India: IBC for Authorised Representative for Creditors
The enforcement of the Insolvency and Bankruptcy Code (hereinafter referred to as “IBC”) has reinforced the resolution of insolvency in a time bound manner and for maximization of the value assets. In furtherance of a more organized resolution process, the Insolvency and Bankruptcy Board (hereinafter referred to as “IBBI”) brought forth the Insolvency Resolution Process for Corporate Persons Regulations, 2016 (hereinafter referred to as the “Regulations”).
Committee of Creditors
With a view to resolve the insolvency proceedings under IBC, the interim resolution professional (operational creditor initiating a corporate insolvency resolution process), shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors. [Section 9 (4) IBC].
In order to represent the financial creditors in a simplified manner, an authorized representative may be appointed to represent their concerns to the committee of creditors for the insolvency resolution under the provisions of Section 21 (6A) (b) of IBC & Regulation 16A (1) of the Regulations as per the IBBI circular dated July 13, 2018 .
Where the corporate debtor has at least 10 financial creditors in a class, the interim resolution professional shall offer a choice of 3 insolvency professionals and a creditor in the class may indicate its choice of an insolvency professional, from amongst them, to act as its authorised representative. The insolvency professional, who is the choice of the highest number of creditors in the class, is appointed as the authorised representative of the creditors of the respective class.
In the case where the approval of resolution plan under [Regulation 39 (3)] is at least 15 days away, the resolution professional shall expeditiously obtain, by electronic means, the choice of the insolvency professional from creditors in a class to act as the authorised representative of the class and proceed further.
The authorised representative collects voting instructions from the respective class of creditors, attends the meetings of the committee of creditors and casts vote in respect of the said class in accordance with the instructions he receives from the creditors.
The IBBI circular reaffirms the faith in the joint effort of the financial creditors of a class, through the face of their authorized representatives, as per IBC principles thereby ensuring speedy insolvency resolution.
India: Tax on leased unsold property
The Government elected by the citizens is bestowed with the responsibility of nation building and development. In order to fulfil this obligation, there lies an indispensable requirement of funds equipping it to contribute in an efficient manner as expected. Taxes are the largest source of income facilitating the Central and State Governments along with local authorities like municipal corporations to work for the fulfilment of their objectives of socio-economic welfare in terms of infrastructure, education, healthcare and medical facilities, industrial advancement, agricultural growth, employment generation, etc.
The taxes are levied on individuals and entities in respect to the income or profits made by them. The provisions of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) help in the determination and collection of income tax along with the Finance Act.
Tax on leasing unsold property
Builders, including both Government and private entities, assume the responsibility of developing adequate infrastructures in the form of industries, roads, housing, research hubs, medical centres, etc. thereby contributing significantly for the nation building. The builders deduct tax at source for the purchasers of the built assets in this regard. Many a times builders are unable to sell off the constructed properties to the prospective buyers. However, they continue to retain their ownership and possession.
As a common industry practice, the builders lease out properties either in the absence of buyers or to get a better price at a later stage as large investors and funds betting on commercial real estate prefer rent fetching properties. Payment of tax in this regard, could adversely impact the business in the real estate sector.
Builders would be likely to pay tax in respect of the revenue generated by them in respect of leasing out unsold property. This attributable to the fact that the action of the builders to lease out unsold premises would amount to a change in the character of the ‘inventory’ to ‘capital asset’.
An inventory has been defined as assets held for sale in the ordinary course of business as per (Income Computation Disclosure Standards II. According to the Finance Act, 2018, amendments have made to Section 28 of the Act by insertion of a clause (via). The said clause deals with the conversion of an inventory into a capital asset and the procedure to be followed for computation of fair value in the said regard. However, the onus to establish applicability of tax under modified Section 28 shall vest with the authorities.
In another scenario, the builders are aware of the applicability of tax on unsold properties not leased out, which can be determined on the notional rental income based on the prevalent rent in a locality in adherence to Section 23(5) of the Act. This has been done in order to prevent hoarding of residential as well as commercial properties.
With increasing Gross Domestic Product real estate has expanded the scope in residential as well as commercial arena. The clarity persists as to the tax imposition in respect of the unsold properties of the builders not leased out. However, ambiguity remains regarding the taxation scheme for the unsold properties leased out.
India: The Renewal of Trade License
India has increasingly becoming the new shoppers’ stop for commercial activities. With the Government’s approach to make the country a business hub many policies have been introduced facilitating the business development. Encouraging the citizens of the nation from being ‘job-seekers’ to ‘job givers’, investor friendly policies with reduced compliance burdens and cost-effective schemes have enabled India to be a nation of budding entrepreneurs.
Facilitation of the business transaction comes with the indispensable responsibility of the Government to ascertain that the same does not harm the citizens of the country
Fostering the new businesses has always been promoted by the Government. Considering that the business activities carried on in the country are not hazardous or nuisance causing to the individuals of the nation, obtaining of a trade license has been necessitated.
Any business entity interested to commence a new business requires an authorization from the local Government in the form of a Trade license which is be mandatorily procured before beginning manufacturing, exchange or storage of any activity/commodity.
Trade license limits the liabilities of the license owners ensuring that no unethical or illegal practices are being carried on thus reinforcing the credibility of the business managers.
Validity of the trade license
The trade license issued by the authorities is valid for a period of one year and requires to be renewed annually. Subsequent to the expiry of this period, the entity is required to apply for renewal of the trade license in order to allow the business house to continue its operations in accordance with the applicable provisions of law in the country.
Once a license is issued by the authority it has to be renewed periodically to ensure that the business is being carried out in accordance with local laws. In India, trade licenses are renewed in the period from January 1st to March 31st. Applications for Trade license renewal of such licenses must be made at least 30 days before the commencement of the year for which renewal is sought. Some of the documents required to be submitted for renewal of trade license are stated below:
- Original License copy;
- Previous year fees challans;
- Latest tax paid receipt.
For the purpose of smooth carrying out business operations, the operators are required to obtain a valid trade license. The law mandates that the conditions stated under the license should be duly complied with by the license owner. Further, before the exhaustion of the term of the license, a duty is casted over the licensee to ensure timely renewal of the same authenticating the fact that the same abides by ethical business practices and recognizes its obligations of adherence to the requisite safety and standard norms.
India: Responsibilities of Consumers and Bulk Consumer under E-Waste (Management) Rules, 2016
With a view to commence business operations in India, the business entities are required to obtain a valid trade license from the local Government authorities. The trade license authenticates that the corporate entity is carrying out in accordance to the legal provisions of the country complying with adequate standards and best practices.
Trade license is obtained under the Shop and Establishment Act, 1953 and the State Government promulgated the Shop and Establishment Act and Rules. These regulatory guidelines draw out appropriate standards required to be adhered to in order to ensure smooth operations of the business houses.
Trade licenses are issued by the authorised department of a municipal corporation in consultation with other specialised departments like police, fire brigade, health, engineering department having jurisdiction over the business.
The following conditions must be fulfilled to apply for a trade license:
- Applicant must be of the age of 18 years or above;
- Applicant must bear no criminal records;
- Business of the Applicant must be capable of executing legal work.
Some of the documents required to be submitted along with the filing an application form for trade license, in the prescribed format, are given below:
- Details regarding the Applicant;
- For individual Applicant ID Proof. However, where the Applicant is a body incorporate, its certificate of incorporation;
- Utility Bill of the premises where the business is being carried on;
- Latest Municipality Tax Payment Receipt;
- Registration Certificate under Shop and Establishment Act;
- Lease documents or consent letter from the owner of the property;
- No Objection Certificate from owner or neighbours;
- Certified layout plan of trade building showing the business, working or washing or resting areas
It usually takes 7-10 days to obtain a trade license, subject to the completion and accuracy of the documents provided.
The trade license enables the business entities to begin and operate their operations in accordance with the law of the land.
India: Kerala Shops and Establishment Ordinance, 2018
India has ever since been a hub of trade and industry involved in providing goods of good quality and repute. The business in India is widespread over various segments of the society. Organization set-up at different levels enable the business persons to carry out their commercial operations. Primary level of business units prevalent in major parts of the country are in the form of shops and establishments.
Regulation of Shops and Establishments
The provisions Shop and Establishment Act monitor terms of service and other work conditions of people employed in shop and commercial establishments. The Shop and Establishment Acts are specific to the legislature of respective States regulated by the Department of Labour controlling the premises wherein any trade, business or profession is carried out.
These laws help in the efficient and proper management of employment in a particular organization based on the principles of fair play. For commencement of the business of any nature, an entity is required to obtain trade license in accordance to the applicable State Shops and Establishment legislation.
Kerala Shops and Establishments Act
In Kerala Shops and Establishments Act, 1960 (hereinafter referred to as the “Act”) has been enforced to consolidate the regulations of conditions of work and employment in the shops and commercial establishments in the State of Kerala.
The Act provides for registration of establishments, duties of employer, payment of wages, hours of work, leaves, holidays, overtime, intervals for rest, prohibited employment as in case of children, cleanliness, ventilation and lighting and penal consequences in the event of failure of compliance.
The Government of Kerala vide notification dated October 4, 2018 promulgated an ordinance – Kerala Shops and Establishments (Amendment) Ordinance (hereinafter referred to as the “Ordinance”) with a view to further modify the prevalent Act. The said Ordinance introduces several changes some of which are listed below:
- Section 2 (6) of the Act- “Employee” means a person wholly or principally employed in, and in connection with, any establishment and includes an apprentices or class of persons as may be declared by the Government.
- Section 11 of the Act- Substitution of the said provision allows for grant of weekly holidays-
- Every person employed in a shop or a commercial establishment shall be allowed in each week a holiday of one whole day provided that nothing in this sub-section shall apply to any person whose total period of employment in the week including any days spend on authorized leave, is less than six days.
- deduction shall be made from the wages of any employee in an establishment on account of any day on which a holiday has been allowed in accordance with this section and if such person is employed on the basis that he would not ordinarily receive wages for such day, he shall nonetheless be paid for such day the wages he would have drawn had the holiday not been allowed on that day.
- Section 20 of the Act- No woman or any person who has not attained the age of seventeen shall be required or allowed to work whether as an employee or otherwise in any establishment before 6 A. M. or after 9 P. M. However, an employer may employee women employees between 9 P.M. and 6 A.M., after obtaining the consent of such women employees ensuring that no female employee is employed between those hours other than in groups consisting of atleast five employees having a minimum of two female employees and adequate protection of their dignity, honour and safety, protection from sexual harassment and facility for transportation from the shop or establishment to the doorstep of their residence.
- Section 21 B of the Act- Newly introduced provision for seating facilitates stating that in every shop and establishment, suitable arrangements for sitting shall be provided for all workers so as to avoid ‘on the toes’ situation throughout the duty time, so that they take advantage of any opportunity to sit which may occur in the course of their work.
- Section 29 of the Act- Modifications have been made to the penal provisions increasing the fine amount.
- Section 30 of the Act- The registers, records and display of notices shall be maintained in electronic as well as physical form.
The newly promulgated ordinance accords equality of working opportunities to the women in State of Kerala while ensuring their safety and protection. Also, the said Ordinance aims at comforting the workers employed by allowing suitable sitting arrangements for them. In order to ascertain due compliance to the provisions of the Act, stricter penalties have been imposed.
India: Supreme Court says No Solid waste management policy, No construction
Recent times have witnessed rapid increase in urbanization owing to population explosion. This mushrooming of concrete jungle has also caused the levels of pollution to rise to a great extent. The air, water & soil around us comprise of huge contaminants. In addition to the same, elevated levels of garbage and solid wastes have become a common site.
Solid wastes include solid or semi-solid domestic waste, sanitary waste, commercial waste, institutional waste, catering and market waste and other non-residential wastes, street sweepings, silt removed or collected from the surface drains, horticulture waste, agriculture and dairy waste, treated bio-medical waste excluding industrial waste, bio-medical waste and e-waste, battery waste, radio-active waste generated in the area under the local authorities.
Regulation of Solid wastes
With a view to monitor the proper and adequate disposal of the solid wastes generated, the Government enforced the Solid Waste Management Rules, 2016 (hereinafter referred to as “Rules”).
Under Regulation 6 of the said Rules, duty has been cast over the Ministry of Urban Development to coordinate with State Governments and Union territory Administrations to-
- take periodic review of the measures taken by the states and local bodies for improving solid waste management practices;
- formulate national policy and strategy on solid waste management;
- facilitate States and Union Territories in formulation of state policy and strategy on solid management;
- promote research and development in solid waste management sector;
- undertake training and capacity building of local bodies;
- provide technical guidelines and project finance to States, Union territories and local bodies on solid waste management.
The rules impose obligations on the local authorities to prepare a solid waste management plan as per state policy and strategy on solid waste management. [Regulation 15]
Supreme Court’s view point
The Apex Court while delivering its order, in the matter of In Re: Outrage as Parents End Life After Childs Dengue , levied a fine of INR 500,000 [USD 6962 approx.] on the State of Andhra Pradesh and INR 300,000 [USD 4144 approx.] each on the States of Madhya Pradesh, Maharashtra, Odisha, Uttarakhand and the Union Territory of Chandigarh on account of their failure to submit their respective State/ Union Territory solid waste management policy in furtherance to the rules.
The Supreme Court criticised the lacklustre attitude of the aforesaid State/ Union Territory Governments towards the cleanliness and well-being of their citizens and also ordered the cessation of construction activities in the said States/ Union Territories.
Impact on Realtors
As the real estate sector spreads its wings in the Indian economy, being one of the major contributors towards the country’s economic development, the abovementioned order is expected to adversely impact important industrial sectors such as banking, cement, steel, sanitary, electrical. The said restriction would also cause delay in delivery of the ongoing projects thereby causing the real estate buyers to suffer. Realtors are aggrieved with the ban on the construction work feeling penalized for the State/ Union Territory Governments negligence in complying with the Rules.
The Supreme Court puts its foot down by curbing construction activities in the defaulting States/ Union Territories who failed to provide their policy for solid waste management. The said punishment requires balancing the interests of the individuals residing therein, while considering the right to clean life and environment on one hand and rights of the purchasers of the real estate projects on the other.