollution Control Committee to study the issue and decide whether Pet Coke was a waste or hazardous waste or by-product waste.
  • ISSUE

    The issue before NGT was whether there should be any restriction or ban on the use of pet coke as fuel and if restrictions were to be imposed, what the same would be.

  • JUDGEMENT

    NGT observed that due to high Sulphur content and presence of metals in Pet Coke and pollution potential of Pet Coke as fuel, it was necessary to apply precautionary principle to regulate its use. The NGT, therefore, issued the following directions-

  • In light of Section 19(3) of the Air (Prevention and Control of Pollution) Act, 1981 (hereinafter referred to as “Air Act”) which grants power to the State Government to ban any fuel other than approved fuel, which may cause air pollution, respective State Governments were directed to notify whether pet coke is ‘an approved fuel or not’.
  • NGT directed the MoEF to notify within two months whether pet coke is hazardous waste under Hazardous Waste Management Rules, 2016 or a by-product.
  • Section 21(5) of the Air Act provides that, any person to whom consent has been granted under the Act to establish and operate any industrial plant, should install, replace or alter pollution control equipment according to direction of SPCB. In the light of this provision industries must obtain necessary consent from State Pollution Control Board/Pollution Control Board to use Pet Coke as industrial fuel or to generate energy. Such industries shall also have to get their Air Pollution Control System approved to use Pet Coke. If industries did not have such consent, then the State Pollution Control Boards were directed to take immediate action.
  • Industries which already have consent to use Pet Coke may continue to use the same for following two months and thereafter, shall abide by the decision taken by respective State Government and MoEF.
  • In Pritam Singh v. Union of India and Anr.[2] , the plaintiff was seeking directions from the NGT on the use of pet coke as an industrial fuel. The Principal Bench of the NGT noted that the matter had already been previously taken up in
    People for Education Research Scholarship & Outward Nutrition v. Union of India and the Central Pollution Control Board, wherein certain directions were issued. However, the NGT also issued another additional direction, directing that the impact on environment should also be studied before any final report is filed before the NGT.

    • USE OF PET COKE & FURNACE OIL IN NCR

      The use of pet coke and other non-standard fuel in industries in the National Capital Region (hereinafter referred to as “NCR”) and its impact is under consideration by the Supreme Court in the case of
      M.C. Mehta vs. Union of India, I.A.No. 345, Writ Petition Civil No. 13029 of 1985. The Supreme Court vide its order dated February 6, 2017 Court had directed all authorities such as Environmental Control Authority (hereinafter referred to as “EPCA”), Government of Delhi, Haryana, Rajasthan and Uttar Pradesh to come up with a comprehensive plan regarding action plan for reducing air pollution in NCR. The EPCA had submitted a report to Supreme Court dated April 4, 2017 in which it has suggested that the distribution, sale and use of furnace oil and pet coke should be strictly banned in NCR.

      It is pertinent to note that the State Governments of U.P., Haryana and Rajasthan have made submissions to the Supreme Court stating that they have no objection if a ban is placed on the use of Furnace Oil and Pet Coke.

      The Supreme Court vide its order dated May 2, 2017 has also directed the Union of India as well as the CPCB to fix standards for SO2, Nox and Sox emissions on or before June 30, 2017 for 35 industries for which standards have not been set, after giving a hearing to a limited number of authorized representatives of these industries. The 35 industries have been given time till December 31, 2017 to comply with the standards set.

    CONCLUSION

    The Supreme Court and NGT orders relating to regulated use of Pet Coke as fuel by industries show that the Courts are willing to take positive actions toward curbing air pollution, thereby protecting people from harmful effects of industrial operations. However, the ban on Pet Coke will be disadvantageous to the industries using Pet Coke as they may have to resort to using alternate fuels or be required to install Air Pollution Control Systems to use Pet Coke, which may not be technologically and economically viable.

    [1] http://www.greentribunal.gov.in/Writereaddata/Downloads/471-2016(PB-I)OA24-3-17.pdf

    [2] Original Application No. 287 of 2016

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