COMMUNIQUE JUNE, 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 Ministry of Corporate Affairs (“MCA”), vide a notification dated 15.06.2021, has notified the Companies (Meetings of Board and its Powers) Amendment Rules, 2021. The said rules have omitted Rule 4 in the Companies (Meetings of Board and its Powers) Rules, 2014, thereby permitting video conferencing on matters like approval of annual financial statements, approval of board’s report, approval of prospectus, approval of matters relating to amalgamation/merger/demerger/acquisition/takeover and the audit committee meetings for consideration of accounts of the companies. 
   
• Vide Notification No. G.S.R. 400 (E) dated 14.06.2021, the Ministry of Labour and Employment issued the draft Employees’ State Insurance (Central) Amendment Rules, 2021 to amend the Employees’ State Insurance (Central) Rules, 1950. The draft Rules aim at inserting a proviso to Rule 55 of the already existing Central Rules which states that “Provided further that in case an Insured woman who is in receipt of maternity benefit and due to reason of which, a shorter contribution period is available to her in the contribution period ending in which the Maternity Benefit falls, she shall be qualified to claim sickness benefit in the corresponding benefit period if the contribution in respect of her were payable for not less than half the number of days available for working in such contribution period.”
   
• Vide circular no. SEBI / HO / ISD / ISD /CIR / P/2021 / 578 dated 16.06.2021, SEBI has included listed debt securities of equity listed companies under the scope of System Driven Disclosures. SEBI had earlier introduced the System Driven Disclosure in phases for member(s) of a promoter group and designated person(s) in addition to the promoter(s) and Director(s) of a Company under Regulation 7(2) of SEBI (Prohibition of Insider Trading) Regulations, 2015 pertaining to trading in equity shares and equity derivative instruments. The Depositories and Stock Exchanges have been directed to make necessary arrangements to disseminate such disclosures on their websites with effect from 01.07.2021.
   
• The MCA vide its notification dated 18.06.2021, amended the Companies (Indian Accounting Standards) Rules, 2015. The amendment rules will be called Companies (Indian Accounting Standards) Amendment Rules, 2021. The rules amend Annexure B of the 2015 Rules and modifies certain accounting standards relating to insurance contracts, business combination, consolidated financial statements, etc.
     
• Ministry of Labour and Employment, vide its notification no. S.O. 2414(E), dated 21.06.2021, declared that the services engaged in the industry of defence establishments shall be a public utility service for the purpose of Industrial Disputes Act, 1947 for a period of 6 more months with effect from 24.06.2021. The said Notification is an extension of an earlier Notification bearing number S.O. 4290 (E), dated 1.12.2020. The Central government is of the opinion that the step has been taken in light of the larger public interest.
    
• The Ministry of Finance on 25.06.2021 announced a series of reliefs by way of income-tax exemptions and extension of timelines for various tax compliances. The Ministry stated that with respect to the financial help received by taxpayers from their employer or from any of their wellwishers for medical treatment of Covid-19 during FY 2019-20 and subsequent years shall be exempted from income tax. The exemption will also be extended to the exgratia payment received by family members of a person who lost their lives on account of Covid-19. Notably, this exemption shall be allowed without any limit for the amount received from the respective employers and would be limited to Rs.10 lakhs in aggregate for the amount received from any other persons. The announcement by the Ministry comes as respite for the tax payers also because it provides for extension of timelines for various tax related compliances.

 
DEALS THIS MONTH 

• TVS Automobiles Solution Ltd., a part of Chennai-based TVS Group, has now acquired vehicle service app “goBumpr”. This acquisition comes in furtherance of the new digital unit “Ki Mobility Solutions” formed by TVS Automobiles. Ki Mobility Solutions has raised Rs 85 crore funding from its investors led by Pratithi Investment Trust and SeaLink Capital Partners. Through its digital unit, TVS Automobiles aim to increase their consumer base and provide access to a larger pool of suppliers etc.
   
• Bengaluru based Prestige Estates Projects has stepped in to take over a real estate project based in Mumbai suburbs from Ariisto Developers by way of a hybrid resolution plan. As per the said plan Prestige will make an upfront payment of Rs 370 crores and provide the lenders with 8 lakh square feet builtup commercial area. Prestige has further undertaken to finish the said real estate project in the span of the next 4 years.
   
• Piramal Pharma Ltd. has concluded its acquisition of Hemmo Pharmaceuticals Pvt Ltd. for an upfront payment of Rs 775 Crores. The formal announcement was made by the contract development and manufacturing organisation of Piramal Pharma Ltd. Hemmo Pharmaceuticals has been in the business of peptides for more than 38 years, catering to the pharmaceuticals, research and veterinary sectors within India and globally. Pursuant to this acquisition, Piramal Pharma will now be venturing into the peptide active pharmaceutical ingredients (API) market.
   
• Heineken NV has increased its stakes in United Breweries Limited (“UBL”) to 61.5% which has resulted in them acquiring controlling interests in the Company. The Dutch parent of UBL, which had 45% stake before, bought the additional 14.99% stake worth about Rs.5,825 crores as a result of the transaction held by the Debt Recovery Tribunal. These shares were earlier owned by the UB Group Chairman and Indian businessman Mr. Vijay Mallya.
   
• HDFC acquired 8.4% stake in Ansal Housing `by invoking its pledged shares for a loan repayment default. The acquisition is an aftermath of HDFC Ltd. issuing a demand notice under Section 1 3 ( 2 ) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, for enforcement of secured assets against outstanding dues of Rs 150.19 crores, including interest till 30.04.2019. The said outstanding dues had also found mention in Ansal Housing’s annual report for the FY 2019-20.