august31, 2017 nov. 30, 2017 issue no
TRANSCRIPT
August 01, 2017 –August31, 2017
Issue No. – 008/ 2017
Nov 01, 2017 – Nov. 30, 2017
Issue No. – 011/ 2017
FROM THE CHIEF EDITOR’S PEN
At the outset, through this column, I want to take a moment and thank you all for appreciating and encouraging WINS. In this edition of our e-newsletter “WINS” (acronym for Whitespan Information and News Services) we have covered the recent updates from RBI, SEBI, MCA, CBDT, CBEC and various other miscellaneous laws. We have also brought for you an article on Disqualification of Directors : An Insight. Hope we not only help you keep updated but also save your time by bringing a brief summary of all the updates through our section on Editor’s Quick Take.
Our Editorial Board comprises the following professionals:
1. Mr. Vinay Shukla - Mr. Vinay Shukla, a Fellow Member of The Institute of Company Secretaries of India (ICSI), a graduate in Law, Commerce and Management is Co-founder of WsA having more than twenty five years’ experience in wide spectrum of corporate functions.
2. Ms. Jaya Yadav - Ms. Jaya Yadav, a practicing company secretary based at Gurgaon is an associate member of The Institute of Company Secretaries of India (ICSI) and a graduate in law and Commerce from Delhi University.
3. Mr. Himanshu Gupta - Mr. Himanshu Gupta has been practicing as an advocate and is an associate member of The Institute of Company Secretaries of India (ICSI) and a graduate in law and Commerce.
4. Ms. Trishna Choudhary - Ms. Trishna Choudhary is an associate member of The Institute of Company Secretaries of India (ICSI) and a graduate in commerce from Delhi University.
In this issue we have covered the following:
Corporate Updates from MCA, RBI, SEBI, CBDT, CBEC and other miscellaneous laws An article on Disqualification of Directors : An Insight
Compliance checklist for the month of December 2017
We hope all these would be of interest to you.
We invite articles on topics of professional interest. Please do ensure that the article is original, written in good style and adds value for the reader.
Your candid feedbacks are valuable: appreciation will encourage us; criticism will help us improve! Feedbacks can be sent at the following email id:
With warm regardsWINS (Whitespan News and Information Services)November 30, 2017
INDEX
S.No Section Page No.
1 Reserve Bank of India (RBI) 5-10
2 Ministry of Corporate Affairs (MCA) 11-16
3 Securities Exchange Board of India (SEBI) 17-20
4 Central Board of Excise and Customs (CBEC) 21-25
5 Central Board of Direct Taxes (CBDT) 26-28
6 Miscellaneous Laws 29-31
7 Article - Disqualification of Directors : An Insight 32-42
8 Compliance Checklist 43-51
1. Introduction of Legal Entity Identifier for large corporate borrowersDate of Notification - November 02, 2017Effective Date - November 02, 2017
The above notification is available at the following link:https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11154&Mode=0
Editor’s Quick Take:
RBI vide its notification dated November 02, 2017 has introduced the Legal Entity Identifier (LEI) code is as akey measure to improve the quality and accuracy of financial data systems for better risk management postthe Global Financial Crisis. LEI is a 20-digit unique code to identify parties to financial transactionsworldwide. Entities can obtain LEI from any of the Local Operating Units (LOUs) accredited by the GlobalLegal Entity Identifier Foundation (GLEIF) – the entity tasked to support the implementation and use of LEI.In India, LEI code may be obtained from Legal Entity Identifier India Ltd (LEIIL), a subsidiary of the ClearingCorporation of India Limited (CCIL), which has been recognised by the Reserve Bank as issuer of LEI underthe Payment and Settlement Systems Act, 2007 and is accredited by the GLEIF as the Local Operating Unit(LOU) in India for issuance and management of LEI.
2. Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017
Date of Notification November 07, 2017 Effective Date:- date of publication in the official gazette Copy of the above notification is available at the following link:https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11161&Mode=0
Editor’s Quick Take:
RBI vide its notification dated November 07, 2017 notified the Foreign Exchange Management (Transfer orIssue of Security by a Person Resident outside India) Regulations, 2017 detailing various provisions relatedto restrictions on investment, permission for making investment, acquisition shares, issue of shares andconvertible notes, pricing guidelines, taxes and remittance of sale proceeds, reporting requirements, forms,downstream investment, prohibited activities for investment by a person resident outside India. Anyinvestment made by a person resident outside India shall be subject to the entry routes, sectoral caps or theinvestment limits, as the case may be, and other conditions for such investment as laid down in theseRegulations.
3. Directions on Managing Risks and Code of Conduct in Outsourcing of Financial Services by NBFCs
Date of Notification November 09, 2017Effective Date November 09, 2017
Copy of the above notification is available at the following link:https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11160&Mode=0
Editor’s Quick Take:
RBI vide its notification dated November 09, 2017 has issued Directions on Managing Risks and Code ofConduct in Outsourcing of Financial Services by NBFCs and has advised NBFCs to conduct a self-assessmentof their existing outsourcing arrangements and bring these in line with the aforesaid Directions within twomonths from the date of this circular. The circular details the Risk Management practices for OutsourcedFinancial Services, Outsourcing within a Group/ Conglomerate and Off-shore outsourcing of FinancialServices.
4. Risk Management and Inter-Bank Dealings – Simplified Hedging Facility
Date of Notification November 09, 2017Effective Date January 01, 2018Copy of the above notification is available at the following link:https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11162&Mode=0
Editor’s Quick Take:
RBI vide its notification dated November 09, 2017 has notified the Simplified Hedging Facility forResident and non-resident entities, other than individuals with a view to hedge exchange rate riskon transactions, contracted or anticipated, permissible under Foreign Exchange Management Act(FEMA), 1999 along with the operational guidelines and terms and conditions.
5. Statement on Developmental and Regulatory Policies - October 4, 2017- Banking Facility for Senior Citizens and Differently abled Persons
Date of Notification November 09, 2017Effective Date November 09, 2017
Copy of the above notification is available at the following linkhttps://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11163&Mode=0
Editor’s Quick Take:
RBI vide its notification dated November 09, 2017 has laid down the mechanism with the following specific provisions for meeting the needs of such customers so that they are able to avail of the bank’s services without difficulty.• Dedicated Counters/Preference to Senior Citizens, Differently abled persons• Ease of submitting Life Certificate• Cheque Book Facility• Automatic conversion of status of accounts• Additional Facilities to visually impaired customers• Ease of filing Form 15G/H• Door Step Banking• Banking Facility for Senior Citizens and Differently abled Persons
5. Conversion of debt into equity- Review
Date of Notification November 23, 2017Effective Date November 23, 2017
Copy of the above notification is available at the following linkhttps://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11177&Mode=0
Editor’s Quick Take:
RBI vide its notification dated November 23, 2017 has decided to exempt ARCs meeting the criteria set out inparagraph 3 below from the cap of 26% subject to compliance with the provisions applicable acts, regulationsand other relevant Statutes.ARCs that meet the conditions mentioned below are exempted from the limit of shareholding at 26% of postconverted equity of the borrower company:The ARC shall be in compliance with Net Owned Fund (NOF) requirement of ₹ 100 crore on an ongoing basis;At least half of the Board of Directors of the ARC comprises of independent directorsThe ARC shall frame policy on debt to equity conversion with the approval of its Board of Directors and maydelegate powers to a Committee comprising majority of independent directors for taking decisions onproposals of debt to equity conversion;The equity shares acquired under the scheme shall be periodically valued and marked to market. Thefrequency of valuation shall be at least once in a month.
1. MASSIVE DRIVE UNDERTAKEN BY THE MINISTRY OF CORPORATE AFFAIRS (MCA), GOVERNMENTOF INDIA, AROUND 2.24 LAKH COMPANIES HAVE BEEN STRUCK-OFF TILL DATE FOR REMAININGINACTIVE FOR A PERIOD OF TWO (2) YEARS OR MORE
Date of press release November 05, 2017 Above notification is available at the following link:http://pib.nic.in/newsite/PrintRelease.aspx?relid=173244
Editor’s Quick Take:
MCA vide its press release dated November 05, 2017 has announced that around 2.24 lakh companies havebeen struck-off till date for remaining inactive for a period of two (2) years or more;. Around 3.09 lakhDirectors disqualified who were on the Board of Companies that have failed to file Financial Statementsand/or Annual Returns for a continuous period of three (3) financial years during 2013-14 to 2015-16. Over3,000 disqualified Directors are Directors in more than 20 companies each, which is beyond the limitprescribed under the Law; To address the criminality angle, the Director, Additional Director or AssistantDirector of SFIO have been recently authorized to arrest any person believed to be guilty of any fraudpunishable under the Act; Steps are underway for setting-up National Financial Reporting Authority(NFRA), an independent body, to test check Financial Statements, prescribe Accounting Standards and takedisciplinary action against errant professionals;. A separate initiative is underway to develop a State-of-the-Art software application to put in place an 'Early Warning System' (EWS) to strengthen the RegulatoryMechanism.
Steps are underway for setting-up National Financial Reporting Authority (NFRA), an independent body, totest check Financial Statements, prescribe Accounting Standards and take disciplinary action against errantprofessionals;. A separate initiative is underway to develop a State-of-the-Art software application to put inplace an 'Early Warning System' (EWS) to strengthen the Regulatory Mechanism. Moreover with a view tocheck the problem of Dummy Directors, action is underway to seed DIN with PAN and Aadhaar at the stageof DIN application through biometric matching for new applications. The same may be extended to legacydata in due course.
2. CONSTITUTION OF INSOLVENCY LAW COMMITTEE
DATE OF ORDER November 16, 2017 Above notification is available at the following link:http://ibbi.gov.in/2017-11-16%2019.37.pdf
Editor’s Quick Take:
MCA vide its order dated November 16, 2017 has announced the constitution of Insolvency LawCommittee. The provisions related to corporate insolvency resolution and liquidation ofthe Insolvency and Bankruptcy Code, 2016 (the Code) were commenced in the month of December, 2016.As on date, more than 300 cases have been admitted for resolution by the Adjudicating Authority i.e.,National Company Law Tribunal. References/ suggestions from various stakeholders have also beenreceived for further improvement in the processes prescribed in the Code. The committee has beenconstituted with a view to examine the suggestions received and related matters
3. THE COMPANIES (ACCOUNTS) AMENDMENT RULES, 2017
Date of Notification November 07, 2017 Effective date – Date of publication in the official gazette Above general circular is available at the following link:http://www.mca.gov.in/Ministry/pdf/CompaniesAccountsamendmentsRules_09112017.pdf
Editor’s Quick Take:
MCA vide its notification dated November 07, 2017 has notified the Companies (Accounts) Amendment Rules, 2017 by making amendments in the eForm AOC - 4 to capture the disclosure of SBN notes in notes to accounts and the comments of auditor on it in his auditor report has to be provided in the e-forms AOC-4 and AOC-4 XBRL as per the financials and Auditors Report.
4. THE COMPANIES (FILING OF DOCUMENTS AND FORMS IN EXTENSIBLE BUSINESS REPORTING LANGUAGE), AMENDMENT, RULES, 2017
Date of Notification November 06, 2017 Effective date - Date of publication in the official gazette Above general circular is available at the following link:http://www.mca.gov.in/Ministry/pdf/Scan_XBRL_09112017.pdf
Editor’s Quick Take:
MCA vide its notification dated November 06, 2017 has notified the Companies (Filing of Documents andForms in Extensible Business Reporting Language), Amendment, Rules, 2017 which shall come into forceon the date of their publication in the Official Gazette i.e 06-11-2017. Few days back MCA had issued aCircular 13/2017 wherein it was mentioned that all Companies following IND-AS has to file Financials inXBRL mode only and as such there was no legal backing for making it compulsory for all suchcompanies. MCA has now amended the applicable rules to include companies which are required toprepare their financial statements in accordance with Companies (Indian Accounting Standards) Rules,2015 under the XBRL filings. Further, MCA has also inserted separate Annexure-II A for companiespreparing their financial statements under Companies (Indian Accounting Standards) Rules, 2015, whichshall file the statements using the Taxonomy provided in that Annexure. All non-banking financialcompanies, housing finance companies and companies engaged in the business of banking and insurancesector are continue to be exempted from filing of financial statements under these rules.
1. ONLINE REGISTRATION MECHANISM AND FILING SYSTEM FOR CLEARINGCORPORATIONSDate of circular November 03, 2017 Effective date November 03, 2017 Above circular is available at the following link:http://www.sebi.gov.in/legal/circulars/nov-2017/online-registration-mechanism-and-filing-system-for-clearing-corporations_36456.html
Editor’s Quick Take:
SEBI vide its circular dated November 03, 2017 has introduced a digital platform for online filingsrelated to Clearing Corporations. All applicants desirous of seeking registration / renewal as a ClearingCorporation in terms of Regulation 4 and 12 of the Securities Contracts (Regulation) (Stock Exchangesand Clearing Corporations) Regulations, 2012, shall now submit their applications online only, throughSEBI Intermediary Portal at https://siportal.sebi.gov.in. Further, all other filings including AnnualFinancial Statements and Returns, Monthly Development Report, Rules, Bye-laws, etc., shall also besubmitted online.
2. INVESTMENTS BY FPIS IN HYBRID SECURITIES
Date of circular November 15, 2017 Effective date November 15, 2017 Above circular is available at the following link: http://www.sebi.gov.in/legal/circulars/nov-2017/investments-by-fpis-in-hybrid-securities_36597.html
Editor’s Quick Take:
SEBI vide its circular dated November 15, 2017 has with a view to capture FPI investment data in hybridsecurities created a third category termed as “Hybrid Security” for the purpose of capturing anddisseminating FPI investment data in hybrid securities. Presently, FPI investments are classified as either debtor equity depending on the type of the security in which the FPIs transact.
3. SHRI ANAND RAJESHWAR BAIWAR HAS TAKEN CHARGE AS EXECUTIVE DIRECTOR, SEBI
Date of press release November 17, 2017Above circular is available at the following link: http://www.sebi.gov.in/media/press-releases/nov-2017/shri-anand-rajeshwar-baiwar-has-taken-charge-as-executive-director-sebi_36612.html
Editor’s Quick Take:
SEBI vide its press release dated November 17, 2017 has announced the appointment of Shri AnandRajeshwar Baiwar as Executive Director, SEBI on November 16, 2017. He will look after the InvestigationDepartment and Division of Foreign Portfolio Investors and Custodians.
4. Modification to Enhanced Supervision Circular
Date of Circular - November 29, 2017Effective Date – December 29, 2017 Above circular is available at the following link: http://www.sebi.gov.in/legal/circulars/nov-2017/modification-to-enhanced-supervision-circular_36743.html
Editor’s Quick Take:
SEBI vide its circular dated November 29, 2017 has modified the guidelines covering broad areas forenhanced supervision based on the recommendation of the committee constituted by SEBI released videcircular dated September 26, 2016.
Said modifications can be viewed at the following link:
http://www.sebi.gov.in/legal/circulars/nov-2017/modification-to-enhanced-supervision-circular_36743.html
1. RECOMMENDATIONS MADE BY THE GST COUNCIL IN THE 23RD MEETING AT GUWAHATI ON 10TH NOVEMBER, 2017Date of Press Release November 10, 2017
Above notification is available at the following link:http://pib.nic.in/newsite/PrintRelease.aspx?relid=173403
Editor’s Quick Take:
The GST Council, in its 23rd meeting held at Guwahati on 10th November 2017, has recommended thevarious facilitative measures for taxpayers with regard to the return filling, manual filling, benefits ofservice providers, extension of dates for filling various forms and benefits for diplomatic missions/ UNOrganizations.
2. EXEMPTION TO SUPPLIERS OF SERVICES THROUGH AN E-COMMERCE PLATFORM FROMOBTAINING COMPULSORY REGISTRATION
Date of Notification November 15,2017 Effective Date November 15,2017Above press release is available at the following linkhttp://www.cbec.gov.in/resources//htdocs-cbec/gst/notfctn-65-central-tax-english.pdf
Editor’s Quick Take:
CBEC vide its notification dated November 15, 2017 has Based on the recommendations of the Council,hereby specifies the persons making supplies of services, other than supplies specified under subsection(5) of section 9 of the said Act through an electronic commerce operator who is required to collect tax atsource under section 52 of the said Act, and having an aggregate turnover, to be computed on all Indiabasis, not exceeding an amount of twenty lakh rupees in a financial year, as the category of personsexempted from obtaining registration under the said Act.
Also, the aggregate value of such supplies, to be computed on all India basis, should not exceed an amountof ten lakh rupees in case of “special category States”.
3. ACCEPTING OF UNIQUE IDENTITY NUMBER OF FOREIGN DIPLOMATIC MISSIONS / UN ORGANIZATIONS WHILEMAKING SALES OR SUPPLIESDate of press release November 13, 2017
Above circular is available at the following link:http://pib.nic.in/newsite/PrintRelease.aspx?relid=173442
Editor’s Quick Take:
Ministry of Finance vide its press release dated November 13, 2017 has said that sale or supply to ForeignDiplomatic Missions / UN Organizations is like any other Business to Consumer (B2C) sale and will not haveany additional effect on the supplier’s tax liability. Recording of UIN while making such sales will enableForeign Diplomatic Missions / UN Organizations to claim refund of the taxes paid by them in India. Therefore,it is advised that under no circumstance any supplier should decline to record the UIN of the diplomat /official on the tax invoice.
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Further, it may also be noted that the diplomats / consulate staff may quote the same UIN as allotted to theirMissions / Consulates or UN organizations while making any purchases.
Unique Identification Number (UIN) is a 15-digit unique number allotted to any specialised agency of theUnited Nations Organisation or any Multilateral Financial Institution and Organisation notified under theUnited Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries. First twodigits of the UIN denotes State code where the Diplomatic Mission/Consulate/ Embassy is located.
4. MANUAL FILING AND PROCESSING OF REFUND CLAIMS IN RESPECT OF ZERO-RATEDSUPPLIES - REG.Date of circular November 15, 2017 Effective date November 15, 2017Above press release is available at the following linkhttp://www.cbec.gov.in/resources//htdocs-cbec/gst/Circular%20No.%2017-GST.pdf;jsessionid=CA58583915128E28F26FDEBD2B341607
Editor’s Quick Take:
CBEC vide its circular dated November 15, 2017 has due to the non-availability of the refund module onthe common portal, decided that the applications / documents / forms pertaining to refund claims onaccount of zero-rated supplies shall be filed and processed manually till further orders. A registered personmay make zero-rated supplies of goods or services or both on payment of integrated tax and claim refundof the tax so paid, or make zero-rated supplies of goods or services or both under bond or Letter ofUndertaking without payment of integrated tax and claim refund of unutilized input tax credit in relation tosuch zero rated supplies.
1. THE INCOME-TAX (TWENTY-FOURTH AMENDMENT) RULES, 2017
Date of Notification October 31, 2017 Effective Date - Date of Publication in the official gazette
Above notification is available at the following link:http://www.incometaxindia.gov.in/communications/notification/notification92_2017.pdf
Editor’s Quick Take:
CBDT vide its notification dated October 31, 2017 has amended the Income-tax Rules, 1962 by notifyingthe Income-tax (Twenty-fourth Amendment) Rules, 2017 by inserting the following rules in Part II, afterrule 10D of the rules:
“Information and documents to be kept and maintained under proviso to sub-section (1) of section 92Dand to be furnished in terms of sub-section (4) of section 92D”
2. CLARIFICATION ON CASH SALE OF AGRICULTURAL PRODUCE BY CULTIVATORS/AGRICULTURIST
Date of circular November 03, 2017 Effective Date November 03, 2017Above notification is available at the following link:https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11154&Mode=0
Editor’s Quick Take:
CBDT vide its circular dated November 03, 2017 has issued a clarification on Cash sale of agriculturalproduce by cultivators /agriculturist on the basis of representations received from the stakeholdersregarding applicability of income-tax provision to cash sale of agricultural produce by cultivators /agriculturists to traders. It is clarified that cash sale of the agricultural produce by its cultivator to thetrader for an amount less than Rs 2 Lakh will neither result in any disallowance of expenditure undersection 40A (3) of the Act in the case of trader nor attract prohibition under section 269ST of the Act in thecase of the cultivator and shall not require the cultivator to quote his PAN/ or furnish Form No.60.
1. NATIONAL COMPANY LAW TRIBUNAL
Date Of Order November 14, 2017 Effective Date November 20, 2017Above press release is available at the following link:http://nclt.gov.in/orders/Dress%20code%20for%20%20President,%20Member%20and%20Advocates%20W.e.f%2020.11.2017.pdf
Editor’s Quick Take:
NCLT vide its order dated November 14, 2017 has in addition to the dress code approved vide order datedAugust 02, 2016 has made wearing of gown necessary w.e.f. November 20, 2017 in all the benches of NCLTfor Hon’ble President, members and advocates.
The dress code for other authorized representatives and parties in person shall remain same as issued videorder dated August 02, 2016.
2. AMENDMENTS IN FOREIGN TRADE POLICY 2015-20 W.R.T AAYAT NIRYAT FORMSOF FTP 2015-20
Date of Public Notice November 13, 2017 Above notification is available at the following link:http://dgft.gov.in/Exim/2000/PN/PN17/Public%20Notice%20No.%2040%20(Eng).pdf
Editor’s Quick Take:
DGFT vide its public notice dated November 13, 2013 has amended sub Para 5 03(a) of Handbook ofProcedure of Foreign Trade Policy 2015- 20 which provides for the certification by a Chartered Engineersw.r.t EPCG Authorisation. Through this amendment Chartered Engineers are requested to act in theirdomain of competence for issuance of nexus certification under EPCG Scheme. A new para C is added afterpara B of appendix 5A of the Aayat Niryat Forms of FTP 2015-20.
In the corporate world, where numerous laws are being adapted simultaneously throughout the nation,
implementation takes a back seat when it comes to interpretation and understanding the purpose of any
particular law that may have been designed for meeting a particular purpose at any given point of time.
Continuing the crackdown on shell companies, MCA in its Press Release issued on September 6, 2017,
expressed that the government will soon take steps against the directors of the shell companies which
have not filed returns for three or more years.
The Ministry of Corporate Affairs has struck off names of approximate 2.10 lakh companies from the
records for non compliance with regard to the annual filing and submission of annual return for a period
of 3 years or more. Further, a total of approximate 1, 00,000 directors have been identified and flagged as
disqualified under Section 164 (2) (a) of the Companies Act, 2013. It is estimated that the final list may
touch the figure of about 4.5 lakh (directors). As per Companies Act, 2013, Section 164 pertains to
disqualification for appointment of director. Under sub-section 164(2) (a), a person who has been a
director with a company that has not filed financial statements or annual returns for three consecutive
financial years will face disqualification.
Disqualification of Directors: An Insight
Section 164(2) :- No person who is or has been a director of a company which—
(a) has not filed financial statements or annual returns for any continuous period of three financial
years; or
(b) has failed to repay the deposits accepted by it or pay interest thereon or to redeem any
debentures on the due date or pay interest due thereon or pay any dividend declared and such
failure to pay or redeem continues for one year or more
© Shall be eligible to be re-appointed as a director of that company or appointed in other
company for a period of five years from the date on which the said company fails to do so.
As per the notice appears on MCA website: “Any person disqualified under section 164(2) of theCompanies Act, 2013 [the Act] is advised not to act as director during the period of thedisqualification and not to file any document or application with MCA as the same shall besummarily rejected.
However, this shall be without prejudice to the liability of the said person for violation of section164(2) read with section 167 of the Act including the action under section 448 r/w 447 of thewherever warranted.”
Rule 14 of the Companies (Appointment and Qualification of Directors) Rules, 2014
prescribes various forms to be filed/ submitted by a director and company in case of
Disqualification of directors sub-section (2) of section 164:
S. No. Form Purpose
1 DIR 8 Every director shall inform to the company concerned about his
disqualification under sub-section (2) of section 164, if any before he is
appointed or reappointed
2 DIR 9 Whenever a company fails to file the financial statements or annual returns,
or fails to repay any deposit, interest, dividend, or fails to redeem its
debentures, as specified in sub-section (2) of section 164, the company shall
immediately file Form DIR-9, to the Registrar furnishing therein the names
and addresses of all the directors of the company during the relevant
financial years.
3 DIR 10 Any application for removal of disqualification of directors
Companies Act 2013 has linked Section 164 to Section 167 leading to an impression that
disqualification under Section 164 leads to automatic vacation. This may seem logical if one were to
be disqualified under Section 164(1), e.g., become an undischarged insolvent or is declared as being
of unsound mind by a Court. Most certainly such a person cannot continue as a director. These are,
what we may refer to as personal disqualifications, because each of these relate to the person
assuming or holding office as a director. However, Section 164(2) is on a different footing than
Section 164(1). The failure to file financial statements or inability to redeem debentures are the
failures of the company. There are corporate failures; many of these may be due to circumstances
beyond the control of the Company. Section 164 (1) specifies disqualification due to personal default
while Section 164 (2) specifies about disqualification arising due to corporate default.
Hence, other than by the doctrine of attribution, whereby the offences done by a company can be
attributed to the director(s), the failures referred to in sec. 164 (2) do not indicate personal
disqualifications.
Are the Sections 164 (2) and 167 of the Act 2013 co-linked?
Section 164 (1) starts with the language “person shall not be eligible for appointment as a director”
implying that the disqualifications apply at the time of appointment itself. Sec. 164 (2), on the other
hand, uses the language, “shall be eligible to be re-appointed as a director of that company or
appointed in other
Company”, implying that the disqualifications, at least for the particular company where the person
is a director, will be applicable only at the time of reappointment. However, if we compare this
language with that of sec. 167 (1) (a), there is a clear mismatch in the language, as sec. 167 (1) (a)
provides that the person attracting any of the disqualifications as in sec. 164 will immediately vacate
his office. If the person immediately vacates his office, then the question of the disqualification
arising at the time of reappointment does not arise. On account of this mismatch in the language,
we are of the view that the provisions of sec. 167 (1) (a) pertain to sec. 164 (1), and not to sec. 164
(2).
This discrepancy is sought to be corrected by the changes proposed in Companies Amendment
(Bill), 2017, pursuant to the recommendation of Company Law Committee, by inserting the
following proviso in sec. 167 (i)(a):
“Provided that where he incurs disqualification under sub-section (2) of section 164, the office of
the director shall become vacant in all the companies, other than the company which is in default
under that sub-section.”
Therefore, by virtue of the proposed amendment, a disqualification under Section 164(2) will
trigger automatic vacation of office of directors in other companies only and not in the company in
respect of which such disqualification has incurred.
How will a company function if all the directors of a company will need to vacate their offices?
As per Section 167 (3), where all the directors of a company vacate their offices under any of the
disqualifications specified 167 (1), then –
• the promoter or, in his absence,
• the Central Government (i.e., MCA Delhi)
shall appoint the required number of directors who shall hold office till the directors are
appointed by the company in the general meeting.
Will disqualification u/s 164 (2) also apply to the newly appointed director of a company?
Section 164 (2) beings with the words “No person who is or has been a director of a companywhich……”. The expression “is or has been” seems to suggest that the disqualification will fasten to adirector, if the director assumes office in a company which is already running a default. However,this view will be both counter-intuitive and patently unfair. First, the doctrine of attribution canattach the offences of a company to a director only if the director in question was responsible for thesame. Secondly, if a person earns a disqualification as soon as he joins the company, there is noreason for a person to join the company at all.
Section 167 (3) seems to provide for replacement directors for a company which has becomeheadless due to the filing offence; however, that provision will also become meaningless as everydirector appointed either by the Central Govt or by the promoters will also lose his office, as soon ashe/she is appointed, if the word “is” in the provision is intended to attach to a director who justenters the board. Obviously, there is no way to make good the filing lapse unless there is a board,and there may be no board if the filing offence is like a venom which kills the person immediatelyupon touch.
Remedy Available
At present, since there seems to be no remedy available as per the Companies Act, 2013, a Writ
Petition can be made by the aggrieved director under Article 226 of the Constitution of India in the
absence of any alternate remedy available.
Recent Judicial Pronouncements with regard to Disqualification of Directors
Bhagvan Das Dhananjaya Das V. Union Of India Writ Petition No. 25455 of 2017(High Court Of Madras – 21.09.2017)The Hon'ble High court of Madras has stayed the disqualification of the concerned directors(petitioners) in the aforesaid matter and stated that:There shall be an order of interim stay only insofar as the petitioners are concerned.
Srinivasan Sandilya&Ors V. Union of India & Ors, W.P.(C) 8876/2017 (Delhi High Court – Oct 10, 2017)The Hon'ble Delhi High Courtalso stayed the disqualification of the concerned directors (Petitioners) and stated that …Prima facie, it appears that the said provision does not provide for immediate disqualification of Directors.In view of the above, the direction disqualifying the petitioners from acting as Directors of companies is hereby stayed till the next date of hearing.
VIKRAM AHUJA VS. GREENSTONE INVESTMENTS PVT LIMITED AND ORS.,
BEFORE NCLT, MUMBAI BENCH, DECIDED ON 22.11.2016: In the said case law, one of
the point for discussion and decision before the Hon’ble bench was “whether the disqualification set
forth in Section 164(2)(a) r/w 167(1)(a) of the Act 2013 has retrospective effect or not”;
a. The Hon’ble Tribunal, after considering various case laws considered that: “this provision
has to be read as applicable to the situations where non-filing has started, at the most in the past and
continuing while this enactment has come to into existence and also to future non-filing……..”
b. Also, in a decided case law it has been provided that, the statute providing posterior
disqualification on past conduct does not become a retrospective one because a part of a requisition
for its action is drawn from a time antecedent to its passing;
c. Therefore, the provisions of Section 164 (2)(a) shall be applicable where the non-filing has
started in the past and continuing while this enactment has come to existence and also to the future
non-filing. Mere applicability of such provision on continuous default till date shall not give rise to
the question of retrospective or prospective effect.
Conclusion
By virtue of the proposed amendment, a disqualification under Section 164(2) of Companies Act,
2013 will trigger automatic vacation of office of directors in other companies only and not in the
company in respect of which such disqualification has incurred. This will partly remove the
anomalies in the current provisions which otherwise may have suggested a situation of vacation of
office by all the directors. It is expected that in sometime from now, there will be several court
rulings on the issue whether the removal of the name of a person as a director was or was not
correct.
WsA Team
****
S. No
Activities Sections/Rules/ Clauses, etc.
Acts/Regulations etc.
Compliance Due Date
To whom to be submitted
Service Tax Related Compliances
1 Pay Service Tax in Challan GAR-7, collected for
the previous Month by persons other than
individuals proprietors and partnership firms.
*(in case of Payment through Internet banking)
Section 68 Read
with Rule 6
Finance Act,1994
Service Tax Rules
1994
05th&*06th
of Every Month
Service Tax
Authorities
Income Tax Related Compliances
2 Due date for deposit of Tax deducted/collected
for the month of November, 2017
Section 194-IA Income-tax Act,
1961
7, December
2017
Income Tax
Authorities
3 Due date for furnishing of Form 24G by an office
of the Government where TDS for the month of
November, 2017 has been paid without the
production of a challan
Form 24G Income-tax Act,
1961
15 December
2017 -
Income Tax
Authorities
4 Third instalment of advance tax for the
assessment year 2018-19
Section 208 Income-tax Act,
1961
15 December 2017
Income Tax
Authorities
5 Due date for issue of TDS Certificate for tax
deducted under section 194-IA in the month of
October, 2017
section 194-IA Income-tax Act,
1961
15 December 2017
Income Tax
Authorities
S. No Activities Sections/Rules/ Clauses, etc.
Acts/Regulations etc.
Compliance Due Date
To whom to be submitted
6 Due date for furnishing of challan-cum-statement in respect of tax deducted under Section 194-IA in the month of November, 2017
Section 194-IA Income-tax Act,
1961
15 December 2017
Income Tax
Authorities
RBI Related Compliances
7 Monthly statement of short term dynamic liquidity
in Form ALM-I
DNBS
(PD).CC.No.15
/02.01/2000-
2001 dated June
27, 2001
Circular 10th of Next
month
RBI
8 Monthly return (NBS-6) on exposure to capital
market
Para 13B NBFC Prudential
Norms (Reserve
Bank)
Directions, 1998
07th of Every
Month
RBI
9 Monthly Return on Important Financial Parameters DNBS (RID) C.C.
No.57/02.05.15/
2005- 06 dated
Sep 6, 2005
Circular 07th of Every
Month
RBI
10 Reporting of actual transactions of ECB in form
ECB-2 within 7 working days (November)
ECB Rules FEMA, 1999 08th December RBI through
Authorized
Dealer
S. No Activities Sections/Rules/ Clauses, etc.
Acts/Regulations etc.
Compliance Due Date
To whom to be submitted
Economic, Industrial & Labour Law Related Compliance
11 Monthly payment of Provident Fund (PF) (Non
Corporate)
(a) Paragraph 38
of Employees
Provident Funds
Scheme, 1952
(a) Employees’
Provident Funds and
Misc. Provisions Act,
1952
(b) Exempted
Scheme
15th Of
Next month
Provident
Fund
Authorities
Trustees of
Provident
Fund
12 File monthly return for employees leaving / joining
during the previous month (Form No.5)
Paragraph 20(2)
read with
Paragraph 36(1)
& (2)
The Employees
Pension Scheme,
1995 (For exempted
establishments
under Employees
Provident Fund and
Misc. Provisions Act,
1952)
15th of
Next Month
Provident
Fund
Commissioner
13 Monthly payment of Provident Fund (PF) (Non
Corporate)
(a) Paragraph 38
of Employees
Provident Funds
Scheme, 1952
(a) Employees’
Provident Funds and
Misc. Provisions Act,
1952
(b) Exempted
Scheme
15th Of
Next month
Provident
Fund
Authorities
Trustees of
Provident
Fund
S. No Activities Sections/Rules/ Clauses, etc.
Acts/Regulations etc.
Compliance Due Date
To whom to be submitted
14 File monthly return for employees leaving / joining
during the previous month (Form No.5)
Paragraph 20(2)
read with
Paragraph 36(1)
& (2)
The Employees
Pension
Scheme, 1995
(For exempted
establishments
under
Employees
Provident Fund
and Misc.
Provisions Act,
1952)
15th of Next
Month
Provident
Fund
Commissioner
15 i) File monthly Return of employees entitled
for membership of Insurance Fund (Form
No.2(IF))
ii) File monthly Return for members of
Insurance Fund leaving service during the
month of April (Form no. 3(IF))
iii) File monthly return of
members joining service during the month of
April (Form no.F4(PS)
Paragraph 10 The Employees
Deposit Linked
Insurance
Scheme, 1976
(For exempted
establishments
under
Employees
Provident Fund
and Misc.
Provisions Act,
1952)
15th of Next
Month
Provident
Fund
Commissioner
S. No Activities Sections/Rules/ Clauses, etc.
Acts/Regulations etc.
Compliance Due Date
To whom to be submitted
16. Payment of ESI contribution for the previous month Regulation 31 Employees’ State
Insurance Act,
1948 and
Employees State
Insurance (Gen.)
Regulations, 1950
21st of Next
Month
ESIC
Authorities
17 Monthly return of Provident Fund for the previous
month Provident funds
Paragraph 38 of
Employees’
Provident Act,
1952
Employees
Provident Funds
and Misc. Scheme,
1952
25th of Next
Month
Provident
Fund
Authorities
18. Monthly return of Provident Fund for the previous
month with respect to International Workers.
Paragraph 36 The Employees'
Provident Funds
Scheme, 1952
25th of Next
Month
Provident
Fund
Authorities
S. No Activities Form No. Acts/Regulations etc.
Compliance Due Date
To whom to be submitted
Good and Service Tax Related Compliances
19. Details of outward supplies of taxable goods and
/or services effected (for the month of August)
GSTR-1 Chapter IX of
CGST Act,2017
10th of Next
Month
Registered
Taxable
Supplier
20. Details of inward supplies of taxable goods and /or
services effected calming input tax credit (for the
month of August)
GSTR-2 Chapter IX of
CGST Act,2017
After the 10th
but before 15th
of Next Month
Registered
Taxable
Recipient
21. Monthly return on the basis of finalization of
details of outward suppliers and inward supplies
along with the payment of amount of tax. (for the
month of August)
GSTR-3 Chapter IX of
CGST Act,2017
20th of Next
Month
Registered
Taxable
Person
22. Quarterly return for Compounding Taxable
person
GSTR-4 Chapter IX of
CGST Act,2017
18th of Next
Succeeding
Quarter
Composition
Supplier
S. No Activities Form No. Acts/Regulations etc.
Compliance Due Date
To whom to be submitted
23. Return for Non- Resident foreign Taxable person GSTR-5 Chapter IX of
CGST Act,2017
20th of Next
Month or
within 7 days
after the last
day of validity
of registration
whichever is
earlier
Non- Resident
Taxable
Person
24. Return for Input Service distributor GSTR-6 Chapter IX of
CGST Act,2017
13th of Next
Month
Input service
distributor
25. Return for authorities deducting tax at source GSTR-7 Chapter IX of
CGST Act,2017
10th of Next
Month
26. Details of suppliers effected through e-commerce
operator and the amount of tax collected
GSTR-8 Chapter IX of
CGST Act,2017
10th of Next
Month
E-Commerce
operator/ Tax
Collector.
S. No Activities Form No. Acts/Regulations etc.
Compliance Due Date
To whom to be submitted
27. Final Return GSTR-10 Chapter IX of
CGST Act,2017
Within 3
months of date
of cancellation
or date
cancellation
order ,
whichever is
later.
Taxable
person whose
registration
has been
surrendered
or cancelled
28. Details of Inward supplies to be furnished by a
person having UIN
GSTR-11 Chapter IX of
CGST Act,2017
28th of the
month
following the
month for
which
statement is
filed.
Person having
UIN and
Calming
refund
For further information please contact:
NCR OF DELHI MUMBAI LGF, 152P, Sector 38, 506, Arcadia, 195, Nariman Point, Near Medanta, the Medicity, Mumbai – 400 023 Gurgaon 122-002 Telephone – 0124-2204242, 63
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