India: Revised Secretarial Standards, SS-1 and SS-2 to be Applicable from October 1, 2017
The Institute of Company Secretaries of India has announced that the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) have been revised and the revised Secretarial Standards have received approval from the Central Government.
India: NCLAT Interprets disputed debts under the Insolvency Bankruptcy Code, 2016
In Kirusa v. Mobilox, the National Company Law Appellate Tribunal passed an order interpreting the ambit of ‘dispute’ and ‘disputed debt’ for rejection of an application under Corporate Insolvency Resolution Proceeding.
India: MCA amends Incorporation Rules with relation to Shifting of Registered Office
The Ministry of Corporate Affairs has notified the Companies (Incorporation) Second Amendment Rules, 2017 to amend the Companies (Incorporation) Rules, 2014, vide notification dated July 27, 2014. The Companies (Incorporation) Second Amendment Rules, 2017 (hereinafter referred to as the “Amendment Rules”) shall come into force from the date of publication in the Official Gazette.
The Ministry has amended the provisions of Rule 28 (Shifting of Registered office within the same state) and Rule 30 (Shifting of Registered Office from one state or Union Territory to another state) of the Companies (Incorporation) Rules, 2014 (hereinafter referred to as the “Principal Rules”).
Shifting of Registered office within the same state
Provision as per Amendment Rules
Rule 28 of the Amendment Rules states that to shift the registered office of a company within the same state from the jurisdiction of one Registrar of Companies to the jurisdiction of another Registrar of Companies, an application is to be filed with the Regional Director in Form INC 23. Form INC 23 is to be submitted along with the requisite fee and the following documents:
- Board Resolution for shifting of registered office
- Special Resolution of the members of the company approving the shifting of registered office
A declaration given by the Key Managerial Personnel or any two directors authorized by the Board, that the company has not defaulted in payment of dues to its workmen and has either the consent of its creditors for the proposed shifting or has made necessary provision for the payment thereof
A declaration not to seek change in the jurisdiction of the Court where cases for prosecution are pending
Acknowledged copy of intimation to the chief Secretary of the State as to the proposed shifting and that the employees interest is not adversely affected consequent to proposed shifting
How Rule 28 of Amendment Rules is different from the Principal Rules
As per Rule 28 of the Principal Rules, the company seeking to carry out change in address of registered office within the state, in addition to submitting Form INC 23 to Regional Director, had to publish a notice in a daily newspaper in English and in the principal language of that district in which the registered office of the company is situated. Such company also had to serve notice on each debenture holder, depositor and creditor of the company indicating the matter of the application. However, such requirements have been done away with in the Amendment Rules.
Further, Rule 28 in the Principal Rules also consisted of the proviso that a company will not be allowed to shift the registered address if any inquiry, inspection or investigation had been initiated against the company or any prosecution was pending against the Company under the Companies Act, 2013. The Amendment Rules do not consist of any such provision, hence, allowing such companies to file application for change in registered office.
Shifting of Registered Office from one state or Union Territory to another state
As per Rule 30 of the Amendment Rules, to shift the registered office of a company from one state or Union Territory to another state, the company has to submit an application seeking approval for alteration of memorandum with respect to such change to the Central Government. Such application is to be filed in Form INC 23 along with the requisite fee and the following documents:
- a copy of Memorandum of Association along with proposed alterations
- a copy of the minutes of the General Meeting at which the resolution authorizing such alteration was passed, giving details of the number of votes cast in favour or against the resolution
- a copy of Board Resolution or Power of Attorney or the executed vakalatnama, as the case may be
The Company shall also be required to advertise in Form INC-26 in Vernacular Newspaper, English Newspaper with the widest circulation in the state in which the Registered Office of the Company is situated, within 30 days of filing of Form INC 23. As per the Principal Rules, such advertisement had to be made within 14 days of filing of application.
India: Revised Secretarial Standards, SS-1 and SS-2 to be Applicable from October 1, 2017
The Institute of Company Secretaries of India has announced that the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) have been revised and the revised Secretarial Standards have received approval from the Central Government. The revised Secretarial Standards shall be applicable for compliance by Companies (except the exempted class of companies ) from October 1, 2017.
History of Secretarial Standards
The Secretarial Standards are formulated by the Institute of Company Secretaries of India (hereinafter referred to as “ICSI”) which was constituted under Section 3 of the Company Secretaries Act, 1980. The Secretarial Standards once formulated are then approved by the Central Government through the Ministry of Corporate Affairs. Earlier, the Companies Act, 1956 provided that the Secretarial Standards were “recommendatory” in nature but the enactment of the Companies Act, 2013 made implementation of the Secretarial Standards in a Company “mandatory”.
The Secretarial Standards are developed to be in conformity with the provision of the Companies Act, 2013 and in case any amendment in the Companies Act, 2013 leads to a Secretarial Standard to be inconsistent with the provisions of the revised Act, then the provisions of the revised Act shall prevail.
Relevant Provisions of the Companies Act, 2013
- Section 118 of Companies Act, 2013
- Section 205 of Companies Act, 2013
(10) Every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980, and approved as such by the Central Government.
(1) The functions of the company secretary shall include: (b) to ensure that the company complies with the applicable secretarial standards; Explanation- For the purpose of this section, “secretarial standards” means secretarial standards issued by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 and approved by the Central Government.
Original Notification for Implementation of SS-1 and SS-2
The Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) were approved by the Central Government under Section 118(10) of the Companies Act, 2013 on April 10, 2015 vide letter No. 1/3/2014-Cl/I and were published in the Official Gazette on April 23, 2015 vide ICSI Notification No. (1) SS of 2015. Companies were required to use the Secretarial Standards with effect from July 1, 2015.
What is Secretarial Standards on Meetings of the Board of Directors (SS-1)
This Standard prescribes a set of principles for convening and conducting Meetings of the Board of Directors and matters connected to the convening and conduct of the Meetings. This Standard is also applicable on Meetings of the Committees of a Company’s Board, unless stipulated otherwise. The Standard is applicable to all Companies incorporated under the Companies Act, 2013 except One Person Company in which there is only one Director on its Board.
What is Secretarial Standards on General Meetings (SS-2)
This Standard prescribes a set of principles for convening and conducting General Meetings of the Company and matters connected to the convening and conduct of the Meetings. The Standard also deals with the conduct of e-voting and postal ballot. SS-2 is applicable to all types of General Meetings of all companies incorporated under the Act except One Person Company (OPC) and class or classes of companies which are exempted by the Central Government through notification.
Why are Secretarial Standards Required
Companies follow diverse secretarial practices which have evolved over time through varied usages and as a response to differing business cultures. For example, the Companies Act, 2013, does not specifically provide for when Agenda and Notes on Agenda for a Board Meeting should be sent to members of the Board. SS-1 provides that the Agenda & Notes on Agenda for a Board Meeting must be sent at least 7 days prior to the Board Meeting thereby giving the Directors sufficient time to prepare and arrive at informed decisions. The Secretarial Standards help to integrate, harmonize and standardize such corporate governance practices across all Companies providing better monitoring of compliances and strengthening the Board processes.
 Such as private companies being set up in International Financial services Centres. They have exempted by the Central Government vide Notification No. GSR 9(E) dated January 4, 2017.
India: NCLAT Interprets disputed debts under the Insolvency Bankruptcy Code, 2016
A need to codify and consolidate the laws related to bankruptcy or insolvency was felt since a long time. The Insolvency and Bankruptcy Code, 2016 (“Code”) brought about many changes to the laws related to corporate insolvency resolution making the process definite, ascertainable and easier. The new code makes the National Company Law Tribunal (“NCLT”) and the National Company Law Appellate Tribunal (“NCLAT”), the adjudicating authority, inter alia in case an application is filed for resolution of matters pertaining to insolvency. Upon a collective reading of various provisions of the code it is observed that if the notice of a disputed debt is sent to the operational creditor by the corporate debtor, then the NCLT is required to send back/ reject the application for corporate insolvency resolution process. (“CIRP”).
Notice of demand for default:
According to Section 8 of the Code, an operational creditor may, on the occurrence of a default, deliver a demand notice and/ or copy of an invoice demanding payment of the amount involved in the default, to the corporate debtor in such form and manner as may be prescribed.
Application for CIRP:
Under Section 9 of the Code, the operational creditor becomes entitled to file an application after expiry of 10 days from the date of delivery of the demand notice or copy of invoice, as the case may be, demanding payment. The ‘operational creditor’ would receive either the payment or a ‘notice of dispute’ in terms of sub-section (2) of Section 8 of the Code. The notice of dispute is a notice given by the debtor claiming that he disputes the amount relating to goods or services, to be paid or owed to the creditor, which is the cause for non-payment. If the operational creditor receives neither, he may file an insolvency proceeding against the debtor.
Acceptance of rejection of Application:
According to Section 9(5)(ii)(d) of the Code, the Adjudicating authority is required to reject the application of CIRP if there is a notice of dispute. In other words, the notice of dispute can be a ground for rejecting an application by Operation Creditor. The pre-requisite for qualification of a notice of dispute to be an eligible ground is the existence of a valid dispute.
Kirusa Software Pvt. Ltd. (“Kirusa”) v. Mobilox Innovations Pvt. Ltd. (“Mobilox”)
Kirusa issued a notice of demand regarding a certain debt to Mobilox, to which Mobilox replied by raising a dispute between the parties with regards the debt. The NCLT, Mumbai, considering this notice of dispute and Section 9, rejected the application made by Kirusa, for CIRP, leading to the instant appeal.
Kirusa appealed to the NCLAT, stating that in the impugned order the validity of the “disputed debt” was not examined by NCLT. If the disputed debt had been analyzed, Kirusa contended, the NCLT would have inferred that the dispute raised neither fulfills the requirements of a dispute as enumerated under Section 5(6), nor is a bonafide dispute within the meaning of the Code. Kirusa therefore prayed that as the dispute was invalid within the meaning of the Code, the NCLT erred in rejecting its application for Corporate Insolvency Resolution Process filed by Kirusa.
The appellants stated that the in order to qualify as a ‘dispute’ under Section 5(6),the dispute must relate to (i) existence of the debt or (ii) quality of the goods or services or (iii) the breach of the representation or warranty with regard to such goods or services.
The appellants further stated that the NCLT failed to exercise its jurisdiction as an adjudicatory body as it did not speculate the requirements for qualification of a dispute as a ‘dispute’ as defined under Section 5(6). It also failed to examine whether the notice of dispute given by the corporate debtor fulfils the condition stipulated in Section 8(2)(a); and ensure whether the dispute was raised in good faith.
The main question of interpretation which the NCLAT speculated and pronounced upon was the ambit of the phrase ‘disputed debt’. It observed, “Sub Section (6) of Section 5 defines “dispute”, to include, unless the context otherwise requires, a dispute pending in any suit or arbitration proceedings relating to: (a) existence of amount of the debt; (b) quality of good or service; (c) breach of a representation or warranty. The definition of “dispute” is “inclusive” and not “exhaustive”. The same has to be given wide meaning provided it is relatable to the existence of the amount of the debt, quality of good or service or breach of a representation or warranty.”
NCLAT, applying the doctrine of harmonious interpretation stated that: “Admittedly in sub-section (6) of Section 5 of the ‘I & B Code’, the Legislature used the words ‘dispute includes a suit or arbitration proceedings… If this is harmoniously read with Section (2) of Section 8 of the ‘I & B Code’, where words used are ‘existence of a dispute, if any, and record of the pendency of the suit or arbitration proceedings, ‘the result is disputes, if any, applies to all 14 kinds of disputes, in relation to debt and default. The expression used in subsection (2) of Section 8 of the ‘I & B Code’ ‘existence of a dispute, if any,’ is disjunctive from the expression ‘record of the pendency of the suit or arbitration proceedings’. Otherwise, the words ‘dispute, if any’. in sub-section (2) of Section 8 would become surplus usage.”
Referring to the Hon’ble Supreme Court’s observation in Mithlesh Singh Vs. Union of India (2003) 3 SCC 309, NCLAT stated that “the Legislature is deemed not to waste its words or to say anything in vain.” Therefore, if the legislature intended to limit the ambit of the wo ‘dispute’ it would have mentioned the requirement of notice of a dispute to only refer to a record of pendency of the suit or arbitration proceedings and not to ‘existence of a dispute, if any’.
With regards to the present case, the NCLAT set aside the order of the NCLT as it was made mechanically and was based on a very vague, got up and motivated dispute made merely with the view of evading the liability.
The word dispute cannot be interpreted in a limited and restrictive sense. The tribunal observed that the definition of the word ‘dispute’ is inclusive and not exhaustive, and therefore it need not be interpreted in a restrictive light. It stated that the term dispute applies to any dispute that has arisen or is pending before the application for CIRP was made. The NCLAT included within this definition, the disputes which are pending with different adjudicating authorities such as, Consumer Courts, Adjudicating Tribunals, arbitration proceedings, mediation or conciliation proceedings as well as any action taken by a Corporate Debtor under any act or law such as replying to a notice under section 80 of the Code of Civil Procedure, 1908, or an action under section 59 of the Sale of Goods Act, 1930 or an action regarding the quality of goods provided by an Operational Creditor. etc. Dispute also includes any dispute raised by the operational debtor with respect to the quality of goods and services delivered or breach of representation of warranty by the operational creditor. On the other hand, the CALT also stated that this interpretation should not be used as a tool by the corporate debtors to avoid or evade insolvency proceedings by mentioning any unsubstantiated or frivolous dispute.
India: Registration of Real Estate Agents Under RERA
The Real Estate Regulation Act, 2016 (“RERA”) was brought into force with the following objectives:
- regulation and promotion of the real estate sector;
- ensure sale of real estate property in an efficient and transparent manner;
- protect consumer’s interests in the real estate sector;
- establish a speedy adjudication and dispute redressal mechanism; and
- establish the Appellate Tribunal
One of the most important interfacing in the real estate sector is held by the brokers or real estate agents today. They form a vital bridge between the concrete industry and the ‘dreams of happy homes’. It is no news that flat buyers and brokers are not friends. The journey of making the one in a million flat into a home is tedious job for both buyers and brokers. There are innumerable cases where the consumers have, legally or not portrayed their dissatisfaction towards the services of their agents.
RERA seeks to smoothen out these kinks by regulating the industry of real estate agents. Chapter 2 of the RERA is partially dedicated to the registration of real estate agents with the appropriate authorities.
Who is a Real Estate Agent:
Section 2 (zm) of RERA defines real estate agents. According to the definition, a “real estate agent” means any person, who negotiates or represents other persons for transfer of a real estate property by way of sale to another person and receives remuneration or fees or any other charges for his services whether as commission. A real estate agent is also a person who introduces, through any medium, prospective buyers and sellers to each other for negotiation for sale or purchase of real estate property, as the case may be, and includes property dealers, brokers, middlemen etc.
Requirement of registration:
To achieve the objective of regulating the real estate sector and to standardize this sector making it more transparent, the Act and the Rules made thereunder require for the real estate agents to obtain a registration certificate from the Real Estate Regulating Authority. RERA also says that the real estate agents will also be liable for any flaws in the project and can be prosecuted for any misconduct in the business. It is Section 9 (1) of RERA that mandates the registration. Section 9 prohibits an agent to operate his business without such registration.
Procedure for registration:
Rule 8 of the National Capital Territory of Delhi Real Estate (Regulation and Development) (General) Rules, 2016 (“Rules”) read with Section 9 (2) of RERA state that every real estate agent, required to register, shall make an application in writing to the Authority established under RERA Form ‘G’, in triplicate, until the application procedure is made web based.
Documents for registration:
- Name, registered address, type of enterprise (proprietorship, societies, partnership, company etc.);
- In case of a Real Estate Agency the particulars of incorporation including the bye-laws, MoA , AoA,
- Name, Address, contact details and photograph of the real estate agent or director or partners
- the authenticated copy of the PAN card of the real estate agent;
- the authenticated copy of the address proof of the place of business.
The registration certificate is valid for 5 years from the date of receipt. It can be revoked before the expiry of this period in case the agent breaches the RER Act or Rules.
According to Section 9 (4) of the Act read with Rule 9 of the Rules, if the Authority does not grant or reject the registration certificate within 30 days, hereon the completion of the period specified under sub-section (3), if the applicant does not receive any communication about the deficiencies in his application or the rejection of his application, he shall be deemed to have been registered.
Conditions for RC:
The following conditions/ compliances are to be adhered to by the real estate agents after attaining the registration certificate:
- Not to facilitate sale of unregistered property;
- Due maintenance of books of accounts records and documents as provided under rule 14;
- Avoid use of any unfair trade practices as enumerated under the rules assistance to enable the allottee and promoter to exercise their respective rights and fulfil their respective obligations at the time of booking and sale of any plot, apartment or building, as the case may be; and
- Generally adhere by the provisions of the Act and the Rules.
These conditions are also mentioned as conditions in the registration certificate as well as Section 10 of RERA.
India: Ferrying passengers could now land you in trouble!!
As per recent news reports, a lot of confusion has been brewing as to whether any driver would be penalized for the passengers in his/her car being in an inebriated state. As per the initial news reports , it was made evidently made clear that the Ministry of Road Transport and Highways’ new “Motor Vehicles Driving Regulations, 2017” (MVR), which came into effect on June 23, 2017, barred drivers from driving a vehicle with inebriated passengers. This news item was further covered by another newspaper , going so far as to provide the relevant excerpt from the Motor Vehicle Regulations, 2017, which is being reproduced hereinbelow:
“The driver shall strictly comply with the laws for the time being in force relating to the prohibition on the consumption of alcohol and drugs and smoking, and also ensure compliance there by the other crew, riders and passengers if any.”
It is pertinent to note that it was reported that the present regulations have not yet been implemented by the Kerala Government as on date, due to the implementation being a herculean task by the low number of staff and the several drawbacks.
However, somewhere along the line, with many other sources reporting the said news, an important fact was not mentioned in the news reports, and the information portrayed was that the Centre had directed cab drivers to not pick up any inebriated passengers. Understandably, this caused confusion amongst the populace, considering that such a rule being implemented across the country would be considered as regressive and would lead to a rise in such instances.
The confusion has now been reportedly cleared after an article containing statements of Kerala’s Joint Transport Commissioner was released. It was correctly pointed out by the said official that any major change made in law cannot be made over a gazette notification, and would instead require amendment to the Act itself. It has also been reportedly stated that the Motor Vehicles Department shall be stringent against drunk drivers, however, no action shall be taken against passengers who are found in an inebriated state.
If one were to practically assess the situation, implementation of the said regulation by the Kerala Government seems to be a message to the state, that consumption of alcohol is going to be restricted to such an extent that it shall be wholly unfeasible to consume alcohol outside of the person’s residence, having no way to turn back. However, since the Government has not yet taken any action for implementation of the said rule, it can be safely assumed that this step might be subject to deliberations, as the livelihoods of cab drivers and prohibition of drunk driving need to be taken into consideration.
“Drunk passengers? Driver will be booked says Kerala’s new law”, August 14, 2017,
“Drivers, don’t take tipplers along, you’ll be nabbed”, August 14, 2017, http://www.newindianexpress.com/states/kerala/2017/aug/14/drivers-dont-take-tipplers-along-youll-be-nabbed-1642884.html
“Why Kerala won’t follow rule penalising cab drivers ferrying drunk passengers”, August 17, 2017, https://scroll.in/article/847451/impossible-to-charge-riders-why-kerala-wont-follow-rule-against-drivers-ferrying-drunk-people