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January 2022

Jan 03
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arbitrability of ip disputes

The Arbitrability of IP Disputes

By Others No Comments

Arbitrability of IP Disputes in India

Courts around the world have been systematically enlarging the ultimate scope of alternate arbitration dispute mechanisms. This is due to the fact that it has been witnessed throughout the years that arbitrability of ip disputes has progressively become the default commercial dispute mechanism around the globe.

Thus, it is quite imperative that the scope of alternative dispute mechanisms is widened in order to reduce the burden on courts. But talking about the Indian jurisprudence, on the contrary, it has been encountered that time and again courts have emphatically6 and effectively held that the disputes concerning various Intellectual Property Rights as non-arbitrable.

But why is this case with India? This is due to a pertinent and prime reason that courts often strongly are of the opinion that enforcement of IPR involves the public policy aspect. This effectively means that it would be strong going against the interests of the public if such contentious matter of intellectual rights is made arbitrable.

On the other hand, what makes the possibility of enactment of arbitration difficult is the fact that the Indian domestic statutes such as the Arbitration and Conciliation Act of 1996 and various other IP legislations do not effectively provide a concrete expression.

This concrete expression pertaining to the availability of Arbitration in IP Disputes is not strategically laid out by the aforementioned Acts.

arbitrability of ip disputes in india

To state the specifics to reinforce the fact, it is to be noted that Section 89 of the code of Civil Procedure, 1908 strategically states that the court has the extreme power to refer the IP matters to ADR. Thus, Courts are given the authority or the extreme power to deem fit and consequently allow arbitration, mediation, or conciliation for the alleged settlement of disputes.

Given the aforementioned authority, Courts have been strongly trying to settle the ADR practices. They have also come up with various tests to strategically and easily determine the arbitrability of various types of disputes. Thus, one can conclude that the arbitration process in India is well laid out by the courts that laid out the tests and measures to effectively determine the arbitrability of disputes.

To cite a case, the case of Booz Allen and Hamilton Inc. v. SBI Home Finance Ltd. Serves as a perfect example. In the aforementioned case, the Supreme Court had strongly held that all the disputes which directly pertain to “right in personam” are arbitrable in nature. On the other hand, for clarity, it was stated that all the disrupts that highly relate to “right in rem” are effectively unsuitable for arbitration.

So, the gist of the aforementioned example gives us a much-needed sneak peek into the world of arbitration in India. It intelligently informs us that a major aspect that determines arbitrability is actually the nature of judgment sought by the aggrieved. This determinative attribute states that if the judgment that is sought by the arrived is against
The current status

To judge the current status of arbitration in India, the latest case of the Delhi High Court Judgment is worthy to be scrutinized. The case of Golden Tobie (P) Ltd. v. Golden Tobacco Ltd., is the case where the defendant had effectively filed an application under Section-8 of the aforementioned act namely Arbitration and Conciliation Act, 1996.

To lay down the facts of the case, the parties had entered into a master long-term supply agreement. Now, by the agreement, the defendant had supplied exclusive brands of the defendant to the Plaintiff. Here, to complicate the matter, the plaintiff had subsequently had entered into a trademark license agreement.

arbitrability

The reason by the plaintiff for the same was stated, he had acquired or had been effectively granted an exclusive non-assignable, non-transferable license. The license gave the power to the plaintiff to strategically manufacture the Defendant’s product.

Here, it was stated by the plaintiff, that despite the humungous operational expenditure and capital spent by the plaintiff to amicably and effectively increase the availability of the Defendant’s products, he was issued a termination notice.

Now here it is to be noted that since the commercial production had not yet begun in strength, the agreement was rightly terminated. Subsequently, it was informed by Defendant, upon receiving another termination letter that the timely payment had not been made.

Thus, this meant, according to the defendant, that the plaintiff had no right to potentially and effectively sell his products or manufacture the exclusive brands in the market. Hence, when this suit was filed, it was decided by the apex court that the matter under consideration will be referred to the sole arbitrator.

Thus, given the aforementioned case, it can be strongly argued that the arbitration in Intellectual property rights matters only arises out of the nature of the dispute. This also reinforces the idea that if the procedures are well in place, they can bring an affirmative impact.

 

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Jan 03
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sebi aif regulations

SEBI’s New AIF Regulations

By Corporate Law No Comments

New SEBI AIF Regulations

India, a developing economy is all set to accommodate investments in the economy. Given the outrage against the Chinese government for its pandemic containment policy, many companies have been leaving China for alternative business investments.

Thus, it can be rightly stated that the pandemic has presented India with a golden opportunity to attract investments in its economy. It is to be noted that this has been materialized in some sense as the FDI equity investments in the economy in the last quarter jumped by 168 percent.

Now, to make the investment environment more accommodative, SEBI has stepped up with its investment accommodation policy. Recently, in a meeting held, the Securities and Exchange Board of India had approved various accommodating amendments to the regulations.

These regulations were brought into force to facilitate alternative investment funds in the economy. It is to be noted that the regulations by the SEBI will effectively ease compliance needed for Alternate Investment funds. On the other hand with flexibility in ease of compliance, such regulations will also foster investment flexibility that will ramp up further investments and will streamline regulatory processes.

sebi regulationsTalking about the recent announcement compared to the earlier archaic regulations, it is to be noted that as per SEBI’s amendments made to Alternative Investment Funds Regulations, 2012, Venture Capital Funds will need to invest at least 75 percent of investable funds.

But it is to be noted that in a partial relief that has been provided by SEBI to alternative investment funds, it has provided the Investments certain exemptions. Such exemptions come in regard to the investment committee. It is duly noted that under the recent norms, AIF members of an investment committee will no longer be effectively responsible for any investment decisions.

Also, as aforementioned, compliance will be made flexible as members of the committee would not be effectively liable for the compliance of the AIF investments. This will be in relation to governing documents, the regulatory provisions, and other applicable laws. This will emphatically take off the burden from AIF investments that will see an inflow in the coming months.

It is to be noted that due to the recent amendments, existing investment restrictions in investable funds of VCFs will be happily done away with. As per the newer regulations, Social Venture Funds that lead to the minimum amount of grant of ₹25 lakh that has been stipulated for Category I AIFs shall not be applicable anymore.

However, it is to be noted that such exemptions come with certain conditionalities. According to the recent amendments, the exemption in the AIF rule is conditional upon capital commitment. As aforementioned, the rule states that the capital commitment of at least ₹70 crores from each investor will be accompanied by a suitable waiver.

However, the effectiveness is somewhat thwarted as the exemptions are quite limited to an AIF in which effectively each investor other than the sponsor, directors, manager, and employees of the AIF or employees has effectively and emphatically committed to investing not less than ₹70 crores.

This is what puts certain conditionalities in investments which can present some kind of hindrance in the promotion of investments. Secondly, the waiver that has been furnished for the AIF is in respect of compliance with the said clauses and is effective in the manner specified by the board. Thus, even with investment promotion, certain conditionalities with the same have been imposed.

sebi guidelinesBut it is to be noted that such investment promotion comes as a series of steps. In October amendments were passed by Sebi that had amended the AIF regulations.

This had provided the recommendation and regulation for shared responsibilities for the members of the investment committee. These responsibilities were to be shared with the investment manager. This has been done to bring in efficiency and accountability in the system as prior to this only fund managers were effectively responsible and accountable for investment decisions.

Thus, it can be rightly stated that such amendment provided an accommodative opportunity for equal responsibility for the members of the IC and the investment managers with regard to investment decisions of the AIF.
Also, such joint accountability will lead to AIF’s compliance with the regulations.

This will also help in doable compliance with the private placement memorandum and the applicable law.
Scrutinizing the newer regulations it is to be noted that the newer AIF fund that is established or incorporated in India and is a privately pooled investment vehicle that emphatically and effectively collects funds from foreign or Indian investors, will invest in accordance with a defined investment policy.

This will effectively lead to the benefit of its investors and thus it can be rightly stated that such amendments have led to upholding of investors’ rights which will again foster confidence and will call for increased inflow of investments in the economy.

In fact, given the data released by the SEBI such regulations led AIFs to witness a surge in commitments worth ₹82,228 crores in the financial year 2021. Such investments found their way from family offices, institutions, and high net-worth individuals.

 

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Jan 03
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retail inflation

Retail Inflation for Industrial Workers Rises Marginally to 4.5 PC in October

By Labour & Employment No Comments

Rising of Retail Inflation for Industrial Workers

Inflation is burning a hole in the consumer’s pocket. The claim can be corroborated by the recent shreds of evidence that suggest that there was a marginal rise in retail inflation. Industrial workers had to significantly bear the brunt as food inflation was soaring making the means of livelihood difficult.

Retail inflation for industrial workers rose marginally to 4.5 percent in October as compared with 4.41 percent in September.

The reason for the rise of retail inflation

Given the unconventional year that the world had witnessed, the aftereffects of the same have been lurking across the economy. With high stimulus packages that were rolled out last year, for liquidity and growth, inflation was an apparent threat from the very start. Given, the case of India, a developing economy, the stimulus was all the more needed for sustained growth and recovery in order to get the growth engine on track.

retail inflation in indiaWith a high accommodative stance that was adopted by the RBI and startup culture that was soaring, liquidity in the economy was bound to rise. Though initially the inflation was assumed to be of transitory nature, recent data shows that the need to curb the same is crucial.

What makes the matter all the more sensitive is the fact that given the discovery of the newer variant around the world, the accommodative stance of the central bank might have to be continued. With the high potential of lockdowns that can be placed in the economy, the stimulus will once again gain center stage. This, emphatically will not materialize well for the economy.

But is the stimulus and excess liquidity a sole contributor to the burgeoning inflation in the economy? Apparently not. Given supply constraints in the market in the form of crippled semiconductors and raw materials, inflation effects have been felt by the consumer. With slow supply and high demand, due to recovering economy, inflation has been seen growing and gnawing at the expenses of the workers and the consumers.

The need for government intervention

retail inflation meaningIt is to be noted that given the recent situation of burgeoning prices, the government needs to step in, soothe the apprehensions of the spenders in the economy. Given the massive recession that was witnessed by India last year, the country is still in the process of recovery.

Thus, consumer confidence is needed to ramp up the growth engine of the economy. But with given burgeoning prices, it is arduous to garner consumer or investors’ confidence, especially when the financial state of many in India is crippled. This assumes all the more important as the bulk of inflation pressure is being exerted through food and beverages.

It is to be noted that according to the reports, the maximum upward pressure in the current index is effectively coming from the food and beverages group contributing 1.31 percentage points to the total change. Given the nature of the commodity, one can emphatically argue that the inflation pressures cannot be avoided. This is due to the fact that on the item level, tomato, mustard oil, brinjal, cabbage, onion, cauliflower, etc., form the basis of the inflation pressures.

The conundrum

But is the solution of government intervention the sole savior for the debt-laden consumers? Is it as unadorned as it sounds? The answer is more complex than expected. It is no news that finances are needed for the healthy functioning of the authorities.

retail inflation rate in india

To top it all extra finances are needed to finance the growth and recovery process. Given, that the government has already given up on its crude oil excessive revenue, it is quite a possibility that the government will not try and reduce its finances through intervention and simple tax cuts. Thus, the government faces the conundrum to emphatically reduce inflation and maintain growth.

Given the complex nature of redressal by the government, it makes us seriously question the fact that is the inflation as high as we are anticipating it to be? It is to be noted that if upward pressure on the index was felt, the downward pressure was felt as well.

According to the reports, the increase in the index was effectively checked by moong dal, grapes, fish fresh, oranges, apple, and ginger, which helped in putting downward pressure on the index.

But is India the only country that is facing such inflation pressures? The answer is negative. Given the reports that are coming from across the world, it has been reported that America recently witnessed the highest ever increase in its inflation.

In fact, the market was in a little frenzy with the anticipation that the FED will increase the interest rates and the liquidity will be brought into control in the economy.

But is India’s comparison with America appropriate given the different natures of the economies? Perhaps not. It is solely due to a characteristic that America enjoys and India doesn’t, which is of free fiscal space. India doesn’t have the luxury to expand liquidity the way that can be afforded by America. Thus, comparing the redressal mechanism by two quite different nations will provide inaccurate results.

Thus, in totality, given the seriousness of the situation and the conundrum that the government faces, what will be the final choice of the authorities be? Guess, we’ll have to patiently analyze the market and wait till the government ponders on its next course of action.

 

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Jan 03
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reit in india

The REIT in India – Policies, EITs, and InvITs

By Real Estate No Comments

The Policies of REIT in India

One benefit that is cropping out of the Real Estate Investment Trusts (REIT in India) and the Infrastructure Investment Trusts (InvITs) is the fact that it can be expected to positively fuel not only real estate growth but also multi-sector economic growth in India.

Such a claim gains traction as the real estate sector can be viably considered as the engine of growth for India/. With its high potential to effectively raise up significant capital for the future, one can state that investments in this sector will be crucial for the economy’s growth that is still recuperating from the effects of the pandemic.

This year’s budget too had laid emphasis on the fact that India’s infrastructure will be used to raise the growth prospects of the economy. Thus, for the same infrastructure- a growth-oriented budget was released. In fact, the government has also been making use of the monetization of assets to curb the budget deficit, thus, assets are proving to be a boon in India’s growth story.

how to start reit in indiaGiven the aforementioned importance of infrastructure development in India, EITs and InvITs come into the picture. According to the reports the real estate investment trusts and infrastructure investment trusts have effectively raised capital up to $9.7 billion.

Favorable policies

It is to be noted that REITs and InvITs are getting the boost due to favorable government policies and a long-term investment outlook of the government authorities. This favorably has enticed and induced many marquee investors including various other sovereign and pension funds for investing.

Another factor that is strongly contributing to increasing investments is that the investors are receiving higher returns and are benefiting from receiving regular cash distributions.

On one hand, stable and increased yield are keeping the investors interested, on the other, they are also relishing the opportunity of expanding their asset base.
as aforementioned, the government had quite enthusiastically had announced the initiation of the National Infrastructure Pipeline.

india reit

It is to be noted that such infrastructure funding is estimated to require a funding requirement of over a whopping $1.4 trillion by 2025. But given the early trends of the performance of REITs and InvITs in India, the picture looks quite satisfactory and encouraging.

This is mainly due to the fact that reports have shown the combined market cap of the three listed REITs in India to be humongous over $7 billion and over $10 billion. Thus, one could say that the infrastructure market is showing encouraging prospects for growth.

The high utility of EITs and InvITs

Given the high encouraging market indicators, EITs and InvITs have a huge potential to effectively and positively attract private investments in the infrastructure. Such investments can be attracted through the mitigation of various challenges that investors face in the real estate market.

Such challenges that need to be mitigated are long-term capital requirements, funding requirements, corporate governance issues, optimal leverage, etc.

Thus, if such discrepancies are mitigated, InvITs are highly expected to play a crucial and key role in the monetization of existing projects. One can expect humungous [potential in sectors like renewable energy, digital infrastructure, roads and highways, conventional power, airports, etc.

what is reit in indiaAs aforementioned, as the InvITS and REITs will play a significant role in effectively funding the Government’s infrastructure plans, in addition to helping in meeting the asset monetization plans of the government it will also strategically help in meeting the capitalization requirements of banks.

SEBI’s infrastructure

It is to be noted that SEBI is the main regulator of the REITs and InvITs. Under SEBI these are governed under SEBI’s Infrastructure Investment Trusts Regulations, 2014 and SEBI Real Estate Investment Trusts Regulations, 2014.

under this legal framework, InvITs can be either publicly listed or privately listed but REITs are strictly required to be publicly listed. It is to be noted that investors face many discrepancies under the system due to the intricacies and adherence to the legal framework.

Under the SEBI’s framework, asset acquisition or business combination are seen to be complex and investors face difficulties inappropriate accounting for distributions.

Thus, one can state that the accounting work of REIT and InvITs is complex due to various, multiple legal entities being involved in the process. On top of it, one can also witness the show and interplay of various regulations having an effect on the investors. Thus, more transparency and ease of conducting such business is the need of the hour.

This will allow the investors to have a relevant structure in place early and will also be beneficial in evaluating the relevant tax, which is the prerequisite need of the investors. Transparency and ease in conducting the aforementioned activities will help and allow sponsors to emphatically make the most of the increasingly popular route to funding.

given the recent trends of the government’s stance and work in the sector, one can state that government authorities including other regulators and SEBI have played a tremendous role in playing a proactive role in popularizing and promoting these investment trusts.

This has been mainly done through effectively and emphatically promoting and popularizing the investment trusts. Such a claim can be corroborated by the fact that SEBI had recently reduced the minimum subscription size and trading lot for REITs and INVITs.

This will help in emphatically boosting bolster liquidity of instruments further in the future. Thus, for long-term growth and success, that needs to be achieved and are crucial for India, consistency is required in financial reporting and better transparency is needed to seep into the system.

 

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Jan 03
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auto debit rbi

How RBI’s Auto Debt Rule Could Emphatically Cause Tax Woes for Fintech Startup?

By Economy, Banking No Comments

Auto Debt RBI Rules for Fintech Startup Companies

In another turn of interesting events, the fintech startups could run into a problem. According to auto debit RBI new rules, Fintech companies run at the risk of attracting a 2% equalization levy. In addition to the equalization levy, the fintech startups will also attract additional goods and services tax (GST) at 18%.

This GST will be attracted on part of the money the fintech startups would make through such an arrangement. This would especially include transactions where an Indian citizen has effectively subscribed to the services of a foreign OTT player.

On the other hand, this can also levy in the case where an Indian citizen buys goods and services from a company that is effectively not based in India. Thus, one could effectively state that the Reserve Bank of India’s significant auto-debit rule could effectively and largely bring tax complications for various fintech companies that are operating in In India.

According to the reports, this will also include fintech startups that had set up platforms for banks to effectively integrate with a common e-mandate platform. This was carried out or done to ensure compliance.

auto debitThis brings various Payment aggregators like Razor pay, BillDesk and PayU under the ambit of the law as these have set up platforms like MandateHQ, SiHub, and Zion, respectively. These had been operating in the capacity to form or provide a “bridge” for banks to complete the transactions.

It is no news that since the introduction of new intermediaries, they have gained popularity in recent years. These intermediaries include platforms like Netflix and Apple stores, functioning apart from the bank. With the increase in popularity, the analysis had shown that they had become an avid link between the customer and the overseas merchant establishment. Due to such arrangement, the tax implications have cropped up and have been introduced by the RBI.

auto debit payments rbiBreaking down the tax structure

It is to be noted that if the tax structure is to be broken down, the equalization levy will constitute up to a 2 percent charge on any transaction which will involve a foreign company over the internet. Additionally, on further inspection, GST that will be charged will effectively depend on the structure of the fintech player’s entities.

Thus, it would depend on how the transaction is routed and the nature of such transactions. Thus, given the ambiguous nature of various forms of transactions that take place, one can state that the government’s new equalization levy could effectively come into play.

In other clarification that has been issued, fintech companies that would attract the 2% equalization levy will be on any overseas transaction or it could also be levied on the company or the merchants that are not based in India. Thus, one can state that such an equalization levy can effectively provide the risk of the platforms charging fees from the merchants.

The businesses that will come under the setup

Firstly, according to analysis, the overseas bank from which the money is being deducted which is effectively not based in India, it will attract an equalization levy of 2 percent. Similarly, these would also include banks that don’t have an emphatic tax presence in India.

The second criterion that will attract tax is the nature and structure of the transactions that will be carried out by the company. In this case, if it is found that a fee that is emphatically received by an Indian bank that doesn’t directly come to an Indian entity, will too effectively attract a 2% tax.

It is to be noted that RBI’s newer laws also include the money that goes through a subsidiary. These subsidiaries are usually of the fintech company, even these could effectively come under RBI’s scrutiny and could attract taxes.

On top of this, there is a GST implication too. GST will come into play if the money that is positively deducted from an Indian’s debit or credit card is done via the fintech’s books before it is remitted in the foreign merchants’ account.

Thus one could effectively state that the services that are provided by the fintech companies in pursuit of validating transactions could actually attract GST on both the transaction fees and the setup fee that is charged by them.

fintech startupit is to be noted that RBI’s newer rules have come into effect from October 1. Since then it has been stated that banks can only process auto-debit transactions if they fulfill the criteria of sending a pre-debit notification to their customers well before time. This is to say that such notifications should be given out at least 24 hours before the payment.

it is to be noted that such a law has been brought into force as many banks do not wish to indulge in such transitions and do not have the technology for undertaking such transactions. Thus, this has led many to instead turn to fintech companies to effectively provide transaction platforms.

 

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Jan 03
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rbi proposes new law to regulate digital lending

RBI Proposes New Laws to Regulate Digital Lending

By Economy, Banking No Comments

RBI Proposes New Laws to Regulate Digital Lending

Once again, RBI has stepped up to protect the interests of the consumers, who in pursuit of excess money were preyed on by wealth-mongering organizations on various apps. In order to effectively safeguard the interest of the customers, the Reserve Bank working group has strongly and emphatically suggested the enactment of separate legislation. The legislation has been propped to strategically prevent illegal digital lending through apps of which innocent customers were victims.

It is no news that get-rich easy schemes are scams. With the involvement of Indian citizens in the same, leading to suicides, the RBI has come in to attack the loan sharks. It has emphatically suggested that digital lending apps should be thoroughly scrutinized and verified by a nodal agency.

This should lead to the establishment of a Self-Regulatory Organization that will effectively and positively cover the participants in the digital lending ecosystem.

Thus, one can state that RBI’s recent steps will help in enhancing customer protection and experience, protecting them from a digital or monetary felony, consequentially making the digital lending ecosystem safe. This will also promote healthy innovation in the digital lending system.

But here it is mandatory to mention that, at the moment, taking down all the apps from Appstore is only a temporary and a preventive measure to mitigate the disaster. The verification of the same should be a top priority for the apex bank.

It is to be noted that under the guidance of RBI, the working group has been set up in the backdrop of business conduct and customer protection concerns that are arising out of the spurt in digital lending activities, which really found momentum during the pandemic.

The case

But the aforementioned details, including RBI’s involvement, raise questions about the nature and motives of the customers to get involved in business with such scandalous groups on the apps? It is to be noted that the motivation for such an activity was the pandemic which has excessively curtailed the financial and monetary standing of the middle-class society in India.

rbi working group on digital lending

With curtailed earnings, increased healthcare expenses, and inflation, easy loans were found tantalizing. This led to a full-fledged affair with the fraudulent loan apps that provided easy loans with high interest. With higher interests and lower-income, people tuned to excessive steps like suicide and self-harm.

This emphatically led the RBI to get involved in the loan app fiasco and formulation of recommendations to mitigate the disaster.

Among other things, it is to be noted that the group also suggested the development of certain baseline technology standards. These standards will have to be adhered to as a pre-condition for offering digital lending solutions.

In order to counter the blackmailing aspect of the fiasco which gave the loan app companies leverage over the consumers in turning the public into an easy target, the RBI has recommended that data collection with the prior and explicit consent of borrowers should emphatically have verifiable audit trails.

In addition to having a verifiable audit trail, the data should also be stored in servers located in India. Data privacy has long needed attention in India, given the fact that India doesn’t have standard and well-crafted rules and regulations for the same.

Further, in order to impactfully curtail the unsolicited commercial communications for digital loans, the committee has also strategically advised the same to be governed by a Code of Conduct to be put in place.

rbi digital lendingThe whole loan app debacle brings to the forefront the need for transparency, better data privacy laws, and a strong vigilance mechanism by the RBI to protect the interest of the public which is currently quite susceptible to harm financially and monetarily.

With the pandemic curtailing financial freedom, it is quite a prevalent possibility that people will ultimately turn to dubious, surreptitious modes to accelerate their wealth. Thus, the need for effective governance and vigilance is the need of the hour. This can be effectively achieved through algorithmic features that are used in digital lending which will help ensure necessary transparency.

What greater attention to the loan apps fiasco is the fact that digital penetration in India is on the rise. Thus, laws to govern the same should be on the trajectory of implementation too. But given the state of data privacy and consumer protection laws, in the country, India has a long way to go. One can certainly state that the recent fraudulent disaster can help provide impetus to the process and safeguard the interest of the consumers.

It is mandatory to be mentioned here that in order to make digital lending a promising reality in India, the authorities will have to with the trust of the citizens, who are rather cynical about the process. Thus, the recent case can be a good start.

With the Reserve Bank constituting the Working Group (WG) on digital lending on to emphatically study all the aspects of digital lending activities in the regulated financial sector as well as by unregulated players in order to put an appropriate regulatory approach in place, one can positively state that future trust-building between the authorities and the citizens is on the rise.

 

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Jan 03
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DHFL loss to lenders

Probe Former DHFL Brass for Causing Rs. 40,000 Crore Loss to Lenders: Union bank

By Cases No Comments

Probe former DHFL Loss to Lenders: Union Bank

CBI has been receiving requests from the Union Bank of India has written to it to effectively probe the promoters of Dewan Housing Finance Corporations. Other than the promoters, the Union bank has called from a probe in the management of the Dewan Housing Finance Corporation Ltd. The ultimate reason for calling such a probe is the fact that Dewan Housing Finance has caused a total loss of Rs 40,623.36 crores. What makes this debacle all the more concerning and debilitating is the fact that the loss was caused to the consortium of the bank, which is led by the Union Bank of India.

The basis of inquiry
The appeal to scrutinize dewan housing finance is based on the ultimate findings by the KPMG, the esteemed audit firm, that deviation of laid down norms and procedures have been committed seriously through manipulation of accounts and concealments. Dewan housing finance has been primarily accused of clandestine activities that were committed by it in terms of undisclosed bank accounts and misrepresentation.

dhfl lossgiven the seriousness of the claim at hand, the CBI has been actively probing the promoters namely Kapil and Dheeraj Wadhawan in the Yes Bank scam. According to the reports, given the pieces of evidence, there is a heavy case of fraud or loss of public money.

But even though the claims of the consortium of banks seem legitimate, the federal agency effectively and emphatically cannot register a fresh FIR. This is merely due to the fact that there is a need or a want of general consent which needs to be accorded by the Maharashtra government.

Last year, in the month of August, in the aftermath of the infamous probe into the Dewan Housing Finance debacle, attempts were made for the manipulation of television rating points (TRP), the state government had effetely withdrawn consent that had been accorded to the CBI.

This was done under Section 6 of the Delhi Special Police Establishment Act. Thus, given the turn of events that had taken place in the case last year, it was made mandatory that general consent is a must for the federal agency, namely CBI, to register an offense in the state, in its absence. Thus, in totality due to the events of the past, the federal agency now has to effectively approach the state government. This will help them get access to permission to conduct the investigation on a case-to-case basis.

union bank net banking

but is Maharashtra the only state to withdraw its consent? Apparently, many non-NDA governments, claiming serious vendetta by the center, have withdrawn their consent. These states mainly include Kerala, West Bengal, Rajasthan, Chhattisgarh, and Punjab.

The woes of the CBI have been aggravated as even after the portrayal, communication, and representation that has been effectively presented to the state government, consent hasn’t been still accorded. This brings to the forefront, the dreadfully awful state of the politics that tend to delay the process of recognition and effective addressal of the inconsistencies and corporate felonies at hand.

What makes this political deadlock all the more debilitating is the fact that the loss due to mismanagement and clandestine, illegal activities caused a loss of public money of over Rs 40,000 crores. Given the threat to social and public welfare, effective and immediate investigation is needed, which cannot go through due to the political deadlock.

To analyze the fraud, it is to be noted that the illegal tampering was found to have been conducted on a large scale as it was found that DHFL disbursed loans and advances totaling a total of Rs19,754 crores to 35 entities with commonalities to DHFL promoter. In fact, what made the whole process surreptitious and unnoticeable was due to DHFL promoters’ tight control of multiple entities. The control was so extensive that even the appointment of directors and auditors was carried out by the DHFL promoters.

It is no news that much of the debacle in the lending business is due to noncredit-worthy disbursement by the lender. The same was the case in the DHFL lending debacle, where it was found that humongous loans and advances to the tune of Rs 25,595 crores were disbursed to 65 entities that effectively and efficiently had various deficiencies.

These discrepancies and deficiencies included inadequate loan documentation and inadequate mortgage security valuation which form the very basis of the debacle. Similarly, to corroborate this claim, various loans can be found missing in the DHFL finance sheet that never made it back to the bank.

union bank of india net banking

in fact to cover up the surreptitious activities of the corporations, the “Bandra Book entity” had been created which effectively and wrongly maintained the details of non-existing retail loans. This was created using dummy names which were maintained in a separate accounting system.

Thus, in totality, it can be argued that the DHFL debacle brings to the forefront the fact that a strong regulatory environment is needed to end clandestine activities that are conducted craft fully under the authorities’ eyes.

 

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Jan 03
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Payment Services Framework – Demystifying Regulations

By Economy, Corporate Law No Comments

Understanding The New Payment Services Regulations

Even though the pandemic might have inflicted severe wounds on economies around the world but one silver lining that can be deciphered from such a debacle is that it has been an ushered of technology usage in various economies.

Given the rapid speed of adoption, it can be stated that it is effectively taking the speed and convenience of being a digitally savvy individual in a globalized world to new and greater heights. But with the increase of convenience and speed in the economy, is also effectively enabling cybercrime.

This is certainly leading to absurdity and discrepancy too as cybercrime is on an alarming rise. Such a claim has been corroborated by the global 2018 study that was conducted by PwC. The study revealed that at least 49% of organizations effectively admitted to being victims of fraud.

If such statistics are put in perspective, it is significantly up 36% in 2016. With the rise of cybercrime, Payment service providers and merchants are facing the challenge of reinforcing eCommerce security. This gains all the more important because it needs to be done without creating any discrepancies and obstacles that could severely lead to cart abandonment.

It is to be noted that much has materialized in the decade since the first Payment Services Directive was introduced. The inefficiency in the system can be accommodated by the fact that fraud losses are on an extreme rise year on year. This has significantly happened due to the rapid digital change. Additionally, this has been also due to the open banking and FinTech industry that has arisen in recent years and has gained momentum radically through the pandemic.

payment services

It is to be noted that the condition is applicable globally and is especially true for a progressing country like India which is imbibing the richness of the digital revolution. It is no news that electronic payments have made a humungous impact on the lives of millions of Indians. This has been seen through the increase in the usage of UPI payments around the country.

With the increased usage by Indians and increasing cyber-attacks, RBI has recently released regulations for all Payment System providers. The regulations significantly state that any payments that will be made in Indian entities for domestic payments transactions need to be stored only in India itself. As for the data for payments that are made outside India, the data has to be effectively deleted from those systems abroad. In addition to deletion of such data abroad systems, it has to be stored in India no later than 1 business day or 24 hours. from payment processing, whichever is earlier.

The need for such payment services regulations

This might give rise to a query that why is there a need for such regulations by the RBI? It is to be noted that with the growth in electronic payments systems and cyber-attacks, there is an urgent need for regulations. Such regulations are needed to protect the interests of millions of users to safeguard their primary data. This is also needed to safeguard the integrity of the newly formed payments systems.

new payment services regulationsGiven the objectives of the RBI regulation, it is quite sagacious to mention what might be the impact of such regulations. It is to be noted that the newer regulations have posed some urgency within the financial institutions and the banks.

This is mainly due to the fact that the financial system and banks need to significantly adhere to such regulations which are crippling and to the working hours of the bank. This in fact has led many of the banks to miss the deadline or breach the regulations, though extensions have been generously provided.

However, it is worth mentioning here that given the arduous list of tasks and regulations that the various banks have to adhere to, it is a significant step in the direction of imbibing the user data privacy norms and strengthening the cyber laws. Given that there has been an immense increase in online businesses, a robust payment system is the need of the hour to usher India into being a digital economy.

Though it is worth noting here that India had its payment system in place with its Level 4 data centers and major cloud providers. In addition to this, it has formidable payments technology. But given the advanced progression that has been made in the cyber-attack industry, such a system usually falters.

payment rules and regulationsThus, given the nature of the issue and the relevance and importance of such robust censoring and payment system, the recent regulations will greatly safeguard the users’ data. This has all the more important as data privacy concerns are becoming a big concern for users across the globe now. Thus the regulations will emphatically ensure that surveillance and right monitoring will ease out in the investigations.

 

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Jan 03
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No Proposal to Recognize Bitcoin As a Currency in India

By Economy, Banking No Comments

No Proposal to Recognize Bitcoin As a Currency

In a world where the contentious digital asset namely bitcoin is garnering growing appreciation and acceptance, India is untouched by its charms.

Bitcoin, throughout this year, has gained a special status of legal tender in El Salvador and huge endorsement from public figures like Jack Dorsey and Elon Musk. But is it just the high popularity of the digital asset that has set it on the pinnacle of success in such a short period of time?

Probably not. It is to be noted that the contentious asset has many merits to it that make it an appreciable currency over others. Its property of making trading an easy business and facilitating easy cross-border transactions is what leads to its soaring merits and applicability.

Given its merits, it is crucial to also note that the contentious asset is also, quite fondly, used for nefarious purposes like money laundering and trafficking. It is this use of the currency that makes the authorities hesitant in accepting the better side of the contentious asset.

bitcoin as a currency

This gives rise to a pertinent and inquisitive question that every side has two sides to it, with its merit and demerits, thus, why is bitcoin suffering the wrath of the government authorities in India? Well, it is to be noted here that the authority loathes uncertainty and lack of action that comes with the crypto package.

With the nefarious side of the coin, the added disadvantage of not being able to regulate is what adds to the agony of the authorities. Given the anonymous character that the crypto gives to the user, authorities usually find it arduous to track the users’ activities and the user itself.

With unregulated transitions that take place through the contentious assets, the government loses a humungous amount of revenue. Thus, given the merits of the currency, its disadvantages outweigh the positives.

Such antagonizing and aversive attitude of the government can be corroborated by the fact that recently the Union Finance Minister Nirmala Sitharaman has emphatically informed the Lok Sabha that there effectively will be no proposal before the government.

Thus, the proposal recognizing bitcoin as a currency is effectively not on the table. Sitharaman, in fact, also emphasized o the fact that the government does not collect data on bitcoin transactions. This strategically shows that the government has no interest in granting the status to the currency any time soon in the future.

In fact, it is to be noted that in the recent turn of events, the Indian government had got the Indian crypto traders anxious again due to its antagonistic stance against the contentious digital currency. With its introduction of the recent crypto regulation law, many traders were found desperately trying to sell a part, if not all, of their cryptocurrency portfolio.

This was mainly due to the fact that the panic sell-off amongst crypto investors was triggered by the announcement that a crypto bill would be introduced in Parliament’s winter session. What had made the whole scenario all the more concerning and frightening for the traders and investors was the declaration of the fact that the bill mentioned that trading of all private cryptocurrencies would be prohibited.

Though, given the Indian government’s odious stance against cryptocurrency, such a step must not have come as a surprise. But given the speculative, whimsical nature of the market, this led to havoc and anxiety, which led to panic selling in the market. This had effectively led to plunging values in the crypto market, where the prices had fluctuated frequently. Given that speculation can do such harm and lead to such panic, it can be argued, that a complete ban will definitely lead to havoc in the market.

It is to be noted that Bitcoin, which is a digital currency that was introduced in 2008 by programmers, strategically allows people to buy goods and services and exchange money without involving banks.

According to the reports, the speculations remain true as the government actually plans to introduce a bill in this regard. The Cryptocurrency and Regulation of Official Digital Currency Bill 2021 can be introduced in the ongoing session. Given the nature of the bill, it can be conjured that the bill will ban all private cryptocurrencies but might allow the underlying technologies.

is it legal to buy bitcoin in indiaBut in the pursuit to eradicate the non-conforming, non-perfect aspect of the asset, will the government forgo the positive potential of the currency? Luckily, the answer might come as good news for the investors, as the government plans to roll out its regulated version, CBDC, in the market.

This claim can be corroborated by the fact that the government has effectively received a proposal from the Reserve Bank of India strategically seeking an amendment to the RBI Act, 1934. The proposal is demanding to enhance the scope of the definition of “banknote”. This is being done to include the currency in digital form.

Given the extensive research that is going on in the CBDC, with RBI examining use cases and working of the currency, one can conjure that the CBDC can be a reality in the near future.

CBDC has its own merits if it is introduced in an undisputed, phased manner. The introduction of a CBDC has immense potential to provide significant benefits in the future. These benefits will include such as reduced dependency on cash in the society, reduced settlement risk, and higher seigniorage due to lower transaction costs.

bitcoin in indiaThus, one can finally state that the phased introduction of CBDC in India will possibly lead to a more efficient, robust, regulated, and legal tender-based payments option for the public which will be an added advantage. Though, it cannot be denied that there are associated risks with such introduction which, in the light of protecting the welfare of the user, need to be carefully evaluated, but given the potential benefits in the future, one can robustly state that something efficient can be born out of the meticulous efforts of the central bank.

 

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Jan 03
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discoms in india

No Immunity from IBC for State Discoms in India Says Centre

By Cases No Comments

Understanding IBC Code For State Discoms in India

In a turn of recent events, the Tamil Nadu government’s response to IBC proceedings against the discoms has brought to the forefront the discrepancy prevailing between the electricity act and the Insolvency and bankruptcy code.

The power ministry has released its say and has stated that state-owned discoms also effectively known as the electrical energy distribution corporations, don’t have any immunity from company insolvency lawsuits. The ministry has also cleared the air around the narrative that there is a discrepancy between the electricity act of 2003 and the Insolvency and Bankruptcy Code of 2016 on the solution of economic claims.

These claims were effectively maintained after the Tamil nandu government had stated that the IBC insolvency doesn’t follow to discoms. The rationale behind such a statement was that discoms have immunity since they have been discharging services for public purposes as an extension of the state executive. This had also led to the cropping up of the conspiracy that there is a struggle or discrepancy between the IBC and the Electrical energy Act.

ibc discoms in india

Discoms in India & The Sense of False Safety

It is to be noted that such revelations by the ministry have brought to the forefront the discrepancy that had prevailed amongst the electrical energy distribution corporations that they were immune to the proceedings of the Insolvency and bankruptcy code. Given that such a false sense of immunity persists in government units, it tells us a lot about the mismanagement that prevails in such units due to the nature of it being government.

One can also state that this episode brings to the forefront the rationale that plays out in the public sector units that have the largest number of NPAs, Given the sense of immunity that such units feel due to their governmental nature. With the government’s needless recapitalization, one can also state that it reinstates or fosters the attitude of mismanagement due to a false sense of safety. Such attitude is detrimental to the efficiency of the banking sector and the discoms as well.

thus, the newer clarification that has been released by the ministry maintains to get rid of a false sense of safety in opposition to insolvency lawsuits for discoms. This effectively and emphatically offers borrowers contemporary prison ammunition for improving dues. Given the recent clarification, it can be seen that the government wants to increase accountability and efficiency in the sector.

ibc - insolvency bankruptcy code The Story of India’s Weak Indian Power Sector

It is to be noted that it would be an understatement to argue that the power distribution is the weakest link in the entire value chain of the Indian power sector.

In fact, severely ailing state-owned power distribution companies also known as discoms emphatically continue to severely hamper the efficient functioning of the transmission and generation sectors. Given the fact that by 2020, discoms had accumulated massive overdue payments amounting to Rs116,340 crore, an effective immunity from IBC will only help the government lose efficiency and revenue.

This will also help create an immense liquidity crunch across India’s power sector, given the deplorable state of the discoms.

Though, it is worth mentioning here that various government reforms have been repeatedly initiated in the sector to effectively improve the sector’s commercial and performance but, it cannot the fact that it is yet to make a sizable impact cannot be denied.

On the other hand, as the case unravels, the discoms continue to incur humungous financial losses which is a clear reflection of massive subsidies and ineffective government funds. From time to time, cases of bailout by the governments, to help state-owned discoms to pare their mounting losses have come forward. But what exactly is leading to such humungous losses in the discoms other than the government’s inefficient methods to bail out?

It is to be noted that the absence of economically inefficient tariff setting processes, healthy competition, and unsustainable cross-subsidies, economically inefficient tariff setting processes, infrastructure development, and technology are severely adding to discoms’ losses.

The Case of Discoms in India Being an Extension of The State Executives

  1. In the case of the Tamil Nadu government, the government’s letter used to be precipitated by means of a writ petition for initiation of lawsuits below IBC filed within the Madras top courtroom by means of South India Corporation Pvt. Ltd.
  2. But on November, 8, the ministry had effectively and positively cited that the apex court had in its ruling announced that state-run discoms are arranged below the Corporations Act and are no longer below statute just like the NHAI.
  3. Therefore, they strategically aren’t an extension of the state executive. It was additionally stated, to clear the matter, that the subject has been “settled” by means of the Ideally suited Courtroom. In fact, the dichotomy surrounding the IBC and Electricity Act has been settled. It has been stated that there effectively used to be no dichotomy between the provisions of IBC and the Electrical energy Act, which applies to other operational problems with discoms.

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