COMMUNIQUE JULY, 2021

COURTS THIS MONTH 

• The Supreme Court in the case of India Resurgence ARC Pvt Ltd vs. Amit Metaliks Ltd & Anr. (Civil Appeal No. 1700 of 2021) held that dissenting financial creditors cannot challenge a resolution plan on grounds that they are entitled to be paid a larger amount on account of their security interests held over the assets of the corporate debtor. In this case the dissenting financial creditors claimed that the resolution plan failed to provide for “equitable treatment” as the same proposed for an amount lesser than the amount of security held by them. The Supreme Court reiterating an already settled position of law stated that acceptance of a resolution plan is based on the financial wisdom of the Committee of Creditors and the courts cannot interfere in exercise of the same unless a mandatory provision of the Insolvency and Bankruptcy Code, 2016 (“IBC”) has not been complied with. The Bench further explained that the scope of interference of a court is limited only to instances where similar classes of creditors are not treated fairly and equitably.  
   
• A vacation Bench comprising of Justice Indira Banerjee and Justice M R Shah of the Supreme Court quashed all the criminal proceedings pending in India against the two Italian Marines namely Massimilano Latorre and Salvatore Girone. An FIR was registered against aforementioned pursuant to a sea firing incident that took place near a coast in Kerala, killing two Indian fisherman. The Apex Court also accepted an amount of Rupees 10 Crores as compensation deposited by the Republic of Italy for the heirs of the deceased. The Hon’ble Court’s decision came pursuant to the ruling of the Permanent Court of Arbitration under UN Convention on Law of Seas stating that even though the Indian Courts have no authority to institute criminal cases against the Italian Marines, a compensation in lieu of the same can be claimed from their country of origin.
   
• The Supreme Court, in the case of Vishal Tiwari vs. UOI & Ors (Writ Petition (Civil) No. 541/2021), disposed of a writ petition seeking financial relief in the form of a fresh loan moratorium, provisional cessation on declaring accounts as Non- Performing Assets and extension of time period under the restructuring scheme. In doing so, the Hon’ble Court relied on the judgment passed in the matter of Small Scale Industrial Manufactures Association (Regd) vs. UOI & Ors, (W.P No. 476 of 2020) where a similar plea for extension of moratorium was denied. The Court refusing to legislate and intervene in the matter observed that “The financial reliefs and other measures are in the domain of government and relates to policy matter.” The Court also explained that petition is only disposed and not dismissed, meaning the parties could make representations to the government for the same.
   
• The Supreme Court in the case of Shashidhar A and others vs. Union of India and others (Writ Petition(s)(Civil) No(s). 631/2021), rejected a petition seeking waiver of final exams for post graduate medical students. The Bench comprising of Justices Indira Banerjee and M R Shah observed that the prayer is an educational policy matter and hence they are not inclined to be interfering with the same. The Hon’ble Court also stated that it has limitations whilst exercising writ jurisdiction and the same can be only exercised in exceptional cases evidencing arbitrariness and prejudice. However, notices were issued to the Central Government and National Medical Commission respectively on the other prayers made in the said writ petition dealing with pay scale and allowances and other recommendations for final year post graduate students.
   
• The Supreme Court in the case of Ministry of Finance vs. Gurcharan Singh (Special Leave to Appeal (c) No.7226/2021), has stayed the decision o f t h e Delhi High Court dated 21.05.2021, declaring levy of Integrated Goods and Services Tax (“IGST”) on oxygen concentrators imported by individuals for personal use as unconstitutional. The Supreme Court in its Order observed “It has been submitted that the judgment of the High Court trenches upon a pure issue of policy. It has been further submitted that the exemption which has been granted in respect of the concentrators which are imported by the State or its agencies falls in a clearly distinct classification.” Notably, the Court also took note of the submissions made on behalf of the Ministry regarding the GST Council, constituting a group of ministers to scrutinize the need of further reliefs to Covid-19 related individual items.
   
• The Apex Court while dismissing an appeal filed in the case of State of Kerala and others vs. Leesamma Joseph (Civil Appeal No. 59 of 2021) held that persons with physical disabilities have the right to reservation in promotions. The case was arising out of a claim under Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act, 1995 which came to be subsequently replaced with the Right of Persons with Disabilities Act 2016. The Court relied on its 3 judge Bench judgement delivered in Siddaraju vs. State of Karnataka (2020(1) SCT742(SC)) that held that the rules of no reservation in promotions does not apply to persons with disabilities. The State government of Kerala, the Appellant in this case has been given 3 months’ time to implement the necessary directions to all such governmental posts.  
   
• A Bench comprising of Justices Ashok Bhushan and R. Subhash Reddy of the Supreme Court ruled that the provisions of the Limitation Act,1963 would apply to arbitration proceedings instituted under Section 18(3) of the Micro, Small and Medium Enterprises Development Act, 2006. In furtherance of the same, the Court observed that the position of law is sufficiently clear as Section 43 of the Arbitration & Conciliation Act, 1996 clearly provides that Limitation Act, 1963 shall apply to arbitration proceedings in the same manner as it would apply to any court proceedings. The Appellant had also sought the Court’s interference on the issue regarding maintainability of the counter claim in such arbitration proceedings. The Bench thus dismissing the challenge against the Kerala High Court judgement held “We make it clear that as the judgment of the High Court is an order of remand, we need not enter into the controversy whether the claims/counter claims are within time or not. We keep it open to the primary authority to go into such issues and record its own findings on merits”. The judgement was delivered in the case of M/s. Silpi Industries vs. Kerala State Road Transport Corporation, (CA 1570- 1578 OF 2021).
     
• In the Suo Moto case of In Re Contagion of COVID Virus In Children Protection Homes (SMW (c) NO.4 OF 2021), an Apex Court, Bench, comprising of Justices L Nageswara Rao and Justice Aniruddha Bose directed the State and Union Territories to “ensure that there is no break in the education of children who have become orphans or lost either one parent during the pandemic”. The Court further directed the States and Union Territories to continue making all possible efforts to identify such children and provide such data to National Commission for Protection of Child Rights. The District Child Protection Units (“DPCU”) have been directed to contact the affected children and their guardians immediately upon becoming aware of the death of the parent(s). The DPCU shall also make adequate arrangements for food, clothing, medicine, shelter etc. of such affected children.  
   
• The Supreme Court on 04.06.2021, overturned the decision of the Punjab & Haryana High Court that denied protection to a live-in couple on grounds that the such relationships are morally and socially not acceptable. The Supreme Court observed that “Needless to state that since it concerns life and liberty, the Superintendent of Police is required to act expeditiously in accordance with law, including the grant of any protection to the petitioners in view of the apprehensions/ threats, uninfluenced by the observations of the High Court.” The Order was passed in the case of Gurwinder Singh & Anr. vs. The State of Punjab & Ors. (Special Leave to Appeal (Crl.) No(s). 4028/2021).
   
• A single Judge Bench of the Bombay High Court allowed the appeal filed by the Board for Control of Cricket in India (“BCCI”) setting aside an arbitral award directing them to pay an amount of Rs 4814 Crores to Deccan Chronicles Holding Ltd (“DCHL”). The issue related to the illegal termination of Deccan Charger’s franchise from the Indian Premier League by BCCI in the year 2012. The High Court observed that the Respondent was also in unquestionable breach of the contractual terms agreed between both the parties. The issues such as DCHL’s failure to pay players and other staffs, creating charges on its assets and initiating insolvency were the major defaults committed by them. However, the arbitral award neither provided any reasoning in regard to the same nor took into consideration the evidence furnished. The Court however directed BCCI to pay a reduced amount of Rs 34.07 Crores with interest to DHCL.
   
• The Kerala High Court, in the case of Zacharia Maramkandathil Mohan and Ors vs. Union Of India (WP (c) No. 21628 of 2020), dismissed a batch of 250 writ petitions challenging the constitutional validity of Section 164(2) and 167(1) of the Companies Act, 2013. The aforesaid sections provide for disqualification of Directors of a company for a period of 5 years pursuant to the company’s failure to file financial statements / annual returns, for 3 consecutive years. The Court held that the provisions did not violate Articles 14 and 19(1)(g) of the Indian Constitution as the provisions are not arbitrary, and were squarely covered under the exception under Article 19(6). The Court also clarified that an opportunity of hearing before disqualifying a Director under Section 164 is not required as the said disqualification occurs due to operation of law. It was also held that the provisos inserted to Section164(2) and Section 167(1)(a) of the said Act which came into effect from 07.05.2018 were clarificatory in nature, and thus would apply retrospectively to defaults occurring from the financial year 2014-15.
   
• A Division Bench comprising of Justices Rajiv Shakdher and Talwant Singh, of the Delhi High Court has directed law firms to not author pieces with respect to ongoing cases being prosecuted by them. In light of the same the Court held that reporting of ongoing cases by law firms is likely to affect the objectivity of the issues involved. The Court observed that “Any slant in the reporting, which is not in line with the orders of the Court, leads to multifarious problems including the embarrassment that counsels appearing in the matter may encounter vis-a-vis their respective principals.” The Order was passed in the case of Society for Tax Analysis and Research vs. UOI (W.P.(C) 5114/2021 & CM Nos. 15675/2021, 17185 / 2021 , 17186 / 2021 ) . The Petitioner had filed the writ petition requesting the Court to direct the Central Government regarding extension of various tax due dates. Meanwhile, an article on the proceedings was published on a blog by a law firm prosecuting the case.
   
• A single Judge Bench of Justice P S Dinesh Kumar of the Karnataka High Court dismissed a writ petition filed by Amazon & Flipkart challenging the preliminary investigation order passed by the Competition Commission of India (“CCI”) against their alleged anticompetitive practices. The Court held that “But in a writ petition filed under Article 226 of the Constitution of India, seeking judicial review, the High Court can examine only the decision making process with the exception namely the cases involving violation of fundamental human rights.” It was also observed that the Courts do not have the jurisdiction to interfere and substitute the wisdom of an adjudicatory authority i.e. CCI in the present case. Therefore, allowing the petition would be unwise and premature at this stage and the same could possibly scuttle the on-going investigation.
   
• In a one of its kind judgements, passed by the Division Bench of the Bombay High Court in the case of Dharmendra M. Jani vs. UOI & Ors.(Writ Petition No.2031 of 2018), a split verdict was delivered by Justice Ujjal Bhuyan & Justice Abhay Ahuja. The issue was pertaining the constitutional challenge to Section 13(8)(b) of the Integrated Goods and Services Tax Act, 2017 (“IGST Act”). The said Section provides that in case of services provided by an intermediary under the Act which is being received outside India, the place of supply shall be deemed to be the location of the supplier i.e., in India. As per the views expressed by Justice Ujjal Bhuyan, the said provision was ultra vires as it intends to impose tax on services rendered outside the territorial jurisdiction of the country. Justice Bhuyan further explained that G S T i s a destination-based tax, whereas said Section 13(8)(b) is an origin-based tax implying that applicability of IGST Act is extra-territorial, thus rendering the provision ultra vires. On the other hand, Justice Abhay Ahuja, dissentingly, by way of a separate judgement and order dated 16.06.2021 held that the said provision was constitutionally valid. Justice Ahuja held that the whole purpose of Article 286(2) and Article 269A(5) of the Indian Constitution is that it empowers the parliament to determine situs of supply. Hence, the scope of the said section does not exceed the constitutional guarantee.  
   
• A single Judge Bench of the Jharkhand High Court in the case of August Kumar Mehta vs. State of Jharkhand, (Cr. Rev. No. 1081 of 2013), whilst setting aside the judgement of the Lower Court held that the Supreme Court’s decision on declaring adultery under Section 497 of Indian Penal Code , 1860 to be unconstitutional, is applicable prospectively to all pending proceedings even with respect to offences committed before the said provision was struck down. The Court observed that as per Article 141 of the Indian Constitution, law declared by the Supreme Court is binding on all the courts within the territory of India and applies to all pending proceedings. The Hon’ble Court relied on the Supreme Court’s judgement of Joseph Shine vs. UOI ((2019) 3 SCC 39) in this regard.  
   
• The Delhi High Court, in the case of Whatsapp LLC vs. Competition Commission of India (LPA 163/2021), refused to stay the CCI’s probe against the former’s Privacy Policy. The Hon’ble Court observed that there was a challenge already persisting on the same issue, pending before another Division Bench of the same Court. Considering there existed a “substantial overlap, in fact near identity,” between the prayers in both the applications, the Court decided not to grant any stay on operation of the CCI notice issued on 04.06.2021, at this stage. Not inclined to get into the merits of the case more so because the matter is pending before the Chief Justice, the Court re-notified the case for the roster Bench.
   
• The Delhi High Court in the case of KLA Const Technologies Pvt. Ltd. vs. The Embassy of Islamic Republic of Afghanistan (OMP (ENF) (COMM) 82/2019 & I.A. No. 7023/2019), held that sovereign immunity under Section 86 of Code of Civil Procedure, 1908 cannot be claimed by foreign states, against enforcement of arbitral awards arising from commercial transactions. The Court in its decision stated that when a foreign state engages in a commercial transaction, it is bound by the rules of the commercial legal ecosystem and cannot claim immunity which is conferred to them only when they are acting in a sovereign capacity. “It is the purpose and nature of the transaction of the Foreign State which would determine whether the transaction, and the contract governing the same, represents a purely commercial activity or whether the same is a manifestation of an exercise of sovereign authority” the Court held. Further, the Court in its judgement also recorded that no prior consent of the Central Government is required under Section 86(3) of the Code of Civil Procedure Code, 1908 to enforce an arbitral award against a Foreign State.  
   
• The Rajasthan High Court, in the case of Rashika Khandal vs. State of Rajasthan (S.B. Criminal Miscellaneous (Petition) No. 3023/2021), dismissed a writ petition seeking protection of life and liberty for a married and an unmarried person in a livein- relationship. The Court relied on the Supreme Court’s decision of D.Velusamy vs. D. Patchaiammal ((2010) 10 SCC 469), to reiterate that for a live-inrelationship “the couple must hold themselves out to society as being akin to spouses and must be of legal age to marry or qualified to enter into a legal marriage, including being unmarried.” The Hon’ble Court observed that in this case one of the petitioners was married. Accordingly, the relationship was not qualified to constitute a legal marriage.

 
NOTIFICATIONS/AMENDMENTS INSIGHTS 

• The Central Board of Indirect Taxes has notified the Income Tax Amendment (19th Amendment), Rules, 2021, vide its Notification No. G.S.R. 472(E) dated 07.07. 2021. In furtherance of the same, the Income Tax Rules, 1962 are amended to include a provision regarding computation of short-term capital gains and the written down value under Section 50 of the Income Tax Act, 1961, where depreciation on goodwill has been obtained by the Assessee. Under the proviso to the said section, the written down value of the block of the asset and short-term capital gains, if any, for the previous year relevant to the assessment year commencing on 01.04.2021, shall be determined as per this rule.
   
• The Reserve Bank of India (“RBI”) vide its Circular No. RBI/2021-22/71 dated 12.07.2021 has extended the timeline for implementation of cassette swap in all ATMs till 31.03.2022. The RBI had issued a circular in April, 2018 notifying implementation of lockable cassettes in the ATMs which shall be swapped at the time of cash replenishment. This was to be implemented t i l l 31 . 03 . 2021 , however,after numerous representations made to RBI with respect to the said timeline, the RBI has granted extension till 31.03.2022.
   
• Ministry of Civil Aviation notified draft Drone Rules, 2021 . The Central government has invited comments and suggestions from the public till 05.08.2021 in furtherance of the same. Pursuant to the finalisation and notification of the Drone Rules, they will replace the already existing Unmanned Aircraft System Rules, 2021. The government via these rules intends to regulate drones as their usage now offers immense opportunities for economic growth and employment generation but simultaneously, raises safety and security concerns. The draft rules aim at reducing the compliance burden on the operators and also provide for dedicated drone corridors and easier transfer and deregistration of drones, among others.
   
• Ministry of Corporate Affairs notified the Companies ( Incorporation) Fifth Amendment Rules, 2021 vide notification no. G.S.R. 503(E) dated 22.07.2021.Through this amendment, a new rule i.e. Rule 33A regarding allotment of a new name to the existing company under Section 16(3) of the Companies Act, 2013 has been introduced. Notably, a new Form No.INC-11C has also been inserted in pursuance of the same. As per the said amendment, if a company fails to change its name or new name, as the case may be, in accordance with the direction issued under sub-section (1) of Section 16 of the Act within a period of 3 (three) months from the date of issue of such direction, the letters “ORDNC” ( Order of Regional Director Not Complied), the year of passing of the direction, the serial number and the existing Corporate Identity Number of the company shall become the new name of the company without any further act or deed by the company.
   
• SEBI, vide a Circular bearing no. SEBI/HO/MIRSD/DOP/P/CIR/2021/59 dated 16.07.2021, provided a block mechanism in the demat account of the clients undertaking sale transactions. Therefore, whenever the client intends to make a sale transaction, shares will be blocked in the demat account of the client in favour of the Clearing Corporation. However, if the sale transaction is not executed, shares shall continue to remain in the client’s demat account and will be unblocked at the end of the T-day. Thus, this mechanism intends to do away with the movement of shares from the client’s demat account for early pay-in and back to client’s demat account if trade is not executed. The proposed facility of block mechanism is on optional basis and early pay-in mechanism shall still continue operating.
  
  The Ministry of Corporate Affairs, vide Circular No. 13 / 2021 , has issued clarification on spending of CSR funds by the Companies for COVID-19 vaccination programmes. The Ministry has clarified that spending of CSR funds for COVID-19 vaccination for persons other than employees and their families, is eligible as a CSR activity under item (i) of Schedule VII of Companies Act, 2013, under promotion of health care including preventive health care and disaster management.
   
• The Ministry of Labour and Employment, vide Notification bearing no. S.O. 2985(E) dated 28 . 07 . 2021 , extended the provisions of the Employees’ State Insurance Act, 1948, to all casual and contractual employees working in the Municipal Corporations / Council established under Central / State legislations where ten or more persons are employed on any day of the preceding twelve months in Delhi NCR.

 
DEALS THIS MONTH 

• Bangalore based online learning platform Unacademy has acquired Rheo TV, a platform that helps professional gamers live stream their games and monetise their respective feeds. Unacademy is one of India’s largest learning platform and Rheo TV is a game streaming platform that aims to make professional game streaming a mainstream career option in India. Pursuant to the acquisition, Rheo TV founders Mr. Saksham Keshri and Mr. Prakash Kumar will join Relevel. Relevel is an Unacademy group company that enables job seekers to showcase their skills through tests, and secure employment at some of the country’s leading companies.
   
• Recently, Cashify acquired the retail solution platform UniShop. Founded in 2013, Cashify is based in Delhi, and is operated by Manak Waste Management Pvt. Ltd. Cashify provides an online platform to sell used smartphones and other electronics whereas Unishop is an omnichannel retail solution platform that enables businesses to open a full- fledged online store. The acquisition and will help Cashify diversify its e-commerce offerings by empowering mobile retailers to have a web presence.
  
  YouTube has acquired video commerce app Simsim to help its viewers discover and buy products from local businesses. This will help small businesses and retailers in India to reach out to new customers in efficient ways. Simsim is a short-video based shopping app that enables small businesses in India transition to the e-commerce front by connecting local businesses, influencers and customers. YouTube has claimed that there will be no immediate changes to Simsim, and the app will continue operating independently.
   
• Zomato, wrapped up its Initial Public Offer (“IPO”), amounting to an issue size of INR. 9375 Crores, out of which fresh issue of equity shares amounted to INR. 9000 Crores, and the offer for sale was set at INR 375 Crores by the existing investor Info Edge (India). The IPO has raised Zomato’s valuation to INR 64,365 Crores. The shares were issued at INR 76 and the listing price of the same at National Stock Exchange reached INR 116.
  
  Paytm, largest Indian digital payment system, is expected to launch its IPO around the end of October 2021. It has filed for an INR. 16,600 Crores ($2.2 Billion) IPO that will likely be the largest ever in India. Paytm is largely backed by China’s Ant Group, Alibaba, private equity major SAIF Partners, SoftBank Vision Fund, and an arm of Berkshire Hathaway. Paytm is currently valued at $16 Billions, and through the IPO is eyeing and augmentation in the valuation to $25-$30 Billions. Paytm might also consider a pre-IPO placement of up to INR 2,000 Crores.
   
• Reliance Retail Ventures Limited (“RRVL”) will acquire a controlling stake of 66.95% in the local search engine platform Just Dial Ltd. for INR 5,713 Crores ( $ 766 Million) through preferential allotment of shares and open offer. Just Dial provides search related services to users across India and had 30.4 Million listings and 129.1 Million quarterly unique users across web, mobile, app and voice platforms as on 31.03.2021. Just Dial has also recently launched its B2B marketplace platform, JD Mart, which is aimed at enabling Indian manufacturers, distributors, wholesalers, retailers to adopt their technology in day to day business activities.
   
• Tata Sons will acquire a majority stake in listed telecom firm Tejas Networks. The acquisition will be via Tata Sons affiliate Panatone Finvest. Tejas Networks is a global optical, broadband and data networking products company. The said company designs, develops and sells products to telecommunications service providers, internet service providers, utilities, defense, and government entities. The acquisition will help Tata strengthen its 5G capacity, and will give Tejas more capital for research and developmental purposes.