May 24
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concrete paver path

The Need for Paving a Concrete Path for SPACs

By Corporate Law, Banking No Comments

The Need for Concrete Paver Path for SPACs

Due to the financial shortages that businesses are experiencing as a result of the epidemic, Special Purpose Acquisition Firms, or more accurately, blank cheque companies, might be a haven during these unusual circumstances, highlighting the need for regulation.

SPACs provide firms with a unique manner of public inclination and distinctive advantages over the traditional IPO measure. They provide greater market certainty in valuing equities, lower exchange charges, adaptable arrangements, greater access to the display, more solid brand worth, and market confidence in a substantially shorter period of time.

The limited market instability produced by the general shutdown is partly to blame for the surprise surge in energy prices. Despite the fact that several firms all around the world had postponed their IPOs due to the pandemic, SPACs have been approved to provide them with an exit strategy by supporting them in obtaining financing even during times of extreme volatility.

Indian corporations have been requesting approval for direct posting on foreign stock exchanges for quite some time, but India lacks a defined mechanism on the subject. In the meanwhile, many organizations have sought alternatives, and SPACs have emerged as a viable option. SEBI has recently formed a specialized advisory committee to look at the viability of SPACs in India.

It has prompted the board to produce a report on enabling SPACs alongside controlling norms to reduce the chances under existing legislation. Its recommendations for administrative income assortments through capital additions charges are also being looked upon.

SPACs frequently choose the newest, most distinctive, and futuristic enterprises in the technological and market arena as acquisition targets, allowing the major investor to be addressed directly, ensuring pricing certainty rather than market value volatility. Another advantage of starting a new firm in the early stages is that the costs associated with records and exposure are low, if not eliminated.

Abroad posting permits Indian new companies to get to bigger and more enhanced pools of capital and raise assets at lower costs, diminishing their expense of capital and making them more cutthroat. Abroad business sectors may help new companies accomplish more rewarding valuations as these business sectors have a more profound financial backer biological system that comprehends the dangers implied in a beginning up.

In particular, new firms seek high values based on expectations rather than beneficial history, making them unsuitable or unattractive candidates for an IPO on Indian stock exchanges. In any event, Nasdaq provides access to a larger and more current financial supporter base, as well as the ability to search for values.

Given how this interaction is performed, i.e., the SPAC support discovers the financial donors rather than target undertaking a wide book-building activity, it is reliant on forecasts. As a result, company entrepreneurs should reconsider a Nasdaq listing via SPAC.

The new USD 8 billion arrangement between India’s ReNew Power and Nasdaq listed SPAC RMG Acquisition Corporation II, for which Khaitan and Co went about as the Indian legitimate guidance to RMG II, is among the biggest ever postings including an Indian organization in the US through this course. Also, if the developing buzz around SPACs is any sign, this arrangement might just be trailed by a lot more sooner rather than later.

Investing in SPAC is not without risk, both for the backers and for the retail financial supporters. If the SPAC posts continue at their current rate, the required number of target companies by the end of 2021 might number in the thousands. In any case, there will surely be a limited number of worthwhile targets.

If the supporters are unable to identify a goal or if the investors refuse to approve the agreement, the supporters are left with no options. Furthermore, in the United States, retail financial supporters are allowed to cancel their offers and guarantee reductions even before they are purchased. In any event, such an option is unlikely to be available to Indian investors for a variety of reasons.

In the United States, posting through SPACs has become the norm. India, too, may join this current trend if it has a strong SPAC system. In the Indian economy, new enterprises have a huge duty to complete.

A robust SPAC system will aid India in creating a stable startup environment. It will help the market conclusions and give new channels to capital development. That would lead to increased foreign inflows to help India in its journey towards expanding its economy.

 

Tags: concrete pavers path, walkway with concrete pavers, distinctive competitive advantage, concrete paver path, concrete paver walkway, concrete path pavers

May 23
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indian startup

SEBI Gives Indian Startup Wings

By Media Coverage No Comments

Indian Startup Wings

The Securities Exchange Board of India has issued a long-awaited circular on a revision in the criteria of listing. This approach allows Indian primary startups to grow their market and gives small investors an investment opportunity. A large number of Indian companies are now in the early stages of development.

At which point the essential market list is in the logical stage to offer initial financial backers the chance to invest cash, yet additionally to take their story to a more extensive crowd.

It is not, however, a smooth journey, since a list of these businesses’ accomplishments might serve as a test based on specific standards that are more extensive and demanding than they have ever been exposed to. Private bankers, private equity funds, and investors treat their children with extraordinary generosity. Since, in the initial phases, the financial backers of the startups, look for development instead of return.

Additionally, the numbers are a result of outstanding advancement. That is the reason we’ve seen terms like gross worth added (GVA) utilized as a measuring stick for computerized business development. Tragically, the benefit of the same in the environment of most new companies has not yet been perceived.

SEBI has also introduced provisions for startups that are similar to mainboard businesses. “Issuer businesses that have given promoters/founders Superior Voting Rights (SR) equity shares will be able to list under the Investors Growth Platform (IGP) framework.” The regulator has increased the set-off mark for open offers for IGP organizations from 25% to 49%.

In any case, independent of procurement or holding of offers or casting ballot rights in an objective organization, any adjustment of control straightforwardly or by implication over the target organization will trigger an open offer. The controller has devised cautious starting instructions.

Currently, a company must have 75 percent of its capital owned by QIBs as of the date of use for moving from IGP to Main Board if it does not meet the conditions of productivity, net resources, total assets, and so on. This need has now been reduced to half of its original size.

The amendments have been made according to the partner’s suggestions for the Innovators Growth Platform. It made changes in the wake of dissecting remarks on the discussion paper given in last November. SEBI has cut the personal period for backers to having 25% of pre-issue capital held by qualified financial backers from 2 years to 1 year for qualification prerequisites which were of significant interest for new businesses.

Other actions done by the controller include rebranding Accredited Investor to ‘Innovators Growth Platform Investors’ with the final purpose of IGP. Currently, such financial supporters’ pre-issue ownership for fulfilling qualification criteria is considered for just 10%, but this is being increased and will be considered for the entire 25% needed to achieve qualification conditions.

Profit is important to experienced investors, and they want it now. Given the current state of main startups, the market is still uncertain about the immediate consequence of earnings. SEBI, on the other hand, has attempted to speed up the process by establishing the Innovators Growth Platform on the National Stock Exchange. Some other discounts such as simplifying open offer trigger requirements and adjusting delisting rules are also intended to make life easier for startups.

Apart from the above-mentioned rules, the market regulator also mandated the public disclosure of analyst calls, and quick reporting of earnings, and expanded the requirement of setting up a Risk Management Committee. Thereby, the startups will eventually have to follow the rules.

According to Renaissance Capital, half of the IPO enrollments in the United States will be withdrawn at long last. Financial backers are disillusioned in the store, even with those documented. For example, McAfee, an internet security corporation, meets all of the criteria to be included on the list for 2020.

It declined on the first day of the season, to $ 20 per offer, and then climbed a half year later. On the other side, Infosys may serve as an inspiration and a good example of how to profitably build a firm. These criteria have made it simpler for startups in India to go public, preventing a possible outflow of Indian firms to international capital markets.

 

Tags: india startups, startups in india 2021, indian startup, startup companies in india, start up india, start up business in india

May 22
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the renewable energy sector

Challenges in Cross Border M&A Deals in The Renewable Energy Sector

By Media Coverage No Comments

Cross Border M&A Deals in The Renewable Energy Sector

Cross Border M&A Deals: India’s government has emphasized the potential of renewable energy to address the country’s rising energy needs. Due to the increasing relevance of renewable energy as an economically viable source of electricity, M&A activity in this sector has increased in India in recent years.

This industry has demonstrated tremendous potential for investment from both domestic and foreign firms, resulting in a surge in cross-border M&A deals.

Although both the acquirer and the acquired firm face obstacles, cross-border M&A may help organizations extend their operations throughout the world without having to start from scratch.

Cross Border M&A Deals – Pros and Cons

PROS

  • Capital builds up:

Long-term capital accumulation is aided by cross-border mergers and acquisitions. It invests not only in plants, buildings, and equipment to develop its enterprises but also in intangible assets like technical know-how and talents, rather than simply the physical element of the capital.

  • Employment creation:

It can sometimes be observed that mergers and acquisitions (M&As) done to drive restructuring may result in downsizing but, in the long run, increase employment. It is sometimes necessary to downsize businesses in order to keep them running. In the long run, as firms grow and become more successful, additional job possibilities will arise.

  • Technology handover:

Once enterprises from other nations join forces, beneficial impacts such as technology transfer, sharing of best management skills and practices, and investment in the host country’s intangible assets are sustained. This, in turn, leads to innovations and has an impact on the company’s operations.

CONS

a. Political concern:

The political environment might have a big impact on cross-border mergers and acquisitions, especially in politically sensitive areas like defense and security. 

b. Legal considerations:

Companies wanting to merge cannot overlook the challenge of meeting the various legal and regulatory issues that they are likely to face. Various laws concerning security, corporate, and competition law are bound to diverge from each other.

Hence before considering the deal, it is important to review the employment regulations, antitrust statutes, and other contractual requirements to be dealt with. These laws are active while the deal is under process and also after it has been closed. 

c. Due diligence:

Due diligence is a crucial aspect of the mergers and acquisitions process. Due diligence can influence the terms and conditions under which the M&A transaction takes place, the deal structure, and the deal price. It assists in identifying the potential for hazards and provides a complete perspective of the proposed transactions.

There is a slew of additional aspects to consider since each transaction has its own set of advantages and disadvantages.

Industry Impact

Frequent improvements, such as energy sources, indicate that market changes reflect the desire for eco-sustainable growth. The availability of renewable energy sources varies. This complicates the complete integration of renewable energy sources into the distribution system, as well as the reduction of system-wide electric imbalances.

Several solutions on the market, on the other hand, allow for the technological exploitation of synergies across diverse energy networks, therefore relieving the issues associated with the integration of renewable energy sources. Political, economic, social, technical, legal, and environmental issues all have a role in M&A decision-making, as well as the number and value of acquisitions that follow.

The most important factors are commodity price fluctuations, increased oil supply, increased penetration and active development of renewable energy sources, use of smart grid technology, which allows for lower transaction costs and optimal operation of electrical grids, and liberalization of energy markets.

 In February 2021, a total of $3.53 billion in cross-border power industry M&A agreements were announced throughout the world, headlined by IFM Investors, and the $2.19 billion asset purchase between Ontario Teachers’ Pension Plan and Brookfield Infrastructure Partners.

Conclusion

Despite the issue, we have discussed above the number of cross-border transactions has increased quite radically over the past few decades. Though there have been a few economic crises and the situation has not been so conducive, it had not disturbed the upward trend in cross-border M&A deals and activity.

More and more firms desire to go global since it provides excellent chances and is a less expensive choice for them to expand themselves inside. Looking into M&A attitudes throughout the world reveals that the business’s acquisition focus is shifting from domestic to cross-border transactions due to the numerous advantages it provides.

 

Tags: global renewable energy, renewable energy industry, renewable energy investment, cross border m&a deals, renewable energy market, renewable energy finance, the renewable energy sector, renewable energy sector

May 22
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ombudsman concept

Will The Ombudsman Concept by The SEBI Adversely Affect The Entities?

By Labour & Employment No Comments

ombudsman Concept by The SEBI

One of the most perplexing issues that SEBI faces is investor complaints. Verifying facts, solving legal issues, and finally reaching a conclusion may be extremely costly for SEBI if the conventional method is followed.

In terms of recognizing the virtue of time, the delay might be far worse. Sebi has also been criticized for effectively performing the function of a postman by just delivering the complaint to the Company without taking any further action. Of course, there are certain criticisms that are baseless. There may be several complaints filed against the company in which SEBI has no part.

Nonetheless, the current circumstances necessitated a new strategy, and Sebi has advised a whole new strategy in the form of the proposed “Ombudsman Regulations.” The notion of an ombudsman is not a novel one; it already exists in the banking industry. Based on all of the recommendations, SEBI suggested this regulation apply to the operation of the capital market sector.

It is, in essence, and even legally, a time-limited arbitration procedure. Many of the procedures, which are usually time-consuming, are and have been eliminated entirely. There will be just one and the last level of appeal, and it will be addressed to SEBI. No legal representation is permitted, and the major importance of this issue is emphasized, with severe consequences.

Given the core of the Act, the Ombudsman does not require any fancy credentials, and anybody with specific knowledge and competence in subjects such as “legal, finance, economics,” and so on would be considered competent for the post.

Apart from the usual disqualifications, one that bears special mention is that he should not have served as a full-time director of an intermediary or a publicly listed company. Surprisingly, his job is entirely at the discretion of the SEBI, and he may be dismissed and dismissed with just a day’s notice.

The proposed regulation included benefits as well as drawbacks for investors, some of which are outlined below. A residuary category of complaints includes any complaint made against an intermediary or a publicly listed firm. As a consequence of this chance, anybody with a compelling claim against a publicly listed company, whether an investor or not, or an intermediary, can apply to the Ombudsman for assistance.

Of course, no arbitrary limits should be placed, since this may lead to the rejection of real concerns for technical reasons. However, such wide breadth may not be required, resulting in some unusual and trivial complaints being brought and addressed before the Ombudsman.

However, when looking at the other half of the page, the broad definition supplied offers some advantages. Certain technological roadblocks are also removed by not requiring the complainant to be an investor (or even qualified in any other way). Additionally, avoiding the development of particular categories aids in preventing some attempts by corporations to dodge certain regulations. Such as the complaints claiming that they do not fit into any of the categories.

Therefore, the “Securities and Exchange Board of India (Sebi)” has now dropped its plan and scrapped the proposal to create an ombudsman to handle the investor complaints more quickly and feasibly. According to the regulator, the present mechanism for stock exchanges handling investor complaints looks to be pretty solid and to be operational, and functioning efficiently.

Investors are increasingly taking their complaints about all publicly listed businesses to specialized stock exchanges, which are also regarded as first-line regulators. After that, the bourses are allowed to take up the cases with the concerning corporations. Sebi is only notified of the complaints that have not been efficiently handled.

“In the most perfect system, every stock market participant would have its own ombudsman.”

Thus, the decision to reject the idea was taken in the best interests of the whole investment community. Since SEBI was also having problems finding a qualified candidate for the position of ombudsman. However, the idea was met with opposition from the start, and hence SEBI decided to withdraw it.

 

Tags: the ombudsman concept, affect of ombudsman on entities, ombudsman concept, affect of ombudsman, ombudsman concept by the sebi

May 20
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delhi rent control act 1958

A Critical Analysis of The Delhi Rent Control Act 1958

By Real Estate No Comments

Analysis of The Delhi Rent Control Act 1958

The motivation for the design of a rent control statute in the post-independence era was to protect economically disadvantaged parts of the community who couldn’t buy a property or qualify for loans due to bad credit scores. When demand for rental property exceeds supply and renters are abused by landlords, rent control measures are required.

As a corollary, the Rent Control Act of 1958 was enacted with the goal of protecting tenants’ rights, ensuring their safety, and limiting landlords’ ability to evict renters. The Act was written uniquely for each Indian state. The purpose of this essay is to examine and comprehend key parts of the Delhi Rent Control Act.

After years of trying to come up with the right law, Delhi finally established a comprehensive rent control law in 1958. The government imposed a rent restriction and established policies that favored renters, resulting in a general lack of interest among investors in purchasing real estate as a result of the DRC Act.

The Delhi Rent Control Act is intended to serve two main purposes: protect the tenant from paying more than the standard rent and protect the tenant from unilateral eviction.

The Act has changed again in 1988, exempting properties with monthly rents above Rs. 3,500 from the Rent Control Law and allowing landlords to increase rent by 10% every three years.

But, because the actual monthly rent at the time varied from the low double digits to barely Rs. 1000, and the legislation stipulated that assets would be subject to the DRC Act until the rent reached Rs. 3500, the realization of this rate failed to provide a significant profit for the landlords.

This amendment was guided by proposals to achieve a better mix between landlords and tenants and to reduce the inhibition of the Delhi Rent Control. However, the Act seeks to apply several other outdated regulations that do not allow landlords to revisit their rent. The relevance of the Act’s outdated requirements, as well as the law’s procedural legality, have been questioned on various occasions.

The DRC Act focuses on the mistreatment of tenants as well as the owners’ exorbitant rental charges, and the regulation of these activities, as well as rental management improvements, is a primary motive for the law.

Rental management also gives property owners more financial stability since, because loans are limited, inhabitants want to stay in an estate for a long time. This ensures that property owners will not face vacancies next year, as the existing renters are expected to extend and renew their lease.

The main effect of the DRC Act is a reduction in housing standards since assets are not maintained regularly and landlords do not increase the quality of the facilities until the returns begin to dwindle.

This law not only restricts the availability of legal rental homes but also eliminates applicants who force residents to establish informal or unrecorded agreements. The eviction of tenants is also a major issue that a landlord face which is very strictly monitored. 

The mismatch between the rent payable and the available lodging is another flaw; also, renters are unable to make modifications, renovations, or withdrawals in the building without the approval of the owner. In addition, the rent control methods entail high administrative expenses and a complicated enforcement mechanism.

Due to the poor returns imposed by the DRC Act and the Pagdi scheme, landlords have no motivation to make any modifications to the house, and to combat this scenario under this non-upgraded regulatory system, rentals have remained low while maintenance and operational costs have grown dramatically.

As a result, the Delhi government allowed landlords of buildings to raise the rent, paid, by 25% in 2020 to fund restoration work, as long as the majority of them remained secure and met safety regulations.

There have been petitions filed in the High Courts of Maharashtra, Tamil Nadu, and Karnataka, requesting that such antiquated rent control legislation be repealed. If any of these appeals are successful, Delhi may be on the verge of passing a tenancy law that benefits both renters and landlords.

To conclude, the Act’s major flaw is its stagnating property income, and implementing a new policy in lieu of the existing one would aid in raising investment and boosting the rental housing industry in the National Capital.

 

Tags: evict renters, tenant eviction, delhi rent control act 1958, tenant eviction notice, delhi rent control act, rent control measures

May 17
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adjudicating authority

How Does The Adjudicating Authority Approve The Resolution Plan?

By Corporate Law, Media Coverage No Comments

The Adjudicating Authority

A resolution plan is a proposal that aims to provide a resolution to the problem of the corporate debtor’s insolvency and its consequent inability to pay off debts. It needs to be approved by the committee of creditors (“COC”), and comply with mandatory requirements prescribed in IBC.

The Code (Insolvency and Bankruptcy Code, 2016) attempts to solve corporate debtors’ difficulties by putting them through a corporate insolvency resolution procedure (CIRP) and transferring them as going concerned to Resolution Applicants prepared to take over their management and assets and pay their obligations.

The CIRP is seen as a more beneficial alternative to liquidation, as a going concern is likely to fetch a higher value for the creditors than a simpliciter sale of its assets.

The market will determine the remedy. Interested resolution applicants can join the CIRP and submit “resolution plans,” which are mechanisms for taking over a corporate debtor, settling its creditors’ debts, and reviving and turning it around. The Adjudicating Authority/National Company Law Tribunal (“NCLT”) then reviews and approves the authorized plan, bringing the CIRP to a close.

While analyzing an authorized plan, the NCLT has limited powers and cannot intervene in a commercial decision made by the Committee of Creditors. When it comes to the Resolution plan’s approval, an adjudicating body must make a judgment in accordance with Section 31 of the Code.

It must go through the reasons to accept or reject one or more suggestions or objections, and it has the option of expressing its own judgment. As a matter of fact, now, the Committee of Creditors ought to record their reason when approving or rejecting one or another Resolution plans.

The Supreme Court has declared in Antanium Holdings Pte. Ltd. Vs. M/s. Sujana Universal Industries Limited, that the adjudicating authority is to record analytical subjective satisfaction which is a precondition before according approval to the Resolution Plan. In other words, the ‘Approval’ of ‘The Resolution Plan’ is to be judged with the utmost care, caution, circumspection, and diligence.

The threadbare examination of the scheme is to be studied astutely before arriving at a subjective satisfaction by the ‘Adjudicating Authority’.

The expression “subjective satisfaction” means the satisfaction of a reasonable man and it can be arrived at based on some material that satisfies a rational mind. It’s worth noting that a Resolution applicant can’t appeal the judgment of the Committee of Creditors (COC).

Given the legislative constraints of Section 30 of the Code, it is the COC that will approve or disapprove a resolution plan. An ‘Adjudicating Authority’ functions in a ‘Quasi-Judicial’ capacity and has the power to set the ‘Resolution Plan.’

 

Tags: adjudicating authority under ibc, adjudicating authority approval, adjudicating authority, approval of resolution plan, resolution plan approval, adjudicating authority under insolvency and bankruptcy code

May 17
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new audit rules

Are The New Audit Rules by RBI a Benefit or Hindrance?

By Banking No Comments

New Audit Rules by RBI

The Reserve Bank of India (RBI) has stiffened the norms for the appointment and functioning of auditors in commercial banks and non-bank financial companies (NBFC). Time and again the role of auditors has been questioned whenever bank frauds have happened in the past including the infamous PNB scam, YES Bank, IL&FS, and DHFL episodes.

The irregularities, in most cases, happened over years, and if experts are to be believed auditors have played a huge role in such scams. 

Need for New Law

The central bank’s new restrictions are the outcome of a few giant enterprises monopolizing their industries. There are numerous new businesses with immense promise, yet the old businesses continue to dominate. The new RBI guidelines will assist fledgling businesses, and there will be no shortage of corporations willing to take on the responsibility.

The new standards were necessary to ensure the auditors’ independence, because, according to experts, if one business works with a bank for numerous years owing to a tight relationship, the firm’s impartiality will be jeopardized.

In the words of Mr. Nihar Jambusaria, President of the Institute of Chartered Accountants of India (ICAI), “Our ethical standards talk about acquaintance threat and the new norms seek to address that. If you work for the same client for a long time, due to acquaintance your independence can be impacted. ”

Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs, and NBFCs (including HFCs)

The RBI guidelines primarily focus on critical topics such as auditor appointment procedures, tenure, eligibility, and independence, among other things. For the financial year 2021-22, the new norms will apply to Commercial Banks, Urban Cooperative Banks (UCBs), and NBFCs, including home financing businesses.

Non-deposit-taking NBFCs with assets under Rs 1,000 crore, on the other hand, have the option of continuing with their current method. UCBs and NBFCs will have enough time to implement these rules starting in H2 (second half) of FY 2021-22 to avoid any interruption. Commercial Banks and UCBs will be required to take prior approval of RBI for the appointment or reappointment of SCAs/SAs on an annual basis in terms of the above-mentioned statutory provisions. 

They must apply to the Department of Supervision of the RBI for this before July 31 of the reference year. While NBFCs are not required to seek RBI clearance before appointing SCAs/SAs, all NBFCs must notify RBI of SCA/SA appointments for each year via a certificate in Form A within one month of the appointment.

Number of the Audit firm that can be Appointed

According to RBI rules, for entities with an asset size of Rs 15,000 crore and above as of the end of the previous year, the statutory audit should be conducted under a joint audit of a minimum of two audit firms.

All other entities should appoint a minimum of one audit firm for conducting the statutory audits. It should be ensured that joint auditors of the entity do not have any common partners and they are not under the same network of audit firms

Number of Auditors

If the asset size of the entity is up to Rs 5 lakh crore, a maximum number of auditors can be four, for firms with asset size between Rs 5 lakh crore to Rs 10 lakh crore. The maximum number can be 6, for entities with asset size above that. Up to Rs 20 lakh crore maximum number of auditors can be up to eight and for those above Rs 20 lakh crore, the number of auditors should be 12.

New Norms on Eligibility, Empanelment, And Selection of Auditors in PSBs

PSBs need to allow the top 20 branches to SCAs in such a manner as to cover a minimum of 15 percent of the total gross advances of the bank by SCAs. For other entities, SCAs/SAs shall visit and audit at least the top 20 branches and the top 20 percent of the branches of the entities.

In order to be selected for the level of outstanding advances, in such a manner as to cover a minimum of 15 percent of the total gross advances of the entities.

Tenure of Auditors

The RBI stated that organizations must appoint SCAs/SAs for a continuous period of three years to ensure the independence of auditors/audit firms. Furthermore, throughout the aforesaid time, commercial banks and UCBs can only dismiss audit companies with the prior consent of the RBI’s concerned office.

According to RBI rules, an audit firm would not be eligible for reappointment in the same entity for six years after completion of full or part of one term of the audit tenure. However, audit firms can continue to undertake the statutory audit of other entities.

 Pros and Cons of the New Guidelines and Their Effect on the Industry

The Reserve Bank’s new auditor requirements will assist enhance overall audit quality and clarity, eliminate conflicts of interest, and assure auditor independence, all of which will contribute to financial stability.

On the flip side, the RBI standards may force auditors to quit in the middle of their contracts, which would break earlier agreements and destabilize the business. Investors, particularly FPIs, OCBs, MFs, and other institutions, will not look favorably on a change in auditors in the middle of the year.

The country’s reputation in the worldwide market would also suffer as a result of this. The Reserve Bank of India’s three-year period is relatively short, while the minimum contract duration for non-compliance with company law is five years.

CONCLUSION

As with all initiatives, the RBI’s new guidelines were greeted with enthusiasm by some and scorned by others. The new principles will improve audit standards while increasing the openness and independence of auditors. The Reserve Bank of India’s rules should be viewed as a new step toward establishing openness and confidence.

As a result of the new legislation, management will have to devote time to hiring new auditors who are familiar with the operation of NBFCs and financial institutions. However, everyone is finding it difficult to accomplish this in the current budget year. The contract will undergo several revisions, which is the industry’s biggest difficulty.

The RBI may consider deferring the circular’s implementation for at least two years to give the sector time to review and prepare for it, according to the industry association, which also proposed that a phased operationalization would help minimize immediate disruption. 

 

Tags: partnership audit rules, new partnership audit rules, new audit rules, partnership tax audit rules, partnership tax audit, partnership audit

May 16
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legal lens

TRUST – Through The Legal Lens

By Media Coverage No Comments

Trust Through The Legal Lens

Trust is an arrangement whereby a person holds property as its nominal owner for good of one or more beneficiaries. We can see many trusts working for different purposes. But are they liable for the paying of tax while working? Does the creation of trust become the device of tax evasion? The answer is No, that is not the case.

The income tax appeal tribunal (ITAT) in Delhi ruled on this. The trust’s legitimacy is discussed in the decision. Second, trust is used to store treasuries and stock. Finally, under the provisions of sections 160 to 166 of the Income-tax Act of 1961, its income is taxed as a representative of the beneficiary or beneficiaries (IT act ).

The trust cannot escape the tax, according to the ruling, and the trust will have the same tax responsibilities and exemptions as the beneficiaries. Escort benefit and welfare trust vs. ITO was the lawsuit that resulted in this decision. The following are the details of the case.

A trust called the escort benefit and welfare trust was founded on February 14, 2012. A trust deed was used to establish it. The Escort benefit and welfare trust’s sole beneficiary and management was the corporation Escort. The trust’s first gift was $10,000, which was made by its three trustees.

Three companies amalgamated into Escort limited. Through this merger, it was decided that the shares of all the companies were to be transferred to Escort benefit and welfare trust, for giving the benefit to the Escort limited and its successor. 

The Escort benefit and welfare trust generated a large amount of money in the fiscal year 2016-17, with an income of over Rs 4,47,60,037. Escort Limited paid the dividend distribution tax under section 115-o of the Income Tax Act.

However, Escort’s claim of exemption under section 10(34) of the IT Act was restricted. Since the settlor and the beneficiary were the same in the case of Escort benefit and welfare trust, the assessing officer found out and claimed that the trust, in this case, is itself valid, under the Indian trust act 1882. 

Furthermore, the assessing officer discovered that, though a few trustees were chosen for this trust, they did not have any discretion, and therefore it was determined that the beneficiary, Escort Limited, was acting as a trustee to the Escort benefit and welfare trust.

The exemption was not granted to the Escort benefit and welfare trust and it was helped that the trust was only created to get an exemption from the taxpaying. And further assessor ordered Escort benefit and welfare trust to pay the tax over the dividend income that they have as the income from the other source under section 56 of the IT act.

 Thereafter, the Escort benefit and welfare trust filed an appeal with the commissioner of income tax (appeals), i.e. CIT (A). Escort benefit and welfare trust is not a genuine and properly created trust, and therefore cannot be taxed as a representative assessee, according to the commissioner of income tax (appeals). It will be held as an association of the people.

The ITAT overturned the commissioner of income tax (appeals) judgment, ruling that the Escort benefit and welfare trust is a legal trust. Since the trust legislation makes no reference to the settlor and single beneficiary being the same person. And also the exemption in taxes under section 10(34) was also granted to the Escort benefit and welfare trust. 

 

Tags: tax fraud, tax evasion and tax avoidance, income tax appeal tribunal, tax evasion, creation of trust, income tax appellate tribunal, tax evasion penalties, income tax evasion, legal lens, tax evasion and avoidance, income tax fraud

May 15
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bitcoin technology and legality

Critically Analyzing The Bitcoin Technology and Legality in India

By Banking, Media Coverage No Comments

Analysis of The Bitcoin Technology and Legality in India

From bartering to cash to digital payments to cryptocurrencies, the financial industry has evolved through time. In 2009, Satoshi Nakamoto, a mysterious and pseudonymous figure, is said to have invented digital money. Surprisingly, the identity of the person or group of people who devised this technique is still unknown.

Bitcoins are significantly simplified by mining, in which a ‘miner’ utilizes his computer ability to solve computationally challenging riddles that are crucial to blockchain technology, therefore assisting in the maintenance of the entire system of blockchains and earning fresh bitcoins as a reward.

Nevertheless, the most common method of purchasing a bitcoin is to use a bitcoin exchange to swap actual money for bitcoins, which are then held in an online bitcoin wallet in digital form. Another option is to accept bitcoins in exchange for selling products and services.

Furthermore, Bitcoin promises lower transaction fees than other traditional online payment methods and is operated by a decentralized authority by virtue of its intangible form, the balances are only kept on a public transparent ledger that everyone has access to, therefore it is a more lucrative currency alternative.

The bitcoin system is made up of a group of machines that execute the bitcoin code and store the blockchain. In simple words, a blockchain may be thought of as a collection of blocks, each of which is a collection of transactions with an identical list of transactions on each system. As the transactions are done in real-time, whether they have a computer running Bitcoin or not, abusing the system is quite unlikely.

Somebody would have to control 51 percent of the computing power that makes up bitcoin to scam the system. However, if a cheat assault is likely to occur, bitcoin miners (computer users that participate in the bitcoin network) would most likely split to a different blockchain, rendering the invader’s efforts worthless.

Nonetheless, bitcoins cannot be used to purchase products or services in India, and only a few firms accept bitcoins instead of actual cash for the sale of the goods and services they provide. Individual bitcoins are not valued as commodities since they are not issued or backed by any banks or governments. Bitcoin transactions are not currently guaranteed by any banks, and no central body in India has sanctioned or regulated them.

There are no established norms, laws, or standards for addressing disputes that may occur while dealing with bitcoins. As a result, these bitcoin transactions have their own set of hazards. Given this context, it is impossible to conclude that bitcoins are unlawful, given no ban has been enforced on bitcoins in India. 

 

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May 14
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land acquisition in india

Impact of The Judgment on Land Acquisition Proceedings in India

By Labour & Employment, Media Coverage No Comments

Impact of The Judgment on Land Acquisition in India

It is widely perceived that the Indian state holds the right of “eminent domain,” which refers to the sovereign’s capacity to acquire private immovable property for public use, provided that the nature of the public purpose can be established beyond a reasonable doubt, and that the owner of such property receives fair and equitable compensation.

The most essential component of land acquisition jurisprudence in India is the payment of fair compensation to the landowners in exchange for the state’s expropriation of their land for public use.

In its March 6, 2020, verdict in the Indore Development Authority v Manoharlal & Ors., a five-judge constitution bench of the Apex Court decided that land acquisition proceedings would not expire if the state has unconditionally provided appropriate compensation.

The bench also clarified that if a person was offered compensation but refused to accept it, he cannot claim lapse of acquisition due to non-performance of payment or non-deposit of compensation.

Furthermore, once the state makes an award and publishes a memorandum, the landowner loses title to the property, and Section 24(2) of the new land acquisition legislation prohibits landowners from reopening settled cases, reviving time-barred claims, or challenging the legitimacy of ended processes.

The Court stated – “Overruling all precedents and resolving the ambiguity relating to the interpretation of Section 24(2) of the New LA Act, the bench held that the word ‘or’ used in Section 24(2), should be read as ‘nor’ or as ‘and’. Since Section 24(2) prescribes two negative conditions, even if one condition is satisfied, there is no lapse in acquisition proceedings.

Therefore, only if both the conditions mentioned under Section 24(2) have not been fulfilled before the New LA Act came into force, would the land acquisition proceedings lapse. The bench observed that the alternative interpretation would place an undue burden on the state in land acquisition proceedings.”

The bench responded by saying that under S. 24(2), the phrase “paid” does not include a court-ordered reparation deposit. If a person has been granted compensation under the Old LA Act, he cannot claim that the acquisition has lapsed owing to non-payment or non-deposit of compensation in court under Section 24(2).

The bench went on to say that if the state has issued the compensation under the Old LA Act, it has fulfilled its duty to pay. 

Thereby, it was held that S. 24(2) of the New Act does not allow landholders to reopen settled cases, revive time-barred claims, or challenge the legality of concluded proceedings. S. 24(2) applies only to pending proceedings where the award was made at least five years prior to the effective date of the 2013 Act.

Impact of the judgment on land acquisition

The Supreme Court’s ruling is anticipated to pave the way for the prompt settlement of issues arising out of current purchase processes under the Old LA Act.

One may fairly anticipate this to open the way for fast physical and associated infrastructure development operations in the post-COVID-19 period, which had previously been blocked or put on hold owing to a variety of litigations concerning outstanding acquisition actions.

More land parcels would be liberated from the clutches of long-standing litigation and given access to the purchasing state or authority for use in significant infrastructure development and construction operations, which would definitely enhance the government’s endeavors to fulfill its goals under the “Housing for All by 2022” program and hasten urban growth.

 

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