Last Minute Revision Notes by CA Sanidhya Saraf

e Last Minute REVISION
GATHA for CA Final STUDENTS

SUMMARY NOTES
FOR CA FINAL LAW
CA Sanidhya Saraf
Your Friend, Mentor & Coach
Keep
Studying
Stay Safe
Summary notes for
CA FINNAL LAW
-BY-
CA SANIDHYA SARAF
Your Friend, Mentor and Coach for Audit and Law
INDEX
CHAPTER REVISION PAGE.NO

Appointment & Qualication of Directors 1-39
Inspection Inquiry & Investigation 40-44
Compromise, Arrangement & Amalgamation 45-49
Prevention. Oppression & Mismanagement 50-53
Registered Valuer 54-54
Removal of Names of Companies 55-56
Foreign Company 57-58
Miscellaneous Provisions 59-60
NCLT & AT 61-62
THE JOURNEY BEGINS...

INDEX
CHAPTER REVISION PAGE.NO

Insolvency & Bankruptcy Code 2016 63-73
Prevention of Money Laundering Act 74-79
Securities Contracts Regulation Act 80-86
SEBI Act, 1992 87-90
SARFAESI ACT, 2002 91-97
Foreign Exchange Management Act 98-126
Arbitration & Conciliation Act 127-130

(Only for new syllabus)
Foreign Contribution Regulation Act 131-134

(Only for New syllabus)
SEBI LODR (Only for new syllabus) 135-136
Competition Act, 2002 137-144

(Only for old syllabus)
Banking Regulation Act 145-149

Interpretation of Statutes 150-153

Insurance Regulatory & Development Act 154-156

THE JOURNEY BEGINS...

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CHAPTER-4
PREVENTION OF OPPRESSION & MISMANAGEMENT
Section 241: Application For Tribunal To Relief In Cases Of Oppression, Etc
1) Any member of a company who complains that the affairs of a company have or are being conducted in a
manner prejudicial to public interest; or prejudicial or oppressive to him or any other member or members; or
prejudicial to the interests of the company; or
whether by an alteration in the BOD, or manager, or in the ownership of the company's shares, or if it has no share
capital, in its membership, and that by reason of such change, it is likely that the affairs of the company will be
conducted in a manner prejudicial to its interests or its members or any class of members, may apply to Tribunal,
provided such member has a right to apply under section 244, for an order under this Chapter XVI.
2) CG, if it is of the opinion that the affairs of the company are being conducted in a manner prejudicial to public
interest, it may itself apply to the Tribunal for an order under this Chapter XVI.
3) CG may initiate a case against a person and refer same to the Tribunal "If in the opinion of the CG there exist
circumstances suggesting that":- (Amendment)
a) any person in conduct of management of the affairs of a company is therewith guilty of fraud, misfeasance,
persistent negligence or default in carrying out his obligations and functions under the law or breach of trust.
b) the business of a company is not been conducted and managed by such person in accordance with sound
business principles or prudent commercial practices.
c) a company has been conducted and managed by such person in a manner which is unlikely to cause, or has
caused serious injury or damage to the interest of the trade, industry or business to which it pertains,
d) the business of a company is or has been managed by such person with intent to defraud its creditors, members
or any other person for a fraudulent or unlawful purpose
Section 244: Right To Apply Under Section 241
Section 242: Powers Of Tribunal

As per 242(1) upon the application made by members u/s 241 after ful lling the criteria of section 244 Tribunal
may give relief to the members only if it is satis ed that the degree of operation is very serious, so severe that it is
just an equitable ground to wind up the company, however the winding up would unfairly prejudice such
applicants.
50
Section 242 (2)
e Tribunal without prejudice to the generality of the powers under sub-section (1) can order for -
the regulation of conduct of affairs of the company in future;
the purchase of shares or interests of any members of the company by other members thereof or by the
company; in the case of a purchase of its shares by the company, the consequent reduction of its share
capital.
restrictions on the transfer or allotment of the shares of the company.
the termina on, se ng aside or modifica on, of any agreement entered between the company and the
managing director.
the termination, setting aside or modi cation of any agreement between the company and any person
other than those referred to in clause(e), provided that no such agreement shall be terminated, set aside or
modi ed except after due notice and after obtaining the consent of the party concerned.
the setting aside of any transfer, delivery of goods, payment, execution or other act relating to property
made or done by or against the company within three months before the date of the application under this
section, which would, if made or done by or against an individual, be deemed in his insolvency to be a
fraudulent preference.
removal of the managing director, manager or any of the directors of the company
recovery of undue gains made by any managing director, manager or direct or during the period of his
appointment as such and the manner of utilization of the recovery including transfer to Investor Education
and Protection Fund or repayment to identi able victims.
the manner in which the managing director or manager of the company may be appointed subsequent to an
order removing the existing managing director or manager of the company made under clause(h).
appointment of such number of persons as directors, who may be required by the Tribunal to report to the
Tribunal on such matters as the Tribunal may direct.
imposition of costs as may be deemed t by the Tribunal
Any other matter for which, in the opinion of the Tribunal, it is just and equitable that provision should be
made.
Section 243: Consequences of Termination Or Modification Of Certain Agreements

Where an order made under section 242 terminates, sets aside or modi es an agreement
a) such order shall not give rise to any claims whatsoever against the company by any person for damages or for
compensation for loss of office or in any other respect either in pursuance of the agreement or otherwise.
b) no MD or other director or manager whose agreement is so terminated or set aside shall, for a period of ve
years from the date of the order terminating or setting aside the agreement, without the leave of the Tribunal, be
appointed, or act, as the managing director or other director or manager of the company.
c) If it is concluded at the hearing of case u/s 241(3), that the person is not a t or proper person such a person shall
not hold the office of a director or any other office connected with the affairs of any company for a period of ve
years, further that person shall not be entitled to , or be paid, any compensation for the loss or termination of
office. (Amendment)
Provided that Tribunal shall not grant leave under this clause unless notice of the intention to apply for leave has
been served on the CG and that Government has been given a reasonable opportunity of being heard in the matter
51
Section 245: Class Action
Applica on for class ac on shall be given:
1) in the case of a company having a share capital:

-not less than 100 -not less than 5% of -any member or
members of the the total number of members holding
company, or its members as may not less than 5% of
be prescribed, the issued share
whichever is less, or capital of the
company, in case of
an unlisted company
2) in the case of a listed company , member or members holding not less than two percent of the issued
share capital of the company
3) in case of depositors:
-not be less than -not less than 5% of -any depositor or
one hundred the total numbers of depositors to whom
depositors, or depositors as may the company owes
be prescribed, five percentage of
whichever is less, or total deposits of the
company.
An application shall be led before the Tribunal on behalf of the members or depositors for seeking all
or any of the following orders, namely-
a) to restrain the company from committing an act which is ultra vires the articles or memorandum of the
company, committing breach of any provision of the company's memorandum or articles, from taking action
contrary to any resolution passed by the members, from doing an act which is contrary to provisions of this Act or
any other law for time being in force, etc.
b) to claim damages or compensation or demand any other suitable action from or against the company or its
directors for fraudulent conduct, the auditor including audit rm, any expert for misleading statement, etc.
Important Case Laws on Oppression
Sindhri Iron A single act of oppression which has its con nuous impact could also
Foundary (P)Ltd 34CC cons tute oppression. Therefore, "affairs are being conducted" has
777 been judicially interpreted to include past & concluded acts which
has a con nuous impact.
52
Re.Sindhri Iron Foundry Majority can also claim relief u/s 397/398:
(P) Ltd Oppressed majority may also file relief under Sec on 397.
Thomas Veddon V.J vs Failure to declare dividends or payment of low dividends does not
Ku anad Rubber Co.Ltd amount to oppression.
Ashok Betelnut Co.Ltd vs Con nuous losses by itself cannot be regarded as oppression.
M.K. Chandrakanth
Re. Tamilnad When both groups are equally strong, there may be a situa on of
Transporters deadlock but oppression cannot take place.
53
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CHAPTER-9
National Company Law Tribunal
& Appellate Tribunal
Acting President and Chairperson of Tribunal or Appellate Tribunal (Only for Knowledge)
1 1. In event of occurrence of any vacancy in the

office of President or Chairperson due to death,
2 When president or chairperson is unable to
discharge his functions owing to absence,
resignation or otherwise, the senior-most illness or any other cause, the senior-most
member shall act as one, until the date on which member shall discharge the functions of
a new President or Chairperson is appointed in President or Chairperson, as case may be,
accordance with provisions of this Act to ll such until date on which President or Chairperson
vacancy enters upon his office. resumes his duties.
Resignation of Members (Only for Knowledge)

e president, chairperson or any member may by notice in writing under his hand addressed to CG, resign from
his office provided they shall continue to hold office until expiry of three months from date of receipt of such
notice by CG or until a person is duly appointed as his successor enters upon his office or until the expiry of his
term of office, whichever is earliest.
Removal of Members (Only for Knowledge)
e CG may after consultation with Chief Justice of India, remove from office President, Chairperson or any
Member, who- has become physically or mentally incapable of acting as same, has acquired such nancial or other
interest likely to affect prejudicially his functions, has been adjudged an insolvent, has been convicted of an
offence which in opinion of CG involves moral turpitude, has abused his position to render his continuance in
office prejudicial to public interest.
provided given a reasonable opportunity of being heard.
Grounds of Removal (Only for Knowledge)
On ground of proven misbehavior or incapacity after an inquiry made by judge of supreme court, until SC passes
such order, CG in consultation with chief justice of India may suspend the concerned person from office.
Benches of Tribunal (Only for Knowledge)
e principal bench of Tribunal shall be at New Delhi which shall be presided over by President of Tribunal,
powers of tribunal shall be exercisable by benches consisting of two members out of whom one shall be a Judicial
Member and the other shall be a technical member, the president shall for disposal of any case relating to
rehabilitation, restructuring, reviving, of companies, constitute one or more Special Benches, in case of
difference of opinions it shall be decided according to majority.
Order of Tribunal- Section 420 (important)
Tribunal shall give opportunity of being heard before passing any order and may rectify mistake apparent from
record within 2 years from date of order if appeal has not been made against that order, tribunal shall send a copy
of every order passed under this section to all parties concerned.
Appeals from order to Tribunal - Section 421 (important)
Any person aggrieved by an order of Tribunal may prefer an appeal to Appellate Tribunal within 45 days, delay
maybe condoned by AT by 45 days if sufficient cause, shall le order after opportunity of being heard.
61
Speedy Disposal - Section 422 (important)
Tribunal/ Appellate Tribunal shall dispose off matter/ appeal within 3 months, reasons should be recorded if not
disposed off within speci ed period. (extension- 90 days).
Appeals to Supreme Court -Section 423 (important)
Any person aggrieved by any order of Appellate Tribunal may le an appeal to supreme court within 60 days,
further condone the delay by 60 days if sufficient cause.
Power of Civil Court -Section 424
Tribunal / Appellate Tribunal shall for purpose of discharging their functions , the same powers as are vested in a
civil court under Code of Civil Procedure,1908.
Vacancy in Tribunal / AT -Section 431 (important)
No act or proceeding of Tribunal or Appellate Tribunal shall be questioned or shall be invalid on ground of
existence of any vacancy or defect in constitution of Tribunal or Appellate Tribunal ,as case may be.
Term of office of President, Chairperson & other members of NCLT
Shall hold office for 5 years, reappointment is possible for another 5 years, minimum age- 50 years , maximum age
-67 years for President & 65 for other members.
Term of office of President, Chairperson & other members of NCLAT
Shall hold office for 5 years, reappointment is possible for another 5 years, minimum age- 50 years , maximum age
-67 years for President & 65 for other members.
Qualification of Judicial Member
A judge of HIgh Court or District Judge for > 5 years or advocate of a court for > 10 years.
62
CHAPTER-10
Insolvency and Bankruptcy Code 2016
Note : It is a summary notes for IBC,2016.It’s highly advisable to go through
sections in detail before referring this file.
What is Insolvency and Bankruptcy?

The term insolvency is used for both individuals and organizations . For individuals, it is known as
bankruptcy and for corporate it is called corporate insolvency i.e. when an individual or company are
not able to pay the debt in present or near future and the value of assets held by them are less than
liability. If untreated, insolvency will lead to bankruptcy for non-corporates and liquidation of corporates.
Insolvency is a situation which arises due to inability to pay off the debts due to insufficient assets,
bankruptcy is a situation wherein application is made to an authority declaring insolvency and seeking to
be declared as bankrupt, which will continue until discharge.
Purpose/ Preamble of IBC

“consolidate and amend the laws relating to reorganization and insolvency resolution of corporate
persons, partnership firms and individuals in a time bound manner for maximization of value of
assets of such persons, to promote entrepreneurship, availability of credit and balance the interests
of all the stakeholders including alteration in the order of priority of payment of Government dues
and to establish an Insolvency and Bankruptcy Board of India, and for matters connected
therewith or incidental thereto”.
Extent and Commencement of The Code

As per Section 1 of the Insolvency and Bankruptcy Code, it extends to the whole of India except Part III
(Insolvency Resolution and Bankruptcy for Individuals and Partnership Firm) which excludes the state of
Jammu and Kashmir. (However, now even Part-III is applicable to Jammu & Kashmir w.e.f. 18th
March 2020).The Code came into an enforcement on 28th May 2016.
Distinct Features of The Code

It is a comprehensive law, the code has withered away multiple laws covering recovery of debts and
insolvency and liquidation process and presents single platform for all the reliefs relating to recovery of
debts and insolvency, it provides a time-bound resolution (180 days, extension 90 days) and defines
fixed time of 330 days (other 60 days are provided to complete legal proceedings) frames for
insolvency resolution of companies and individuals, fast track resolution of corporate insolvency within
90 days. It has been drafted to provide one window clearance. There is a clear and unambiguous
process to be followed by stakeholders, shift of control from shareholders and promoters to
creditors. One chain authority, NCLT for companies and DRT (Debt Recovery Tribunal) for
individuals. It protects the interests of workmen and employees. It provides new authority 'Insolvency
and Bankruptcy Board of India' to regulate professionals, agencies, partnership firms and individuals.
63
A unique feature of code is establishment of Information Utilities which are intended to function as a
databank to collect, collate and disseminate financial information and to facilitate insolvency resolution.
Structure of The Code

Part I - Preliminary (Sec 1-3),
Part II- Insolvency Resolution & Liquidation for Corporate Persons (Sec 4-77),
Part III- Insolvency Resolution & Bankruptcy for individuals and Partnership firms (sec 78-187),
Part IV- Regulation of Insolvency Professionals, Agencies, & Information Utilities (sec 188-233),
Part V- Miscellaneous (sec 224-255)
Five Pillars of the Code

I. Insolvency Professionals- The role of IP encompasses a wide range of functions adhering to
procedure of law, accounting and finance related functions,
II. Insolvency Professional Agencies- To enroll and regulate insolvency professionals as its
members. They are registered with IBBI.
III. Information Utilities- To collect, collate, authenticate and disseminate financial information of
debtors in centralized electronic data bases at all times,
IV. Insolvency and Bankruptcy Board of India-The Code provides for establishment of a
Regulator who will oversee these entities and to perform legislative, executive and quasi-judicial
functions. Also, referred as “Board” in the act.
V. Adjudication Authority- The AA for corporate insolvency and liquidation is NCLT and DRT
for Individuals and Partnership firms. Appeals arising out of NCLT orders lie to NCLAT and
thereafter to SC of India.
Applicability of the Code?

Companies, Individuals, Partnership firms, LLP's , Notified Entities ,Personal Guarantors to Corporate
Debtors w.e.f. 1st day of December,2019
Non-Applicability of the Code? (IMP)

The Code is not applicable to corporates in finance sector. Section 3(7) of Insolvency & Bankruptcy
Code, 2016 states that "Corporate person" shall not include any financial service provider.
Thus, the Code does not cover Bank, Financial Institutions, Insurance Company, Asset
Reconstruction Company, Mutual Funds, Collective Investment Schemes or Pension Funds. It
implies that IBC Code, 2016 cannot be initiated against these institutions even if they have
made a default. However, NBFC is engaged in various activities and hence NBFC is not ipso facto
excluded from definition of 'corporate person' under section 3(7) of Insolvency Code. NBFC can be a
'corporate debtor' [Jindal Saxena Financial Services v. Mayfair Capital (2018)]
64
Amendment Nov 20 :Applicability of IBC ,2016 on NBFC: The Central Government in
consultation with the Reserve Bank of India notifies that the insolvency resolution and
liquidation proceedings of the Non-banking finance companies (which include housing
finance companies) with asset size of Rs.500 crore or more, as per last audited balance
sheet shall be done according to IBC,2016
Amendment Nov 20 Enhancement in the minimum amount of default to ₹ 1 crore .
Note : Previously ,this minimum amount was ₹ 1 Lakh only.
Note : Provisions of this Code to override other laws: Section 238 of the Code, 2016 states that
the Code shall have overriding effect over other laws.
Comprehensive Flow of Corporate Insolvency Process

I. Filing of application before NCLT, Admission or Rejection of application.
II. Moratorium and Public Announcement
III. Appointment of Interim Resolution Professional
IV. Formation of Committee of Creditors
V. Appointment of Resolution Professional
VI. Submission of Resolution Plan -Approval of Resolution Plan
VII. Consequences of non-submission of the Resolution Plan
Important Definitions
1. [Section 3(1)] - Board means the Insolvency and Bankruptcy Board of India (IBBI)
established under section 188(1)
2. Section 5 (12) – Definition of Insolvency Commencement Date Amendment Nov 20
“Insolvency commencement date” means the date of admission of an application
for initiating corporate insolvency resolution process by the Adjudicating Authority
under sections 7, 9 or section 10, as the case may be.
Provided that where the interim resolution professional is not appointed in the order
admitting application under section 7, 9 or section 10, the insolvency commencement
date shall be the date on which such interim resolution professional is appointed by the
Adjudicating Authority; (omitted)
Effect : Now, the insolvency commencement date is the date on which application is
admitted by the NCLT.
3. [Section 5(7)] Financial creditor means any person to whom a financial debt is owed and
includes a person to whom such debt has been legally assigned or transferred to.
4. [Section 5(20)] Operational creditor means a person to whom an operational debt is owed
and includes any person to whom such debt has been legally assigned or transferred.
65
Who can initiate Corporate Insolvency Resolution Process? (Section 6)
The financial Creditor, Operational Creditor and the corporate debtor itself.
Initiation of CIRP by Financial Creditor (Section 7)

Default should be occurred, *** Amendment Nov 20 FC either by itself or jointly with other FC
may file an application for initiation of corporate insolvency process before AA,FC shall along with
application furnish record of default, name of resolution professional proposed to act as IRP.
AA shall within 14 days of receipt of application, ascertain existence of default, AA may accept or
reject application after determining whether any disciplinary proceeding is pending against proposed IRP.
If the AA rejects the application, AA shall give a notice to the applicant to rectify the defect in his
application within 7 days of receipt of such notice from the Adjudicating Authority.
*** Filing of application in certain special cases
i) Where the FC relates to Section 21(6A) (a) ,(b) i.e. Security/deposit holders /Debenture
holders – The application can be filed jointly by 100 of such creditors of same class or 10%
of the total no.of creditors in the same class, whichever is less.
ii) Where the FC relates to allottees under a real estate project– The application can be filed
jointly by 100 of such allottees of same class or 10% of the total no.of allottees in the same
class, whichever is less.
Note : According to the existing provision, even one deposit holder or one debenture
holder or one home buyer could have filed an Insolvency application under IBC
Code, which was felt to be effecting the interest of the other creditors or other home
buyers who are allottees in other real estate projects of the same corporate debtor.
After the said Amendment, a single home buyer or one deposit holder or one
debenture holder cannot file the IBC Case against the builder and disrupt the
Company’s functioning.
Initiation of CIRP by Operational Creditor (Section 9)

Default should be occurred, Operational Creditor shall first send a demand notice and copy of invoice to
corporate debtor, on receipt of notice , the corporate debtor is either required to pay off within 10
days or give notice of dispute, After expiry of ten days, if operational creditor does not receive
payment or notice of dispute it may file an application before AA for initiating process.
Along with application it shall furnish copy of record with information utility confirming that there is no
payment of unpaid operational debt, and any other proof. An operational creditor initiating a corporate
insolvency resolution process , may propose a resolution professional to act as an IRP.
66
AA shall within 14 days of receipt of application, ascertain existence of default, AA may accept or
reject application after determining whether any disciplinary proceeding is pending against proposed IRP.
If the AA rejects the application, AA shall give a notice to the applicant to rectify the defect in his
application within 7 days of receipt of such notice from the Adjudicating Authority.
Initiation of CIRP by Corporate Applicant (Section 10)

“Corporate applicant means – (a) Corporate debtor, or (b) a member or partner of the
corporate debtor who is authorized to make an application for the CIRP under the constitutional
document of the corporate debtor; or (c) an individual who is in charge of managing the
operations and resources of the corporate debtor; or (d) a person who has the control and
supervision over the financial affairs of the corporate debtor;
Default should have occurred, application should be made to AA with prescribed books and documents,
name of IRP should also be proposed in application, AA shall within 14 days approve/ reject
application, in case of rejection ,notice shall be given within 7 days to rectify any defect, if any.
Persons not entitled to make application (Section 11)

The following persons shall not be entitled to make application if –
a) CD is undergoing a CIRP.
b) CD has completed CIRP 12 months preceding the date of making application.
c) CD’s liquidation order has been made.
d) CD or FC has violated any terms of resolution plan which was approved 12 months before
the date of making application for CIRP.
Note 1 :A Corporate debtor includes its corporate applicant.
Note 2 : Amendment Nov 20 -It is hereby clarified that nothing in this section shall prevent
a corporate debtor referred to in clauses (a) to (d) from initiating corporate insolvency
resolution process against another corporate debtor." (IMPORTANT)
Effect : This step is likely to enhance the maximization of value of a corporate debtor as it
would be now able to recover its debts from its creditors ,which will ultimately serve the
objective of the code.
Here, (CD- Corporate Debtor ,FC-Financial Creditor)
Time Limit for completion of CIRP (Section 12)

The corporate insolvency resolution process shall be completed within a period of 330 days (180 days + 90
days extension + 60 days for completing the pending litigation) from the date of admission of the
application to initiate such process.
67
New timeline
180 days + 90 days + 60 days = 330 days
Note : The amendment is effective from 16th August,2019.This date is important as on this date, IBC
cases have to be checked and if the case had already crossed 330 days ,then only 90 days will be given
to complete its CIRP. It’s a transitionary measure only.
Withdrawal of application admitted under Section 7,9,10 (Section 12A)

The Adjudicating Authority may allow the withdrawal of application admitted under section 7 or section
9 or section 10, on an application made by the applicant with the approval of 90% voting share of the
committee of creditors.
Declaration of moratorium and public announcement (Section 13)

The Adjudicating Authority, after admission of the application, shall, by an order—
• Declare Moratorium under Section 14
• Cause a public announcement of the initiation of corporate insolvency resolution process and call
for submission of claims, and appoint an interim resolution professional.
Moratorium (Section 14) (IMPORTANT)

After the commencement of corporate insolvency resolution, a calm period for 180 days is declared,
during which all suits and legal proceedings etc. against the Corporate Debtor are kept in abeyance to
give time to the entity to resolve its status. It is called the Moratorium Period.
Following acts will be prohibited during moratorium period:-
(i) the institution of suits or continuation of pending suits or proceedings against corporate debtor.
(ii) transferring, encumbering, alienating or disposing off by the corporate debtor any of its
assets or any legal right or beneficial interest therein.
(iii) Any action to foreclose, recover or enforce any security interest created by the corporate
debtor in respect of its property including any action under the SARFAESI Act,2002.
(iv) the recovery of any property by an owner or lessor where such property is occupied by or in the
possession of the corporate debtor.
Amendment Nov 20
Note : Supply of essential goods or services to the corporate debtor as may be specified shall
not be terminated or suspended or interrupted during moratorium period subject to the
condition that there is no default in payment of current dues.
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IBC,2016 Summary Notes Economic Laws
Analysis: It means that supply of the critical goods and services will not be suspended but the
corporate debtor has to make payment for such critical supplies DURING THE MORATORIUM
PERIOD. If it fails to make payment for such critical supplies, it might get terminated.
Note 1: The provision of section 14(1) of the Code is not applicable on a surety in a contract of
guarantee to a corporate debtor. Thus, recovery proceedings, insolvency resolution process or
bankruptcy proceedings against surety (guarantor) can be initiated even if moratorium is
granted to corporate debtor.
Note 2 : The order of moratorium shall have effect from the date of such order till the completion of
the corporate insolvency resolution process. Moratorium period shall cease when AA approves the
resolution plan or passes an order for liquidation of corporate debtor.
Appointment and tenure of Interim Resolution Professional (Section 16)
Amendment Nov 20
The Adjudicating Authority shall appoint an interim resolution professional on the insolvency
commencement date. within fourteen days from the insolvency commencement date.
Term-IRP shall continue till appointment of resolution professional
Effect : It has been done to expedite the CIRP as to IRP will be appointed on the same date
as when the insolvency commences i.e. the date on which the application is admitted by
NCLT ,so it has removed the 14 days window period now.
Exception : What if Operational Creditor don’t propose the name of IRP while filing
application under Section 9 ,in such as a case ,AA will ask IBBI (Board) to recommend
name of IRP and within 10 days the board has to do so. So, it’s clear that here IRP can’t be
appointed on the same date on which application is admitted.
Hence, in this case the date of admission of application (Insolvency Commencement Date )
and Date of appointment of IRP will differ.
Appointment of Resolution Professional (Section 22)

1. The First Meeting shall be held within 7 days of constitution of committee of creditors.
2. In the first meeting, the CoC may, by majority vote of not less than 66 % of the voting share
of FC,either appoint the IRP as RP or replace IRP by another resolution professional.
Eligibility for Resolution Professional (Regulation 3)
An insolvency professional shall be eligible for appointment as a resolution professional for a corporate
insolvency process if he and all partners and directors of the insolvency professional entity of which
he is the insolvency professional entity of which he is partner or director are independent of
corporate debtor.i.e.
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1. He is eligible to be appointed as an independent director on board of corporate debtor u/s 149 of
companies act,2013 where corporate debtor is a company.
2. He is not a related party of corporate debtor,
3. He is not an employee or proprietor or a partner of a firm of auditors or CS in practice or cost
auditors of the corporate debtor in last 3 FYs
or He is not an employee or proprietor of legal or consulting firm that has or had any
transaction with Corporate debtor amounting to 5% or more of gross turnover of such firm in
last three FYs
Functions of Resolution Professional- The resolution professional shall conduct entire process and
manage operations of corporate debtor , shall exercise powers and perform duties as are vested or
conferred on IRP.
Appeal can be made against approval of resolution plan if any criteria is not fulfilled. The committee of
creditors may approve a resolution plan by a vote of not less than 66% of voting share of financial
creditors. The resolution professional shall submit resolution plan as approved by CoC to AA, further
AA may approve or reject the resolution plan.
Committee of Creditors (Section 21)

The committee of creditors shall compromise of all financial creditors of corporate debtor.
Where financial creditors don't exist, where the corporate debtor has no financial debt or where all
financial creditors are related parties of corporate debtor, the committee shall be formed comprising of 18
largest operational creditors by value (in case less than 18, include all), 1 representative elected by
all workmen, 1 representative elected by all employees.
Meeting of Committee of Creditors (Section 24)

Important Points:
i) Quorum for the Meeting-A meeting of committee of creditors shall quorate if members
represent at least 33% of voting rights are present either in person or by video/ audio means, if
requisite not fulfilled, meeting cannot be held and shall automatically stand adjourned at same
time and place on next day.
ii) Voting share-Where corporate debtor owes financial debts to two or more financial creditors as
part of a consortium or agreement, each shall be part of creditors and their voting share shall be
determined on basis of financial debts owed to them.
Where any person is a financial creditor as well as operational creditor such person shall be a
financial creditor, to the extent of financial debt owed by corporate debtor and shall be included
in committee of creditors, with voting share proportionate to extent of financial debts owed to
such creditor.
iii) All decisions of committee of creditors shall be taken by a vote not less than 66% of voting share
of financial creditors.
70
iv) No right of vote to directors, partners and representatives of OC ,they can only attend
meetings of CoC.
v) A related party to whom a corporate debtor owes a nancial debt shall not have any right
of representation , participation or voting in a meeting of the Committee of Creditors
Right to ask for financial information of CD
The CoC has right to ask for furnishing any financial information in relation to corporate debtor at any
time during the corporate insolvency resolution process ,RP shall make any financial information
available within a period of 7 days of such requisition.
Approval of committee of creditors (66%) for certain actions of resolution professional such as raise
any interim finance, create any security interest over assets of corporate, change capital structure of
corporate debtor, record any change in ownership interest of corporate debtor, undertake related party
transaction, etc.
Note : CoC may take decision (66%) to liquidate corporate debtor , any time after its constitution
under sub-section (7) of section 21 and before confirmation of resolution plan , including at any
time before preparation of information memorandum.
Person not eligible to be Resolution Applicant (Section 29A)

Undischarged insolvent, willful defaulter as per RBI guidelines, imprisoned for 2 years or more,
disqualified u/s 164, prohibited by SEBI, has been promoter/ in management or control of
corporate debtor where preferential/ undervalued/extortionate credit transactions has taken place ,
or has executed an enforceable guarantee in favor of a creditor, has a connected person which has
defaulted as per above provisions.
Note- It is strictly advisable to go through section 29A from main notes.
Submission and Approval of Resolution Plan (Section 30,31)

Approval of Resolution Plan by the CoC- 66% voting share .The AA may approve the RP if it
meets requirements of Section 30. The Resolution Plan shall provide for the payment of the debts of
operational creditors in such manner as may be speci ed by the Board which shall not be less than—
i) The amount to be paid to such creditors in the event of a liquidation of the corporate debtor
under section 53; or
ii) The amount that would have been paid to such creditors, if the amount to be distributed under
the resolution plan had been distributed in accordance with the order of priority in sub-section
(1) of section 53,
whichever is higher, and provides for the payment of debts of nancial creditors, who do not vote in
favour of the resolution plan, in such manner as may be speci ed by the Board, which shall not be less than
the amount to be paid to such creditors in accordance with sub-section (7) of section 53 in the event of a
liquidation of the corporate debtor.
71
Liability of prior offences etc. (Section 32A) (NEW INSERTION)
Section 32A provides that Corporate Debtor shall not be prosecuted for an offence committed
prior to commencement of Corporate Insolvency Resolution Process (CIRP) once
Resolution Plan has been approved by Adjudicating Authority (AA).There cannot be any
attachment or confiscation of assets of Corporate Debtor, as otherwise same will defeat
objects of the Code.
It provides that no action shall be taken against property of Corporate Debtor covered
under such a Resolution Plan.
Liquidation Process
Circumstances under which AA may pass a liquidation order
• The AA may order for liquidation of corporate debtor in cases where before expiry of Insolvency
Resolution Process or within 180 days of initiation of CIRP or fast track corporate insolvency
process u/s 56, the AA does not receive Resolution Plan.
• If CoC before expiry of resolution process intimate the AA of their decision approved by not less
than 66% of voting share that they have passed an order of liquidation of corporate debtor,
• Where resolution plan is contravened by concerned corporate debtor, any person other than
debtor whose interests are affected may make an application.
Once AA passes an order of liquidation, a moratorium is imposed on pending legal proceedings against
corporate debtor, and assets of debtor vest in liquidation estate.
Where AA passes an order for liquidation, the resolution professional appointed for corporate
insolvency resolution process subject to submission of a written consent by resolution professional to
AA in specified form , act as liquidator for purpose of liquidation unless replaced by AA.
To be a liquidator,a person should be independent of corporate debtor.(Regulation 3 conditions

,same as RP ,that will be checked for Liquidator too)
The liquidator has the power to verify all claims of creditors, to take all assets, property, effects and
actionable claims of corporate debtor into his custody, to evaluate the assets and property of corporate
debtor, to carry out business of corporate debtor for its beneficiary liquidation, to make progress report of
corporate debtor.
For purpose of liquidation, liquidator shall form an estate of assets , which will be called liquidation
estate, includes tangible and intangible assets, asset that may or may not be in possession of corporate
debtor, assets subject to determination of ownership by court or authority, etc.
Assets not forming part of liquidation estate Assets owned by a third party in possession of
corporate debtor, personal assets of any shareholder or partner of a corporate debtor, assets of any
Indian or foreign subsidiary , assets in security collateral held by financial service providers and
subject to netting and set off in multi-lateral trading or clearing transactions, any other assets as may be
specified by board. (IMP FOR MCQ)
72
The liquidator shall receive of collect claims of creditors within a period of 30 days from date of
commencement of liquidation process. The liquidator shall communicate his decision of admission or
rejection of claims to creditor and corporate debtor within 7 days of such admission or rejection of
claims. A creditor may appeal to AA against decision of liquidator rejecting its claims within 14
days.
Distribution Order (Section 53)
i) The insolvency resolution process costs and liquidation costs paid in full ,
ii) Workmen dues for period of 24 months preceding liquidation commencement date , and
debts owed to secured creditors in the event such secured creditors has relinquished
security, shall rank equally,
iii) wages and unpaid dues owed to employees other than workmen for period of 12 months
preceding liquidation commencement date,
iv) Financial debts owed to unsecured creditors,
v) Amount due to CG and SG and debts owed to secured creditors for any unpaid amount after
enforcement of security interest, shall rank equally,
vi) remaining debts and dues, preference shareholders and equity shareholders or partners, a
case maybe.
Voluntary Liquidation Process
Section 59 of Code empowers a corporate person intending to liquidate itself voluntarily if it has not
committed any default to initiate voluntary liquidation proceedings . Any corporate person registered as a
company shall meet conditions such as declaration from majority of directors of company verified by
affidavit stating that they have made a full inquiry into the affairs of company and company is not being
liquidated to defraud any person, the declaration shall be accompanied with documents namely,
audited financial statements and a record of business operations of previous two years or period since
incorporation whichever is later, a report of valuation of assets of company, prepared by registered valuer.
After making declaration, within four weeks, pass a special resolution at a general meeting, stating the
company should be liquidated voluntarily and insolvency professional to act as liquidator may be
appointed.
Fast-track CIRP (Section 55 to 58)
Eligible Corporate Debtor : A Small Company, a startup or an Unlisted company with total assets
not exceeding 1 crore in the immediately preceding FY.
A fast track insolvency resolution is a process wherein process shall be completed in an expeditious
manner within 90 days from insolvency commencement date (extension by AA of not exceeding 45
days , such extension shall not be granted more than once).
Validity of Undervalued and Overvalued Transaction with Related Parties If corporate debtor enters
into undervalued or overvalued transactions with its related parties, the resolution professional may report
about such transactions to NCLT and NCLT may declare such transactions null and void and may
reverse such transactions.
73
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97
CHAPTER-15
Foreign Exchange Management Act, 1999
Important definitions:
Person "person" includes-

[Section 2(u)] (i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether
incorporated or not,
(vi) every artificial juridical person, not falling within any of
the preceding sub-clauses, and
(vii) any agency, office or branch owned or controlled by
such person;
Person "person resident in India" means-

Resident in (i) a person residing in India for more than one hundred and
eighty-two days during the course of the preceding financial
India[Section
year but does not include-
2(v)] (A) a person who has gone out of India or who stays outside
India, in either case-
(a) for or on taking up employment outside India, or
(b) for carrying on outside India a business or vocation
outside India, or
(c) for any other purpose, in such circumstances as would
indicate his intention to stay outside India for an uncertain
period;
(B) a person who has come to or stays in India, in either
case, otherwise than-
(a) for or on taking up employment in India, or
(b) for carrying on in India a business or vocation in India,
or
(c) for any other purpose, in such circumstances as
would indicate his intention to stay in India for an uncertain
period;
(ii) any person or body corporate registered or incorporated
in India,
(iii) an office, branch or agency in India owned or controlled
by a person resident outside India,
(iv) an office, branch or agency outside India owned or
controlled by a person resident in India;
98
Important If a person comes in India on 1st June 2019 for employment,
clarification in PRI business or circumstances which indicate his intention to stay in
given in study India for an uncertain period, he will be a resident from 1st
material June 2019.
Residential status is not for a year. It is from a particular date that
a person will be a resident or a non-resident. This is different from
income-tax law. Under income-tax law, a person has to pay tax.
Even if his status is known at the end of the year, it will only affect
his tax. It will not affect his transactions. FEMA is a regulatory law.
One has to know the person’s status at the time of undertaking a
transaction.
Author Note : This view taken by ICAI is highly debatable. As per the
author's opinion , the condition of 182 days in previous year must also
be complied .
PTR:
The Reserve Bank notifies debit cards, ATM cards or any other instrument by
whatever name called that can be used to create a financial liability, as
‘currency Current Account Transactions (Section 5)
Schedule 1-Rule 3 Schedule 2-Rule 4 Schedule 3-Rule 5
Prohibited Cuat’s CG approval needed RBI approval needed
Transaction Remittance of 1. Individuals can avail of foreign

specified in Sch 1 a) freight of vessel exchange facility for the
or Travel to Nepal chartered by following purposes within the
/Bhutan or a PSU limit of USD 2,50,000 only.
transaction with b) Multi-modal Any additional remittance in
person resident in transport excess of the said limits for
Nepal/Bhutan. operators to the following purposes shall
Remittance of their agents require prior approval of RBI.
a) income from abroad Private visits to any
racing /riding c) hiring charges country (except Nepal and
b) purchase of of transponders Bhutan).
by TV Gift or Donation.
lottery
channels/Internet Going abroad for
tickets, banned
Service Providers.
/prescribed employment
d) container Emigration
magazines,
detention charges
football pools, Maintenance of close
exceeding the rate
sweepstakes relatives abroad,
prescribed by
etc. Business travel, or
Director General
c) interest attending a conference or
of Shipping
income on specialized training or for
e) prize
funds held in maintenance expenses of
money/sponsorship of
Non-Resident a patient going abroad for
sports activity
99
Special Rupee abroad by a medical treatment or
(Account) person other than check-up abroad, or for
Scheme. International / accompanying as
d) Dividend by a National / State attendant to a patient
company to Level sports going abroad for medical
which bodies, if the treatment/check-up.
requirement amount involved Meeting expenses for
of dividend exceeds USD medical treatment abroad
balancing is 100,000. Studies abroad
applicable. f) Remittance for Any other current account
Payment of membership of transaction
a) Commission P&I Club Exceptions:
on exports- Cultural Tours a) higher exchange facility can
towards Advertisement in availed under Liberalized
equity foreign print media for Remittance Scheme for
investment in the purposes other emigration/ medical
J.V./WOS than promotion of treatment / education if so
abroad in tourism, foreign required by a country of
Indian Co’s investments and emigration, medical institute
b) Commission international bidding offering treatment or the
on exports (exceeding USD university, respectively
under Rupee 10,000) by a State b) a person who is a resident but
State Credit Government and its not permanently resident in
Route except Public Sector India and is a citizen of
commission Undertakings foreign state (other than Pak)
up to 10% of Payment of import or Indian citizen on deputation
invoice value through ocean of such foreign country may
of tea and transport by a Govt. make remittance up to his net
tobacco. Department or a PSU salary.
c) Call back on c.i.f. basis (i.e.
services of other than f.o.b. and
Telephone f.a.s. basis
2. Facilities for persons other than individual-

The following remittances by persons other than individuals shall require prior
approval of RBI.
Donations exceeding one per cent of their foreign exchange earnings during
the previous three financial years or US$ 5,000,000, whichever is less, for:-
(a) creation of Chairs in reputed educational institutes,
100
(b) to funds(not being an investment fund) promoted by educational institutes;
and
(c) to a technical institution or body or association in the field of activity of
the donor Company.
Commission, per transaction, to agents abroad for sale of residential flats or

commercial plots in India exceeding USD 25,000 or 5% of the inward remittance
whichever is more.
Remittances exceeding five per cent of investment brought into India or US$
1,00,000 whichever is higher, by an entity in India by way of reimbursement of
pre-incorporation expenses.
Remittances exceeding US$ 10,000,000 per project for any consultancy services
in respect of infrastructure projects and US$ 1,000,000 per project, for other
consultancy services procured from outside India.
Infrastructure project' is those related to –Power, Telecommunication,
Railways, Roads including bridges, Sea port and airport, Industrial parks,
and Urban Infrastructure (water supply, sanitation and sewerage)
No person shall draw foreign exchange for a transaction included in the Schedule III
without prior approval of the Reserve Bank;
Provided that Schedule II and III Rule shall not apply where the payment is made out
of funds held in Resident Foreign Currency (RFC) Account of the remitter.
CAPITAL ACCOUNT TRANSACTIONS:
Section 2(e)-Definition
"capital account transaction" means a transaction which alters the assets or liabilities,
including contingent liabilities, outside India of persons resident in India or assets or
liabilities in India of persons resident outside India, and includes transactions referred
to in sub -section (3) of section 6 i.e. transfer of share, deposits between PRI and
PROI, transfer of immovable property export, import or holding of currency or currency
notes; borrowing; lending .
Any PROI cannot establish a place of business of India without the prior approval
of RBI. For such approval, application shall be made in Form No. FNC 1.
The following are the objects for which RBI permits companies engaged in
manufacturing and trading activities abroad to set up a Branch Office in India.
101
1. Consultancy.
2. Import/Export Trading activities.
3. Software Development.
4. Sales & After Sales Service/Technical support to products supplied by

partners/group activities.
5. Promote technical collaborations between Indian Companies and Overseas

Companies.
6. R&D in areas where parent company is engaged.
Schedule I
See Regulation 3
Classes of capital account transactions of persons resident in India
a) Investment by a person resident in India in foreign securities.

b) Foreign currency loans raised in India and abroad by a person resident in India.
c) Transfer of immovable property outside India by a person resident in India.
d) Guarantees issued by a person resident in India in favor of a person resident outside India
e) Export, import and holding of currency/currency notes.
f) Loans and overdrafts (borrowings) by a person resident in India from a person resident outside
India.
g) Maintenance of foreign currency accounts in India and outside India by a person resident in
India
h) Taking out of insurance policy by a person resident in India from an insurance company outside
India
i) Loans and overdrafts by a person resident in India to a person resident outside India.
j) Remittance outside India of capital assets of a person resident in India.
k) Undertake derivative contracts.
Schedule II
See Regulation 3
Classes of capital account transactions of persons resident outside India
a) Investment in India by a person resident outside India, that is to say,
i) issue of security by a body corporate or an entity in India and investment

therein by a person resident outside India; and
ii) investment by way of contribution by a person resident outside India to the capital of a
firm or a proprietorship concern or an association of persons in India.
b) Acquisition and transfer of immovable property in India by a person resident outside
India.
102
c) Guarantee by a person resident outside India in favour of, or on behalf of, a person
resident in India.
d) Import and export of currency/currency notes into/from India by a person resident
outside India.
e) Deposits between a person resident in India and a person resident outside India.
f) Foreign currency accounts in India of a person resident outside India.
g) Remittance outside India of capital assets in India of a person resident outside India.
h) Undertake derivative contracts
Transactions with no restrictions
• Amortization of loan and

• Depreciation of direct investments in ordinary course of business.
• When drawl is of the purpose of repayment of loan instalments
Prohibited Capital Account Transactions

No person resident outside India shall make investment in India , in any form, in any company or
partnership firm or proprietary concern or any entity, whether incorporated or not, which is
engaged or proposes to engage –
a) in the business of chit fund, or

b) as Nidhi Company, or
c) in agricultural or plantation activities or
d) in real estate business, or construction of farm houses or
e) in trading in Transferable Development Rights (TDRs).
Note- Registrar of Chits or an officer authorized by SG in this behalf, may in consultation with
SG, permit any chit fund to accept subscriptions from NRI’s. NRI’s shall be eligible to
subscribe, through banking channel and on non-repatriation basis to such chit funds, without
limits subject to conditions stipulated by RBI from time to time.
For the purpose of this regulation, 'real estate business' shall not include development of
townships, construction of residential/commercial premises, roads or bridges and bridges and
Real Estate Investment Trusts (REITs) Regulations 2014”.
Section 7-Export of Goods and Services
1. Every exporter of goods shall furnish to the Reserve Bank or to such other authority a
declaration in such form and in such manner as may be specified, containing true and
correct material particulars, including the amount representing the full export value
OR
If the full export value of the goods is not ascertainable at the time of export, the value which
the exporter, having regard to the prevailing market conditions, expects to receive on the sale
of the goods in a market outside India.
Note-Such declaration should contain true and correct material particulars.

103
2. Export declaration should be submitted in the following forms;
Form When it is applicable
a) Form EDF -Export Declaration Form for all types of export of

goods from Non-EDI ports (Non-EDI means where bills are
generated manually
b) Form Softex- Export of software in single or in bulk
1. Export without furnishing declaration
a) trade samples of goods and publicity material supplied free of payment;

b) personal effects of travelers, whether accompanied or unaccompanied;
c) ship's stores, trans-shipment cargo and goods supplied under the orders
of Central Government or of such officers as may be appointed by the
Central Government in this behalf or of the military, naval or air force
authorities in India for military, naval or air force requirements.
requirements;
d) goods or software accompanied by a declaration by the exporter that
they are not more than five lakhs rupees in value;
e) by way of gift of goods accompanied by a declaration by the exporter
that they are not more than five lakh rupees in value;
f) aircrafts or aircraft engines and spare parts for overhauling and/or
repairs abroad subject to their reimport into India after overhauling
/repairs, within a period of six months from the date of their export;
g) goods imported free of cost on re-export basis;
h) Goods send outside India for testing subject to re-import into India;
i) Replaced goods exported free of charge in accordance with provisions of
Exim.
j) defective goods sent outside India for repair and re-import
provided the goods are accompanied by a certificate from an
authorized dealer in India that the export is for repair and re-import
and that the export does not involve any transaction in foreign
exchange.
104
Period within which export value of goods/software to be realized: -
The amount representing the full export value of goods or software exported
shall be realized and repatriated to India within nine months from the date of
export.
Provided that where the goods are exported to a warehouse realization period is
15 months.
Provided further that the Reserve Bank, or subject to the directions issued by
that Bank in this behalf, the authorized dealer may, for a sufficient and
reasonable cause shown, extend the said period of nine months or
fifteen months, as the case may be.
Section 9-Exemption from realization and repatriation in certain

cases.- The provisions of sections 4 and 8 shall not apply to the
following, namely:-
(a) possession of foreign currency or foreign coins by any person up to such limit
as the Reserve
Bank may specify;(Every resident can hold foreign currency up to 2000 US $ and
foreign coins without limit)
(b) foreign currency account held or operated by such person or class of persons
and the limit up
to which the Reserve Bank may specify;
(c) foreign exchange acquired or received before the 8th day of July, 1947 or
any income arising or
accruing thereon which is held outside India by any person in pursuance of a
general or special
permission granted by the Reserve Bank;
(d) foreign exchange held by a person resident in India up to such limit as the
Reserve Bank may
specify, if such foreign exchange was acquired by way of gift or inheritance
from a person
referred to in clause (c), including any income arising there from;
(e) foreign exchange acquired from employment, business, trade, vocation,
services, honorarium,
gifts, inheritance or any other legitimate means up to such limit as the Reserve
Bank may specify;
and
105
(f) such other receipts in foreign exchange as the Reserve Bank may specify.
Contraventions and Penalties in Brief
Section No. Contravention Quantum of Penalty

Section 11 Authorized person Up to ₹ 10,000.
contravenes any direction If continuing offence
by RBI or failure to file any additional penalty up to
return as directed by RBI ₹ 2,000 per day.
Section 13 Of any provision of the Up to three times,

Act, or any rule, the sum involved, if it is
regulation, notification, quantifiable.
direction or order or of If not quantifiable up
any condition subject to to ₹ 2 lacs.
which an authorization If continuing, further
issued penalty upto ₹ 5,000
per day after first day.
Section 14 Failure to pay penalty as Civil imprisonment.
above Upto 3 years
– where demand is of
Upto 6 months.
an amount exceeding ₹
1 crore.
– in any other case
Section No. Obligation Time Limit
Section 14 Full penalty to be paid Within 90 days from the

date on which notice for
payment of penalty is
served.
Section 15 Compounding of Within 180 days of receipt
Contravention under of application by
section 13 Directorate of
Enforcement.
Section 16 Complaint under Within 1 year of
section 16(1) to be dealt receipt of complaint.
by Adjudicated
106
Section 17 Appeal to Special Within 45 days from
Director (Appeals) receipt of order.
Section 19 Appeal to Appellate Within 45 days from

Tribunal receipt of order.
Section 19(5) Appeal to be Will try to dispose of the
dealt with by appeal within 180 days
Appellate Tribunal from receipt of appeal.
Section 35 Appeal to High Court Within 60 days of
communication of order
or decision.
Compounding of Offences(Section 15)
Contraventions that can Contravention punishable u/s 13 can be

be compounded compounded.
Time limit for The Compounding Authority shall compound the

compounding offence within 180 days from the date of
application.
Authorities appointed RBI if contravention is related to foreign exchange or
for compounding foreign security and Directorate of Enforcement if
related to any other contravention.
Amount must be No contravention shall be compounded unless

quantifiable amount involved in such contravention is
quantifiable.
Similar offences Similar offences cannot be compounded within 3

years.
Some important regulations

1. Issue of equity shares to PROI is a permissible CAT. NRI may purchase
shares of an Indian Company which is not engaged in Print Media Sector on non-
repatriation basis without any limit.
2. NRI may transfer shares of Indian Companies to another NRI by way of sale.
(Not gift)
3. NRI may transfer shares of Indian Companies to PRI by way of gift.
107
Foreign Exchange Management (Acquisition and transfer of
immovable property outside India) Regulations, 2015 w.e.f.
21.01.2016
Acquisition and Transfer of Immovable Property outside India:-
1. A person resident in India may acquire immovable property outside India, -
(a). by way of gift or inheritance from a person on or before 8th July 1947 and continued to be
held by him with the permission of the Reserve Bank.
(b). by way of purchase out of foreign exchange held in Resident Foreign Currency (RFC)
account maintained in accordance with the Foreign Exchange Management (Foreign
Currency accounts by a person resident in India) Regulations, 2015;
©.jointly with a relative who is a person resident outside India, provided there is no
outflow of funds from India;
2. A person resident in India may acquire immovable property outside India, by way of inheritance
or gift from a person resident in India who has acquired such property in accordance with
the foreign exchange provisions in force at the time of such acquisition.
3. A company incorporated in India having overseas offices, may acquire immovable property
outside India for its business and for residential purposes of its staff, in accordance with the
direction issued by the Reserve Bank of India from time to time.
Explanation:
For the purposes of these regulations, 'relative' in relation to an individual means husband, wife,
brother or sister or any lineal ascendant or descendant of that individual.
Space for notes:
108
FOR THE BEST TEST SERIES AND PENDRIVE CLASSES VISIT...

www.apnamentor.com,Call 69019 55055 / 56
Foreign Exchange
6 Management Act, 1999
6
Addition/Changes in FEMA
5 Section 6
Overseas Direct Investment { Study Material}
5
External Commercial Borrowings{ RTP May 2020}
Import of Goods and Services { Study Material)
Borrowing and Lending in Foreign currency by persons other than authorized
5 dealer
Section 6 of the Foreign Exchange Management Act, 1999 vide Finance Act, 2015 w.e.f.
15.10.2019.
Amended section with the changes marked in bold, is as follows:-

1 Subject to the provisions of sub-section (2), any person may sell or draw foreign
exchange to or from an authorised person for a capital account transaction.
2 The Reserve Bank may, in consultation with the Central Government, specify-
any class or classes of capital account transactions, involving debt
a
instruments, which are permissible
the limit up to which foreign exchange shall be admissible for such
b transactions.
c any conditions which may be placed on such transactions.
[Provided that the Reserve Bank or the Central Government shall not impose any
restrictions on the drawal of foreign exchange for payment due on account of amortisation
of loans or for depreciation of direct investments in the ordinary course of business.
2A The Central Government may, in consultation with the Reserve Bank, prescribe—
a) any class or classes of capital account transactions, not involving debt
instruments, which are permissible.
b) the limit up to which foreign exchange shall be admissible for such transactions;
and
c) any conditions which may be placed on such transactions.
CA SANIDHYA SARAF www.apnamentor.com sanidhyasaraf@gmail.com
Foreign Exchange Management Act, 1999 109

For the purposes of this section, the term "debt instruments" shall mean, such
instruments as may be determined by the Central Government in consultation with the
Reserve Bank.
In a nutshell, RBI has the power to specify class of transactions involving debt instruments
as Capital Account Transactions and CG has power to specify class of transactions as
Capital Account Transactions, not involving debt instruments. {Earlier such classification
was not there. RBI exercise the power to specify class of transactions as capital account
transactions for both debt and non-debt instruments}.
Section 6 (3) has now been omitted.
Overseas Direct Investment (ODI)

Relevant Definitions:
“Direct investment outside India” means investments, either under the Automatic Route
or the Approval Route, by way of:
Contribution to the capital or subscription to the Memorandum of a foreign
a entity,or
purchase of existing shares of a foreign entity either by market purchase or

b private placement or through stock exchange, signifying a long-term
interest in the foreign entity (JV or WOS)
However, it does not include Portfolio investment

'Joint Venture'
means a foreign entity formed, registered or incorporated in accordance with the laws
and regulations of the host country in which the Indian Party makes a direct investment.
"Wholly Owned Subsidiary (WOS)"
means a foreign entity formed, registered or incorporated in accordance with the laws and
regulations of the host country, whose entire capital is held by the Indian Party.
"Indian Party"
means a company incorporated in India or a body created under an Act of Parliament or a
partnership firm registered under the Indian Partnership Act, 1932, or a Limited Liability
Partnership (LLP), registered under the Limited Liability Partnership Act, 2008, making
investment in a Joint Venture or Wholly Owned Subsidiary abroad, and includes any
other entity in India as may be notified by the Reserve Bank.
NOTE
In the definition of Indian Party ,resident individual is not covered. Resident individual will
be separately covered later on.

“Host Country”
means the country in which the foreign entity receiving the direct investment from an
Indian Party is registered or incorporated.
“Financial Commitment”
means the amount of direct investment by way of contribution to equity, loan and 100 per
cent of the amount of guarantees and 50 per cent of the performance guarantees issued
by an Indian Party to or on behalf of its overseas Joint Venture Company or Wholly
Owned Subsidiary.
Please Note
An Indian Party can make overseas direct investment in any
bonafide activity. Real Estate and Banking business are
prohibited sectors for overseas direct investment.
A resident individual may make overseas direct investment in

the equity shares and compulsorily convertible preference
shares of a Joint Venture (JV) or Wholly Owned Subsidiary
(WOS) outside India. However, the limit of overseas direct
investment by the resident individual is prescribed by RBI
under the Liberalized Remittance Scheme.
Mode of direct investment outside India
a Automatic route for direct investment or financial commitment outside India
Under the Automatic route, an Indian Party does not require any prior
approval from the Reserve Bank for making overseas direct investment in
a JV/WOS abroad.He should approach an Authorized Dealer Category -1
bank with prescribed application and documents.
All the transactions relating to investment in a JV/WOS must be routed
through one branch of the authorized dealer to be designated by the Indian
Party.
The total financial commitment(FC) of Indian Party in overseas JV/WOS
shall not exceed 400 % of its networth { as per the last audited Balance
Sheet}.{ Currently 400 % has been revised to 100 percent by RBI but not yet
notified by ICAI. Please check the RTP before your attempt to confirm
whether there are changes applicable for your exams}.
Net worth here means aggregate of paid up capital and free reserves.
FC made out of balances held in EEFC account of the Indian Party or out of
the funds raised through ADR's/GDR's will not be taken into consideration
for the purpose of the aforesaid calculation.

However, if the financial commitment exceeds USD 1 (one) billion (or its
equivalent) in a financial year would require prior approval of the Reserve
Bank even when the total FC of the Indian Party is within the eligible limit
given under the automatic route.
Overseas JV/WOS shall carry out bonafide activity permitted as per the
laws of the host country.
Indian Party shall not be on the Reserve Bank's exporter's caution list/list
of defaulters/under investigation by the Director of Enforcement or any
investigative agency or regulatory authority.
ODI in Pakistan is allowed under the approval route only. ODI in Nepal can
be only in Indian Rupees. ODI in Bhutan is allowed only in Indian Rupees
and in freely convertible currencies.
In a nutshell, The total financial commitment of the Indian Party in JV/WOS
in any country is uptoUSD 1 (one) billion { or 100 million}(or its equivalent)
in any one financial year or 400 % of networth whichever is lower and
investment is a lawful activity permitted by a host country.
b Approval Route
Prior approval of the Reserve Bank would be required in all other cases of
direct investment (or financial commitment)abroad.
Reserve Bank would, inter alia, take into account the following factors
while considering such applications.
 Prima facie viability of the JV / WOS outside India.
 Contribution to external trade and other benefits which will accrue to
India through such investment (or financial commitment)
 Financial position and business track record of the Indian Party and
the foreign entity; and
 Expertise and experience of the Indian Party in the same or related line
of activity as of the JV / WOS outside India

Prohibitions on direct investment in abroad by an Indian party
1 Indian Parties are prohibited from making investment (or financial commitment)
in foreign entity engaged in real estate (meaning buying and selling of real estate
or trading in Transferable Development Rights (TDRs) but does not include
development of townships, construction of residential/commercial premises,
roads or bridges) or banking business, without the prior approval of the
ReserveBank.
2 An overseas entity, having direct or indirect equity participation by an Indian Party,

shall not offer financial products linked to Indian Rupee (e.g. non-deliverable
trades involving foreign currency, rupee exchange rates, stock indices linked to
Indian market, etc.) without the specific approval of the ReserveBank.
Meaning of Financial Commitment {Understanding with help of a case study}
The total financial commitment of the Indian Party in all the Joint Ventures/ Wholly Owned
Subsidiaries shall comprise of the following:-
a 100% of the amount of equity shares and/ or Compulsorily Convertible Preference
Shares (CCPS);
b 100% of the amount of other preference shares
c 100% of the amount of loan
d 100% of the amount of guarantee (other than performance guarantee) issued by
the Indian Party
e 100% of the amount of bank guarantee issued by a resident bank on behalf of JV or
WOS of the Indian Party provided the bank guarantee is backed by a counter
guarantee / collateral by the IndianParty
f 50% of the amount of performance guarantee issued by the Indian Party.
CASE STUDY 1:
An Indian Company{I Ltd) formed a WOS in USA {U Ltd, an Limited Liability
Company}.
I Co remitted sum as under to U Co on various dates:-
Subscription to Equity Shares-USD 100
Subscription to Redeemable Preference Shares-USD 250
Extended Corporate Guarantee on behalf of U Co with Midtown Mutual

Bank to the extent of USD 50 (value of loan extended by the Bank to U Co)
Performance Guarantee on behalf of U Co-USD 50

Question
What is the Financial Commitment of I Co?
Answer
Financial Commitment of I Co is USD 100(Equity) + USD 250( Preference Shares) + USD
50 {Corporate Guarantee} + USD 25 { Performance Guarantee}=USD 425.
CASE STUDY 2:
1 Can an Indian Party issue performance guarantee in favour of overseas JV/WOS?

Yes, the Indian Party is permitted to issue performance guarantee and 50 % of
the amount of the performance guarantees will be reckoned for the purpose
of computing financial commitment.
2 Can an Indian Party extend guarantee to an overseas entity without any equity
participationin that entity?
No, Indian Party can extend Loan and guarantee to an overseas entity only if
there is already an existing equity participation by way of direct investment.
3 Can an Indian Party make foreign direct investment in real estate?

Real Estate sector and Banking are the prohibited sectors for overseas
investment. { Real estate business means buying and selling of real estate or
trading in transferable development rights but does not include
development of township, construction of residential/commercial premises,
roads and bridges.
4 Can ECB raised be utilized for ODI?

Yes, ECB raised can be utilized for ODI.
Overseas Direct Investments by resident individuals

Resident individuals may make overseas direct investment in the equity
shares and compulsorily convertible preference shares of a Joint Venture
(JV) or Wholly Owned Subsidiary (WOS) outside India.
The limit of overseas direct investment by the resident individual shall be

within the overall limit prescribed by the Reserve Bank of India under the
provisions of Liberalised Remittance Scheme{LRS}, as prescribed by the
Reserve Bank from time to time. { i.e. USD 2,50,000 per Financial year}
Investment from EEFC and RFC Account shall also be included in the limit of
USD 2,50,000 under the provisions of LRS.

External Commercial Borrowing
New Guidelines w.r.t ECB were introduced in the Revised Study Material for
May 2020 and Nov 2020.
However, within 2 months of issue of new edition, the guidelines have been
again Amended in RTP for May 2020.
The guidelines for ECB has been given in a very detailed manner in RTP.
However, a few guidelines have been simplified in this amendment sheet and
a few has been omitted from this Amendment Sheet and the amendment
sheet has been strictly made from Exam point of view. Student can refer May
2020 RTP for more details.
It has been decided, in consultation with the Government of India, to

rationalise the framework for ECB and Rupee Denominated Bonds in light of
the experience gained to improve the ease of doing business.
Meaning of ECB’s
ECB’s are commercial loans raised by eligible resident entities from recognized non-
resident entities and should conform to parameters such as minimum maturity,
permitted and non-permitted end-uses, maximum all-in-cost ceiling, etc.
The term 'All-in-Cost' includes rate of interest, other fees, expenses, charges,
guarantee fees whether paid in foreign currency or Indian Rupees (INR) but will not
include commitment fees, pre- payment fees / charges, withholding tax payable in INR.
Salient features of the New Guidelines

Merging of Track 1 and II as “Foreign Currency Denominated ECB “and
merging of Track III and Rupee Denominated Bonds framework as “Rupee
Denominated ECB”
List of Eligible borrowers has been expanded to include all entities eligible to
receive FDI. Additionally, Port Trust, Units in SEZ, SIDBI, EXIM Bank ,
registered entities engaged in micro-finance activities and non-government
organizations can also borrow under this framework.
The lender shall be resident of FATF {Financial Action Task Force} or IOSCO
{The International Organization of Securities Commissions} compliant
country. Multilateral and Regional Financial Institutions, Individuals and
Foreign branches/subsidiaries of Indian banks can also be lenders.
Minimum Average Maturity Period will be 3 years for all ECB's. However, in
special cases it may be different.

Framework on Raising Loans through ECB’s
The framework for raising loan through ECB comprises of the following 2 options:-
1 FCY denominated ECB {Foreign currency risk is involved}
2 INR denominated ECB {Foreign currency risk is not involved}
Eligible Borrowers
All entities eligible to receive FDI are eligible to raise funds via ECB. Further, the
following entities are also eligible to raise ECB:
Port Trusts
Units in SEZ
SIDBI
EXIM Bank
Registered entities engaged in micro-finance activities, viz., registered Not
for Profit companies, registered societies/trusts/cooperatives and Non-
Government Organisations (permitted only to raise INR ECB}.
Minimum Average Maturity Period.
Minimum Average maturity period will be 3 years.

Call and put options, if any, shall not be exercisable prior to completion of minimum
average maturity.
Category MAMP
ECB raised by manufacturing companies up to USD 50 million or its equivalent 1 Year
per financial year
ECB raised from foreign equity holder for working capital purposes, general 5 Year
corporate purposes or for repayment of Rupee loans
ECB raised for working capital purposes or general corporate purposes & on- 10 Year
lending by NBFCs for working capitalpurposes or generalcorporate purposes.
ECB raised for repayment of Rupee loans availed domestically for capital 7 Year
expenditure & on-lending by NBFCs for the same purpose
ECB raised for repayment of Rupee loans availed domestically for purposes 10 Year
other than capital expenditure & on-lending by NBFCs for the same purpose

Available routes for raising ECB
a Automatic Route
No approval of RBI is needed to raise funds via ECB upto USD 750 million or
equivalent per Financial Year.
The application to raise funds under Automatic Route shall be examined by
Authorized Dealer Category -I Bank.
The designated AD Category 1 bank while considering the ECB proposal is
expected to ensure compliance with applicable ECB guidelines.
ECB liability -equity ratio for ECB raised under the Automatic Route cannot
exceed 7: 1
b Approval Route-To raise funds , above exceeding the limits given in automatic
route, borrowers shall approach RBI to seek its approval. RBI shall submit the
proposal before the Empowered Committee set by RBI . The RBI shall take a final
decision based on the recommendation of Empowered Committee.
Authorized Dealer category 1 banks are basically authorized

NOTE money changers approved by RBI under section 10 of
FEMA,1999.Examples-SBI,Canara Bank, Axis Bank.
Negative List w.r.t ECB

The negative list, for which the ECB proceeds cannot be utilised, would include the following:
Real estate activities
Investment in capital market NOTE
Equity investment However if the ECB was raised specifically for
Working Capital Purposes/General corporate
Working capital purposes
Purposes/Repayment of Rupee Loans, the
General corporate purposes proceeds realized can be utilized for the same
Repayment of Rupee loans
Hedging Provisions w.r.t. ECB

The entities raising ECB are required to follow the guidelines for hedging issued, if
any, by the concerned sectoral or prudential regulator in respect of foreign
currency exposure.
Infrastructure space companies shall have a Board approved Risk management

policy.

Further, such companies are required to mandatorily hedge 70 per cent of their
ECB exposure {principal as well as the coupon} in case the average maturity of the
ECB is less than 5 years.
Overseas investors are eligible to hedge their exposure in Rupee through

permitted derivative products with AD Category I banks in India.
Change of currency of borrowing

Change of currency of ECB from one freely convertible foreign currency to any
other freely convertible foreign currency as well as to INR is freely permitted.
Change of currency from INR to any freely convertible foreign currency is not
permitted.
Loan Registration Number

Funds can be raised via ECB Route only after obtaining the Loan Registration
1 Number from the Reserve Bank.
To obtain the Loan Registration Number, borrowers are likely to submit duly
2 certified FORM ECB , which also contains terms and conditions of the ECB , in
duplicate to the designated AD Category 1 Bank.
3 AD Category 1 bank will forward one copy to the concerned department in RBI.
Monthly Reporting of Actual Transections

The borrowers are required to report actual ECB transactions through FORM ECB 2 Return
through the AD Category 1 bank on monthly basis so as to reach DSIM {Department of Statistics
and Information Management} within seven working days from the close of month to which it
relates.
Changes , if any, in ECB parameters should also be incorporated in FORM ECB 2 Return.
Late submission fee for delay in reporting

S.L. NO Type of return/form Period of delay Applicable LSF
1 Form ECB 2 Upto 30 calender days from due INR 5,000
date of submission
2 Form ECB 2/Form Upto 3 years from due date of INR 50,000 per year
ECB submission
3 Form ECB 2/Form Beyond 3 years from due date of INR 1,00,000 per
ECB submission year

118
Foreign Exchange Management Act, 1999
Standard operating procedure (SOP) for untraceable entities
The following SOP has to be followed by designated AD Category-I banks in case of untraceable
entities who are found to be in contravention of reporting provisions for ECB by failing to submit
prescribed return(s) under the ECB framework, either physically or electronically, for past eight
quarters or more.
Definition of untraceable entities

Any borrower who has raised ECB will be treated as 'untraceable entity', if
entity/auditor(s)/director(s)/ promoter(s) of entity are not reachable/responsive/reply in
negative over email/letters/phone for a period of not less than two quarters with documented
communication/ reminders numbering 6 or more and it fulfills both of the following
conditions:-
a Entity not found to be operative at the registered office address as

per records available with the AD Bank or not found to be operative
during the visit by the officials of the AD Bank or any other agencies
authorised by the AD bank for the purpose;
b Entities have not submitted Statutory Auditor’s Certificate for last

two years or more;
Action
The followings actions are to be undertaken in respect of 'untraceable entities;
File Revised Form ECB, if required, and last Form ECB 2 Return without certification from
company with 'UNTRACEABLE ENTITY' written in bold on top. The outstanding amount will
a be treated as written-off from external debt liability of the country but may be retained by
the lender in its books for recovery through judicial/ non-judicial means;
b No fresh ECB application by the entity should be examined/processed by the AD bank.
Directorate of Enforcement should be informed whenever any entity is designated

c 'UNTRACEABLE ENTITY'; and
d No inward remittance or debt servicing will be permitted under auto route
Conversion of ECB into equity

Conversion of ECB, including those which are matured but unpaid, into equity is permitted
subject to the following conditions;-
The activity of the borrowing company is covered under the automatic route
for FDI or Government approval is received.

The conversion, which should be with the lender's consent and without any
additional cost, should not result in contravention of eligibility and breach
of applicable sector cap on the foreign equity holding under FDI policy.
Applicable pricing guidelines for shares are complied with
If the borrower concerned has availed of other credit facilities from the
Indian banking system, including foreign branches/subsidiaries of Indian
banks, the applicable prudential guidelines issued by the Department of
Banking Regulation of Reserve Bank, including guidelines on restructuring
are complied with
Security for raising ECB

AD Category I banks are permitted to allow creation/cancellation of charge on
immovable assets, movable assets, financial securities and issue of corporate and/or
personal guarantees in favour of overseas lender / security trustee, to secure the ECB to
be raised/ raised by the borrower, subject to satisfying themselves that:-
the underlying ECB is in compliance with the extant ECB guidelines.
there exists a security clause in the Loan Agreement requiring the ECB
borrower to create/cancel charge, in favour of overseas lender/security
trustee, on immovable assets/movable assets/financial securities/issuance
of corporate and/or personal guarantee, and
No objection certificate, as applicable, from the existing lenders in India has

been obtained in case of creation of charge.
ECB Facility for Sturtups

Framework
AD Category 1-banks are permitted to allow Startups to raise ECB under the automatic
route.
Eligibility
An entity recognised as a Startup by the Central Government as on the date of raising ECB.
Recognized lender
Lender/Investor shall be resident of FATF compliant country.
Forms
The borrowing can be in form of loans or non-convertible , optionally convertible or
partially convertible preference shares.
Maturity
Minimum Average maturity period will be 3 years.

Currency
The borrowing should be denominated in any freely convertible currency or in Indian
Rupees or a combination thereof.
Amount
The borrowing per Start-up will be limited to USD 3 million or equivalent per financial
year either in INR or any convertible foreign currency or a combination of both.
End Uses
For any expenditure in connection with business of the borrower.
Security
The choice of security to be provided to the lender is left to the borrowing entity. Security
can be in the nature of movable, immovable, intangible assets (including patents,
intellectual property rights ), financial securities etc . However, issuance of guarantee ,
standby letter of credit , letter of undertaking or letter of comfort by Indian banks, all
India Financial Institutions and NBFC's is not permitted.
ECB facility with Oil Marketing Companies

Public sector Oil Marketing Companies can raise ECB's for working capital
purposes with minimum average maturity period of 3 years from all recognized
lenders under the Automatic Route without mandatory hedging and individual
limit requirements.
The overall ceiling for such ECB's shall be USD 10 billion or equivalent.
ECB by entities under restructuring/ECB facility for refinancing stressed assets:
An entity which is under a restructuring scheme/ corporate insolvency

resolution process can raise ECB only if specifically permitted under the
resolution plan.
Eligible borrowers under the ECB framework, who are participating in the
Corporate Insolvency Resolution Process under Insolvency and Bankruptcy
Code, 2016 as resolution applicants, can raise ECB from all recognised
lenders, except foreign branches/subsidiaries of Indian banks, for
repayment of Rupee term loans of the target company. Such ECB will be
considered under the approval route.
Eligible corporate borrowers who have availed Rupee loans domestically for
capital expenditure in manufacturing and infrastructure sector and which
have been classified as SMA-2 or NPA can avail ECB for repayment of these
loans under any one time settlement with lenders.
The applicable MAMP will have to be strictly complied with under all
circumstances.

Contravention of ECB Guidelines and Transparency Requirement
For providing greater transparency, information with regard to the name of
the borrower, amount, purpose and maturity of ECB under both Automatic
and Approval routes are put on the RBI's website, on a monthly basis, with a
lag of one month to which it relates.
The primary responsibility for ensuring that the borrowing is in compliance
with the applicable guidelines is that of the borrower concerned. Any
contravention of the applicable provisions of ECB guidelines will invite
penal action under the FEMA.
Import of Goods and Services

Import
The term 'Import' means bringing into India any goods or services.
Governing Regulation
Section 5 of FEMA Act 1999, read with Foreign Exchange Management (Current
Account Transaction) Rules, 2000.
Guidelines to be remembered
1 The Authorised Dealer {AD} shall adhere to “Know Your Customer” (KYC) guidelines
issued by RBI while undertaking import transactions.
2 AD may allow remittance for making payments

for imports into India, after ensuring that all the
requisite details are made available by the
importer and the remittance is for bonafide trade
transactions as per applicable laws in force.
3 AD should ensure that the importer furnishes

evidence of import viz., as in IDPMS, Postal
Appraisal Form or Customs Assessment
Certificate, etc., and satisfy himself that goods
equivalent to the value of remittance have been
imported. AD should ensure that all import
remittances outstanding on the notified date of
IDPMS are uploaded in IDPMS (Import Data
Processing and Monitoring System)
4 A person resident in India may make payment for import of goods in foreign
exchange through an international card held by him/in rupees from international
credit card/ debit card through the credit/debit card servicing bank in India against the
charge slip signed by the importer,or as prescribed by Reserve Bank from time to time

5 Any person resident in India may also make payment In rupees towards meeting
expenses on account of boarding, lodging and services related thereto or travel to
and from and within India ofa person resident outside India who is on a visit
toIndia; by means of a crossed cheque or a draft as consideration for purchase of
gold or silver in any form imported by such person
6 A company or resident in India may make payment in rupees to its non-whole

time director who is resident outside India and is on a visit to India for the
company's work and is entitled to payment of sitting fees or commission or
remuneration, and travel expenses to and from and within India . However such
payment shall be in accordance with Memorandum of Association or Articles of
Association or any agreement entered into by it or any resolution passed in
General Meeting or by BOD.
7 Time Limit for Settlement of Import Payments:-

remittances against imports should be completed not later than six
a months from the date of shipment, except in cases where amounts are
withheld towards guarantee of performance,etc.
Deferred payment arrangements (including suppliers' and buyers' credit)
b up to five years, are treated as trade credits.
8 Extension of Time for settlement of Import Payments

AD can consider granting extension of time for settlement of import
dues up to a period of six months at a time (maximum up to the period of
three years) irrespective of the invoice value for delays on account of
a disputes about quantity or quality or non-fulfilment of terms of contract;
financial difficulties and cases where importer has filed suit against the
seller.
However, Extension cannot be granted by the AD, if the import transactions

b are under investigation by Directorate of Enforcement / Central Bureau of
Investigation or other investigating agencies.
While considering extension beyond one year from the date of remittance,
the total outstanding of the importer does not exceed USD one million or
c 10 percent of the average import remittances during the preceding two
financial years, whichever is lower.
9 Import for Foreign Exchange into India

A person may send into India , without limit , foreign exchange in any form
a (other than currency notes, bank notes and travellers cheques).

A person may bring into India from any place outside India, without limit,
foreign exchange (other than unissued notes). However, on arrival in
India, a declaration must be given to custom authorities about the same.
However, declaration is not needed if aggregate value of the foreign
b
exchange in the form of currency notes, bank notes or travellers cheques
brought in by such person at any one time does not exceed USD 10,000
and/or the aggregate value of foreign currency notes (cash portion) alone
brought in by such person at any one time does not exceed USD 5,000.
10 Import of Indian Currency and Currency Notes

Any person resident in India who had gone out of India on a temporary
visit, may bring into India at the time of his return from any place outside
a India (other than from Nepal and Bhutan), currency notes of Government
of India and Reserve Bank of India notes up to an amount not exceeding
Rs.25,000 (Rupees twenty five thousand only)
A person may bring into India from Nepal or Bhutan, currency notes of
Government of India and Reserve Bank of India for any amount in
b denominations upto Rs.100/- {The reason for the same is that post
demonetization Nepal Government has banned the notes of Rs 200, 500
and 2000}.
11 Issue of Guarantees by an Authorised Dealer in favour of importer

An authorized dealer is permitted to provide a guarantee in respect of any
debt, obligation or other liability incurred by a PRI as an importer, in
a respect of imports undertaken on deferred payment terms in accordance
with approval of RBI.
It is also clarified that AD may give a guarantee , Letter of Undertaking or

Letter of Comfort in respect of any debt, obligation or other liability
b incurred by a person resident in India and owned to a overseas supplier of
goods, banks, or financial institution in respect of permitted import of
goods.
AD, may subject to the directions of RBI also permit a person resident in
c India to issue corporate guarantee in favour of an overseas lessor for
financing import.
An AD may also give guarantee in favour of a service importer upto USD

d 1,00,000 if such service importer is a PSU or a department/undertaking of
Government of India /State Government and upto USD 5,00,000 if such
service importer is other than PSU or a department/undertaking of
Government of India /State Government.

Borrowing and Lending in Foreign currency by persons other than authorized
dealer
Borrowing in foreign currency by persons other than an authorised dealer: The
circumstances and the conditions regarding borrowing in foreign currency by persons
other than an authorised dealer are mentioned below:
For execution of projects outside India and for exports on deferred payment
I terms: A person resident in India may borrow, whether by way of loan or
overdraft or any other credit facility, from a bank situated outside India, for
execution outside India of a turnkey project or civil construction contract or in
connection with exports on deferred payment terms, provided the terms and
conditions stipulated by the authority which has granted the approval to the
project or contract or export is in accordance with the Foreign Exchange
Management (Export of Goods and Services) Regulations,2000.
For imports: An importer in India may, for import of goods into India, avail of
ii foreign currency credit for a period not exceeding six months extended by the
overseas supplier of goods, provided the import is in compliance with the Export
Import Policy of the Government of India in force.
iii Borrowing by resident individual: An individual resident in India may borrow a

sum not exceeding US$ 250,000/- or its equivalent from his close relative outside
India, subject to the conditions that:-
a the minimum maturity period of the loan is one year.
b the loan is free of interest; and

the amount of loan is received by inward remittance in free foreign
c exchange through normal banking channels or by debit to the
NRE/FCNR account to the non-resident lender.
Lending in foreign currency by persons other than an authorised dealer: The
circumstances and the conditions regarding lending in foreign currency by persons other
than an authorised dealer are mentioned below:-
Lending to WOS / JV: An Indian entity may lend to its wholly owned subsidiary or
I joint venture abroad constituted in accordance with the provisions of Foreign
Exchange Management (Transfer or issue of foreign security) Regulations,2000.
Lending by Select Institutions: Export Import Bank of India, Industrial Development

ii Bank of India, Industrial Finance Corporation of India, Industrial Credit and Investment
Corporation of India Limited, Small Industries Development Bank of India Limited or any
other institution in India may extend loans to their constituents in India out of the
foreign currency borrowings raised by these institutions with the approval of the Central
Government for the purpose of onward lending.

iii Lending by Indian companies to their employees: Indian companies in India may
grant loans to the employees of their branches outside India for personal
purposes provided that the loan shall be granted for personal purposes in
accordance with the lender's Staff Welfare Scheme/Loan Rules and other terms
and conditions as applicable to its staff resident in India and abroad.
? Probable Questions ?
Time limit for settlement of import payments and
extension of the same.
What are the routes available for raising ECB's?

Can ECB raised be utilized for real estate activities?
Short Note on ECB facility for start up's
Who are the eligible borrowers to raise funds via ECB

route?
Can ECB raised be utilized for ODI?
What is the total financial commitment that a Indian Party

can make in its overseas JV/WOS?
Modes of Direct Investment outside India?
Which authority can prescribe capital account transaction's for

Non-debt instruments?
126
CHAPTER-16
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136
CHAPTER-19
COMPETITION ACT, 2002
Definitions: (Only for Old Syllabus)
includes any arrangement or understanding or action in

Agreement concert,—
(I) whether or not, such arrangement, understanding or action
is formal or in writing; or
(ii) whether or not such arrangement, understanding or action

is intended to be enforceable by legal proceedings.
includes an association of producers, sellers, distributors,

Cartel traders or service providers who, by agreement amongst
themselves, limit, control or attempt to control the production,
distribution, sale or price of, or, trade in goods or provision of
services;
means a person or a department of the Government.

Enterprise engaged in any activity(production, storage, supply,
distribution, service etc.
Investment-directly or through subsidiary.
Not including sovereign functions provided by the central
govt- atomic energy, currency, defence and space.
Buyer ofGoods Hires of avails of any services

Consumer
Buys any goods for a hires or avails of any services for a
consideration. consideration.
Including user of such and includes any bene ciary of such
goods. services.
whether such purchase
whether such hiring or availing of
of goods is for resale or
services is for any commercial
for any commercial
purpose or for personal use.
purpose or for personal
use.
137
Means goods as defined in the Sale of Goods Act, 1930 and
G oo d s includes—
A Products manufactured, processed or mined.

B Debentures, stocks and shares after allotment.
In relation to goods supplied, distributed or
C controlled in India.
Includes-individual, HUF, company, rm, AOP, BOI. corporate

Person established under any law, body cooperate,co-operative
society,local authority, any other artificial judicial person.
Section 3- Anti Competitive Agreements Section 4-Abuse of Dominant Position

Agreements between persons or enterprises ~ No enterprise shall abuse its dominant
including cartels position
~ directly or indirectly determines purchase ~ There shall be abuse of dominant
or sale price position if
~ directly or indirectly results in bid rigging (a) Unfair or discriminatory condition is
or collusive bidding imposed including predatorypricing
~ limits or controls production, supply, (b) Limits or restricts-production, scientific or
markets, technical development, technical development,
investment or provision of services; (c) Indulges in practices resulting in denial
~ shares the market or source of production of market access,
or provision of services by way of (d) forceful supplementary obligations
allocation of geographical area of having no connection with subject matter of
market, or type of goods or services, or contract
number of customers in the market or any (e) uses its dominant position in one relevant
other similar way; market to enter into, or protect, other
~ shall be presumed to have an relevant market.
appreciable adverse effect on
competition and regarded as void.
Section 3(4)-Agreement amongst enterprises or persons at different stages or levels of the

production chain in different markets, in respect of production, supply, distribution, storage, sale or
price of, or trade in goods or provision of services, including—
(a) “tie-in arrangement” includes any agreement requiring a purchaser of goods, as a condition of
such purchase, to purchase some other goods.
(b) “exclusive supply agreement” includes any agreement restricting in any manner the purchaser in
the course of his trade from acquiring or otherwise dealing in any goods other than those of the seller
or any other person.
138
(c) “exclusive distribution agreement” includes any agreement to limit, restrict or withhold the output
or supply of any goods or allocate any area or market for the disposal or sale of the goods.
(d) “refusal to deal” includes any agreement which restricts, or is likely to restrict, by any method the
persons or classes of persons to whom goods are sold or from whom goods are bought.
(e) “resale price maintenance” includes any agreement to sell goods on condition that the prices to be
charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly
stated that prices lower than those prices may be charged.
What is combination? (SECTION-5)

-Acquisition/Control/Merger/Amalgamation
A Individual(Acquirer plus enterprise acquired)
LOCATION ASSETS TURNOVER
In India Rs 2000 Crore Rs 6000 Crore
In India or >1000 million US > 3000 million

outside India $(of which at U S$ ( o f w h i c h
least Rs 1000 atleast Rs.3000
crore in India). Crore in India).
B Group
LOCATION ASSETS TURNOVER
In India Rs 8000 Crore Rs 24000 Crore
In India or >4000 million US >12000 million

outside India $(of which atleast U S$ ( o f w h i c h
Rs 1000 crore in atleast Rs.3000
India). Crore in India).
Regulation ofcombinations(SECTION-5)
No person or enterprise shall enter into a combination which causes or is likely to cause an
appreciable adverse effect on competition within the relevant market in India and such a
combination shall be void.
Any person or enterprise proposes to enter into combination shall give notice to competition
commission in prescribed form within 30 days of:
Approval of BOD of proposal relating to merger or amalgamation.

Execution of any agreement relating to acquisition or acquiring control.
139
Factors to be considered by Commission while
determining whether enterprise enjoys dominant position:
Market Share
Size of enterprise/Competitor.
Economic power.
Monopoly exercised.
Dependence of consumers.
Countervailing buying power.
Relative advantage by way of economic
development.
Other factors.
The Commission shall, while determining the “relevant

geographic market”, have due regard to all or any of the following
factors, namely:
(a) Regulatoryy trade barriers.
(b) Local speci cation requirements.
(c)National procurement policies.
(d) Adequate distribution facilities.
(e) Transport costs.
(f) Language.
(g) Consumer preferences.
(h) Need for secure or regular supplies or rapid
after-sales services.
The Commission shall, while determining the “relevant

product market”, have due regard to all or any of the following
factors, namely:
(a) physical characteristics or end-use of
goods;
(b) price of goods or service
(c) consumer preferences;
(d) exclusion of in-house production;
(e) existence of specialised producers;
(f) classification of industrial products
140
IMPORTANT POWERS OF CCI:
Powers of Civil Court
Inquire into certain agreements or dominant position of enterprise Suo moto or on complain
received.
Power to call upon experts from various elds of economics, commerce, accountancy,
international trade or from any other discipline as it deems necessary, to assist the Commission
in the conduct of any inquiry or proceeding before it.
If after enquiry by the Director General, the commission nds that the agreement entered are in
contravention of Section 3, it may pass all or any of the following orders.

(a) Direct to discontinue and not to reenter such agreement.
(b) impose penalty up to 10% of average turnover for last 3 preceding FY's.
(c) Direct to modify the agreement.
(d) Give directions including payment of costs.
CHAIRMAN AND MEMBERS OF CCI (IMPORTANT PROVSIONS)

A)The Chairperson C)Resignation shall be valid from :(Section D)Restriction on
and every other 11) employmentof
Member shall be a expiry of three months from the date of receipt Chairperson and other
person of ability, of such Members
integrityand notice or
standing and who b) until a person duly appointed as his 2 years from the
h a s s p e c i a l successor enters upon his date on which they
knowledge of, and office or cease to hold office
such c)until the expiry of his term of office of, any enterprise
professional d) he is permitted by the Central Government, which has been a
experience of not less whichever is earliest. p a r t y t o a
than fteen years in Removal-4 grounds- insolvent, convicted of proceeding before
various elds. moral turpitude, p paid employment, t h e C o m m is sio n
B)Term of office of acquired such financial or other interest as under
Chairperson and is likely to affect prejudicially his this Act.
other Members functions as a Member; or)has so abused Exception:
5 years his position as to render his continuance in a) employment under
M a x a g e - 6 5 office prejudicial to the public interest; or the Central Government
years mentally become incapable. or a State Government.
Whenever CG forms an opinion p that any b) local authority.
commission has acquired financial interest c) statutory authority or
in any enterprise or abused his position, it any corporation
shall make a reference to Supreme Court. established by or under
The S.C. shall hold an enquiry and then any Central, State or
report that the member in question ought to Provincial Act
be removed from his office d)Government
company.
141
Factors that the Competition Commission of India shall consider while
determining whether and action has appreciable adverse effect on competition in
India?
Creation of barriers to new entrants in the market.

Driving existing competitors out of the market.
Foreclosure of competition by hindering entry into the market.
Accrual of benefits to consumers.
Improvements in production or distribution of goods or provision of services .
RTP MAY2018:
Exemption has been granted to Regional Rural Banks

1 from application of Sections 5 and 6 of the Competition
Act, 2002 for a period of 5 years from date of
publication of this noti cation in the Official Gazette.
Exemption has been granted to the Vessels Sharing

2 Agreements of the Liner Shipping Industry from the
provisions of Section 3 of the Competition Act, 2002.
Exemption has been granted to all cases of

reconstitution , transfer of the whole or any part thereof
3 and amalgamation of nationalized banks from the
application of provisions of Section 5 and 6 of the
Competition Act, 2002.
Amendment through RTP MAY 2020

The Competition Commission of India (Procedure in regard to the transaction of business relating to
combinations) Amendment Regulations, 2019,w.e.f. 15th August,2019
1.Insertion of Regulation 5A : Notice for approval of combinations under Green Channel
GREEN CHANNEL FAST TRACK APPROVAL OF COMBINATION UNDER COMPETITION ACT,2002 –

Done as a part to improve Ease of Doing Business in India.
142
(1) For the category of combination mentioned in Schedule III, the
parties to such combination may, at their option, give notice in
Form I pursuant to regulation 5 along with the declaration
specified in Schedule IV.
(2) Upon filing of a notice under sub-regulation (1) and acknowledgement

thereof, the proposed combination shall be deemed to have been approved by
the Commission under sub-section (1) of section 31 of the Act:
Provided that where the Commission finds that the combination does not fall
under Schedule III and/or the declaration filed pursuant to sub-regulation (1) is
incorrect, the notice given and the approval granted under this regulation shall
be void ab initio and the Commission shall deal with the combination in
accordance with the provisions contained in the Act:
Provided further that the Commission shall give to the parties to the
combination an opportunity of being heard before arriving at a finding that the
combination does not fall under Schedule III and/or the declaration filed
pursuant to sub-regulation (1) is incorrect.”;
Analysis of Regulation 5A
Regulation 5A provides for a "green channel" for obtaining an approval from the
CCI ("Green Channel Route") in relation to specified transactions which may
constitute a combination i.e. Companies don’t have to wait for 30 days for
approval from CCI. It will be provisionally approved on the same day as Form I is
submitted to the CCI. The CCI has emphasized that the Green Channel Route is
predominantly aimed to sustain and promote a speedy, transparent and
accountable review of combination cases, create a culture of compliance, and
support economic growth. The parties are given a provisional approval to the
combination, subject to the CCI analysing the combination. If any information in
the application is incorrect, such provisional approval shall be void-ab-initio.
143
Extra Readings for more clarity :
Note : Schedule III [See sub-regulation (1) of Regulation 5A]
The Amendment has listed out various criteria in relation to the combinations that would
be eligible to apply through the Green Channel Route in terms of Schedule III of the
Amendment. The eligibility conditions mandate that the parties to a combination, being the
acquirer and the target company and/or their respective group companies do not have any
overlaps, horizontal, vertical or complementary, i.e.:
Considering all plausible alternative market definitions, the parties to the combination, their
respective group entities and/or any entity in which they, directly or indirectly, hold shares
and/or control:-
(a) do not produce/provide similar or identical or substitutable product(s) or service(s);
(b) are not engaged in any activity relating to production, supply, distribution, storage, sale and
service or trade in product(s) or provision of service(s) which are at different stage or level of
production chain; and
(c) are not engaged in any activity relating to production, supply, distribution, storage, sale and
service or trade in product(s) or provision of service(s) which are complementary to each other.
Note 1 : After the issuance of the Guidance notes, the term ‘overlap’ includes:
(i) direct or indirect shareholding of more than 10%;

(ii) a right which is unavailable to an ordinary shareholder (some commercial advantage for
example), and
(iii) a right to appoint a director or an observer in another undertaking.
Note 2 : The updated 'Notes to Form-I' clarify that complementary products/services are those
which are combined and used together (for example, printers and ink cartridges), and that the
competition assessment for such products would be undertaken in a manner similar to vertically
related products.
If they fulfils the criteria under Schedule III ,then only green channel Route will be
applicable on them .
2. In regulation 13, of the Competition Commission of India (Procedure in regard to the

transaction of business relating to combinations) Regulations, 2011, following are the
amendments-(a) For sub-regulation (1A), the following sub-regulation shall be substituted,
namely: - “(1A) A summary of the combination, not containing any confidential information, in
not more than 1000 words, comprising details regarding: (a) name of the parties to the
combination; (b) the nature and purpose of the combination; (c) the products, services and
business(es) of the parties to the combination; and (d) the respective markets in which the parties
to the combination operate, shall be filed for the purpose of publishing the same on the website
of the Commission”;
(b) sub-regulation (1B) shall be omitted.
Note : It’s a factual amendment in Regulation 13 (1A) ,earlier the words were 2000.
144
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Last Minute Revision Notes by CA Sanidhya Saraf

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e Last Minute REVISION

GATHA for CA Final STUDENTS

CHAPTER REVISION PAGE.NO

Inspection Inquiry & Investigation 40-44

Compromise, Arrangement & Amalgamation 45-49

Prevention. Oppression & Mismanagement 50-53

Registered Valuer 54-54

Removal of Names of Companies 55-56

Foreign Company 57-58

Miscellaneous Provisions 59-60

NCLT & AT 61-62

THE JOURNEY BEGINS...

CHAPTER REVISION PAGE.NO

Prevention of Money Laundering Act 74-79

Securities Contracts Regulation Act 80-86

SEBI Act, 1992 87-90

SARFAESI ACT, 2002 91-97

Foreign Exchange Management Act 98-126

Arbitration & Conciliation Act 127-130

Foreign Contribution Regulation Act 131-134

SEBI LODR (Only for new syllabus) 135-136

Competition Act, 2002 137-144

Banking Regulation Act 145-149

Interpretation of Statutes 150-153

Insurance Regulatory & Development Act 154-156

THE JOURNEY BEGINS...

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Section 242: Powers Of Tribunal

Section 243: Consequences of Termination Or Modiﬁcation Of Certain Agreements

1) in the case of a company having a share capital:

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1 1. In event of occurrence of any vacancy in the

Resignation of Members (Only for Knowledge)

What is Insolvency and Bankruptcy?

Purpose/ Preamble of IBC

Extent and Commencement of The Code

Distinct Features of The Code

Structure of The Code

Part V- Miscellaneous (sec 224-255)

Five Pillars of the Code

Applicability of the Code?

Non-Applicability of the Code? (IMP)

Amendment Nov 20 Enhancement in the minimum amount of default to ₹ 1 crore .

Note : Previously ,this minimum amount was ₹ 1 Lakh only.

Comprehensive Flow of Corporate Insolvency Process

Initiation of CIRP by Financial Creditor (Section 7)

*** Filing of application in certain special cases

Initiation of CIRP by Operational Creditor (Section 9)

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