Sep 13
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Retrospective Tax Law: Good Radiance To a Bad Taxation Approach

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Retrospective Tax Law – Good Radiance to a Bad Taxation

Retrospective Tax Law: In an interesting turn of events, India is all set to end its retrospective tax. The retrospective tax was a tax of special capital gains that was extracted from the sale of assets located in the country by the entities that were registered abroad.

The crackdown on companies came at the back of the fact that many escaped paying taxes to India while transferring assets to the country. To be more specific, the statute was criticized after a series of significant setbacks in arbitration disputes. Retro tax demands were challenged in these arbitration disputes by companies like Cairn Energy and Vodafone.

Quite ruefully, the Indian government, which has been fighting for taxes for years now, will also refund the money that had been collected on the basis of retrospective taxation. However, it should be highlighted that the Indian government will do so without charging interest if certain conditions are met.

In reality, the international business community has been calling for an end to retrospective taxation for a long time. This is because, once the retrospective tax is abolished, it will effectively remove businesses’ undue anxiety about India’s massive, crushing corporate tax liabilities which effectively cripple investments in India.

Will there be any effective future scope for retrospective tax in the country after its nullification?

The Indian government’s action raises the intriguing question of whether the retrospective tax would have any future application in India. Given that the government is modifying the Income Tax Act of 1961 through the Taxation Laws (Amendment) Bill, 2021, it will be done in such a way that future retrospective tax demands would not be possible. This was done because the new amendment bill causes tax claims to be nullified if they were made before May 28, 2012.

Surprisingly, the President had given his assent to the financial bill 2012 on this date. As a result, it is reasonable to conclude that the most recent modification will render the retrospective bill obsolete. Though it is to be noted that this certain defeat that has been claimed by the government will cost the government US$1.2 billion, just by refunding the claims of Cairn Energy.

The legalities

The amendment bill also effectively and emphatically proposes to amend the Finance Act, 2012. This will be amended to strategically provide the validation of demand, etc. It’s worth noting that, if certain criteria are met, section 119 of the Finance Act of 2012 will be effectively repealed. The withdrawal of pending litigation is one of the stipulated criteria, as is a strategic undertaking that no demand for cost, damages, interest or other fees will be filed.

What is the need to introduce the bill right now?

Why is India now bowing out after fighting for its dues for so long? It should be mentioned that the Indian government’s taxes bill 2021 is a major endeavour to effectively ensure that the idea of tax certainty prevails in India. For years, the retrospective tax has been a major disincentive for foreign investors who believe it is the cause of tax uncertainty in India, making the investment climate in India unfavourable. As a result, international investors and multinational corporations operating in India have long requested such favour in order to give tax certainty.

Furthermore, it is fairly obvious that the high-profile tax arbitration disputes between Cairn Energy and Vodafone have severely harmed India’s reputation as a business-friendly nation. This substantially negated the benefits of bureaucratic reforms and harmed India’s plan to expand industrial production and upgrade infrastructure.

This comes after the Indian government lost an international arbitration in December 2020 over the taxation of Cairn Energy PLC retroactively. On the contrary, the tribunal had effectively ordered India to return the value of shares it had invariably sold while claiming its tax.

This also included dividends seized and tax refunds that were withheld to recoup the tax demand. In a similar case, the Indian government had again lost against Vodafone, citing it as a “breach of the provision of fair and equitable treatment” that was essentially secured by the bilateral investment protection deal signed by India and the Netherlands.

However, here it is to be highlighted that the Indian government’s liabilities, covering all the legal costs in this matter are significantly less. This is due to the fact that in this case, the Indian government had not taken action to recover the retro tax demand from Vodafone. Thus, to state that India has ended its humiliating losing streak against international companies would be an understatement.

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Sep 13
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what does vodafone demise

What Does Vodafone Demise Mean for Our Banking Industry?

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What Does Vodafone Demise Mean?

The Vodafone demise: Call it a foreboding debacle or a case of poor strategy, but Vodafone has pushed its investors to the front of a heinous bargaining table. Negotiations will include discussions about their future course of action in relation to their exposure to the indebted telecom player. It should be noted that the telecommunications company is currently struggling to stay afloat.


Given the debt-ridden state of the telecom giant, quite rationally the investors and promoters have denied infusing cash into Vodafone’s Idea. Additionally, in much interesting turn of events, the apex Court has recently dismissed a plea for rectification of alleged miscalculation adjusted for gross revenue dues.

The revenue has to be paid by the company to the government which is quite an aversive situation for the telecom giant. The Supreme court has also actively condemned the telecom operator to bankruptcy and has recommended if it can raise fresh capital. It is to be noted, that given Vodafone’s bankruptcy status, it quite unlikely that it will be able to raise cash in the market.

As for its investors and promoters, they have denied infusing extra cash into the telecom giants to get it out of troubled waters. If Vodafone goes bankrupt, it will be the government’s worst nightmare because it owes the government a massive debt in the form of AGR dues and spectrum charges.

vodafone idea latest newsAs previously stated, the company’s prospects for raising funds appear bleak. But why are Vodafone’s investors blocking the company’s last hope of survival? Any new strategic investor will be putting billions of dollars into the government coffers, which is a necessary fact. This practically means that the funds will be transferred to the government rather than being strategically or successfully reinvested in the company to prepare it for the new 5G world.

In addition to the judicial proceedings, Kumar Mangalam Birla has stepped down as non-executive director and non-executive chairman of Vodafone Idea, which could be a deterrent to other investors. He has also offered the government to buy out the Aditya Birla group’s interest in the company, much to the chagrin of the telecom behemoth and its investors.


The Chairman of the Aditya Birla Group has effectively volunteered to hand over his stake in VIL to the government or any other company in order for Vodafone to continue to operate.

Vodafone Idea is highly unlikely to be able to service its gross debt in light of the aforementioned difficult circumstances. It’s worth noting that the telecom behemoth’s debt totals Rs 1.8 lakh crore. According to estimates, the telecom company owes various state-owned lenders at least Rs 28,700 crore. When official data is thoroughly examined, it can be seen that VIL had a gross revenue liability of Rs 58,254 crore. However, it should be noted that the telecom operator has paid a total of Rs 7,854.37 crore.

Banks in India, on the other hand, have begun classifying Vodafone as a stressed firm, which will come as no surprise to many. Vodafone Idea has been designated as stressed by IDFC, the first bank to do so. In addition, the bank has made a provision for 15% of the outstanding debt.

Given the Vodafone fiasco, it’s easy to understand how it might affect these banks’ financial performance in the near future. This is because banks will have to set aside a large amount of money to cover these risky lending accounts.
Various banking concerns have been raised as a result of another telecom major failing in the economy. S S Mallikarjuna Rao, the MD, and CEO of Punjab National Bank have backed up these assertions. The recent developments in the case of Vodafone have caused alarm in the banking industry, pointing to AGR-related difficulties for telecom companies.

vodafone demise meanThe whole shambles began after the Supreme Court ordered telecom companies to pay their AGR debts. The AGR-related dues to the government totaled Rs 93,520 crore, and they had to be paid over a ten-year period. Though Vodafone filed a review petition but considering the past events the chances of overturning the judgment are quite less.

Birla expressed his concerns about the situation in a letter to Cabinet Secretary Rajiv Gauba in June. Birla, who owns a 27% stake in VIL, has expressed his concern that investors are unwilling to invest in the company. The hesitation stemmed from a lack of clarity on AGR liability. Uncertainty over a sufficient embargo on spectrum payments was also a possible disincentive. The fact that the floor pricing regime was above the cost of service was the main source of investor skepticism.

If Vodafone goes out of business, the market will be dominated by only two major competitors, resulting in a duopoly, which is disastrous for the economy. Tariffs will rise because acquiring a Vodafone customer is also a cost-increasing activity, with the consumer bearing the ultimate burden.

The only way to save Vodafone is for the loans to be restructured, or for the AGR judgment to be overturned, which would give the beleaguered telecom sector a break, or for the government to offer some sort of assistance package. According to reports, the lender has proposed to the government that their debts be converted into equity, and if this happens, there’s a good probability it’ll be combined with BSNL, which is facing a slow death.

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Sep 10
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RBI’s Monetary Policy Conundrum

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RBI’s Monetary Policy

The RBI’s monetary policy Conundrum: It is no news that the central bank’s responsibilities pile up whenever a disaster struck a market. This scenario is especially true for pandemics like the covid. The problem of being economically destitute is something that the public in India and around the world is emphatically facing. With policy measures trying to restore normalcy in the market, consumer and producer confidence aren’t actively inspiring confidence in the economic recovery.

Not only has consumer confidence affected trade severely but also the crippled global supply chains are adding to the detestable attribute of the pandemic. This has led the RBI to maintain an accommodative stance in the economy, so as to infuse enough liquidity in the market.

This is being done to revamp the business and the financial sector of the economy. Since crippling lockdowns were placed in the economy, manufacturing and economic activity had contracted at an unprecedented level, so much so, that the economy had contracted by 23.4 percent in decades.

rbi's monetary policyBut such easy credit necessarily isn’t helping the economy. As a simple rule of economics, banks usually face two short-term tradeoffs. These are trade-offs between growth and inflation in the economy.

Given that the RBI has maintained an accommodative stance, supporting the growth for quite some time, inflation signs in the economy are starting to appear. These have been more persistent and significant in the consumer price index due to the burgeoning crude prices in the economy. Given, that OPEC has yet again decided to restrict the supply of crude, stating that demand is not robust, such woes are bound to be exacerbated.

RBI, in fact, has recently deciphered that inflation had hovered above its tolerance limit. The inflation of 6 percent was obliviously an uncomfortable range for the RBI given it tends to keep inflation in the 2-4 percent range (+- 2percent). Thus, the RBI now faces a conundrum, whether to prioritize the growth or inflation monitoring in the economy.

The Conundrum

The RBI right now faces a tough challenge between growth and inflation monitoring. This is due to the very crucial fact that the economic recovery is still in its nascent stage of recovery. The impetus or momentum that is needed to bring it on track can only be provided through excess liquidity in the economy.

As unemployment is on the rise, the manufacturing sector needs its engine oil to revamp in order to take on the world demand and to increase exports.

But, it is to be noted that this excess liquidity does not only pose a threat to inflation but also to bad debt in the economy. Given that the financial standing of many has been crippled by the pandemic, there are effectively high chances of default of repayment on loans. On the other hand, the USA is robustly considering and signaling toward the tightening of the monetary policy. This can lead to a taper tantrum and reversal of FDI in India. Thus, growth prospects can seem bleak for the country.

It is no news that when India had gone into lockdown back in the month of March last year, inflation was not even a blip on our anxiety radar. But in comparison to last year, today, the fiscal and monetary policymakers need to give serious attention to the concept of “stagflation”. This effectively means that the government will have to decipher early odious signs that signify any odd rise in prices amid economic stagnancy.

rbi monetary policy todayAccording to the reports, Retail inflation had effectively broken away from the Reserve Bank of India’s tolerance limit of 6% in the month of June. Consequently, it had risen to just above 6.73% for the month of July. But, for the month of August, it had taken a dip to 6.69%, which emphatically points towards its persistence in the economy. A closer look at the data shows that the immense contributor to inflation is the increasing food prices. Of these, protein-rich items are especially getting dearer.

Though to point down one reason is not feasible, it can be rightfully stated that an obvious culprit can be the snapped-off supplies. Though most of the restrictions have been eased, however not all supply chains have been fully restored.

Lastly, it is to be noted that as long as the inflation stays above the 6% mark, which marks the uncomfortable range for the RBI, it would face the policy conundrum and will be definitely wary of easing money any further. But if the rate cuts might actually stoke prices, so could a fiscal stimulus by the Central authorities, which can be a sagacious alternative. With the economy in a dire state of need of funds and state spending, the expansionary policy of the RBI is important.

Thus, this effectively means that the government will have to make important and crucial decisions now. An alternative could be that RBI can swerve to control the rupee’s internal rather than external value. With India largely acting open to capital flows, it can attract investments. Thus, what stance the Indian authorities will take will depend on what RBI perceives as a priority.

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Sep 10
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Why The IBC is Not The Best Bet in Resolving Distressed Assets

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Is IBC Not The Best Bet in Resolving Distressed Assets?

IBC Resolution on Distressed Assets: Given that the Indian banking sector is plagued by the NPA crisis, its redressal is the need of the hour. The pandemic has wreaked havoc on the economy which has crippled the financial standing of many, especially in India. Thus, it can quite rightly be stated that the economy will definitely see an increase in non-performing assets in the future.

This will be effective due to various reasons, firstly, as aforementioned financial crippling of the masses, secondly, it will be due to failed repayment of loans due to low job rates and lower quality of jobs. Thus, it becomes absolutely crucial that India’s NPA redressal mechanism is well structured and effective.

A ray of hope that was seen in such a system was definitely the Insolvency and bankruptcy code, but given its invention 5 years ago, it is quite rueful to witness that the resolution of distressed assets through its due process has not made any significant or notable progress. The biggest setback of the policy comes when the central issue of recovering stranded loans at fair value cannot be accommodated by the same.

Other issues that plague the IBC mechanism are the untimely resolution of the problems and the delay in arriving at meaningful resolutions. Also, the massive haircuts, that involve the significant amount that the lenders have to forego on their outstanding loans coupled with interests is also a canker for the deal.

It is to be noted that this comes despite several amendments by courts being made to the law. The other grounds which make IBC not so attractive include matters is low recovery and delays. Such a claim has been corroborated by various data out there, and such data talks volumes about the significant drawbacks of the IBC. Recently light was shed on the dubious matter by the regulator Insolvency and Bankruptcy Board of India. The released dataset showed low recovery and resolution of assets, given IBC’s strategical regime.

According to reports, there were 348 insolvency cases that had been successfully resolved as of March 31. It is to be noted that reportedly, banks and financial institutions had recovered around Rs 2 lakh crore. But if the comparison is made, this was recovered from the total claims of Rs 5.16 lakh crore. This presents a haircut of over 60 percent on average.

Moreover, given the data that was released for the fourth quarter of the financial year 2021, 29 insolvency cases were actually and effectively resolved. This emphatically led the creditors to recover about Rs 4,600 crore. This was out of the total claims of Rs 17,389 crore. This effectively shows that given the reports and analysis, the recovery rate stood at just 26.45 percent.

Talking about the time taken, it is to be noted that the average time that was taken to resolve the cases was 459 days. If scrutinized this is effectively quite a breach of the stipulated 180 days. This effectively makes the recovery time more than a year. This is also coupled with various concerns that have been raised over the grossly high percentage of liquidation after a failure of a viable plan.

This detestable attribute of the IBC strategy can lead to the analysis that India is now making a paradigm shift from the globally followed enthusiastic and strategic practice of debtor in possession to the concept of the creditor in possession.

insolvency and bankruptcy codeAdditionally, it is worthy of mentioning here that the IBC significantly leaves the responsibility of managing the asset in the lurch by presenting the opportunity in the hands of a resolution professional. It is quite an odious attribute as, in all probability, it strategically has very low or no experience in effectively running the industrial units.

As aforementioned, the time taken for resolution is quite long, thus the assets have to significantly undergo a widespread lack of alignment which is always not along with business interest. This quite odiously leads to a downward spiral in the value of assets over an increased period of time. This time period also works until the case is systematically resolved or liquidated.

Not only the long gestation period pesters the whole process but also the humungous legal and administrative cost actually the system which makes it quite uneconomical. In addition to making it a long and drawn-out process, we also witness erosion in the value of assets. This definitely leads to adding up to the lender’s costs, which again is quite uneconomical.

Given all the odious circumstances that plague the IBC system, it is worth mentioning that a structural adjustment is needed to be made to revamp the IBC. Thus, given all the discrepancies it can be rightfully stated that the IBC has lost its relevance. This can be countered by strategically enabling bankers to make economically efficient decisions that are apt in the domain.

This effectively and invariably calls for fair competition. Fair competition can be promoted by reportedly allowing existing promoters to themselves bid for their assets. However, such a suggestion is not followed when somebody, who is a promoter has been proven guilty of fraud.

Thus, in a gist, it can be stated that various factors such as longer gestation period, low recovery rate, and high incidences of liquidation, IBC is slowly losing its relevance in today’s NPA redressal scenario. Thus, it would be quite prudent for the Indian government to take some effective steps that might help redress the issue. This also means that it is the need of the hour that IBC and the banks and financial institutions are made robust and adaptive.

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Sep 10
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Dior Couture 2021’s Byculla Roots: How Better Fashion Laws Can Attract More Revenues

By Economy, Others No Comments

Dior Couture 2021

Dior Couture 2021: India is known for its passion for craft and robust sense of artistic culture. The recent Dior Couture Autumn Winter 2021-22 show was a similar buzzing collaboration between the French luxury fashion house and a Mumbai-based embroidery export house.

It is no secret that the fashion industry generates massive revenues and employment in the country, but the dismal quality of legal protection offered to this industry is quite a revelation. It is common for counterfeit products to be sold in the market and plaguing the fashion industry. Hence, in terms of designs and prints, fashion houses and fashion creatives are often toiling due to the paucity of suitable protection.

Crimes such as fashion forgeries, counterfeiting, lifting, and knockoffs are just the tip of the iceberg as the lack of protection for safeguarding the rights and interests of designers, artisans, craftsmen, and others involved therein is currently emerging to be an alarming concern. In India, there are no laws that govern the fashion industry per se. 

However, there are a comprehensive set of laws that protect and regulate the fashion industry. For instance, design and artistic ideas can be protected under the ambit of IPR laws i.e. The Designs Act 2000, The Patents Act 1970, Trade Marks Act 1999, The Geographical Indications of Goods (Registration & Protection) Act 1999, and The Copyright Act 1957. Likewise, labor laws regulate the manufacturing processes, corporate laws oversee company-related issues and banking laws govern the financial aspect of the same.

As an intellectual property right, the value of Copyright, Trademark, Geographical Indication, or Design Rights is to generate more value and surplus in the economy. IPR as commonly known is introduced to protect the creativity of human beings. On the one hand, it encourages human beings to be creative and innovative in the development of new and novel products, thereby, enhancing competition in the market.

On the other, it attempts to indicate the source of the good for confirming the integrity of the marketplace. Therefore, it is evident that IPR laws and fashion are interdependent. Having said that, considering the boom in the fashion industry post-globalization and the competition that is intensifying exponentially therein, it is crucial that some protectionist measures are established to encourage innovation and ensure the inflow of revenues.

Economic development of countries and IPR are intertwined as registration copyright, trademark, geographical indication or design rights can help fashion communities and houses to develop a corporate image, brand value, and reputation in the national and international marketplace. Registration of the same adds value to the companies as it acts as provides a competitive edge to the fashion houses which reflects upon the sales, profits, and the brand value of the product and company.

Also, registration of an IPR would also avoid any probability of an offense. The purpose of IPR laws is to ensure that the origin is clearly indicated, the creative ideas of a human are protected and at the same time, it also assesses the implications of the natural, utilitarian and aesthetic features on market competition. Therefore, it has two-fold benefits which enable consumers to enrich their purchase decisions and provides perpetual protection to the owner of the creative idea. 

Theoretically, the aim of the law is to ensure that the potential and contribution of the traditional fashion community are protected and recognized. However, owing to its strenuous registration procedures, the same often causes a lot of hassle to the traditional fashion community, thereby, leaving their potential goes unnoticed.  Moreover, the various expenditures associated with these registrations and the process of renewing the same in various countries drastically demotivates the aspirations of our traditional fashion segment.

Nevertheless, IPR laws can be a vehicle to augment the economic potential of our country as the fashion industry can play a dynamic role in encouraging and supporting innovation and creativity. Also, with the widespread influence of IPR at a domestic and international level, it provides an opportunity for Indian fashion brands and traditional communities to establish and protect their brand value in the global marketplace by generating revenue.

 

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Sep 09
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crypto landscape

Changing Crypto Landscape Across The World

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Changing Crypto Landscape

Crypto landscape: When the idea of cryptocurrency had descended on the world, it was quite clear that it was not the favorite innovation of the government or regulatory authorities. This has various reasons, much of which include cryptocurrency’s detestable attributes that make it less appealing to the regulatory authorities. But given, given how the contentious digital asset has taken over the world’s investors right now, it can be rightly stated that regulators cannot afford to miss the cryptocurrency bus.

If it is scrutinized, it can be known that the most valuable digital currencies today are unconventional Ether, Bitcoin, Ripple, etc., the craze for which will not go away anytime soon.

But the possibility of its endangerment isn’t nil, this is due to the fact that the world can see the emphatic rise of government-backed digital currencies. These can definitely over-weight or outrun today’s heavyweights called cryptocurrency as it will have the government’s backing.

Though, it would be quite contradictory to state that something that will be closely regulated by the authorities should be enticing for the investors. But here it is to be noted that government backing provides assurance and feasibility of investments that unregulated markets can never offer. Moreover, cautious investors love stability, short-term profits are enticing but can never outdo the long-term stability that the government regulation will provide.

Such government efforts have been evident in various nations like China and India. India is all set to release its amendment to the crypto law. Though at the moment, it is quite unclear whether the government’s stance will be liberating or authoritative for the investors, there are reportedly high chances of adoption of an accommodative stance by the authorities. On the other hand, China, which currently has unveiled its highly crippling wealth distribution plan has also developed a robust framework called the Digital Currency Electronic Payment.

This significant payment system will emphatically allow its central bank to effectively issue a digital currency to other commercial banks in the economy. This payment system will also involve third-party payments networks like China’s payment giants like WeChat Pay and Alipay.

Given the regulatory framework that is all set to be launched, it can be stated that China can start using its centrally regulating digital currency in the next 2-3 months.

But how will China’s altered stance change the tune of other countries around the world? It is to be noted that China has come a long way from its detestable, antagonistic relationship with the digital currency to finally embracing it under its authoritative regime. It is worthy of mentioning here that if the country significantly succeeds in its Lucrative and crucial initiative, then other countries will definitely follow suit.

This will lead various other nations to launch their own state-backed digital currencies. However, if such measures will be adopted by various other countries, this will lead to a significant paradigm shift in the cryptocurrency landscape from being unregulated to being thoroughly regulated. Thus this will emphatically contradict with non-controlled nature of the cryptocurrencies that we witness today.

But this gives rise to a pertinent question why will profit-mongering investors embrace the regulated crypto? As a matter of fact, cryptocurrency is so enticing for investors due to its unregulated and clandestine attribute that facilitates incurring high profits and carrying out clandestine affairs of money laundering.

It is to be noted that it wouldn’t be an easy feat for the central bank that will have to blend the regulatory and liberal techniques to entice more investors to the crypto market. Excessive revenue collection on gains will definitely be a canker for the deal. As a matter of fact, easy and mild monitoring will lead a long way.

It is to be noted that China is solely not the country that has been emphatically working on issuing digital currencies but Switzerland too is planning on rolling out the same framework. According to the reports, the Swiss National Bank of Switzerland is effectively working with the country’s stock exchange to significantly and effectively scrutinize and examine the high possible use of such currencies in various kinds of trading in a safe manner.

Though the world is still wary of the contentious digital asset, 4El Salvador’s bold approach to granting the digital currency the legal tender has already paved the way for an opportunistic future of the digital currency. On the other hand, with the invariable endorsement by Tesla’s CEO Elon Musk and Jack Dorsey, much credibility is being added to the contentious digital asset. However, similarly, on the other hand, US ex-President Mr. Donald Trump is not too subtle in attacking the contentious digital asset or hiding his hostility.

Thus, it can be stated that no matter what controversy surrounds the crypto, it only adds to its popularity. This emphatically points toward the fact that the crypto landscape is changing around the world. The paradigm shift can definitely lead to a rise in the regulated state-backed cryptocurrency and the fall of the conventional cryptocurrency we see today. This will help bring a radical change in the valued acceptance or burgeoning popularity of major cryptocurrencies in the following years.

Thus, one can emphatically maintain that while many countries around the world are thinking of introducing crypto-based transactions, several states like the UK and Turkey are planning on banning them for good, as discrepancies plague the road to its acceptance. However, lastly, it should be remembered that the regulatory landscape will definitely change the game for this sector.

 

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Sep 09
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bitcoin technology and legality

Crypto Space Too Large Now to Ignore

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Crypto Space Too Large Now To Ignore

Crypto space: With the advent of cryptocurrency, its battle with the authorities and rising popularity amongst the masses cannot be ignored. The contentious digital asset though is of contentious currency and of questionable character, cryptocurrency debate amongst various nations rages on. Since the advent of the contentious digital currency, its surge has been so undeniable that authorities cannot ignore it any longer.

On August 17, even as Bitcoin prices had strategically and significantly recovered, Finance Minister Nirmala Sitharaman had pointed toward the cryptocurrency bill that is invariably waiting for the Union Cabinet’s clearance.

As aforementioned, the crypto craze around the world, at the moment, is at its zenith. In this, India too is an enthusiastic participant. According to the reports, given the stern and formidable attitude of the authorities, $6.6 billion by Indians have been invested in cryptocurrencies already.

This effectively means that around 1.5 crore Indians have emphatically invested in the virtual contentious digital currency, even if it means putting them on the wrong side of the law. On the other hand, the extent of the spread of the contentious asset can also be seen as currently, 350 startups are quite diligently and arduously working in the blockchain and cryptocurrency space.

This just goes on to show the larger extent of cryptocurrency admirers in the economy. This also emphatically points toward the fact that the Indian administration can no longer deny the legitimate rise of the same and need to look for an accommodative policy that elevates the market and is also safe.

Indian administration for decades now has taken a hostile stance against the currency due to its volatile and anonymous nature. Given the odious character of the same, the Indian administration finds it difficult to regulate the asset and this does not spark much faith in the digital currency. But given the apprehensive stance of the government, why are people so drawn toward the volatile asset?

The reason for the same can be because of a new wave of excitement that is whirling around decentralized finance. This will lead to a humungous asset appreciation, which provides robust profits that can be incurred by the investors. Grabbing small positions by the Institutional investors too leads to the endorsement or further excitement.

The popularity of the asset was in fact sealed when the bull market had emphatically picked up during the pandemic. Thus, this effectively shows that the crypto space has now become too large to ignore. Some other reason that might lead to the burgeoning popularity of the same is the clarity of no regulations.

The finance market usually rallies behind the finance industry’s regulations but the clarity the market provides the investors is something that is definitely enticing to the investors. Thus, given the crypto rise, it will definitely take time for the government to reach a viable solution that will effectively work for everyone.

According to the reports, an effective uptick in India’s crypto market invariably matches the same globally. In fact, after March 2020, when the Supreme Court had set aside the RBI circular, it had significantly acted as an enabler for the Indian ecosystem.

Though it is not quite well known what the recent amendment will bring for the Indian crypto setup, it is to be noted that there have been certain rumors that RBI can be experimenting with the crypto by launching its very own, with alterations. What has actually baffled the market is that consumerization of the same that has happened, has taken place at a waltzing speed. Such a claim can even be corroborated by the legal tender that has been provided by El Salvador.

With even the global wave turning positive towards the contentious asset, India sure can reap some benefits too. Thus, RBI’s accommodative though a bit alerted stance will prove quite beneficial for the market. This is due to a very pressing fact that in the last year or two, the crypto market trading has effectively become very entrenched in regular legitimate activity.

Although, it is to be noted that crypto is a borderless, broad phenomenon, thus, India’s exchange control regime is facing some real-time friction between FEMA and crypto. Thus, in order to make its stance more accommodative, urgent clarity is swiftly required from FEMA. This can effectively lead many people, who can plan better for the future.

The government also needs to scrutinize the fact that the companies are usually comfortable with investing in a market that is extremely global in nature. On the other hand, the regulatory challenges and clarity are some of the best drivers of the market. Thus, in order to attract or be accommodative, it is quite crucial that the Indian authorities keep an open mind.

Thus, the rise of the currency amidst all the uncertainty certainly guarantees the popularity of the market. If the government wants to effectively escape clandestine and illegal crypto trading in India, it is quite essential that the authorities alter their detestable, apprehensive stance and be more accommodative. Thus, what path the authorities travel, is still a mystery and will be only clearer once the amendment bill is passed.

 

Tags: safespace crypto, space crypto, cryptocurrency space, space cryptocurrency, deep space crypto, crypto space

Sep 09
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ecommerce policy

Ecommerce Policy and Consumer Protection in India

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Ecommerce Policy & Consumer Protection

Ecommerce policy: As strategically as it can be said that the pandemic inflicted economic wounds on various ventures around the world, the fact that the e-commerce industry incurred huge profits cannot be denied. It is to be noted that the pharma and e-commerce sectors in the economy were the ones that took wealth home when various MSMEs were slaughtered by the virulent nature of the virus. This was mainly due to the fact that closure or partial closure of economies led the online e-commerce business to boom in the economy.

But with its jittering achievements during the pandemic does not mean that the e-commerce sector is not plagued with inefficiencies. It is to be noted that the proposed amendments to be made to the Consumer Protection Rules can be a major deterrent for the e-commerce industry’s growth. This is mainly due to the fact that the e-commerce consumer protection rules are ambiguous which likely will have unintended negative consequences for the consumers, which might not have been deciphered at first.

According to the Internet and Mobile Association of India, several suggestions like effectively excluding the entire value chain from the e-commerce definition are needed. This step needs to be taken to clarify the contentious flash sale concept, and properly defining and confining the rules to strategically protect the interests of the consumers. The ambiguity needs to be effectively cleared as if the current form of such laws is scrutinized, they ambiguously fall under various jurisdictions of legal metrology, Competition law, and intermediary law.

Though support to the government’s initiatives and interventions should be given proposed amendments and regulative interventions emphatically raise several ambiguities and concerns. The ambiguities are raised not only for consumer rights but also for e-commerce business standpoint. This can, in effect, lead to double unintended negative consequences for the consumers, who will bear a large brunt.

It is no news that flash sales and cheap wares at the e-commerce platform drive more sales than the convenience of getting your things at home. This has led to outrages from informal MSMEs and shipowners around India which have been facing stiff competition from the same. But given the latest amendment, a ban on such random, flash sales has been proposed.

To make the business environment on such platforms more nonaccommodative, the appointment of a chief compliance officer or a grievance redressal officer has been made. are among the key amendments proposed under the Consumer Protection (E-Commerce) Rules, 2020.

It is to be noted that the government through its latest amendments seeks to thoroughly regulate the entire gamut of the e-commerce supply chain. This can effectively involve Platform Business e-commerce and Business-to-Business e-commerce too.

This gives rise to a pertinent, inquisitive question that how various e-commerce platforms will fell the burden? It is to be noted that the amendments will make the business environment quite unconducive as e-commerce platforms will have to face heightened scrutiny and several restrictions. This would emphatically lead to an increased compliance burden under such amendments, which many small businesses might not be able to afford.

Effectively, the implementation of these amendments in their current form will, as aforementioned, emphatically increase the compliance burden on, especially MSMEs. Such an increased burden will also be felt by start-ups who are currently not even in the e-commerce business but significantly earn their bread by providing services to e-commerce.

In fact, the e-commerce industry has the most to lose due to the concept of “Fall Back liability”. This is due to the fact that it will emphatically dilute the intermediary safe harbor which was earlier provided under the provisions of the IT Act. Thus, it can be rightfully stated that such an amendment will effectively open floodgates for highly unscrupulous claims to be made against e-commerce entities.

Thus, with heightened scrutiny and unscrupulous and detestable claims, e-commerce giants like Walmart and Amazon will have much to lose. In fact, it won’t be further from right to state that this can also significantly change the landscape of the e-commerce market in India. On the other hand, instead of protecting consumer interests, innovation in the industry will be impeded.

What is the most detestable and odious character of the amendments is that one of the proposals effectively maintains that a marketplace e-commerce entity will be actually subject to a ”fallback liability”. This means that when a seller that is effectively registered on the e-commerce platform fails to deliver the goods that were ordered by a consumer due to any negligent conduct or any act by such a seller, the fallback liability will be the e-commerce giant.

Talking about the other clause of mis-spelling, it is to be noted that it is in contradiction with sellers’ liabilities in e-commerce rules. In addition to this, it is also in contradiction to the intermediary role that must effectively be performed by all marketplace e-commerce entities strategically and ardently under the FDI laws and the IT Act.
Thus, given the odious nature of the newer amendments, it does not come as a surprise that various industry bodies have actually and quite forcefully have raised concerns over various provisions. But what stance the government takes of the proposed regulations is yet to be discovered.

According to various experts, obligations should be rationalized. It should be rationalized in line with the activities of relevant entities. On the other hand, the fallback liability of online retailers should be effectively and strategically limited to only ensuring timely refunds to consumers. On a larger scale, the consequences of the amendments will be even larger as they will definitely affect the global investor sentiments around the world with respect to the parameter of the ease of doing business in the country. This can severely hamper the growth of the e-commerce sector in India.

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Tags: consumer protection, consumer protection act, consumer rights, right to choose consumer rights, consumer protection agency, consumer law, department of consumer affairs, consumer rights act, consumer protection law, need for consumer protection, the consumer protection act, ecommerce policy

Sep 09
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operational creditors

No Equality Among Equals : Treatment of Secured Creditors Under IBC

By Economy, Corporate Law, Others No Comments

Treatment of Secured Creditors Under IBC

Creditors Under IBC: It is no secret that the Indian economy is beset by a never-ending bad credit issue. It would be an exaggeration to say that such poor loans are destroying India’s financial and banking systems. IBC was introduced in India to combat the bad credit situation.

The law was critical in averting the catastrophe since it addressed the root of the problem. The IBC is a quick-response tool that addresses the NPA situation right away. However, it should be recognized that every coin has two sides. This practically suggests that IBC has flaws of its own and may not be as foolproof as one might think.

Given the IBC’s flaws and inconsistencies, it is imperative that the government reform the IBC regulation. The government must acknowledge and accept that different sorts of debtors may have different needs. This reclassification must be completed as quickly as possible so that the Code’s ultimate goal can be realized.
The topic of contention

The treatment of inter-creditor and subordinate agreements under the IBC is the major point of disagreement. It should be emphasized that, since the Code’s inception, a furious debate has erupted over the years about the difficult matter. It is worth noting that such inconsistencies have raised a number of key concerns in both the corporate litigation and insolvency resolution processes.

It should be emphasized that in 2019, only CIRP-related clarity was provided. In CIRP, the government had strategically and efficiently clarified the discriminatory treatment of secured creditors. The rationale for this clarification of differentiated treatment was the priority of charge.

While approving the resolution proceeds offered under a resolution plan, the “priority” of a secured creditor’s security interest can be effectively and strategically addressed, according to the clarification. As a result, it can be safely asserted that it will be investigated as a consideration when the committee of creditors approves the distribution of resolution funds. However, establishing clarity on CIRP did not successfully address the issue, as there remained ambiguity in the context of liquidation.

Certain issues surrounding liquidations, such as whether senior (in terms of the amount owed) secured creditors would have any strategic precedence over junior charge holders, remained woefully unclear, causing confusion. It’s worth noting that the Code’s liquidation waterfall, Section 53, states unequivocally that all secured creditors will be paid in proportion to their recognized claims.

However, there is ambiguity in the topic because no regulations or statements were made to differentiate between secured creditors based on inter-creditor or subordinate agreements.

However, in 2018, the Insolvency Law Committee took notice of the situation and determined that several valid inter-creditor and subordination regulations must be followed. It must be done in a courteous and polite manner in the liquidation cascade established by Section 53 of the Code. It should be noted, however, that the Insolvency and Bankruptcy Board of India reported in 2019 that the subject was still being debated.

the creditors under ibcThe question of whether a senior creditor has a better right than a junior creditor was discussed. This is directly in the Code’s section 53 waterfall. As a result, the Insolvency Law Committee addressed this ambiguity once more in 2020.

It was proposed in its report that a clarification be provided invariably by inserting an Explanation under Section 53. (2). this was done to ensure that subordinate agreements and inter-creditor agreements were legal.
But did this result in the resolution of a long-standing and difficult issue?

No, there isn’t an answer to that question. This was owing to the government’s refusal to embrace the ILC’s 2020 recommendations. As a result, no changes were made to Section 53 to add an explanation (2).

However, it is worth noting that a number of liquidators have begun to assert that agreements between secured creditors and inter creditors, as well as subordinate agreements, should be respected. Because of ICL’s 2020 decision, this huge step was taken. This effectively gave senior secured creditors preferential treatment.

In the context of the liquidation distribution, senior secured creditors were given preferential treatment. However, it is worth noting that, when the relevant matter of inter-creditor validity was ultimately put to the NCLAT, it rejected this judgment and, as a result, disagreed with the ILC’s interpretation.

Furthermore, according to the TDB Judgment, rights created through an inter-creditor or subordinate arrangement expire once the charge holders over an asset opt to engage in the liquidation procedure.

Though the aforementioned decision clarifies the legal issue, it also creates several undesirable situations. Charge holders are recommended to keep out of the liquidation process in certain cases. This could drive kids to choose and pursue some of their own independent actions. This could lead to severe outcomes in the future.

In the end, even the Supreme Court stated in its Swiss Ribbons decision that the Code’s overall goal is to avoid corporate death by liquidation as much as possible. This is to say that if inter-creditor relationships are recognized under CLP, there may be liquidation scenarios in which senior secured lenders would wish to avoid paying other creditors. Furthermore, such decisions can be made based on the corporate debtor’s liquidation value.

As a result, the legislature must update the Code in a decisive and effective manner. The modification must be written in such a way that it recognizes the various types of creditors. This should be done based on the security interest’s priority and value. Another requirement to remember is that when amendments are being made, the ultimate goal of the Code should not be obfuscated.

 

Tags: creditors, the creditor, trade creditors, creditors and debtors, preferential creditors, creditors in accounting, unsecured creditors, creditors under ibc, financial creditor, secured creditors, creditor protection

Sep 08
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ecb policy

Changes To ECB Policy: A Bane or A Boon?

By Economy, Banking, Others No Comments

Changes To ECB Policy

ECB Policy: Given the current market conditions in India, Indian corporations have had difficulty obtaining overseas finance. Credit from debt capital markets and onshore lending markets has been tough to come by given the current situation. The Securities and Exchange Board of India’s recent policies has effectively attempted to increase India’s debt capital market. This was also started in order to reduce corporate India’s reliance on loans from the Indian banking industry.

This is due to the fact that certain Indian corporations must absolutely, without exception, fund a specific percentage of their debt by effectively issuing bonds in order to obtain loans from the Indian banking sector.
The upcoming SEBI new standards for the Indian banking sector on single and group exposures have effectively driven some of the larger corporations to look at other choices. For satisfying their debt funding needs, these choices will look beyond their normal, conventional, favored relationship with onshore banks.

Significant sources of onshore debt in India, such as the mutual fund business and the non-banking sector, are apparently dealing with their own set of problems, which doesn’t help the situation. Given the current state of the onshore debt market, the proposed changes to the External Commercial Borrowing framework have been greeted with optimism.

The moves have been applauded since they will enable Indian enterprises to explore. This has also been done to ensure that Indian businesses are able to meet their financing requirements successfully.

This will go a long way toward easing the resolution of stressed assets in the Indian banking system, which is currently under strain. It should also be emphasized that the bad debt financing in India will ease off during the peak of the country’s crisis, with enormous potential to grow in the future. Due to the epidemic that has destroyed the financial situation of many people and businesses, numerous debt financing techniques and channels are required.

The Reserve Bank of India liberalized the framework that had previously governed ECBs in 2019. End-use restrictions were relaxed, and domestic lenders were allowed to transfer and assign their existing INR loans offshore.

What has changed with ECB revenues is that they can now be used to repay onshore INR loans and meet working capital requirements as needed. Non-banking financial companies that are registered with the RBI, on the other hand, will now be able to raise ECBs.

Companies in the infrastructure and manufacturing sectors, for example, can successfully raise ECBs to pay back INR loans. These can be used to fund INR targets that were obtained onshore and when the revenues of such loans were used to fund capital expenditure. Companies that are currently classed as SMA-2 or NPA (according to RBI rules) as a result of a settlement or agreement reached with the company’s lenders.

However, international branches and subsidiaries of Indian banks are not permitted to offer ECBs. The SEBI’s relaxations are expected to become more relevant for higher-rated Indian firms. Those who can get the best ratings. ECBs will be allowed to access offshore markets at a set price.

The RBI treats ECB funds that are utilized by borrowers in the infrastructure and manufacturing sectors to repay onshore loans, including stressed assets and NPA loans, more positively. Because the RBI’s latest move is designed to help resolve stressed assets. As a result, this is the most significant development in the Indian NPA market. This is because it allows Indian banks to sell nonperforming loans. The loans can be offered directly to ECB-approved offshore lenders.

Notably, this will very definitely lead to increased foreign direct engagement in the Indian distressed credit market. However, this is a major paradigm shift from the previous method. The current framework restricts investments to onshore vehicles and security receipts.

As a result, this innovative idea should enable onshore banks to allocate troubled loans to eligible offshore lenders. However, these foreign lenders should be immune from the RBI’s securitization rules. Resolving stressed assets in this creative way reduces the possibility of certain difficulties. Concerns emerge from the securitization procedure according to the RBI’s securitization requirements.

Notably, SEBI and RBI’s creative measures will allow troubled Indian firms to access foreign financial markets. To refinance their existing INR debt or to meet their specific working capital needs. The option will only be offered to higher-rated Indian firms. Using this approach, other Indian corporations will be able to receive considerable debt finance from the domestic debt markets.

The changes, on the other hand, are quite progressive, allowing direct assignment or transfer of current INR loans to foreign lenders. This will help to struggle Indian enterprises since it will help resolve stressed loan assets in India.

 

Tags: external commercial borrowings, ecb policy india, ecb monetary policy, ecb policy, ecb external commercial borrowing, external commercial lending rbi, external commercial borrowing rbi, external commercial borrowing guidelines, economic commercial borrowing, impact of external commercial borrowing on indian economy, external commercial borrowing regulations.