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June 2022

Jun 30
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insolvency proceedings

What Will Happen to Your Home? Supertech’s Insolvency Proceedings

By Banking 2 Comments

Supertech Insolvency Proceedings Against Debtor

More than 10,000 home buyers have not yet received possession of their hard-earned flats by the Supertech group. This is all you need to know about the whole case. The Supertech Group is a reputed real estate development firm.

Insolvency Proceedings: One of the financial creditors of Suprectech Ltd., Union Bank, filed a petition before the National Company Law Tribunal under Section 7 of the Insolvency and Bankruptcy Code, 2016 to initiate an insolvency resolution proceeding against Supertech. Section 7 gives the power to a financial creditor to initiate insolvency proceedings against the debtor.

In 2013, an alleged loan amount of around 430 crore rupees was taken for the construction of a project, namely Eco Village II in Greater Noida, Uttar Pradesh.

NCLT Decision on The Insolvency Proceedings

NCLT, after examining all the documents submitted by the debtor and financial creditor, came to the conclusion that there was a debt and Supertech Ltd had defaulted. The Court has agreed to initiate the Corporate Insolvency Resolution Proceedings (CIRP) against Supertech Ltd. and appointed Mr. Hitesh Goel as Interim Resolution Professional.

CIRP is a proceeding or a mechanism through which creditors can recover their money. After the proceedings are initiated against the company, it would be examined whether the defaulter would be able to repay the loan or not. If the debtor is unable to repay the loan, then the creditor can file an application to NCLT for liquidation or restructuring of the company.

What Happens When a Company is Declared Insolvent?

When a company is declared insolvent by the court, a moratorium is placed on all the pending civil, consumer, or other cases till a resolution is achieved. In the present case, Supertech is also barred from disposing of its assets in any form.

Usually, after such proceedings, there are chances that the assets of the company are auctioned and a new owner altogether takes over the whole project. So there will definitely be a delay in the construction of the remaining houses and all the other formalities will need some time to be fulfilled. But this would be really painful and frustrating for the buyers who have spent more than 10 years on the projects.

But in the present case, Supertech knocked on the doors of NCLAT and took the matter into their own hands.

Current Status of The Case:

Supertech Ltd. filed an appeal with NCLAT against the order of NCLT. The company contended that reverse CIRP should be allowed in the present case. Now, reverse CIRP is a very new concept and originated in the matter of Umang Realtech. This is a process exclusively for real estate companies that are on the verge of completing their projects but could not do so due to lack of funds and CIRP proceedings.

In this process, a promoter agrees to stay outside the CIRP process but wants to act as a lender by injecting funds or cash flow. To put it simply, another company provides additional funds for the completion of the projects undertaken by a real estate defaulter.

This innovative process helps the homebuyers get early possession of their houses. But it is pertinent to note that the courts have limited this process to just a single project in order to drive the major focus toward that project. This is done to ensure that the asset value maximization remains project-specific. As a result, the company’s assets are not maximized. The project’s assets should be maximized in order to balance the project’s creditors, including allottees, financial institutions, and operational creditors.

In the present case, NCLAT gave the green light to the Reverse CIRP for the project Eco Village II and for all the other projects for which IRP is responsible. The NCLAT ruled that no funds from any account could be withdrawn from the corporate debtor’s other projects without the permission of the IRP.IRP is directed to constitute the COC for just one project, i.e., Project Eco Village II, and claims received in the name of the project must be separated from other projects.

The Reverse CIRP definitely gives an edge to the unsecured financial creditors, i.e., the home buyers, because the financial creditors will not be provided with the assets of the company. The home buyers would be handed possession of the completed project, and the financial creditors could not claim those flats and land.

The process looks quite promising from the theoretical point of view, but it is still under examination. Now the question arises, what if a home buyer does not want possession of the flat but wants their money back? This would be a problem because the reverse insolvency process only allows the completion of a project and provides the possession of flats. The only thing a home buyer can do after receiving their allotment is a request that the in-charge find a suitable buyer for their flats and refund their money.

Analysis

The home buyers are currently worried about their hard-earned money, which they invested in the project. But one should have faith in the process of the law. The NCLAT has established an insolvency process that would help unsecured financial creditors. Unlike the usual insolvency proceedings, real estate insolvency proceedings can now be different, which would help the home buyers over financial creditors (banks).

All a home buyer could do now is wait and trust the legal system.

Jun 21
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upi credit cards

Linking of UPI Credit Cards

By Banking No Comments

UPI Credit Cards

UPI is a single platform that brings together a variety of banking services and features into one place. The National Payments Corporation of India (NPCI), in collaboration with the Reserve Bank of India and the Indian Banks Association (IBA), has launched the Unified Payments Interface (UPI).

With the introduction of the Unified Payment Interface (UPI), India has made a significant step toward becoming a cashless economy. You may now use your smartphone as a virtual debit card thanks to a new payment methodology. It has also made instant money sending and receiving possible. The QR code concept has completely eliminated the use of digital wallets.

How Does UPI Work?

Transactions using UPI employ a highly secure encryption format that is difficult to mess with. Every day, the IMPS network of the National Payments Corporation of India (NPCI) processes Rs.8,000 crore in transactions. With the advent of UPI technology, this is projected to skyrocket. Every transaction is verified using a two-factor authentication approach similar to OTP. For validation, however, UPI PIN will be used instead of OTP.

Why is UPI in News Again?

The Reserve Bank of India (RBI) suggested that credit cards be linked to UPI networks on June 8. For the time being, Governor Shaktikanta Das said that the operation will begin with RuPay credit cards. As of now UPI only allows users to make purchases by connecting their debit cards to their savings or checking accounts.

According to RBI Governor Shaktikanta Das, 594.63 crore transactions worth 10.40 lakh crore were overseen using UPI in May 2022 alone. The inability to use credit cards for any purchase has been a key downside of UPI transactions thus far. Until now, clients’ debit cards were only able to be used for transactions if they were linked to their savings or current accounts.

This is a significant step since purchasers will now be able to use UPI transactions to pay using their credit cards. While transactions will initially be limited to RuPay credit cards, other major credit card issuers such as Visa and Mastercard are likely to join in the future.

“This arrangement is expected to provide more avenues and convenience to the customers in making payments through the UPI platform. This facility would be available after the required system development is complete,” the RBI said on June 8.

UPI accounted for more than 60% of all non-cash transactions in FY22, according to a joint study by PhonePe and the Boston Consulting Group. PoS transactions, on the other hand, only made about 5% of all transactions. As a result, it is evident that, if properly implemented, this effort has the potential to greatly improve credit card acceptance and adoption.

Benefits of linking UPI and Credit Cards:

At first, UPI payments could only be processed through bank accounts. Later, UPI applications started allowing users to add debit cards to their accounts and make payments. The ease of usage of UPI makes it popular. Experts believe that the linkage of UPI and credit cards will also be extremely beneficial for small merchants.

Users may now link their credit cards to UPI, enabling further adoption of fast and easy payments for even minor transactions without the necessity of a PoS (Point of Sale), as previously Credit Cards needed PoS machines for payment services that were to be bought by merchants at high prices. Only a few applications and banks have been allowed to use credit limits for UPI transactions. With the most recent statement, the RBI has made the UPI credit facility available to all participants.

Because the feature is being rolled out to RuPay, India’s local payment method, it would be interesting to observe if this offers RuPay a competitive advantage over global competitors like Visa and Mastercard and if this increases RuPay’s market share. Also, while paying with a credit card has advantages such as reward points on your spending and a credit-free period of up to 45 days, it may also draw up to 48 percent annual interest on the outstanding amount if not managed properly.

Challenges:

While this is an intriguing start, there are still a few unsolved questions. Let us see what they are.
Because UPI payments are free, merchants prefer to accept them. However, it is unclear how credit card companies can recoup their capital costs and how the current infrastructure would allow this if credit cards were accepted through UPI Payments. At a press briefing, when asked about pricing, RBI deputy governor T Rabi Sankar said, “How the pricing will work out, that we will have to see as we go forward.”

Credit card transaction revenues (mostly from MDR) account for 30% of overall bank revenue. If banks do not see this as a win-win situation, they cannot be blamed. This might put a part of bank profits at risk in the long term unless the RBI is ready to foot the tab through the Payment Infrastructure Development Fund, just as it is for UPI-dependent merchants.

That’s not all, though. Banks may become subject to revolving credit risk if the number of credit card users increases dramatically because of low-ticket transactions.

Credit cards, furthermore, are a sort of soft loan or short-term debt that must be responsibly managed. Credit rotation and extra debt reinvestment in investing, trading, and other activities are possibilities.
It has the potential to significantly raise UPI volumes and average order amounts, which are far greater in the case of credit cards than UPI, but the simplicity of payments may lead to consumer overspending and a debt trap for many individuals.

A four- or six-digit PIN is required for all UPI transactions, whereas credit cards require a PIN for offline purchases and an OTP for online purchases. Payment authentication is unknown, which might lead to an increase in fraud cases if the necessary infrastructure and standards are not in place.

Conclusion:

Through this suggestion, The RBI’s goal is to increase the digital payments and keep also to clients from falling prey to some of these players’ shady business methods from other third-party applications. It should be emphasized, however, that both UPI and RuPay are now NPCI products, and the RBI is only piloting this initiative with RuPay cards, which account for less than 5% of all credit cards in use. If the pilot is successful, the RBI will need to consider MDR costs and the risk credit risks before moving forward with a full-scale roll-out to other care providers.

Jun 17
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ecommerce industry

Compliance and Control in The Ecommerce Industry: Sufficient or Crippling?

By Economy No Comments

Compliance and Control in The Ecommerce Industry

The eCommerce industry in India is a burgeoning business that is taking the Indian e-commerce market by storm. With increasing integration and usage in the economy, the government is trying to concoct compliance schemes that will help regulate the sector. The proposed amendments to the Consumer Protection Act reveal the government’s penchant and willingness to intensify its scrutiny and intervention in India’s burgeoning e-commerce business which might give fair competition to its global peers.

With the introduction of new changes in the e-commerce act, it can be scrutinized that the industry might be waltzing towards greater compliance which in hindsight appears to protect the interests of a powerful domestic retailer lobby rather than the interests of consumers, an agenda that is being vehemently supported by the government.

Though, one should make no mistake, that regulation in the eCommerce industry is long overdue. This is due to the fact that there have been various instances and episodes of sharing of consumers’ data without consent which has emphatically rendered them the quality of being a product that is being used by the multinational companies for its benefits.

Thus, increasing compliance in the industry has been a burgeoning need in recent times. The time for better alternatives for consumers needs to be provided by the government, which extensively has been exploited by the money-mongering capitalists.

The recent advisory’s requirement effectively requires eCommerce platforms to emphatically register themselves with the Department of Industry and Internal Trade. This needs to be additionally carried out with the appointment of a chief compliance officer as a nodal point for effective and positive law enforcement. This law enforcement will be enforced by the agencies and will be a useful way for the government to track the clandestine activities of the platforms.

However, suspicions have been brewing in the industry that such a compliance order will hinder the working of the platforms that already find it difficult to comply with the crippling laws. With the need for compliance through nodal officers, delays in decision-making will be seen. This will be complemented by delayed decision making and in business given the companies are still recuperating from the covid-induced slowdown and supply chain shocks.

E-commerce, as is no news, is an online-based business model. This sector or niche has been set up to effectively provide the consumers with an online market service through an online portal used by people for several functions like selling and buying products. Many might argue that it is quite a newer concept for transforming India, especially the Rural area, which is still tasting the fruit of the success of such businesses.

India’s compliance policy in a relatively newer domain raises the question about its archaic structure which might not be quite suitable for the newly invented venture. With relatively new businesses cropping up in e-commerce, it is quite odious to comply with the policies that hinder the businesses which are in their nascent stage of growth.

India, for years now, has been bearing the brunt of a low position on the freedom of business index. Such policies exacerbate the already battered business circumstances in the country.

The problem is particularly arduous and debilitating for the e-commerce sector as the legal compliances make it particularly arduous for the effective functioning of the supply chain ecosystem. However, not every law under the Indian legal system can be characterized as illegitimate or crippling. One such act is the Legal Metrology Act which is also defined as the “E-commerce entity”.

According to the aforementioned act, the entity is entitled to comply with and meet certain specific standards relating to packaging and labeling that have been set by the Legal Metrology Act of 2009. According to many deflectors, the act proves to be particularly cumbersome as it provides a hindrance at the very first step of the sale of a product.

According to the Legal Metrology (Packaged Commodity) Rules of 2011, it has been stated that an entity is needed to display mandatory information about the goods on the network. Though many might argue that this proves a specific hindrance in the ecosystem, it cannot be denied that an act of such a character is required as the right to information is a considerable, legitimate right of a consumer. Here, such an act cannot be confirmed as a hindrance as it effectively provides a customer a legitimate right to delve deeper into what he or she is consuming.

Thus, in totality, it cannot be denied that the e-commerce industry’s rapid growth reflects the public’s growing acceptance of it, but it also cannot be denied that it has also been brought to the fore that there are certain concerns that the country’s legal system has been dealing with for quite some time now. Here, particularly cumbersome is the fact that the laws pertaining to e-commerce are quite uncondensed of statutes.

This can be argued on the fact that there is no specific codified law for the functioning of the e-commerce sector. Thus, this will lead the companies to particularly look at such a perspective of the particular situation for which the laws are to be considered. To succeed in such an uncodified legal system in the sector, many multinationals and e-commerce enterprises will have to have a thorough awareness of the legal regime.

This will also include potential challenges that an e-commerce business will face due to sheer negligence and crippling laws prevailing at the moment. Further, it might not be farther than the truth to argue that the regulation of the e-commerce sector is quite emphatically dynamic in nature.

This effectively means that laws are quite scattered in nature. Thus, given such variability in the legal system, it becomes of utmost importance that entrepreneurs that are willing to venture into the e-commerce business must be quite mindful of the legal and regulatory compliances. Thus, such a structure does not very well fit with the theme of making business in India accessible for entrepreneurs. On the contrary, India’s crippling laws need a replacement, the sooner it comes the better.

Jun 15
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Cryptocurrency is money

Crypto Currency is Money For the Information Age

By cryptocurrency No Comments

What is Crypto Currency?

Crypto currency is a type of digital currency which uses secure communication called cryptography and verifies the transactions by a decentralized system. Crypto currencies are digital assets that don’t have any regulating authority. However, the decentralized system records all crypto money transactions and issues new units.

Crypto Currency and The Information Age

Due to the old trickery of events, individuals are usually seen accepting the old tricks and concepts as simply “the way things are.” However, the same individuals, in the changing world order, use their prerequisite knowledge to reach certain explanations of the theories that are new and interesting to delve into.

Take the financial sector and crypto currencies for example. Rarely is an individual seen questioning the genesis of money and the banking system? However, in contrast to such arcane behavior, we now witness a radical shift toward questioning the cryptocurrency legitimacy or digital currency. With the dissemination of data that has readily become decentralized, the internet has been seen as ushering in a revolution, which can be seen as radically democratizing information. 

If crypto currencies were invented in the previous decade, chances are that people might have abstained from its use and might have loathed the newer entry into the market. But with the rise of the information age and the increasing need for autonomy, digital currencies have been deciphered as a friend rather than a foe. What entices the audience about crypto money is the fact that Crypto can automatically and instantaneously share your data’s value with you, unlike the arcane financial system that didn’t recognize an individual as a partner but as a product.

The genesis crypto currency

With the rise of the information age, we witness that the financial system remains stubbornly stuck in an industrial age. Such an industrialized notion of functioning is based on the fact that the financial systems presume that the needs of oil-based manufacturing are paramount. However, this no longer stands true. Experts and academia have testified to the fact that the World’s Most Valuable Resource is empathically and effectively no longer Oil, but rather it is Data. 

Even though we discredit the industrialized age, we cannot help but deny the fact that the information age to has been disastrous in itself. With the power of data, the information age has led the existing economic system to hoard and extract vast amounts of wealth for a few in one place. A very glaring example of the same is Silicon Valley.

It is to be noted here that information is finding its way wherever the value is being generated by that information. Thus, information finds its way to all the social networks which make huge amounts of money.

How the crypto currency seeps in?

It is not news that individuals or the public realize the importance of the decentralized world. Thus, it is quite a collory to state that the same individuals will also value crypto currency highly. But why is it so? It is to be noted that crypto currency has immense potential to offer a set of Information Age economic tools that can efficiently and effectively increase the efficiency of how money travels around various sectors.

On top of the dismantling of information, it also takes into consideration how value is distributed amongst these sectors. With the invention of UPI, payments have suddenly been made instantaneously. With the help of technological advancement, stimulus payments, welfare checks, etc. can be all distributed and collected instantaneously. Crypto currency through its decentralized state can help transactions and capital to flow between parties without the meddling of all the costly intermediaries which persistently and arduously slow the financial system down.

Much of this advantage is being reaped by a number of crypto billionaires and as the billionaires climb, so will the number of nonprofits which will start accepting these decentralized, contentious digital assets. This will highly bring about integration in the technology and the crypto sectors.

On top of the decentralized financial sector, the crypto currency also offers a more fair and efficient distribution of wealth itself which was a major problem in the industrialized world. This can be explained by the mechanism that as enormous new amounts of wealth and value are being generated by this information economy, information age economic tools emphatically a rightly have the power and immense ability to distribute that wealth and value amongst the masses as quickly.

In a contrast to the game where Facebook takes all of your data and sells it making humungous profits for itself, crypto can automatically share your data’s value with you. This is due to the fact that crypto offers you the power to become a partner and not a product. This crypto currency can rightfully be stated as the currency of the information age.

With much-needed integration, wealth would effectively flow just as information does. It won’t be concentrated at a singular point where it’s hoarded by a small class of billionaires but would rather be seen flowing in every way. This might be a long short to state but with the flowing of information and crypto currency around the globe, it can also create the opportunity to eliminate poverty worldwide.

This model of universal income can be realized by imagining every person as an endless and regenerative source of value. With all the information that is needed which effectively at the moment makes a few people extraordinarily wealthy, can now provide the same luxury to all around the globe.

Thus, decentralized crypto currency has much potential to eliminate global poverty but it needs to be accepted worldwide, unlike some nations that have an antagonistic and aversive stance against it. With a dream of an egalitarian world, perhaps the policymakers will be able to use the information technology more sagaciously. The threat is not of disapproval, but rather that of negligence and underutilization of the potential that has the power to alter the world wealth scenario.