Highlights:

Corporate Brief

  • Circular dated 03.05.2024 issued by Reserve Bank of India (“RBI”) regarding amendments under Master Direction- Risk Management and Inter-Bank Dealings.
  • Draft guidelines dated 03.05.2024 issued by RBI on Prudential Framework for Income Recognition, Asset Classification and Provisioning pertaining to Advances- Projects Under Implementation.
  • Notification dated 06.05.2024 issued by RBI- Foreign Exchange Management (Deposit) (Fourth Amendment) Regulations, 2024.
  • Notification dated 10.05.2024 issued by Securities Exchange Board of India (‘SEBI”) regarding NISM Series-XIX-C: Alternative Investment Fund Managers Certification Examination under SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007.
  • Commencement Notification dated 10.05.2024 issued by SEBI for certain provisions of the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2023.
  • Circular dated 13.05.2024 issued by SEBI on Certification requirement for key investment team of manager of Alternative Investment Funds (“AIF”).
  • Circular dated 14.05.2024 issued by SEBI for Review of validation of KYC records by KRAs under Risk Management Framework.
  • Circular dated 21.05.2024 issued by RBI on Issuance of partly paid units to persons resident outside India by investment vehicles under Foreign Exchange Management (Non-debt Instruments) Rules, 2019.
  • Circular dated 24.05.2024 issued by SEBI on Modifications in Staggered Delivery Period in Commodity Futures Contracts.
  • Circular dated 27.05.2024 issued by SEBI regarding Timelines for disclosures by Social Enterprises on Social Stock Exchange (“SSE”).
  • Circular dated 29.05.2024 issued by SEBI regarding modifications in Investor Charter for Depositories and Depository Participants.
  • Circular dated 29.05.2024 issued by SEBI- Modification in requirement of inspection of accredited warehouses by Clearing Corporations.

Real Estate Brief

  • Order dated 08.05.2024 issued by Andhra Pradesh Real Estate Regulatory Authority (“AP RERA”) regarding modification in the delegation of powers for quasi-judicial proceedings related to processing of complaints received.
  • Order dated 08.05.2024 issued by Maharashtra Real Estate Regulatory Authority (“MahaRERA”) regarding establishing minimum physical criteria that every project must meet to be eligible for advertising as a “Retirement Home/or any other equivalent”.
  • Order dated 29.05.2024 issued by Uttar Pradesh Real Estate Regulatory Authority (“UP RERA”) regarding issuance of the model format for offer-of-possession letter.

 NCLT Brief

  • Whether Insolvency Applications are Maintainable against Struck-off Companies?.

Litigation Brief

  • Court’s Jurisdiction to be determined by Section 16-20 of CPC when seat of Arbitration is not specified in Agreement

  

Corporate Brief

Circular dated 03.05.2024 issued by RBI regarding amendments under Master Direction- Risk Management and Inter-Bank Dealings (“Master Direction”).

  • The Standalone Primary Dealers (SPDs) have been granted authorization under Section 10(1) of the Foreign Exchange Management Act (FEMA), 1999 pursuant to notification no. DNBR (PD) CC.No.094/03.10.001/2018-19 July 27, 2018. Accordingly, amendments have been made in the Master Direction to reflect the applicability of the provisions to SPDs. Additionally, directions on reporting of OTC foreign exchange derivative contracts and foreign currency interest rate derivative contracts to the Trade Repository of Clearing Corporation of India Limited have been updated and incorporated in Part E of the Master Direction.
  • The said circular dated 03.05.2024 may be referred to at the link below:

https://rbi.org.in/Scripts/NotificationUser.aspx?Id=12680&Mode=0

Draft guidelines dated 03.05.2024 issued by RBI on Prudential Framework for Income Recognition, Asset Classification and Provisioning pertaining to Advances- Projects under Implementation. 

  • With a view to strengthen the extant regulatory framework governing project finance and to harmonise the instructions across all regulated entities, the RBI has released a draft Direction dated 03.05.2024 on the prudential framework applicable to financing of project loans.These guidelines provide for an enabling framework for the regulated entities for financing of project loans, while addressing the underlying risks. The comments on the draft Direction are invited from public/stakeholders by 15.06.2024.
  • The draft Directions may be referred to at the link below:

https://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=4428

Notification dated 06.05.2024 issued by RBI- Foreign Exchange Management (Deposit) (Fourth Amendment) Regulations, 2024. 

  • The RBI vide its notification dated 06.05.2024 has made amendments to the Regulation 7 of the Foreign Exchange Management (Deposit) Regulations, 2016. Vide the said notification, a new sub-regulation (“6”) under Regulation 7 has been inserted which states that an authorized dealer in India may allow a person resident outside India to open, hold and maintain an interest bearing account in Indian Rupees and / or foreign currency for the purpose of posting and collecting margin in India, for a permitted derivative contract entered into by such person in terms of Foreign Exchange Management (Margin for Derivative Contracts) Regulations, 2020, dated 23.10.2020.

Notification dated 10.05.2024 issued by SEBI regarding NISM Series-XIX-C: Alternative Investment Fund Managers Certification Examination under SEBI (Certification of Associated Persons in the Securities Markets) Regulations, 2007. 

  • Vide the notification dated 10.05.2024, SEBI has issued that at least one key personnel, amongst the associated persons functioning in the key investment team of the Manager of an Alternative Investment Fund, shall obtain certification from the National Institute of Securities Market by passing the NISM Series-XIX-C: Alternative Investment Fund Managers Certification Examination as mentioned in   the   communiqué      NISM/   Certification/   Series-XIX-C:   Alternative   Investment   Fund Managers/2024/01 dated January 10, 2024.

Commencement notification dated 10.05.2024 issued by SEBI for certain provisions of the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2023. 

  • Vide the said commencement notification dated 10.05.2024, SEBI has issued that the amendments in sub-regulation  (III)  of  regulation  3  of  the  SEBI (Alternative  Investment  Funds)  (Second  Amendment)  Regulations,  2023  shall  come  into  force  on  the  date  of publication of the said notification dated 10.05.2024 in the Official Gazette.

Circular dated 13.05.2024 issued by SEBI regarding certification requirement for key investment team of manager of AIF. 

  • Vide the said circular dated 13.05.2024, SEBI specified that the requirement for at least one key personnel of the key investment team of manager of AIF to obtain the certification from the National Institute of Securities Market, shall be applicable as an eligibility criterion to all the applications for registration of AIFs and launch of schemes by AIFs filed after 10.05.2024. Further, the aforesaid requirement of obtaining certification shall be complied with on or before 09.05.2025 for existing schemes of AIFs and schemes of AIFs whose application for launch of scheme has been pending with SEBI as on 10.05.2024.

Circular dated 14.05.2024 issued by SEBI for review of validation of KYC records by KRAs under Risk Management Framework. 

  • Vide the circular dated 14.05.2024, SEBI has modified Para 96 and para 100 of the master circular dated 12.10.2023 regarding the Risk Management Framework at KRAs wherein the attributes for verification by KRAs have been mentioned. These modifications respectively state that KRAs shall verify the Permanent Account Number, name and address of all clients within 2 (two) days of receipt of KYC records and the records of those clients in respect of which all attributes mentioned in para 96/97 are verified by KRAs with official databases and PAN-Adhaar linkage has also been verified as referred to in Rule 114 AAA of the Income Tax Rules, 1962 shall be considered as Validated Records. As per the said circular, the timeline for the necessary technical change by the Exchanges/ Depositories/ concerned intermediaries shall be till 31.05.2024.

Circular dated 21.05.2024 issued by RBI regarding Issuance of partly paid units to persons resident outside India by investment vehicles under Foreign Exchange Management (Non-debt Instruments) Rules, 2019. 

  • Vide the said circular dated 21.05.2024, the RBI regularized the issuances of partly paid units by Alternative Investment Funds to persons resident outside India prior to the Foreign Exchange Management (Non-debt Instruments) (Second Amendment) Rules, 2024 through compounding under Foreign Exchange Management Act, 1999. Authorized Dealers, Category I banks have to ensure that necessary administrative action (like reporting by AIF to RBI through FIRMS, conditional acknowledgement for such reporting) is taken before approaching RBI for compounding.

Circular dated 24.05.2024 issued by SEBI on Modifications in Staggered Delivery Period in Commodity Futures Contracts. 

  • Vide this circular dated 24.05.2024, SEBI modified the Master Circular for Commodity Derivatives Segment dated 04.08.2023. Based on representations received from market participants and deliberations by Commodity Derivatives Advisory Committee (CDAC) of SEBI, paragraph 11.1.3 of the said Master Circular dated 04.08.2023 on Minimum duration of staggered delivery stands revised as follows and other conditions remain the same:

“The minimum duration of staggered delivery shall be at least three working days.” 

Circular dated 27.05.2024 issued by SEBI regarding Self-Regulatory Organizations for Social Impact Assessors in the context of SSE. 

  • As per the said circular dated 27.05.2024, ICMAI Social Auditors Organization (“ICMAI SAO”) under the Institute of Cost Accountants of India and ICSI Institute of Social Auditors (“ICSI ISA”) under the Institute of Company Secretaries of India are specified as Self-Regulatory Organizations for Social Impact Assessors in the context of Social Stock Exchange other than the Self-Regulatory Organizations under the Institute of Chartered Accountants of India.

Circular dated 29.05.2024 issued by SEBI regarding modifications in Investor Charter for Depositories and Depository Participants (“Charter”).

  • SEBI formulated the Investor Charter for Depositories and Depository Participants (DPs) in November, 2021 to facilitate the investor awareness about various activities such as dematerialization/ rematerialization of securities, transmission of securities, settlement instruction, consolidated account statement, grievance redressal mechanism, etc. As per the said circular dated 29.05.2024, SEBI has modified the Charter for Depositories and DPs, interalia, detailing the services provided to Investors, Rights of Investors, various activities of Depository through DPs with timelines, Dos and DON’T’s for Investors, Responsibilities of Investors, Code of Conduct for Depositories and DPs and Grievance Redressal Mechanism.
  • The said circular dated 29.05.2024 and may be referred to at the following link:

https://www.sebi.gov.in/legal/circulars/may-2024/investor-charter-for-depositories-and-depository-participants_83649.html

Circular dated 29.05.2024 issued by SEBI- Modification in requirement of inspection of accredited warehouses by Clearing Corporations. 

  • The circular dated 29.05.2024 has been released by SEBI in response to the requests made by the Clearing Corporations (CCs) regarding inspection requirements under Master Circular for Commodity Derivatives Segment dated 04.08.2023 (“Master Circular”). The CCs claimed that in line with the schedule of sticking, these requirements lead to inspections in relatively shorter periods of time.
  • As per the said circular dated 29.05.2024, the requirement of independent audit twice in a calendar year has been reduced to once in a calendar year for accredited storage facility with ‘Nil’ stock continuously during preceding 6 months. Additionally, the requirement of inspection by independent agency has been completely done away with in case there is ‘Nil’ stock in an accredited storage facility continuously during the calendar year. The requirement to conduct periodic in-house by clearing corporation, as stated in Para 12.16.1 of Master Circular, shall continue to apply.

Real Estate Brief

Order dated 08.05.2024 issued by AP RERA regarding modification in the delegation of powers for quasi-judicial proceedings related to processing of complaints received.

  • As per Order No. 1/2024 dated 08.05.2024, to facilitate timely resolution of complaints, the AP RERA has appointed an Adjudicating Officer with the requisite qualifications and experience in quasi-judicial matters. Effective immediately and until further notice, the power to address complaints received in Form M has been delegated to the Adjudicating Officer of AP RERA.
  • This circular, approved by the Chairperson (FAC) of AP RERA, is directed to the Members, Adjudicating Officer, Administrative Officer, and Complaint Cell staff of AP RERA. This delegation of power aims to enhance the efficiency of the complaint redressal process, ensuring prompt grievance resolution for stakeholders in the real estate sector.

Order dated 08.05.2024 issued by MahaRERA regarding establishing minimum physical criteria that every project must meet to be eligible for advertising as a “Retirement Home/or any other equivalent”. 

  • As per Order No. 55/2024 dated 08.05.2024, MahaRERA has prescribed minimum physical criteria that every project must meet to be eligible for advertising as a “Retirement Home/ or any other Equivalent”, including interalia specifications regarding Building Design, Green Building Principles, Lifts and Ramps, Staircase, Corridors, Kitchen, Bathrooms, Lighting and Ventilation, Safety and Security.
  • These regulations are effective immediately and aim to ensure transparency and provide appropriate amenities for senior citizens in retirement home projects.

Office order dated 29.05.2024 issued by UP RERA regarding issuance of the model format for offer-of-possession letter.

  • UP RERA issued an order dated 29.05.2024 (“UP RERA Order”) which interalia provides for a model format which is required to be used by the promoters for issuing offer-of-possession letters to the allottees. The model format issued by UP RERA provides that the promoters need to clearly mention the project details, remaining works in the offer-of possession letter and call allottees to take possession within the stipulated timeline.
  • The copy of the said UP RERA Order is available at the following website link: https://www.up-rera.in/pdf/OC-CCOrder.pdf.

NCLT Brief

Whether Insolvency Applications are Maintainable against Struck-off Companies?.

Facts

FedEx Express Transportation and Supply Chain Services (India) Pvt. Ltd. (the Appellant/Operational Creditor), a provider of integrated and turnkey shipping, logistics, and supply chain management services, was providing shipping and logistics services to Zipker Online Services Pvt. Ltd. (the Respondent/Corporate Debtor). However, the Corporate Debtor defaulted on their payment obligations to the Operational Creditor. As a result, the Operational Creditor served a demand notice under Section 8 of the Insolvency & Bankruptcy Code, 2016 (“IBC”) demanding payment of Rs. 18,34,120.93/- plus accrued interest.

After receiving no response from the Corporate Debtor, the Operational Creditor had filed an application under Section 9 of IBC seeking initiation of the Corporate Insolvency Resolution Process [“CIRP”] proceedings of the Corporate Debtor on account of the unpaid debt. However, on September 5, 2023, the National Company Law Tribunal [“NCLT”], New Delhi Bench, dismissed this application, holding that the Corporate Debtor’s name had already been struck off from the register maintained by the RoC, and hence, the application under Section 9 of the IBC was not maintainable.

Aggrieved by this decision, the Appellant preferred an appeal to the NCLAT under Section 61 of the IBC, challenging the order of the NCLT.

Issue
Whether an application under Section 9 of the IBC is maintainable against a Corporate Debtor whose name has been struck off from the register of companies in light of the provisions of Sections 248, 250, and 252 of the Companies Act, 2013 [“Act”]?

Decision
The NCLAT, after careful consideration, finally held that the judgments cited by the Appellant in the cases of Hemang Phophalia v. The Greater Bombay Co-Operative Bank Ltd. & Anr. and Elektrans Shipping Pte. Ltd. v. Pierre D’Silva are not laying down the correct law and are per incuriam. Accordingly, the NCLAT ruled that Section 7 or 9 IBC applications are not maintainable against companies struck off from the RoC’s register.

The NCLAT emphasized that IBC is not a debt recovery mechanism but a means for reviving companies facing financial distress.

The NCLAT elucidated that through the winding up proceedings as provided in the Act, the purpose of debt recovery is served, which is distinct from the objectives of IBC. Furthermore, the exceptions outlined in Section 248(6), Section 248(7), and Section 250 of the Act, which provide avenues for debt recovery, do not apply in case of Section 7 or 9 IBC applications.

In light of the above, the NCLAT was inclined to dismiss the appeal preferred by the Operational Creditor.

Litigation Brief

Court’s Jurisdiction to be determined by Section 16-20 of CPC when seat of Arbitration is not specified in Agreement.

CASE: Kings Chariot Through its Sole Proprietor Mrs. Neelima Suri Versus Tarun Wadhwa passed by Hon’ble Delhi High Court (2024 SCC OnLine Del 4039)

FACTUAL MATRIX: The present petition was filed under Section 11(5) of Arbitration and Conciliation Act, 1996 for appointment of sole arbitrator. The parties entered into an MEP Contract on 11.10.2018. Later owing to dispute between them, the respondent invoked the Arbitration Clause on 18.01.2024 by sending a legal notice. The petitioner replied dated 15.02.2024 and called upon the respondent to pay the outstanding amount but the respondent neither paid the outstanding amount nor responded to the Reply till date. Therefore, present petition is filed.

ISSUE: What will be the seat of arbitration when Arbitration clause is silent about the seat or venue of arbitration proceedings?

OBSERVATION: The captioned agreement does not specify the seat of Arbitration. The general jurisdictional Clause cannot be read to define the seat or venue for the purpose of the Arbitration. The Hon’ble Supreme Court in Ravi Ranjan Developers Pvt. Ltd. v. Aditya Kumar Chatterjee, 2022 SCC OnLine SC 568 held that Section 11(6) of the Act, 1996 has to be harmoniously read with Section 2(1)(e) of the Act, 1996 and construed to mean a High Court which exercises superintendence/supervisory jurisdiction over a Court within the meaning of Section 2(1)(e) of the Act, 1996. If there is no such Agreement on seat of jurisdiction, then the Application under Section 11(6) of the Act, 1996 would be filed only in the jurisdiction of the High Court and shall be determined in accordance with Section 16 to 20 of the Civil Procedure Code (CPC).

In Union of India v. Hardy Exploration and Production (India) Inc., (2019) 13 SCC 472, a 3-Judge Bench of the Apex Court held that the “sittings” at various places are relatable to “venue”. It cannot be equated with the “seat of arbitration” or “place of arbitration”, which has a different connotation.

After referring to all the aforesaid judgments in the case of Ravi Ranjan Developers Pvt. Ltd., (supra), it was held that the parties cannot by consent, confer jurisdiction on a Court which inherently lacks jurisdiction. When neither the seat nor the place of arbitration is designated in the particular Arbitration Clause/Agreement and no part of cause of action has arisen within the jurisdiction of the High Court, the Application under Section 11(6) of the Act, 1996 would not be maintainable, in said High Court.

DECISION: Therefore, there is no ambiguity in the law, which clearly states that parties can mutually designate a jurisdiction for arbitration purposes even if no part of the cause of action arises there. This designated jurisdiction would govern all litigation under the Arbitration Act. However, if the parties do not specify a seat or place for arbitration, the court’s territorial jurisdiction will be determined according to Sections 16 to 20 of the Civil Procedure Code (CPC). 

 

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