RTP Compiler May 2018 To Nov 2021

PAPER 4: CORPORATE AND ECONOMIC LAWS
FINAL (NEW COURSE)
Part I – I : RELEVANT AMENDMENTS FOR NOVEMBER 2021 EXAMINATION

1. Amendments made through the enforcement of various sections of the Companies
(Amendment) Act, 2020 through different Notifications.
Ministry of Law and Justice on 28 th September 2020 enacted the Companies (Amendment)
Act, 2020. This was an Act further to amend the Companies Act, 2013. According to this
amendment Act, different dates may be appointed for different provisions of this Act and
any reference in any such provision to the commencement of this Act shall be construed
as a reference to the coming into force of that provision.
Notification Amendment in Relevant Sections of the Companies Act, 2013
MCA vide In section 165 of the principal Act, for sub-section (6), the following
Notification sub-section shall be substituted, namely:—
S.O. 4646(E) "(6) If a person accepts an appointment as a director in violation of
dated 21st this section, he shall be liable to a penalty of two thousand rupees
December, for each day after the first during which such violation continues,
2020, the subject to a maximum of two lakh rupees.".
Central
Government
In section 167 of the principal Act, in sub-section (2),—
hereby
appoints the (a) the words "with imprisonment for a term which may extend to
21st day of one year or" shall be omitted;
December, (b) for the words "five lakh rupees, or with both", the words "five
2020 as the lakh rupees" shall be substituted.
date on which
the following For section 172 of the principal Act, the following section shall be
provisions of substituted, namely:—
the said Act
shall come "172. If a company is in default in complying with any of the
into force. provisions of this Chapter and for which no specific penalty or
punishment is provided therein, the company and every officer of
the company who is in default shall be liable to a penalty of fifty
thousand rupees, and in case of continuing failure, with a further
penalty of five hundred rupees for each day during which such
failure continues, subject to a maximum of three lakh rupees in case
of a company and one lakh rupees in case of an officer who is in
default.".
© The Institute of Chartered Accountants of India

82 FINAL (NEW) EXAMINATION: NOVEMBER, 2021
In section 178 of the principal Act, in sub-section (8), for the words
"punishable with fine which shall not be less than one lakh rupees
but which may extend to five lakh rupees and every officer of the
company who is in default shall be punishable with imprisonment
for a term which may extend to one year or with fine which shall not
be less than twenty-five thousand rupees but which may extend to
one lakh rupees, or with both", the words "liable to a penalty of five
lakh rupees and every officer of the company who is in default shall
be liable to a penalty of one lakh rupees" shall be substituted.
In section 184 of the principal Act, in sub- section (4), for the words
"punishable with imprisonment for a term which may extend to one
year or with fine which may extend to one lakh rupees, or with both",
the words "liable to a penalty of one lakh rupees" shall be
substituted.
In section 187 of the principal Act, for sub-section (4), the following
sub-section. shall be substituted, namely:—
"(4) If a company is in default in complying with the provisions of
this section, the company shall be liable to a penalty of five lakh
rupees and every officer of the company who is in default shall be
liable to a penalty of fifty thousand rupees."
(a) in clause (i), for the words "punishable with imprisonment for a
term which may extend to one year or with fine which shall not be
less than twenty-five thousand rupees but which may extend to five
lakh rupees, or with both", the words "liable to a penalty of twenty-
five lakh rupees" shall be substituted;
(b) in clause (ii), for the words "punishable with fine which shall not
be less than twenty-five thousand rupees but which may extend to
five lakh rupees", the words "liable to a penalty of five lakh rupees"
shall be substituted.
In section 204 of the principal Act, in sub-section (4), for the words
"punishable section 204. with fine which shall not be less than one
lakh rupees but which may extend to five lakh rupees", the words
"liable to a penalty of two lakh rupees" shall be substituted.
sub-section section 232. shall be substituted, namely:—
"(8) If a company fails to comply with sub-section (5), the company
and every officer of the company who is in default shall be liable to
a penalty of twenty thousand rupees, and where the failure is a
continuing one, with a further penalty of one thousand rupees for

PAPER – 4 : CORPORATE AND ECONOMIC LAWS 83
each day after the first during which such failure continues, subject
to a maximum of three lakh rupees.".
(a) the words "with imprisonment for a term which may extend to six
months or" shall be omitted;
(b) for the words "one lakh rupees, or with both", the words "one
lakh rupees" shall be substituted.
(b) for the words "five lakh rupees, or with both", the words "five
sub-sections shall be substituted, namely:—
"(2) If any person required to assist or cooperate with the Company
Liquidator under sub-section (1) does not assist or cooperate, the
Company Liquidator may make an application to the Tribunal for
necessary directions.
(3) On receiving an application under sub-section (2), the Tribunal
shall, by an order, direct the person required to assist or cooperate
with the Company Liquidator to comply with the instructions of the
Company Liquidator and to cooperate with him in discharging his
functions and duties.".
In section 302 of the principal Act,—
(a) for sub-section (3), the following sub-section shall be
substituted, namely:—
"(3) The Tribunal shall, within a period of thirty days from the date
of the order,—
(a) forward a copy of the order to the Registrar who shall record
in the register relating to the company a minute of the dissolution of
the company; and
(b) direct the Company Liquidator to forward a copy of the order
to the Registrar who shall record in the register relating to the
company a minute of the dissolution of the company.";
(b) sub-section (4) shall be omitted.

(b) for the words "fifty thousand rupees, or with both", the words"
fifty thousand rupees" shall be substituted.
sub-section shall be substituted, namely:—
"(2) The Tribunal shall—
(a) forward a copy of the order, within thirty days from the date
thereof, to the Registrar who shall record the same; and
(b) direct the Company Liquidator or the person on whose
application the order was made, to file a certified copy of the order,
within thirty days from the date thereof or such further period as
allowed by the Tribunal, with the Registrar who shall record the
same."
In section 392 of the principal Act,—
(a)the words "with imprisonment for a term which may extend to six
(b) for the words "five lakh rupees, or with both", the words "five
In section 450 of the principal Act, for the words "punishable with
fine which may extend to ten thousand rupees, and where the
contravention is continuing one, with a further fine which may
extend to one thousand rupees for every day after the first during
which the contravention continues", the words "liable to a penalty of
ten thousand rupees, and in case of continuing contravention, with
a further penalty of one thousand rupees for each day after the first
during which the contravention continues, subject to a maximum of
two lakh rupees in case of a company and fifty thousand rupees in
case of an officer who is in default or any other person" shall be
substituted.
MCA Vide In section 379 of the principal Act, in sub-section (1), the proviso
Notification shall be omitted.
325(E) dated After section 393 of the principal Act, the following section shall be
22nd January, inserted, namely:—
2021, the "393A. The Central Government may, by notification, exempt any
Central class of—
Government
(a) foreign companies;
hereby
appoints the (b) Companies incorporated or to be incorporated outside India,
22nd day of whether the company has or has not established, or when formed
January, 2021 may or may not establish, a place of business in India, as may be
as the date on specified in the notification, from any of the provisions of this

which the Chapter and a copy of every such notification shall, as soon as may
mentioned be after it is made, be laid before both Houses of Parliament.".
provisions of
the said Act In section 435 of the principal Act, in sub-section (1), for the words
shall come "offences under this Act, by notification", the words and figures
into force. "offences under this Act, except under section 452, by notification"
For section 446B of the principal Act, the following section shall be
'446B. Notwithstanding anything contained in this Act, if penalty is
payable for non-compliance of any of the provisions of this Act by a
One Person Company, small company, start-up company or
Producer Company, or by any of its officer in default, or any other
person in respect of such company, then such company, its officer
in default or any other person, as the case may be, shall be liable
to a penalty which shall not be more than one-half of the penalty
specified in such provisions subject to a maximum of two lakh
rupees in case of a company and one lakh rupees in case of an
officer who is in default or any other person, as the case may be.
Explanation.—For the purposes of this section,—
(a)"Producer Company" means a company as defined in clause (l)
of section 378A;(b)"start-up company" means a private company
incorporated under thisAct or under the Companies Act, 1956 and
recognised as start-up in accordance with the notification issued by
the Central Government in the Department for Promotion of Industry
and Internal Trade.'.
In section 454 of the principal Act, in sub-section (3), the following
proviso shall be inserted, namely:—
"Provided that in case the default relates to non-compliance of sub-
section (4) of section 92 or sub-section (1) or sub-section (2) of
section 137 and such default has been rectified either prior to, or
within thirty days of, the issue of the notice by the adjudicating
officer, no penalty shall be imposed in this regard and all
proceedings under this section in respect of such default shall be
deemed to be concluded.".
MCA Vide In section 247 of the principal Act, in sub-section (3), for the words
Notification "punishable with fine which shall not be less than twenty-five
S.O. 1303(E) thousand rupees but which may extend to one lakh rupees", the
dated 24th words "liable to a penalty of fifty thousand rupees" shall be
March 2021 substituted.

the Central
Government
hereby
appoints the
24th March,
2021 as the
date on which
the provisions
of section 45
of the said Act
shall come
into force.
MCA vide In section 149 of the principal Act, in sub-section (9), the following
Notification proviso shall be inserted, namely:—
S.O. 1255(E) "Provided that if a company has no profits or its profits are
Dated 18th inadequate, an independent director may receive remuneration,
March, 2021 exclusive of any fees payable under sub-section (5) of section 197,
the Central in accordance with the provisions of Schedule V.".
Government
hereby
In section 197 of the principal Act, in sub-section (3), after the
appoints the
words "whole-time director or manager,", the words "or any other
18th March,
non-executive director, including an independent director" shall be
2021 as the
inserted
date on which
the provisions
of section 32
and section
40 of the said
Act shall come
into force.
2. Ministry of Corporate Affairs vide Notification S.O. 1256(E), dated 18th March, 2021
hereby amends Schedule V of the Companies Act 2013, as follows:—
In Schedule V of the Companies Act, 2013, in PART II, under the heading ―
REMUNERATION
A. in Section I, in the first para, after the words ―managerial person or persons, the
words ―or other director or directors shall be inserted;
B. in Section II,--
(i) after the words ―managerial person, wherever occurred, the words ―or other
director shall be inserted;

(ii) for Table (A):, the following shall be substituted, namely.-

―(A):
(1) (2) (3)
Sl. Where the Limit of yearly Limit of yearly
No. effective capital remuneration payable remuneration
(in rupees) is shall not exceed (in payable shall not
Rupees) in case of a exceed (in rupees)
managerial person in case of other
director
(i) Negative or less 60 lakhs 12 Lakhs
than 5 crores.
(ii) 5 crores and 84 lakhs 17 Lakhs
above but less
than 100 crores.
(iii) 100 crores and 120 lakhs 24 Lakhs
above but less
than 250 crores.
(iv) 250 crores and 120 lakhs plus 0.01% of 24 Lakhs plus 0.01%
above. the effective capital in of the effective capital
excess of `250 crores: in excess of `250
crores:
C. in Section III, –
(i) after the words ―managerial person, wherever occurred, except in clause (i ) of
the proviso, the words ―or other director shall be inserted;
(ii) after the words ―managerial persons, wherever occurred, the words ―or other
directors shall be inserted;
(iii) following explanation shall be inserted at the end, namely:-
“Explanation.– For the purposes of Section I, Section II and Section III, the term
―or other director shall mean a non-executive director or an independent
director.
3. Amendment in Rule 6 of the Companies (Appointment and Qualification of Directors)
Rules, 2014 vide Notification dated G.S.R. 774(E) dated 18th December, 2020.
Said Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014
was completely replaced by the Companies (Appointment and Qualification of Directors)
Fifth Amendment Rules, 2019, vide Notification dated 22 nd October 2019 w.e.f 1st day of
December 2019. Further this rule was regularly amended through various notifications in
following order :

Through series of Notifications i.e., the Companies (Appointment and Qualification of

Directors) Amendment Rules, 2020, dated 28.02.2020, the Companies (Appointment and
Qualification of Directors) Second Amendment Rules 2020,dated 29.04.2020, the
Companies (Appointment and Qualification of Directors) Third Amendment
Rules,2020,dated 23.06.2020, the Companies (Appointment and Qualification of
Directors) Fourth Amendment Rules,2020, dated 28.09.2020, and through the Companies
(Appointment and Qualification of Directors ) Fifth Amendment Rules, 2020, w.e.f.
18.12.2020.
Revised Rule 6 in line with these amendments are as follows:
6. Compliances required by a person eligible and willing to be appointed as an
independent director.
(1) Every individual –
(a) who has been appointed as an independent director in a company, on the date
of commencement of the Companies (Appointment and Qualification of
Directors) Fifth Amendment Rules, 2019, shall within a period of thirteen months
from such commencement; or
(b) who intends to get appointed as an independent director in a company after such
commencement, shall before such appointment,
apply online to the institute for inclusion of his name in the data bank for a period
of one year or five years or for his life-time, and from time to time take steps as
specified in sub-rule (2), till he continues to hold the office of an independent
director in any company:
Provided that any individual, including an individual not having DIN, may
voluntarily apply to the institute for inclusion of his name in the data bank.
(2) Every individual whose name has been so included in the data bank shall file an
application for renewal for a further period of one year or five years or for his life -time,
within a period of thirty days from the date of expiry of the period upto which the name o f
the individual was applied for inclusion in the data bank, failing which, the name of such
individual shall stand removed from the data bank of the institute:
Provided that no application for renewal shall be filed by an individual who has paid life -
time fees for inclusion of his name in the data bank.
(3) Every independent director shall submit a declaration of compliance of sub -rule (1)
and sub-rule (2) to the Board, each time he submits the declaration required under sub -
section (7) of section 149 of the Act.
(4) Every individual whose name is so included in the data bank under sub-rule (1) shall
pass an online proficiency self-assessment test conducted by the institute within a period

of Two years from the date of inclusion of his name in the data bank, failing which, his
name shall stand removed from the databank of the institute:
Provided that an individual shall not be required to pass the online proficiency self -
assessment test when he has served for a total period of not less than three years as on
the date of inclusion of his name in the data bank,-
(A) as a director or key managerial personnel, as on the date of inclusion of his name in
the databank, in one or more of the following, namely:-
(a) listed public company; or
(b) unlisted public company having a paid-up share capital of rupees ten crore or
more; or
(c) body corporate listed on any recognized stock exchange or in a country which
is a member State of the Financial Action Task Force on Money Laundering and
the regulator of the securities market in such member State is a member of the
International Organization of Securities Commissions; or
(d) bodies corporate incorporated outside India having a paid-up share capital of
US$ 2 million or more; or
(e) statutory corporations set up under an Act of Parliament or any State Legislature
carrying on commercial activities; or
(B) in the pay scale of Director or above in the Ministry of Corporate Affairs or the Ministry
of Finance or Ministry of Commerce and Industry or the Ministry of Heavy Industries
and Public Enterprises and having experience in handling the matters relating to
corporate laws or securities laws or economic laws; or
(C) in the pay scale of Chief General Manager or above in the Securities and Exchange
Board or the Reserve Bank of India or the Insurance Regulatory and Exchange Board
or the Reserve Bank of India or the Insurance Regulatory and Development Authority
of India or the Pension Fund Regulatory and Development Authority and having
experience in handling the matters relating to corporate laws or securities laws or
economic laws:
Provided further that for the purpose of calculation of the period of three years
referred to in the first proviso, any period during which an individual was acting as a
director or as a key managerial personnel in two or more companies or bodies
corporate or statutory corporations at the same time shall be counted only once.
Explanation: For the purposes of this rule,-
(a) the expression “institute” means the ‘Indian Institute of Corporate Affairs at
Manesar’ notified under sub-section (1) of section 150 of the Companies Act,
2013 as the institute for the creation and maintenance of data bank of
Independent Directors;

(b) an individual who has obtained a score of not less than fifty percent in aggregate
in the online proficiency self-assessment test shall be deemed to have passed
such test;
(c) there shall be no limit on the number of attempts an individual may take for
passing the online proficiency self-assessment test.
Securities Laws: SEBI ACT,1992
Through Finance Act, 2021 w.e.f 1 st April, 2021, in section 12, the below provision has been
added after 1(B):
(1C) No person shall sponsor or cause to be sponsored or carry on or cause to be carried on
the activity of an alternative investment fund or a business trust as defined in clause (13A) of
section 2 of the Income-tax Act, 1961, unless a certificate of registration is granted by the Board
in accordance with the regulations made under this Act.
Economic Laws: FEMA, 1999
Vide Notification No. FEMA 23(R)/(4)/2021-RB , dated January 08, 2021, the Foreign
Exchange Management (Export of Goods and Services) (Amendment) Regulations, 2021 has
been enacted,
In exercise of the powers conferred by clause (a) of sub-section (1), sub-section (3) of section
7 and clause (b) of sub-section (2) of section 47 of the Foreign Exchange Management Act,
1999 (42 of 1999), the Reserve Bank of India makes the following amendments in the Foreign
Exchange Management (Export of Goods & Services) Regulations, 2015 through the
enforcement of the Foreign Exchange Management (Export of Goods and Services)
(Amendment) Regulations, 2021.
In the Principal Regulations, in regulation 4, for sub-regulation (ea), the following shall be
substituted, namely:-
“(ea) re-export of leased aircraft/helicopter and/or engines/auxiliary power units (APUs), either
completely or in partially knocked down condition repossessed by overseas lessor and duly de -
registered by the Directorate General of Civil Aviation (DGCA) on the request of Irrevocable
Deregistration and Export Request Authorisation (IDERA) holder under ‘Cape Town Convention’
or any other termination or cancellation of the lease agreement between the lessor and lessee
subject to permission by DGCA/Ministry of Civil Aviation for such export/s.”
PMLA, 2002
1. Vide Notification G.S.R. 798(E) [F. NO. P-12011/14/2020-ES CELL-DOR], Dated 28-12-
2020,in exercise of the powers conferred by sub-clause (iv) of clause (sa) of sub-section
(1) of section 2 of the Prevention of Money-laundering Act, 2002 , the Central Government
hereby rescinds the notification of the Government of India, Ministry of Finance,
Department of Revenue, No. 8/2017, dated 15 November, 2017, published in the Gazette
of India, Part II, Section 3, Sub-section (ii), extraordinary, vide GSR 1423 (E) dated the 16

November 2017, except as respects things done or omitted to done before such recession
and notifies the "Real Estate Agents", as a person engaged in providing services in relation
to sale or purchase of real estate and having annual turnover of Rupees twenty lakhs or
above, as "persons carrying on designated businesses or professions".
2. Vide Notification G.S.R. 799(E) [F. NO. P-12011/14/2020-ES CELL-DOR], Dated 28-12-
2020, in exercise of the powers conferred by sub-clause (iv) of clause (sa) of sub-section
(1) of section 2 of the Prevention of Money-laundering Act, 2002 , the Central Government
hereby notifies the dealers in precious metals, precious stones as persons carrying on
designated businesses or professions - if they engage in any cash transactions with a
customer equal to or above Rupees ten lakhs, carried out in a single operation or in several
operations that appear to be linked.
3. Vide Notification G.S.R. 59(E) [F. NO. P-12011/24/2017-ES CELL-DOR-PART(1)],
Dated 28-1-2021, in exercise of the powers conferred by sub-section (1) of section 11A of
the Prevention of Money-laundering Act, 2002 , the Central Government on being satisfied
that the reporting entities mentioned below comply with standards of privacy and security
under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and
Services) Act, 2016 (18 of 2016) and it is necessary and expedient to do so, and after
consultation with the Unique Identification Authority of India established under sub -section
(1) of section 11 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies,
Benefits and Services) Act, 2016 and the regulatory authority, namely the Reserve Bank
of India, hereby notifies the reporting entity specified below to undertake Aadhaar
authentication service of the Unique Identification Authority of India under section 11A of
the Prevention of Money-laundering Act, 2002, namely:—
"National Payments Corporation of India."
FCRA, 2010
Vide Notification G.S.R. 695(E) [F. NO. II/21022/23(12)/2020-FCRA-III], dated 10-11-2020, in
exercise of the powers conferred by section 48 of the Foreign Contribution (Regulation) Act,
2010, the Central Government hereby makes the following rules further to amend the Foreign
Contribution (Regulation) Rules, 2011, through the enforcement of the Foreign Contribution
(Regulation) (Amendment) Rules, 2020 w.r.e.f 29.04.2011. Revised Rule is given here, made
out of various amendments till 30 th April, 2021.
3. Guidelines for declaration of an organisation to be of a political nature, not being a
political party. – (1) The Central Government may specify any organisation as
organisation of political nature on one or more of the following grounds: -
(i) organisation having avowed political objectives in its Memorandum of Association or
bylaws;
(ii) any Trade Union whose objectives include activities for promoting political goals;

(iii) any voluntary action group with objectives of a political nature or which participates
in political activities;
(iv) front or mass organisations like Students Unions, Workers' Unions, Youth Forums
and Women's wing of a political party;
(v) organisation of farmers, workers, students, youth based on caste, community,
religion, language or otherwise, which is not directly aligned to any political pa rty, but
whose objectives, as stated in the Memorandum of Association, or activities gathered
through other material evidence, include steps towards advancement of Political
interests of such groups;
(vi) any organisation, by whatever name called, which habitually engages itself in or
employs common methods of political action like 'bandh' or 'hartal', 'rasta roko', 'rail
roko' or 'jail bharo' in support of public causes.
(2) The organisations specified under clauses (v) and (vi) of sub-rule (1) shall be
considered to be of political nature, if they participate in active politics or party politics, as
the case may be.
4. Speculative activities. - (1) The following activities shall be treated as speculative
activities:-
(a) any activity or investment that was an element of risk of appreciation or depreciation
of the original investment, linked to market forces, including investment in mutual
funds or in shares;
(b) participation in any scheme that promises high returns like investment in chits or land
or similar assets not directly linked to the declared aims and objectives of the
organisation or association.
(2) A debt-based secure investment shall not be treated as speculative investment.
(3) Every association shall maintain a separate register of investments.
(4) Every register of investments maintained under sub-rule (3) shall be submitted for
audit.
5. Administrative expenses. - The following shall constitute administrative expenses:-
(i) salaries, wages, travel expenses or any remuneration realised by the Members of the
Executive Committee or Governing Council of the person;
(ii) all expenses towards hiring of personnel for management of the activities of the
person and salaries, wages or any kind of remuneration paid, including cost of travel,
to such personnel;
(iii) all expenses related to consumables like electricity and water charges, telephone
charges, postal charges, repairs to premise(s) from where the organisation or
Association is functioning, stationery and printing charges transport and travel

charges by the Members of the Executive Committee or Governing Council and

expenditure on office equipment;
(iv) cost of accounting for and administering funds;
(v) expenses towards running and maintenance of vehicles;
(vi) cost of writing and filing reports;
(vii) legal and professional charges; and
(viii) rent of premises, repairs to premises and expenses on other utilities:
Provided that the expenditure incurred on salaries or remuneration of personnel engaged
in training or for collection or analysis of field data of an association primarily engaged in
research or training shall not be counted towards administrative expenses:
Provided further that the expenses incurred directly in furtherance of the stated objectives
of the welfare oriented organisation shall be excluded from the administrative expenses
such as salaries to doctors of hospital, salaries to teachers of school etc.
6. Intimation of receiving foreign contribution from relatives. - Any person receiving
foreign contribution in excess of one lakh rupees or equivalent thereto in a financial year
from any of his relatives shall inform the Central Government [regarding the details of the
foreign contribution received by him in electronic form] in Form FC-1 within thirty days from
the date of receipt of such contribution.
[6A. When articles gifted for personal use do not amount to foreign contribution. - Any
article gifted to a person for his personal use whose market value in India on the date of
such gift does not exceed [one lakh rupees] shall not be a foreign contribution within the
meaning of sub-clause (i) of clause (h) of sub-section (1) of section (2)].
7. Receiving foreign hospitality by specified categories of persons. - (1) Any person
belonging to any of the categories specified in section 6 who wishes to avail of foreign
hospitality shall apply [to the Central Government in electronic form] in Form FC-2 for prior
permission to accept such foreign hospitality.
(2) Every application for acceptance of foreign hospitality shall be accompanied by an
invitation letter from the host or the host country, as the case may be, and administrative
clearance of the Ministry or department concerned in case of visits sponsored by a Ministry
or department of the Government.
(3) The application for grant of permission to accept foreign hospitality must reach the
appropriate authority ordinarily two weeks before the proposed date of onward journey.
(4) In case of emergent medical aid needed on account of sudden illness dur ing a visit
abroad, the acceptance of foreign hospitality shall be required to be intimated to the Central
Government within [one month] of such receipt giving full details including the source,
approximate value in Indian Rupees, and the purpose for which and the manner in which
it was utilised.

Provided that no such intimation is required if the value of such hospitality in emergent
medical aid is upto one lakh rupees or equivalent thereto.
8. Action in respect of article, currency or security received in contravention of the
Act. - (1) The Central Government may issue a prohibitory order for contravention of the
Act in respect of any article, currency or securities.
(2) The prohibitory order issued under sub-rule (1) shall be served on the person
concerned in the following manner:-
(a) by delivering or tendering it to that person or to his duly authorised agent; or
(b) by sending it to him by 'registered post with acknowledgement due' or 'speed post' to
the address of his last known place of residence or the place where he carries on, or
is known to have last carried on, business or the place where he personally works for
gain or is known to have last worked for gain and, in case the person is an
organisation or an association, to the last known address of the office of such
organisation or association; or
(c) if it cannot be served in any of the manner aforesaid, by affixing, it on the outer door
or some other conspicuous part of the premises in which that person resides or carries
on, or is known to have last carried on, business or personally works for gain or is
known to have last worked personally for gain and, in case the person is an
organisation or an association, on the outer door or some other conspicuous part of
the premises in which the office of that organisation or association is located, or is
known to have been last located, and the written report whereof should be witnessed
by at least two persons.
9. Application for obtaining 'registration' or 'prior permission' to receive foreign
contribution. - (1)[(a) An application for certificate of registration by a person under sub -
section (1) of section 11, for acceptance of foreign contribution shall be made [in electronic
form] in Form FC-3A [with an affidavit executed by each office bearer and key functionary
and member in Proforma 'AA' appended to these rules] and an application for obtaining
prior permission by a person under sub-section (2) of section 11, for acceptance of foreign
contribution, shall be made [in electronic form] in Form FC-3B [with an affidavit executed
by each office bearer and key functionary and member in Proforma 'AA' appended to these
rules].]
[(b) The applicant shall upload the signed or digitally signed application along with
scanned documents as specified by the Central Government from time to time;]
[(d) Any person making an application for registration under clause (a) of sub-rule (1) shall
have an FCRA Account.]
(e) The person may open one or more accounts in one or more banks for the purpose of
utilising the foreign contribution after it has been received and, in all such cases,

intimation [ [in electronic form] in form [FC-6D]] shall be furnished to the Secretary,
Ministry of Home Affairs, New Delhi within fifteen days of the opening of any account.
[(f) A person seeking registration under clause (b) of sub-section (4) of section 12 of the
Act shall meet the following conditions, namely: -
(i) it shall be in existence for three years and have spent a minimum amount of
rupees fifteen lakh on its core activities for the benefit of society during the last
three financial years:
Provided that the Central Government, in exceptional cases or in cases where
a person is controlled by the Central Government or a State Government may
waive the conditions;
(ii) if the person wants inclusion of its existing capital investment in assets like land,
building, other permanent structures, vehicles, equipment in the computation of
its spending during last three years, then the chief functionary shall give an
undertaking that the assets shall be vested henceforth with the person till the
validity of the certificate and they shall be utilised only for the activities covered
under the Act and the rules made thereunder and shall not be diverted for any
other purpose till the validity of its certificate of registration remains valid.]
[(1A) Every application seeking registration under clause (a) of sub -rule (1), made before
the commencement of these rules but not disposed of, shall be considered after
furnishing the details of FCRA Account.]
(2) [* * *]
[(d) Any person making an application for obtaining prior permission under clause (a) of
sub-rule (1) shall have an FCRA Account.]
(e) person seeking prior permission under this rule may open one or more accounts in
one or more banks for the purpose of utilising the foreign contribution after it has been
received and in all such cases intimation [ [in electronic form] in form [FC-6D]] shall
be furnished to the Secretary, Ministry of Home Affairs, New Delhi within fifteen days
of the opening of any account.
[(f) A person seeking prior permission for receipt of specific amount from a specific donor
for carrying out specific activities or projects mentioned in clause (c) of sub-section
(4) of section 12 of the Act shall meet the following criteria, namely: -
(i) submit a specific commitment letter from the donor indicating the amount of
foreign contribution and the purpose for which it is proposed to be given;
(ii) for the Indian recipient persons and foreign donor organisations having common
members, prior permission shall be granted to the person subject to it satisfying
the following conditions, namely: -

(A) the chief functionary of the recipient person shall not be a part of the donor
organisation;
(B) seventy-five per cent. of the office-bearers or members of the governing
body of the person shall not be members or employees of the foreign donor
organisation;
(C) in case of foreign donor organisation being a single individual that
individual shall not be the chief functionary or office bearer of the recipient
person; and
(D) in case of a single foreign donor, seventy-five per cent. of the office bearers
or members of the governing body of the recipient person shall not be the
family members or close relatives of the donor.]
[(2A) Every application for obtaining prior permission under clause (a) of sub -
rule (1) made before the commencement of these rules but not disposed of, shall
be considered after furnishing the details of FCRA Account.]
(3) No person shall prefer a second application for registration or prior permission
within a period of six months after submitting an application either for the grant of
prior permission for the same project or for registration.
(4) [(a) An application made for the grant of prior permission shall be accompanied
by a fee of rupees five thousand only, which shall be paid through the payment
gateway specified by the Central Government.]
[(b) An application made for the grant of registration shall be accompanied by a
fee of rupees ten thousand only, which shall be paid through the payment
gateway specified by the Central Government.]
(c) The fee may be revised by the Central Government from time to time.
[***]
(5) Notwithstanding anything contained in sub-rules (1) to (4), every application
made for registration or prior permission under the Foreign Contribution (Regulation)
Act, 1976 (49 of 1976) but not disposed of before the date of commencement of these
rules shall be deemed to be an application for registration or prior permission, as the
case may be, under these rules, subject to the condition that the applicant furnishes
the prescribed fees for such registration or prior permission, as the case may be.
[9A. Permission for receipt of foreign contribution in application for obtaining prior
permission. – If the value of foreign contribution on the date of final disposal of an
application for obtaining prior permission under clause (a) of sub-rule (1) of rule 9 is
over rupees one crore, the Central Government may permit receipt of foreign
contribution in such instalments, as it may deem fit:

Provided that the second and subsequent instalment shall be released after
submission of proof of utilisation of seventy five per cent. of the foreign contribution
received in the previous instalment and after field inquiry of the utilisation of foreign
contribution.]
10. Validity of certificate. - [(1)] Every certificate or registration granted to a person under the
Act shall be valid for a period of five years from the date of its issue.
[(2) The validity of certificate surrendered under section 14A of the Act shall be deemed
to have expired on the date of acceptance of the request by the Central Government.]
11. Maintenance of accounts. - Every person who has been granted registration or prior
permission under section 12 shall maintain a separate set of accounts and records,
exclusively, for the foreign contribution received and utilized.
12. Renewal of registration certificate. - (1) Every certificate of registration issued to a
person shall be liable to be renewed after the expiry of five years from the date of its issue
on proper application.
[(2) An application for renewal of the certificate of registration shall be made to the Central
Government in electronic before in Form FC-3C accompanied with an affidavit executed
by each office bearer, key functionary and member in Proforma 'AA' appended to these
rules within six months from the date of expiry of the certificate of registration.]
[(2A) Every person seeking renewal of the certificate of registration under section 16 of the
Act shall open an FCRA Account and mention details of the account in his application for
renewal of registration.
(2B) Every application for renewal of the certificate of registration made under sub -rule (2)
before commencement of these rules, but not disposed of, shall be considered after
furnishing the details of FCRA Account.]
[* * *]
[(4) An application made for renewal of the certificate of registration shall be accompanied
by a fee of rupees five thousand only, which shall be paid through payment gateway
specified by the Central Government.]
[(5) No person whose certificate of registration has ceased to exist shall either receive or
utilise the foreign contribution until the certificate is renewed.]
[(6) If no application for renewal of registration is received or the application is not
accompanied by requisite fee before the expiry of the validity of the certificate of
registration, the validity of the certificate of registration shall be deemed to have ceased
from the date of completion of the period of five years from the date of the grant of
certificate of registration.
Note 1: A certificate of registration granted on the 1st January, 2012 shall be valid till the
31st December, 2016 and a request for renewal of certificate of registration shall be

submitted in electronic form accompanied by requisite fee after the 30th June, 2016 and
within the 31st December, 2016.
Note 2: If no application is received or is not accompanied by renewal fee, the validity of
the certificate of registration issued on the 1st January 2012 shall be deemed to have
ceased after the 31st December, 2016 and the applicant shall neither receive nor utilise
the foreign contribution until the certificate of registration is renewed.]
[(6A) The amount of foreign contribution lying unutilised in the FCRA Account and
utilisation account of a person whose certificate of registration is deemed to have ceased
under sub-rule (6) and assets, if any, created out of the foreign contribution, shall vest with
the prescribed authority under the Act until the certificate is renewed or fresh registration
is granted by the Central Government.]
(7) If the validity of the certificate of registration of a person has ceased in accordance
with the provisions of these rules, a fresh request for the grant of a certificate of registration
may be made by the person to the Centra1 Government as per the provisions of rule 9.
(8) In case a person provides sufficient grounds, in writing, explaining the reasons for not
submitting the certificate of registration for renewal within the stipulated time, his
application may be accepted for consideration along with the requisite fee [and with late
fee of `5000/- (Five Thousand rupees only)], but not later than [one year] after the expiry
of the original certificate of registration.
[13. Declaration of receipt of foreign contribution. - (a) A person who has been granted a
certificate of registration or prior permission shall place the audited statement of accounts
on receipts and utilisation of the foreign contribution, including income and expenditure
statement, receipt and payment account and balance sheet for every financial year
beginning on the first day of April within nine months of the closure of the financial year on
its official website or on the website as specified by the Central Government.
(b) A person receiving foreign contribution in a quarter of the financial year shall place
details of foreign contribution received on its official website or on the website as
specified by the Central Government within fifteen days following the last day of the
quarter in which it has been received clearly indicating the details of donors, amount
received and date of receipt.]
14. Extent of amount that can be utilised in case of suspension of the certificate of
registration. - The unspent amount that can be utilised in case of suspension of a
certificate of registration may be as under -
(a) In case the certificate of registration is suspend under sub-section (1) of section 13
of the Act, up to twenty-five per cent of the unutilised amount may be spent, with the
prior approval of the Central Government, for the declared aims and objects for which
the foreign contribution was received.

(b) The remaining seventy-five per cent of the unutilised foreign contribution shall be
utilised only after revocation of suspension of the certificate of registration.
[15. Custody of foreign contribution in respect of a person whose certificate has been
cancelled. - If the certificate of registration of a person who has opened an FCRA Account
under section 17 is cancelled, the amount of foreign contribution lying unutilised in that
Account shall vest with the prescribed authority under the Act.]
[15A. Voluntary surrender of certificate. - Every person who has been granted certificate
of registration under section 12 of the Act may make an application in electronic form in
Form FC-7 for surrender of the certificate of registration in terms of section 14A of the Act.]
[16. Reporting by banks of receipt of foreign contribution. - The bank shall report to the
Central Government within forty-eight hours any transaction in respect of receipt or
utilisation of any foreign contribution by any person whether or not such person is
registered or granted prior permission under the Act.]
17. Intimation of foreign contribution by the recipient. - [(1) Every person who receives
foreign contribution under the Act, shall submit a signed or digitally signed report [in
electronic form] in Form FC-4 with scanned copies of income and expenditure statement,
receipt and payment account and balance sheet for every financial year beginning on the
1st day of April within nine months of the closure of the financial year.]
(2) The annual return in Form [FC-4] shall reflect the foreign contribution received in the
exclusive bank account and include the details in respect of the funds transferred to other
bank accounts for utilisation.
(3) If the foreign contribution relates only to articles, the intimation shall be submitted in
Form [FC-1].
(4) If the foreign contribution relates to foreign securities, the intimation shall be
submitted in Form [FC-1].
(5) Every report submitted under sub-rules (2) to (4) shall be duly certified by a chartered
accountant.
(6) Every such return in Form [FC-4] shall also be accompanied by a copy of statement
of account from the bank where the exclusive foreign contribution account is maintained
by the person, duly certified by an officer of such bank.
(7) The accounting statements referred to above in the preceding sub-rule shall be
preserved by the person for a period of six years.
(8) A 'Nil' report shall be furnished even if no foreign contribution is received during a
financial year.
[Provided that where foreign contribution has not been received or utilised during a
financial year, it shall not be required to enclose certificate from Chartered Accountant or

income and expenditure statement or receipt and payment account or balance sheet with
Form FC-4.]
[17A. Change of designated bank account, name, address, aims, objectives or Key
members of the association. - [A person who has been granted a certificate of
registration under section 12 or prior permission under section 11 of the Act shall intimate
in electronic form within fifteen days, of any change in the following , namely:] -
(i) name of the association or its address within the State for which registration/ prior
permission has been granted under the Act [in Form FC-6A];
(ii) its nature, aims and objects and registration with local/relevant authorities [in Form FC-
6B];
(iii) bank and/or branch of the bank and/or designated foreign contribution account
number [in Form FC-6C]; [***]
[(iiia) bank and/or branch of the bank for the purpose of utilising the foreign contribution
after it has been received in Form FC-6D; and]
[(iv) office bearers or key functionaries or members mentioned in the application for grant
of registration or prior permission or renewal of registration, as the case may be, in
Form FC-6E.]]
[Provided that the change shall be effective only after final approval by the Central
Government.]
18. Foreign contribution received by a candidate for election. - Foreign contribution
received by a candidate for election, referred to in section 21, shall be furnished in
Form [FC-1] [in electronic form] within forty-five days from the date on which he is duly
nominated as a candidate for election.
19. Limit to which a judicial officer, not below the rank of an Assistant Sessions Judge
may make adjudication or order confiscation. - An officer referred in clause (b) of sub-
section (1) of section 29 may adjudge confiscation in relation to any article or currency
seized under section 25, if the value of such article or the amount of such currency seized
does not exceed ` 10,000,000/- (Ten Lakh only).
[20. Revision. - An application for revision of an order passed by the competent authority under
section 32 of the Act shall be made to the Secretary, Ministry of Home Affairs, Government
of India, New Delhi on a plain paper and it shall be accompanied by a fee of rupees three
thousand only, which shall be paid through the payment gateway specified by the Central
Government.]
[21. Compounding of offence. - An application for compounding of an offence under section
41 may be made to the Secretary, Ministry of Home Affairs, New Delhi in electronic form
and shall be accompanied by fee of rupees three thousand only, which shall be paid
through the payment gateway specified by the Central Government.]

22. Returns by the Investigating Agency to the Central Government. - The Central Bureau
of Investigation or any other Government investigating agency that conducts any
investigation under the Act shall furnish reports to the Central Government on a quarterly
basis, indicating the status of each case that was entrusted to it, including information
regarding the case number, date of registration, date of filing charge sheet, court before
which it has been filed, progress of trial, date of judgment and the conclusion of each case.
23. Authority to whom an application or intimation to be sent. - Any information or
intimation about political or speculative activities of a person as mentioned in rule 3 or rule
4, shall be furnished to the Secretary to the Government of India in the Ministry of Home
Affairs, New Delhi. Such information or intimation shall be sent by registered post [or in
electronic form].
[24. ***]
Insolvency & Bankruptcy Code, 2016
1. The Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021
The President promulgated the Insolvency and Bankruptcy Code (Amendment) Ordinance,
2021 on 4th April 2021. The Cabinet had approved on 31st March 2021 the proposal to
make amendments in the Insolvency and Bankruptcy Code, 2016 (Code), through the
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021.
The amendments aims to provide an efficient alternative insolvency resolution framework
for corporate persons classified as micro, small and medium enterprises (MSMEs) under
the Code, for ensuring quicker, cost-effective and value maximising outcomes for all the
stakeholders, in a manner which is least disruptive to the continuity of MSMEs businesses
and which preserves jobs. The initiative is based on a trust model and the amendments
honour the honest MSME owners by trying to ensure that the resolution happens and the
company remains with them.
It is expected that the incorporation of Pre-Packaged insolvency resolution process for
MSMEs in the Code will alleviate the distress faced by MSMEs due to the impact of the
pandemic & the unique nature of their business, duly recognizing their importance in the
economy. It provides an efficient alternative insolvency resolution framework for corporate
persons classified as MSMEs for timely, efficient & cost-effective resolution of distress
thereby ensuring positive signal to debt market, employment preservation, ease of doing
business and preservation of enterprise capital. Other expected impact and benefits of the
amendment in Code are lesser burden on Adjudicating Authority, assured continuity of
business operations for corporate debtor (CD), less process costs & maximum assets
realization for financial creditors (FC) and assurance of continued business relation with
CD and rights protection for operational Creditors (OC).
The Amendment Ordinance seeks to amend sections such as 4, 5, 11, 33, 34, 61, 65, 77,
208, 239, 240 & insert new sections such as 11A, 67A, 77A and a new chapter as IIIA on

Pre-Packaged insolvency resolution process for MSMEs in the Code based on

recommendations made by the Insolvency Law Committee (ILC).
Details of the amendments are given at under:
1. This Ordinance may be called the Insolvency and Bankruptcy Code (Amendment)
Ordinance, 2021. It shall come into force at once.
2. Amendment of Section 4- Application of this Part II of the Code
After the given proviso in the said section, the following proviso shall be inserted, namely: —
“Provided further that the Central Government may, by notification, specify such minimum
amount of default of higher value, which shall not be more than one crore rupees, for
matters relating to the prepackaged insolvency resolution process of corporate debtors
under Chapter III-A.”.
3. Amendment of Section 5- Definitions covered under this part of the Code.
(i) after clause (2), the following clause shall be inserted, namely: —
‘(2A) “base resolution plan” means a resolution plan provided by the corporate
debtor under clause (c) of ub-section (4) of section 54A;’;
(ii) in clause (5), in sub-clause (b), after the words “corporate insolvency resolution
process”, the words “or the pre-packaged insolvency resolution process, as the case
may be,” shall be inserted;
(iii) in clause (11), after the words “corporate insolvency resolution process”, the words
“or prepackaged insolvency resolution process, as the case may be” shall be inserted;
(iv) in clause (15), after the words, “process period”, the words “or by the corporate debtor
during the pre-packaged insolvency resolution process period, as the case may be,”
shall be inserted;
(v) in clause (19), after the words “for the purposes of”, the words and figures “Chapter
VI and” shall be inserted;
(vi) after clause (23), the following clauses shall be inserted, namely: —
(23A) “preliminary information memrandum” means a memorandum submitted by the
corporate debtor under clause (b) of sub-section (1) of section 54G;
(23B)“pre-packaged insolvency commencement date” means the date of admission
of an application for initiating the pre-packaged insolvency resolution process by the
Adjudicating Authority under clause (a) of sub-section (4) of section 54C;
(23C) “pre-packaged insolvency resolution process costs” means—
(a) the amount of any interim finance and the costs incurred in raising such finance;

(b) the fees payable to any person acting as a resolution professional and any
expenses incurred by him for conducting the pre-packaged insolvency resolution
process during the prepackaged insolvency resolution process period, subject
to sub-section (6) of section 54F;
(c) any costs incurred by the resolution professional in running the business of the
corporate debtor as a going concern pursuant to an order under sub-section (2)
of section 54J;
(d) any costs incurred at the expense of the Government to facilitate the pre-
packaged insolvency resolution process; and
(e) any other costs as may be specified;
(23D) “pre-packaged insolvency resolution process period” means the period
beginning from the pre-packaged insolvency commencement date and ending
on the date on which an order under sub-section (1) of section 54L, or sub-
section (1) of section 54N, or sub-section (2) of section 54-O, as the case may
be, is passed by the Adjudicating Authority;’;
(vii) in clause (25), after the words, brackets and figures “of sub-section (2) of section
25”, the words, figures and letter “or pursuant to section 54K, as the case may be”
shall be inserted;
(viii) in clause (27), after the words “corporate insolvency resolution process”, the words
“or the prepackaged insolvency resolution process (PPIRP), as the case may be,”
shall be inserted.
4. Amendment of section 11- Persons not entitled to make application.
(i) in clause (a), after the words “corporate insolvency resolution process”, the words
“or a prepackaged insolvency resolution process” shall be inserted;
(ii) after clause (a), the following clause shall be inserted, namely:––
“(aa) a financial creditor or an operational creditor of a corporate debtor undergoing
a prepackaged insolvency resolution process; or”;
(iii) after clause (b), the following clause shall be inserted, namely:—
“(ba) a corporate debtor in respect of whom a resolution plan has been approved
under Chapter III-A, twelve months preceding the date of making of the application;
or”.
5. After section 11 of the principal Act, following new section 11A shall be inserted,.
“11A. (1) Where an application filed under section 54C is pending, the Adjudicating
Authority shall pass applications under section an order to admit or reject such applicatio n,
before 54C and under considering any application filed under section 7 or section 7 or
section 9 or section 10 during the pendency of such section 9 or application under section
54C, in respect of the same section 10. corporate debtor.

(2) Where an application under section 54C is filed within fourteen days of filing of any
application under section 7 or section 9 or section 10, which is pending, in respect of the
same corporate debtor, then, notwithstanding anything contained in sections 7, 9 and 10,
the Adjudicating Authority shall first dispose of the application under section 54C.
(3) Where an application under section 54C is filed after fourteen days of the filing of any
application under section 7 or section 9 or section 10, in respect of the same corporate
debtor, the Adjudicating Authority shall first dispose of the application unde r sections 7, 9
or 10.
(4) The provisions of this section shall not apply where an application under section 7 or
section 9 or section 10 is filed and pending as on the date of the commencement of the
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021.”.
6. In section 33 of the principal Act, which deals with the initiation of liquidation, in sub-
section (3), after the words, “approved by the Adjudicating Authority”, the words, figures,
brackets and letter “under section 31 or under sub-section (1) of section 54L,” shall be
inserted.
7. Amendment of section 34- Appointment of liquidator and fee to be paid.
In section 34 of the principal Act, in sub-section (1), after the words and figures, “under
Chapter II”, the words, figures and letter “or for the pre-packaged insolvency resolution
process under Chapter III-A” shall be inserted.
8. After Chapter III of the principal Act, the following Chapter III-A, shall be inserted,
namely:—
‘CHAPTER III-A
PRE-PACKAGED INSOLVENCY RESOLUTION PROCESS
Corporate debtors eligible for pre-packaged insolvency resolution process.
54 A.(1) An application for initiating pre-packaged insolvency resolution process may be made
in respect of a corporate debtor classified as a micro, small or medium enterprise under sub-
section (1) of section 7 of the Micro, Small and Medium Enterprises Development 27 of 2006.
Act, 2006.
(2) Without prejudice to sub-section (1), an application for initiating pre-packaged insolvency
resolution process may be made in respect of a corporate debtor, who commits a default referred
to in section 4, subject to the following conditions, that––
(a) it has not undergone pre-packaged insolvency resolution process or completed corporate
insolvency resolution process, as the case may be, during the period of three years
preceding the initiation date;
(b) it is not undergoing a corporate insolvency resolution process;
(c) no order requiring it to be liquidated is passed under section 33;

(d) it is eligible to submit a resolution plan under section 29A;

(e) the financial creditors of the corporate debtor, not being its related parties, representing
such number and such manner as may be specified, have proposed the name of the
insolvency professional to be appointed as resolution professional for conducting the pre-
packaged insolvency resolution process of the corporate debtor, and the financial creditors
of the corporate debtor, not being its related parties, representing not less than sixty -six
per cent. in value of the financial debt due to such creditors, have approved such proposal
in such form as may be specified:
Provided that where a corporate debtor does not have any financial creditors, not being
its related parties, the proposal and approval under this clause shall be provided by such
persons as may be specified;
(f) the majority of the directors or partners of the corporate debtor, as the case may be, have
made a declaration, in such form as may be specified, stating, inter alia, —
i that the corporate debtor shall file an application for initiating pre-packaged
insolvency resolution process within a definite time period not exceeding ninety days;
ii that the pre-packaged insolvency resolution process is not being initiated to
defraud any person; and
iii the name of the insolvency professional proposed and approved to be appointed as
resolution professional under clause (e);
(g) the members of the corporate debtor have passed a special resolution, or at least three -
fourth of the total number of partners, as the case may be, of the corporate debto r have
passed a resolution, approving the filing of an application for initiating pre -packaged
insolvency resolution process.
(3) The corporate debtor shall obtain an approval from its financial creditors, not being its
related parties, representing not less than sixty-six per cent. in value of the financial debt due
to such creditors, for the filing of an application for initiating pre-packaged insolvency resolution
process, in such form as may be specified:
Provided that where a corporate debtor does not have any financial creditors, not being its
related parties, the approval under this sub-section shall be provided by such persons as may
be specified.
(4) Prior to seeking approval from financial creditors under sub-section (3), the corporate
debtor shall provide such financial creditors with —
(a) the declaration referred to in clause (f) of sub- section (2);
(b) the special resolution or resolution referred to in clause (g) of sub-section (2);
(c) a base resolution plan which conforms to the requirements referred to in section 54K, and
such other conditions as m ay be specified; and

(d) such other information and documents as may be specified.

Duties of resolution professional before initiation of pre-packaged insolvency resolution
process.
54B. (1) The insolvency professional, proposed to be appointed as the resolution professional,
shall have the following duties commencing from the date of the approval under clause (e) of
sub-section (2) of section 54A, namely:—
(a) prepare a report in such form as may be specified, confirming whether the corporate debtor
meets the requirements of section 54A, and the base resolution plan conforms to the
requirements referred to in clause (c) of sub-section (4) of section 54A;
(b) file such reports and other documents, with the Board, as may be specified; and
(c) perform such other duties as may be specified.
(2) The duties of the insolvency professional under sub-section (1) shall cease, if, —
(a) the corporate debtor fails to file an application for initiating pre -packaged insolvency
resolution process within the time period as stated under the declaration referred to in
clause (f) of subsection (2) of section 54A; or
(b) the application for initiating pre-packaged insolvency resolution process is admitted or
rejected by the Adjudicating Authority, as the case may be.
(3) The fees payable to the insolvency professional in relation to the duties performed under
sub-section (1) shall be determined and borne in such manner as may be specified and such
fees shall form part of the prepackaged insolvency resolution process costs, if the application
for initiation of pre-packaged insolvency resolution process is admitted.
Application to initiate pre-packaged insolvency resolution process.
54C. (1) Where a corporate debtor meets the requirements of section 54A, a corporate applicant
thereof may file an application with the Adjudicating insolvency Authority for initiating pre -
packaged insolvency resolution resolution process.
(2) The application under sub-section (1) shall be filed in such form, containing such
particulars, in such manner and accompanied with such fee as may be prescribed.
(3) The corporate applicant shall, along with the application, furnish—
(a) the declaration, special resolution or resolution, as the case may be, and the approval of
financial creditors for initiating pre-packaged insolvency resolution process in terms of
section 54A;
(b) the name and written consent, in such form as may be specified, of the insolvency
professional proposed to be appointed as resolution professional, as approved under
clause (e) of sub-section (2) of section 54A, and his report as referred to in clause (a) of
sub-section (1) of section 54B;

(c) a declaration regarding the existence of any transactions of the corporate debtor that may
be within the scope of provisions in respect of avoidance of transactions under Chapter III
or fraudulent or wrongful trading under Chapter VI, in such form as may be specified;
(d) information relating to books of account of the corporate debtor and such other documents
relating to such period as may be specified.
(4) The Adjudicating Authority shall, within a period of fourteen days of the receipt of the
application, by an order,––
(a) admit the application, if it is complete; or
(b) reject the application, if it is incomplete:
Provided that the Adjudicating Authority shall, before rejecting an application, give notice
to the applicant to rectify the defect in the application within seven days from the date of
receipt of such notice from the Adjudicating Authority.
(5) The pre-packaged insolvency resolution process shall commence from the date of
admission of the application under clause (a) of sub-section (4).
Time-limit for completion of pre-packaged insolvency resolution process.
54D. (1) The pre-packaged insolvency resolution process shall be completed within a period of
one hundred and twenty days from the pre-packaged insolvency commencement date.
(2) Without prejudice to sub-section (1), the resolution professional shall submit the resolution
plan, as approved by the committee of creditors, to the Adjudicating Authority under sub-section
(4) or subsection (12), as the case may be, of section 54K, within a period of ninety days from
the pre-packaged insolvency commencement date.
(3) Where no resolution plan is approved by the committee of creditors within the time period
referred to in sub-section (2), the resolution professional shall, on the day after the expiry of
such time period, file an application with the Adjudicating Authority for termination of the pre -
packaged insolvency resolution process in such form and manner as may be
specified.
Declaration of moratorium and public announcement during prepackaged insolvency
resolution process
54E. (1) The Adjudicating Authority shall, on the pre-packaged insolvency commencement date,
along with the order of admission under section 54C —
(a) declare a moratorium for the purposes referred to in sub-section (1) read with sub-section
(3) of section 14, which shall, mutatis mutandis apply, to the proceedings under this
Chapter;
(b) appoint a resolution professional —

(i) as named in the application, if no disciplinary proceeding is pending against him;

or
(ii) based on the recommendation made by the Board, if any disciplinary
proceeding is pending against the insolvency professional named in the
application.
(c) cause a public announcement of the initiation of the pre-packaged insolvency resolution
process to be made by the resolution professional, in such form and manner as may be
specified, immediately after his appointment.
(2) The order of moratorium shall have effect from the date of such order till the date on which
the prepackaged insolvency resolution process period comes to an end.
Duties and powers of resolution professional during pre-packaged insolvency resolution
process.
54F. (1) The resolution professional shall conduct the pre-packaged insolvency resolution
process of a corporate debtor during the pre-packaged insolvency resolution process period.
(2) The resolution professional shall perform the following duties, namely: —
(a) confirm the list of claims submitted by the corporate debtor under section 54G, in such
manner as may be specified;
(b) inform creditors regarding their claims as confirmed under clause (a), in such manner as
may be specified;
(c) maintain an updated list of claims, in such manner as may be specified;
(d) monitor management of the affairs of the corporate debtor;
(e) inform the committee of creditors in the event of breach of any of the obligations of the
Board of Directors or partners, as the case may be, of the corporate debtor, under the
provisions of this Chapter and the rules and regulations made thereunder;
(f) constitute the committee of creditors and convene and attend all its meetings;
(g) prepare the information memorandum on the basis of the preliminary information
memorandum submitted under section 54G and any other relevant information, in such
form and manner as may be specified;
(h) file applications for avoidance of transactions under Chapter III or fraudulent or wrongful
trading under Chapter VI, if any; and
(i) such other duties as may be specified.
(3) The resolution professional shall exercise the following powers, namely: —
(a) access all books of accounts, records and information available with the corporate debtor;
(b) access the electronic records of the corporate

debtor from an information utility having financial information of the corporate debtor;
(c) access the books of accounts, records and
other relevant documents of the corporate debtor available with Government authorities,
statutory auditors, accountants and such other persons as may be specified;
(d) attend meetings of members, Board of
Directors and committee of directors, or partners, as the case may be, of the corporate
debtor;
(e) appoint accountants, legal or other professionals in such manner as may be specified;
(f) collect all information relating to the assets,
finances and operations of the corporate debtor for determining the financial position of
the corporate debtor and the existence of any transactions that may be within the scope of
provisions relating to avoidance of transactions under Chapter III or fraudulent or wrongful
trading under Chapter VI, including information relating to —
(i) business operations for the previous two
years from the date of pre-packaged insolvency commencement date;
(ii) financial and operational payments for the previous two years from the date of
prepackaged insolvency commencement date;
(iii) list of assets and liabilities as on the initiation date; and
(iv) such other matters as may be specified;
(g) take such other actions in such manner as may be specified.
(4) From the date of appointment of the resolution professional, the financial institutions
maintaining accounts of the corporate debtor shall furnish all information relating to the
corporate debtor available with them to the resolution professional, as and when required
by him.
(5) The personnel of the corporate debtor, its promoters and any other person associated with
the management of the corporate debtor shall extend all assistance and cooperation to the
resolution professional as may be required by him to perform his duties and exercise his powers,
and for such purposes, the provisions of sub-sections (2) and (3) of section 19 shall, mutatis
mutandis apply, in relation to the proceedings under this Chapter.
(6) The fees of the resolution professional and any expenses incurred by him for conducting
the prepackaged insolvency resolution process shall be determined in such manner as may be
specified:
Provided that the committee of creditors may impose limits and conditions on such fees and
expenses:

Provided further that the fees and expenses for the period prior to the constitution of the
committee of creditors shall be subject to ratification by it.
(7) The fees and expenses referred to in sub-section (6) shall be borne in such manner as
may be specified.
List of claims and preliminary information memorandum.
54G. (1) The corporate debtor shall, within two days of the pre-packaged insolvency
commencement date, submit to the resolution professional the following information, updated
as on that date, in such form and manner as may be specified, namely: —
(a) a list of claims, along with details of the respective creditors, their security interests and
guarantees, if any; and
(b) a preliminary information memorandum containing information relevant for formulating a
resolution plan.
(2) Where any person has sustained any loss or damage as a consequence of the omission
of any material information or inclusion of any misleading information in the list of claims or the
preliminary information memorandum submitted by the corporate debtor, every person who —
(a) is a promoter or director or partner of the corporate debtor, as the case may be, at the
time of submission of the list of claims or the preliminary information memorandum by the
corporate debtor; or
(b) has authorised the submission of the list of claims or the preliminary information
memorandum by the corporate debtor,
shall, without prejudice to section 77A, be liable to pay compensation to every person who
has sustained such loss or damage.
(3) No person shall be liable under sub-section (2), if the list of claims or the preliminary
information memorandum was submitted by the corporate debtor without his knowledge or
consent.
(4) Subject to section 54E, any person, who sustained any loss or damage as a consequence
of omission of material information or inclusion of any misleading information in the list of claims
or the preliminary information memorandum shall be entitled to move a court having jurisdiction
for seeking compensation for such loss or damage.
Management of affairs of corporate debtor
54H. During the pre-packaged insolvency resolution process period,—
(a) the management of the affairs of the corporate debtor shall continue to vest in the Board
of Directors or the partners, as the case may be, of the corporate debtor, subject to such
conditions as may be specified;

(b) the Board of Directors or the partners, as the case may be, of the corporate debtor, shall
make every endeavour to protect and preserve the value of the property of the corporate
debtor, and manage its operations as a going concern; and
(c) the promoters, members, personnel and partners, as the case may be, of the corporate
debtor, shall exercise and discharge their contractual or statutory rights and obligations in
relation to the corporate debtor, subject to the provisions of this Chapter and such other
conditions and restrictions as may be prescribed.
Committee of creditors
54-I. (1) The resolution professional shall, within seven days of the pre-packaged insolvency
commencement date, constitute a committee of creditors, based on the list of claims confirmed
under clause (a) of sub-section (2) of section 54F:
Provided that the composition of the committee of creditors shall be altered on the basis of the
updated list of claims, in such manner as may be specified, and any such alteration shall not
affect the validity of any past decision of the committee of creditors.
(2) The first meeting of the committee of creditors shall be held within seven days of the
constitution of the committee of creditors.
(3) Provisions of section 21, except sub-section (1) thereof, shall, mutatis mutandis apply, in
relation to the committee of creditors under this Chapter:
Provided that for the purposes of this sub-section, references to the “resolution professional”
under subsections (9) and (10) of section 21, shall be construed as references to “corporate
debtor or the resolution professional”.
Vesting management of corporate debtor with resolution professional
54J. (1) Where the committee of creditors, at any time during the pre-packaged insolvency
resolution corporate process, by a vote of not less than sixty-six per cent. of the voting shares,
resolves to vest the management of the corporate debtor with the resolution professional, the
resolution professional shall make an application for this purpose to the Adjudicating Authority,
in such form and manner as may be specified.
(2) On an application made under sub-section (1), if the Adjudicating Authority is of the opinion
that
during the pre-packaged insolvency resolution process—
(a) the affairs of the corporate debtor have been conducted in a fraudulent manner; or
(b) there has been gross mismanagement of the affairs of the corporate debtor,
it shall pass an order vesting the management of the corporate debtor with the resolution
professional.
(3) Notwithstanding anything to the contrary contained in this Chapter, the provisions of —
(a) sub-sections (2) and (2A) of section 14;

(b) section 17;

(c) clauses (e) to (g) of section 18;
(d) sections 19 and 20;
(e) sub-section (1) of section 25;
(f) clauses (a) to (c) and clause (k) of sub- section (2) of section 25; and
(g) section 28,
shall, mutatis mutandis apply, to the proceedings under this Chapter, from the date of the
order under subsection (2), until the pre-packaged insolvency resolution process period
comes to an end.
Consideration and approval of resolution plan
54K. (1) The corporate debtor shall submit the base resolution plan, referred to in clause (c) of
sub-section (4) of section 54A, to the resolution professional within two days of the pre -
packaged insolvency commencement date, and the resolution professional shall present it to
the committee of creditors.
(2) The committee of creditors may provide the corporate debtor an opportunity to revise the
base resolution plan prior to its approval under sub-section (4) or invitation of prospective
resolution applicants under sub-section (5), as the case may be.
(3) The resolution plans and the base resolution plan, submitted under this section shall
conform to the requirements referred to in sub-sections (1) and (2) of section 30, and the
provisions of sub-sections (1), (2) and (5) of section 30 shall, mutatis mutandis apply, to the
proceedings under this Chapter.
(4) The committee of creditors may approve the base resolution plan for submission to the
Adjudicating Authority if it does not impair any claims owed by the corporate debtor to the
operational creditors.
(5) Where —
(a) the committee of creditors does not approve the base resolution plan under sub-section
(4); or
(b) the base resolution plan impairs any claims owed by the corporate debtor to the
operational creditors, the resolution professional shall invite prospective
resolution applicants to submit a resolution plan or plans, to compete with the base
resolution plan, in such manner as may be specified.
(6) The resolution applicants submitting resolution plans pursuant to invitation under sub -
section (5), shall fulfil such criteria as may be laid down by the resolution professional with the
approval of the committee of creditors, having regard to the complexity and scale of operations
of the business of the corporate debtor and such other conditions as may be specified.
(7) The resolution professional shall provide to the resolution applicants, —

(a) the basis for evaluation of resolution plans

for the purposes of sub-section (9), as approved by the committee of creditors subject to
such conditions as may be specified; and
(b) the relevant information referred to in section 29, which shall, mutatis mutandis apply, to
the proceedings under this Chapter, in such manner as may be specified.
(8) The resolution professional shall present to the committee of creditors, for its evaluation,
resolution plans which conform to the requirements referred to in sub -section (2) of section 30.
(9) The committee of creditors shall evaluate the resolution plans presented by the resolution
professional and select a resolution plan from amongst them.
(10) Where, on the basis of such criteria as may be laid down by it, the committee of creditors
decides that the resolution plan selected under sub-section (9) is significantly better than the
base resolution plan, such resolution plan may be selected for approval under subsection (12):
Provided that the criteria laid down by the committee of creditors under this sub -section shall
be subject to such conditions as may be specified.
(11) Where the resolution plan selected under sub-section (9) is not considered for approval
or does not fulfil the requirements of sub-section (10), it shall compete with the base resolution
plan, in such manner and subject to such conditions as may be specified, and one of them shall
be selected for approval under subsection (12).
(12) The resolution plan selected for approval under sub-section (10) or sub-section (11), as
the case may be, may be approved by the committee of creditors for submission to the
Adjudicating Authority:
Provided that where the resolution plan selected for approval under sub-section (11) is not
approved by the committee of creditors, the resolution professional shall file an application for
termination of the pre-packaged insolvency resolution process in such form and manner as may
be specified.
(13) The approval of the resolution plan under sub-section (4) or sub-section (12), as the case
may be, by the committee of creditors, shall be by a vote of not less than sixty -six per cent. of
the voting shares, after considering its feasibility and viability, the manner of distribution
proposed, taking into account the order of priority amongst creditors as laid down in sub-section
(1) of section 53, including the priority and value of the security interest of a secured creditor
and such other requirements as may be specified.
(14) While considering the feasibility and viability of a resolution plan, where the resolution
plan submitted by the corporate debtor provides for impairment of any claims owed by the
corporate debtor, the committee of creditors may require the promoters of the corporate debtor
to dilute their shareholding or voting or control rights in the corporate debtor:

Provided that where the resolution plan does not provide for such dilution, the committee of
creditors shall, prior to the approval of such resolution plan under sub-section (4) or sub-section
(12), as the case may be, record reasons for its approval.
(15) The resolution professional shall submit the resolution plan as approved by the committee
of creditors under sub-section (4) or sub-section (12), as the case may be, to the Adjudicating
Authority.
Explanation I.––For the removal of doubts, it is hereby clarified that, the corporate debtor being
a resolution applicant under clause (25) of section 5, may submit the base resolution plan either
individually or jointly with any other person.
Explanation II.––For the purposes of sub- sections (4) and (14), claims shall be considered to
be impaired where the resolution plan does not provide for the full payment of the confirmed
claims as per the updated list of claims maintained by the resolution professional.
Approval of resolution plan
54L. (1) If the Adjudicating Authority is satisfied that the resolution plan as approved by the
committee of creditors under sub-section (4) or sub-section (12) of section 54K, as the case
may be, subject to the conditions provided therein, meets the requirements as referred to in
sub-section (2) of section 30, it shall, within thirty days of the receipt of such resolution plan, by
order approve the resolution plan:
Provided that the Adjudicating Authority shall, before passing an order for approval of a
resolution plan under this sub-section, satisfy itself that the resolution plan has provisions for its
effective implementation.
(2) The order of approval under sub-section (1) shall have such effect as provided under sub-
sections (1), (3) and (4) of section 31, which shall, mutatis mutandis apply, to the proceedings
under this Chapter.
(3) Where the Adjudicating Authority is satisfied that the resolution plan does not conform to
the requirements referred to in sub-section (1), it may, within thirty days of the receipt of such
resolution plan, by an order, reject the resolution plan and pass an order under section 54N.
(4) Notwithstanding anything to the contrary contained in this section, where the Adjudicating
Authority has passed an order under sub-section (2) of section 54J and the resolution plan
approved by the committee of creditors under sub-section (4) or subsection (12), as the case
may be, of section 54K, does not result in the change in the management or control of the
corporate debtor to a person who was not a promoter or in the management or control of the
corporate debtor, the Adjudicating Authority shall pass an order —
(a) rejecting such resolution plan;
(b) terminating the pre-packaged insolvency resolution process and passing a liquidation
order in respect of the corporate debtor as referred to in sub clauses (i), (ii) and (iii) of
clause (b) of sub-section (1) of section 33; and

(c) declaring that the pre-packaged insolvency resolution process costs, if any, shall be
included as part of the liquidation costs for the purposes of liquidation of the corporate
debtor.
Appeal against order under section 54L
54M. Any appeal from an order approving the resolution plan under sub-section (1) of section
54L, shall be on the grounds laid down in sub-section (3) of section 61.
Termination of pre-packaged insolvency resolution process.
54N. (1) Where the resolution professional files an application with the Adjudicating Authority,—
(a) under the proviso to sub-section (12) of section 54K; or
(b) under sub-section (3) of section 54D, the Adjudicating Authority shall, within thirty days
of the date of such application, by an order, —
(i) terminate the pre-packaged insolvency resolution process; and
(ii) provide for the manner of continuation of proceedings initiated for avoidance of
transactions under Chapter III or proceedings initiated under section 66 and section
67A, if any.
(2) Where the resolution professional, at any time after the pre-packaged insolvency
commencement date, but before the approval of resolution plan under subsection (4) or sub -
section (12), as the case may be, of section 54K, intimates the Adjudicating Authority of the
decision of the committee of creditors, approved by a vote of sixty -six per cent. of the voting
shares, to terminate the pre-packaged insolvency resolution process, the Adjudicating Authority
shall pass an order under sub-section (1).
(3) Where the Adjudicating Authority passes an order under sub-section (1), the corporate
debtor shall bear the pre-packaged insolvency resolution process costs, if any.
(4) Notwithstanding anything to the contrary contained in this section, where the Adjudicating
Authority has passed an order under sub-section (2) of section 54J and the pre-packaged
insolvency resolution process is required to be terminated under sub-section (1), the
Adjudicating Authority shall pass an order —
(a) of liquidation in respect of the corporate debtor as referred to in sub-clauses (i), (ii) and
(iii) of clause (b) of sub-section (1) of section 33; and
(b) declare that the pre-packaged insolvency resolution process costs, if any, shall be included
as part of the liquidation costs for the purposes of liquidation of the corporate debtor.
Initiation of corporate insolvency resolution process.
54-O. (1) The committee of creditors, at any time after the pre-packaged insolvency
commencement date but before the approval of resolution plan under sub- section (4) or sub-
section (12), as the case may be, of section 54K, by a vote of sixty-six per cent. of the voting
shares, may resolve to initiate a corporate insolvency resolution process in respect of the

corporate debtor, if such corporate debtor is eligible for corporate insolvency resolution process
under Chapter II.
(2) Notwithstanding anything to the contrary contained in Chapter II, where the resolution
professional intimates the Adjudicating Authority of the decision of the committee of creditors
under sub-section (1), the Adjudicating Authority shall, within thirty days of the date of such
intimation, pass an order to —
a. terminate the pre-packaged insolvency resolution process and initiate corporate insolvency
resolution process under Chapter II in respect of the corporate debtor;
b. appoint the resolution professional referred to in under clause (b) of sub-section (1) of
section 54E as the interim resolution professional, subject to submission of written consent
by such resolution professional to the Adjudicatory Authority in such form as may be
specified; and
c. declare that the pre-packaged insolvency resolution process costs, if any, shall be included
as part of insolvency resolution process costs for the purposes of the corporate insolvency
resolution process of the corporate debtor.
(3) Where the resolution professional fails to submit written consent under clause (b) of sub-
section (2), the Adjudicating Authority shall appoint an interim resolution professional by
making a reference to the Board for recommendation, in the manner as provided under
section 16.
(4) Where the Adjudicating Authority passes an order under sub-section (2) —
(a) such order shall be deemed to be an order of admission of an application under section 7
and shall have the same effect;
(b) the corporate insolvency resolution process shall commence from the date of such order;
(c) the proceedings initiated for avoidance of transactions under Chapter III or proceedings
initiated under section 66 and section 67A, if any, shall continue during the corporate
insolvency resolution process;
(d) for the purposes of sections 43, 46 and 50, references to “insolvency commencement
date” shall mean “pre-packaged insolvency commencement date”; and
(e) in computing the relevant time or the period for avoidable transactions, the time -period for
the duration of the pre-packaged insolvency resolution process shall also be included,
notwithstanding anything to the contrary contained in sections 43, 46 and 50.
Application of provisions of Chapters II, III, VI, and VII to this Chapter
54P. (1) Save as provided under this Chapter, sections 24, 25A, 26, 27, 28, 29A, 32A, 43 to 51,
and the provisions of Chapters VI and VII of this VI, and VII to Part shall, mutatis mutandis apply,
to the pre-packaged insolvency resolution process, subject to the following, namely:―
(a) reference to “members of the suspended Board of Directors or the partners” under clause
(b) of sub-section (3) of section 24 shall be construed as reference to “members of the

Board of Directors or the partners, unless an order has been passed by the Adjudicating
Authority under section 54J”;
(b) reference to “clause (j) of sub-section (2) of section 25” under section 26 shall be
construed as reference to “clause (h) of sub-section (2) of section 54F”;
(c) reference to “section 16” under section 27 shall be construed as reference to “section
54E”;
(d) reference to “resolution professional” in sub-sections (1) and (4) of section 28 shall be
construed as “corporate debtor”;
(e) reference to “section 31” under sub-section (3) of section 61 shall be construed as
reference to “sub-section (1) of section 54L”;
(f) reference to “section 14” in sub-sections (1) and (2) of section 74 shall be construed as
reference to “clause (a) of sub-section (1) of section 54E”;
(g) reference to “section 31” in sub-section (3) of section 74 shall be construed as" reference
to “sub-section (1) of section 54L”.
(2) Without prejudice to the provisions of this Chapter and unless the context otherwise
requires, where the provisions of Chapters II, III, VI and VII are applied to the proceedi ngs under
this Chapter, references to —
(a) “insolvency commencement date” shall be construed as references to “pre -packaged
insolvency commencement date”;
(b) “resolution professional” or “interim resolution professional”, as the case may be, shall be
construed as references to the resolution professional appointed under this Chapter;
(c) “corporate insolvency resolution process” shall be construed as references to “pre -
packaged insolvency resolution process”; and
(d) “insolvency resolution process period” shall be construed as references to “pre-packaged
insolvency resolution process period.”.’.
2. Vide Notification S.O. 4638 (E) [F. NO. 30/33/2020-INSOLVENCY], dated 22-12-2020
In exercise of the powers conferred by section 10A of the Insolvency and Bankruptcy Code,
2016 (31 of 2016), the Central Government hereby extended the period of suspension of
insolvency proceedings by further period of three months from the 25th December, 2020,
for the purposes of the said section.
3. Vide MCA Notification S.O.1543(E) dated 9th April, 2021, in exercise of the powers
conferred by the second proviso to section 4 of the Insolvency and
Bankruptcy Code, 2016 (31 of 2016), as amended by the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2021, the Central Government hereby specifies ten lakh rupees
as the minimum amount of default for the matters relating to the pre -packaged insolvency
resolution process of corporate debtor under Chapter III-A of the Code.

PART – II : QUESTIONS AND ANSWERS
QUESTIONS
CASE SCENARIO/ MULTIPLE CHOICE QUESTIONS

Case Scenario-1
Sukesh Web Developers Ltd. (for short SWD) is a public company, incorporated in December,
2018. Sukesh is the Managing Director of the company. The company is engaged in the
business of developing Websites, Mobile App, providing of On-line Platform for conducting
Business Meetings, Class Room Teachings and providing of pre-filled educational Tablets as
per syllabus prescribed by the respective Central / State Boards, of Classes 6 th to 12th.
At the time of incorporation, the company was formed by 7 members, who were actually
classmates when they all were doing B.Tech (Electronics) from IIT, Mumbai. Initially they
contributed the capital from their own resources and the paid up capital at the t ime of
incorporation was ` 50 crore. Among the 7 members, 3 members occupied the position of
director in the company. In addition to this, 2 other persons were also appointed as Independent
Directors. One is a Professor (Finance) in IIM, Ahmedabad and another is an Advocate on
Record at Supreme Court.
The popularity and user friendly features of On-Line Products, increased the demand, and the
turnover of the company dramatically increased from ` 100 crore in March 2019 to ` 350 crore
by the end of March 2020.
The Company Secretary in full time employment of the company, apprised the Board that,
company should now appoint at least one woman director on the Board. The Board agreed and
the name of Sudha (the wife of Sukesh) was proposed and approved in the Gen eral Meeting of
the company. Sudha was appointed as woman director in the Board of the Company with effect
from 10th April, 2020.
Now, the Board of SWD consists of the following persons:
S. No. Name Designation Group
1. Sukesh Managing Director Promoter
2. Rahul Director Promoter
3. Parmeshwar Director Promoter
4. Kamal Independent Director Professor (Finance)
5. Damodar Independent Director Advocate on Record at Supreme Court
6. Sudha Woman Director Wife of MD
During this pandemic situation, Rahul, one of the member and director in the company passed
away due to Corona in March 2021. Rahul was the key person in procuring new business

relations and was having good connections with various schools, in which the co mpany’s pre-
loaded educational Tablets were being supplied. It was a great set-back to the company.
However, the company went on doing business inspite of the fact that the minimum requirement
of members in SWD reduced from 7 to 6. The Company Secretary apprised to the Board that
Arundhati (the wife of deceased Rahul) has applied for transmission of shares in her name,
which were held in the name of Rahul. The Board accepted the transmission request, and the
Board Secretariat of the company entered the name of Arundhati as member of the company.
Now again the minimum requirement of seven members of this public company fulfilled.
During the Financial Year 2020-21 the five meetings of the Board of Directors were held, but
Sudha, being a woman director, never ever attended any meeting of the Board of Directors due
to her shy nature and always sought leave of absence of the Board. The Company Secretary
apprised in the Board Meeting held in April 2021, about the vacation of the post of woman
director on account of continuous absence of Sudha in the Board Meetings held during the FY
2020-21 and requested the Board to again propose for the appointment of new woman director
and also other director (in replacement of the demise of Rahul, Ex -Director). The Board
accepted the recommendation of the Company Secretary and was advised to move ahead to
complete the legal formalities.
Based on the above scenario, answer the following questions in the light of the Companies Act,
2013:
1. State the legal position w.r.t. appointment of woman director in the Board by the SWD:
(a) It is not required to appoint any woman director, since the company is not a listed
entity.
(b) It is not required to appoint woman director, since the paid-up capital of the company
is only ` 50 crore, which is below the threshold limit of ` 100 crore.
(c) It is required to appoint at least one woman director, since the turnover of the
company has crossed ` 300 crore, which is actually ` 350 crore as on 31 st March,
2020.
(d) If both the conditions i.e. paid-up capital of ` 100 crore or more; and turnover of
` 300 crore or more, are fulfilled, then SWD is required to have at least one woman
director.
2. The company is not a listed entity, even then it has appointed two Independent Directors.
Why?
(a) By appointing independent director(s), the company is benefitted of their expertise
and wisdom.
(b) The company was required to appoint independent directors since its paid -up capital
is ` 50 crore, (at the time of incorporation) which is above the threshold limi t of
` 10 crore.

(c) Appointing of Advocate on Records at Supreme Court as Independent director is

beneficial to address the legal issues.
(d) The company was used to get the financial advice, hence it appointed a Financial
Professional as an Independent Director.
3. In the above case, Sudha (the wife of Sukesh, Managing Director) was appointed to fill up
the vacancy of woman director. Whether appointment of relative of Managing Director to
fill up the vacancy of woman director is permissible?
(a) Sudha is the wife of MD, and hence cannot be considered to be appointed as woman
director. So her appointment is not valid.
(b) There is no prohibition/ restriction in the Companies Act, 2013 to appoint any woman
to fill up the vacancy of woman director even she is a relative of any of the director.
(c) Woman director should be chosen only from the Databank maintained by the Indian
Institute of Company Affairs (IICA), New Delhi.
(d) Sudha should immediately break the relationship with her husband, who is MD in the
company, if she want to continue as woman director, in order to maintain the
independent status.
4. Sudha being a woman director did not attended any meeting during FY 2020 -21. However
she always sought leave of absence of the Board. Sudha argued that when leave of
absence have been sought, she may continue to be on Board by holding the Office of
Woman Director. What is your opinion?
(a) No, a woman director is given a special treatment under the Law, so the post of
woman director shall not be treated as vacant.
(b) Since in the given she has sought leave of absence of the Board, so the office of
woman director shall not be treated as vacant.
(c) The office of a director shall become vacant in case he absents himself from all the
meetings of the Board of Directors held during a period of 12 months with or without
seeking leave of absence of the Board.
(d) In option (c) above, words used are ‘he’ and ‘himself’, which are used for a male
person, so the intention of the law makers are very clear and the office of woman
director cannot be treated as vacant. If the intention of the law maker would have
been to include a woman director, the words in the above sentence [Option C] should
have been used as ‘she’ and ‘herself’.
Case scenario 2
Vivaan Contractors Limited, a public company incorporated under the Companies Act, 2013 is
engaged in engineering and construction business. Over the past 2 years, the company has
been struggling to pay dues to its various stakeholders such as lenders of working capital,
suppliers of material, subcontractors, etc. The amount lend by the lenders for working capital is

secured by first charge over current assets including receivables and stock and fixed assets are
provided as collaterals. Mr. Ravi, CFO being an authorized person to make an application, files
for Corporate Insolvency Resolution Process (CIRP) to the Adjudicating Authority at Mumbai on
29th March 2020. The Adjudicating Authority admitted the application and passed an order for
initiating CIRP under section 10 of the Insolvency and Bankruptcy Code (IBC) and accordingly
declared moratorium under section 14 of the Code. The order passed by the Adjudicating
Authority did not provide for the appointment of Interim Resolution Professional (IRP) and thu s,
Mr. Rahul was appointed as IRP by a separate order dated 30 th April 2020. The said order copy
was however received to Mr. Ravi on 3 rd May 2020 and on the very same day Mr. Rahul was
informed regarding his appointment. Subsequently, Mr. Rahul made a public announcement and
took over the control of the assets of the Corporate Debtor.
5. As per the given facts in the case scenario, in which category the lenders for working
capital would fall for the constitution of Committee of Creditors?
(a) Financial Creditors
(b) Secured Creditors
(c) Either (a) or (b)
(d) Both (a) and (b)
6. What amongst the following is necessary for filing an application for CIRP by the authorized
representative of Vivaan Contractors Limited?
(a) Resolution passed by all the directors approving the filing of application.
(b) Special resolution passed by shareholders of Corporate Debtor approving the filing
of application.
(c) Resolution passed by all the directors followed by approval through special resolution
of shareholders of the Corporate Debtor.
(d) Ordinary resolution passed by shareholders of Corporate Debtor approving the filing
of application.
7. Which date shall be considered as the insolvency commencement date for the purpose of
computing the time period for Corporate Insolvency Resolution Process?
(a) 29th March 2020
(b) 30th April 2020
(c) 3rd May 2020
(d) 6th May 2020
8. Which date shall be the last date of the completion of the Corporate Insolvency Resolution
Process including any extension granted under section 12 of the Code.
(a) 21st February 2021

(b) 25th March 2021

(c) 24th September 2020
(d) 28th March 2020
9. Under the case scenario, by which date Mr. Rahul, Interim Resolution Professional should
have the made the public announcement under section 15 of the Code
(a) 3rd May 2020
(b) 30th April 2020
(c) 6th May 2020
(d) 5th May 2020
Independent MCQs
10. Pankaj Nidhi Limited, incorporated under section 406 of the Companies Act, 2013. Pankaj
Nidhi Limited wants to enter into an agreement for acquiring another company by purchase
of its securities. Now the management of the Pankaj Nidhi Limited is in dilemma with
respect to the requirment of entering into such an agreement. Pankaj Nidhi Limited
approached you to provide with the best course of action considering the provisions of the
Companies Act, 2013.
(a) As per the Nidhi Rules, 2014, Nidhi company can enter into an agreement for
acquiring other company by purchase of its securities provided the Nidhi company
has passed a special resolution in its general meeting or have obtained the previous
approval of the Regional Director having jurisdiction over such Nidhi.
(b) As per the Nidhi Rules, 2014, Nidhi company can enter into an agreement for
has passed a special resolution in its general meeting and also obtained the previous
approval of the Regional Director having jurisdiction over such Nidhi.
(c) As per the Nidhi Rules, 2014, Nidhi company can enter into an agreement for
acquiring other company by purchase of its securities provided the Nidhi c ompany
has passed a special resolution in its general meeting and have obtained the previous
approval of the Registrar of Companies (Roc) having jurisdiction over such Nidhi.
(d) As per the Nidhi Rules, 2014, Nidhi company can enter into an agreement for
has passed a special resolution in its general meeting or have obtained the previous
approval of the Registrar of Companies (Roc) having jurisdiction over such Nidhi.
11. Adheera Limited, a company incorporated under the Companies Act, 2013, has not entered
into significant accounting transaction during the last one financial year. Accordingly, the
management of the company was thinking to obtain the status of the dormant c ompany
under section 455 of the Companies Act, 2013. The Registrar on the filings made during
the last financial year found some irregularities and ordered inspection of the books of

accounts under section 207 of the Companies Act, 2013. Now the management of the
Company consults you, to advise on the application to be made to Registrar for obtaining
the status of the dormant company considering the provisions of the Companies Act, 2013.
(1) The company shall be able to obtain the status of the dormant company after passing
special resolution to this effect in the general meeting of the company.
(2) The company shall not be able to obtain the status of the dormant company as
company shall be inactive i.e. not carrying significant accounting transactions du ring
the last 2 financial years.
(3) The company shall be able to obtain the status of the dormant company after issuing
notice to all the shareholders of the company for this purpose and obtaining consent
of at least 3/4th shareholders in value.
(4) The company shall not be able to obtain the status of the dormant company as
inspection u/s 207 of the Act is going on against the Company.
(a) Only (3)
(b) Either (2) or (4)
(c) Either (1) or (3)
(d) Both (2) and (4)
12. Kiara Limited holds 77% of the shares of Sunny Limited. Kiara Limited makes an
application for merger of Holding and Subsidiary Company under section 233 – Fast Track
Merger of the Companies Act, 2013. The legal counsel of Kiara Limited states that
company cannot apply for merger under section 233 of the said Act. He further stated that
company shall have to apply for merger as per section 232 of the Act i.e. Merger and
Amalgamation of Companies. State the correct statement in terms of the validity of the
difference in the opinion of the legal counsel.
(a) Opinion of the legal counsel of Kiara Limited is valid as the provisions given for fast
track merger in section 233 can be made between only small companies.
(b) Opinion of the legal counsel of Kiara Limited is invalid as merger shall be possible
only as per section 233 between Holding and Subsidiary Company.
(c) Opinion of the legal counsel of Kiara Limited is valid as the provisions given for fast
track merger in section 233 can be made between Holding and wholly owned
subsidiary.
(d) Opinion of the legal counsel of Kiara Limited is invalid as merger of Holding and
Subsidiary company is possible under both section 232 and section 233.
13. Under which circumstances the arbitration process comes to an end as per the Arbitration
and Conciliation Act, 1996:
(a) When Arbitrator denies to pass final award

(b) When arbitrator fails to pass the award within 12 months

(c) When the parties decide to no longer continue with issue.
(d) Where the parties decide to refer the matter before the court.
14. A meeting of committee of creditors shall quorate if members of the CoC representing ----
-------are present either in person or by video/audio means:
(a) at least thirty three percent of the voting rights
(b) at least Fifty one percent of the voting rights
(c) at least sixty six percent of the voting rights
(d) at least seventy five percent of the voting rights
15. Anna, a foreign citizen has made donated variety of articles in kind, to various individuals
of Indian residence for their personal use. When shall such donation of articles in kind be
excluded from the definition of Foreign Contribution considering the provisions of Foreign
Contribution (Regulation) Act, 2010.
(a) If the market value, in India, of such article, on the date of such gift, is more than
` 1,00,000 but less than 5,00,000.
(b) If the market value, in India, of such article, on the date of such gift, is more than
` 500,000 but less than 10,00,000.
(c) Any donation in kind given for personal use is always excluded.
(d) If the market value, in India, of such article given for personal use, on the date of such
gift, is not more than ` 1,00,000.
16. The Committee of Creditors (CoC) of Ashoka Cement Limited under the Corporate
Insolvency Resolution Process (CIRP) have passed a resolution allowing the Resolution
Professional (RP) of Company for initiating the process of liquidation before NCLT under
section 33 of the Insolvency and Bankruptcy (Amendment) Code, 2019. Accordingly, the
RP was appointed as liquidator of the Ashoka Cement Limited. While forming the
liquidation estate, the liquidator was in dilemma regarding the inclusion and exclusion of
the assets forming part of the liquidation estate. You as a Qualified Chartered Accountant
are required to advise the liquidator regarding the issues faced by him with respect to the
exclusion to be made in the liquidation estate of Ashoka Cement Limited as per the
provisions of the Code.
1. Assets in security collateral held by financial service providers.
2. Any asset of the corporate debtor in respect of which a secured creditor has
relinquished security interest.
3. Assets owned by a third party which are in the possession of the corporate debtor.
4. Assets subject to the determination of ownership by the court or authority.

(a) Only (3)

(b) Both (2) and (4)
(c) Only (1)
(d) (1) and (3)
Descriptive Questions
17. ABC Ltd. is incorporated in December, 2010 under the Companies Act, 1956. For the year
ended on 31 st March, 2020 and 31 st March, 2021, the financial and other relevant
information of the company were as under:
(` in crores)
Particulars 31.03.2020 31.03.2021
(a) Paid-up capital 8 18#
(b) Reserves 16 6
(c) Turnover 75 98
(d) Borrowings from Banks /FIs 50 45
(The sanctioned limit is 60 crores rupees)
(e) No. of directors 10 10
# Part amount of the Reserves was capitalised, by issue of Bonus shares during the
FY 2020-21
The Company Secretary apprised the Board, of requirement of appointment of Independent
Director (ID). Few candidates were shortlisted, out of which 2 candidate were nominated
and got approval of the shareholders in the General Meeting. The appointment of both the
IDs were approved for a tenure of one year only.
Enumerate in the given situation, the following issues in the light of the Companies Act,
2013:
(A) Whether ABC Ltd. was required to appoint Independent Director (ID) based on the
information as on 31 st March, 2020.
(B) In the given case, the tenure of the appointment of both the IDs is for one year only.
Comment upon the validity of the term of appointment of the Independent Directors.
18. Atlantic Garments Ltd., is a company engaged in the business of manufacturing of
garments for all seasons. The company have in all 14 directors.
The first meeting of the Board was held on 15 th February, 2020. Thereafter, the subsequent
meetings of the Board were held on 29 th February, 2020, 25 th March, 2020, 30 th August,
2020 and 25 th December, 2020.

In these meetings, the full strength of the Board was present except in the meeting of 25 th
March, 2020. In this meeting only 4 persons were present.
Decide whether the Board meeting held on 25 th March 2020 is valid in compliance with the
legal requirements under the Companies Act, 2013. What shall be date of the meeting in
case where if meeting could not be held because of quorum.
19. Surya Ltd., wants to reorganise the company’ share capital by the consolidation of sh ares
of different classes and passed a resolution to this effect in the Board meeting and
thereafter made an application to the Tribunal. The Tribunal ordered that a meeting of the
members be called. The company sent notices to all the members.
In the meeting, some of the members made objections to such arrangements. However,
the majority of the members were interested in the resolution proposed by the company.
Tribunal after scrutinising the minutes of the meeting, sanctioned the proposed
arrangement.
Examine in the light of the given facts, that in order to give effect to the arrangement which
prescribes the reorganisation of company’ share capital by the cons olidation of shares of
different classes, mention the requirements on the execution of the said arrangement
under the Companies Act, 2013.
20. Perfect Tyres Ltd. was incorporated in January, 2019 and came out with its first IPO in the
month of May 2020. The company’s shares were listed on the BSE and NSE after
successful completion of the IPO and allotment of equity shares made to the investors.
The Chairperson of the Board of Directors is a non-executive director. There are 13
directors, out of which one is woman director.
Based on the stated facts in the light of the relevant law, advise on the following issues:
(i) where if after listing of the shares, the total number of directors on the board are 13.
Out of which, one is woman director. What shall be the required number of
independent directors in the company.
(ii) If the Board of directors do not have regular non-executive director, then what shall
be the required number of independent directors in the Board in the said case.
21. Jewar Ltd., a diamond manufacturing company, is undergoing Corporate Insolvency
Resolution Process (CIRP). The CIRP had initiated on 1 st January 2020. Mr. Shubh was
acting as the Interim Resolution Professional who was later appointed as Resolution
Professional by the Committee of Creditor. Mr. Shubh has been working hard since day 1
to get a resolution plan approved before the last day of the CIRP. However, due to external
factors, as on 31 st May, 2020, he realized that he is unable to decide as to which resolution
plan can be taken to the committee of creditors for approval and also that he will need
another 3 months to get a resolution plan approved. You are his partner in an Insolvency
Professional Entity. Advise as to:

1. The factors that need to be considered before taking the resolution plan to the
committee of creditors
2. Whether Mr. Shubh can seek an extension for completion of the CIRP?
22. Sudip of Jaipur was posted as Tehsildar in a Tehsil Headquarter near Jaipur. After a year
of his joining he purchased a ready built house in Jaipur in the name of his wife. He
ostensibly shown the business income of his wife and availed loan of 90% of the value of
house from a bank and also gave a guarantee of house loan.
The Bank in this case, did not ensured the business activity of his wife, (address of
business place, Income tax Return filed, how long she is doing business etc.) and solely
relying that Sudip is giving the guarantee, it sanctioned the loan.
After availing the loan, he continued to deposit some amount in the house loan account of
his wife, regularly (apart from the EMI) and within a year, liquidated the loan account. One
of the employee in his office made compliant to ED of taking of bribe/commission by him
on regular basis and so liquidating the account in just a year.
Examine whether Sudip was involved in the money laundering activity i n the light of the
given facts.
23. Amol Open University of Languages, a private university established under a State Act
was meant to provide degree/ diploma/ certificate course to the students, through an online
leaning platform of various foreign languages. The examination was also decided to be
held online through their PC/Laptop.
Several Foreign Governments intend to offer donations / contributions for the deve lopment
of their language. Mr. Bhupendra, the Registrar applied for the registration of the university
and was granted certificate to receive foreign exchange for the purpose of preparing the
educational material (print or soft copy), paying of honorarium to teachers and IT related
infrastructure for online classes only. Mr. Bhupendra faced financial problems for building
the infrastructure of the University Campus. Advise Mr. Bhupendra, whether foreign
contribution received for language development, can be used by him for building the
infrastructure of the University Campus.
24. John is a writer. He entered into an agreement with Mumbai Publishing House (MPH). It
contains various clauses such as time limit within which the manuscript is to be given,
payment of royalty of 10% of amount received by the publisher, recovery of royalty amount
in case of sales return, revision in the material, etc. The agreement also contains a clause
that in case of dispute, the matter may be referred to arbitration, at the sole discretion of
the publisher.
For the FY 2017-18, John received the royalty amount of ` 2.50 lakh. During the FY 2018-
19 the syllabus of management subject was changed and the author wrote manuscript for
2nd edition.

The statement of royalty payment for the FY 2018-19 was given by the publisher as under:
1. Royalty payable @ 10% of amount received by the publisher 1,85,000
2. Less: Sales return of 1 st edition of the book (-) 95,000
3. Less: Future Sales return expected for during FY 2019-20 (-) 45,000
4. Gross amount payable 45,000
5. Less: TDS @10% (-) 4,500
6. Net amount paid 40,500
When John compared the amount of royalty which he received in previous FY which was
` 2.50 lakh, whereas in the next year the publisher paid the amount for FY 2018 -19 only
of ` 40.5 thousand.
John’s arguments were:
▪ Future sale return and royalty deduction cannot be made.
▪ The retail book seller cannot return the book after 3 months, then why the publisher
has allowed / accepted the sale return even after the lapse of 3 months. This resulted
in big deduction of sales return.
In the light of the provided facts, answer the following questions as per the Arbitrating and
Conciliation Act, 1996:
(i) In the absence of separate arbitration agreement, whether the matter can be referred
to the Arbitration?
(ii) In the contract agreement, it was mentioned that in case of dispute, the matter may
be referred to arbitration, at the sole discretion of the publisher. Whether the
arbitration clause, as written in the contract agreement is perfect? Give your
comments.
25. Tokushia Motors Ltd. was incorporated in Japan. Its share capital is held by the following
persons-
Citizens of India – 10%
Indian Companies– 40%
The company has opened its representative office in Mumbai on 15 th January, 2021, in
order to receive orders from the Indian Market and make available the delivery of Japanese
luxury cars to the Indian purchasers.
The company was not aware of the Indian Company Law, hence could not file the required
documents to the Registrar. The company could file all the required documents only on
28th February, 2021.

Based on the above facts, answer the following questions:

(i) Whether the provisions of Chapter XXII of the Companies Act, 2013 are applicable
on Tokushia Motors Ltd?
(ii) What documents are required to be filed by Tokushia Motors Ltd to the Registrar of
Companies?
(iii) By what time all the requisite documents shall be filed?
26. Amar is a branch manager in Kismat Bank Ltd. During the course of recovery drive initiated
by the Bank, Amar collected around 50 lakh rupees from the defaulters / non -performing
accounts. He did not credited the amount so recovered, in the respective borrower’s loan
account, but kept with himself. Later he absconded along with amount so collected. A FIR
was lodged by the Bank and the police, after making intensive search, caught and arrested
him. Chargesheet was issued and case was submitted in the court.
Give the following answers in reference to the Companies Act, 2013:
(i) In which category, cognizance or non-cognizance, the embezzlement of cash by Amar
shall be treated?
(ii) Non-cognizable offences are less serious than that of the cognizable offences. Do
you agree? Substantiate your plea by differentiating between these two.
(iii) Which offences, Special Court cannot deal with? Whether the said case can be dealt
by the Special court.
SUGGESTED ANSWERS
Case Scenario-1
1. (c)
2. (b)
3. (b)
4. (c)
Case scenario 2
5. (d)
6. (b)
7. (b)
8. (b)
9. (c)

Independent MCQs
10. (b)
11. (c)
12. (c)
13. (b)
14. (a)
15. (d)
16. (d)
17. (A) As per Section 149 read with the Rule 4(1)(iii) of the Companies (Appointment and
Qualifications of Directors) Rules, 2014, which provides that the following class or
classes of companies shall have at least two directors as independent directors –
(i) the Public Companies having paid-up share capital of ten crore rupees or
more; or
(ii) the Public Companies having turnover of one hundred crore rupees or more; or
(iii) “the Public Companies which have, in aggregate, outstanding loans, debentures
and deposits, exceeding fifty crore rupees”.
Here, the words used in the law is ‘exceeding 50 crore rupees’, whereas the banks
borrowings in the given case is only ` 50 crore and not exceeding ` 50 crore.
Hence, no need to appoint ID on the basis of information as on 31 st March, 2020.
Further, the words used in the said Rule is ‘Outstanding Loans’ and not the
‘Sanctioned limit’. The limit is ` 60 crore, but the outstanding loans is only ` 50
crore.
Therefore, in line with the stated legal provision, there is no need to appoint
Independent Directors as on 31/3/2020.
(B) According to Section 149(10) read as ‘Subject to the provisions of section 152, an
independent director shall hold office for a term up to five consecutive years on the
Board of a company, and shall be eligible for re-appointment on passing of a special
resolution by the company and disclosure of such appointment in the Board's report.
Further, Vide MCA General Circular No. 14/ 2014 dated 9 th June, 2014, under
Para (iii) Section 149(10), it has been clarified that section 149(10) of the Act
provides for a term of “upto five consecutive years” for an ID. As such while
appointment of an ID for a term of less than five years would be permissible,
appointment for any term (whether for five years or less) is to be treated as a one
term under section 149(10).

Therefore, the tenure of the appointment of both the IDs for one year only, will be
considered as valid.
18. As per given section 174(1) of the Companies Act, 2013 the quorum for a meeting of
the Board of Directors of a company shall be one third of its total strength or two
directors, whichever is higher, and the participation of the directors by video
conferencing or by other audio visual means shall also be counted for the purposes of
quorum under this sub-section.
Section 174(4) provides that where a meeting of the Board could not be held for want of
quorum, then, unless the articles of the company otherwise provide, the meeting shall
automatically stand adjourned to the same day at the same time and place in the
next week or if that day is a national holiday, till the next succeeding day, which is
not a national holiday, at the same time and place.
Further explanation to section 174(4) provides that for the purposes of this section, (i) any
fraction of a number shall be rounded off as one; (ii) “total strength” shall not include
directors whose places are vacant.
Total Strength of directors =14
One-third of 14 = 4.67
Rounded off to = 5 (Five)
As in the meeting scheduled on 25 th March 2020, only 4 persons were present, hence due
to want of required minimum quorum, the meeting shall have to be adjourn ed to the same
day at the same time and place in the next week or if that day is a national holiday, till the
next succeeding day, which is not a national holiday, at the same time and place.
The meeting of the Board was not valid as the required quorum was not present in the
meeting. In this case, the adjourned meeting was to be held on 1st April, 2020.
19. Section 230(1) of the Companies Act, 2013 provides that where a compromise or
arrangement is proposed—
(a) between a company and its creditors or any class of them; or
(b) between a company and its members or any class of them,
The Tribunal may, on the application of the company or of any creditor
or member of the company, or in the case of a company which is being wound up,
of the liquidator, “appointed under this Act or under the Insolvency and Bankruptcy
Code, 2016, as the case may be,” order a meeting of the creditors or class of
creditors, or of the members or class of members, as the case may be, to be called,
held and conducted in such manner as the Tribunal directs.
Here the term, arrangement includes a reorganisation of the company’s share
capital by the consolidation of shares of different classes or by the division of
shares into shares of different classes, or by both of those methods.

Any compromise or arrangement needs the order of sanction by the Tribunal and the
Tribunal may on an application made by the company, order the company to call the
meeting of the shareholders, pass such resolution in the meetings and then f orward
the minutes to the Tribunal for its order.
The order of the Tribunal shall be filed with the Registrar by the company within a
period of thirty days of the receipt of the order.
The Tribunal may dispense with calling of a meeting of creditor or class of creditors
where such creditors or class of creditors, having at least ninety per cent. value, agree
and confirm, by way of affidavit, to the scheme of compromise or arrangement.
20. (i) As per Regulation 17 of the SEBI(LODR) Regulations, 2015, the composition of
board of directors of the listed entity shall be as follows:
(a) board of directors shall have an optimum combination of executive and
nonexecutive directors with at least one woman director and not less than fifty
per cent. of the board of directors shall comprise of non-executive directors;
(b) where the chairperson of the board of directors is a non-executive director, at
least one-third of the board of directors shall comprise of independent directors
and where the listed entity does not have a regular non-executive chairperson,
at least half of the board of directors shall comprise of independent directors.
Any fraction in number, shall be rounded off to the nearest number.
So one-third of 13 comes to 4.33, rounded off to 5. So at least 5 independent
directors should be there.
(ii) In line with above clause (b) of part (i), where the listed entity does not have a regular
non-executive chairperson, at least half of the board of directors shall comprise of
independent directors.
So one-half of 13 comes to 6.5, rounded off to 7. So at least 7 independent directors
should be there.
21. 1. Mr. Shubh, the resolution profession will have to consider the following factors while
examining the resolution plan before taking it to the Committee of Creditors for
approval:
a. Whether the resolution plan provides for the payment of insolvency resolution
process costs in a manner specified by the Board in priority to the payment of
other debts of the corporate debtor
b. Whether the resolution plan provides for the payment of debts of operational
creditors in such manner as may be specified by the Board which shall not be
less than higher of:
(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,
c. Whether the resolution plan provides for the management of the affairs of the
Corporate debtor after approval of the resolution plan;
d. Whether the resolution plan provides for the implementation and supervision of
the resolution plan
e. Whether the resolution plan contravene any of the provisions of the law for the
time being in force
f. Whether the resolution plan confirms to such other requirements as may be
specified by the Board.
2. Relevant Provision of the Insolvency and Bankruptcy Code for extension of
period for completion of CIRP
As per Section 12, the corporate insolvency resolution process shall be completed
within a period of 180 days from the date of admission of the application to initiate
such process.
The resolution professional shall file an application to the Adjudicating Authority to
extend the period of the corporate insolvency resolution process beyond 180 days, if
instructed to do so by a resolution passed at a meeting of the committee of creditors
by a vote of 66% of the voting shares.
On receipt of the application, if the Adjudicating Authority is satisfied that the subject
matter of the case is such that corporate insolvency resolution process cannot be
completed within 180 days, it may by order extend the duration of such process
beyond 180 days by such further period as it thinks fit, but not exceeding 90 days.
Provided that any extension of the period of corporate insolvency resolution process
under this section shall not be granted more than once
Provided further that the corporate insolvency resolution process shall mandatorily
be completed within a period of 330 days from the insolvency commencement date,
including any extension of the period of corporate insolvency resolution process
granted under this section and the time taken in legal proceedings in relation to such
resolution process of the corporate debtor.
In the given case, Mr. Shubh can seek an extension of maximum 90 days by making
an application of the National Company Law Tribunal i.e. till 29th August, 2020.
22. As per the Section 3 of the Prevention of Money Laundering Act -
Whosoever directly or indirectly attempts to indulge or knowingly assists or
knowingly is a party or is actually involved in any process or activity connected with
the proceeds of crime including its concealment, possession, acquisition or use and

projecting or claiming it as untainted property shall be guilty of offence of money -

laundering.
The process or activity connected with proceeds of crime is a continuing activity and
continues till such time a person is directly or indirectly enjoying the proceeds of crime by
its concealment or possession or acquisition or use or projecting it as untainted property
or claiming it as untainted property in any manner whatsoever.
Section 2(1)(u) “proceeds of crime” means any property derived or obtained, directly or
indirectly, by any person as a result of criminal activity relating to a scheduled offence or
the value of any such property or where such property is taken or held outside the country,
then the property equivalent in value held within the country or abroad;
Section 2(1)(y) of the PML Act provides that –
“scheduled offence” means— (i) the offences specified under Part A of the Schedule;
Under Schedule -Part A - Paragraph 8: Offences under the Prevention of Corruption
Act, 1988 specifies Section 7- Offence relating to public servant being bribed.
In the light of the above mentioned sections, act of Sudip is a case of money laundering
i.e. converting of black income earned through bribe and efforts in converting it into white
money and raising the house loan in the name of wife.
23. Section 8(1) of the FCRA, 2010 provides that every person, who is registered and granted
a certificate or given prior permission under this Act and receives any foreign
contribution,—
(a) shall utilise such contribution for the purposes for which the contribution has
been received.
Provided that any foreign contribution or any income arising out of it shall not be used
for speculative business.
(b) shall not defray as far as possible such sum, not exceeding twenty per cent. of
such contribution, received in a financial year, to meet administrative expenses:
Provided that administrative expenses exceeding twenty per cent. of such
contribution may be defrayed with prior approval of the Central Government.
(2) The Central Government may prescribe the elements which shall be included in the
administrative expenses and the manner in which the administrative expenses
referred to in sub-section (1) shall be calculated.
Accordingly, the purpose for which the Certificate of Registration has been granted, cannot
be diverted. The end use of the funds has to ensured to utilise in that purpose only.
Therefore, Mr. Bhupendra, the registrar of Amol Open University cannot use the foreign
contribution for building the infrastructure of the University Campus.

24. (i) Section 7(2) of the Arbitration and Conciliation Act, 1996 provides that an arbitration
agreement may be in the form of an arbitration clause in a contract or in the form of
a separate agreement.
Further section 7(5) states that the reference in a contract to a document containing
an arbitration clause constitutes an arbitration agreement if the contract is in writing
and the reference is such as to make that arbitration clause part of the contract.
In the given case, the arbitration clause was there in the contract agreement. There
is no need to have a separate arbitration clause. It is sufficient, if it have a clause in
the contract agreement itself.
(ii) Section 7(1) of the Arbitration and Conciliation Act, 1996, provides that “arbitration
agreement” means an agreement by the parties to submit to arbitration all or certain
disputes which have arisen or which may arise between them in respect of a defined
legal relationship, whether contractual or not.
In the contract agreement the words written were “the matter may be referred to
arbitration, at the sole discretion of the publisher”.
Here the matter “may be referred to” have been used and further “at the sole
discretion of the publisher”. It means that referring of the matter to the arbitration was
at the sole discretion of the publisher and was not mutually agreed on. Although the
author would have signed the contract agreement, but the matter of referring was
arbitrary i.e. at the sole discretion of the publisher itself. If the publisher do not want
to refer the matter to the arbitration, then no recourse is available to the author, except
to move to the civil court.
25. (i) Section 379(2) of the Companies Act, 2013, provides that where not less than fifty
per cent of the paid-up share capital, whether equity or preference or partly equity
and partly preference, of a foreign company is held by one or more citizens of India
or by one or more companies or bodies corporate incorporated in India, or by one or
more citizens of India and one or more companies or bodies corporate incorporate d
in India, whether singly or in the aggregate, such company shall comply with the
provisions of this Chapter and such other provisions of this Act as may be prescribed
with regard to the business carried on by it in India as if it were a company
incorporated in India.
In the given case, although the company was incorporated in Japan, however its
share capital of not less than 50% is held by the Indian citizens and Indian companies,
hence in terms of section 379(2) all the provisions pertaining to Chapter XXII of the
Companies Act, 2013, shall be applicable on it.
(ii) In terms of section 380(1) every foreign company shall, within thirty days of the
establishment of its place of business in India, deliver to the Registrar for
registration—

(a) a certified copy of the charter, statutes or memorandum and articles, of the
company or other instrument constituting or defining the constitution of the
company and, if the instrument is not in the English language, a certified
translation thereof in the English language;
(b) the full address of the registered or principal office of the company;
(c) a list of the directors and secretary of the company containing such particulars
as may be prescribed;
(d) the name and address or the names and addresses of one or more persons
resident in India authorised to accept on behalf of the company service of
process and any notices or other documents required to be served on the
company;
(e) the full address of the office of the company in India which is deemed to be its
principal place of business in India;
(f) particulars of opening and closing of a place of business in India on earlier
occasion or occasions;
(g) declaration that none of the directors of the company or the authorised
representative in India has ever been convicted or debarred from formation of
companies and management in India or abroad; and
(h) any other information as may be prescribed.
Further its sub-section (3) provides that where any alteration is made or occurs in the
documents delivered to the Registrar under this section, the foreign company shall,
within thirty days of such alteration, deliver to the Registrar for registration, a return
containing the particulars of the alteration in the prescribed form.
(iii) In the given, case the company had established its representative office in India on
15.01.2021, it was required to file the documents latest by 14.02.2021 with the
Registrar.
26. (i) Embezzlement of the cash and absconding is a cognizable offence which means a
police officer can arrest such person without the warrant of the magistrate.
(ii) Cognizable Offence:
“Cognizable offence” means an offence for which, and “cognizable case” means a
case in which, a police officer may, in accordance with the First Schedule or under
any other law for the time being in force, arrest without warrant.
Non- Cognizable Offence:
“Non-cognizable offence” means an offence for which, and “non-cognizable case”
means a case in which, a police officer has no authority to arrest without warrant.

Cognizable offences are heinous crimes, whereas non-cognizable offences are not
so serious. Cognizable offences encompasses murder, rape, theft, kidnapping,
counterfeiting, etc. whereas the, non-cognizable offences include offences like
forgery, cheating, assault, defamation and so forth.
By having an overview of the definitions of cognizable and non-cognizable offences
as stated above, it is clear that in the matter of cognizable offences, a police officer
have authority to arrest any person without warrant, but in case of non -cognizable
offences, policy office do not have such authority. Therefore non-cognizable offences
are less serious than that of the cognizable offences.
(iii) Section 435 (1) provides that the Central Government may, for the purpose of
providing speedy trial of offences under this Act, except under section 452, by
notification, establish or designate as many Special Courts as may be necessary.
Section 452 of the Companies Act, 2013 provides that
If any officer or employee of a company—
(a) wrongfully obtains possession of any property, including cash of the company;
or
(b) having any such property including cash in his possession, wrongfully withholds
it or knowingly applies it for the purposes other than those expressed or directed
in the articles and authorised by this Act,
he shall, on the complaint of the company or of any member or creditor or contributory
thereof, be punishable with fine which shall not be less than one lakh rupees but
which may extend to five lakh rupees.
Hence, as per the provisions of the Companies Act, 2013, the Special Court cannot
deal with the matters on which section 452 applies. In the given case, since the branch
manager, after collecting the money from the borrowers, absconded [as defined as
per section 452(1)(a) & (b)], which comes under the purview of section 452, hence
this matter shall not be dealt with by the Special Court.

PART – I: RELEVANT MATERIALS FOR MAY 2021 EXAMINATION

For May 2021 examinations for Paper 4: Corporate and Economic Laws, relevant material is of
November 2020 edition containing relevant amendments made latest by 31st October 2020.
Besides, refer booklet on MCQS and Case scenarios of January 2021 edition containing
Independent MCQs and Case Scenarios on the topics covered under the study material for 30
marks segment of MCQs in the Examination.
Read thoroughly the study material first and then go with the said booklet to have practice and
revision of concepts with an analytical and application approach with the thorough
understanding of the subject.
DIVISION A: CASE SCENARIO BASED MCQS/ INDEPENDENT MULTIPLE CHOICE
QUESTIONS
Case scenario 1
Balfor Ltd., is an unlisted company, having total 70 members, with a paid up capital of
` 42,00,000, having turnover of ` 200 crore, as per the audited financial statements for the year
ended on 31st March, 2020.
5 members holding in total 4% stake in the company, met in person to discuss about the
oppression and mismanagement going on in Balfor Ltd. and to do something abo ut it. One of
the members, Mr. Ravi, suggested that we five members should file a class action application
to the Tribunal to get a resolution in this matter, to which another member, Mr. Jay, told that he
is in contact with 3 other members of the company, holding in total 3% stake, who are also
finding the activities going on in the company to be unjust. So, five plus three other members
i.e. 8 members in total, will be able to file an application to the Tribunal under section 244 of the
Companies Act, 2013.
The application of complaint for oppression and mismanagement was filed to the Tribunal on 4 th
June, 2020, with the consent of aforesaid 8 members of the company. The said application
provided the details of an agreement made by Balfor Ltd. with Mr. Dev , a relative of director of
Balfor Ltd., Mr. Raj, with respect to continuous supply of raw materials to Balfor Ltd., for which
Mr. Raj, had received certain commission from Mr. Dev, in cash, for offering the contract to him.
Also, another director, Mr. Jayesh, had improperly transferred a property of Balfor Ltd. on 6 th
March, 2020, to Mr. Prakash.

76 FINAL (NEW) EXAMINATION: MAY, 2021
The Tribunal on receipt of such application, made an order, directing investigation into the affairs
of Balfor Ltd. Also, the agreement made with Mr. Dev was ordered to be terminated after giving
notice to Mr. Dev and obtaining his consent. However, no compensation was ordered to be paid
to Mr. Dev for such cancellation of agreement. The contract with respect to property transferred
by Mr. Jayesh was also ordered to be set aside, as it would have been deemed to be a fraudulent
preference, in case such transaction was made by an individual in his insolvency.
Simultaneously, the Central Government ordered for the investigation into the affairs of Balfor
Ltd., on receipt of the order from the Tribunal and the task of such investigation was assigned
to the Serious Fraud Investigation Office. The Director of Serious Fraud Investigation Office, on
getting such order from the Central Government, designated 3 inspectors for such investigation
and soon, the investigation got started by the designated persons.
One of the Investigating officers, Mr. Vaibhav, issued summons, to 2 employees, of Balfor Ltd.,
Mr. Karan and Mr. Arjun, respectively, as well as, to Mr. Daya, an employee of Kafor Ltd., an
associate company of Balfor Ltd., after taking the requisite approvals.
The aforesaid persons attended at the place at which they were summoned by Mr. Vaibhav and
were examined on oath, one after the other. During the said examination , Mr. Vaibhav, took
down notes in writing and he read over the notes taken by him, to all the persons examined,
after the end of examination. After hearing the said notes, Mr. Karan and Mr. Arjun, signed the
document on which such notes were written but Mr. Daya, refused to sign such document
without any reasonable cause for the same, on the same day, but then he thought there would
be no issue in signing and so he signed the same after 20 days.
Mr. Vaibhav, forwarded the notes taken by him to the Assistant Director of Serious Fraud
Investigation Office, Mr. Ramanuj, and on the basis of such notes, he derived that Mr. Arjun has
committed an offence under section 447 of the Companies Act, 2013 which Mr. Ramanuj
reconfirmed with Mr. Vaibhav, via email.
Mr. Ramanuj, accordingly, passed an order for arrest of Mr. Arjun, after recording in writing the
reasons for such arrest and he immediately forwarded the copy of order of such arrest to the
concerned authority along with the document containing notes taken by Mr . Vaibhav at the time
of examination of Mr. Arjun, which indicated that he has committed an offence under section
447 of the Companies Act, 2013.
Balfor Ltd., on coming to know of such arrest of Mr. Arjun, wanted to give termination to him and
also wanted to demote Mr. Karan to position of junior assistant from his position of senior
assistant in the company, during the pendency of investigation and for that purpose it made an
application to the Tribunal for the same on 10 th October, 2020.
In response to the said application from Balfor Ltd., the Tribunal passed an order on 26 th
October, 2020 allowing the termination to be given to Mr. Arjun but it objected to the decision of

the company for reduction in rank of Mr. Karan from his current position, against which Balfor
Ltd. filed an application with the appellate tribunal on 15 th November, 2020.
Multiple Choice Questions:
1. State in the light of the given facts , whether, the five members holding in total 4% stake in
Balfor Ltd., or the eight members, holding in total 7% stake in Balfor Ltd., were eligible for
filing application for class action or/ and u/s 244, respectively, of the Companies Act, 2013?
(a) For filing application for class action, 5 members were eligible and also for filing
application u/s 244 of the Companies Act, 2013, 8 members were eligible.
(b) For filing application for class action, 5 members were not eligible and also for filing
application u/s 244 of the Companies Act, 2013, 8 members were not eligible .
(c) For filing application for class action, 5 members were eligible but for filing application
u/s 244 of the Companies Act, 2013, 8 members were not eligible.
(d) For filing application for class action, 5 members were not eligible but for filing
application u/s 244 of the Companies Act, 2013, 8 members were eligible .
2. Whether the decision of Tribunal can be considered as valid with respect to termination of
agreement made by Balfor Ltd. with Mr. Dev as well as setting aside the contract of transfer
of property, respectively?
(a) The decision of tribunal for termination of agreement made by Balfor Ltd. with
Mr. Dev can be considered as valid. Also, the decision of setting aside the contract
of transfer of property, can be considered as valid as such transfer was made within
6 months before the date of making application to the tribunal.
(b) The decision of tribunal for termination of agreement made by Balfor Ltd. with
Mr. Dev cannot be considered as valid as no compensation was ordered to be paid
to Mr. Dev. Also, the decision of setting aside the contract of transfer of property,
cannot be considered as valid as such transfer was not made within 90 days before
the date of making application to the tribunal.
(c) The decision of tribunal for termination of agreement made by Balfor Ltd. with
Mr. Dev can be considered as valid. Also, the decision of setting aside the contract
of transfer of property, can be considered as valid as such transfer was made within
3 months before the date of making application to the tribunal.
(d) The decision of tribunal for termination of agreement made by Balfor Ltd. with
Mr. Dev cannot be considered as valid as no compensation was ordered to be paid
to Mr. Dev. However, the decision of setting aside the contract of transfer of property,

can be considered as valid as such transfer was made within 3 months before the
date of making application to the tribunal.
3. Prior approval of which authority would have been sufficient for Mr. Vaibhav for examining
Mr. Daya, on oath, and how much maximum amount of fine could be levied on Mr. Daya
for refusing to sign the document containing the notes taken down by Mr. Vaibhav?
(a) Prior approval of Director of Serious Fraud Investigation Office would have been
sufficient for Mr. Vaibhav and maximum amount of fine that could be levied on
Mr. Daya is ` 1,00,000.
(b) Prior approval of Central Government would have been sufficient for Mr. Vaibhav and
maximum amount of fine that could be levied on Mr. Daya is ` 40,000.
(c) Prior approval of Director of Serious Fraud Investigation Office would have been
sufficient for Mr. Vaibhav and maximum amount of fine that could be levied on
Mr. Daya is ` 1,40,000.
(d) Prior approval of Central Government would have been sufficient for Mr. Vaibhav and
no fine that could be levied on Mr. Daya as he has signed the said document within
30 days of being examined on oath.
4. Whether Mr. Ramanuj was having the authority to exercise power to make an order of
arrest of Mr. Arjun on the basis of notes of examination received from Mr. Vaibhav and to
which authority, Mr. Ramanuj would have forwarded the copy of arrest order along with the
document containing notes?
(a) No, as such notes can’t be considered as a material or evidence in his possession to
be used against Mr. Arjun and Mr. Ramanuj would have forwarded the copy of arrest
order along with the document containing notes to the Serious Fraud Inv estigation
Office.
(b) Yes, as such notes constitute valid evidence to be used against Mr. Arjun and
Mr. Ramanuj would have forwarded the copy of arrest order along with the document
containing notes to the Central Government.
(c) No, as such notes can’t be considered as a material or evidence in Mr. Ramanuj’s
possession to be used against Mr. Arjun and Mr. Ramanuj would have forwarded the
copy of arrest order along with the document containing notes to NCLT.
(d) Yes, as such notes constitute valid evidence to be used against Mr. Arjun and
Mr. Ramanuj would have forwarded the copy of arrest order along with the document
containing notes to the Serious Fraud Investigation Office.

5. What was the last date available with Tribunal to give response to the application made by
Balfor Ltd. with respect to its employees as well as with Balfor Ltd. to file appeal with the
appellate tribunal?
(a) 10th November, 2020 and 26 th November, 2020, respectively.
(b) 9th November, 2020 and 25 th November, 2020, respectively.
(c) 10th November, 2020 and 25 th December, 2020, respectively.
(d) 9th November, 2020 and 26 th November, 2020, respectively.
Case scenario 2
Shri Hari Textiles Limited was incorporated in the year 2010. Its Registered Office is situated in
Connaught Place, New Delhi. It filed its audited annual financial statements for the financial
year 2019-20 well within time with the jurisdictional Registrar of Companies. The Registrar
inspected the statements and after reviewing them, felt the need to seek clarifications on certain
matters. Accordingly, a written notice was sent by the Registrar to the company and its officials
directing them to comply with the notice within thirty days of its receipt. However, the company
and its officials failed to reply within the time specified in the notice.
The Registrar initiated the inquiry and proceeded further for inspecting all the documents of the
company. While conducting the inquiry, the Registrar on prudent grounds believed that some of
the documents and other vital information in relation to the company would be destr oyed or
altered by the official of the company. With a view to safeguard the documents, the Registrar
obtained an order from the Special Court and thereafter, seized all such material.
While inspecting some of the documents the Registrar came to know that the Board of Directors
had passed a resolution in a Board Meeting held on 10-04-2019 and thereby, increased the
remuneration payable to the directors including two whole-time directors and Managing Director
to 12℅ of the net profits of the company which was a sharp increase of 5% from the preceding
financial year.
Prior to the inquiry, two directors of the company, namely, Mr. X and Mr. D got retired. The
Registrar found from the inspection of the documents that they were involved in certain dealings
which included selling of the assets of the company. On the basis of such information gathered
from the inspected documents, the Registrar sought some clarifications from both of them
regarding the dubious transactions. However, both Mr. X and Mr. D refused to appear before
him showing their non-availability in the town and also represented through a common
representative that they were no more a part of the Board of Directors of Shri Hari Textiles
Limited.

After the completion of inspection and inquiry, the Registrar submitted a written report to the
Central Government in respect of his findings against the company. The reports mentioned that
there were major discrepancies in the assets and liabilities as well as profit and loss statements
filed by the company.
On receipt of report from the Registrar, the Central Government considered it necessary to
investigate the affairs of the company by the Serious Fraud Investigation Office (SFIO).
Accordingly, by an order SFIO was directed to conduct the investigation of Shri Hari Textiles
Limited and submit its report within the stipulated time. As instructed by the Central Government,
SFIO authorised some of its inspectors to investigate the affairs of the company. The team
deputed by the SFIO included experts in the field of cost accounting, financial accounting,
taxation, law and forensic auditing.
While inspecting the company, the team of SFIO came to know that the Income -tax authorities
had already initiated investigation against Shri Hari Textiles Limited.
Multiple Choice Questions (MCQs) [2 Marks each]
6. Shri Hari Textiles Limited and its officials failed to submit any reply to the written notice
issued by the Registrar within the time specified in the notice. How much fine can be
imposed for such failure?
(a) The Company and every defaulting officer shall be punishable with a fine up to
` 1,00,000 and in case of continuing failure, with an additional fine up to ` 500 for
every day after the first during which the failure continues.
(b) The Company and every defaulting officer shall be punishable with a fine up to
` 1,50,000 and in case of continuing failure, with an additional fine up to ` 1,000 for
(c) The Company and every defaulting officer shall be punishable with a fine up to
(d) The Company and every defaulting officer shall be punishable with a fine up to
7. From the case scenario, it is observed that the Registrar seized certain important
documents in the course of inquiry. After inspection what procedure is to followed
pertaining to such documents?
(a) The Registrar is required to submit such documents in the Special Court which
permitted seizure.

(b) The Registrar is required to forward all such documents along with the inquiry report
to the Central Government.
(c) The Registrar is required to return such documents back to the company after making,
if considered necessary, the copies of them.
(d) The Registrar is required to retain such documents until further instruction is
received from the Special Court.
8. What is the requisite requirement for increasing the remuneration of directors including
whole-time directors and Managing Director to 12% so that it shall be in accordance with
the relevant provisions of the Companies, Act, 2013?
(a) Board Resolution increasing the remuneration to 12% needs to be authorised at the
General Meeting and thereafter, duly sanctioned by the ROC.
(b) Board Resolution increasing the remuneration to 12% needs to be authorised at the
General Meeting and thereafter, duly sanctioned by the Tribunal.
(c) Board Resolution increasing the remuneration to 12% needs to be authorised at the
General Meeting subject to Schedule V.
(d) Board Resolution increasing the remuneration to 12% needs to be authorised at the
General Meeting and thereafter, duly sanctioned by the Central Government through
Regional Director.
9. The case scenario states that the Registrar of Companies had called ex -directors of the
company for examining them during the inquiry. Is the Registrar empowered to call the ex -
directors:
(a) The Registrar cannot call ex-directors of the company, without the order of the court.
(b) The Registrar may, by issuing a written notice, call the ex-directors for seeking the
requisite information.
(c) In case the Registrar is appointed by the Central Government to conduct
investigation, then only he can call ex-directors of the company.
(d) Except the Tribunal, no other authority is empowered to call ex-directors of a company
for any examination.
10. According to the case scenario, while inspecting the company, the team of SFIO came to
know that the Income-tax authorities had already initiated investigation against the
company. From the given options, choose the correct one that indicates as to how in amidst
of such a situation, SFIO will be continuing with the investigation.
(a) SFIO has to put its investigation on hold so long as the company is being investigated
by Income-tax authorities.

(b) SFIO will proceed with its investigation on the basis of report submitted by Income -
tax authorities.
(c) SFIO will proceed with its investigation while Income-tax authorities shall keep on
hold its investigation.
(d) SFIO will simultaneously continue its investigation along with the Income -tax
authorities.
INDEPENDENT MCQS [Question 11-17]
11. ABC Ltd incorporated in India want to register as an ARC to commence the business of
asset reconstruction. The company made all the arrangement required for the realisation
of the financial assets acquired for the purpose of reconstruction of the assets an d shall
be able to pay periodical returns on respective due dates on the investments made in the
company. The directors are well qualified and had nearly 25 years of experience in finance,
10 years of experience in reconstruction and securitisation of asse ts. The company has
also complied with all the requirement of regulations and guidelines issued by Reserve
Bank of India. The details of the profits made during the past 3 years are 2016 -17 ` 200
Cr (Loss), 2017-2018 ` 500 Cr (Profit), 2018-2019 ` 700Cr. (Profit).
(a) The ARC can be registered and certificate be issued by RBI, but RBI may not
prescribe any further conditions.
(b) The ARC can be registered and certificate be issued by RBI, but RBI may prescribe
any further conditions.
(c) The ARC registration cannot be made.
(d) RBI has no power to register ARC, as ARC’s are governed by SARFAESI Act, 2002.
12. Proceedings under the Prevention of Money Laundering Act, 2002 were initiated against
Mr. Suraj. Through an order, property of Mr. Suraj has been attached under section 8.
Mr. Suraj Preferred an appeal to the Appellate Tribunal. Mr. Suraj is adjudicated an
insolvent during the pendency of the appeal. What will happen to the proceedings initiated
under PMLA in the given case?
(a) Proceedings will be dispensed with
(b) His legal representatives will continue proceedings before the Appellate Tribunal
(c) The official assignee or the official receiver, as the case may be, continue the appeal
before the Appellate Tribunal.
(d) Creditors will continue the proceedings before the Appellate Tribunal

13. Who shall determine the amount of claim due to a creditor under the Insolvency and
Bankruptcy Code during the Corporate Insolvency Resolution Process (CIRP)?
(a) Committee of creditors
(b) Resolution professional
(c) Adjudicating Authority
(d) Corporate debtor
14. Can an Adjudicating Authority order the liquidation of a corporate debtor even after
approving the resolution plan:
(a) Yes, if the resolution plan is contravened.
(b) The Adjudicating Authority may order the liquidation of a corporate debtor even after
approving the resolution plan on receiving an application from a third party who is
unaffected by such liquidation
(c) Yes, the Adjudicating Authority may order for the liquidation of a corporate debtor if
the committee of creditor does not approve the resolution plan after its approval by
the Adjudicating Authority
(d) No, the Adjudicating Authority cannot order the liquidation of a corporate debtor after
approving the resolution plan.
15. What is the periodicity of submission of report by company liquidator with respect to the
progress of winding up of the company to the Tribunal:
(a) Monthly
(b) Bi-monthly
(c) Quarterly
(d) Half yearly
16. Mr. X, a resident of India planned a tour of 15 days to visit Paris and to meet his niece
living there. While returning to India, Mr. X was carrying with him INR 30,000. Her niece
told him that limit is marked on bringing Indian currency notes at the time of return to India.
Identify the correct limit :
(a) INR 2000
(b) INR 5000
(c) INR 10,000
(d) INR 25,000

17. In the case of financing of a financial asset by more than one secured creditors, there
secured creditor shall be entitled to exercise any of the rights conferred on him is agreed
upon by the secured creditors representing ---------in order to make such an action binding
on all the secured creditors.
(a) Less 60% in value of the amount outstanding as on a record date
(b) Not less than 60% in value of the amount outstanding as on a record date
(c) At least 75% in value of the amount outstanding as on a record date
(d) Not less than 75% in value of the amount outstanding as on a record date
Descriptive Questions [Questions 18- 26]
18. Dharma Ltd. in the light of prospective developments in the infrastructure of company
decided to have borrowing on long term basis from financial Institutions. In the Board
Meeting held on 15th September, 2020, following proposal of borrowing 2, 00,00,000 from
Financial institutions on long-term basis was also presented for consideration. As per the
given information, in the light of relevant provisions of the Companies Act, 2013, examine
the eligibility of the amount up to which the Board can borrow from Financial institution and
the state on the validity of the said proposal.
Following were the Balance Sheets of last three years of Dharma Ltd., containing following
facts and figure of financial information :
Particulars As at As at As at
31.03.2018 31.03.2019 31.03.2020
` ` `
Paid up capital 60,00,000 60,00,000 85,00,000
General Reserve 50,00,000 52,50,000 60,00,000
Credit Balance in Profit & Loss Account 6,00,000 8,50,000 20,00,000
Securities Premium 3,00,000 3,00,000 3,00,000
Secured Loans 20,00,000 25,00,000 40,00,000
19. Mr. Shariff who was a Key Managerial Personnel (Manager) of XYZ Ltd. retired on
12th May 2020. An examination of the final accounts of the company for the year ended on
31st March 2020, the Registrar of Companies found some serious irregularities in writing
off of the huge amounts of bad debts and no satisfactory explanation was provided for the
same from the company. In such a situation the Registrar of Companies wants some
explanation from the company and Mr. Shariff. In the light of the Companies Act, 2013,
examine the situation and advice on the act of Registrar seeking explanation from
Mr. Shariff.

20. Mr. M, a member of XYZ Ltd. filed an application before the Tribunal complaining of
oppression and mismanagement w.r.t. an agreement entered by XYZ Ltd. effecting the
interest of the company. Vide order passed by the Tribunal under section 242 of the
Companies Act, 2013, terminated the said agreement. The agreement was entered by
Mr. H and Mr. G who was managing director and the executive director of the XYZ Ltd.
Mr. Rasik, with whom the XYZ Ltd entered the agreement, filed a petition claimin g the loss
caused due to termination of the said agreement. Also state the legal position of Mr. H and
Mr. G holding their place of office in the said situation. Examine the given facts and address
the issues in terms of the relevant provisions of Companies Act, 2013.
21. Mr. Ingenious, who is registered as an Intermediary fails to enter into an agreement with
his client and hence penalised by SEBI under the SEBI Act 1992. Advise Mr. Ingenious
as to what remedies are available to him against the order of SEBI.
22. A foreign tourist comes to India and he purchases a antiques from a shop. He would like
to pay US$ 30 in cash to the shopkeeper. Comment in the light of the FEMA, whether
shopkeeper is permitted to accept foreign currency?
23. Comment upon nature of offence committed under the Prevention of Money Launderi ng
Act? In the case, a spouse sold their property in 175 lakh to Mr. Y. In lieu of the sale, they
obtained amount 100 lakh through RTGS in his account and rest amount of 75 lakh in
cash which he transferred to wife’s offshore bank account . Examine the liability of the
spouse in the given case in the light of the PMLA, 2002. Also state whether they will be
liable to be released on bail.
24. X, a registered association transfers the Foreign Contribution received by it to another
person? Comment upon the validity of said act of X in terms of Foreign Contribution
(Regulation) Act, 2010?
25. Anil, who is a Chartered Accountant with his own independent practice, is the arbitrator in
an arbitration between Tata Tea Inc., and Suzuki Ltd.
scenarios I - Prior to starting his practice, Anil had worked for five years with Tata Tea Inc.
II – During the proceedings before the arbitral tribunal, Anil would allow Tata Tea to take
many liberties, for instance taking as much time for making oral arguments, cross
examining the witnesses, for submitting documents, etc. Also the proceedings were
adjourned (postponed) whenever so requested by Tata Tea. When Suzuki Motors wanted
to take extra time they were not allowed. In few instances when they were permitted, they
are asked to pay heavy cost to Tata Tea for delaying the proceedings..
Suziki Ltd. on the basis of above scenarios wanted to challenge the appointment of
Mr. Anil. State whether the appointment of Mr. Anil as an arbitrator can be challenged?

26. X Inc Ltd is a holding company of Y Infrastructure Ltd. Insolvency resolution process was
initiated against the X Inc Ltd on 15 th December 2020. In the mean time another financial
creditor initiated corporate insolvency resolution process against Y Infrastructure Ltd. Later
X Inc Ltd filed an appeal contending that resolution process against Y Infrastructure Ltd.
should not continue till corporate insolvency resolution process is decided in the case of X
Inc Ltd. on the basis of initiation of moratorium. Also the Resolution plan of X Inc Ltd.
approved by CoC, was still pending before the Adjudicating authority for its approval. In
the light of given situation, examine whether corporate insolvency resolution process
initiated against the X Inc Ltd., can bar the corporate insolvency resolution process initiated
against the Y Infrastructure Ltd.?
SUGGESTED ANSWER
DIVISION A: ANSWERS TO CASE SCENARIO BASED MCQS/ INDEPENDENT MULTIPLE

CHOICE QUESTIONS
Answers Keys to MCQs
Question No. Answer
1. (a)
2. (c)
3. (c)
4. (d)
5. (b)
6. (a)
7. (c)
8. (c)
9. (b)
10. (c)
11. (c)
12. (c)
13. (b)
14. (a)
15. (c)
16. (d)
17. (b)

DIVISION B: Descriptive Answers [Questions 18- 26]

18. Borrowing from Financial Institutions: As per Section 180(1)(c) of the Companies Act,
2013, the Board of Directors of a company, without obtaining the approval of shareholders
in a general meeting, can borrow money including moneys already borrowed up to an
amount which does not exceed the aggregate of paid up capital of the company, free
reserves and securities premium. Such borrowing shall not include temporary loans
obtained from the company’s bankers in the ordinary course of business. Here, free
reserves do not include the reserves set apart for specific purpose.
Since the decision to borrow is taken in a meeting held on 15th September, 2020, the
figures relevant for this purpose are the figures as per the Balance Sheet as at 31.03.2020.
According to the above provisions, the eligibility of Board of Directors of Dharma Ltd.to
borrow up to an amount is calculated as follows:
Particulars `
Paid up Capital 85,00,000
General Reserve (being free reserve) 60,00,000
Credit Balance in Profit & Loss Account (to be treated as free 20,00,000
reserve)
Securities Premium 3,00,000
Aggregate of paid-up capital, free reserves and securities premium 1,68,00,000
Total borrowing power of the Board of Directors of the company, i.e,
100% of the aggregate of paid-up capital, free reserves and 1,68,00,000
securities premium
Less: Amount already borrowed as secured loans 40,00,000
Amount up to which the Board of Directors can further borrow 1,28,00,000
Dharma Ltd. is entitled to borrow `1,28,00,000 through board of directors. As in the given
case proposal of borrowing was Rs, 2,00, 00, 000 which is more than eligibility to borrow ,
therefore, Dharma Ltd, have to seek approval of shareholders in general meeting. As the
proposal of borrowing ` 2,00,00,000 from Financial institutions on long-term basis was
presented for consideration in Board Meeting without approval of shareholders i n general
meeting, therefore said proposal is invalid.
19. As per the provisions of Section 206(2) of the Companies Act, 2013, the Registrar can call
for any information or explanation or any other further documents related to the company
from the company or any officer if the company, which he thinks, is necessary for deciding
any matter of the company. Proviso to Section 206(2) provides that, where such
information or explanation relates to any past period, the officers who had been in the
employment of the company for such period, if so called upon by the Registrar through a
notice served on him, in writing, shall also furnish such information or explanation to the
best of their knowledge. So, in the given case Mr. Shariff, the ex-manager of the company

can be called upon for such information/explanation which was related to their period of
service.
20. As per section 243 of the Companies Act, 2013 , where an order made under section 242
terminates, sets aside or modifies an agreement which was entered by the company,
were in a manner prejudicial to the interests of the company,—
(a) such order shall not give rise to any claims whatever 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 managing director or other director or manager whose agreement is so terminated
or set aside shall, for a period of five 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:
Accordingly, Mr. Rasik, with whom the XYZ Ltd entered the agreement, filed a petition
claiming the loss caused due to termination of the said agreement, is not viable. Further,
Mr. H and Mr. G, managing director and the executive director of the XYZ Ltd. who entered
agreement with Mr. Rasik which was ordered to be terminated by the Tribunal, shall not
act as the managing director or other director or manager of the company, for a period of
five years from the date of the order terminating or setting aside the agreement, without
the leave of the Tribunal.
21. Remedies against SEBI order: Section 15B of the Securities and Exchange Board of
India Act, 1992 lays down that if any person, who is registered as an intermediary and is
required under this Act or any rules or regulations made there under, to en ter into an
agreement with his client, fails to enter into such agreement, he shall be liable to a penalty
of one lakh rupees for each day during which such failure continues or one crore rupees,
whichever is less. Mr. Ingenious has been penalised under the above mentioned provision.
Two remedies are available to Mr. Ingenious in this matter:-
(i) Appeal to the Securities Appellate Tribunal: Section 15T of the SEBI Act, 1992
states that any person aggrieved,—
(a) by an order of the Board made, on and after the commencement of the Securities
Laws (Second Amendment) Act, 1999, under this Act, or the rules or regulations
made thereunder; or
(b) by an order made by an adjudicating officer under this Act; or
(c) by an order of the Insurance Regulatory and Development Authority or the
Pension Fund Regulatory and Development Authority, may prefer an appeal to
a Securities Appellate Tribunal having jurisdiction in the matter.
Every appeal shall be filed within a period of forty-five days from the date on which a
copy of the order made by the Board or the Adjudicating Officer or the Insurance
Regulatory and Development Authority or the Pension Fund Regulatory and

Development Authority, as the case may be, is received by him and it shall be in such
form and be accompanied by such fee as may be prescribed :
Provided that the Securities Appellate Tribunal may entertain an appeal after the
expiry of the said period of forty-five days if it is satisfied that there was sufficient
cause for not filing it within that period.
On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may,
after giving the parties to the appeal, an opportunity of being heard, pass such orders
thereon as it thinks fit, confirming, modifying or setting aside the order a ppealed
against.
The Securities Appellate Tribunal shall send a copy of every order made by it to the
Board, or the Insurance Regulatory and Development Authority or the Pension Fund
Regulatory and Development Authority, as the case may be the parties to the appeal
and to the concerned Adjudicating Officer.
The appeal filed before the Securities Appellate Tribunal under sub -section (1) shall
be dealt with by it as expeditiously as possible and endeavor shall be made by it to
dispose of the appeal finally within six months from the date of receipt of the appeal.
(ii) Appeal to the Supreme Court: Section 15Z of the SEBI Act, 1992 provides that any
person aggrieved by any decision or order of the Securities Appellate Tribunal may
file an appeal to the Supreme Court within 60 days from the date of communication
of the decision or order to him on any question of fact or law arising out of such order.
The Supreme Court may, if it is satisfied that the appellant was prevented by sufficient
cause from filing the appeal within the said period, allow it to be filed within a further
period not exceeding 60 days.
22. As per section 3 of the FEMA, save as otherwise provided in this Act, rules or regulations
made thereunder, or with the general or special permission of the Reserve Bank, no person
shall receive otherwise than through an authorised person, any payment by order or on
behalf of any person resident outside India in any manner.
Where any person in, or resident in, India receives any payment by order or on behalf of
any person resident outside India through any other person (including an authorised
person) without a corresponding inward remittance from any place outside India, then ,
such person shall be deemed to have received such payment otherwise than through an
authorised person;
Here in the given case, the foreign tourist wanted to pay foreign currency in cash on
purchase of antiques to shopkeeper which as per section 3, is not permissible to any
person to receive any payment by order or on behalf of any person resident outside India
in any manner except received through an authorised person. Therefore, the Shopkeeper
cannot accept cash as it will be a receipt otherwise than through Authorised Person except
where the shopkeeper have taken a money changers license to accept foreign currency.

23. Nature of offence committed under the Act: Section 45 of the PMLA, 2002, provides
that the offences under the Act shall be cognizable and non-bailable. Person accused of
an offence under this Act shall not be released on bail or on his own bond unless-
(i) The Public Prosecutor has been given an opportunity to oppose the application for
such release, and
(ii) Where the Public Prosecutor opposes the application, the court is satisfied that there
are reasonable grounds for believing that he is not guilty of such offence and that he
is not likely to commit any offence while on bail.
Exceptions: In case of any person who is under the age of 16 years or in case of a woman
or in case of a sick or infirm or is accused either on his own or along with other co-accused
of money-laundering a sum of less than one crore rupees, may be released on bail, if the
Special Court so directs.
As per the said section the spouse, are liable for commission of an offence of money
laundering by transferring an unaccounted money obtained through sale of their property
to an offshore bank account of his wife with an intent to evade tax. As the husband and his
wife, i.e., the spouse jointly acted in the commission of the act of money-laundering of a
sum less than one crore rupees, so both the Husband and wife, are falling under the
exception. Therefore, they shall be released on bail, if the Special Court so directs.
24. In the light of section 7 of the FCRA, 2010, no person who –
o is registered and granted a certificate or has obtained prior permission under this Act;
and
o receives any foreign contribution,
shall transfer such foreign contribution to any other person.
According to the section, the act of X, an association of transferring the Foreign
Contribution to another person, is not valid.
25. As per section 12 of the Arbitration and Conciliation Act, 1996, when a person is
approached in connection with his possible appointment as an arbitrator, he shall disclose
in writing any circumstances-
a. such as existence either direct or indirect of any past or present relationship with or
interest in any of the parties or in relation to the subject matter in dispute, whether
financial, business, professional or other kind, which is likely to give rise to justifiable
doubts as to his independence or impartiality; and

b. which are likely to affect his ability to devote sufficient time to the arbitration and in
particular his ability to complete the entire arbitration within a period of twelve months.
In the first case Anil had worked for five years with Tata Tea Inc. In this situation the law
would deem Anil to be lacking independence.
In second case, arbitrator by his / her behaviour gives an impression that he is favouring
one party over the other.
An arbitrator may be challenged only if circumstances exist that give rise to justifiable
doubts as to his independence or impartiality. In the given scenarios, it would be deemed
that Anil to be lacking independence and whereas in the second case it clearly reflects that
arbitral tribunal favours and is partial towards Tata Tea, and therefore lacks impartiality.
Yes, appointment of Mr. Anil as an arbitrator can be challenged.
26. In the given case, both the X Inc Ltd. and Y Infrastructure Ltd. in the eyes o f law are
separate entity. Further section 14 of IBC, 2016 which deals with moratorium, no where
prohibits initiation of corporate insolvency resolution process on the subsidiary company
or its holding company. Further also that a separate CIRP has been in itiated against
another corporate debtor by another financial creditor, which is altogether separate and
have no connection with the CIRP initiated against X Inc Ltd. or Y Infrastructure Ltd.
Therefore, in the given case, corporate insolvency resolution process initiated against the
X Inc Ltd, which is a holding company, cannot bar the corporate insolvency resolution
process initiated against the Y Infrastructure Ltd which is its subsidiary or vice versa.

PART I: RELEVANT AMENDMENTS APPLICABLE FOR NOVEMBER 2020 EXAMINATION

For November 2020 examinations for Paper 4: Corporate and Economic Laws, the significant
amendments made in the respective subject for the period 1 st May 2019 to 30th April, 2020 are
relevant and applicable.
Students are advised to refer study material of August 2019 edition with these applicable
amendments.
Relevant amendments: Here are given relevant amendments arranged chapter wise.
PART I: CORPORATE LAWS
SECTION A: COMPANY LAW
Companies (Amendment) Act, 2019: The Companies Act, 2013 have been continuously
amended by the Government vide enforcement of various amendment Act, namely Companies
(Amendment) Act, 2017, the Companies (Amendment) Ordinance, 2018, the Companies
(Amendment) Ordinance Act, 2019 and the Companies (Amendment) Second Ordinance, 2019
and Companies (Amendment) Act, 2019.
On July 31, 2019, the Ministry of Corporate Affairs introduced the Companies (Amendment) Act,
2019. The Amendment considers changes brought in by the Companies (Amendment)
Ordinance, 2018, the Companies (Amendment) Ordinance Act, 2019 and the Companies
(Amendment) Second Ordinance, 2019 to further amend the Companies Act, 2013.
The Amendment has reinforced the 2018 Ordinance and 2019 Ordinances, and all provisions to
have come into force from November 2, 2018 except some sections which have come into force
on August 15, 2019.
CHAPTER 1: APPOINTMENT AND QUALIFICATION OF DIRECTORS
I. The Companies (Appointment and Qualification of Directors) Fifth Amendment
Rules, 2019 notified by MCA vide notification no. G.S.R. 804(E), dated 22nd October, 2019
w.e.f. 1st day of December, 2019. This amended rule is further to amend the Companies
(Appointment and Qualification of Directors) Rules, 2014.
For Rule 6, the following rule shall be substituted, namely: –
“6. Compliances required by a person eligible and willing to be appointed as an
independent director.─
(1) Every individual –
(a) who has been appointed as an independent director in a company, on the
date of commencement of the Companies (Appointment and Qualification
of Directors) Fifth Amendment Rules, 2019, shall within a period of three
months from such commencement; or

(b) who intends to get appointed as an independent director in a company after

such commencement, shall before such appointment, apply online to the
institute for inclusion of his name in the data bank for a period of one year
or five years or for his life-time, and from time to time take steps as
specified in sub-rule (2), till he continues to hold the office of an
independent director in any company:
Provided that any individual, including an individual not having DIN, may
voluntarily apply to the institute for inclusion of his name in the data bank.
(2) Every individual whose name has been so included in the data bank shall file an
application for renewal for a further period of one year or five years or for his
life-time, within a period of thirty days from the date of expiry of the period upto
which the name of the individual was applied for inclusion in the data bank,
failing which, the name of such individual shall stand removed from the data
bank of the institute:
Provided that no application for renewal shall be filed by an individual who has
paid life-time fees for inclusion of his name in the data bank.
(3) Every independent director shall submit a declaration of compliance of sub-rule
(1) and sub-rule (2) to the Board, each time he submits the declaration required
under sub-section (7) of section 149 of the Act.
(4) Every individual whose name is so included in the data bank under sub-rule (1)
shall pass an online proficiency self-assessment test conducted by the institute
within a period of one year from the date of inclusion of his name in the data
bank, failing which, his name shall stand removed from the databank of the
institute.
Provided that the individual who has served for a period of not less than ten
years as on the date of inclusion of his name in the databank as director or key
managerial personnel in a listed public company or in an unlisted public
company having a paid-up share capital of rupees ten crore or more shall not be
required to pass the online proficiency self-assessment test.
Provided further that for the purpose of calculation of the period of ten years
referred to in the first proviso, any period during which an individual was acting
as a director or as a key managerial personnel in two or more companies at the
same time shall be counted only once.
Explanation: For the purposes of this rule,-
(a) the expression “institute” means the ‘Indian Institute of Corporate Affairs at
Manesar’ notified under sub-section (1) of section 150 of the Companies
Act, 2013 as the institute for the creation and maintenance of data bank of
Independent Directors;

(b) an individual who has obtained a score of not less than sixty percent. in
aggregate in the online proficiency self-assessment test shall be deemed
to have passed such test;
(c) there shall be no limit on the number of attempts an individual may take for
passing the online proficiency self-assessment test.”
II. The Companies (Appointment and Qualification of Directors) Amendment Rules,
2020
MCA vide Notification G.S.R. 145(E) dated 28th February, 2020 notified the Companies
(Appointment and Qualification of Directors) Amendment Rules, 2020 further to amend
the Companies (Appointment and Qualification of Directors) Rules, 2014 w.e.f. the date of
their publication in the Official Gazette.
1In the Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 6:
Sl. No. Previous Law Amended law
1. in sub-rule (1), in clause (a), for the the words “five months” shall be
words “three months” substituted;
2. in sub-rule (4),- Following proviso shall be substituted-
For the first Proviso- “Provided that an individual shall not be
Provided that the individual who required to pass the online proficiency
has served for a period of not less self-assessment test, when he has
than ten years as on the date of served as a director or key managerial
inclusion of his name in the personnel, for a total period of not less
databank as director or key than ten years, as on the date of
managerial personnel in a listed inclusion of his name in the databank,
public company or in an unlisted in one or more of the following, namely:-
public company having a paid-up (a) listed public company; or
share capital of rupees ten crore or
more shall not be required to pass (b) unlisted public company having a
the online proficiency self- paid-up share capital of rupees ten
assessment test. crore or more; or
(c) body corporate listed on a
recognized stock exchange:”
1Vide notification no. G.S.R. 804(E), dated 22nd October, 2019 w.e.f. 1st day of December, 2019, Rule 6 have
been amended. The amended Rule 6 is given in Point no. I., the above para. This Rule have been further
amended by the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2020,
w.e.f. 29-3-2020 and Companies (Appointment and Qualification of Directors) Amendment Rules, 2020, w.e.f.
8-2-2020.

3. in sub-rule (4),-
in the second proviso, for the word the words “companies or bodies
“companies”, corporate” shall be substituted.
III. The Companies (Appointment and Qualification of Directors) Second Amendment
Rules, 2020
Vide Notification G.S.R. 268 (E), dated 29th April, 2020, the Companies (Appointment and
Qualification of Directors) Second Amendment Rules, 2020 came into enforcement from
the date of their publication in the Official Gazette further to amend the Companies
1. In rule 6 in sub-rule (1), in clause (a), for the words “seven months” shall
the words “five months” be substituted.
CHAPTER 2: APPOINTMENT AND REMUNARATION OF MANAGERIAL PERSONNEL

The Companies (Appointment and Remuneration of Managerial Personnel) Amendment
Rules, 2020
Vide Notification G.S.R. 13(E) dated 3rd January, 2020, the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 has been amended with the above
mentioned rules. It shall be applicable in respect of financial years commencing on or after 1st
April, 2020.
1. According to Rule 8A, a company the following shall be substituted as under:-
other than a company covered under “8A. Every private company which has a
Rule 8, which has a paid up share paid up share capital of ten crore rupees or
capital of ` 5 crore or more shall have more shall have a whole-time company
a whole-time company secretary. secretary.”
2. in rule 9, in sub-rule (1), in rule 9, in sub-rule (1),
(i) after clause (b), at the end, (i) the word “or” shall be inserted.
(ii) No clause (c) was there (ii) after clause (b), the following clause (c)
shall be inserted, namely:-
(iii) No Explanation earlier
“(c) every company having
outstanding loans or borrowings
from banks or public financial
institutions of one hundred crore
rupees or more.”
(iii) following Explanation inserted,
namely:-

“Explanation:- For the purposes of this sub-

rule, it is hereby clarified that the paid up
share capital, turnover, or outstanding
loans or borrowings as the case may be,
existing on the last date of latest audited
financial statement shall be taken into
account.”
CHAPTER 3: MEETING OF BOARD AND ITS POWERS
I. The Companies (Meetings of Board and its Powers) Second Amendment Rules, 2019
Vide Notification G.S.R. 857(E) dated 18th November, 2019, the Central Government
hereby makes the following rules further to amend the Companies (Meetings of Board and
its Powers) Rules, 2014 to be enforced from the date of their publication in the Official
Gazette.
Sl. Previous Law Amended law
No.
1. In rule 15, in sub-rule (3), in clause (a),- shall be omitted
(a) in sub-clauses (i) and (ii), the words “or
rupees one hundred crore, whichever is
lower”
2. In rule 15, in sub-rule (3), in clause (a),- the words “amounting to ten
(a) in sub-clause (iii), for the words “amounting per cent or more of the
to ten per cent or more of the net worth of the turnover of the company”
company or ten per cent or more of turnover shall be substituted
of the company or rupees one hundred crore,
whichever is lower”
3. In rule 15, in sub-rule (3), in clause (a),- shall be omitted
(a) in sub-clause (iv), the words “or rupees fifty
crore, whichever is lower”
II. The Companies (Meetings of Board and its Powers) Amendment Rules, 2020
Vide notification G.S.R. 186(E) dated 19th March, 2020, the Central Government hereby
makes the amended the Companies (Meetings of Board and its Powers) Rules, 2014
through the enforcement of the Companies (Meetings of Board and its Powers)
Amendment Rules, 2020 from the date of their publication in the Official Gazette.
In the Companies (Meetings of Board and its Powers) Rules, 2014, rule 4 shall be
renumbered as sub-rule (1) thereof and after sub-rule (1) as so renumbered, the following
sub-rule shall be inserted, namely:-

“(2) For the period beginning from the commencement of the Companies (Meetings of
Board and its Powers) Amendment Rules, 2020 and ending on the 30th June, 2020, the
meetings on matters referred to in sub-rule (1) may be held through video conferencing or
other audio visual means in accordance with rule 3.”
III. Further exemptions to Government company: Vide Notification G.S.R. 151(E) dated
2nd March, 2020, the Central Government, in the public interest, hereby makes the
following further amendments in the notification of the Government of India, in the Ministry
of Corporate Affairs, number G.S.R. 463(E), dated 5th June, 2015 which dealt with the
exemptions to Government Companies:
1. Chapter XII, first and second Chapter XII, first and second proviso to
proviso to sub-section (1) of sub-section (1) of section 188, Shall not
section 188 Shall not apply to – apply to –
(a) a Government company in (a) a Government company in respect
respect of contracts or of contracts or arrangements
arrangements entered into entered into by it with any other
by it with any other Government company, or with
Government Company Central Government or any State
(b) a Government company, Government or any combination
other than a listed company, thereof;
in respect of contracts or (b) a Government company, other
arrangements other than than a listed company, in respect
those referred to in clause of contracts or arrangements other
(a), in case such company than those referred to in clause
obtains approval of the (a), in case such company obtains
Ministry or Department of the approval of the Ministry or
Central Government which is Department of the Central
administratively in charge of Government which is
the company, or, as the case administratively in charge of the
may be, the State company, or, as the case may be,
Government before entering the State Government before
into such contract or entering into such contract or
arrangement. arrangement.”
CHAPTER 4: INSPECTION, INQUIRY AND INVESTIGATION
Amendments through the Companies (Amendment) Act, 2019
Relevant Earlier law Amendment in law Date of
Section Enforcement
Amendment of (a) in sub-section (8), for (a) the words “If any 15th August,
Section 212 the words “If the officer not below 2019

Director, Additional the rank of

Director or Assistant Assistant Director”
Director” shall be substituted;
(b) in sub-section (9), for (b) the words, brackets

the portion beginning and figure “The
with the words “The officer authorised
Director” and ending under sub-section
with the word, (8) shall,
brackets and figure immediately after
“sub-section (8)”, arrest of such
person under such
sub-section” shall
be substituted;
(c) in sub-section (10),—
(i) for the words
“Judicial (i) the words
Magistrate”, “Special Court
or Judicial
Magistrate”
(ii) in the proviso, for shall be
the words substituted;
“Magistrate’s
(ii) “Special Court
court”,
or Magistrate’s
court” shall be
substituted;
(d) Earlier not there (d) New sub-section
inserted after sub-
section 14, namely:—
“(14A) Where the report
under sub-section (11) or
sub-section (12) states
that fraud has taken place
in a company and due to
such fraud any director,
key managerial personnel,
other officer of the
company or any other
person or entity, has taken
undue advantage or
benefit, whether in the
form of any asset, property
or cash or in any other

manner, the Central

Government may file an
application before the
Tribunal for appropriate
orders with regard to
disgorgement of such
asset, property or cash
and also for holding such
director, key managerial
personnel, other officer or
any other person liable
personally without any
limitation of liability.”
CHAPTER 5: COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS
I. Clarification under Section 232(6) of the Companies Act, 2013
A clarification has been issued by the MCA on 21st August, 2019 regarding section 232(6).
According to the clarification,
(a) The provision of section 232(6) of the Act enables the companies in question to
choose and state in the scheme an 'appointed date'. This date may be a specific
calendar date or may be tied to the occurrence of an event such as grant of license
by a competent authority or fulfilment of any preconditions agreed upon by the parties,
or meeting any other requirement as agreed upon between the parties, etc., which
are relevant to the scheme.
(b) The 'appointed date' identified under the scheme shall also be deemed to be the
'acquisition date' and date of transfer of control for the purpose of conforming to
accounting standards (including Ind-AS 103 Business Combinations).
(c) Where the 'appointed date' is chosen as a specific calendar date, it may precede the
date of filing of the application for scheme of merger/amalgamation in NCLT.
However, if the 'appointed date' is significantly ante-dated beyond a year from the
date of filing, the justification for the same would have to be specifically brought out
in the scheme and it should not be against public interest.
(d) The scheme may identify the 'appointed date' based on the occurrence of a trigger
event which is key to the proposed scheme and agreed upon by the parties to the
scheme. This event would have to be indicated in the scheme itself upon occurrence
of which the scheme would become effective. However, in case of such event based
date being a date subsequent to the date of filing the order with the Registrar under
section 232(5), the company shall file an intimation of the same with the Registrar
within 30 days of such scheme coming into force.

II. Enforcement of section 230(11) and 230(12): Government of India through Ministry of
Corporate Affairs vide notification dated 3rd February, 2020, appoints 3rd day of
February, 2020 as the date on which the provisions of sub-sections (11) and (12) of section
230 of the said Act shall come into force.
CHAPTER 6: PREVENTION OF OPPRESSION AND MISMANAGEMENT
1. Amendments through the Companies (Amendment) Act, 2019
Relevant Earlier Law Amendment Date of
Section Enforcement
Amendment (a) No proviso (a) in sub-section (2), the 15th August,
of Section was there to following proviso is inserted, 2019
241 sub-section namely:—
(2) “Provided that the
applications under this sub-
section, in respect of such
company or class of
companies, as may be
prescribed, shall be made
before the Principal Bench of
the Tribunal which shall be
dealt with by such Bench.”
(b) Not there (b) New insertion of sub-sections
earlier (3),(4) & (5) after sub-section
(2), namely:—
“(3) Where in the opinion of
the Central Government there
exist circumstances
suggesting that––
(a) any person concerned in
the conduct and management
of the affairs of a company is
or has been in connection
therewith guilty of fraud,
misfeasance, persistent
negligence or default in
carrying out his obligations
and functions under the law or
of breach of trust;
(b) the business of a
company is not or has not
been conducted and
managed by such person in

accordance with sound

business principles or prudent
commercial practices;
(c) a company is or has
been conducted and
managed by such person in a
manner which is likely to
cause, or has caused, serious
injury or damage to the
interest of the trade, industry
or business to which such
company pertains; or
(d) the business of a
company is or has been
conducted and managed by
such person with intent to
defraud its creditors,
members or any other person
or otherwise for a fraudulent
or unlawful purpose or in a
manner prejudicial to public
interest,
the Central Government may
initiate a case against such
person and refer the same to
the Tribunal with a request
that the Tribunal may inquire
into the case and record a
decision as to whether or not
such person is a fit and proper
person to hold the office of
director or any other office
connected with the conduct
and management of any
company.
(4) The person against whom a
case is referred to the
Tribunal under sub-section
(3), shall be joined as a
respondent to the
application.

(5) Every application under sub-

section (3)––
(a) shall contain a concise
statement of such circumstances
and materials as the Central
Government may consider
necessary for the purposes of the
inquiry; and
(b) shall be signed and verified in
the manner laid down in the Code
of Civil Procedure, 1908, for the
signature and verification of a
plaint in a suit by the Central
Government.”
Amendment Not there earlier New insertion sub-section 4A 15th August,
of Section After sub-section (4), , namely:–– 2019
242 “(4A) At the conclusion of the
hearing of the case in respect of
sub-section (3) of section 241, the
Tribunal shall record its decision
stating therein specifically as to
whether or not the respondent is a
fit and proper person to hold the
office of director or any other office
connected with the conduct and
management of any company.”.
Amendment (a) Earlier not (a) new insertion of sub-section 15th August,
of Section there 1A & 1B after sub-section (1), 2019
243 the following sub-sections
shall be inserted, namely:—
“(1A) The person who is not a
fit and proper person
pursuant to sub-section (4A)
of section 242 shall not hold
the office of a director or any
other office connected with
the conduct and management
of the affairs of any company
for a period of five years from
the date of the said decision:
Provided that the Central
Government may, with the

leave of the Tribunal, permit

such person to hold any such
office before the expiry of the
said period of five years.
(1B) Notwithstanding
anything contained in any
other provision of this Act, or
any other law for the time
being in force, or any
contract, memorandum or
articles, on the removal of a
person from the office of a
director or any other office
connected with the conduct
and management of the
affairs of the company, that
person shall not be entitled to,
or be paid, any compensation
for the loss or termination of
office.”;
(b) the words, brackets, figure
(b) in sub-
and letter “or sub-section
section (2),
(1A)” shall be inserted.
after the
word,
brackets and
figure “sub-
section (1)”,
2. Enforcement of the National Company Law Tribunal (Second Amendment) Rules,

2019 vide Notification G.S.R. 351(E) dated 8th May, 2019
The Central Government makes the National Company Law Tribunal (Second Amendment)
Rules, 2019 to amend the National Company Law Tribunal Rules, 2016.
In National Company Law Tribunal Rules, 2016, in rule 84 which dealt with “Right to apply
under section 245”, after sub-rule (2), the following sub-rules (3) & (4) shall be inserted,
namely: –
“(3) In case of a company having a share capital, the requisite number of member or
members to file an application under sub-section (1) of section 245 shall be -
(i) (a) at least five per cent. of the total number of members of the company; or
(b) one hundred members of the company,
whichever is less; or

(ii) (a) member or members holding not less than five per cent. of the issued share
capital of the company, in case of an unlisted company;
(b) member or members holding not less than two per cent. of the issued share
capital of the company, in case of a listed company.
(4) The requisite number of depositor or depositors to file an application under sub -
section (1) of section 245 shall be -
(i) (a) at least five per cent. of the total number of depositors of the company; or
(b) one hundred depositors of the company,
(ii) depositor or depositors to whom the company owes five per cent. of total
deposits of the company.”
CHAPTER 7: WINDING UP
Relevant Earlier Law Amendment Date of
sections Enforcement
Amendment In sub-section (3), for the the words “of that section” 15th August,
of Section words, brackets and letter shall be substituted. 2019
272 “or clause (e) of that sub-
section”,
CHAPTER 10: MISCELLANEOUS PROVISIONS

I. Amendment in Section 406: Section 406 has been substituted by the Companies
(Amendment) Act, 2017, with effect from 15th August, 2019.
Section 406: (1) In this section, "Nidhi" or "Mutual Benefit Society" means a company
which the Central Government may, by notification in the Official Gazette, declare to be a
Nidhi or Mutual Benefit Society, as the case may be.
(2) The Central Government may, by notification in the Official Gazette, direct that any
of the provisions of this Act specified in the notification—
(a) shall not apply to any Nidhi or Mutual Benefit Society; or
(b) shall apply to any Nidhi or Mutual Benefit Society with such exceptions,
modifications and adaptations as may be specified in the notification.
(3) A copy of every notification proposed to be issued under sub-section (2), shall be laid
in draft before each House of Parliament, while it is in session, for a total period of
thirty days, and if, both Houses agree in disapproving the issue of notification or both
Houses agree in making any modification in the notification, the notification shall not

be issued or, as the case may be, shall be issued only in such modified form as may
be agreed upon by both the Houses.
(4) In reckoning any such period of thirty days as is referred to in sub-section (3), no
account shall be taken of any period during which the House referred to in sub-section
(3) is prorogued or adjourned for more than four consecutive days.
(5) The copies of every notification issued under this section shall, as soon as may be
after it has been issued, be laid before each House of Parliament.
II. Enforcement of the Nidhi (Amendment) Rules, 2019 via G.S.R. 467(E) dated
15th August, 2019
The Central Government makes the Nidhi (Amendment) Rules, 2019 to amend Nidhi Rules,
2014. In the Nidhi rules, 2014 (hereinafter referred to as “said rules”):
Sl. Nidhi rules, 2014 Amendment vide Nidhi (Amendment) Rules, 2019
No.
1. In rule 2, after clause Insertion of clause (d), namely:-
(c) “(d) every company declared as Nidhi or Mutual
Benefit Society under sub-section (1) of section 406 of
the Act”.
2. In rule 3, after clause Following clause (da) is inserted:-
(d) ‘(da) “Nidhi” means a company which has been
incorporated as a Nidhi with the object of cultivating
the habit of thrift and savings amongst its members,
receiving deposits from, and lending to, its members
only, for their mutual benefit, and which complies with
the rules made by the Central Government for
regulation of such class of companies.’
3. After rule 3 New rule 3A is inserted:-
“3A. Declaration of Nidhis.─ The Central Government,
on receipt of application (in Form NDH-4 along with
fee thereon) of a public company for declaring it as
Nidhi and on being satisfied that the company meets
the requirements under these rules, shall notify the
company as a Nidhi in the Official Gazette:
Provided that a Nidhi incorporated under the Act on or
after the commencement of the Nidhi (Amendment)
Rules, 2019 shall file Form NDH-4 within sixty days
from the date of expiry of:-
(a) one year from the date of its incorporation; or

(b) the period up to which extension of time has been

granted by the Regional Director under sub-rule
(3) of rule 5:
Provided further that nothing in the first proviso shall
prevent a Nidhi from filing Form NDH-4 before the
period referred therein:
Provided also that that in case a company does not
comply with the requirements of this rule, it shall not
be allowed to file Form No. SH-7 (Notice to Registrar
of any alteration of share capital) and Form PAS-3
(Return of Allotment).”
4. In rule 4 (i) in sub-rule (1), the words, “to be incorporated
under the Act” shall be omitted;
(ii) in sub-rule (5), the words “Company
incorporated as a” shall be omitted.
5. In rule 5
(i) in sub-rule (1), for (i) the words “from the date of its incorporation”
the words “from shall be substituted;
the
commencement
of these rules”,
(ii) the following proviso shall be inserted, namely:-
(ii) in sub-rule (3),
before the “Provided that the Regional Director may extend
Explanation, the period upto one year from the date of receipt
of application.”.
(iii) in sub-rule (4), (iii) the words, brackets and figures “and gets itself
after the words, declared under sub-section (1) of section
brackets and 406” shall be inserted.
figure
“contained in
sub-rule (1)”,
6. In rule 7, in sub-rule the words “fully paid up” shall be inserted.
(1), after the words
“shall issue”
7. In rule 12
(i) in sub-rule (1) (i) the following clause (ba) shall be inserted
after clause (b) namely:-

“(ba) The date of declaration or notification as

Nidhi”;
(ii) in sub-rule (2), in (ii) the words “Bench of the National Company
clause (a), for the Law Tribunal” shall be substituted.
words “Registrar
of Companies”,
8. In the said rules, in
rule 23, in sub-rule
(2),- (i) the words, “Central Government” shall be
(i) for the words substituted;
“concerned
Regional
Director”,
(ii) the words, “Central Government” shall be
(ii) for the words
substituted;
“such Regional
Director”,
(iii) in the proviso, for (iii) the words, “Central Government” shall be
the words substituted.
“Regional
Director”,
9. After rule 23 following rules 23A & 23B shall be inserted, namely:-
23A. Compliance with rule 3A by certain Nidhis:-
Every company referred to in clause (b) of rule 2 and
every Nidhi incorporated under the Act, before the
commencement of Nidhi (Amendment) Rules, 2019,
shall also get itself declared as such in accordance
with rule 3A within a period of one year from the date
of its incorporation or within a period of six months
from the date of commencement of Nidhi
(Amendment) Rules, 2019, whichever is later.
Provided that in case a company does not comply
with the requirements of this rule, it shall not be
allowed to file Form No. SH-7 (Notice to Registrar of
any alteration of share capital) and Form PAS-3
(Return of Allotment).
23B. Companies declared as Nidhis under
previous company law to file Form NDH-4:- Every
company referred in clause (a) of rule 2 shall file
Form NDH-4 along with fees as per the Companies

(Registration Offices and Fees) Rules, 2014 for

updating its status.
Provided that no fees shall be charged under this rule
for filing Form NDH-4, in case it is filed within six
month of the commencement of Nidhi (Amendment)
Rules, 2019.
Provided further that, in case a company does not
comply with the requirements of this rule, it shall not
be allowed to file Form No. SH-7 (Notice to Registrar
of any alteration of share capital) and Form PAS-3
(Return of Allotment).
III. The Nidhi (Second Amendment) Rules, 2020
Vide Notification G.S.R. 114(E) dated 14th February, 2020, to further amend the Nidhi
Rules, 2014, the Nidhi (Second Amendment) Rules, 2020 have come into force on the date
of their publication in the Official Gazette.
Sl. Nidhi rules, 2014 Amendment vide Nidhi (Amendment)
No. Rules, 2019
1. in rule 23A, for the words “six the words “nine months” shall be
months” substituted
IV. Ministry of Corporate Affairs issued Corrigendum vide notification G.S.R. 150 (E)
dated 2nd March, 2020
W.r.t. to the notification 2G.S.R. 114(E) of the Government of India, dated the 14th
February, 2020, in line 9, for “rule 23A” read “rule 23A and first proviso to rule 23B”.
SECTION B: SECURITIES LAWS
1. Amendments through Finance Act, 2018 w.e.f. 8.3.2019
1. In the Securities and Exchange Board of India Act, 1992 (hereafter in this Part
referred to as the principal Act), in section 11 which deals with the Functions of
Board,—
(i) after sub-section (4), the following sub-section shall be inserted, namely:—
“(4A) Without prejudice to the provisions contained in sub-sections (1), (2), (2A),
(3) and (4), section 11B and section 15-I, the Board may, by an order, for
reasons to be recorded in writing, levy penalty under sections 15A, 15B, 15C,
15D, 15E, 15EA, 15EB, 15F, 15G, 15H, 15HA and 15HB after holding an inquiry
in the prescribed manner.”;
2 Given above in Point no. III

(ii) in sub-section (5), after the words and figures “the Depositories Act, 1996”, the
words, figures, letters and brackets shall be inserted, namely:—
“or under a settlement made under section 15JB or section 23JA of the
Securities Contracts (Regulation) Act, 1956 or section 19-IA of the Depositories
Act, 1996,”.
2. In section 11B, of the principal Act,—
(a) in the marginal heading, after the word ‘‘directions’’, the words ‘‘and levy
penalty’’ shall be inserted;
(b) section 11B shall be numbered as sub-section (1) thereof and after subsection
(1) as so renumbered, the following sub-section shall be inserted, namely:—
“(2) Without prejudice to the provisions contained in sub-section (1), sub-section
(4A) of section 11 and section 15-I, the Board may, by an order, for reasons to
be recorded in writing, levy penalty under sections 15A, 15B, 15C, 15D, 15E,
15EA, 15EB, 15F, 15G, 15H, 15HA and 15HB after holding an inquiry in the
prescribed manner.’’.
3. In the principal Act, in section 15A which deals with the Penalty for failure to furnish
information, return, etc.,—
(i) in clause (a), after the words “fails to furnish the same”, the words “or who
furnishes or files false, incorrect or incomplete information, return, report, books
or other documents” shall be inserted;
(ii) in clause (b), after the words “furnish the same within the time specified therefor
in the regulations”, the words “or who furnishes or files false, incorrect or
incomplete information, return, report, books or other documents” shall be
inserted.
4. In the principal Act, after section 15E, the following sections shall be inserted,
namely:—
“15EA. Where any person fails to comply with the regulations made by the Board in
respect of alternative investment funds, infrastructure investment trusts and real
estate investment trusts or fails to comply with the directions issued by the Board,
such person shall be liable to penalty which shall not be less than one lakh rupees
but which may extend to one lakh rupees for each day during which such failure
continues subject to a maximum of one crore rupees or three times the amount of
gains made out of such failure, whichever is higher.
15EB. Where an investment adviser or a research analyst fails to comply with the
regulations made by the Board or directions issued by the Board, such investment
adviser or research analyst shall be liable to penalty which shall not be less than one
lakh rupees but which may extend to one lakh rupees for each day during which such
failure continues subject to a maximum of one crore rupees.”.

5. In the principal Act, in section 15F which deals with the Penalty for default in case of
stock brokers, in clause (b), for the words “he sponsors or carries on any such
collective investment scheme including mutual funds”, the words “such failure
continues” shall be substituted.
6. In the principal Act, in section 15-I which deals with the Power to adjudicate, in sub-
section (1),—
(i) after the figures and letter “15E,”, the figures and letters “15EA, 15EB,” shall be
inserted;
(ii) for the word “shall” the word “may” shall be substituted.
7. In the principal Act, in section 15J,—
(a) for the marginal heading, the following marginal heading shall be
substituted, namely:— “Factors to be taken into account while adjudging
quantum of penalty.”;
(b) after the words, figures and letter “section 15-I, the adjudicating officer”,
the figures, letters and words “15-I or section 11 or section 11B, the Board
or the adjudicating officer” shall be substituted;
(c) in the Explanation, the words “of an adjudicating officer” shall be omitted.
8. In the principal Act, in section 15JB which deals with the Settlement of administrative
and civil proceedings, after sub-section (4), the following sub-section shall be
inserted, namely:—
“(5) All settlement amounts, excluding the disgorgement amount and legal costs,
realised under this Act shall be credited to the Consolidated Fund of India.”.
9. In the principal Act, in section 24 which states about the Offences,—
(i) after the words “adjudicating officer” at both the places where they occur, the
words “or the Board” shall be inserted;
(ii) in sub-section (2), the words “of his” shall be omitted.
10. In the principal Act, in section 27 which deals with the Contravention by companies,—
(i) for the marginal heading, the following marginal heading shall be substituted,
namely:— “Contravention by companies.”;
(ii) in sub-section (1), for the words “an offence under this Act,”, the words “a
contravention of any of the provisions of this Act or any rule, regulation, direction
or order made thereunder” shall be substituted;
(iii) for the word “offence”, wherever it occurs, the word “contravention” shall be
substituted. 189. In the principal Act, in section 28A, in sub-section (1), for the
words “by the adjudicating officer”, the words “under this Act” shall be
substituted.

11. In the principal Act, after section 28A which deals with recovery of money, the
following section shall be inserted, namely:—
‘28B. (1) Where a person dies, his legal representative shall be liable to pay any sum
which the deceased would have been liable to pay, if he had not died, in the like
manner and to the same extent as the deceased. Provided that, in case of any penalty
payable under this Act, a legal representative shall be liable only in case the penalty
has been imposed before the death of the deceased person.
(2) For the purposes of sub-section (1),—
(a) any proceeding for disgorgement, refund or an action for recovery before
the Recovery Officer under this Act, except a proceeding for levy of penalty,
initiated against the deceased before his death, shall be deemed to have
been initiated against the legal representative, and may be continued
against the legal representative from the stage at which it stood on the date
of the death of the deceased and all the provisions of this Act shall apply
accordingly;
(b) any proceeding for disgorgement, refund or an action for recovery before
the Recovery Officer under this Act, except a proceeding for levy of penalty,
which could have been initiated against the deceased if he had survived,
may be initiated against the legal representative and all the provisions of
this Act shall apply accordingly.
(3) Every legal representative shall be personally liable for any sum payable
by him in his capacity as legal representative if, while his liability for such
sum remains undischarged, he creates a charge on or disposes of or parts
with any assets of the estate of the deceased, which are in, or may come
into, his possession, but such liability shall be limited to the value of the
asset so charged, disposed of or parted with.
(4) The liability of a legal representative under this section shall be limited to
the extent to which the estate of the deceased is capable of meeting the
liability.
Explanation.—For the purposes of this section “legal representative”
means a person who in law represents the estate of a deceased person,
and includes any person who intermeddles with the estate of the deceased
and where a party sues or is sued in a representative character, the person
on whom the estate devolves on the death of the party so suing or sued.’.
2. Inserted by Finance (No. 2) Act, 2019, w.e.f. 20-1-2020.
(i) In section 15C of the principal Act, which deals with the Penalty for failure to redress
investors’ grievances after the words "after having been called upon by the Board in
writing", the words "including by any means of electronic communication" shall be
inserted.

(ii) In section 15F of the principal Act, which deals with the Penalty for default in case of
stock brokers in sub-clause (a), after the words "one lakh rupees but which may
extend to", the words "one crore rupees" shall be inserted.
(iii) After section 15HA of the principal Act, the following section shall be inserted,
namely:—
‘15HAA. Penalty for alteration destruction, etc., of records and failure to protect the
electronic database of Board
Any person, who—
(a) knowingly alters, destroys, mutilates, conceals, falsifies, or makes a false entry
in any information, record, document (including electronic records), which is
required under this Act or any rules or regulations made thereunder, so as to
impede, obstruct, or influence the investigation, inquiry, audit, inspec tion or
proper administration of any matter within the jurisdiction of the Board.
Explanation.—For the purposes of this clause, a person shall be deemed to have
altered, concealed or destroyed such information, record or document, in case
he knowingly fails to immediately report the matter to the Board or fails to
preserve the same till such information continues to be relevant to any
investigation, inquiry, audit, inspection or proceeding, which may be initiated by
the Board and conclusion thereof;
(b) without being authorised to do so, access or tries to access, or denies of access
or modifies access parameters, to the regulatory data in the database;
(c) without being authorised to do so, downloads, extracts, copies, or reproduces in
any form the regulatory data maintained in the system database;
(d) knowingly introduces any computer virus or other computer contaminant into the
system database and brings out a trading halt;
(e) without authorisation disrupts the functioning of system database;
(f) knowingly damages, destroys, deletes, alters, diminishes in value or utility, or
affects by any means, the regulatory data in the system database; or
(g) knowingly provides any assistance to or causes any other person to do any of
the acts specified in clauses (a) to (f), shall be liable to a penalty which shall not
be less than one lakh rupees but which may extend to ten crore rupees or three
times the amount of profits made out of such act, whichever is higher.
Explanation.—In this section, the expressions "computer contaminant",
"computer virus" and "damage" shall have the meanings respectively assigned
to them under section 43 of the Information Technology Act, 2000.

PART II: ECONOMIC LAWS
CHAPTER 1: THE FOREIGN EXCHANGE MANAGEMENT ACT, 1999

I. Amendment in 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:
(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 —
(a) any class or classes of capital account transactions, involving debt
instruments, which are permissible;
(b) the limit up to which foreign exchange shall be admissible for such
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
transactions; and
(c) any conditions which may be placed on such transactions.
(3) [***]
(4) A person resident in India may hold, own, transfer or invest in foreign currency,
foreign security or any immovable property situated outside India if such currency,
security or property was acquired, held or owned by such person when he was
resident outside India or inherited from a person who was resident outside India.
(5) A person resident outside India may hold, own, transfer or invest in Indian currency,
security or any immovable property situated in India if such currency, security or
property was acquired, held or owned by such person when he was resident in India
or inherited from a person who was resident in India.
(6) Without prejudice to the provisions of this section, the Reserve Bank may, by
regulation, prohibit, restrict, or regulate establishment in India of a branch, office or

other place of business by a person resident outside India, for carrying on any activity
relating to such branch, office or other place of business.
(7) 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.
II. Amendments in External Commercial Borrowings
Vide FED Master Direction No.5/2018-19, amendments have been made in the
Transactions on account of External Commercial Borrowings (ECB). Here is the updated
master direction –external commercial borrowings.
Within the contours of the Regulations, Reserve Bank of India also issues directions to
Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA),
1999. These directions lay down the modalities as to how the foreign exchange business
has to be conducted by the Authorised Persons with their customers/constituents with a
view to implementing the regulations framed.
Index
Para. Particulars
No.
External Commercial Borrowings Framework
2 Introduction
2.1 External Commercial Borrowings Framework
2.2 Limit and leverage
3 Issuance of Guarantee, etc. by Indian banks and Financial Institutions
4 Parking of ECB proceeds
4.1 Parking of ECB proceeds abroad
4.2 Parking of ECB proceeds domestically
5 Procedure of raising ECB
6 Reporting Requirements
6.1 Loan Registration Number
6.2 Changes in terms and conditions of ECB
6.3 Monthly reporting of actual transactions
6.4 Late Submission Fee for delay in reporting
6.5 Standard Operating Procedure for Untraceable Entities
7 Powers delegated to AD Category I banks to deal with ECB cases
7.1 Change of the AD Category I bank

7.2 Cancellation of LRN

7.3 Refinancing of existing ECB
7.4 Conversion of ECB into equity
7.5 Security for raising ECB
7.6 Additional Requirements
8 Special Dispensations under the ECB framework
8.1 ECB facility for Oil Marketing Companies
8.2 ECB facility for Start-ups
9 Borrowing by Entities under Investigation
10 ECB by entities under restructuring/ ECB facility for refinancing stressed
assets
11 Dissemination of information
12 Compliance with the guidelines
Introduction: External Commercial Borrowings are commercial loans raised by eligible
resident entities from recognised 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 parameters given below apply in totality and not on a standalone basis.
2.1. ECB Framework: The framework for raising loans through ECB (hereinafter referred
to as the ECB Framework) comprises the following two options:
Sr. Parameters FCY denominated ECB INR denominated ECB

No.
i Currency of Any freely convertible Foreign Indian Rupee (INR)
borrowing Currency
ii Forms of ECB Loans including bank loans; Loans including bank
floating/ fixed rate notes/ loans; floating/ fixed rate
bonds/ debentures (other notes/bonds/
than fully and compulsorily debentures/ preference
convertible instruments); shares (other than fully
Trade credits beyond 3 and compulsorily
years; FCCBs; FCEBs and convertible instruments);
Financial Lease. Trade credits beyond 3
years; and Financial
Lease. Also, plain vanilla
Rupee denominated
bonds issued overseas,
which can be either
placed privately or listed

on exchanges as per
host country regulations.
iii Eligible All entities eligible to receive (a) All entities eligible
borrowers FDI. Further, the following to raise FCY
entities are also eligible to ECB; and
raise ECB: (b) Registered entities
i. Port Trusts; engaged in micro-
ii. Units in SEZ; finance activities,
iii. SIDBI; and viz., registered Not
iv. EXIM Bank of India. for Profit
companies,
registered
societies/trusts/
cooperatives and
Non-Government
Organisations.
iv Recognised The lender should be resident of FATF or IOSCO
lenders compliant country, including on transfer of ECB.
However,
(a) Multilateral and Regional Financial Institutions
where India is a member country will also be
considered as recognised lenders;
(b) Individuals as lenders can only be permitted if they
are foreign equity holders or for subscription to
bonds/debentures listed abroad; and
(c) Foreign branches / subsidiaries of Indian banks are
permitted as recognised lenders only for FCY ECB
(except FCCBs and FCEBs).
Foreign branches / subsidiaries of Indian banks, subject
to applicable prudential norms, can participate as
arrangers/underwriters/market-makers/traders for Rupee
denominated Bonds issued overseas. However,
underwriting by foreign branches/subsidiaries of Indian
banks for issuances by Indian banks will not be allowed.
V Minimum MAMP for ECB will be 3 years. Call and put options, if
Average any, shall not be exercisable prior to completion of
Maturity Period minimum average maturity. However, for the specific
(MAMP) categories mentioned below, the MAMP will be as
prescribed therein:

Sr. Category MAMP

No.
(a) ECB raised by manufacturing 1 year
companies up to USD 50 million or
its equivalent per financial year.
(b) ECB raised from foreign equity 5 years
holder for working capital
purposes, general corporate
purposes or for repayment of
Rupee loans
3(c) ECB raised for 10year
(i) working capital purposes or s
general corporate purposes
(ii) on-lending by NBFCs for
working capital purposes or
(d) ECB raised for 7 years
(i) repayment of Rupee loans
availed domestically for capital
expenditure
(ii) on-lending by NBFCs for the
same purpose
(e) ECB raised for 10
(i) repayment of Rupee loans years
availed domestically for
purposes other than capital
expenditure
same purpose
for the categories mentioned at (b) to (e) –
(i) ECB cannot be raised from foreign branches /
subsidiaries of Indian banks
(ii) the prescribed MAMP will have to be strictly
complied with under all circumstances.
vi All-in-cost Benchmark rate plus 450 bps spread.
ceiling per
annum
3 Inserted vide A.P.(DIR Series) Circular No. 04 dated July 30, 2019.

vii Other costs Prepayment charge/ Penal interest, if any, for default or
breach of covenants, should not be more than 2 per cent
over and above the contracted rate of interest on the
outstanding principal amount and will be outside the all-
in-cost ceiling.
Viii End-uses The negative list, for which the ECB proceeds cannot be
(Negative list) utilised, would include the following:
(a) Real estate activities.
(b) Investment in capital market.
(c) Equity investment.
(d) 4Working capital purposes, except in case of ECB
mentioned at v(b) and v(c) above.
(e) General corporate purposes, except in case of
ECB mentioned at v(b) and v(c) above.
(f) Repayment of Rupee loans, except in case of ECB
mentioned at v(d) and v(e) above.
(g) On-lending to entities for the above activities,
except in case of ECB raised by NBFCs as given
at v(c), v(d) and v(e) above.
ix Exchange Change of currency of FCY For conversion to
rate ECB into INR ECB can be at Rupee, the exchange
the exchange rate prevailing rate shall be the rate
on the date of the agreement prevailing on the date of
for such change between the settlement.
parties concerned or at an
exchange rate, which is less
than the rate prevailing on
the date of the agreement, if
consented to by the ECB
lender.
x Hedging The entities raising ECB are Overseas investors are
provision required to follow the eligible to hedge their
guidelines for hedging exposure in Rupee
issued, if any, by the through permitted
4
Substituted vide A.P.(DIR Series) Circular No. 04 dated July 30, 2019. Prior to substitution it read as below:
(a) Working capital purposes except from foreign equity holder.
(b) General corporate purposes except from foreign equity holder.
(c) Repayment of Rupee loans except from foreign equity holder.
(d) On-lending to entities for the above activities.

concerned sectoral or derivative products with

prudential regulator in AD Category I banks in
respect of foreign currency India. The investors can
exposure. also access the
Infrastructure space domestic market
companies shall have a through branches /
Board approved risk subsidiaries of Indian
management policy. Further, banks abroad or
such companies are branches of foreign
required to mandatorily banks with Indian
hedge 70 per cent of their presence on a back to
ECB exposure in case the back basis.
average maturity of the ECB
is less than 5 years. The
designated AD Category-I
bank shall verify that 70 per
cent hedging requirement is
complied with during the
currency of the ECB and
report the position to RBI
through Form ECB 2. The
following operational
aspects with respect to
hedging should be ensured:
a. Coverage: The ECB
borrower will be required to
cover the principal as well as
the coupon through financial
hedges. The financial hedge
for all exposures on account
of ECB should start from the
time of each such exposure
(i.e. the day the liability is
created in the books of the
borrower).
b. Tenor and rollover: A
minimum tenor of one year
for the financial hedge would
be required with periodic
rollover, duly ensuring that

the exposure on account of

ECB is not unhedged at any
point during the currency of
the ECB.
c. Natural Hedge:
Natural hedge, in lieu of
financial hedge, will be
considered only to the extent
of offsetting projected cash
flows / revenues in matching
currency, net of all other
projected outflows. For this
purpose, an ECB may be
considered naturally hedged
if the offsetting exposure has
the maturity/cash flow within
the same accounting any
other arrangements/
structures, where revenues
are indexed to foreign
currency will not be
considered as a natural
hedge.
xi Change of Change of currency of ECB Change of currency
currency of from one freely convertible from INR to any freely
borrowing foreign currency to any convertible foreign
other freely convertible currency is not
foreign currency as well as permitted.
to INR is freely permitted.
Note: The ECB framework is not applicable in respect of investments in Non-
Convertible Debentures in India made by Registered Foreign Portfolio Investors.
5Lending and borrowing under the ECB framework by Indian banks and their
branches/subsidiaries outside India will be subject to prudential guidelines issued by

the Department of Banking Regulation of the Reserve Bank. Further, other entities
raising ECB are required to follow the guidelines issued, if any, by the concerned
sectoral or prudential regulator.
2.2. Limit and leverage: Under the aforesaid framework, all eligible borrowers can raise
ECB up to USD 750 million or equivalent per financial year under the automatic route.
5 Inserted vide A.P. (DIR Series) Circular No. 17 dated January 16, 2019.

Further, in case of FCY denominated ECB raised from direct foreign equity holder,
ECB liability-equity ratio for ECB raised under the automatic route cannot exceed 7:1.
However, this ratio will not be applicable if the outstanding amount of all ECB,
including the proposed one, is up to USD 5 million or its equivalent. Further, the
borrowing entities will also be governed by the guidelines on debt equity ratio, issued,
if any, by the sectoral or prudential regulator concerned.
3. Issuance of Guarantee, etc. by Indian banks and Financial Institutions: Issuance of
any type of guarantee by Indian banks, All India Financial Institutions and NBFCs
relating to ECB is not permitted. Further, financial intermediaries (viz., Indian banks,
All India Financial Institutions, or NBFCs) shall not invest in FCCBs/ FCEBs in any
manner whatsoever.
4. Parking of ECB proceeds: ECB proceeds are permitted to be parked abroad as well
as domestically in the manner given below:
4.1 Parking of ECB proceeds abroad: ECB proceeds meant only for foreign currency
expenditure can be parked abroad pending utilisation. Till utilisation, the se funds can
be invested in the following liquid assets (a) deposits or Certificate of Deposit or other
products offered by banks rated not less than AA (-) by Standard and Poor/Fitch IBCA
or Aa3 by Moody’s; (b) Treasury bills and other monetary instruments of one-year
maturity having minimum rating as indicated above and (c) deposits with foreign
branches/subsidiaries of Indian banks abroad.
4.2 Parking of ECB proceeds domestically: ECB proceeds meant for Rupee
expenditure should be repatriated immediately for credit to their Rupee accounts with
AD Category I banks in India. ECB borrowers are also allowed to park ECB proceeds
in term deposits with AD Category I banks in India for a maximum period of 12 months
cumulatively. These term deposits should be kept in unencumbered position.
5. Procedure of raising ECB: All ECB can be raised under the automatic route if they
conform to the parameters prescribed under this framework. For approval route
cases, the borrowers may approach the RBI with an application in prescribed format
(Form ECB) for examination through their AD Category I bank. Such cases shall be
considered keeping in view the overall guidelines, macroeconomic situation and
merits of the specific proposals. ECB proposals received in the Reserve Bank above
certain threshold limit (refixed from time to time) would be placed before the
Empowered Committee set up by the Reserve Bank. The Empowered Committee will
have external as well as internal members and the Reserve Bank will take a final
decision in the cases taking into account recommendation of the Empowered
Committee. Entities desirous to raise ECB under the automatic route may approach
an AD Category I bank with their proposal along with duly filled in Form ECB.
6. Reporting Requirements: Borrowings under ECB Framework are subject to
following reporting requirements apart from any other specific reporting required
under the framework:

6.1 Loan Registration Number (LRN): Any draw-down in respect of an ECB should
happen only after obtaining the LRN from the Reserve Bank. To obtain the LRN,
borrowers are required to submit duly certified Form ECB, which also contains terms
and conditions of the ECB, in duplicate to the designated AD Category I bank. In turn,
the AD Category I bank will forward one copy to the Director, Reserve Bank of India,
Department of Statistics and Information Management, External Commercial
Borrowings Division, Bandra-Kurla Complex, Mumbai – 400 051 (Contact numbers
022-26572513 and 022-26573612). Copies of loan agreement for raising ECB are
not required to be submitted to the Reserve Bank.
6.2 Changes in terms and conditions of ECB: Changes in ECB parameters in
consonance with the ECB norms, including reduced repayment by mutual agreement
between the lender and borrower, should be reported to the DSIM through revised
Form ECB at the earliest, in any case not later than 7 days from the changes effected.
While submitting revised Form ECB the changes should be specifically mentioned in
the communication.
6.3 Monthly Reporting of actual transactions: The borrowers are required to report
actual ECB transactions through Form ECB 2 Return through the AD Category I bank
on monthly basis so as to reach DSIM 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.
6.4 Late Submission Fee (LSF) for delay in reporting:
6.4.1 Any borrower, who is otherwise in compliance of ECB guidelines, can
regularise the delay in reporting of drawdown of ECB proceeds before obtaining LRN
or delay in submission of Form ECB 2 returns, by payment of late submission fees as
detailed in the following matrix:
Sr. Type of Period of delay Applicable LSF
No. Return/Form
1 Form ECB 2 Up to 30 calendar days from due INR 5,000
date of submission
2 Form ECB 2/ Up to three years from due date of INR 50,000 per
Form ECB submission/date of drawdown year
3 Form ECB Beyond three years from due date INR 100,000 per
2/Form ECB of submission/date of drawdown year
6.4.2 The borrower, through its AD bank, may pay the LSF by way of demand draft in
favour of “Reserve Bank of India” or any other mode specified by the Reserve Bank.
Such payment should be accompanied with the requisite return(s). Form ECB and
Form ECB 2 returns reporting contraventions will be treated separately. Non-payment

of LSF will be treated as contravention of reporting provision and shall be subject to

compounding or adjudication as provided in FEMA 1999 or regulations/rules framed
thereunder.
6.5 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.
i. Definition: 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;
ii. Action: The followings actions are to be undertaken in respect of ‘untraceable
entities’:
(a) 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 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;
(c) Directorate of Enforcement should be informed whenever any entity is
designated ‘UNTRACEABLE ENTITY’; and
(d) No inward remittance or debt servicing will be permitted under auto route.
7. Powers delegated to AD Category I banks to deal with ECB cases: The
designated AD Category I banks can approve any requests from the borrowe rs for
changes in respect of ECB, except for FCCBs/FCEBs, duly ensuring that the changed
conditions, including change in name of borrower/lender, transfer of ECB and any
other parameters, comply with extant ECB norms and are with the consent of
lender(s). Further, the following can also be undertaken under the automatic route:

7.1 Change of the AD Category I bank: AD Category I bank can be changed subject to
obtaining no objection certificate from the existing AD Category I bank.
7.2 Cancellation of LRN: The designated AD Category I banks may directly approach
DSIM for cancellation of LRN for ECB contracted, subject to ensuring that no draw
down against the said LRN has taken place and the monthly ECB-2 returns till date
in respect of the allotted LRN have been submitted to DSIM.
7.3 Refinancing of existing ECB: Refinancing of existing ECB by fresh ECB provided
the outstanding maturity of the original borrowing (weighted outstanding maturity in
case of multiple borrowings) is not reduced and all-in-cost of fresh ECB is lower than
the all-in-cost (weighted average cost in case of multiple borrowings) of existing ECB.
Further, refinancing of ECB raised under the previous ECB frameworks may also be
permitted, subject to additionally ensuring that the borrower is eligible to raise ECB
under the extant framework. Raising of fresh ECB to part refinance the existing ECB
is also permitted subject to same conditions. Indian banks are permitted to participate
in refinancing of existing ECB, only for highly rated corporates (AAA) and for
Maharatna/Navratna public sector undertakings.
7.4 Conversion of ECB into equity: Conversion of ECB, including those which are
matured but unpaid, into equity is permitted subject to the following conditions:
(i) The activity of the borrowing company is covered under the automatic route for
FDI or Government approval is received, wherever applicable, for foreign equity
participation as per extant FDI policy.
(ii) 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;
(iii) Applicable pricing guidelines for shares are complied with; In case of partial or
full conversion of ECB into equity, the reporting to the Reserve Bank will be as
under:
(a) For partial conversion, the converted portion is to be reported in Form FC-
GPR prescribed for reporting of FDI flows, while monthly reporting to DSIM
in Form ECB 2 Return will be with suitable remarks, viz., "ECB partially
converted to equity".
(b) For full conversion, the entire portion is to be reported in Form FC-GPR,
while reporting to DSIM in Form ECB 2 Return should be done with remarks
“ECB fully converted to equity”. Subsequent filing of Form ECB 2 Return is
not required.
(c) For conversion of ECB into equity in phases, reporting through Form FC-
GPR and Form ECB 2 Return will also be in phases.

(iv) 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;
(v) Consent of other lenders, if any, to the same borrower is available or atleast
information regarding conversions is exchanged with other lenders of the
borrower.
(vi) For conversion of ECB dues into equity, the exchange rate prevailing on the date
of the agreement between the parties concerned for such conversion or any
lesser rate can be applied with a mutual agreement with the ECB lender. It may
be noted that the fair value of the equity shares to be issued shall be worked out
with reference to the date of conversion only.
7.5. 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:
(i) the underlying ECB is in compliance with the extant ECB guidelines,
(ii) 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
(iii) No objection certificate, as applicable, from the existing lenders in India has
been obtained in case of creation of charge.
Once the aforesaid stipulations are met, the AD Category I bank may permit creation
of charge on immovable assets, movable assets, financial securities and issue of
corporate and/or personal guarantees, during the currency of the ECB with security
co-terminating with underlying ECB, subject to the following:
(i) Creation of Charge on Immovable Assets: The arrangement shall be subject
to the following:
(a) Such security shall be subject to provisions contained in the Foreign
Exchange Management (Acquisition and Transfer of Immovable Property
in India) Regulations, 2017, as amended from time to time.
(b) The permission should not be construed as a permission to acquire
immovable asset (property) in India, by the overseas lender/ security
trustee.
(c) In the event of enforcement / invocation of the charge, the immovable

asset/ property will have to be sold only to a person resident in India and
the sale proceeds shall be repatriated to liquidate the outstanding ECB.
(ii) Creation of Charge on Movable Assets: In the event of enforcement/
invocation of the charge, the claim of the lender, whether the lender takes over
the movable asset or otherwise, will be restricted to the outstanding claim
against the ECB. Encumbered movable assets may also be taken out of the
country subject to getting ‘No Objection Certificate’ from domestic lender/s, if
any.
(iii) Creation of Charge over Financial Securities: The arrangements may be
permitted subject to the following:
(a) Pledge of shares of the borrowing company held by the promoters as well
as in domestic associate companies of the borrower is permitted. Pledge
on other financial securities, viz. bonds and debentures, Government
Securities, Government Savings Certificates, deposit receipts of securities
and units of the Unit Trust of India or of any mutual funds, standing in the
name of ECB borrower/promoter, is also permitted.
(b) In addition, security interest over all current and future loan assets and all
current assets including cash and cash equivalents, including Rupee
accounts of the borrower with ADs in India, standing in the name of the
borrower/promoter, can be used as security for ECB. The Rupee accounts
of the borrower/promoter can also be in the form of escrow arrangement or
debt service reserve account.
(c) In case of invocation of pledge, transfer of financial securities shall be in
accordance with the extant FDI/FII policy including provisions relating to
sectoral cap and pricing as applicable read with the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident outside
India) Regulations, 2017, as amended from time to time.
(iv) Issue of Corporate or Personal Guarantee: The arrangement shall be subject
to the following:
(a) A copy of Board Resolution for the issue of corporate guarantee for the
company issuing such guarantee, specifying name of the officials
authorised to execute such guarantees on behalf of the company or in
individual capacity should be obtained.
(b) Specific requests from individuals to issue personal guarantee indicating
details of the ECB should be obtained.
(c) Such security shall be subject to provisions contained in the Foreign
Exchange Management (Guarantees) Regulations, 2000, as amended
from time to time.

(d) ECB can be credit enhanced / guaranteed / insured by overseas party/

parties only if it/ they fulfil/s the criteria of recognised lender under extant
ECB guidelines.
7.6. Additional Requirements: While exercising the delegated powers, the AD
Category I banks should ensure that:
i. The changes permitted are in conformity with the applicable ceilings / guidelines
and the ECB continues to be in compliance with applicable guidelines. It should
also be ensured that if the ECB borrower has availed of credit facilities from the
Indian banking system, including foreign branches/subsidiaries of Indian banks,
any extension of tenure of ECB (whether matured or not) shall be subject to
applicable prudential guidelines issued by Department of Banking Regulation of
Reserve Bank including guidelines on restructuring.
ii. The changes in the terms and conditions of ECB allowed by the ADs under the
powers delegated and / or changes approved by the Reserve Bank should be
reported to the DSIM as given at paragraph 6.2 above. Further, these changes
should also get reflected in the Form ECB 2 returns appropriately.
8. Special Dispensations under the ECB framework:
8.1 ECB facility for Oil Marketing Companies: Notwithstanding the provisions
contained in paragraph 2.1 (viii), 2.1 (x) and 2.2 above, Public Sector Oil Marketing
Companies (OMCs) can raise ECB for working capital purposes with minimum
average maturity period of 3 years from all recognised lenders under the automatic
route without mandatory hedging and individual limit requirements. The overall ceiling
for such ECB shall be USD 10 billion or equivalent. However, OMCs should have a
Board approved forex mark to market procedure and prudent risk management policy,
for such ECB. All other provisions under the ECB framework will be applicable to such
ECB.
8.2 ECB facility for Startups: AD Category-I banks are permitted to allow Startups to
raise ECB under the automatic route as per the following framework:
(i) Eligibility: An entity recognised as a Startup by the Central Government as on
date of raising ECB.
(ii) Maturity: Minimum average maturity period will be 3 years.
(iii) Recognised lender: Lender / investor shall be a resident of a FATF compliant
country. However, foreign branches/subsidiaries of Indian banks and overseas
entity in which Indian entity has made overseas direct investment as per the
extant Overseas Direct Investment Policy will not be considered as recognised
lenders under this framework.
(iv) Forms: The borrowing can be in form of loans or non-convertible, optionally
convertible or partially convertible preference shares.

(v) Currency: The borrowing should be denominated in any freely convertible

currency or in Indian Rupees (INR) or a combination thereof. In case of
borrowing in INR, the non resident lender, should mobilise INR through
swaps/outright sale undertaken through an AD Category-I bank in India.
(vi) Amount: The borrowing per Startup 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.
(vii) All-in-cost: Shall be mutually agreed between the borrower and the lender.
(viii) End uses: For any expenditure in connection with the business of the borrower.
(ix) Conversion into equity: Conversion into equity is freely permitted subject to
Regulations applicable for foreign investment in Startups.
(x) 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.
and shall comply with foreign direct investment / foreign portfolio investment / or
any other norms applicable for foreign lenders / entities holding such securities.
Further, issuance of corporate or personal guarantee is allowed. Guarantee
issued by a non resident(s) is allowed only if such parties qualify as lender under
ECB for Startups. However, issuance of guarantee, standby letter of credit, letter
of undertaking or letter of comfort by Indian banks, all India Financial Institutions
and NBFCs is not permitted.
(xi) Hedging: The overseas lender, in case of INR denominated ECB, will be eligible
to hedge its INR exposure through permitted derivative products with AD
Category – I banks in India. The lender can also access the domestic market
through branches/ subsidiaries of Indian banks abroad or branches of foreign
bank with Indian presence on a back to back basis.
Note: Startups raising ECB in foreign currency, whether having natural hedge
or not, are exposed to currency risk due to exchange rate movements and hence
are advised to ensure that they have an appropriate risk management policy to
manage potential risk arising out of ECB.
(xii) Conversion rate: In case of borrowing in INR, the foreign currency - INR
conversion will be at the market rate as on the date of agreement.
(xiii) Other Provisions: Other provisions like parking of ECB proceeds, reporting
arrangements, powers delegated to AD banks, borrowing by entities under
investigation, conversion of ECB into equity will be as included in the ECB
framework. However, provisions on leverage ratio and ECB liability: Equity ratio
will not be applicable. Further, the Start-ups as defined above [8.2. (i)] as well
as other start-ups which do not comply with the aforesaid definition but are

eligible to receive FDI, can also raise ECB under the general ECB
route/framework.
9. Borrowing by Entities under Investigation: All entities against which investigation/
adjudication / appeal by the law enforcing agencies for violation of any of the
provisions of the Regulations under FEMA pending, may raise ECB as per the
applicable norms, if they are otherwise eligible, notwithstanding the pe nding
investigations / adjudications / appeals, without prejudice to the outcome of such
investigations / adjudications / appeals. The borrowing entity shall inform about
pendency of such investigation / adjudication / appeal to the AD Category -I bank /
RBI as the case may be. Accordingly, in case of all applications where the borrowing
entity has indicated about the pending investigations / adjudications/ appeals, the AD
Category I Banks / Reserve Bank while approving the proposal shall intimate the
agencies concerned by endorsing a copy of the approval letter.
10. ECB by entities under restructuring/ ECB facility for refinancing stressed
assets:
10.1 An entity which is under a restructuring scheme/ corporate insolvency resolution
process can raise ECB only if specifically permitted under the resolution plan.
10.2 6Eligible 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. Lender banks are also permitted to sell, through
assignment, such loans to eligible ECB lenders, provided, the resultant external
commercial borrowing complies with all-in-cost, minimum average maturity period
and other relevant norms of the ECB framework. Foreign branches/ overseas
subsidiaries of Indian banks are not eligible to lend for the above purposes. The
applicable MAMP will have to be strictly complied with under all circumstances.
10.3 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 fore ign
branches/subsidiaries of Indian banks, for repayment of Rupee term loans of the
target company. Such ECB will be considered under the approval route, procedure of
which is given at paragraph No. 5 above.
11. Dissemination of information: 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.
12. Compliance with the guidelines: 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. The designated AD Category I bank is also
expected to ensure compliance with applicable ECB guidelines by their constituents.
III. Foreign Exchange Management (Export of Goods and Services) (Amendment)
Regulations, 2019
Vide Notification No. FEMA 23(R)/(2)/2019-RB dated December 09, 2019, the Reserve
Bank of India makes the following amendments in the Foreign Exchange Management
(Export of Goods & Services) Regulations, 2015 ('the Principal Regulations'), namely:
In the Principal Regulations, in regulation 4, after sub-regulation (e), the following shall
be inserted, namely :-
“(ea) re-export of leased aircraft/ helicopter and/or engines/auxiliary power units (APUs)
re-possessed by overseas lessor and duly de-registered by the Directorate General of Civil
Aviation (DGCA) on the request of Irrevocable Deregistration and Export Request
Authorisation (IDERA) holder under ‘Cape Town Convention’ subject to permission by
DGCA/Ministry of Civil Aviation for such export/s.”
IV. Foreign Exchange Management (Export of Goods and Services) (Amendment)
Regulations, 2020
Vide Notification No. FEMA 23(R)/(3)/2020-RB dated March 31, 2020, the Reserve Bank
of India makes the following amendments in the Foreign Exchange Management (Export
of Goods & Services) Regulations, 2015 ('the Principal Regulations'), namely:
 In the Principal Regulations, in regulation 9, in sub-regulation (1) and sub-regulation
(2)(a), for the words “nine months”, the words “nine months or within such period
as may be specified by the Reserve Bank, in consultation with the Government,
from time to time” shall be substituted.
 Similarly, in sub-regulation (1) (a), for the words “fifteen months”, the words
“fifteen months or within such period as may be specified by the Reserve Bank,
in consultation with the Government, from time to time” shall be substituted.
 In Regulation 9 (1)(b), for the words “period of nine months or fifteen months, as
the case may be”, the words “said period” shall be substituted.
 In proviso to Regulation 9 (2)(a), for the words “period of nine months”, the words
“said period” shall be substituted.
CHAPTER 3: PREVENTION OF MONEY LAUNDERING ACT, 2002

I Amendment in section 8 vide Finance Act, 2019, w.r.e.f. 20-3-2019.
Sub-section (3) dealing with the computation of period of attachment/retention of property
/ record seized / frozen during investigation, is amended as follows:

(3) Where the Adjudicating Authority decides that any property is involved in money-
laundering, he shall, by an order in writing, confirm the attachment of the property made
under section 5(1) or retention of property or record seized or frozen under section 17 or
section 18 and record a finding to that effect, whereupon such attachment or retention or
freezing of the seized or frozen property or record shall—
(a) continue during investigation for a period not exceeding three hundred and sixty-
five days or the pendency of the proceedings relating to any offence under this Act
before a court or under the corresponding law of any other country, before the
competent court of criminal jurisdiction outside India, as the case may be; and
(b) become final after an order of confiscation is passed under sub-section (5) or sub-
section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the Special
Court.
Explanation.—For the purposes of computing the period of three hundred and sixty-
five days under clause (a), the period during which the investigation is stayed by any
court under any law for the time being in force shall be excluded.
II Insertion of Section 11A vide the Aadhaar and Other Laws (Amendment) Act, 2019,
w.e.f. 25-7-2019
Verification of identity by reporting entity.
11A. (1) Every reporting entity shall verify the identity of its clients and the beneficial owner,
by—
(a) authentication under the Aadhaar (Targeted Delivery of Financial and Other
Subsidies, Benefits and Services) Act, 2016 if the reporting entity is a banking
company; or
(b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other
Subsidies, Benefits and Services) Act, 2016; or
(c) use of passport issued under section 4 of the Passports Act, 1967; or
(d) use of any other officially valid document or modes of identification as may be notified
by the Central Government in this behalf:
Provided that the Central Government may, if satisfied that a reporting entity other than
banking company, complies with such standards of privacy and security under the Aadhaar
(Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016,
and it is necessary and expedient to do so, by notification, permit such entity to perform
authentication under clause (a):
Provided further that no notification under the first proviso shall be issued without
consultation with the Unique Identification Authority of India established under sub-section
(1) of section 11 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies,
Benefits and Services) Act, 2016 and the appropriate regulator.

(2) If any reporting entity performs authentication under clause (a) of sub-section (1), to
verify the identity of its client or the beneficial owner it shall make the other modes of
identification under clauses (b), (c) and (d) of sub-section (1) also available to such
client or the beneficial owner.
(3) The use of modes of identification under sub-section (1) shall be a voluntary choice
of every client or beneficial owner who is sought to be identified and no client or
beneficial owner shall be denied services for not having an Aadhaar number.
(4) If, for identification of a client or beneficial owner, authentication or offline verification
under clause (a) or clause (b) of sub-section (1) is used, neither his core biometric
information nor his Aadhaar number shall be stored.
(5) Nothing in this section shall prevent the Central Government from notifying additional
safeguards on any reporting entity in respect of verification of the identity of its client
or beneficial owner.
Explanation.—The expressions “Aadhaar number” and “core biometric information” shall
have the same meanings as are respectively assigned to them in clauses (a) and ( j) of
section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and
Services) Act, 2016.’.
III Amendment in section 12 vide Aadhaar and Other Laws (Amendment) Act, 2019,
w.e.f. 25-7-2019
Clause (c) & (d) of section 12(1) have been omitted by the Aadhaar and Other Laws
(Amendment) Act, 2019, w.e.f. 25-7-2019.
Prior to their omission, clauses (c) and (d) read as under:
"(c) verify the identity of its clients in such manner and subject to such conditions, as may
be prescribed;
(d) identify the beneficial owner, if any, of such of its clients, as may be prescribed;"
CHAPTER 4: FOREIGN CONTRIBUTION REGULATION ACT, 2010
Foreign Contribution (Regulation) (Second Amendment) Rules, 2019
Vide notification no. G.S.R. 659(E), dated 16th September, 2019, Central Government hereby
enacts the Foreign Contribution (Regulation) (Second Amendment) Rules, 2019, further to
amend the Foreign Contribution (Regulation) Rules, 2011.
In the Foreign Contribution (Regulation) Rules, 2011, —
(i) in rule 6A, for the words “rupees twenty-five thousand”, the words “one lakh rupees” shall
be substituted;
(ii) in rule 7, in sub-rule (4), for the words “sixty days”, the words “one month” shall be
substituted;

(iii) in rule 12, in sub-rule (2), after the prescribed form (i.e., FC- 3C) the words and letters
“with an affidavit executed by each office bearer and key functionary and member in
Performa ‘AA’ appended to these rules” shall be inserted;
CHAPTER 5: ARBITRATION AND CONCILIATION ACT, 1996
In section 1 which deals with the Short title, extent and commencement, proviso is omitted by
the Jammu and Kashmir Reorganisation Act, 2019, dated 9-8-2019, w.e.f. 31-10-2019, Prior to
its omission read as under:
"Provided that Parts I, III and IV shall extent to the State of Jammu and Kashmir only insofar as
they relate to international Commercial arbitration or, as the case may be, international
Commercial Conciliation."
CHAPTER 6: INSOLVENCY AND BANKRUPTCY CODE, 2016
I. The Insolvency and Bankruptcy Code (Amendment) Act, 2019
Ministry of Corporate Affairs vide Notification S.O. 2953(E) dated 16th August, 2019, in
exercise of the powers conferred by sub-section (2) of section 1 of the Insolvency and
Bankruptcy Code (Amendment) Act, 2019, the Central Government hereby appoints the
date of publication of this notification in the Official Gazette as the date on which the
provisions of the said Act shall come into force.
Following are the relevant amendments:
(i) In section 5(26) pertaining to the definition “resolution plan”, following explanation is
added.
“Explanation.—For the removal of doubts, it is hereby clarified that a resolution plan
may include provisions for the restructuring of the corporate debtor, including by way
of merger, amalgamation and demerger;”
(ii) In section 7(4) of the Code, following proviso shall be inserted:
“Provided that if the Adjudicating Authority has not ascertained the existence of
default and passed an order under sub-section (5) within such time, it shall record its
reasons in writing for the same.”
(iii) In section 12 which deals with the Time-limit for completion of insolvency resolution
process. – Following provisos have been added after the proviso to section 3:
“Provided further that the corporate insolvency resolution process shall mandatorily
be completed within a period of three hundred and thirty days from the insolvency
commencement date, including any extension of the period of corporate insolvency
resolution process granted under this section and the time taken in legal proceedings
in relation to such resolution process of the corporate debtor:
Provided also that where the insolvency resolution process of a corporate debtor is
pending and has not been completed within the period referred to in the second
proviso, such resolution process shall be completed within a period of ninety days

from the date of commencement of the Insolvency and Bankruptcy Code

(Amendment) Act, 2019”.
(iv) In section 30(2)(b) , the following shall be substituted :
(b) provides for the payment of debts of operational creditors in such manner as
may be specified by the Board which shall not be less than—
(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 financial creditors,
who do not vote in favour of the resolution plan, in such manner as may be
specified 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.
Explanation 1.—For the removal of doubts, it is hereby clarified that a distribution
in accordance with the provisions of this clause shall be fair and equitable to
such creditors.
Explanation 2.—For the purposes of this clause, it is hereby declared that on
and from the date of commencement of the Insolvency and Bankruptcy Code
(Amendment) Act, 2019, the provisions of this clause shall also apply to the
corporate insolvency resolution process of a corporate debtor—
(i) where a resolution plan has not been approved or rejected by the
Adjudicating Authority;
(ii) where an appeal has been preferred under section 61 or section 62 or such
an appeal is not time barred under any provision of law for the time being
in force; or
(iii) where a legal proceeding has been initiated in any court against the
decision of the Adjudicating Authority in respect of a resolution plan;”
(v) In section 31(1) of the Code, after the words “members, creditors,” the following
words shall be inserted:
“including the Central Government, any State Government or any local authority to
whom a debt in respect of the payment of dues arising under any law for the time
being in force, such as authorities to whom statutory dues are owed,”
(vi) In section 33(2), following explanation shall be added:
“Explanation.—For the purposes of this sub-section, it is hereby declared that the
committee of creditors may take the decision to liquidate the corporate debtor, any

time after its constitution under sub-section (7) of section 21 and before the
confirmation of the resolution plan, including at any time before the preparation of the
information memorandum.”
II. The Insolvency and Bankruptcy Code (Amendment) Act, 2020
Ministry of law and justice notified on 13 th March, 2020, the Insolvency and Bankruptcy
Code (Amendment) Act, 2020 w.e.f. 28th day of December, 2019. With the enforcement
of this Amendment Act, the Insolvency and Bankruptcy Code (Amendment) Ordinance,
2019 was hereby repealed.
1. In section 5 of the Insolvency and Bankruptcy Code, 2016 (hereafter referred to as
the principal Act),—
Sl. Earlier Law Amended Law
No.
1. in clause (12), the given proviso- Omitted
7“Provided that where the interim
resolution professional is not

appointed in the order admitting
application under section 7, 9 or 10,
the insolvency commencement date
shall be the date on which such
interim resolution professional is
appointed by the Adjudicating
Authority”
2. in clause (15), after the words the words "and such other debt as
"during the insolvency resolution may be notified" shall be inserted.
process period" occurring at the end
3. No such proviso to section 7(1) was In section 7 of the principal Act, in
there. sub-section (1), before the
Explanation, the following provisos
inserted—
"Provided that for the financial
creditors, referred to in clauses (a)
and (b) of sub-section (6A) of
section 21, an application for
initiating corporate insolvency
resolution process against the
7 Proviso was Ins. by Act No. 26 of 2018, sec. 3 (w.e.f. 6-6-2018)

corporate debtor shall be filed

jointly by not less than one hundred
of such creditors in the same class
or not less than ten per cent. of the
total number of such creditors in
the same class, whichever is less:
Provided further that for financial
creditors who are allottees under a
real estate project, an application
for initiating corporate insolvency
resolution process against the
corporate debtor shall be filed
jointly by not less than one hundred
of such allottees under the same
real estate project or not less than
ten per cent. of the total number of
such allottees under the same real
estate project, whichever is less:
Provided also that where an
application for initiating the
corporate insolvency resolution
process against a corporate debtor
has been filed by a financial
creditor referred to in the first and
second provisos and has not been
admitted by the Adjudicating
Authority before the
commencement of the Insolvency
and Bankruptcy Code
(Amendment) Act, 2020, such
application shall be modified to
comply with the requirements of the
first or second proviso within thirty
days of the commencement of the
said Act, failing which the
application shall be deemed to be
withdrawn before its admission."
4. In section 11 of the principal Act, In section 11 of the principal Act,
only an Explanation is there. the Explanation shall be numbered
as Explanation I and after
Explanation I as so numbered, the
following Explanation shall be

"Explanation II—For the purposes
of this section, 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."
5. (a) In section 14, no explanation In section 14 of the principal Act,—
was there with Sub-section (1)
(a) in sub-section (1), the
of the principal Act.
following Explanation
"Explanation.—For the
purposes of this sub-section,
it is hereby clarified
that notwithstanding anything
contained in any other law for
the time being in force, a
license, permit, registration,
quota, concession,
clearances or a similar grant
or right given by the Central
Government, State
Government, local authority,
sectoral regulator or any other
authority constituted under
any other law for the time
being in force, shall not be
suspended or terminated on
the grounds of insolvency,
subject to the condition that
there is no default in payment
of current dues arising for the
use or continuation of the
license, permit, registration,
quota, concession,
clearances or a similar grant
or right during the moratorium
period;";

(b) No Sub-section 2A was there (b) after sub-section (2), the

in the Principal Act. following sub-section 2A shall
be inserted, namely:—
"(2A) Where the interim
resolution professional or
resolution professional, as the
case may be, considers the
supply of goods or services
critical to protect and preserve
the value of the corporate
debtor and manage the
operations of such corporate
debtor as a going concern,
then the supply of such goods
or services shall not be
terminated, suspended or
interrupted during the period
of moratorium, except where
such corporate debtor has not
paid dues arising from such
supply during the moratorium
period or in such
circumstances as may be
specified.";
(c) in sub-section (3), for clause (c) the following clause shall be
(a), namely- substituted, namely:—
"(a) such transactions,
“(a) such transaction as may
agreements or other
be notified by the Central
Government in consultation arrangements as may be
notified by the Central
with any financial regulator;”
Government in consultation
with any financial sector
regulator or any other
authority;".
6. In section 16 in sub-section (1), for the words "on the insolvency
the words "within fourteen days from commencement date" shall be
the insolvency commencement substituted.
date"
7. In section 21, in sub-section (2), in the words "or completion of such
the second proviso, after the words transactions as may be
"convertible into equity shares" prescribed," shall be inserted.

8. In section 29A of the principal Act-

(i) in clause (c), in the second (i) the words "or completion of
proviso, in Explanation I, after such transactions as may be
the words, "convertible into prescribed," shall be inserted;
equity shares", (ii) the words "or completion of
(ii) in clause (j), in Explanation I, in such transactions as may be
the second proviso, after the prescribed," shall be inserted.
words "convertible into equity
shares",
9. No such section 32A was there in After section 32 of the principal Act,
the Principal Act. the following section 32A shall be
"32A. (1) Notwithstanding anything
to the contrary contained in this
Code or any other law for the time
being in force, the liability of a
corporate debtor for an offence
committed prior to the
commencement of the corporate
insolvency resolution process shall
cease, and the corporate debtor
shall not be prosecuted for such an
offence from the date the resolution
plan has been approved by the
Adjudicating Authority under
section 31, if the resolution plan
results in the change in the
management or control of the
corporate debtor to a person who
was not—
(a) a promoter or in the
corporate debtor or a related
party of such a person; or
(b) a person with regard to whom
the relevant investigating
authority has, on the basis of
material in its possession,
reason to believe that he had
abetted or conspired for the
commission of the offence,

and has submitted or filed a

report or a complaint to the
relevant statutory authority or
Court:
Provided that if a prosecution
had been instituted during the
corporate insolvency
resolution process against
such corporate debtor, it shall
stand discharged from the
date of approval of the
resolution plan subject to
requirements of this sub-
section having been fulfilled:
Provided further that every
person who was a
"designated partner" as
defined in clause (j) of section
2 of the Limited Liability
Partnership Act, 2008, or an
"officer who is in default", as
defined in clause (60) of
section 2 of the Companies
Act, 2013, or was in any
manner incharge of, or
responsible to the corporate
debtor for the conduct of its
business or associated with
the corporate debtor in any
manner and who was directly
or indirectly involved in the
commission of such offence
as per the report submitted or
complaint filed by the
investigating authority, shall
continue to be liable to be
prosecuted and punished for
such an offence committed by
the corporate debtor
notwithstanding that the
corporate debtor's liability has

ceased under this sub-

section.
(2) No action shall be taken
against the property of the
corporate debtor in relation to an
offence committed prior to the
insolvency resolution process of
the corporate debtor, where such
property is covered under a
resolution plan approved by the
Adjudicating Authority under
section 31, which results in the
change in control of the corporate
debtor to a person, or sale of
liquidation assets under the
provisions of Chapter III of Part II of
this Code to a person, who was
not—
(i) a promoter or in the
corporate debtor or a related
party of such a person; or
(ii) a person with regard to whom
the relevant investigating
authority has, on the basis of
material in its possession
reason to believe that he had
abetted or conspired for the
commission of the offence,
and has submitted or filed a
report or a complaint to the
relevant statutory authority or
Court.
Explanation.—For the
purposes of this sub-section,
it is hereby clarified that,—
(i) an action against the
property of the corporate
debtor in relation to an
offence shall include the

attachment, seizure,
retention or confiscation
of such property under
such law as may be
applicable to the
corporate debtor;
(ii) nothing in this sub-
section shall be
construed to bar an
action against the
property of any person,
other than the corporate
debtor or a person who
has acquired such
property through
corporate insolvency
resolution process or
liquidation process
under this Code and
fulfils the requirements
specified in this section,
against whom such an
action may be taken
under such law as may
be applicable.
(3) Subject to the provisions
contained in sub-sections (1) and
(2), and notwithstanding the
immunity given in this section, the
corporate debtor and any person
who may be required to provide
assistance under such law as may
be applicable to such corporate
debtor or person, shall extend all
assistance and co-operation to any
authority investigating an offence
committed prior to the
insolvency resolution process."

III. Enhancement in the limit of amount of default: Ministry of Corporate Affairs vide
notification S.O. 1205(E) dated 24th March, 2020, in exercise of the powers conferred by
the proviso to section 4 of the Insolvency and Bankruptcy Code, 2016, the Central
Government hereby specifies one crore rupees as the minimum amount of default for the
purposes of the said section.
IV. Ministry of Corporate Affairs Vide Notification S.O. 4126(E) dated 15th November, 2019,
in exercise of the powers conferred by sub-section (3) of section 1 of the Insolvency and
Bankruptcy Code, 2016, the Central Government hereby appoints the 1st day of
December, 2019 as the date on which clause (e) of section 2 of the Code in so far as they
relate to personal guarantors to corporate debtors, shall come into force.
V. Vide Notification S.O. 4139(E) dated 18 th November, 2019, in exercise of the powers
conferred by section 227 of the Insolvency and Bankruptcy Code, 2016, 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 ` 500 crore or more, as per last
audited balance sheet, shall be undertaken in accordance with the provisions of the
Insolvency and Bankruptcy Code, 2016 read with the Insolvency and Bankruptcy
(Insolvency and Liquidation Proceedings of Financial Service Providers and Application to
Adjudicating Authority) Rules, 2019 and the applicable Regulations.


QUESTIONS
DIVISION A: INTEGRATED CASE SCENARIO/ MULTIPLE CHOICE QUESTIONS
Integrated Case scenario 1
DEF Limited is an unlisted public company, incorporated under the provisions of the Companies
Act, 2013 having its registered office in the state of Rajasthan.
The Registrar after the inspection of the books of account or an inquiry under section 206 and
other books and papers of DEF Limited under section 207, submitted a report in writing to the
Central Government including a recommendation that further investigation into the affairs o f the
company was necessary, giving his reasons in support.
The Central Government was of the opinion, that it was necessary to investigate into the affairs
of the company by the Serious Fraud Investigation Office (SFIO).
The director, SFIO appointed an investigating officer who called on the directors of the company
and arrested the directors of the company. The directors demanded the reasons for such arrest
which were informed to them.
The directors of the company were produced before the jurisdictional Judicial Magistrate who
released them on bail though the prosecution opposed the application of bail in the court.
On completion of the investigation of the director, SFIO submitted the investigation report to the
Central Government. The Central Government, after examination of the report, directed the
SFIO to initiate prosecution against the company and its officers or employees, who are or have
been in employment of the company or any other person directly or indirectly connected with
the affairs of the company.
A charge sheet was presented against the accused directors of the company before the Special
Court and after the completion of the trial, the court convicted the directors and sentenced them
with imprisonment for a term of six months and a fine of Rupees Two Thousand each.
Given the above situation, your opinion is sought on the following matters:
[Questions 1-5]
1. If the Central Government is of the opinion to order the investigation into affairs of a
company on receipt of a report of the Registrar under section 208 of the Companies Act,
state the correct statement as to the initiation of order of the investigation into affairs of a
company-
(a) It cannot order investigation by inspectors under the provisions of section 210 of the
Companies Act.
(b) It can order investigation by inspectors under the provisions of section 210 of the
Companies Act.

(c) It cannot order investigation by SFIO under the provisions of section 212 of the
Companies Act.
(d) It can order investigation by inspectors under section 210 or by SFIO under section
212 of the companies Act.
2. Is Director, SFIO a competent authority to arrest the directors of DEF Limited, an unlisted
public company?
(a) Yes, Director, SFIO is competent authority to arrest the directors of the unlisted public
company.
(b) Yes, Director, SFIO is competent authority subject to approval of Central
Government.
(c) No, Director, SFIO cannot arrest the directors of the unlisted public company.
(d) Yes, Director, SFIO is competent authority subject to approval of special court to
arrest the directors of the unlisted public company.
3. Is it the duty of the director, SFIO to inform the arrestee the grounds of arrest?
(a) Yes, it is the duty of the director, SFIO to inform the grounds of arrest and as well as
right of arrestee to know the grounds of his arrest.
(b) No, it is not necessary to inform the grounds of arrest.
(c) No, the ground of arrest may be informed, if asked for.
(d) No, it is prerogative of the authority to arrest the accused, there is no need to inform
the grounds of arrest.
4. Within how much time are the arrested directors of DEF Limited required to be produced
before jurisdictional judicial magistrate by the director, SFIO after arrest?
(a) Within 24 hours of such arrest.
(b) Within 48 hours of such arrest.
(c) Within 72 hours of such arrest.
(d) Within 80 hours of such arrest.
5. When do the directors of DEF Limited vacate the office of director in the company?
(a) On the date when the directors were arrested by the SFIO.
(b) On the date when the charge sheet was submitted in the court by the SFIO.

(c) On the date when the directors were arrested and produced before jurisdictional
Judicial Magistrate.
(d) On the date when the directors were convicted by the Special Court.
Integrated Case Scenario 2
Hansraj Power Distribution Ltd. (HPDL) was incorporated in the year 2008. The annual turnover
of the company is two crore rupees. Mr. Raj Purohit, a Director of the company was appointed
by company four years back. Mr. Raj Purohit is eligible for retirement by rotation at this AGM.
The AGM is schedule to be held on 22nd August, 2020. He is also working as a director in Max
International Limited and Trinity Infrastructure Limited. Trinity Infrastructure Limited did not file
its financial statements for the last three years with the Registrar of Companies. Trinity
Infrastructure Limited also defaulted in paying interest on loans taken from a Public Financial
Institution in the last two years. The Board of HPDL has decided to propose Mr. Raj’s name for
re-appointment. Mr. Raj gave his consent for the same.
Application to the Tribunal for Compromise & Arrangement was submitted along with all the
documents. The Tribunal fixed the time and place of the meeting and appointed a Chairperson
for the meeting.
A meeting of members of the company was held as per the orders of the Court to consider a
scheme of compromise and arrangement. Notice of the meeting was sent to all 1000
members. Notice of the meeting was also sent to all the creditors or class of creditors and to
the debenture-holders of the company, individually at the address registered with the company
which will be accompanied by a statement disclosing the details of the compromise or
arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, key
managerial personnel, promoters and non-promoter members, and the debenture-holders and
the effect of the compromise or arrangement on any material interests of the directors of the
company or the debenture trustees.
In total, the 1000 members of the company holds in aggregate 10,00,000 equity shares. The
meeting was attended by 800 members holding 7,00,000 shares. Out of which 460 members
holding 4,70,000 shares voted in favour of the scheme; 190 members holding 1,25,000 shares
voted against the scheme. The remaining 150 members holding 1,05,000 shares abstained from
voting. All the members voted for the scheme either in person or through proxies.
As prescribed under this Act, a notice along with all the documents was also sent to the Central
Government, the Income-Tax Authorities, the Reserve Bank of India, the Securities and
Exchange Board, the Registrar, the respective stock exchanges, and the Competition
Commission of India. The Securities and Exchange Board made objection to scheme of
arrangements after 45 days of receiving all the documents.

According to the last audit financial report, the outstanding debt on the company is ` 50 lakh
rupees. The creditors of the company is as follows:
X-One financial Company 200,000 rupees 4%
Mr. Mohan Shah 1,250,000 rupees 25%
Radhey Finance Company 200,000 rupees 4%
Soham Company 700,000 rupees 14%
Onex National bank 1,000,000 rupees 20%
DXY National bank 1,650,000 rupees 33%
So from the above mentioned Creditors’ list, X-One financial Company raised its objection in
the Tribunal, to the aforementioned scheme. The creditor file the petition in the Tribunal.
The Chairperson of the meeting submitted the report to the Tribunal within the time fixed by the
Tribunal. After hearing the creditors, the Tribunal finally approve the scheme of compromise and
arrangement between the company and its members. The order of the Tribunal is binding on
the company, all its members and creditors.
Answer the following questions in the light of the given information:
[Questions 6-10]
6. With reference to the provisions of the Companies Act, 2013, which value of the requisite
majority will be considered to approve the scheme?
(a) 3/4th of the total value of shares held by 650 members.
(b) 3/4th of the total value of shares held by 800 members.
(c) 3/4th of the total value of shares held by 1000 members.
(d) 3/4th majority of 1000 shares holders present and voting.
7. According to the provision of the Companies Act, 2013, X-One financial company objected
to the compromise held on the scheme in between the company and its shareholders?
According to their respective percentage in debt owed to the company, choose the correct
option?
(a) X-One Finance Company can raise the objection as aggregate loan amount needs to
be more than 2℅ of debt.
(b) X-One Finance Company jointly with Radhey Finance company can raise the
objection as the aggregate amount needs to be not less than 5℅.

(c) Only X-One Finance Company along with Soham Finance company can jointly raise
the objection as the aggregate amounts needs not to be less than 15℅.
(d) Only X-One Finance Company jointly with Soham Finance company and Radhey
Finance company can raise the objection the aggregate amounts needs not to be less
than 20 ℅.
8. Evaluate the representation made by SEBI, after 45 days of receiving the notice and all
the documents, is tenable or not?
(a) Not tenable. It is required to be made within 10 days
(b) Not tenable. It is required to be made within 15 days.
(c) Not tenable. It is required to be made within 30 days.
(d) Not tenable. It is required to be made within 45 days.
9. While finally approving the scheme of compromise and arrangements between the
company and its members, which of the below mentioned certificate is necessary to be
filed with the Tribunal?
(a) Certificate from the Central Government
(b) Certificate from the Registrar.
(c) Certificate from the audit and accounts committee of the company
(d) Certificate from the company's auditor.
10. According to the above mentioned facts under the directorship of Mr. Raj Purohit, Trinity
Infrastructure Limited, defaulted in filing statements and paying the interest due on the
loans. How the default of Trinity Infrastructure Limited going to affect the directorship of
Mr. Raj Purohit, in all the three companies?
(a) Mr. Raj has to immediately vacate his office as a director in all the three companies.
(b) Mr. Raj needs to vacate his office as a director in (HPDL).
(c) Mr. Raj needs to vacate his office as a director only in (HPDL) and in Max International
Limited.
(d) Mr. Raj need not resign in any of the company, as the default makes him only
ineligible for re-appointment.
INDEPENDENT MCQS [Question 11-15]
11. State under which given situation, a lender can avail the benefits of SARFAESI Act -
(i) An insolvency application has been launched against the borrower

(ii) The borrower is under BIFR

(iii) A winding up petition has been made against the borrower
(iv) A criminal proceeding has been launched by the lender against the borrower
(a) In situations (i) & (iii)
(b) In situations (ii) & (iv)
(c) In situations (ii), (iii) & (iv)
(d) In all the given situations (i), (ii), (iii) & (iv)
12. Mr. Kamal is accused of an offence as mentioned in Part B of Schedule to the PMLA, 2002.
What must be the minimum amount of the offence for which Mr. Kamal is accused of?
(a) INR 25 Lakhs
(b) INR 50 Lakhs
(c) INR 100 Lakhs
(d) INR 75 Lakhs
13. Anna, a foreign citizen has made donations in kind to various individuals of Indian resident
for their personal use. When shall such donation in kind will be excluded from the definition
of Foreign Contribution considering the provisions of Foreign Contribution (Regulation) Act,
2010?
(a) If the market value, in India, of such article, on the date of such gift, is more than
` 1,00,000 but less than 5,00,000.
(b) If the market value, in India, of such article, on the date of such gift, is more than
` 500,000 but less than 10,00,000.
(c) Any donation in kind given for personal use is always excluded.
(d) If the market value, in India, of such article, on the date of such gift, is not more than
` 100,000.
14. Milan Limited entered into an agreement with Vinne Limited for the supply of confectionary
biscuits and cakes for a period of 5 years. The Arbitration clause of the agreement states,
“That all the disputes shall be submitted to arbitration.” After a period, it was found that the
principal contract is invalid in the light of the Indian Contract Act, 1872. You are required
to select the best option in the given scenario considering the provisions of the Arbitration
and Conciliation Act, 1996.

(a) The arbitration clause in the principal agreement also stands invalid due to the
principal contract becoming invalid.
(b) The arbitration clause is an independent agreement of the principal agreement and
cannot be treated as invalid merely because the principal contract was invalid.
(c) The arbitration clause shall be exercisable only if the Judicial Authority under the
Arbitration and Conciliation Act, 1996 allows to treat it as an independent agreement.
(d) The arbitration clause in the principal agreement stands valid only till the time the
principal contract was in force and valid.
15. MX Limited was admitted in the Corporate Insolvency Resolution Process (CIRP) under
section 7 of the Insolvency and Bankruptcy Code (Code). The Resolution Professional (RP)
of the MX Limited (Corporate Debtor) conducted the Committee of Creditors (CoC) meeting
but the same was adjourned due to lack of quorum. Accordingly, in the adjourned meeting,
a resolution was passed by the CoC members present, representing 51% of the voting
rights for liquidation of the Corporate Debtor before the expiry of the Corporate Insolvency
Resolution Process (CIRP). You as a qualified Chartered Accountant in the team of RP is
required to advise RP whether the resolution of liquidation passed is valid in law
considering the provisions of the Insolvency and Bankruptcy Code.
(a) The resolution passed for liquidation is not valid in law as it has not been approved
by minimum of 90% of the voting shares of the financial creditors.
(b) The resolution passed for liquidation is not valid in law as it has not been approved
by minimum of 66% of the voting shares of the financial creditors.
(c) The resolution passed for liquidation is not valid in law as it cannot be passed before
the expiry of the CIRP.
(d) The resolution passed for liquidation is valid in law as it has been passed by 51% of
the voting shares of the financial creditors.
Descriptive Questions [Questions 16-24]
16. The Board of Directors of the Universal Ltd. which is an MNC comprised of directors who
were Indian as well as of Foreign Nationals. Mr. “X”, who is a Director on the Board is very
often on business tour abroad. He approached you being legal expert of the company to
know from you the regulatory provisions of the Companies Act, 2013 relating to
appointment of Alternate Directors.
Examine the following situations and advise suitably, Mr. X referring to the provisions of
the Companies Act, 2013.
(a) Number of directors for which a person can be appointed as an alternate director.

(b) Where an alternate director is appointed in place of a director whose term is indefinite,
then, what will be the tenure of such alternate director?
(c) Can an Executive Director/Whole Time Director/Managing Director appoint alternate
directors?
17. International Technologies Limited, a listed company, being managed by a Managing
Director proposes to pay the following managerial remuneration:
(i) Commission at the rate of five percent of the net profits to its Managing Director,
Mr. Kamal.
(ii) The directors other than the Managing Director are proposed to be paid monthly
remuneration of ` 50,000 and also commission at the rate of one percent of net profits
of the company subject to the condition that overall remuneration payable to ordinary
directors including monthly remuneration payable to each of them shall not exceed
two percent of the net profits of the company. The commission is to be distributed
equally among all the directors.
You are required to examine with reference to the provisions of the Companies Act, 2013
the validity of the above proposals.
18. On an application filed from shareholder of Company, Tribunal (NCLT) passed an order on
20th December, 2019 without the consent of parties. Mr. Rama whose family’s condition
was not good so didn’t take much interest in order of tribunal but after few days due to
aggrieved by an order, he filled an appeal before Appellate Tribunal (NCLAT) on 1 5th
March, 2020 showing sufficient cause of delay for not filling appeal up to 45 days from the
date of order. Even after receiving order from Appellate Tribunal dated 30th April, 2020,
Mr. Rama was not satisfied and desires to make application to Supreme Court on 30th
October, 2020.
Considering the given situation, examine whether Appeal to be filed before the Supreme
Court will be admissible?
19. 'X' Stock Exchange Limited was granted recognition by Securities and Exchange Board of
India (SEBI). The stock brokers of the Stock Exchange did not pay much heed to the
concept of governance and focused on increasing their wealth and snubbed the protection
of investors. Their activities were against the interest of the trade and general public.
Examine whether the SEBI has the power to withdraw the recognition granted to 'X' Stock
Exchange Limited under the provisions of Securities Contracts (Regulations) Act, 1956?
Whether a person can be a member of an unrecognized Stock Exchange for the purpose
of performing any contracts in Securities?

20. The composition of Audit Committee of MKBTC Limited, an unlisted Public Company, as
on 31-3-2019 comprised of 7 Directors including 4 Independent Directors. The majority of
the members of the Audit Committee has the ability to read and understand the financial
statements but none of them has accounting or related financial management expertise.
The Company listed its Securities in a recognized Stock Exchange in the month of August
2019. Referring to the regulations of Securities and Exchange Board of India [Listing
Obligations and Disclosure Requirements] Regulations 2015, decide whether the existing
Audit Committee can continue after listing of its Securities?
21. Mr. Kunal used his car for smuggling cash and for other illegal activities. On trial before
the Special Court, it was found that an offence of money laundering was committed by Mr.
'Kunal'. Also found that the car was under hypothecation to a Bank for the car loan
obtained. Referring to provisions of the PMLA, 2002, examine whether the car can be
confiscated in the light of the given situation?
22. Quality Rubber Limited, a supplier of raw materials filed a petition before the NCLT for the
recovery of ` 10,00,000 against Smart Latex Limited. Smart Latex Limited, the Corporate
Debtor, has other financial creditors to the extent of ` 1,50,00,000 and they also joined
together and filed petitions to NCLT. The Corporate Debtor has a total of 40 financial
creditors and 2 operational creditors. Further, all the financial creditors are having equal
voting rights/shares.
Notice was issued on 1 st August, 2019 for the conduct of the first meeting to be held on 5 th
August, 2019 at a common venue. The meeting was attended by all 40 financial creditors
and 2 operational creditors. A resolution was passed to appoint Mr. Naveen as a Resolution
Professional. 25 of the financial creditors voted in favour of the resolution and 10 voted
against the resolution and 5 financial creditors and 2 operational creditors abstained from
voting.
Decide in terms of the given information whether the resolution passed to appoint
Mr. Naveen is valid? In the light of the provisions of Insolvency and Bankruptcy Code, 2016
read with rules framed thereunder, explain the requirements of valid quorum for the
conduct of the meeting.
23. XYZ Foundation, a society registered under the Societies Registration Act, 1860, has
received foreign contribution from a Mala Company LLC, a company incorporated in
Singapore. XYZ Foundation deposited the amount of foreign contribution in a bank and
earned interest on it. XYZ Foundation desires to invest maturity proceeds from deposits in
mutual funds. You are required to advise whether XYZ Foundation is allowed to make such
investment considering the provisions of the Foreign Contribution (Regulation) Act, 2010
(Note: XYZ Foundation has obtained certificate of registration under section 11 of the Act).

24. Mr. Ramesh Kulkarni conducts private tuition classes from his residence. It was alleged by
the Enforcement Directorate that Mr. Kulkarni has under reported his income and collected
income in tax and used the proceeds to purchase a house property in Marol, Mumbai. The
ED officers through written orders provisionally attached the properties on suspicion of it
being derived from the proceeds of crime. Comment on the validity of the provisional
attachment on the order issued by the ED officers.
SUGGESTED ANSWERS/HINTS
Answers to Integrated Case Scenario/Independent MCQs

1. (d)
2. (a)
3. (a)
4. (a)
5. (d)
6. (a)
7. (b)
8. (c)
9. (d)
10. (c)
11. (c)
12. (c)
13. (d)
14. (b)
15. (b)
Answers to Descriptive Questions
16. (a) According to Section 161(2) of the Companies Act, 2013, the Board of Directors of a
company may, if so authorised by its articles or by a resolution passed by the
company in general meeting, appoint a person, not being a person holding any
alternate directorship for any other director in the company or holding directorship in
the same company, to act as an alternate director for a director during his absence
for a period of not less than three months from India.

According to section 165, no person shall hold office as a director, including any
alternate directorship, in more than twenty companies at the same time. However,
the maximum number of public companies in which a person can be appointed as a
director shall not exceed ten.
Hence, in the instant case, a person can be appointed as an alternate director for
only one director in the same company but maximum twenty different companies.
(b) According to second proviso to section 161(2), an alternate director shall not hold
office for a period longer than that permissible to the director in whose place he has
been appointed and shall vacate the office if and when the director in whose place he
has been appointed returns to India.
Third proviso says that if the term of office of the original director is determined before
he so returns to India, any provision for the automatic re-appointment of retiring
directors in default of another appointment shall apply to the original, and not to the
alternate director.
Hence, in the instant case, the alternate director shall hold office till the time original
director returns to India.
(c) As per section 161(2), the Board of Directors of a company may, if so authorised by
its articles or by a resolution passed by the company in general meeting, appoint a
person, not being a person holding any alternate directorship for any other director in
the company or holding directorship in the same company, to act as an alternate
director for a director during his absence for a period of not less than three months
from India.
From the above provision, it is clear that an alternate director can be appointed for
any director by the board of directors and not by an Executive Director/Whole Time
Director/Managing Director for themselves.
17. International Technologies Limited, a listed company, being managed by a Managing
Director proposes to pay the following managerial remuneration:
(i) Commission at the rate of 5% of the net profits to its Managing Director, Mr.
Kamal: Part (i) of the Second Proviso to Section 197(1), provides that except with the
approval of the company in general meeting by a special resolution, the remuneration
payable to any one managing director or whole time director or manager shall not
exceed 5% of the net profits of the company and if there is more than one such
director then remuneration shall not exceed 10% of the net profits to all such directors
and manager taken together.
In the present case, since the International Technologies Limited is bein g managed
by a Managing Director, the commission at the rate of 5% of the net profit to Mr.
Kamal, the Managing Director is allowed and no approval of company in general
meeting is required.

(ii) The directors other than the Managing Director are proposed to be paid monthly
remuneration of ` 50,000 and also commission at the rate of 1 % of net profits of the
company subject to the condition that overall remuneration payable to ordinary
directors including monthly remuneration payable to each of them shall not exceed 2
% of the net profits of the company. Part (ii) of the Second Proviso to Section 197(1)
provides that except with the approval of the company in general meeting by a special
resolution, the remuneration payable to directors who are neither managing directors
nor whole time directors shall not exceed-
(A) 1% of the net profits of the company, if there is a managing or whole -time
director or manager;
(B) 3% of the net profits in any other case.
In the present case, the maximum remuneration allowed to directors other than
managing or whole-time director is 1% of the net profits of the company because the
company is managed by a managing director. Hence, if the company wants to fix
directors’ remuneration at not more than 2% of the net profits of the company, the
approval of the company in general meeting is required by passing a special
resolution.
18. According to Section 423 of the Companies Act, 2013, any person aggrieved by an order
of the Appellate Tribunal may prefer an appeal to the Supreme Court.
Every appeal shall be filed within a period of 60 days from the date on which a copy of the
order of the Appellate Tribunal is made available to the person aggrieved and shall be in
such form, and accompanied by such fees, as may be prescribed.
Supreme Court may entertain an appeal even after the expiry of the said period of 60 days
from the date aforesaid, but within a further period not exceeding 60 days, if it is satisfied
that the appellant was prevented by sufficient cause from filing the appeal within period.
In above case, since Mr. Rama even aggrieved by an order of Appellate Tribunal desires
to fill an application before Supreme Court on 30 th October 2020. But as Supreme Court
can entertain appeal only upto 60 days + 60 Days (Extension if sufficient cause). Since
this appeal was to be filled beyond 120 days by Mr. Rama, so, appeal to be filed before
the Supreme Court will not be admissible.
19. (i) Section 5(1) of the Securities Contracts (Regulations) Act, 1956 states that if the
Central Government/ SEBI is of the opinion that the recognition granted to a stock
exchange under the provisions of this Act, should, in the interest of the trade or in
the public interest, be withdrawn, the Central Government or SEBI may serve on the
governing body of the stock exchange, a written notice that the Central Government
or SEBI is considering the withdrawal of the recognition for the reasons stated in the
notice and after giving an opportunity to the governing body to be heard in the matter,
the Central Government/SEBI may withdraw the recognition granted to the stock
exchange.

Thus, Central Government or SEBI can withdraw the recognition of ‘X’ Stock
Exchange Limited on the grounds that their activities were against the interest of the
trade and general public.
(ii) As per section 19 of the Securities Contracts (Regulations) Act, 1956, no person shall
organise or assist in organising or be a member of any stock exchange (other than a
recognised stock exchange) for the purpose of assisting in, entering into or
performing any contracts in securities, except with the approval of Central
Government or SEBI.
Hence, no person can be a member of an unrecognised Stock exchange for the
purpose of performing any contracts in Securities, except with the approval of Central
Government or SEBI.
20. Audit Committee: According to Regulation 18 of SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015, every listed entity shall constitute a qualified and
independent audit committee which shall have:
(a) Minimum three directors as members.
(b) Two-thirds of the members of audit committee shall be independent directors.
(c) All members of audit committee shall be financially literate and at least one member
shall have accounting or related financial management expertise.
As per the facts of the question, MKBTC Limited, listed its securities in a recognised Stock
Exchange in the month of August, 2019. In order to comply with the requirements of SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015, the company
requires to do the following:
(i) The audit committee of MKBTC Limited already has 7 directors as members, which
is in compliance.
(ii) The audit committee has 4 directors as independent directors. However, once the
company gets listed, at least 5 [7*(2/3)] directors shall be independent directors.
Thus, they need to change the composition of audit committee once the company
gets listed on stock exchange.
(iii) In the existing audit committee though majority of the members have the ability to
read and understand the financial statement but none of them has accounting or
related financial management expertise. However, once the company gets listed it is
required that all members of audit committee shall be financially literate and at least
one member shall have accounting or related financial management expertise.
Hence, it is required that the company should appoint at least one member in the
audit committee who shall have accounting or related financial management
expertise.

In view of above, the existing audit committee cannot continue after listing of its
securities.
21. Vesting of property in Central Government [Section 9]: Where an order of confiscation
has been made under section 8(5) or section 8(7) or section 58B or section 60(2A) of
PMLA, 2002 in respect of any property of a person, all the rights and title in such property
shall vest absolutely in the Central Government free from all encumbrances.
However, where the Special Court or the Adjudicating Authority, as the case may be, after
giving an opportunity of being heard to any other person interested in the property attached
under this Chapter, or seized or frozen, is of the opinion that any encumbrance on the
property or lease-hold interest has been created with a view to defeat the provisions of this
Chapter, it may, by order, declare such encumbrance or lease-hold interest to be void and
thereupon the aforesaid property shall vest in the Central Government free from such
encumbrances or lease-hold interest.
In the instant case, Mr. Kunal used his car for smuggling cash and for other illegal activities
for committing of an offence under the purview of the Prevention of Money Laundering Act.
The Special Court found on conclusion of trial that an offence of money laundering was
committed by Mr. Kunal. The car was under hypothecation with the bank for the car loan
obtained. As the encumbrance on the car has been created to defeat the provisions and
special court may order to declare such encumbrance to be void and therefore the car can
be confiscated and shall vest in the Central Government.
22. According to section 22 of the Insolvency and Bankruptcy Code, 2016, the first meeting of
the committee of creditors shall be held within seven days of the constitutio n of the
committee of creditors. The committee of creditors in the first meeting may by a majority
vote of not less than sixty-six percent of the voting share of the financial creditors, either
resolve to appoint the interim resolution professional as a resolution professional or to
replace the interim resolution professional by another resolution professional.
A meeting of committee of creditors shall quorate if members of the committee of creditors
representing at least thirty three percent of the voting rights are present either in person or
by video/audio means.
The adjourned meeting shall quorate with the members of the committee attending the
meeting.
As per the facts of the question and the provisions of law, the requisite quorum was present
in the meeting as all 40 financial creditors attended the meeting and 5 abstained from
voting.

The Act requires that not less 66% of the financial creditors shall resolve to appoint
resolution professional. However, in the given case 71.4% [(25/35)* 100] voted in favour
of Mr. Naveen. Hence, the said appointment is valid.
23. As per the explanation 2 to the definition of the Foreign Contribution under the Act, the
interest accrued on the foreign contribution deposited in any bank referred to in section
17(1) or any other income derived from the foreign contribution or interest thereon shall
also be deemed to be foreign contribution within the meaning of this clause.
Further as per section 8 of the Act, every person, who is registered and granted a certificate
or given prior permission under this Act and receives any foreign contribution, shall utilise
such contribution for the purpose for which the contribution has been received.
Provided that any foreign contribution or any income arising out of it shall not be used for
speculative business, where as speculative business includes investment in mutual fund.
XYZ Foundation cannot use the contribution as well as the interest component for the
Investment in Mutual Fund.
24. As per Section 5(5) of the Prevention of Money Laundering Act, 2002, the Director or any
other officer who provisionally attaches any property under sub-section (1) shall, within a
period of thirty days from such attachment, file a complaint stating the facts of such
attachment before the Adjudicating Authority.
As per Section 8(4) of the Prevention of Money Laundering Act, 2002, where the
provisional order of attachment made under sub-section (1) of section 5 has been
confirmed under sub-section (3), the Director or any other officer authorised by him in this
behalf shall forthwith take the possession of the property attached under section 5 or frozen
under sub-section (lA) of section 17, in such manner as may be prescribed. Accordingly ,
the Director is to file a petition with the Adjudicating Authority within 30 days of attachment.
After order of attachment is confirmed, the Director take possession of the attached
property.

PART – I: RELEVANT AMENDMENTS APPLICABLE FOR MAY 2020 EXAMINATION
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc.
For May 2020 examinations for Paper 4: Corporate and Economic Laws, the significant
amendments made in the respective subject for the period 1 st May 2019 to 31st October, 2019
are relevant and applicable for said examinations.
Students are advised to refer study material of August 2019 edition with these applicable
amendments.

Companies (Amendment) Act, 2019: On July 31, 2019, the Ministry of Corporate Affairs
introduced the Companies (Amendment) Act, 2019. The Amendment considers changes
brought in by the Companies (Amendment) Ordinance, 2018, the Companies (Amendment)
Ordinance Act, 2019 and the Companies (Amendment) Second Ordinance, 2019 to further
amend the Companies Act, 2013.
The Amendment has reinforced the 2018 Ordinance and 2019 Ordinances, and all provisions
are deemed to have come into force from November 2, 2018 except some sections which have
come into force on August 15, 2019.
Enforcement of the Companies (Appointment and Qualification of Directors) Third
Amendment Rules, 2019 via G.S.R. 528(E) dated 25th July, 2019
The Central Government makes the Companies (Appointment and Qualification of Directors)
Third Amendment Rules, 2019 to amend Companies (Appointment and Qualification of
Directors) Rules, 2014.
In Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 12A, -
(i) for the words “who has been allotted”, the words “who holds” shall be substituted;
(ii) for the words, letters and figures “submit e-form DIR-3-KYC to the Central Government on
or before 30th June of immediate next financial year”, the words, letters and figures “submit
e-form DIR-3-KYC for the said financial year to the Central Government on or before 30th
September of immediate next financial year” shall be substituted;
(iii) after the proviso, the following provisos shall be inserted, namely:-
“Provided further that where an individual who has already submitted e -form DIR-3 KYC in
relation to any previous financial year, submits web-form DIR-3 KYC-WEB through the web

service in relation to any subsequent financial year it shall be deemed to be compliance of the
provisions of this rule for the said financial year:
Provided also that in case an individual desires to update his personal mobile number or the e-
mail address, as the case may be, he shall update the same by submitting e -form DIR-3 KYC
only.
Provided also that fee for filing e-form DIR-3 KYC or web-form DIR-3 KYC-WEB through the
web service, as the case may be, shall be payable as provided in Companies (Registration
Offices and Fees) Rules, 2014.”.
Enforcement of the Companies (Meetings of Board and its Powers) Amendment Rules,
2019 dated 11th October, 2019
The Central Government makes the Companies (Meetings of Board and its Powers) Amendment
Rules, 2019 to amend the Companies (Meetings of Board and its Powers) Rules, 2014.
In the Companies (Meetings of Board and its Powers) Rules, 2014, in rule 11, in sub-rule (2),
for the words "business of financing of companies", the words "business of financing industrial
enterprises" shall be substituted.
Relevant Amendment Date of
Section Enforcement
Amendment of (a) in sub-section (8), for the words “If the Director, 15th August,
Section 212 Additional Director or Assistant Director”, the 2019
words “If any officer not below the rank of Assistant
Director” shall be substituted;
(b) in sub-section (9), for the portion beginning with
the words “The Director” and ending with the word,
brackets and figure “sub-section (8)”, the words,
brackets and figure “The officer authorised under
sub-section (8) shall, immediately after arrest of
such person under such sub-section” shall be
substituted;
(i) for the words “Judicial Magistrate”, the words
“Special Court or Judicial Magistrate” shall be
substituted;
(ii) in the proviso, for the words “Magistrate’s
court”, the words “Special Court or
Magistrate’s court” shall be substituted;

(d) after sub-section (14), the following sub-section

“(14A) Where the report under sub-section (11) or sub-
section (12) states that fraud has taken place in a
company and due to such fraud any director, key
managerial personnel, other officer of the company or
any other person or entity, has taken undue advantage
or benefit, whether in the form of any asset, property or
cash or in any other manner, the Central Government
may file an application before the Tribunal for
appropriate orders with regard to disgorgement of such
asset, property or cash and also for holding such
director, key managerial personnel, other officer or any
other person liable personally without any limitation of
liability.”
Clarification under Section 232(6) of the Companies Act, 2013
A clarification has been issued by the MCA on 21 st August, 2019 regarding section 232(6).
According to the clarification,
(a) The provision of section 232(6) of the Act enables the companies in question to choose
and state in the scheme an 'appointed date'. This date may be a specific calendar date or
may be tied to the occurrence of an event such as grant of license by a competent authority
or fulfilment of any preconditions agreed upon by the parties, or meeting any other
requirement as agreed upon between the parties, etc., which are relevant to the scheme.
(b) The 'appointed date' identified under the scheme shall also be deemed to be the
'acquisition date' and date of transfer of control for the purpose of conforming to accounting
standards (including Ind-AS 103 Business Combinations).
(c) Where the 'appointed date' is chosen as a specific calendar date, it may precede the date
of filing of the application for scheme of merger/amalgamation in NCLT. However, if the
'appointed date' is significantly ante-dated beyond a year from the date of filing, the
justification for the same would have to be specifically brought out in the scheme and it
should not be against public interest.
(d) The scheme may identify the 'appointed date' based on the occurrence of a trigger event
which is key to the proposed scheme and agreed upon by the parties to the scheme. This
event would have to be indicated in the scheme itself upon occurrence of which the scheme
would become effective. However, in case of such event based date being a date
subsequent to the date of filing the order with the Registrar under section 232(5), the
company shall file an intimation of the same with the Registrar within 30 days of such
scheme coming into force.


Section Enforcement
Amendment (a) in sub-section (2), the following proviso shall be 15th August,
of Section inserted, namely:— 2019
241 “Provided that the applications under this sub-
section, in respect of such company or class of
companies, as may be prescribed, shall be made
before the Principal Bench of the Tribunal which
shall be dealt with by such Bench.”;
(b) after sub-section (2), the following sub-sections
“(3) Where in the opinion of the Central
Government there exist circumstances
suggesting that––
(a) any person concerned in the conduct
and management of the affairs of a
company is or has been in connection
therewith guilty of fraud, misfeasance,
persistent negligence or default in
carrying out his obligations and functions
under the law or of breach of trust;
(b) the business of a company is not or has
not been conducted and managed by
such person in accordance with sound
business principles or prudent
commercial practices;
(c) a company is or has been conducted and
managed by such person in a manner
which is likely to cause, or has caused,
serious injury or damage to the interest
of the trade, industry or business to
which such company pertains; or
(d) the business of a company is or has
been conducted and managed by such
person with intent to defraud its
creditors, members or any other person
or otherwise for a fraudulent or unlawful
purpose or in a manner prejudicial to
public interest, the Central Government

may initiate a case against such person

and refer the same to the Tribunal with
a request that the Tribunal may inquire
into the case and record a decision as
to whether or not such person is a fit
and proper person to hold the office of
director or any other office connected
with the conduct and management of
any company.
(4) The person against whom a case is referred
to the Tribunal under sub-section (3), shall be
joined as a respondent to the application.
(5) Every application under sub-section (3)––
(a) shall contain a concise statement of
such circumstances and materials as
the Central Government may consider
necessary for the purposes of the
inquiry; and
(b) shall be signed and verified in the
manner laid down in the Code of Civil
Procedure, 1908, for the signature and
verification of a plaint in a suit by the
Central Government.”.
Amendment after sub-section (4), the following sub-section shall be 15th August,
of Section inserted, namely:–– 2019
242 “(4A) At the conclusion of the hearing of the case in
respect of sub-section (3) of section 241, the Tribunal
shall record its decision stating therein specifically as to
whether or not the respondent is a fit and proper person
to hold the office of director or any other office
connected with the conduct and management of any
company.”.
Amendment (a) after sub-section (1), the following sub-sections 15th August,
of Section shall be inserted, namely:— 2019
243
“(1A)The person who is not a fit and proper
person pursuant to sub-section (4A) of
section 242 shall not hold the office of a
director or any other office connected with
the conduct and management of the affairs
of any company for a period of five years
from the date of the said decision:

Provided that the Central Government may,

with the leave of the Tribunal, permit such
person to hold any such office before the
expiry of the said period of five years.
(1B) Notwithstanding anything contained in any
other provision of this Act, or any other law
for the time being in force, or any contract,
memorandum or articles, on the removal of a
person from the office of a director or any
other office connected with the conduct and
management of the affairs of the company,
that person shall not be entitled to, or be
paid, any compensation for the loss or
termination of office.”;
(b) in sub-section (2), after the word, brackets and
figure “sub-section (1)”, the words, brackets,
figure and letter “or sub-section (1A)” shall be
inserted.
2. Enforcement of the National Company Law Tribunal (Second Amendment) Rules,
2019 vide Notification G.S.R. 351(E) dated 8th May, 2019
The Central Government makes the National Company Law Tribunal (Second Amendment)
Rules, 2019 to amend the National Company Law Tribunal Rules, 2016.
In National Company Law Tribunal Rules, 2016,
in rule 84, after sub-rule (2), the following sub-rules shall be inserted, namely: –
“(3) In case of a company having a share capital, the requisite number of member or
members to file an application under sub-section (1) of section 245 shall be -
(i) (a) at least five per cent. of the total number of members of the company; or
(b) one hundred members of the company,
(ii) (a) member or members holding not less than five per cent. of the issued share
capital of the company, in case of an unlisted company;
(b) member or members holding not less than two per cent. of the issued share
capital of the company, in case of a listed company.
(4) The requisite number of depositor or depositors to file an application under sub -
section (1) of section 245 shall be -
(i) (a) at least five per cent. of the total number of depositors of the company; or
(b) one hundred depositors of the company,

(ii) depositor or depositors to whom the company owes five per cent. of total
deposits of the company.”
CHAPTER 7: WINDING UP
sections Enforcement
Amendment of in sub-section (3), for the words, brackets and 15th August, 2019
Section 272 letter “or clause (e) of that sub-section”, the words
“of that section” shall be substituted.
1. Amendment in Section 406: Section 406 has been substituted by the Companies
(Amendment) Act, 2017, with effect from 15th August, 2019
Section 406: (1) In this section, "Nidhi" or "Mutual Benefit Society" means a company
which the Central Government may, by notification in the Official Gazette, declare to be a
Nidhi or Mutual Benefit Society, as the case may be.
(2) The Central Government may, by notification in the Official Gazette , direct that any
of the provisions of this Act specified in the notification—
(a) shall not apply to any Nidhi or Mutual Benefit Society; or
(b) shall apply to any Nidhi or Mutual Benefit Society with such exceptions,
modifications and adaptations as may be specified in the notification.
(3) A copy of every notification proposed to be issued under sub-section (2), shall be laid
in draft before each House of Parliament, while it is in session, for a total period of
thirty days, and if, both Houses agree in disapproving the issue of notification or both
Houses agree in making any modification in the notification, the notification shall not
be issued or, as the case may be, shall be issued only in such modified form as may
be agreed upon by both the Houses.
(4) In reckoning any such period of thirty days as is referred to in sub-section (3), no
account shall be taken of any period during which the House referred to in sub-section
(3) is prorogued or adjourned for more than four consecutive days.
(5) The copies of every notification issued under this section shall, as soon as may be
after it has been issued, be laid before each House of Parliament.
2. Enforcement of the Nidhi (Amendment) Rules, 2019 via G.S.R. 467(E) dated
15th August, 2019
The Central Government makes the Nidhi (Amendment) Rules, 2019 to amend Nidhi Rules,
2014.

In the Nidhi rules, 2014 (hereinafter referred to as “said rules”):

1. in rule 2, after clause (c), the following clause shall be inserted, namely:-
“(d) every company declared as Nidhi or Mutual Benefit Society under sub -section
(1) of section 406 of the Act”.
2. in rule 3, after clause (d), the following clause shall be inserted, namely:-
‘(da) “Nidhi” means a company which has been incorporated as a Nidhi with the object
of cultivating the habit of thrift and savings amongst its members, receiving deposits
from, and lending to, its members only, for their mutual benefit, and which complies
with the rules made by the Central Government for regulation of such class of
companies.’.
3. In the said rules, after rule 3, the following rule shall be inserted, namely:-
“3A. Declaration of Nidhis.─ The Central Government, on receipt of application (in
Form NDH-4 along with fee thereon) of a public company for declaring it as Nidhi and
on being satisfied that the company meets the requirements under these rules, shall
notify the company as a Nidhi in the Official Gazette:
Provided that a Nidhi incorporated under the Act on or after the commencement of
the Nidhi (Amendment) Rules, 2019 shall file Form NDH-4 within sixty days from the
date of expiry of:-
(a) one year from the date of its incorporation; or
(b) the period up to which extension of time has been granted by the Regional
Director under sub-rule (3) of rule 5:
Provided further that nothing in the first proviso shall prevent a Nidhi from filing Form
NDH-4 before the period referred therein:
Provided also that that in case a company does not comply with the requirements of
this rule, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any
alteration of share capital) and Form PAS-3 (Return of Allotment).”.
4. In the said rules, in rule 4, -
(i) in sub-rule (1), the words, “to be incorporated under the Act” shall be omitted;
(ii) in sub-rule (5), the words “Company incorporated as a” shall be omitted.
5. In the said rules, in rule 5, –
(i) in sub-rule (1), for the words “from the commencement of these rules”, the words
“from the date of its incorporation” shall be substituted;
(ii) in sub-rule (3), before the Explanation, the following proviso shall be inserted, namely:-
“Provided that the Regional Director may extend the period upto one y ear from
the date of receipt of application”.

(iii) in sub-rule (4), after the words, brackets and figure “contained in sub-rule (1)”,
the words, brackets and figures “and gets itself declared under sub-section (1)
of section 406” shall be inserted.
6. In the said rules, in rule 7, in sub-rule (1), after the words “shall issue” the words “fully
paid up” shall be inserted.
7. In the said rules, in rule 12,─
(i) in sub-rule (1) after clause (b), the following clause shall be inserted namely: -
“(ba) The date of declaration or notification as Nidhi”;”;
(ii) in sub-rule (2), in clause (a), for the words “Registrar of Companies”, the words
“Bench of the National Company Law Tribunal” shall be substituted.
8. In the said rules, in rule 23, in sub-rule (2),-
(i) for the words “concerned Regional Director”, the words, “Central Government”
shall be substituted;
(ii) for the words “such Regional Director”, the words, “Central Government” shall
be substituted;
(iii) in the proviso, for the words “Regional Director”, the words, “Central
Government” shall be substituted.
9. In the said rules, after rule 23, the following rules shall be inserted, namely:-
23A. Compliance with rule 3A by certain Nidhis:- Every company referred to in
clause (b) of rule 2 and every Nidhi incorporated under the Act, before the
commencement of Nidhi (Amendment) Rules, 2019, shall also get itself declared as
such in accordance with rule 3A within a period of one year from the date of its
incorporation or within a period of six months from the date of commencement of
Nidhi (Amendment) Rules, 2019, whichever is later:
Provided that in case a company does not comply with the requirements of this rule,
it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any alteration of
share capital) and Form PAS-3 (Return of Allotment).
23B. Companies declared as Nidhis under previous company law to file Form
NDH-4:- Every company referred in clause (a) of rule 2 shall file Form NDH-4
alongwith fees as per the Companies (Registration Offices and Fees) Rules, 2014 for
updating its status:
Provided that no fees shall be charged under this rule for filing Form NDH-4, in case
it is filed within six month of the commencement of Nidhi (Amendment) Rules, 2019:
Provided further that, in case a company does not comply with the requirements of
this rule, it shall not be allowed to file Form No. SH-7 (Notice to Registrar of any
alteration of share capital) and Form PAS-3 (Return of Allotment).

CHAPTER 1: THE FOREIGN EXCHANGE AND MANAGEMENT ACT, 1999

I Amendment in 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 —
(a) any class or classes of capital account transactions, involving debt
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
transactions; and
(c) any conditions which may be placed on such transactions.
(3) [***]
(4) A person resident in India may hold, own, transfer or invest in foreign currency,
foreign security or any immovable property situated outside India if such cu rrency,
security or property was acquired, held or owned by such person when he was
resident outside India or inherited from a person who was resident outside India.
(5) A person resident outside India may hold, own, transfer or invest in Indian currency,
security or any immovable property situated in India if such currency, security or
property was acquired, held or owned by such person when he was resident in India
or inherited from a person who was resident in India.
(6) Without prejudice to the provisions of this section, the Reserve Bank may, by
regulation, prohibit, restrict, or regulate establishment in India of a branch, office or

other place of business by a person resident outside India, for carrying on any activity
relating to such branch, office or other place of business.
(7) 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.
II. Amendments in External Commercial Borrowings
Vide FED Master Direction No.5/2018-19, amendments have been made in the
Transactions on account of External Commercial Borrowings (ECB) . Here is the updated
master direction –external commercial borrowings.
Within the contours of the Regulations, Reserve Bank of India also issues directions to
Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA),
1999. These directions lay down the modalities as to how the foreign exchange business
has to be conducted by the Authorised Persons with their customers/constituents with a
view to implementing the regulations framed.
Index
Para. Particulars
No.
External Commercial Borrowings Framework
2 Introduction
2.1 External Commercial Borrowings Framework
2.2 Limit and leverage
3 Issuance of Guarantee, etc. by Indian banks and Financial Institutions
4 Parking of ECB proceeds
4.1 Parking of ECB proceeds abroad
4.2 Parking of ECB proceeds domestically
5 Procedure of raising ECB
6 Reporting Requirements
6.1 Loan Registration Number
6.2 Changes in terms and conditions of ECB
6.3 Monthly reporting of actual transactions
6.4 Late Submission Fee for delay in reporting
6.5 Standard Operating Procedure for Untraceable Entities

7 Powers delegated to AD Category I banks to deal with ECB cases

7.1 Change of the AD Category I bank
7.2 Cancellation of LRN
7.3 Refinancing of existing ECB
7.4 Conversion of ECB into equity
7.5 Security for raising ECB
7.6 Additional Requirements
8 Special Dispensations under the ECB framework
8.1 ECB facility for Oil Marketing Companies
8.2 ECB facility for Start-ups
9 Borrowing by Entities under Investigation
10 ECB by entities under restructuring/ ECB facility for refinancing stressed assets
11 Dissemination of information
12 Compliance with the guidelines
2. Introduction: External Commercial Borrowings are commercial loans raised by
eligible resident entities from recognised 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 parameters given below apply in totality and not
on a standalone basis.
2.1. ECB Framework: The framework for raising loans through ECB (hereinafter
referred to as the ECB Framework) comprises the following two options:
Sr.No. Parameters FCY denominated ECB INR denominated ECB

i Currency of Any freely convertible Indian Rupee (INR)
borrowing Foreign Currency
ii Forms of Loans including bank Loans including bank
ECB loans; floating/ fixed rate loans; floating/ fixed rate
notes/ bonds/ debentures notes/bonds/ debentures/
(other than fully and preference shares (other
compulsorily convertible than fully and
instruments); Trade credits compulsorily convertible
beyond 3 years; 1FCCBs; instruments); Trade
1 FCCB – Foreign Currency Convertible Bond

2FCEBs and Financial credits beyond 3 years;

Lease. and
Financial Lease. Also,
plain vanilla
Rupee denominated
bonds issued overseas,
which can be either
placed privately or listed
on exchanges as per host
country regulations.
iii Eligible All entities eligible to a) All entities eligible to
borrowers receive 3FDI. Further, the raise 4FCY
following entities are also ECB; and
eligible to raise ECB:
b) Registered entities
i. Port Trusts; engaged in micro-
ii. Units in SEZ; finance activities,
iii. SIDBI; and iv. EXIM viz., registered Not
Bank of India. for Profit companies,
registered
societies/trusts/
cooperatives and
Non-Government
Organisations.
iv Recognised The lender should be resident of 5FATF or 6IOSCO
lenders compliant country, including on transfer of ECB.
However,
a) Multilateral and Regional Financial Institutions
where India is a member country will also be
considered as recognised lenders;
b) Individuals as lenders can only be permitted if they
are foreign equity holders or for subscription to
bonds/debentures listed abroad; and
c) Foreign branches / subsidiaries of Indian banks
are permitted as recognised lenders only for FCY
ECB (except FCCBs and FCEBs).
2 FCEB – Foreign Currency Exchangeable Bond

3 FDI – Foreign Direct Investment
4 FCY – Foreign Currency
5 FATF – Financial Action Task Force
6 IOSCO – International Organization of Securities Commission

Foreign branches / subsidiaries of Indian banks, subject

to applicable prudential norms, can participate as
arrangers/underwriters/market-makers/traders for
Rupee denominated Bonds issued overseas. However,
underwriting by foreign branches/subsidiaries of Indian
banks for issuances by Indian banks will not be allowed.
V Minimum MAMP for ECB will be 3 years. Call and put options, if
Average any, shall not be exercisable prior to completion of
Maturity minimum average maturity. However, for the specific
categories mentioned below, the MAMP will be as
Period
prescribed therein:
(MAMP)
Sr.No. Category MAMP
(a) ECB raised by manufacturing 1 year
companies up to USD 50 million
or its equivalent per financial
year.
(b) ECB raised from foreign equity 5 years
holder for working capital
purposes, general corporate
purposes or for repayment of
Rupee loans
7(c) ECB raised for 10
(i) working capital purposes or years
(ii) on-lending by NBFCs for
working capital purposes or
(d) ECB raised for 7 years
(i) repayment of Rupee loans
availed domestically for capital
expenditure
same purpose
(e) ECB raised for 10
(i) repayment of Rupee loans years
availed domestically for

purposes other than capital

expenditure
same purpose
for the categories mentioned at (b) to (e) –
(i) ECB cannot be raised from foreign branches /
subsidiaries of
Indian banks
(ii) the prescribed MAMP will have to be strictly
complied with under all circumstances.
vi All-in-cost Benchmark rate plus 450 bps spread.
ceiling per
annum
vii Other Prepayment charge/ Penal interest, if any, for default
costs or breach of covenants, should not be more than 2 per
cent over and above the
contracted rate of interest on the outstanding principal
amount and will be outside the all-in-cost ceiling.
Viii End-uses The negative list, for which the ECB proceeds cannot
(Negative be utilised, would include the following:
list) a) Real estate activities.
b) Investment in capital market.
c) Equity investment.
d) 8Working capital purposes, except in case of ECB
mentioned at v(b) and v(c) above.
e) General corporate purposes, except in case of
ECB mentioned at v(b) and v(c) above.
f) Repayment of Rupee loans, except in case of
ECB mentioned at v(d) and v(e) above.
g) On-lending to entities for the above activities,
except in case of ECB raised by NBFCs as given
at v(c), v(d) and v(e) above.
8
Substituted vide A.P.(DIR Series) Circular No. 04 dated July 30, 2019. Prior to substitution it read as below:
a) Working capital purposes except from foreign equity holder.
b) General corporate purposes except from foreign equity holder.
c) Repayment of Rupee loans except from foreign equity holder.
d) On-lending to entities for the above activities.

ix Exchange Change of currency of For conversion to Rupee,

rate FCY ECB into INR ECB the exchange rate shall
can be at the exchange be the rate prevailing on
rate prevailing on the date the date of settlement.
of the agreement for such
change between the
parties concerned or at an
exchange rate, which is
less than the rate
prevailing on the date of
the agreement, if
consented to by the ECB
lender.
x Hedging The entities raising ECB Overseas investors are
provision are required to follow the eligible to hedge their
guidelines for hedging exposure in Rupee
issued, if any, by the through permitted
concerned sectoral or derivative products with
prudential regulator in AD Category I banks in
respect of foreign currency India. The investors can
exposure. also access the domestic
Infrastructure space market through branches
companies shall have a / subsidiaries of Indian
Board approved risk banks abroad or
management policy. branches of foreign
Further, such companies banks with Indian
are required to presence on a back to
mandatorily hedge 70 per back basis.
cent of their ECB exposure
in case the average
maturity of the ECB is less
than 5 years. The
designated AD Category-I
bank shall verify that 70 per
cent hedging requirement is
complied with during the
currency of the ECB and
report the position to RBI
through Form ECB 2. The
following operational
aspects with respect to
hedging should be ensured:

a. Coverage: The ECB

borrower will be
required to cover the
principal as well as the
coupon through
financial hedges. The
financial hedge for all
exposures on account
of ECB should start
from the time of each
such exposure (i.e.
the day the liability is
created in the books of
the borrower).
b. Tenor and rollover: A
minimum tenor of one
year for the financial
hedge would be
required with periodic
rollover, duly ensuring
that the exposure on
account of ECB is not
unhedged at any point
during the currency of
the ECB.
c. Natural Hedge:
Natural hedge, in lieu
of financial hedge, will
be considered only to
the extent of offsetting
projected cash flows /
revenues in matching
currency, net of all
other projected
outflows. For this
purpose, an ECB may
be considered
naturally hedged if the
offsetting exposure

has the maturity/cash

flow within the same
accounting any other
arrangements/
structures, where
revenues are indexed
to foreign currency will
not be considered as a
natural hedge.
xi Change of Change of currency of Change of currency from
currency of ECB from one freely INR to any freely
borrowing convertible foreign convertible foreign
currency to any other currency is not permitted.
freely convertible foreign
currency as well as to INR
is freely permitted.
Note: The ECB framework is not applicable in respect of investments in Non -
Convertible Debentures in India made by Registered Foreign Portfolio Investors.
9Lending and borrowing under the ECB framework by Indian banks and their
branches/subsidiaries outside India will be subject to prudential guidelines

issued by the Department of Banking Regulation of the Reserve Bank. Further,
other entities raising ECB are required to follow the guidelines issued, if any, by
the concerned sectoral or prudential regulator.
2.2. Limit and leverage: Under the aforesaid framework, all eligible borrowers can
raise ECB up to USD 750 million or equivalent per financial year under the
automatic route. Further, in case of FCY denominated ECB raised from direct
foreign equity holder, ECB liability-equity ratio for ECB raised under the
automatic route cannot exceed 7:1. However, this ratio will not be applicable if
the outstanding amount of all ECB, including the proposed one, is up to USD 5
million or its equivalent. Further, the borrowing entities will also be governed by
the guidelines on debt equity ratio, issued, if any, by the sectoral or prudential
regulator concerned.
3. Issuance of Guarantee, etc. by Indian banks and Financial Institutions: Issuance of
any type of guarantee by Indian banks, All India Financial Institutions and NBFCs
relating to ECB is not permitted. Further, financial intermediaries (viz., Indian banks,
All India Financial Institutions, or NBFCs) shall not invest in FCCBs/ FCEBs in any
manner whatsoever.
9 Inserted vide A.P. (DIR Series) Circular No. 17 dated January 16, 2019.

4. Parking of ECB proceeds: ECB proceeds are permitted to be parked abroad as well
as domestically in the manner given below:
4.1 Parking of ECB proceeds abroad: ECB proceeds meant only for foreign
currency expenditure can be parked abroad pending utilisation. Till utilisation,
these funds can be invested in the following liquid assets (a) deposits or
Certificate of Deposit or other products offered by banks rated not less than AA
(-) by Standard and Poor/Fitch IBCA or Aa3 by Moody’s; (b) Treasury bills and
other monetary instruments of one-year maturity having minimum rating as
indicated above and (c) deposits with foreign branches/subsidiaries of Indian
banks abroad.
4.2 Parking of ECB proceeds domestically: ECB proceeds meant for Rupee
expenditure should be repatriated immediately for credit to their Rupee accounts
with AD Category I banks in India. ECB borrowers are also allowed to park ECB
proceeds in term deposits with AD Category I banks in India for a maximum
period of 12 months cumulatively. These term deposits should be kept in
unencumbered position.
5. Procedure of raising ECB: All ECB can be raised under the automatic route if they
conform to the parameters prescribed under this framework. For approval route
cases, the borrowers may approach the RBI with an application in prescribed format
(Form ECB) for examination through their AD Category I bank. Such cases shall be
considered keeping in view the overall guidelines, macroeconomic situation and
merits of the specific proposals. ECB proposals received in the Reserve Bank above
certain threshold limit (refixed from time to time) would be placed before the
Empowered Committee set up by the Reserve Bank. The Empowered Committee will
have external as well as internal members and the Reserve Bank will take a final
decision in the cases taking into account recommendation of the Empowered
Committee. Entities desirous to raise ECB under the automatic route may approach
an AD Category I bank with their proposal along with duly filled in Form ECB.
6. Reporting Requirements: Borrowings under ECB Framework are subject to
following reporting requirements apart from any other specific reporting required
under the framework:
6.1 Loan Registration Number (LRN): Any draw-down in respect of an ECB should
happen only after obtaining the LRN from the Reserve Bank. To obtain the LRN,
borrowers are required to submit duly certified Form ECB, which also contains
terms and conditions of the ECB, in duplicate to the designated AD Category I
bank. In turn, the AD Category I bank will forward one copy to the Director,
Reserve Bank of India, Department of Statistics and Information Management,
External Commercial Borrowings Division, Bandra-Kurla Complex, Mumbai –
400 051 (Contact numbers 022-26572513 and 022-26573612). Copies of loan
agreement for raising ECB are not required to be submitted to the Reserve Bank.

6.2 Changes in terms and conditions of ECB: Changes in ECB parameters in

consonance with the ECB norms, including reduced repayment by mutual
agreement between the lender and borrower, should be reported to the 10DSIM
through revised Form ECB at the earliest, in any case not later than 7 days from
the changes effected. While submitting revised Form ECB the changes should
be specifically mentioned in the communication.
6.3 Monthly Reporting of actual transactions: The borrowers are required to
report actual ECB transactions through Form ECB 2 Return through the AD
Category I bank on monthly basis so as to reach DSIM 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.
6.4 Late Submission Fee (LSF) for delay in reporting:
6.4.1 Any borrower, who is otherwise in compliance of ECB guidelines, can
regularise the delay in reporting of drawdown of ECB proceeds before
obtaining 11LRN or delay in submission of Form ECB 2 returns, by payment of
late submission fees as detailed in the following matrix:
Sr. Type of Period of delay Applicable

No. Return /Form LSF
1 Form ECB 2 Up to 30 calendar days from due INR 5,000
date of submission
2 Form ECB Up to three years from due date of INR 50,000
2/Form ECB submission/date of drawdown per year
3 Form ECB Beyond three years from due date INR 100,000
2/Form ECB of submission/date of drawdown per year
6.4.2 The borrower, through its AD bank, may pay the LSF by way of demand draft
in favour of “Reserve Bank of India” or any other mode specified by the
Reserve Bank. Such payment should be accompanied with the requisite
return(s). Form ECB and Form ECB 2 returns reporting contraventions will be
treated separately. Non-payment of LSF will be treated as contravention of
reporting provision and shall be subject to compounding or adjudication as
provided in FEMA 1999 or regulations/rules framed thereunder.
6.5 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
10 DISM – Department of Statistics and Information Management
11 LRN – Loan Registration Number

for ECB by failing to submit prescribed return(s) under the ECB framework,
either physically or electronically, for past eight quarters or more.
i. Definition: 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;
ii. Action: The followings actions are to be undertaken in respect of ‘untraceable
entities’:
a) 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 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;
c) Directorate of Enforcement should be informed whenever any entity is
designated ‘UNTRACEABLE ENTITY’; and
d) No inward remittance or debt servicing will be permitted under auto route.
7. Powers delegated to AD Category I banks to deal with ECB cases: The
designated AD Category I banks can approve any requests from the borrowers for
changes in respect of ECB, except for FCCBs/FCEBs, duly ensuring that the changed
conditions, including change in name of borrower/lender, transfer of ECB and any
other parameters, comply with extant ECB norms and are with the consent of
lender(s). Further, the following can also be undertaken under the automatic route:
7.1 Change of the AD Category I bank: AD Category I bank can be changed
subject to obtaining no objection certificate from the existing AD Category I bank.
7.2 Cancellation of LRN: The designated AD Category I banks may directly
approach DSIM for cancellation of LRN for ECB contracted, subject to ensuring
that no draw down against the said LRN has taken place and the monthly ECB-
2 returns till date in respect of the allotted LRN have been submitted to DSIM.

7.3 Refinancing of existing ECB: Refinancing of existing ECB by fresh ECB

provided the outstanding maturity of the original borrowing (weighted
outstanding maturity in case of multiple borrowings) is not reduced and all -in-
cost of fresh ECB is lower than the all-in-cost (weighted average cost in case of
multiple borrowings) of existing ECB. Further, refinancing of ECB raised under
the previous ECB frameworks may also be permitted, subject to additionally
ensuring that the borrower is eligible to raise ECB under the extant framework.
Raising of fresh ECB to part refinance the existing ECB is also permitted subject
to same conditions. Indian banks are permitted to participate in refinancing of
existing ECB, only for highly rated corporates (AAA) and for Maharatna/
Navratna public sector undertakings.
7.4 Conversion of ECB into equity: Conversion of ECB, including those which are
matured but unpaid, into equity is permitted subject to the following conditions:
(i) The activity of the borrowing company is covered under the automatic route
for FDI or Government approval is received, wherever applicable, for
foreign equity participation as per extant FDI policy.
(ii) 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;
(iii) Applicable pricing guidelines for shares are complied with; iv. In case of
partial or full conversion of ECB into equity, the reporting to the Reserve
Bank will be as under:
(a) For partial conversion, the converted portion is to be reported in Form
FC-GPR prescribed for reporting of FDI flows, while monthly reporting
to DSIM in Form ECB 2 Return will be with suitable remarks, viz.,
"ECB partially converted to equity".
(b) For full conversion, the entire portion is to be reported in Form FC-
GPR, while reporting to DSIM in Form ECB 2 Return should be done
with remarks “ECB fully converted to equity”. Subsequent filing of
Form ECB 2 Return is not required.
(c) For conversion of ECB into equity in phases, reporting through Form
FC-GPR and Form ECB 2 Return will also be in phases.
(iv) 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;

(v) Consent of other lenders, if any, to the same borrower is available or atleast
information regarding conversions is exchanged with other lenders of the
borrower.
(vi) For conversion of ECB dues into equity, the exchange rate prevailing on
the date of the agreement between the parties concerned for such
conversion or any lesser rate can be applied with a mutual agreement with
the ECB lender. It may be noted that the fair value of the equity shares to
be issued shall be worked out with reference to the date of conversion only.
7.5. 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:
(i) the underlying ECB is in compliance with the extant ECB guidelines,
(ii) 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
(iii) No objection certificate, as applicable, from the existing lenders in India has
been obtained in case of creation of charge.
Once the aforesaid stipulations are met, the AD Category I bank may permit
creation of charge on immovable assets, movable assets, financial securities
and issue of corporate and/or personal guarantees, during the currency of the
ECB with security co-terminating with underlying ECB, subject to the following:
(i) Creation of Charge on Immovable Assets: The arrangement shall be subject
to the following:
(a) Such security shall be subject to provisions contained in the Foreign
Exchange Management (Acquisition and Transfer of Immovable Property
in India) Regulations, 2017, as amended from time to time.
(b) The permission should not be construed as a permission to acquire
immovable asset (property) in India, by the overseas lender/ security
trustee.
(c) In the event of enforcement / invocation of the charge, the immovable
asset/ property will have to be sold only to a person resident in India and
the sale proceeds shall be repatriated to liquidate the outstanding ECB.
(ii) Creation of Charge on Movable Assets: In the event of enforcement/
invocation of the charge, the claim of the lender, whether the lender takes over
the movable asset or otherwise, will be restricted to the outstanding claim

against the ECB. Encumbered movable assets may also be taken out of the
country subject to getting ‘No Objection Certificate’ from domestic lender/s, if
any.
(iii) Creation of Charge over Financial Securities: The arrangements may be
permitted subject to the following:
(a) Pledge of shares of the borrowing company held by the promoters as well
as in domestic associate companies of the borrower is permitted. Pledge
on other financial securities, viz. bonds and debentures, Government
Securities, Government Savings Certificates, deposit receipts of
securities and units of the Unit Trust of India or of any mutual funds,
standing in the name of ECB borrower/promoter, is also permitted.
(b) In addition, security interest over all current and future loan assets and
all current assets including cash and cash equivalents, including Rupee
accounts of the borrower with ADs in India, standing in the name of the
borrower/promoter, can be used as security for ECB. The Rupee
accounts of the borrower/promoter can also be in the form of escrow
arrangement or debt service reserve account.
(c) In case of invocation of pledge, transfer of financial securities shall be in
accordance with the extant FDI/FII policy including provisions relating to
sectoral cap and pricing as applicable read with the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident outside
India) Regulations, 2017, as amended from time to time.
(iv) Issue of Corporate or Personal Guarantee: The arrangement shall be
subject to the following:
(a) A copy of Board Resolution for the issue of corporate guarantee for the
company issuing such guarantee, specifying name of the officials
authorised to execute such guarantees on behalf of the company or in
individual capacity should be obtained.
(b) Specific requests from individuals to issue personal guarantee indicating
details of the ECB should be obtained.
(c) Such security shall be subject to provisions contained in the Foreign
Exchange Management (Guarantees) Regulations, 2000, as amended
from time to time.
(d) ECB can be credit enhanced / guaranteed / insured by overseas party/
parties only if it/ they fulfil/s the criteria of recognised lender under extant
ECB guidelines.
7.6. Additional Requirements: While exercising the delegated powers, the AD
Category I banks should ensure that:

i. The changes permitted are in conformity with the applicable ceilings /

guidelines and the ECB continues to be in compliance with applicable
guidelines. It should also be ensured that if the ECB borrower has availed of
credit facilities from the Indian banking system, including foreign
branches/subsidiaries of Indian banks, any extension of tenure of ECB
(whether matured or not) shall be subject to applicable prudential guidelines
issued by Department of Banking Regulation of Reserve Bank including
guidelines on restructuring.
ii. The changes in the terms and conditions of ECB allowed by the ADs under the
powers delegated and / or changes approved by the Reserve Bank should be
reported to the DSIM as given at paragraph 6.2 above. Further, these changes
should also get reflected in the Form ECB 2 returns appropriately.
8. Special Dispensations under the ECB framework:
8.1 ECB facility for Oil Marketing Companies: Notwithstanding the provisions
contained in paragraph 2.1 (viii), 2.1 (x) and 2.2 above, Public Sector Oil
Marketing Companies (OMCs) can raise ECB for working capital purposes with
minimum average maturity period of 3 years from all recognised lenders under
the automatic route without mandatory hedging and individual limit
requirements. The overall ceiling for such ECB shall be USD 10 billion or
equivalent. However, OMCs should have a Board approved forex mark to market
procedure and prudent risk management policy, for such ECB. All other
provisions under the ECB framework will be applicable to such ECB.
8.2 ECB facility for Startups: AD Category-I banks are permitted to allow Startups
to raise ECB under the automatic route as per the following framework:
(i) Eligibility: An entity recognised as a Startup by the Central Government as on
date of raising ECB.
(ii) Maturity: Minimum average maturity period will be 3 years.
(iii) Recognised lender: Lender / investor shall be a resident of a FATF compliant
country. However, foreign branches/subsidiaries of Indian banks and overseas
entity in which Indian entity has made overseas direct investment as per the
extant Overseas Direct Investment Policy will not be considered as recognised
lenders under this framework.
(iv) Forms: The borrowing can be in form of loans or non-convertible, optionally
convertible or partially convertible preference shares.
(v) Currency: The borrowing should be denominated in any freely convertible
currency or in Indian Rupees (INR) or a combination thereof. In case of
borrowing in INR, the nonresident lender, should mobilise INR through
swaps/outright sale undertaken through an AD Category-I bank in India.

(vi) Amount: The borrowing per Startup 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.
(vii) All-in-cost: Shall be mutually agreed between the borrower and the lender.
(viii) End uses: For any expenditure in connection with the business of the
borrower.
(ix) Conversion into equity: Conversion into equity is freely permitted subject to
Regulations applicable for foreign investment in Startups.
(x) 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. and shall comply with foreign direct investment / foreign portfolio
investment / or any other norms applicable for foreign lenders / entities holding
such securities. Further, issuance of corporate or personal guarantee is
allowed. Guarantee issued by a nonresident(s) is allowed only if such parties
qualify as lender under ECB for Startups. However, issuance of guarantee,
standby letter of credit, letter of undertaking or letter of comfort by Indian banks,
all India Financial Institutions and NBFCs is not permitted.
(xi) Hedging: The overseas lender, in case of INR denominated ECB, will be
eligible to hedge its INR exposure through permitted derivative products with
AD Category – I banks in India. The lender can also access the domestic
market through branches/ subsidiaries of Indian banks abroad or branches of
foreign bank with Indian presence on a back to back basis.
Note: Startups raising ECB in foreign currency, whether having natural hedge
or not, are exposed to currency risk due to exchange rate movements and
hence are advised to ensure that they have an appropriate risk management
policy to manage potential risk arising out of ECB.
(xii) Conversion rate: In case of borrowing in INR, the foreign currency - INR
conversion will be at the market rate as on the date of agreement.
(xiii) Other Provisions: Other provisions like parking of ECB proceeds, reporting
arrangements, powers delegated to AD banks, borrowing by entities under
investigation, conversion of ECB into equity will be as included in the ECB
framework. However, provisions on leverage ratio and ECB liability: Equity
ratio will not be applicable. Further, the Start-ups as defined above [8.2. (i)] as
well as other start-ups which do not comply with the aforesaid definition but are
eligible to receive FDI, can also raise ECB under the general ECB
route/framework.
9. Borrowing by Entities under Investigation: All entities against which investigation
/ adjudication / appeal by the law enforcing agencies for violation of any of the

provisions of the Regulations under FEMA pending, may raise ECB as per the
applicable norms, if they are otherwise eligible, notwithstanding the pending
investigations / adjudications / appeals, without prejudice to the outcome of such
investigations / adjudications / appeals. The borrowing entity shall inform about
pendency of such investigation / adjudication / appeal to the AD Category -I bank /
RBI as the case may be. Accordingly, in case of all applications where the borrowing
entity has indicated about the pending investigations / adjudications / appeals, the
AD Category I Banks / Reserve Bank while approving the proposal shall intimate the
agencies concerned by endorsing a copy of the approval letter.
10. ECB by entities under restructuring/ ECB facility for refinancing stressed
assets:
10.1 An entity which is under a restructuring scheme/ corporate insolvency resolution
process can raise ECB only if specifically permitted under the resolution plan.
10.2 12Eligible 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. Lender banks are also permitted to
sell, through assignment, such loans to eligible ECB lenders, provided, the
resultant external commercial borrowing complies with all-in-cost, minimum
average maturity period and other relevant norms of the ECB framework.
Foreign branches/ overseas subsidiaries of Indian banks are not eligible to lend
for the above purposes. The applicable MAMP will have to be strictly complied
with under all circumstances.
10.3 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, procedure of which is given at paragraph No. 5 above.
11. Dissemination of information: 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.
12. Compliance with the guidelines: 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. The designated AD Category I bank is also
expected to ensure compliance with applicable ECB guidelines by their constituent s.


I Amendment in section 8 vide Finance Act, 2019, w.r.e.f. 20-3-2019.
Sub-section (3) dealing with the computation of period of attachment/ retention of
property / record seized / frozen during investigation, is amended as follows:
(3) Where the Adjudicating Authority decides that any property is involved in money -
laundering, he shall, by an order in writing, confirm the attachment of the property made
under section 5(1) or retention of property or record seized or frozen under section 17 or
section 18 and record a finding to that effect, whereupon such attachment or retention or
freezing of the seized or frozen property or record shall—
(a) continue during investigation for a period not exceeding three hundred and sixty-
five days or the pendency of the proceedings relating to any offence under this Act
before a court or under the corresponding law of any other country, before the
competent court of criminal jurisdiction outside India, as the case may be; and
(b) become final after an order of confiscation is passed under sub -section (5) or sub-
section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the Special
Court.
Explanation.—For the purposes of computing the period of three hundred and sixty -
five days under clause (a), the period during which the investigation is stayed by any
court under any law for the time being in force shall be excluded.
II Insertion of section 11A vide the Aadhaar and Other Laws (Amendment) Act, 2019,
w.e.f. 25-7-2019
Verification of identity by reporting entity.
11A.(1) Every reporting entity shall verify the identity of its clients and the beneficial
owner, by—
(a) authentication under the Aadhaar (Targeted Delivery of Financial and Other
Subsidies, Benefits and Services) Act, 2016 (18 of 2016) if the reporting entity is a
banking company; or
(b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other
Subsidies, Benefits and Services) Act, 2016 (18 of 2016); or
(c) use of passport issued under section 4 of the Passports Act, 1967 (15 of 1967); or
(d) use of any other officially valid document or modes of identification as may be notified
by the Central Government in this behalf:
Provided that the Central Government may, if satisfied that a reporting entity other
than banking company, complies with such standards of privacy and security under
the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and

Services) Act, 2016 (18 of 2016), and it is necessary and expedient to do so, by
notification, permit such entity to perform authentication under clause (a):
Provided further that no notification under the first proviso shall be issued without
consultation with the Unique Identification Authority of India established under sub -
section (1) of section 11 of the Aadhaar (Targeted Delivery of Financial and Other
Subsidies, Benefits and Services) Act, 2016 (18 of 2016) and the appropriate
regulator.
(2) If any reporting entity performs authentication under clause (a) of sub-section (1), to
verify the identity of its client or the beneficial owner it shall make the other modes of
identification under clauses (b), (c) and (d) of sub-section (1) also available to such
client or the beneficial owner.
(3) The use of modes of identification under sub-section (1) shall be a voluntary choice
of every client or beneficial owner who is sought to be identified and no client or
beneficial owner shall be denied services for not having an Aadhaar number.
(4) If, for identification of a client or beneficial owner, authentication or offline verification
under clause (a) or clause (b) of sub-section (1) is used, neither his core biometric
information nor his Aadhaar number shall be stored.
(5) Nothing in this section shall prevent the Central Government from notifying additional
safeguards on any reporting entity in respect of verification of the identity of its clie nt
or beneficial owner.
Explanation.—The expressions "Aadhaar number" and "core biometric information" shall
have the same meanings as are respectively assigned to them in clauses (a) and ( j) of
section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and
Services) Act, 2016 (18 of 2016).]
III Amendment in section 12 vide Aadhaar and Other Laws (Amendment) Act, 2019,
w.e.f. 25-7-2019
Clause (c) & (d) of section 12(1) have been omitted by the Aadhaar and Other Laws
(Amendment) Act, 2019, w.e.f. 25-7-2019.
Prior to their omission, clauses (c) and (d) read as under:
"(c) verify the identity of its clients in such manner and subject to such conditions, as may
be prescribed;
(d) identify the beneficial owner, if any, of such of its clients, as may be prescribed;"
Foreign Contribution (Regulation) (Second Amendment) Rules, 2019
Vide notification no. G.S.R. 659(E), dated 16th September, 2019, Central Government hereby
enacts the Foreign Contribution (Regulation) (Second Amendment) Rules, 2019, further to
amend the Foreign Contribution (Regulation) Rules, 2011.

In the Foreign Contribution (Regulation) Rules, 2011, —

(i) in rule 6A, for the words “rupees twenty-five thousand”, the words “one lakh rupees” shall
be substituted;
(ii) in rule 7, in sub-rule (4), for the words “sixty days”, the words “one month” shall be
substituted;
(iii) in rule 12, in sub-rule (2), after the prescribed form (i.e., FC- 3C) the words and letters
“with an affidavit executed by each office bearer and key functionary and member in
Performa ‘AA’ appended to these rules” shall be inserted;
CHAPTER 5: ARBITRATION AND CONCILIATION ACT, 1996
In section 1 which deals with the Short title, extent and commencement, provisio is omitted by
the Jammu and Kashmir Reorganisation Act, 2019, dated 9-8-2019, w.e.f. 31-10-2019, Prior to
its omission read as under:
"Provided that Parts I, III and IV shall extent to the State of Jammu and Kashmir only insofar as
they relate to international Commercial arbitration or, as the case may be, international
Commercial Conciliation."
The Insolvency and Bankruptcy Code (Amendment) Act, 2019
Ministry of Corporate Affairs vide Notification S.O. 2953(E) dated 16th August, 2019, in exercise
of the powers conferred by sub-section (2) of section 1 of the Insolvency and Bankruptcy
Code (Amendment) Act, 2019, the Central Government hereby appoints the date of publication
of this notification in the Official Gazette as the date on which the provisions of the said Act shall
come into force.
(i) In section 5(26) pertaining to the definition “resolution plan”, following explanation is
added.
“Explanation.—For the removal of doubts, it is hereby clarified that a resolution plan may
include provisions for the restructuring of the corporate debtor, including by way of merger,
amalgamation and demerger;”
(ii) In section 7(4) of the Code, following proviso shall be inserted:
“Provided that if the Adjudicating Authority has not ascertained the existence of default and
passed an order under sub-section (5) within such time, it shall record its reasons in writing
for the same.”
(iii) In section 12 which deals with the Time-limit for completion of insolvency resolution
process. – Following provisos have been added after the proviso to section 3:
“Provided further that the corporate insolvency resolution process shall mandatorily be
completed within a period of three hundred and thirty days from the insolvency

commencement date, including any extension of the period of corporate insolvency

resolution process granted under this section and the time taken in legal p roceedings in
relation to such resolution process of the corporate debtor:
Provided also that where the insolvency resolution process of a corporate debtor is pending
and has not been completed within the period referred to in the second proviso, such
resolution process shall be completed within a period of ninety days from the date of
commencement of the Insolvency and Bankruptcy Code (Amendment) Act, 2019”.
(iv) In section 25A after sub-section 3, following sub-section shall be added:
“(3A) Notwithstanding anything to the contrary contained in sub-section (3), the authorised
representative under sub-section (6A) of section 21 shall cast his vote on behalf of all the
financial creditors he represents in accordance with the decision taken by a vote of mo re
than fifty per cent, of the voting share of the financial creditors he represents, who have
cast their vote:
Provided that for a vote to be cast in respect of an application under section 12 A, the
authorised representative shall cast his vote in accordance with the provisions of sub-
section (3).”
(v) In section 30(2)(b), the following shall be substituted :
(b) provides for the payment of debts of operational creditors in such manner as may be
specified by the Board which shall not be less than—
(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 financial creditors, who
do not vote in favour of the resolution plan, in such manner as may be specified 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.
Explanation 1.—For the removal of doubts, it is hereby clarified that a distribution in
accordance with the provisions of this clause shall be fair and equitable to such
creditors.
Explanation 2.—For the purposes of this clause, it is hereby declared that on and
from the date of commencement of the Insolvency and Bankruptcy Code
(Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate
insolvency resolution process of a corporate debtor—

(i) where a resolution plan has not been approved or rejected by the Adjudicating
Authority;
(ii) where an appeal has been preferred under section 61 or section 62 or such an
appeal is not time barred under any provision of law for the time being in force;
or
(iii) where a legal proceeding has been initiated in any court against the decision of
the Adjudicating Authority in respect of a resolution plan;”
(vi) In section 31(1) of the Code, after the words “members, creditors,” the following words
shall be inserted:
“including the Central Government, any State Government or any local authority to whom
a debt in respect of the payment of dues arising under any law for the time being in force,
such as authorities to whom statutory dues are owed,”
(vii) In section 33(2), following explanation shall be added:
“Explanation.—For the purposes of this sub-section, it is hereby declared that the
committee of creditors may take the decision to liquidate the corporate debtor, any time
after its constitution under sub-section (7) of section 21 and before the confirmation of the
resolution plan, including at any time before the preparation of the information
memorandum.”
QUESTIONS
Integrated Case Scenario/ Multiple Choice Questions

1. Lagus Transport Services Limited (LTSL) is operating in logistics and public transport
domain. The company has pan-India presence. As per its Articles of Association, the
company can appoint a maximum of 15 directors and all of them shall be rotational
directors. Presently, the company has a strength of 14 directors, of which 9 are executive
directors and the remaining 5 are non-executive directors. As on 31 st March, 2018, its paid-
up share capital was ` 8.42 crore; the turnover was ` 84 crore; and it had, in the aggregate,
outstanding loans, debentures and deposits to the tune of ` 42 crore.
In the Annual General Meeting (AGM), held on 20 th August, 2018, Anil, Badal, Chanchal
and Damodar were appointed as directors in place of Mohan, Navin, Om and Prasad by
passing a single resolution with simple majority. It is to be noted that earlier, a motion
authorising the appointment of Anil, Badal, Chanchal and Damodar by a single resolution
was passed in the meeting and not a single vote was cast against such motion.
As on 31st March, 2019, the turnover of the company increased to ` 120.52 crore but the
aggregate of outstanding loans, debentures and deposits reduced to ` 40 crore. The paid-

up share capital was the same as earlier. Due to the increased turnover there arose the
requirement of appointing two independent directors.
Since the company was required to appoint two independent directors, the total strength
of the Board with such appointments would go up to 16 directors from the present 14
whereas according to the Articles, the company can have a maximum of 15 directors.
Accordingly, the Articles were altered and the total strength was increased to 20 directors.
After altering the Articles, the company proceeded to appoint four independent directors
instead of the mandatorily required two since it was felt that such step would strengthen
the corporate governance to the maximum extent. The independent directors were - Mrs.
Eekam, who is considered ‘influencer’ on supply chain management and has a lot of
expertise in the logistics field; Mrs. Prajna who is a marketing expert; Mrs. Ruchita, who is
MBA (Finance and Accounting) from IIM, Ahmedabad; and Mr. Amit, who is skilled in
developing customised software. Subsequent to the above developments, the time to hold
Annual General Meeting (AGM) approached and it was held on 12 th August, 2019, at the
registered office of the company at Mumbai.
Multiple Choice Questions (MCQs)
1. In this case scenario, Anil, Badal, Chanchal and Damodar were appointed as directors
by passing a single resolution at the AGM. Is such appointment valid?
(a) The appointment of Anil, Badal, Chanchal and Damodar by a single resolution
is valid because beforehand, a motion authorising their appointment by a single
resolution was passed in the meeting and not a single vote was cast against
such motion.
(b) The appointment of Anil, Badal, Chanchal and Damodar by a single resolution
is not valid because passing of resolution by simple majority indicates that it was
not passed unanimously.
(c) The appointment of Anil, Badal, Chanchal and Damodar by a single resolution
with simple majority is not valid because such resolution is required to be passed
as a special resolution.
(d) The appointment of Anil, Badal, Chanchal and Damodar by a single resolution
is not valid because in no case more than one director can be appointed by
passing a single resolution.
2. In the given case scenario, according to the Articles all the directors are rotational.
Had this been not the case, how many directors were required to retire at the AGM
which was held on 20 th August, 2018?
(a) Five directors
(b) Four directors
(c) Three directors

(d) Two directors

3. In the given case scenario, if it is presumed that as on 31 st March, 2019, the turnover
of the company is ` 87.00 crore and the paid-up share capital is ` 12.00 crore, would
the company be still mandatorily required to appoint two independent directors?
(a) There is no need to appoint two independent directors since the aggregate of
turnover and paid-up share capital has not crossed the threshold of ` 100 crore.
(b) Instead of appointing two independent directors, the company is required to
appoint only one independent director since the aggregate of turnover and paid -
up share capital is above ` 90 crore but less than ` 100 crore.
(c) The company is required to appoint minimum two independent directors since
the paid-up share capital is ` 12 crore.
(d) The company is required to appoint only one independent director since the
paid-up share capital is below ` 15 crore.
4. According to the case scenario, the company altered its Articles of Association so as
to increase the total strength of directors up to 20 from the present 15 directors. Which
of the following options is applicable in such a case of alteration:
(a) The articles were altered by passing an ordinary resolution.
(b) The articles were altered by passing an ordinary resolution followed by approval
sought from the jurisdictional Registrar of Companies.
(c) The articles were altered by passing a Board Resolution with more than seventy-
five percent majority.
(d) The articles were altered by passing a special resolution.
5. As on 12th August, 2019, when the AGM of LTSL was held, the total strength of
directors reached to 18 due to the appointment of four independent directors. When
all the directors are rotational, how many directors shall get retired at this AGM ?
(a) Six directors
(b) Five directors
(c) Four directors
(d) Two directors
2. Ali Baba Limited is a listed company incorporated under the provisions of Company Law
having its registered office at Andhra Pradesh. Mrs. Smart is a Managing Director of Ali
Baba Limited since its incorporation. She was first director and one of the promo ters of the
company. She has vast experience of managing the company in very efficient manner.
Ali Baba Ltd. is a holding company of PM Limited with a Fira Private Limited as a subsidiary
to PM Limited.

Following are the details pertaining to the incorporation of the related entities and its capital
structure:
S. Particulars Ali Baba Limited PM Limited Fira Private
No. Limited
1. Date of Incorporation 17/09/1985 06/09/1988 28/09/1989
2. Place of Registered Andhra Pradesh Delhi Hyderabad
Office
3. Authorised Share Capital ` 100,00,00,000/- ` 20,00,00,000/- `10,00, 00,000/-
4. Paid Up Share Capital ` 99,00,00,000/- ` 10,00,00,000/- ` 10,00,00,000/-
Under the guidance of Mrs. Smart, Ali Baba Limited acquired shareholding in PM Limited
and thus resulting it into a subsidiary company of Ali Baba Limited. Now the Board of
Directors of Ali Baba Limited wishes to nominate Mrs. Smart for the position of Man aging
Director in PM Limited and also to appoint her as Whole Time Director(WTO) in Fira Private
Limited, which is a wholly owned subsidiary (WOS) of PM Limited.
Therefore, the Board of Directors of PM Limited passed a Board Resolution through
resolution by circulation to appoint Mrs. Smart as Managing Director of the company.
Subsequently, the Board of Directors of Fira Private Limited passed the Board Resolution
at Board Meeting, wherein all directors present in the meeting approved the resolution for
appointing her as Whole Time Director of the company and then subsequent to unanimous
Board approval, Fira Private Limited also conducted the general meeting for getting
approval of shareholders and passed the ordinary resolution to appoint her as Whole Tim e
Director in the company.
Further, for appointment of Mrs. Smart, PM Limited and Fira Private Limited had complied
with Schedule V of the Companies Act, 2013 as a result respective companies did not take
any approval from Central Government for her appointment as Managing Director and
Whole Time Director respectively.
Based on the above provided information and in the light of applicable provisions of the
Companies Act, 2013, read with Schedule V of the Act, you are asked to advice on the
following Multiple Choice Questions:
1. State on the validity of the appointment of Mrs. Smart as Managing Director in PM
Limited in terms of the provisions of the Companies Act, 2013?
(a) Invalid, as no such appointment was made or approved by resolution passed at
the board meeting with the consent of all the directors present at the meeting
and supported by general meeting’s ordinary resolution under section 196.
(b) Valid as whole time KMP shall hold office in its subsidiary at the same time.
(c) Valid with further approval of the Central Government
(d) Invalid because a person cannot hold more than one office as Managing Director

2. Whether Mrs. Smart appointment as Whole Time Director in Fira Private Limited is
valid as per provisions of the Companies Act, 2013?
(a) No, because being Fira Private Limited is private company so rule 8 & 8A of
Companies (Appointment & Remuneration of Managerial Personnel) Rules,
2014, not applicable
(b) Yes, as per section 2(71) it is deemed as public Co.
(c) Yes, on further approval of Central Government
(d) No, because of restriction under section 203(3) on appointment in more than
one company.
3. What will be legal position as to the appointment of Mrs. Smart as Managing Director
in PM Limited, if Ali Baba Limited is a Government Company?
(a) Invalid due to non-compliance of section 203
(b) Valid in light of the provisions 203(4A)
(c) Valid with approval of central government
(d) Invalid because a person cannot hold office of Managing Director in more than
1 company.
4. What is the status of Fira Private Limited for the purpose of the applicability of the
Companies Act, 2013, if Ali Baba Limited is a Government Company?
(a) Private Company
(b) Public Company
(c) Government Company
(d) Associate Company
5. Whether appointment of Mrs. Smart as Whole Time Director in Fira Private Limited is
legally acceptable, if Ali Baba Limited is a Government Company?
(a) No, because being Fira Private Limited is private company so rule 8 & 8A of
Companies (Appointment & Remuneration of Managerial Personnel) Rules,
2014, not applicable
(b) Yes, because section 203 is not applicable on Government Companies
(c) Yes, with further approval Central Government
(d) No, because of restriction under section 203(3)
3. In case of Topica Sugar Mills Limited, necessary arrangements are in place for conducting
of Board Meetings through the means of video conferencing, a facility which Vaibhav and
Yukta, the two directors out of six intend to utilize by participating in such meetings through

it. During which part of the year they should intimate the company about their participation
in Board Meetings through video conferencing?
(a) At the beginning of the Financial Year
(b) At the beginning of the Calendar Year
(c) On 1st day of any month falling in the Financial Year
(d) Before the Board Meeting.
4. Blue Rose Agri-Products Limited, which is inter-alia listed on National Stock Exchange,
has called an extra-ordinary general meeting (EGM) of the shareholders on 29 th January,
2019 at its Head Office in New Delhi to seek approval in respect of certain matters. It so
happened that the company received a notice on 25 th January, 2019 from the requisite
number of small shareholders who proposed appointment of Shivank as their director but
it refused to entertain the notice as the same was served quite late. Advise the latest date
by which the small shareholders must have given the notice for the appointment of Shivank
so that it was not refused by the company.
(a) The notice should have been served latest by 24 th January, 2019.
(b) The notice should have been served latest by 15 th January, 2019.
(c) The notice should have been served latest by 22 nd January, 2019.
(d) The notice should have been served latest by 19 th January, 2019.
5. The IRP appointed for M Ltd. is seeking your views on the constitution of the Committee
of creditors of M Ltd. M Ltd. does not have any financial debt other than loan obtained
from Mr. A, son of Mr. B, the managing director of M Ltd. Considering the above, identify
the appropriate constitution of the committee of creditors out of the following:
(a) Mr. A, 18 largest operational creditors, 1 representative of all workmen
(b) 18 largest operational creditors, 1 representative of workmen and 1 representative of
employees.
(c) Only Mr. A since he is the only financial creditor
(d) 18 largest operational creditors, 1 representative of workmen and 1 representative of
employees and the resolution professional.
6. Which of the following terms are not included within arrangements entered into by the
Central Government with another country, in relation to reciprocal arrangements under
PMLA, 2002?
(a) Enforcement of the provisions of PMLA, 2002
(b) Prevention of offence in India under the corresponding PMLA law in force in the other
country
(c) Exchange the history of person if it is wilful offender under the PMLA on annual basis.

(d) Exchange information to prevent any offence under PMLA, 2002.

7. Mr. V, brother of Mr. R, is a resident of Singapore and he owns an immovable property in
Chennai which he inherited from his father, who was a resident of India, Can Mr. V continue
to hold the property?
(a) No, he cannot hold transfer or invest In India, since he is resident outside India.
(b) Yes, he can continue to hold in India, since he is person of India Origin and the
property is located in India
(c) Yes, he can continue to hold the property, since this was inherited from a person who
was resident in India.
(d) Yes, he can continue to hold the property, since his brother (Mr. R) uses the property
whenever he travels to Chennai.
8. Which among the following is legally acceptable permissible source for funding overseas
direct investment :
(a) Proceeds of External Commercial Borrowings
(b) Proceeds of Real estate business
(c) Proceeds of Banking business
(d) Proceeds of foreign currency funds raised through other than ADR / GDR issues
9. Aster limited (a listed company) deals in business of trading of raw materials to the
manufacturer of the garments. The company was running in losses for past two years. The
Board of the company appointed Mr. C with good experience in cost management to
overcome the said situation, as whole time director. He was of 70 years on the date of his
appointment i.e. 18.12.2019.
Following were the relevant extracts from latest audited financial statements (as on
31st March, 2019);
(a) Authorised Share capital is ` 390 crore, out of which paid up share capital was ` 215
crore; company was in process of FPO, hence had balance of ` 15 crore in share
application money account.
(b) Balance of reserve and surplus was ` 170 crore, out of which ` 150 crore was general
reserve and ` 20 crore was on accounts of revaluation reserve.
(c) Outstanding amount for long term loans was ` 200 crore
(d) Company had investment of ` 40 crore at book value; due to economic slowdown
same is not liquid investment
(e) Accumulated losses were of ` 10 crore.

In the light of the given facts and figures, evaluate the given situations in terms of the
relevant provisions of the Companies Act, 2013-
(i) Validity of appointment of Mr. C, as managerial person in office of whole time director
in Aster Limited.
(ii) Compute the Effective Capital of Aster Limited for payment of Managerial
Remuneration.
(iii) Since Aster Ltd. was running in losses, state the maximum amount of remuneration
to be paid on yearly basis to each Managerial Person.
10. Fame Ltd. filed an application to the registrar for removal of the name of company from
the register of companies after passing special resolution. On the complaint of certain
members, Registrar came to know that already an application is pending before the
Tribunal for the sanctioning of a compromise or arrangement proposal. The application
was filed by the Fame Ltd. two months before the filing of this application to the Registrar.
Determine the given situations in the lights of the given facts as per the Companies Act,
2013:
(i) Legality of filing an application by Fame Ltd. Before the Registrar.
(ii) Consequences if Fame Ltd. files an application in the above given situation.
(iii) In case Registrar notifies Fame Ltd as dissolved under section 248 in compliances to
the required provisions, what remedy will be available to the aggrieved party?
11. Draft a Board Resolution of disclosure of interest by Mr. J, director of ABC Ltd. in a
proposed contract to be entered into with M/s APL & Co. in which, such director is a partner.
12. Enumerate the given situations in the light of the term defined as Current Account
Transaction under FEMA.
(a) An Indian resident imports machinery from a vendor in UK for installing in his factory.
(b) An Indian resident imports machinery from a vendor in UK for installing in his factory
on a credit period of 3 months.
(c) An Indian resident transfers US$ 1,000 to his NRI brother in New York as “gift”. The
funds are sent from resident’s Indian bank account to the NRI brother’s bank account
in New York.
13. Mr. X was found to be guilty of offence of money-laundering by being involved in an activity
connected with proceeds of crime. Adjudicating Authority(AA) as per findings confirmed
the attachment of the property and ordered for the investigation. The investigation was
initiated by the AA on 1 st February, 2019. The attachment of the property of Mr. X was still
to be continued by 31 st January 2020. Enumerate in the given situation the validity of the
attachment period.

14. ABZ Ltd. an unlisted company with total assets of ` one crore as per financial statement
as on 31st March, 2018, defaulted in the payment of the financial debt against the financial
creditor Mr. X. Mr. X filed an application for initiation of insolvency process against ABZ
Ltd. under the fast track corporate insolvency resolution process on 31 st May 2019. Discuss
the relevancy for disposal through the mechanism of the fast track corporate insolvency
resolution process and the legal position of holding of fast track corporate insolvency
resolution process by Mr. X in the term of the IBC, 2016. Compute the time period for
completion of fast track process in the said situation.
15. Bhrat Ltd. is a subsidiary of Global Ltd., which is a MNC registered in Hongkong. The Bhrat
Ltd. had obtained the permission to receive foreign contribution in a designated account in
the SBI. Later it was discovered that the obtained foreign contribution were deposited in
other account for its functioning. Advise on the given situation as to depositing of the
amount of foreign contribution from designated account to any other account. And state
the duty of the bank on the said transactions made?
16. SEBI on an complaint of Mr. KG enquires that Mr. Mehta, a Chief Executive Officer of the
X Company, on the basis of unpublished price sensitive information, has been indulged in
the trading of the securities of that company. Examine, on the basis of the said finding,
what action SEBI can take against Mr. Mehta under the Securities and Exchange Board of
India Act, 1992.
17. Mr. R, the respondent had placed an order of purchase of various quantities of phosphoric
acid from the Mr. P, the petitioner. The purchase order noted that the terms and conditions
were to be as per the Fertilizer Association of India (FAI). Terms and Conditions for Sale
and Purchase of Phosphoric Acid were as per Clause 15 of the FAI which also provided
terms for settlement of disputes by arbitration. Enumerate in the light of the given
circumstances as to existence of a valid arbitration agreement between the parties as per
the Arbitration and Conciliation Act, 1996.
18. PQR Ltd. is holding 30% of the paid up equity capital of Cochin Stock Exchange. The
company appoints MNL Ltd. as its proxy who is not a member of the Cochin Stock
Exchange, to attend and vote at the meeting of the stock exchange. Examine whether the
Cochin Stock Exchange can restrict the appointment of MNL Ltd. as proxy for PQR L td.
and further restrict, the voting rights of PQR Ltd. in the Cochin Stock Exchange.
19. Mr. Mediator was proposed to be appointed as a resolution professional for the corporate
insolvency resolution process initiated against BMR Ltd. Mr. R, a relative of director of
BMR Ltd. is a partner in the insolvency professional entity in which Mr. Mediator is partner.
In the light of the given facts, examine the nature of the proposal of the appointment of Mr.
Mediator for the conduct of the CIRP as per the Insolvency and Bankruptcy Code, 2016.
20. In the annual general meeting of XYZ Ltd., while discussing on the matter of retirement
and reappointment of director Mr. X, allegations of fraud and financial irregularities were
marked against him by some members. This resulted into chaos in the meeting. The
situation was normal only after the Chairman declared about initiating an inquiry against

the director Mr. X, however, could not be re-appointed in the meeting. The matter was
published in the newspapers next day. On the basis of such news, whether the court can
take cognizance of the matter and take action against the director on its own? Justify your
answer with reference to the provisions of the Companies Act, 2013.
SUGGESTED ANSWER
(1) Integrated case scenario 1

1. Answer – (a)
2. Answer - (c)
3. Answer - (c)
4. Answer- (d)
5. Answer - (b)
(2) Integrated case scenario 2
1. Answer: (a)
2. Answer: (b)
3. Answer: (b)
4. Answer: (c)
5. Answer: (b)
Multiple choice questions
3. Answer (b)
4. Answer (b)
5. Answer (b)
6. Answer (c)
7. Answer (c)
8. Answer (a)
9. (i) As per section 196(3) of the Companies Act, 2013, no company shall appoint or
continue the employment of any person as managing director, whole-time director or
manager who is below the age of twenty-one years or has attained the age of seventy
years, unless that appointment of a person who has attained the age of seventy years
may be made by passing a special resolution(SR) with explanatory statement
annexed to the notice for such an appointment of person.

Where no such special resolution is passed but votes cast in favour of the motion
exceed the votes, if any, cast against the motion and the Central Government is
satisfied, on an application made by the Board, that such appointment is most
beneficial to the company, the appointment of the person who ha s attained the age
of seventy years may be made.
Therefore, appointment of Mr. C as whole time director in the Aster Ltd. being of 70
years, is valid in compliance to above legal provisions.
(ii) As per section II of Part II of Schedule V to the Companies Act 2013, "effective capital"
means the aggregate of the paid-up share capital (excluding share application money
or advances against shares); amount, if any, for the time being standing to the credit
of share premium account; reserves and surplus (excluding revaluation reserve);
long-term loans and deposits repayable after one year (excluding working capital
loans, overdrafts, interest due on loans unless funded, bank guarantee, etc., and
other short-term arrangements) as reduced by the aggregate of any investments
(except in case of investment by an investment company whose principal business is
acquisition of shares, stock, debentures or other securities), accumulated losses and
preliminary expenses not written off.
According to the particulars given:
Particulars Amounts (in
Crore)
Paid up share capital (Excluding share application money) (215-15) ` 200
General Reserve (Excluding Revaluation Reserve) (170-20) ` 150
Long term loans ` 200
Less; Investments (40) and Accumulated losses (10) ` 50
Effective Capital ` 500
(iii) As per Section II of Part II of Schedule V to the Companies Act 2013,in case of no or
inadequate profits, if effective capital of company is ` 250 crore or more then, yearly
remuneration per person payable shall not exceed by ` 120 lakh plus 0.01% of the
effective capital in excess of ` 250 crore.
The maximum remuneration that may be paid to each managerial person will be [120
lakh+ (0.01% x 250 cr)] = 122.5 lakh.
Provided that the remuneration in excess of above limits may be paid if the resolution
passed by the shareholders is a special resolution.
10. According to the Section 248(2) of the Companies Act, 2013, a company may, after
extinguishing all its liabilities, by a special resolution, or consent of seventy -five per cent.
members in terms of paid-up share capital, file an application in the prescribed manner to
the Registrar for removing the name of the company from the register of companies on all

or any of the grounds specified in section 248(1) and the Registrar shall, on receipt of such
application, cause a public notice to be issued in the prescribed manner.
Further Section 249 provides restrictions on making application under section 248 .
An application under section 248 on behalf of a company shall not be made if, at any time
in the previous three months, the company—
(a) has changed its name or shifted its registered office from one State to another;
(b) has made a disposal for value of property or rights held by it, immediately before
cesser of trade or otherwise carrying on of business, for the purpose of disposal for
gain in the normal course of trading or otherwise carrying on of business;
(c) has engaged in any other activity except the one which is necessary or expedient for
the purpose of making an application under that section, or deciding whether to do so
or concluding the affairs of the company, or complying with any statutory requirement;
(d) has made an application to the Tribunal for the sanctioning of a compromise or
arrangement and the matter has not been finally concluded; or
(e) is being wound up under Chapter XX of this Act or under the Insolvency and
Bankruptcy Code, 2016.
Violation of above conditions on filing of application: If a company files an application
in violation of restriction given above, it shall be punishable with fine which may extend to
one lakh rupees.
Rights of registrar on non-compliance of conditions by the company: An application
filed under above circumstances, shall be withdrawn by the company or rejected by the
Registrar as soon as conditions are brought to his notice.
Aggrieved person to file an appeal against the order of registrar: As per section
252(1),any person aggrieved by an order of the Registrar, notifying a company as dissolved
under section 248, may file an appeal to the Tribunal within a period of three years from
the date of the order of the Registrar and if the Tribunal is of the opinion that the removal
of the name of the company from the register of companies is not justified in view of the
absence of any of the grounds on which the order was passed by the Registrar, it may
order restoration of the name of the company in the register of companies. However a
reasonable opportunity is given to the company and all the persons concerned.
According to the above provisions, following are the answers:
(i) As per the restrictions marked in the Section 249(d) stating that an application under
section 248 on behalf of a company shall not be made if, at any time in the previous
three months, the company has made an application to the Tribunal for the
sanctioning of a compromise or arrangement and the matter has not been finally
concluded.

As per the facts application to the registrar for removal of the name of company from
the register of companies, was filed by the Fame Ltd. within three months to the filing
of an application to the Tribunal for approval of compromise or arrangement proposal.
Therefore filing of such an application by Fame Ltd is not valid.
(ii) If a company files an application in above situation, it shall be punishable with fine
which may extend to one lakh rupees. An application so filed, shall be withdrawn by
the company or rejected by the Registrar as soon as conditions are brought to his
notice.
(iii) According to the provision given in section 252(1),a person aggrieved by an order of
the Registrar, notifying Fame Ltd. as dissolved under section 248, may:
 file an appeal to the Tribunal within a period of three years from the date of the
order of the Registrar, and
 if the Tribunal is of the opinion that the removal of the name of the company
from the register of companies is not justified in view of the absence of any of
the grounds on which the order was passed by the Registrar, it may order
restoration of the name of the Fame Ltd. in the register of companies.
 A reasonable opportunity is given to the Fame Ltd. and all the persons
concerned.
11. Board Resolution of disclosure of Interest U/s 184
Resolved that pursuant to section 184(1) of the Companies Act, 2013 read with Rul e 9(1)
of the Companies (Meetings of Board and its powers) Rules, 2014, and other applicable
provisions of the Companies Act, 2013, the general notice of disclosure of interest or
concern in Form MBP-1 received from Mr. J, Director of the company, as placed before
the meeting, be and hereby noted and taken on record by the Board.
Resolved further that Mr. J, Director of the company, and Mr. ------------Company Secretary
of the company be and hereby severally authorised to make necessary entries in the
register maintained for the purpose.
Further resolved that Mr. ----------- Company secretary and Mr. J director of the company,
be and are severally authorised to affix his/ her DSC and file e-form MGT-14 with the
Registrar of Companies.
12. (1) An Indian resident imports machinery from a vendor in UK for installing in his
factory.
Answer: As per accounts and income-tax law, machinery is a “capital expenditure”.
However, under FEMA, it does not alter (create) an asset in India for the UK vendor.
It does not create any liability to a UK vendor for the Indian importer. Once the
payment is made, the Indian resident or the UK vendor neither owns nor owes
anything in the other country. Hence, the said transaction, is a Current Account
Transaction.

(2) An Indian resident imports machinery from a vendor in UK for installing in his
factory on a credit period of 3 months.
Answer: As per accounts and income-tax law, for the credit period of 3 months, there
is a liability of the Indian importer to the UK vendor. Technically under FEMA also, it
is a liability outside India. However, under definition of Current Account Transaction
[S. 2(j)(i)], “short-term banking and credit facilities in the ordinary course of business”
are considered as a Current Account Transaction. Hence import of machinery on
credit terms is Current Account Transaction.
(3) An Indian resident transfers US$ 1,000 to his NRI brother in New York as “gift”.
The funds are sent from resident’s Indian bank account to the NRI brother’s
bank account in New York.
Answer: Under accounts and income-tax law, gift is a “capital receipt”. However,
under FEMA, once the gift is accepted by the NRI, no one owns or owes anything to
anyone in India or USA. The transactions is over. Hence it is a Current Account
Transaction.
13. Order for attachment/retention of property etc.: As per section 8 of the PMLA, 2002,
where the Adjudicating Authority decides that any property is involved in money-
laundering, he shall, by an order in writing, confirm the attachment of the property or
retention of property or record seized or frozen under section 17 or section 18 and record
a finding to that effect.
Period for attachment, retention, or freezing of the seized or frozen property or
record: Whereupon such attachment, retention, or freezing of the seized or frozen
property or record, AA shall—
(a) continue during investigation, for a period not exceeding three hundred and sixty-five
days or the pendency of the proceedings relating to any offence under this Act before
a court or under the corresponding law of any other country, before the competent
court of criminal jurisdiction outside India, as the case may be; and
(b) become final after an order of confiscation is passed under section 8(7) or section
8(5) or section 58B or section 60(2A) by the Special Court .
For the purposes of computing the period of three hundred and sixty-five days under clause
(a), the period during which the investigation is stayed by any court under any law for the
time being in force shall be excluded.
Accordingly, the attachment of the property of Mr. X to be continued by 31 st January 2020
is valid as it is within 365 days from the date of order of the investigation by the Adjudicating
Authority.
14. Relevancy : Fast track corporate insolvency resolution process is a speedy process for
corporate insolvency resolution for small corporates.

As per section 55 of the IBC, 2016, it is applicable to following corporate debtors - (a) a
corporate debtor with assets and income below a level as may be notified by the Central
Government; or (b) a corporate debtor with such class of creditors or such amount of debt
as may be notified by the Central Government; or (c) such other category of corporate
persons as may be notified by the Central Government.
Applicability of the provisions - The provisions are applicable to - (a) small company
under section 2(85) of Companies Act (b) a start-up (other than partnership firm)[as defined
by Ministry of Commerce and Industry notification No. GSR 501(E) dated 23 -5-2017] (c)
an unlisted company with total assets not exceeding ` one crore as per financial statement
immediately preceding the financial year [SO 1911(E) dated 14-6-2017].
Time period for completion of fast track process
The fast track corporate insolvency resolution process shall be completed within a period
of 90 days from the insolvency commencement date. It can be extended by Adjudicating
Authority by further 45 days, if resolution passed at a meeting of the committee of creditors
and supported by a vote of seventy five per cent of the voting shares [section 56(3) of
Insolvency Code, 2016].
According to the provisions, fast track corporate insolvency resolution process shall be
completed by 29 th of August 2019. On further extension uptil by 13 th of October, 2019 in
compliance with above provision.
15. Every person who has been granted a certificate or given prior permissio n shall receive
foreign contribution in a single account only through such one of the branches of a bank
as he may specify in his application for grant of certificate. However, person may open one
or more accounts in one or more banks for utilising the foreign contribution received by
him. No funds other than foreign contribution shall be received or deposited in such
account or accounts.
Every bank or authorised person in foreign exchange shall report to such authority as may
be specified —
(a) prescribed amount of foreign remittance;
(b) the source and manner in which the foreign remittance was received; and
(c) other particulars, in such form and manner as may be prescribed.
As per the above stated provisions, Foreign contributions should be received only in the
branch of Bank as specified in the application for grant of registration certificate. If
permission is obtained to receive foreign contribution in a designated account, and
depositing the same in other account, is an offence. However, for utilisation of the funds,
one or more banks are permissible [proviso to section 17(1) of FCRA, 2010].

Obligations of Bank receiving foreign contribution of its customer

According to Rule 16 of FCR, Rule 2011, the bank shall report to the Central Government
within forty-eight hours any transaction in respect of receipt or utilisation of any foreign
contribution by any person whether or not such person is registered or granted prior
permission under the Act.
16. Section 15G of the Securities and Exchange Board of India (SEBI) Act, 1992 deals with
penalty for Insider Trading. According to this, if any insider
(i) either on his own behalf or on behalf of any other person, deals in securities of a body
corporate on any stock exchange on the basis of any unpublished price sensitive
information; or
(ii) communicates any unpublished price sensitive information to any person, with or
without his request for such information except as required in the ordinary cause of
business or under any law, or
(iii) counsels or procures for, any other person to deal in any securities of any body
corporate on the basis of unpublished price sensitive information,
shall be liable to a penalty of minimum ` 10 lacs which may extend upto twenty-five crore
rupees or three times the amount of profits made out of insider trading, whichever is higher.
As such SEBI can, after following the prescribed procedure, impose a penalty on Mr.
Mehta. The maximum penalty that SEBI can impose is Rupees twenty-five crores or three
times the amount of profits made out of insider trading, whichever is higher.
17. Arbitration agreement through reference: The Arbitration and Conciliation Act, 1996
envisages a possibility of an arbitration agreement coming into being through
incorporation. In other words, parties to an agreement could agree to arbitrate by referring
to another contract containing an arbitration agreement. The requirement is that the
reference must leave no doubt in the mind of the reader that the parties indeed wanted to
incorporate the arbitration agreement into the agreement between them.[Section 7(5)]
Accordingly, as per the said provision, yes this a valid reference for an arbitration
agreement to come into existence. It was held by the Supreme Court of India in Groupe
Chimique Tunisien SA v. Southern Petrochemicals Industries Corpn Ltd 2006 (2) ArbLR
435 (SC) that for a reference to constitute an arbitration agreement the contract should be in
writing and reference should be such as to make that arbitration clause a part of the contract.
Both the conditions were held to be fulfilled in the present instance.
18. Section 7(A) of the Securities (Contracts) Regulation Act, 1956 provides that a recognised
stock exchange is empowered to amend rules to provide for all or any of the following
matters:
(a) Restriction of voting right to members only.
(b) Regulation of voting rights by specifying that each member is entitled to one vote only
irrespective of number of shares held.

(c) Restriction on right of members to appoint proxy.

(d) such incidental, consequential and supplementary matters as may be necessary to
give effect to any of the matters specified in clauses (a), (b) and (c).
As such Cochin Stock Exchange can restrict the appointment of MNL Ltd., as proxy, if rules
of the exchange so provide. If it is not so provided, rules may be amended and after getting
approval of the Central Government regarding amendment, it can restrict appointment of
proxies.
Cochin Stock Exchange can also restrict the voting rights of PQR Ltd. if rules of the
exchange so provide. If it is not so provided, rules maybe amended and after getting
approval of Central Government regarding amendment, it can restrict the voting rights of
PQR Ltd. on appointment of proxies.
19. As per Regulation 3 of the Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016, an insolvency professional
shall be eligible to be appointed as a resolution professional for a corporate insolvency
resolution process of a corporate debtor if he, and all partners and directors of the
insolvency professional entity of which he is a partner or director, are independent of the
corporate debtor.
Explanation– A person shall be considered independent of the corporate debtor, if he :
(a) is eligible to be appointed as an independent director on the board of the corporate
debtor under section 149 of the Companies Act, 2013, where the corporate debtor is
a company;
(b) is not a related party of the corporate debtor; or
(c) is not an employee or proprietor or a partner:
(i) of a firm of auditors or secretarial auditors in practice or cost auditors of the
corporate debtor in the last three financial years.
(ii) of a legal or a consulting firm, that has or had any transaction with the corporate
debtor amounting to five per cent or more of the gross turnover of such firm, in
the last three financial years.
As per the given facts, Mr. Mediator was proposed to be appointed as a resolution
professional for the insolvency resolution process initiated against BMR Ltd. Whereas,
Mr. R, a relative of director of BMR Ltd. is a partner in the insolvency professional entity
in which Mr. Mediator is partner.
Since, Mr. R is the partner in Insolvency Professional Entity in which Mr. Mediator is also
a partner, so, Mr. Mediator is not eligible for appointment as Resolution Professional as he
is not independent of the corporate debtor, because Mr. R is relative of Director of BMR
Ltd. (Corporate Debtors).

20. Section 439 of the Companies Act, 2013 provides that offences under the Act shall be non-
cognizable. As per this section:
1. Every offence under this Act except the offences referred to in sub section (6) of section
212 shall be deemed to be non-cognizable within the meaning of the said Code.
2. No court shall take cognizance of any offence under this Act which is alleged to have
been committed by any company or any officer thereof, except on the complaint in
writing of the Registrar, a shareholder, member of the company, or of a person
authorized by the Central Government in that behalf.
Thus, in the given situation, the court shall not initiate any suo moto action against the
director Mr. X without receiving any complaint in writing of the Registrar of Companies, a
shareholder of the company or of a person authorized by the Central Government in this
behalf.

PART – I: RELEVANT AMENDMENTS APPLICABLE FOR NOVEMBER, 2019
EXAMINATION
relevant and applicable for said examinations.
This RTP of November 2019 examination will help the students to know of the signific ant
changes, that are relevant and applicable for November 2019 examination. These amendments
are to read with August 2017 edition of the Study material.
Relevant amendments: Here are the given relevant amendments arranged chapter wise.
1. Exemptions to Government Companies Vide Notification G.S.R. 582(E) Dated 13th
June, 2017
The Central Government amends the Notification G.S.R. 463(E), dated 5 th June 2015.
Following are the amendments:
According to the amendment, section 152(6) & (7) shall not apply to –
(a) a Government company, which is not a listed company, in which not less than fifty-
one per cent. of paid up share capital is held by the Central Government, or by any
State Government or Governments or by the Central Government and one or more
State Governments;
(b) a subsidiary of a Government company, referred to in (a) above.
2. Insertion of Paragraph 2A in the principal notification G.S.R. 463(E), dated 5th June
2015 vide Notification G.S.R. 582(E) Dated 13th June, 2017
In the principal notification, after paragraph 2, the following paragraph shall be inserted,
namely:-
“2A. The exceptions, modifications and adaptations provided in column (3) of the aforesaid
Table shall be applicable to a Government company which has not committed a default in
filing its financial statements under section 137 of the said Act or annual return under
section 92 of the said Act with the Registrar.”
3. Exemptions to Companies covered section 8 of the Companies Act, 2013 vide
Notification G.S.R. 584(E) Dated 13 th June, 2017

Section 149(1)(b) & first proviso shall not apply on section 8 companies.
Insertion of Paragraph 2A in the principal notification G.S.R. 466 (E), dated 5 th June 2015
Vide Notification G.S.R. 584(E) Dated 13 th June, 2017
namely:- “2A. The exceptions, modifications and adaptations provided in column (3) of the
aforesaid Table shall be applicable to a company covered under section 8 of the said Act
which has not committed a default in filing its financial statements under section 137 or
annual return under section 92 of the said Act with the Registrar.
4. Enforcement of the Companies (Appointment and Qualification of Directors)
Amendment Rules, 2017 Vide Notification G.S.R. 839(E) dated 5th July 2017
The Central Government hereby makes the following rules further to amend the Companies
In the Companies (Appointment and Qualification of Directors) Rules, 2014, rule 4 shall be
numbered as sub-rule (1) and after sub-rule (1) as so renumbered, the following sub-rule
shall be inserted namely :-
“(2) The following classes of unlisted public company shall not be covered under sub-rule
(1), namely:-
(a) a joint venture;
(b) a wholly owned subsidiary; and
(c) a dormant company as defined under section 455 of the Act.”
5. Exemptions given to certain unlisted public companies under the Companies
(Appointment and Qualification of Directors) Rules, 2014 from appointment of
Independent Directors Vide notification of circular 09/2017 dated 5 th September 2017
Vide Notification number G.S.R. 839(E) dated 5th July, 2017 an amendment was issued
through the Companies (Appointment and Qualification of Directors) Amendment Rules,
2017 inter-alia amending rule 4 of the Companies (Appointment and Qualification of
The said amended Rule 4 provides that an unlisted public company which is a joint venture,
a wholly owned subsidiary or a dormant company will not be required to appoint
Independent Directors.
Through the issue of this circular, it is hereby clarified that a "joint venture”, would mean a
joint arrangement, entered into in writing, whereby the parties that have joint control of the
arrangement, have rights to the net assets of the arrangement. The usage of the term is
similar to that under the Accounting Standards.


Amendment Rules, 2018 Vide Notification G.S.R.51(E) dated 22nd January, 2018
(Appointment and Qualification of Directors) Rules, 2014
In the Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 9,
(A) for the marginal heading, the following marginal heading shall be substituted,
namely:-
“Application for allotment of Director Identification Number before appointment
in an existing company”;
(B) for sub-rule (1), the following shall be substituted, namely:-
“(1) Every applicant, who intends to be appointed as director of an existing company
shall make an application electronically in Form DIR-3, to the Central
Government for allotment of a Director Identification Number (DIN) along with
such fees as provided under the Companies (Registration Offices and Fees)
Rules, 2014.
Provided that in case of proposed directors not having approved DIN, the
particulars of maximum three directors shall be mentioned in Form No.INC-32
(SPICe) and DIN may be allotted to maximum three proposed directors through
Form INC-32 (SPICe)”;
(C) in sub-rule (3),
(I) In sub-clause (a), after sub-clause (iii), the following sub-clause shall be
inserted, namely:-
“(iiia) board resolution proposing his appointment as director in an existing
company”;
(II) for clause (b), the following clause shall be substituted, namely:-
“(b) Form DIR-3 shall be signed and submitted electronically by the applicant
using his or her own Digital Signature Certificate and shall be verified digitally
by a company secretary in full time employment of the company or by the
managing director or director or CEO or CFO of the company in which the
applicant is intended to be appointed as director in an existing company,”
7. Companies (Removal of Difficulties) Order, 2018 S.O. 768(E) dated 21st February,
2018
In the Companies Act, 2013, in section 169, in sub-section (1), −
(i) before the proviso, the following proviso shall be inserted, namely :-

“Provided that an independent director re-appointed for second term under sub-
section (10) of section 149 shall be removed by the company only by passing a
special resolution and after giving him a reasonable opportunity of being heard:”;
(ii) in the existing proviso, for the words “Provided that”, the words “Provided further that”
8. Enforcement of the Companies (Appointment and Qualification of Directors) Second
Amendment Rules, 2018 vide Notification G.S.R. 431(E) dated 7th May 2018
The Central Government makes the Companies (Appointment and Qualification of
Directors) Second Amendment Rules, 2018 to amend the Companies (Appointment and
Qualification of Directors) Rules, 2014.
In the Companies (Appointment and Qualification of Directors) Rules, 2014,
(a) rule 5 shall be numbered as sub-rule (1) thereof, and after sub-rule (1) as so
numbered, the following sub-rule shall be inserted, namely:-
“(2) None of the relatives of an independent director, for the purposes of sub-clauses (ii)
and (iii) of clause (d) of sub-section (6) of section 149,-
(i) is indebted to the company, its holding, subsidiary or associate company or their
promoters, or directors; or
(ii) has given a guarantee or provided any security in connection with the indebtedness
of any third person to the company, its holding, subsidiary or associate company or
their promoters, or directors of such holding company,
for an amount of fifty lakhs rupees, at any time during the two immediately preceding
financial years or during the current financial year.”
(b) In the principal rules, in rule 16, for the word “shall”, the word “may” shall be substituted.
9. Enforcement of the Companies (Appointment and Qualification of Directors) Third
Amendment Rules, 2018 vide Notification G.S.R. 558 (E) dated 12th June 2018
Directors) Third Amendment Rules, 2018 to amend the Companies (Appointment and
In the Companies (Appointment and Qualification of Directors) Rules, 2014, in the
annexure for form DIR-3, a new form shall be substituted.
10. Enforcement of the Companies (Appointment and Qualification of Directors) fourth
Amendment Rules, 2018 vide Notification G.S.R. 615(E) w.e.f. 10th July, 2018
Directors) Fourth Amendment Rules, 2018 to amend the Companies (Appointment and
In Companies (Appointment and Qualification of Directors) Rules, 2014,

(i) The rule 11 shall be renumbered as sub-rule (1) thereof and after sub-rule (1) as so
renumbered, the following sub-rules shall be inserted, namely:-
"(2) The Central Government or Regional Director (Northern Region), or any
officer authorised by the Central Government or Regional Director (Northern Region)
shall, deactivate the Director Identification Number (DIN), of an individual who does
not intimate his particulars in e-form DIR-3-KYC within stipulated time in accordance
with Rule 12A.
(3) The de-activated DIN shall be re-activated only after e-form DIR-3-KYC is filed
along with fee as prescribed under Companies (Registration Offices and Fees)
Rules, 2014.
(ii) after rule 12, the following shall be inserted, namely:-
“12A Directors KYC:- Every individual who has been allotted a Director Identification
Number (DIN) as on 31st March of a financial year as per these rules shall, submit e-
form DIR-3-KYC to the Central Government on or before 30 th April of immediate next
financial year.
Provided that every individual who has already been allotted a Director Identification
Number (DIN) as at 31st March, 2018, shall submit e-form DIR-3 KYC on or before
31st August, 2018.”;
(iii) In the Annexure after Form DIR-3 the Form DIR-3-KYC shall be inserted.
11. Enforcement of the Companies (Appointment and Qualification of Directors) Fifth
Amendment Rules, 2018 vide Notification G.S.R. 798 (E) dated 21st August 2018
Directors) Fifth Amendment Rules, 2018 to amend the Companies (Appointment and
(i) in the proviso to rule 12A, for the words and numbers “DIR-3 KYC on or before 31st
August, 2018, the words and numbers “DIR-3 KYC on or before 15th September,
2018” shall be substituted.
(ii) in the Annexure, for Form No.DIR-3 KYC, a new Form shall be substituted.
12. Enforcement of the Companies (Appointment and Qualification of Directors) Sixth
Amendment Rules, 2018 vide Notification G.S.R. 904(E) dated 20th September 2018
Directors) Sixth Amendment Rules, 2018 to amend the Companies (Appointment and

In the Companies (Appointment and Qualification of Directors) Rules, 2014, in the proviso
to rule 12A, for the words and figures “before 15th September, 2018,” the words and figures
“before 5th October, 2018 ” shall be substituted.
Relevant Amendment
sections
Amendment of In section 149 of the principal Act,—
section 149 (i) for sub-section (3), the following sub-section shall be substituted,
namely:—
"(3)Every company shall have at least one director who stays
in India for a total period of not less than one hundred and
eighty-two days during the financial year:
Provided that in case of a newly incorporated company the
requirement under this sub-section shall apply proportionately
at the end of the financial year in which it is incorporated.";
(ii) in sub-section (6),—
(a) in clause (c), for the words "pecuniary relationship", the
words "pecuniary relationship, other than remuneration
as such director or having transaction not exceeding ten
per cent. of his total income or such amount as may be
prescribed," shall be substituted;
(b) for clause (d), the following clause shall be substituted,
namely:—
"(d) none of whose relatives—
(i) is holding any security of or interest in the
company, its holding, subsidiary or associate
company during the two immediately preceding
financial years or during the current financial year:
Provided that the relative may hold security or
interest in the company of face value not exceeding
fifty lakh rupees or two per cent. of the paid-up
capital of the company, its holding, subsidiary or
associate company or such higher sum as may be
prescribed;
(ii) is indebted to the company, its holding, subsidiary or
associate company or their promoters, or directors,
in excess of such amount as may be prescribed
during the two immediately preceding financial
years or during the current financial year;

(iii) has given a guarantee or provided any security in

connection with the indebtedness of any third
person to the company, its holding, subsidiary or
associate company or their promoters, or directors
of such holding company, for such amount as may
be prescribed during the two immediately preceding
financial years or during the current financial year; or
(iv) has any other pecuniary transaction or relationship
with the company, or its subsidiary, or its holding or
associate company amounting to two per cent. or
more of its gross turnover or total income singly or
in combination with the transactions referred to in
sub-clause (i), (ii) or (iii);";
(c) in clause (e), in sub-clause (i), the following proviso shall
"Provided that in case of a relative who is an employee, the
restriction under this clause shall not apply for his
employment during preceding three financial years.".
section 152 (a) in sub-section (3), after the word and figures "section 154",
the words and figures "or any other number as may be prescribed
under section 153" shall be inserted;
(b) in sub-section (4), after the word "Number", the words and
figures "or such other number as may be prescribed under section
153" shall be inserted.
Amendment of In section 153 of the principal Act, the following proviso shall be
section 153 inserted, namely:—
"Provided that the Central Government may prescribe any
identification number which shall be treated as Director
Identification Number for the purposes of this Act and in case any
individual holds or acquires such identification number, the
requirement of this section shall not apply or apply in such manner
as may be prescribed."
Section 157 (i) in sub-section (1), the words and figures, “within the time
specified under section 403” shall be omitted;
(ii) in sub-section (2), the words and figures, “before the expiry of
the period specified under section 403 with additional fee”,
shall be omitted.

Amendment of In section 160 of the principal Act, in sub-section (1), the following
section 160. proviso shall be inserted, namely:—
‘‘Provided that requirements of deposit of amount shall not apply
in case of appointment of an independent director or a director
recommended by the Nomination and Remuneration Committee, if
any, constituted under sub-section (1) of section 178 or a director
recommended by the Board of Directors of the Company, in the
case of a company not required to constitute Nomination and
Remuneration Committee.”
section 161. (i) in sub-section (2), after the words "alternate directorship for
any other director in the company", the words "or holding
directorship in the same company" shall be inserted;
(a) the words "In the case of a public company," shall be omitted;
(b) after the words "meeting of the Board", the words "which shall
be subsequently approved by members in the immediate next
general meeting" shall be inserted.
section 164 (i) in sub-section (2), the following proviso shall be inserted,
namely:—
"Provided that where a person is appointed as a director of
a company which is in default of clause (a) or clause (b), he shall
not incur the disqualification for a period of six months from the
date of his appointment.";
(ii) in sub-section (3), for the proviso, the following proviso shall be
"Provided that the disqualifications referred to in clauses (d), (e)
and (g) of sub-section (1) shall continue to apply even if the
appeal or petition has been filed against the order of
conviction or disqualification."
Amendment of In section 165 of the principal Act, in sub-section (1), the Explanation
section 165. shall be renumbered as Explanation I and after Explanation I as so
numbered, the following Explanation shall be inserted, namely:—
"Explanation II.—For reckoning the limit of directorships of twenty
companies, the directorship in a dormant company shall not be
included."

Amendment of In section 167 of the principal Act, in sub-section (1),—

section 167. (i) in clause (a), the following proviso shall be inserted,
namely:—
"Provided that where he incurs disqualification under sub-
section (2) of section 164, the office of the director shall
become vacant in all the companies, other than the company
which is in default under that sub-section.";
(ii) in clause (f), for the proviso the following proviso shall be
substituted, namely,—
"Provided that the office shall not be vacated by the director
in case of orders referred to in clauses (e) and (f)—
(i) for thirty days from the date of conviction or order of
disqualification;
(ii) where an appeal or petition is preferred within thirty days
as aforesaid against the conviction resulting in sentence
or order, until expiry of seven days from the date on
which such appeal or petition is disposed of; or
(iii) where any further appeal or petition is preferred against order
or sentence within seven days, until such further appeal or
petition is disposed of."
Amendment of In section 168 of the principal Act, in sub-section (1), in the proviso, for
Section 168 the words, "director shall also forward", the words "director may also
forward" shall be substituted.
14. Amendments through the Companies (Amendment) Second Ordinance, 2019 w.e.f.
2nd November, 2018
Relevant Amendment
sections
Amendment of In section 157 of the principal Act, for sub-section (2), the following
section 157. sub-section shall be substituted, namely:—
“(2) If any company fails to furnish the Director Identification Number
under sub-section (1), such company shall be liable to a penalty of
twenty-five thousand rupees and in case of continuing failure, with
a further penalty of one hundred rupees for each day after the first
during which such failure continues, subject to a maximum of one
lakh rupees, and every officer of the company who is in default shall
be liable to a penalty of not less than twenty-five thousand rupees
and in case of continuing failure, with a further penalty of one
hundred rupees for each day after the first during which such failure
continues, subject to a maximum of one lakh rupees.”

Substitution of For section 159 of the principal Act, the following Substitution of
new section for section shall be substituted, namely:
section 159. Penalty for default of certain provisions.
“159. If any individual or director of a company makes any default in
complying with any of the provisions of section 152, section 155 and
section 156, such individual or director of the company shall be
liable to a penalty which may extend to fifty thousand rupees and
where the default is a continuing one, with a further penalty which
may extend to five hundred rupees for each day after the first during
which such default continues.”
Amendment of In section 164 of the principal Act, in sub-section (1), after clause
section 164. (h), the following clause shall be inserted, namely:—
“(i) he has not complied with the provisions of sub-section (1) of
section 165.”
Amendment of In section 165 of the principal Act, in sub-section (6), for the portion
section 165. beginning with “punishable with fine” and ending with “c ontravention
continues”, the words “liable to a penalty of five thousand rupees for
each day after the first during which such contravention continues”
CHAPTER 2: APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL
1. Enforcement of the Companies (Appointment and Remuneration of Managerial
Personnel) Amendment Rules, 2018 vide Notification G.S.R. G.S.R 875(E) dated 12th
September 2018
The Central Government makes the Companies (Appointment and Remuneration of
Managerial Personnel) Amendment Rules, 2018 to amend the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014.
In Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014,
(i) in rule 6,
(a) for the heading ‘application to the Central Government’ the heading ‘Parameters
for consideration of remuneration’ shall be substituted.
(b) the words ‘Central Government’ shall be omitted.
(ii) in rule 7, sub-rule (2) shall be omitted
(iii) for form no.MR-2, a new form MR-2 shall be substituted.
2. Amendment in Schedule V to the Companies Act, 2013
The Central Government vide Notification No. S.O. 4822(E) dated 12th September 2018
has amended the Schedule V to the Companies Act, 2013.


Relevant Amendment
Sections
Amendment in in clause (51), —
Section 2(51) (a) in sub-clause (iv), the word "and" shall be omitted;
(b) for sub-clause (v), the following sub-clauses shall be
"(v) such other officer, not more than one level below the
directors who is in whole-time employment, designated as
key managerial personnel by the Board; and
(vi) such other officer as may be prescribed;"
section 196
(a) in sub-section (3), in clause (a), after the proviso, the following
“Provided further that where no such special resolution is
passed but votes cast in favour of the motion exceed the
votes, if any, cast against the motion and the Central
Government is satisfied, on an application made by the Board,
that such appointment is most beneficial to the company, the
appointment of the person who has attained the age of seventy
years may be made.”;
(b) in sub-section (4), for the words “specified in that Schedule”,
the words “specified in Part I of that Schedule” shall be
substituted.
Section 197
(a) in sub-section (1),—
(i) in the first proviso, the words "with the approval of the
Central Government," shall be omitted;
(ii) in the second proviso, after the words "general meeting,",
the words "by a special resolution," shall be inserted;
(iii) after the second proviso, the following proviso shall be
"Provided also that, where the company has defaulted in
payment of dues to any bank or public financial institution
or non-convertible debenture holders or any other
secured creditor, the prior approval of the bank or public

financial institution concerned or the non-convertible

debenture holders or other secured creditor, as the case
may be, shall be obtained by the company before
obtaining the approval in the general meeting.";
(b) in sub-section (3), the words "and if it is not able to comply
with such provisions, with the previous approval of the Central
Government" shall be omitted;
(c) for sub-section (9), the following sub-section shall be substituted,
namely:—
"(9) If any director draws or receives, directly or indirectly, by
way of remuneration any such sums in excess of the limit
prescribed by this section or without approval required
under this section, he shall refund such sums to the
company, within two years or such lesser period as may be
allowed by the company, and until such sum is refunded,
hold it in trust for the company.";
(d) in sub-section (10),—
(i) for the words "permitted by the Central Government", the
words "approved by the company by special resolution
within two years from the date the sum becomes
refundable" shall be substituted;
(ii) the following proviso shall be inserted, namely:—
"Provided that where the company has defaulted in
obtaining approval of such waiver.";
(e) in sub-section (11), the words "and if such conditions are not being
complied, the approval of the Central Government had been
obtained" shall be omitted;
(f) after sub-section (15), the following sub-sections shall be
"(16) The auditor of the company shall, in his report under
section 143, make a statement as to whether the

remuneration paid by the company to its directors is in

accordance with the provisions of this section, whether
remuneration paid to any director is in excess of the limit
laid down under this section and give such other details
as may be prescribed.
(17) On and from the commencement of the Companies
(Amendment) Act, 2017, any application made to the
Central Government under the provisions of this section
[as it stood before such commencement], which is pending
with that Government shall abate, and the company shall,
within one year of such commencement, obtain the
approval in accordance with the provisions of this
section, as so amended."
Section 198
(i) in sub-section (3),—
(a) in clause (a), after the words “sold by the company”, the
words, letter, brackets and figures “unless the company is
an investment company as referred to in clause (a) of the
Explanation to section 186” shall be inserted;
(b) after clause (e), the following clause shall be inserted,
namely:—
“(f) any amount representing unrealised gains,
notional gains or revaluation of assets.”;
(ii) in sub-section (4), in clause (l), the words "which begins
at or after the commencement of this Act" shall be
omitted.
Amendment of In section 200 of the principal Act, the words "the Central
section 200. Government or" appearing at both the places shall be omitted.
section 201. (a) in sub-section (1), for the words "this Chapter", the word and
figures "section 196" shall be substituted;
(b) in sub-section (2), in clause (a), for the words "any of the sections
aforesaid", the word and figures "section 196" shall be
substituted.


2nd November, 2018
Relevant Amendment
sections
section 197.
(a) sub-section (7) shall be omitted;
(b) for sub-section (15), the following sub-section shall be
“(15) If any person makes any default in complying with the
provisions of this section, he shall be liable to a penalty of one
lakh rupees and where any default has been made by a
company, the company shall be liable to a penalty of five lakh
rupees.”
Amendment of In section 203 of the principal Act, for sub-section (5), the
section 203. following sub-section shall be substituted, namely:—
“(5) If any company makes any default in complying with the
provisions of this section, such company shall be liable to a
penalty of five lakh rupees and every director and key managerial
personnel of the company who is in default shall be liable to a
penalty of fifty thousand rupees and where the default is a
continuing one, with a further penalty of one thousand rupees for
each day after the first during which such default continues but
not exceeding five lakh rupees.”

1. Exemptions to Private Companies Vide Notification G.S.R. 583(E) Dated 13 th June,
2017
(i) With respect to Section 173(5), the following sub- section shall be substituted:
(5) A One Person Company, small company, dormant company and a private
company (if such private company is a start-up) shall be deemed to have
complied with the provisions of this section if at least one meeting of the Board
of Directors has been conducted in each half of a calendar year and the gap
between the two meetings is not less than ninety days:

Provided that nothing contained in this subsection and in section 174 shall apply
to One person Company in which there is only one director on its Board of
Directors.
(ii) With respect to section 174(3)-
It shall apply with the exception that the interested director may also be counted
towards quorum in such meeting after disclosure of his interest pursuant to section
184.
2. Insertion of Paragraph 2A in the principal notification G.S.R. 464(E), dated 5 th June
2015 Vide Notification G.S.R. 583(E) Dated 13 th June, 2017
aforesaid Table shall be applicable to a private company which has not committed a default
in filing its financial statements under section 137 of the said Act or annual return u nder
section 92 of the said Act with the Registrar.”.
3. Exemptions to Companies covered section 8 of the Companies Act, 2013 Vide
Notification G.S.R. 584(E) Dated 13th June, 2017
In section 186(7)- following proviso shall be inserted-
Provided that nothing contained in this sub-section shall apply to a company in which
twenty-six per cent. or more of the paid-up share capital is held by the Central Government
or one or more State Governments or both, in respect of loans provided by such company
for funding Industrial Research and Development projects in furtherance objects as stated
in its memorandum of association.".
4. Insertion of Paragraph 2A in the principal notification G.S.R. 466 (E), dated 5th June
annual return under section 92 of the said Act with the Registrar.”
5. Enforcement of the Companies (Meetings of Board and its Powers) Second
Amendment Rules, 2017 vide Notification G.S.R. 880(E) Dated 13 th July 2017
(Meetings of Board and its Powers) Rules, 2014.
(1) In rule 3 for clause (e), the following shall be substituted, -

“(e) Any director who intends to participate in the meeting through electronic mode
may intimate about such participation at the beginning of the calendar year and such
declaration shall be valid for one year: Provided that such declaration shall not debar
him from participation in the meeting in person in which case he shall intimate the
company sufficiently in advance of his intention to participate in person.”
(2) In the principal rules, for rule 6, the following rule shall be substituted, namely:-
"6. Committees of the Board. - The Board of directors of every listed company and a
company covered under rule 4 of the Companies (Appointment and Qualification of
Directors) Rules, 2014 shall constitute an 'Audit Committee' and a 'Nomination and
Remuneration Committee of the Board'.
6. Enforcement of the Companies (Restriction on number of layers) Rules, 2017 in
exercise of the powers conferred under proviso to clause (87) of section 2 Vide
notification G.S.R. 1176(E), dated 20 th September 2017
Restriction on number of layers for certain classes of holding companies -
(1) On and from the date of commencement of these rules, no company, other than a
company belonging to a class specified in sub-rule (2) , shall have more than two
layers of subsidiaries:
Provided that the provisions of this sub-rule shall not affect a company from acquiring
a company incorporated outside India with subsidiaries beyond two layers as per the
laws of such country:
Provided further that for computing the number of layers under this rule, one layer
which consists of one or more wholly owned subsidiary or subsidiaries shall not be
taken into account.
(2) The provisions of this rule shall not apply to the following classes of
companies, namely:—
(a) a banking company as defined in the Banking Regulation Act, 1949
(b) a non-banking financial company as defined in the Reserve Bank of India Act,
1934 which is registered with the Reserve Bank of India and considered as
systematically important non-banking financial company by the Reserve Bank of
India;
(c) an insurance company being a company which carries on the business of
insurance in accordance with provisions of the Insurance Act, 1938 and the
Insurance Regulatory Development Authority Act, 1999
(d) a Government company referred to in clause (45) of section 2 of the Companies
Act.
(3) The provisions of this rule shall not be in derogation of the proviso to sub-section (1)
of section 186 of the Act.

(4) Every company, other than a company referred to in sub-rule (2), existing on or before
the commencement of these rules, which has number of layers of subsidiaries in
excess of the layers specified in sub-rule (1) –
(i) shall file, with the Registrar a return disclosing the details specified therein,
within a period of one hundred and fifty days from the date of publication of these
rules in the Official Gazette;
(ii) shall not, after the date of commencement of these rules, have any additional
layer of subsidiaries over and above the layers existing on such date; and (iii)
shall not, in case one or more layers are reduced by it subsequent to the
commencement of these rules, have the number of layers beyond the number
of layers it has after such reduction or maximum layers allowed in sub rule (1),
whichever is more.
(5) If any company contravenes any provision of these rules the company and every
officer of the company who is in default shall be punishable with fine which may
extend to ten thousand rupees and where the contravention is a continuing one, with
a further fine which may extend to one thousand rupees for every day after the first
during which such contravention continues.
7. Enforcement of the Companies (Meetings of Board and its Powers) Amendment
Rules, 2018 vide Notification G.S.R. 429 (E) dated 7th May, 2018
The Central Government makes the Companies (Meetings of Board and its Powers)
Amendment Rules, 2018 to amend the Companies (Meetings of Board and its Powers)
Rules, 2014.
In Companies (Meetings of Board and its Powers) Rules, 2014,
(i) in rule 4, the following proviso shall be inserted, namely:-
“Provided that where there is quorum in a meeting through physical presence of
directors, any other director may participate through video conferencing or other
audio visual means.”
(ii) In the principal rules, in rule 6, for the words “every listed company”, the words “every
listed public company” shall be substituted.
(iii) In the principal rules, for rule 13, the following rule shall be substituted, namely:-
“13. Special Resolution- A resolution passed at a general meeting in terms of sub-
section (3) of section 186 to give any loan or guarantee or investment or providing
any security or the acquisition under sub-section (2) of section 186 shall specify the
total amount up to which the Board of Directors are authorised to give such loan or
guarantee, to provide such security or make such acquisition:
Provided that the company shall disclose to the members in the financial statement
the full particulars in accordance with the provisions of sub-section (4) of section 186.”


Relevant sections Amendment
Amendment of section In section 173 of the principal Act, in sub-section (2),
173 after the first proviso, the following proviso shall be
"Provided further that where there is quorum in a
meeting through physical presence of directors, any
other director may participate through video
conferencing or other audio visual means in such
meeting on any matter specified under the first proviso.".
Amendment of section In section 177 of the principal Act,—
177. (i) in sub-section (1), for the words "every listed
company", the words "every listed public company"
(ii) in sub-section (4), in clause (iv), after the proviso,
the following provisos shall be inserted, namely:—
"Provided further that in case of transaction, other
than transactions referred to in section 188, and
where Audit Committee does not approve the
transaction, it shall make its recommendations to
the Board:
Provided also that in case any transaction involvin g
any amount not exceeding one crore rupees is
entered into by a director or officer of the company
without obtaining the approval of the Audit
Committee and it is not ratified by the Audit
Committee within three months from the date of the
transaction, such transaction shall be voidable at
the option of the Audit Committee and if the
transaction is with the related party to any director
or is authorised by any other director, the director
concerned shall indemnify the company against
any loss incurred by it:
Provided also that the provisions of this clause
shall not apply to a transaction, other than a
transaction referred to in section 188, between a
holding company and its wholly owned subsidiary
company."
Amendment of Section 178 In section 178 of the principal Act,—
(i) in sub-section (1), for the words "every listed

(ii) in sub-section (2), for the words "shall carry out

evaluation of every director's performance", the
words "shall specify the manner for effective
evaluation of performance of Board, its committees
and individual directors to be carried out either by
the Board, by the Nomination and Remuneration
Committee or by an independent external agency
and review its implementation and compliance"
(iii) in sub-section (4), in clause (c), for the proviso, the
following proviso shall be substituted, namely:—
"Provided that such policy shall be placed on the
website of the company, if any, and the salient
features of the policy and changes therein, if any,
along with the web address of the policy, if any,
shall be disclosed in the Board's report.";
(iv) in sub-section (8), in the proviso, for the words
"non-consideration of resolution of any grievance",
the words "inability to resolve or consider any
grievance" shall be substituted.
Amendment of Section In section 180 of the principal Act, in sub-section (1), in
180 clause (c), for the words "paid-up share capital and free
reserves", the words "paid-up share capital, free
reserves and securities premium" shall be substituted.
Amendment of Section In section 184 of the principal Act,—
184 (i) in sub-section (4), the words "shall not be less than
fifty thousand rupees but which" shall be omitted;
(ii) in sub-section (5), for clause (b), the following
clause shall be substituted, namely:—
"(b) shall apply to any contract or arrangement
entered into or to be entered into between two
companies or between one or more
companies and one or more bodies corporate
where any of the directors of the one
company or body corporate or two or more of
them together holds or hold not more than two
per cent. of the paid-up share capital in the
other company or the body corporate."
Substitution of new section For section 185 of the principal Act, the following section
for section 185. shall be substituted, namely:—
Loan to Directors '185. (1) No company shall, directly or indirectly,
advance any loan, including any loan represented by a

book debt to, or give any guarantee or provide any

security in connection with any loan taken by,—
(a) any director of company, or of a company which is
its holding company or any partner or relative of
any such director; or
(b) any firm in which any such director or relative is a
partner.
(2) A company may advance any loan including any loan
represented by a book debt, or give any guarantee or
provide any security in connection with any loan taken
by any person in whom any of the director of the
company is interested, subject to the condition that—
(a) a special resolution is passed by the company in
general meeting:
Provided that the explanatory statement to the
notice for the relevant general meeting shall
disclose the full particulars of the loans given, or
guarantee given or security provided and the
purpose for which the loan or guarantee or security
is proposed to be utilised by the recipient of the
loan or guarantee or security and any other
relevant fact; and
(b) the loans are utilised by the borrowing company for
its principal business activities.
Explanation.—For the purposes of this sub-section, the
expression "any person in whom any of the director of
the company is interested" means—
(a) any private company of which any such director is
a director or member;
(b) any body corporate at a general meeting of which
not less than twenty-five per cent. of the total
voting power may be exercised or controlled by any
such director, or by two or more such directors,
together; or
(c) any body corporate, the Board of directors,
managing director or manager, whereof is
accustomed to act in accordance with the
directions or instructions of the Board, or of any
director or directors, of the lending company.
(3) Nothing contained in sub-sections (1) and (2) shall
apply to—

(a) the giving of any loan to a managing or whole-time

director—
(i) as a part of the conditions of service extended
by the company to all its employees; or
(ii) pursuant to any scheme approved by the
members by a special resolution; or
(b) a company which in the ordinary course of its
business provides loans or gives guarantees or
securities for the due repayment of any loan and in
respect of such loans an interest is charged at a
rate not less than the rate of prevailing yield of one
year, three years, five years or ten years
Government security closest to the tenor of the
loan; or
(c) any loan made by a holding company to its wholly
owned subsidiary company or any guarantee given
or security provided by a holding company in
respect of any loan made to its wholly owned
subsidiary company; or
(d) any guarantee given or security provided by a
holding company in respect of loan made by any
bank or financial institution to its subsidiary
company:
Provided that the loans made under clauses (c)
and (d) are utilized by the subsidiary company for
(4) If any loan is advanced or a guarantee or security is
given or provided or utilised in contravention of the
provisions of this section,—
(i) the company shall be punishable with fine which
shall not be less than five lakh rupees but which
may extend to twenty-five lakh rupees;
(ii) every officer of the company who is in default shall
be punishable with imprisonment for a term which
may extend to six months or with fine which shall
not be less than five lakh rupees but which may
extend to twenty-five lakh rupees; and
(iii) the director or the other person to whom any loan
is advanced or guarantee or security is given or
provided in connection with any loan taken by him
or the other person, shall be punishable with
imprisonment which may extend to six months or

with fine which shall not be less than five lakh

rupees but which may extend to twenty-five lakh
rupees, or with both.’
186. (i) in sub-section (2), the following Explanation shall
'Explanation.—For the purposes of this sub-
section, the word "person" does not include any
individual who is in the employment of the
company.';
(ii) for sub-section (3), the following sub-section shall
be substituted, namely:—
'(3) Where the aggregate of the loans and
investment so far made, the amount for which
guarantee or security so far provided to or in
all other bodies corporate along with the
investment, loan, guarantee or security
proposed to be made or given by the Board,
exceed the limits specified under sub-section
(2), no investment or loan shall be made or
guarantee shall be given or security shall be
provided unless previously authorised by a
special resolution passed in a general
meeting:
Provided that where a loan or guarantee is
given or where a security has been provided
by a company to its wholly owned subsidiary
company or a joint venture company, or
acquisition is made by a holding company, by
way of subscription, purchase or otherwise of,
the securities of its wholly owned subsidiary
company, the requirement of this sub-section
shall not apply:
Provided further that the company shall
disclose the details of such loans or
guarantee or security or acquisition in the
financial statement as provided under sub-
section (4).”.
(iii) for sub-section (11), the following sub-section shall

"(11) Nothing contained in this section, except sub-

section (1), shall apply—
(a) to any loan made, any guarantee given
or any security provided or any
investment made by a banking
company, or an insurance company, or
a housing finance company in the
ordinary course of its business, or a
company established with the object of
and engaged in the business of
financing industrial enterprises, or of
providing infrastructural facilities;
(b) to any investment—
(i) made by an investment company;
(ii) made in shares allotted in
pursuance of clause (a) of sub-
section (1) of section 62 or in
shares allotted in pursuance of
rights issues made by a body
corporate;
(iii) made, in respect of investment or
lending activities, by a non-banking
financial company registered under
Chapter III-B of the Reserve Bank
of India Act, 1934 and whose
principal business is acquisition of
securities.";
(iv) in the Explanation, in clause (a), after the words
"other securities" the following shall be inserted,
namely:—
"and a company will be deemed to be principally
engaged in the business of acquisition of shares,
debentures or other securities, if its assets in the
form of investment in shares, debentures or other
securities constitute not less than fifty per cent. of
its total assets, or if its income derived from
investment business constitutes not less than fifty
per cent. as a proportion of its gross income."
188. (i) in sub-section (1), after the second proviso, the
following proviso shall be inserted, namely:—

"Provided also that nothing contained in the

second proviso shall apply to a company in which
ninety per cent. or more members, in number, are
relatives of promoters or are related parties:"
(ii) in sub-section (3), for the words "shall be voidable
at the option of the Board", the words "shall be
voidable at the option of the Board or, as the case
may be, of the shareholders" shall be substituted.
Omission of section 194 Section 194 of the principal Act shall be omitted.
2nd November, 2018
Relevant Amendment
sections
section 191 following sub-section shall be substituted, namely:—
“(5) If a director of the company makes any default in complying

with the provisions of this section, such director shall be liable
to a penalty of one lakh rupees.”
1. Enforcement of Section 212(8), (9), & (10) vide Notification S.O. 2751(E) dated 24 th of
August, 2017
The Central Government notified the provisions of sub-sections (8), (9) and sub-section
(10) of section 212 of the Companies Act, 2013 with effect from 24th day of August, 2017.
2. Enforcement of the Companies (Arrests in connection with Investigation by Serious
Fraud Investigation Office) Rules, 2017 Vide Notification G.S.R. 1062(E) dated 24 th of
August 2017
In exercise of the powers conferred under sub-section (1) of section 469 read with section
212 of the Companies Act, 2013, Central Government enforced the Companies (Arrests
in connection with Investigation by Serious Fraud Investigation Office) Rules, 2017.
According to the Rule where any person has been guilty of any offence punishable under
section 212 of the Act, he may be arrested as per the respective rules.
The Companies (Arrests in Connection with Investigation by Serious Fraud
Investigation Office) Rules, 2017
a. In case of other than government companies/foreign companies: Where the
Director, Additional Director or Assistant Director of the Serious Fraud Investigation

Office (herein after referred to as SFIO) investigating into the affairs of a company
other than a Government company or foreign company has, on the basis of material
in his possession, reason to believe (the reason for such belief to be recorded in
writing) that any person has been guilty of any offence punishable under section 212
of the Act, he may arrest such person; Provided that in case of an arrest being made
by Additional Director or Assistant Director, the prior written approval of the Director
SFIO shall be obtained.
b. Competent authority: The Director SFIO shall be the competent authority for all
decisions pertaining to arrest.
c. In case of Government Company /foreign company: Where an arrest of a person
is to be made in connection with a Government company or a foreign company under
investigation, such arrest shall be made with prior written approval of the Central
Government. Provided that the intimation of such arrest shall also be given to the
Managing Director or the person in-charge of the affairs of the Government Company
and where the person arrested is the Managing Director or person in-charge of the
Government Company, to the Secretary of the administrative ministry concerned, by
the arresting officer.
d. Serving of Arrest order to arrestee: The Director, Additional Director or Assistant
Director, while exercising powers under sub-section (8) of section 212 of the Act, shall
sign the arrest order together with personal search memo in the Form appended to these
rules and shall serve it on the arrestee and obtain written acknowledgement of service.
e. Forwarding of copy of arrest order and other documents: The Director, Additional
Director or Assistant Director shall forward a copy of the arrest order along with the
material in his possession and all the other documents including personal search
memo to the office of Director, SFIO in a sealed envelope with a forwarding letter
after signing on each page of these documents, so as to reach the office of the
Director, SFIO within twenty four hours through the quickest possible means.
f. Maintenance of arrest order: An arrest register shall be maintained in the office of
Director, SFIO and the Director or any officer nominated by Director shall ensure that
entries with regard to particulars of the arrestee, date and time of arrest and other
relevant information pertaining to the arrest are made in the arrest register in respect
of all arrests made by the arresting officers.
g. Entry in arrest register: The entry regarding arrest of the person and information
given to such person shall be made in the arrest register immediately on receipt of
the documents as specified under rule 5 in the arrest register maintained by the SFIO
office.
h. Preservation of copy of arrest order: The office of Director, SFIO shall preserve
the copy of arrest order together with supporting materials for a period of five years
a) from the date of judgment or final order of the Trial Court, in cases where the said

judgment has not been impugned in the appellate court; or b) from the date of disposal
of the matter before the final appellate court, in cases where the said judgment or
final order has been impugned, whichever is later.
i. Applicability of provision of Cr.P.C: The provisions of the Code of Criminal
Procedure, 1973 (2 of 1974), relating to arrest shall be applied mutatis mutandis to
every arrest made under this Act.
Amendment of section 223. In section 223 of the principal Act, in sub-section (3),
after the words "may be obtained", the words "by
members, creditors or any other person whose interest
is likely to be affected" shall be inserted.
1. Exemptions to Government Companies Vide Notification G.S.R. 582(E) Dated
13th June, 2017
The Central Government amends the Notification G.S.R. 463(E), dated 5th June 2015.
The word "Tribunal “wherever it occurs in sections 230 to 232, the words "Central
Amendment of section In section 236 of the principal Act, in sub-sections (4), (5)
236. and (6), for the words, "transferor company", wherever they
occur, the words "company whose shares are being
transferred" shall be substituted.

2nd November, 2018
Relevant Amendment
sections
Amendment of In section 238 of the principal Act, in sub-section (3), for the words
section 238 “punishable with fine which shall not be less than twenty-five
thousand rupees but which may extend to five lakh rupees”, the
words “liable to a penalty of one lakh rupees” shall be substituted.


Amendments through the Companies (Amendment) Second Ordinance, 2019 w.e.f.
2nd November, 2018
Relevant Amendment
sections
Amendment of In section 248 of the principal Act, in sub-section Amendment of (1),—
section 248 (a) in clause (c), for the word and figures “section 455,”, the words and
figures “section 455; or” shall be substituted;
(b) after clause (c) and before the long line, the following clauses shall be
“(d) the subscribers to the memorandum have not paid the subscription
which they had undertaken to pay at the time of incorporation of a
company and a declaration to this effect has not been filed within one
hundred and eighty days of its incorporation under sub-section (1) of
section 10A; or
(e) the company is not carrying on any business or operations, as
revealed after the physical verification carried out under sub-section (9)
of section 12.”.
CHAPTER 9: COMPANIES INCORPORATED OUTSIDE INDIA

Relevant Amendment
sections
Amendment of Section 379 of the principal Act shall be renumbered as sub-section (2)
section 379. thereof and before sub-section (2) as so renumbered, the following sub-
section shall be inserted, namely:—
"(1) Sections 380 to 386 (both inclusive) and sections 392 and 393 shall
apply to all foreign companies:
Provided that the Central Government may, by Order published in the
Official Gazette, exempt any class of foreign companies, specified in the
Order, from any of the provisions of sections 380 to 386 and sections 392
and 393 and a copy of every such Order shall, as soon as may be after it
is made, be laid before both Houses of Parliament."
Amendment of In section 384 of the principal Act, in sub-section (2), after the word and
section 384. figures "section 92", the words and figures "and section 135" shall be
inserted.

Amendment of In section 391 of the principal Act, for sub-section (2), the following sub-
section 391. section shall be substituted, namely:—
“(2) Subject to the provisions of section 376, the provisions of Chapter
XX shall apply mutatis mutandis for closure of the place of business of
a foreign company in India as if it were a company incorporated in India
in case such foreign company has raised monies through offer or issue
of securities under this Chapter which have not been repaid or
redeemed.”
1. Notification of Section 247 vide Notification S.O. 3393(E) dated 18th October 2017
The Central Government hereby appoints the 18th October, 2017 as the date on which the
provisions of section 247 of the said Act shall come into force.
Section 247: Valuation by Registered Valuers
(1) Where a valuation is required to be made in respect of any property, stocks, shares,
debentures, securities or goodwill or any other assets (herein referred to as the
assets) or net worth of a company or its liabilities under the provision of this Act, it
shall be valued by a person having such qualifications and experience and registered
as a valuer in such manner, on such terms and conditions as may be prescribed] and
appointed by the audit committee or in its absence by the Board of Directors of that
company.
(2) The valuer appointed under sub-section (1) shall,—
(a) make an impartial, true and fair valuation of any assets which may be required
to be valued;
(b) exercise due diligence while performing the functions as valuer;
(c) make the valuation in accordance with such rules as may be prescribed; and
(d) not undertake valuation of any assets in which he has a direct or indirect interest
or becomes so interested at any time during a period of three years prior to his
appointment as valuer or three years after the valuation of assets was conducted
by him.
(3) If a valuer contravenes the provisions of this section or the rules made thereunder,
the valuer shall be punishable with fine which shall not be less than twenty-five
thousand rupees but which may extend to one lakh rupees.
However if the valuer has contravened such provisions with the intention to defraud
the company or its members, he shall be punishable with imprisonment for a term
which may extend to one year and with fine which shall not be less than one lakh
rupees but which may extend to five lakh rupees.
(4) Where a valuer has been convicted under sub-section (3), he shall be liable to—

(i) refund the remuneration received by him to the company; and

(ii) pay for damages to the company or to any other person for loss arising out of
incorrect or misleading statements of particulars made in his report.
2. Notification of the Companies (Registered Valuers and Valuation) Rules, 2017 vide
Notification G.S.R 1316(E) dated 18 th October, 2017
In exercise of the powers conferred by section 247, the Central Government hereby
enforced the Companies (Registered Valuers and Valuation) Rules, 2017.
COMPANIES (REGISTERED VALUERS AND VALUATION) RULES, 2017
2. Definitions
(1) In these rules, unless the context otherwise requires -
"authority" means an authority specified by the Central Government under
section 458 of the Companies Act, 2013 to perform the functions under these
rules;
"asset class" means a distinct group of assets, such as land and building,
machinery and equipment, displaying similar characteristics, that can be
classified and requires separate set of valuers for valuation;
"certificate of recognition" means the certificate of recognition granted to a
registered valuers organisation under sub-rule (5) of rule 13 and the term
"recognition" shall be construed accordingly;
"certificate of registration" means the certificate of registration granted to a
valuer under sub-rule (6) of rule 6 and the term "registration" shall be construed
accordingly;
"registered valuers organisation" means a registered valuers organization
recognised under sub-rule (5) of rule 13;
"valuer" means a person registered with the authority in ac cordance with these
rules and the term "registered valuer" shall be construed accordingly.
3. Eligibility for registered valuers
(1) A person shall be eligible to be a registered valuer if he-
(a) Is a valuer member of a registered valuers organisation;
Explanation.- For the purposes of this clause, "a valuer member" is a member
of a registered valuers organisation who possesses the requisite educational
qualifications and experience for being registered as a valuer;
(b) Is recommended by the registered valuers organisation of which he is a valuer
member for registration as a valuer;
(c) Has passed the valuation examination under rule 5 within three years

preceding the date of making an application for registration under rule 6;

(d) Possesses the qualifications and experience as specified in rule 4;
(e) Is not a minor;
(f) Has not been declared to be of unsound mind;
(g) Is not an undischarged bankrupt, or has not applied to be adjudicated as a
bankrupt;
(h) Is a person resident in India;
Explanation.- For the purposes of these rules 'person resident in India'
shall have the same meaning as defined in clause (v) of section 2 of the
Foreign Exchange Management Act, 1999 (42 of 1999) as far as it is
applicable to an individual;
(i) Has not been convicted by any competent court for an offence punishable
with imprisonment for a term exceeding six months or for an offence
involving moral turpitude, and a period of five years has not elapsed from
the date of expiry of the sentence:
Provided that if a person has been convicted of any offence and sentenced
in respect thereof to imprisonment for a period of seven years or more, he
shall not be eligible to be registered;
(j) Has not been levied a penalty under section 271J of Income-tax Act, 1961
(43 of 1961) and time limit for filing appeal before Commissioner of Income-
tax (Appeals) or Income-tax Appellate Tribunal, as the case may be has
expired, or such penalty has been confirmed by Income-tax Appellate
Tribunal, and five years have not elapsed after levy of such penalty; and
(k) Is a fit and proper person:
Explanation.- For determining whether an individual is a fit and proper
person under these rules, the authority may take account of any relevant
consideration, including but not limited to the following c riteria-
(i) Integrity, reputation and character,
(ii) Absence of convictions and restraint orders, and
(iii) Competence and financial solvency.
(2) No partnership entity or company shall be eligible to be a registered valuer if-
(a) It has been set up for objects other than for rendering professional or
financial services, including valuation services and that in the case of a
company, it is not a subsidiary, joint venture or associate of another
company or body corporate;
(b) It is undergoing an insolvency resolution or is an undischarged bankrupt;

(c) All the partners or directors, as the case may be, are not ineligible under
clauses (c), (d), (e), (g), (h), (i), (j) and (k) of sub-rule (1);
(d) Three or all the partners or directors, whichever is lower, of the partnership
entity or company, as the case may be, are not registered valuers; or
(e) None of its partners or directors, as the case may be, is a registered valuer for
the asset class, for the valuation of which it seeks to be a registered valuer.
4. Qualifications and experience
An individual shall have the following qualifications and experience to be eligible for
registration under rule 3, namely:-
(a) post-graduate degree or post-graduate diploma, in the specified discipline, from
a University or Institute established, recognised or incorporated by law in India
and at least three years of experience in the specified discipline thereafter; or
(b) a Bachelor's degree or equivalent, in the specified discipline, from a University
or Institute established, recognised or incorporated by law in India and at least
five years of experience in the specified discipline thereafter; or
(c) membership of a professional institute established by an Act of Parliament
enacted for the purpose of regulation of a profession with at least three years'
experience after such membership and having qualification mentioned at clause
(a) or (b).
Explanation-I- For the purposes of this clause the 'specified discipline' shall mean the
specific discipline which is relevant for valuation of an asset class for which the
registration as a valuer or recognition as a registered valuers organisation is sought
under these rules.
Explanation-II.- Qualifying education and experience and examination or training for
various asset classes, is given in an indicative manner in Annexure-IV of these rules.
6. Application for certificate of registration
(1) An individual eligible for registration as a registered valuer under rule 3 may
make an application to the authority in Form-A of Annexure-II along with a non-
refundable application fee of five thousand rupees in favour of the authority.
(2) A partnership entity or company eligible for registration as a registered valuer
under rule 3 may make an application to the authority in Form-B of Annexure-
II along with a non-refundable application fee of ten thousand rupees in favour
of the authority.
(3) The authority shall examine the application, and may grant twenty one days to
the applicant to remove the deficiencies, if any, in the application.

(4) The authority may require the applicant to submit additional documents or
clarification within twenty- one days.
(5) The authority may require the applicant to appear, within twenty one days,
before the authority in person, or through its authorised representative for
explanation or clarifications required for processing the application.
(6) If the authority is satisfied, after such scrutiny, inspection or inquiry as it deems
necessary, that the applicant is eligible under these rules, it may grant a
certificate of registration to the applicant to carry on the activities of a registered
valuer for the relevant asset class or classes in Form-C of the Annexure-II within
sixty days of receipt of the application, excluding the time given by the authority
for presenting additional documents, information or clarification, or appearing in
person, as the case may be.
(7) If, after considering an application made under this rule, the authority is of
the prima facie opinion that the registration ought not be granted, it shall
communicate the reasons for forming such an opinion within forty-five days of
receipt of the application, excluding the time given by it for removing the
deficiencies, presenting additional documents or clarifications, or appearing in
(8) The applicant shall submit an explanation as to why his/its application should be
accepted within fifteen days of the receipt of the communication under sub- rule
(7), to enable the authority to form a final opinion.
(9) After considering the explanation, if any, given by the applicant under sub-rule
(8), the authority shall either -
(a) accept the application and grant the certificate of registration; or
(b) reject the application by an order, giving reasons thereof.
(10) The authority shall communicate its decision to the applicant within thirty days
of receipt of explanation.
7. Conditions of Registration
The registration granted under rule 6 shall be subject to the conditions that the valuer
shall -
(a) at all times possess the eligibility and qualification and experience criteria as
specified under rule 3 and rule 4;
(b) at all times comply with the provisions of the Act, these rules and the Bye-laws
or internal regulations, as the case may be, of the respective registered valuers
organisation;

(c) in his capacity as a registered valuer, not conduct valuation of the assets or
class(es) of assets other than for which he/it has been registered by the
authority;
(d) take prior permission of the authority for shifting his/ its membership from one
registered valuers organisation to another;
(e) take adequate steps for redressal of grievances;
(f) maintain records of each assignment undertaken by him for at least three years
from the completion of such assignment;
(g) comply with the Code of Conduct of the registered valuers organisation of which
he is a member;
(h) in case a partnership entity or company is the registered valuer, allow only the
partner or director who is a registered valuer for the asset class(es) that is being
valued to sign and act on behalf of it;
(i) in case a partnership entity or company is the registered valuer, it shall disclose
to the company concerned, the extent of capital employed or contributed in the
partnership entity or the company by the partner or director, as the case may
be, who would sign and act in respect of relevant valuation assignment for the
company;
(j) in case a partnership entity is the registered valuer, be liable jointly and severally
along with the partner who signs and acts in respect of a valuation assignment
on behalf of the partnership entity;
(k) in case a company is the registered valuer, be liable alongwith director who signs
and acts in respect of a valuation assignment on behalf of the company;
(l) in case a partnership entity or company is the registered valuer, immediately
inform the authority on the removal of a partner or director, as the case may be,
who is a registered valuer along with detailed reasons for such removal; and
(m) comply with such other conditions as may be imposed by the authority.
8. Conduct of Valuation
(1) The registered valuer shall, while conducting a valuation, comply with the
valuation standards as notified or modified under rule 18:
Provided that until the valuation standards are notified or modified by the Central
Government, a valuer shall make valuations as per-
(a) internationally accepted valuation standards;
(b) valuation standards adopted by any registered valuers organisation.
(2) The registered valuer may obtain inputs for his valuation report or get a separate
valuation for an asset class conducted from another registered valuer, in which

case he shall fully disclose the details of the inputs and the particulars etc. of
the other registered valuer in his report and the liabilities against the resultant
valuation, irrespective of the nature of inputs or valuation by the other registered
valuer, shall remain of the first mentioned registered valuer.
(3) The valuer shall, in his report, state the following:-
(a) background information of the asset being valued;
(b) purpose of valuation and appointing authority;
(c) identity of the valuer and any other experts involved in the valuation;
(d) disclosure of valuer interest or conflict, if any;
(e) date of appointment, valuation date and date of report;
(f) inspections and/or investigations undertaken;
(g) nature and sources of the information used or relied upon;
(h) procedures adopted in carrying out the valuation and valuation standards
followed;
(i) restrictions on use of the report, if any;
(j) major factors that were taken into account during the valuation;
(k) conclusion; and
(l) caveats, limitations and disclaimers to the extent they explain or elucidate
the limitations faced by valuer, which shall not be for the purpose of limiting
his responsibility for the valuation report.
9. Temporary surrender
(1) A registered valuer may temporarily surrender his registration certificate in
accordance with the bye-laws or regulations, as the case may be, of the
registered valuers organisation and on such surrender, the valuer shall inform
the authority for taking such information on record.
(2) A registered valuers organisation shall inform the authority if any valuer member
has temporarily surrendered his/its membership or revived his/ its membership
after temporary surrender, not later than seven days from approval of the
application for temporary surrender or revival, as the case may be.
(3) Every registered valuers organisation shall place, on its website, in a searchable
format, the names and other details of its valuers members who have
surrendered or revived their memberships.

10. Functions of a Valuer

A valuer shall conduct valuation required under the Act as per these rules and he may
conduct valuation as per these rules if required under any other law or by any other
regulatory authority.
12. Eligibility for registered valuers organisations
(1) An organisation that meets requirements under sub-rule (2) may be recognised
as a registered valuers organisation for valuation of a specific asset class or
asset classes if -
(i) it has been registered under section 25 of the Companies Act, 1956 (1 of 1956)
or section 8 of the Companies Act, 2013 (18 of 2013) with the sole object of
dealing with matters relating to regulation of valuers of an asset class or asset
classes and has in its bye laws the requirements specified in Annexure-III;
(ii) a professional institute established by an Act of Parliament enacted for the
purpose of regulation of a profession;
Provided that, subject to sub-rule (3), the following organisations may also be
recognised as a registered valuers organisation for valuation of a specific asset
class or asset classes, namely:-
(a) an organisation registered as a society under the Societies Registration Act,
1860 (21 of 1860) or any relevant state law, or;
(b) an organisation set up as a trust governed by the Indian Trust Act, 1882 (2 of
1882).
(2) The organisation referred to in sub-rule (1) shall be recognised if it –
(a) conducts educational courses in valuation, in accordance with the syllabus
determined by the authority, under rule 5, for individuals who may be its valuers
members, and delivered in class room or through distance education modules
and which includes practical training;
(b) grants membership or certificate of practice to individuals, who possess the
qualifications and experience as specified in rule 4, in respect of valuation of
asset class for which it is recognised as a registered valuers organisation ;
(c) conducts training for the individual members before a certificate of practice is
issued to them;
(d) lays down and enforces a code of conduct for valuers who are its members,
which includes all the provisions specified in Annexure-I;
(e) provides for continuing education of individuals who are its members;
(f) monitors and reviews the functioning, including quality of service, of valuers
who are its members; and

(g) has a mechanism to address grievances and conduct disciplinary proceedings

against valuers who are its members.
(3) A registered valuers organisation, being an entity under proviso to sub-rule (1),
shall convert into or register itself as a company under section 8 of the
Companies Act, 2013, and include in its bye laws the requirem ents specified
in Annexure- III, within one year from the date of commencement of these rules.
14. Conditions of Recognition
The recognition granted under rule 13 shall be subject to the conditions that the
registered valuers organisation shall-
(a) at all times continue to satisfy the eligibility requirements specified under rule
12;
(b) maintain a register of members who are registered valuers, which shall be
publicly available;
(c) admits only individuals who possess the educational qualifications and
experience requirements, in accordance with rule 4 and as specified in its
recognition certificate, as members;
(d) make such reports to the authority as may be required by it;
(e) comply with any directions, including with regard to course to be conducted by
valuation organisation under clause (a) of sub-rule (2) of rule 12, issued by the
authority;
(f) be converted or registered as company under section 8 of the Act, with
governance structure and bye laws specified in Annexure-III, within a period of
one year from the date of commencement of these rules if it is an organisation
referred to in proviso to sub-rule (1) of rule 12;
(g) shall have the governance structure and incorporate in its bye laws the
requirements specified in Annexure-III within one year of commencement of
these rules if it is an organisation referred to in clause (i) of sub-rule (1) of rule
12 and existing on the date of commencement of these rules;
(h) display on its website, the status and specified details of every registered valuer
being its valuer members including action under rule 17 being taken against him;
and
(i) comply with such other conditions as may be specified by authority.
15. Cancellation or suspension of certificate of registration or recognition
The authority may cancel or suspend the registration of a valuer or recognition of a
registered valuers organisation for violation of the provisions of the Act, any other law
allowing him to perform valuation, these rules or any condition of registration or
recognition, as the case may be in the manner specified in rule 17.

16. Complaint against a registered valuer or registered valuers organisation

A complaint may be filed against a registered valuer or registered valuers organisation
before the authority in person or by post or courier along with a non-refundable fees
of rupees one thousand in favour of the authority and the authority shall examine the
complaint and take such necessary action as it deems fit:
Provided that in case of a complaint against a registered valuer, who is a partner of
a partnership entity or director of a company, the authority may refer the complaint to
the relevant registered valuers organisation and such organisation shall handle the
complaint in accordance with its bye laws.
18. Valuation Standards
The Central Government shall notify and may modify (from time to time) the valuation
standards on the recommendations of the Committee set up under rule 19.
20. Punishment for contravention
Without prejudice to any other liabilities where a person contravenes any of the
provision of these rules he shall be punishable in accordance with sub-section (3) of
section 469 of the Act.
21. Punishment for false statement
If in any report, certificate or other document required by, or for, the purposes of any
of the provisions of the Act or the rules made thereunder or these rules, any person
makes a statement,—
(a) which is false in any material particulars, knowing it to be false; or
(b) which omits any material fact, knowing it to be material, he shall be liable under
3. Enforcement of the Companies (Registered Valuers and Valuation) Amendment
Rules, 2018 vide Notification No. G.S.R. 155 (E) dated 9th February, 2018
In exercise of the powers conferred by section 247 read with section 469 of the Companies
Act, 2013, the Central Government makes the Companies (Registered Valuers and
Valuation) Amendment Rules, 2018 to amend the Companies (Registered Valuers and
Valuation) Rules, 2017, namely:-
In the Companies (Registered Valuers and Valuation) Rules, 2017, in rule 11, for the
figures, letters and word "31st March, 2018", occurring at both the places, the figures,
letters and word "30th September, 2018" shall be substituted.

4. Enforcement of the Companies (Registered Valuers and Valuation) Second

Amendment Rules, 2018 vide Notification G.S.R. 559(E) dated 13th June, 2018
The Central Government makes the Companies (Registered Valuers and Valuation)
Second Amendment Rules, 2018 to amend the Companies (Registered Valuers and
Valuation) Rules, 2017.
In Companies (Registered Valuers and Valuation) Rules, 2017, in rule 19, in sub-rule 2,
after clause (g), the following clause shall be inserted, namely:-
“(h) Presidents of, the Institute of Chartered Accountants of India, the Institute of Company
Secretaries of India, the Institute of Cost Accountants of India as ex-officio members.”.
5. Enforcement of the Companies (Registered Valuers and Valuation) Third
Amendment Rules, 2018 vide Notification G.S.R. G.S.R. 925(E) dated 25th
September, 2018
The Central Government makes the Companies (Registered Valuers and Valuation) Third
Amendment Rules, 2018 to amend the Companies (Registered Valuers and Valuation)
Rules, 2017.
In the Companies (Registered Valuers and Valuation) Rules, 2017,
(i) in rule 11, for the figures, letters and word “30th September, 2018” occurring at both
the places, the figures, letters and word “31st January, 2019” shall be substituted.
(ii) In the said rules, in rule 14, in clause (f), for the words “one year”, the words “two years”
Amendment of In section 247 of the principal Act, in sub-section (2), in clause
Section 247 (d), for the words "during or after the valuation of assets", the
words "during a period of three years prior to his appointment
as valuer or three years after the valuation of assets was
conducted by him" shall be substituted.
section 447. (i) after the words "guilty of fraud", the words "involving an
amount of at least ten lakh rupees or one per cent. of the
turnover of the company, whichever is lower" shall be
inserted;
(ii) after the proviso, the following proviso shall be inserted,
namely:—
"Provided further that where the fraud involves an
amount less than ten lakh rupees or one per cent. of the
turnover of the company, whichever is lower, and does

not involve public interest, any person guilty of such

fraud shall be punishable with imprisonment for a term
which may extend to five years or with fine which may
extend to twenty lakh rupees or with both.".
7. Enforcement of the Companies (Registered Valuers and Valuation) Fourth
Amendment Rules, 2018 vide Notification G.S.R.1108(E) dated 13th November 2018
The Central Government makes the Companies (Registered Valuers and Valuation) Fourth
Rules, 2017.
In the Companies (Registered Valuers and Valuation) Rules, 2017 (hereinafter
referred to as “the said rules”)
(i) in rule 1, -
for the marginal heading, the following marginal heading shall be substituted,
namely:-
“Short title, commencement and application”;
(ii) after sub-rule (2), the following sub-rule shall be inserted, namely:-
“(3) These rules shall apply for valuation in respect of any property, stocks, shares,
debentures, securities or goodwill or any other assets or net worth of a company or
its liabilities under the provision of the Act or these rules.
Explanation.- It is hereby clarified that conduct of valuation under any ther law other
than the Act or these rules by any person shall not be affected by virtue of coming
into effect of these rules.”.
(iii) In the said rules, in rule 3, in sub-rule (2), -
(a) in clause (a), the word “not” shall be omitted;
(b) in clause (c), after the brackets and letter “(e)”, the brackets and letter “(f),” shall
be inserted.
(iv) In the said rules, in rule 4,-
(a) in clause (c), the words, brackets and letters “and having qualification mentioned
at clause (a) or (b)” shall be omitted;
(b) in Explanation II, the words “and examination or training” shall be omitted;
(c) after Explanation II, the following Explanation shall be inserted, namely :-
“Explanation III.─ For the purposes of this rule and Annexure IV, ‘equivalent’
shall mean professional and technical qualifications which are recognised by the
Ministry of Human Resources and Development as equivalent to professional
and technical degree.”.

(v) In the said rules, in rule 10, the words “and he may conduct valuation as per these
rules if required under any other law or by any other regulatory authority” shall be
omitted.
(vi) In the said rules, in rule 11, the Explanation shall be omitted.
(vi) In the said rules, in rule 12, in sub-rule (1), in clause (ii), for the words “a professional
institute”, the words “it is a professional institute” shall be substituted.
8. Enforcement of section 465 of the Companies Act, 2013
The Central Government vide Notification No. S.O. 560(E) appoints the 30th January, 2019
as the date on which the provisions of section 465 of the said Act in so far as they relate
to the repeal of the Companies Act, 1956 [that in except in so far as they relate to the
repeal of the Registration of Companies (Sikkim) Act, 1961] shall come into force.
2nd November, 2018
Relevant Amendment
sections
Amendment In section 447 of the principal Act, in the second proviso, for the
of section 447. words “twenty lakh rupees”, the words “fifty lakh rupees” shall be
substituted.
CHAPTER 11: COMPOUNDING OF OFFENCES, ADJUDICATION, SPECIAL COURTS

Relevant Amendment
sections
Amendment of For section 435 of the principal Act, the following shall be
section 435. substituted, namely:—
Establishment of 435. (1) The Central Government may, for the purpose of providing
Special Courts speedy trial of offences under this Act, by notification, establish or
designate as many Special Courts as may be necessary.
(2) A Special Court shall consist of—
(a) a single judge holding office as Session Judge or
Additional Session Judge, in case of offences
punishable under this Act with imprisonment of two
years or more; and
(b) a Metropolitan Magistrate or a Judicial Magistrate of the
First Class, in the case of other offences,
who shall be appointed by the Central Government with the
concurrence of the Chief Justice of the High Court within whose
jurisdiction the judge to be appointed is working."

Amendment of In section 438 of the principal Act, for the words "deemed to be a Court
section 438. of Session", the words "deemed to be a Court of Session or the court
of Metropolitan Magistrate or a Judicial Magistrate of the First Class,
as the case may be," shall be substituted.
Amendment of In section 439 of the principal Act, in sub-section (2), after the
section 439. words "a shareholder", the words "or a member" shall be inserted.
Amendment of In section 440 of the principal Act, for the words "Court of Session",
section 440. at both the places, the words "Court of Session or the Court of
Metropolitan Magistrate or a Judicial Magistrate of the First Class,
as the case may be" shall be substituted.
Insertion of new After section 446 of the principal Act, the following sections shall
section 446A. be inserted, namely:—
"446A. The court or the Special Court, while deciding the amount
Factors for of fine or imprisonment under this Act, shall have due regard to the
determining level following factors, namely:—
of punishment. (a) size of the company;
(b) nature of business carried on by the company;
(c) injury to public interest;
(d) nature of the default; and
(e) repetition of the default.
Lesser penalties for 446B. Notwithstanding anything contained in this Act, if a One
One Person Person Company or a small company fails to comply with the
Companies or provisions of sub-section (5) of section 92, sub-section (2) of
small companies. section 117 or sub-section (3) of section 137, such company and
officer in default of such company shall be punishable with fine or
imprisonment or fine and imprisonment, as the case may be, which
shall not be more than one-half of the fine or imprisonment or fine
and imprisonment, as the case may be, of the minimum or
maximum fine or imprisonment or fine and imprisonment, as the
case may be, specified in such sections.".

2nd November, 2018
Relevant Amendment
sections
Amendment of In section 446B of the principal Act, for the portion beginning with
section 446B. “punishable with fine” and ending with “specified in such sections”,

the words “liable to a penalty which shall not be more than one half
of the penalty specified in such sections” shall be substituted.
Amendment In section 454 of the principal Act, —
of section 454 (i) for sub-section (3), the following sub-section shall be substituted,
namely: —
“(3) The adjudicating officer may, by an order
(a) impose the penalty on the company, the officer who is in default,
or any other person, as the case may be, stating therein any non-
compliance or default under the relevant provisions of this Act; and
(b) direct such company, or officer who is in default, or any other
person, as the case may be, to rectify the default, wherever he
considers fit.”;
(ii) in sub-section (4), for the words “such company and the officer
who is in default”, the words “such company, the officer who is in
default or any other person” shall be substituted;
(iii) in sub-section (8),—
(a) in clause (i), for the words “does not pay the penalty imposed by
the adjudicating officer or the Regional Director”, the words,
brackets and figures “fails to comply with the order made under sub-
section (3) or sub-section (7), as the case may be,” shall be
substituted;
(b) in clause (ii)—
(i) for the words “Where an officer of a company”, the words “Where
an officer of a company or any other person” shall be substituted;
(ii) for the words “does not pay the penalty”, the words, brackets and
figures “fails to comply with the order made under sub-section (3) or
sub-section (7), as the case may be,” shall be substituted.
Insertion of new After section 454 of the principal Act, the following section shall be
section 454A. inserted, namely:
Penalty for repeated default.
“454A. Where a company or an officer of a company or any other
person having already been subjected to penalty for default under
any provisions of this Act, again commits such default within a
period of three years from the date of order imposing such penalty
passed by the adjudicating officer or the Regional Director, as the
case may be, it or he shall be liable for the second or subsequent
defaults for an amount equal to twice the amount of penalty provided
for such default under the relevant provisions of this Act.”

3. Enforcement of the Companies (Adjudication of Penalties) Amendment Rules, 2019

vide Notification G.S.R. 131(E) dated 19th February, 2019
The Central Government makes the Companies (Adjudication of Penalties) Amendment Rules,
2019 to amend the Companies (Adjudication of Penalties) Rules, 2014.
In the Companies (Adjudication of Penalties) Rules, 2014, for Rule 3, the following rule shall be
substituted:
“3. Adjudication of Penalties. - (1) The Central Government may appoint any of its officers,
not below the rank of Registrar, as adjudicating officers for adjudging penalty under the
provisions of the Act.
(2) Before adjudging penalty, the adjudicating officer shall issue a written notice in the
specified manner, to the company, the officer who is in default or any other person, as the
case may be, to show cause, within such period as may be specified in the notice (not
being less than 15 days and more than 30 days from the date of service thereon), why the
penalty should not be imposed on it or him.
(3) Every notice issued under sub-rule (2), shall clearly indicate the nature of non-compliance
or default under the Act alleged to have been committed or made by such company, officer
in default, or any other person, the company, and each of the officers in default, or the
other person. as the case may be and also draw attention to the relevant penal provisions
of the Act and the maximum penalty which can be imposed on the company, and each of
the officers in default, or the other person.
(4) The reply to such notice shall be filed in electronic mode only within the period as specified
in the notice.
However, the adjudicating officer may, for reasons to be recorded in writing, extend the
period referred to above by a further period not exceeding 15 days, if the company or officer
in default or any person as the case may be, satisfies the adjudicating officer that it or he
has sufficient cause for not responding to the notice within the stipulated period or the
adjudicating officer has reason to believe that the company or the officer or the person has
received a shorter notice and did not have reasonable time to give reply.
(5) If, after considering the reply submitted by such company, its officer, or any other person,
as the case may be, the adjudicating officer is of the opinion that physical appearance is
required, he shall issue a notice, within a period of 10 working days from the date of receipt
of reply fixing a date for the appearance of such company, through its authorised
representative, or officer of such company, or any other person, whether personally or
through his authorised representative.
If any person, to whom a notice is issued under sub-rule (2), desires to make an oral
representation, whether personally or through his authorised representative and has
indicated the same while submitting his reply in electronic mode, the adjudicating
officer shall allow such person to make such representation after fixing a date of
appearance.

(6) On the date fixed for hearing and after giving a reasonable opportunity of being heard to
the person concerned, the adjudicating officer may, subject to reasons to be recorded in
writing, pass any order in writing as he thinks fit including an order for adjournment:
Provided that after hearing, adjudicating officer may require the concerned person to
submit his reply in writing on certain other issues related to the notice under sub-rule
(2), relevant for determination of the default.
(7) The adjudicating officer shall pass an order,-
(a) within 30 days of the expiry of the period referred in sub-rule (2) or of such extended
period as referred therein, where physical appearance was not required under sub-
rule (5);
(b) within 90 days of the date of issue of notice under sub-rule (2), where any person
appeared before the adjudicating officer under sub-rule (5):
Provided that in case an order is passed after the aforementioned duration, the
reasons of the delay shall be recorded by the adjudicating officer and no such
order shall be invalid merely because of its passing after the expiry of such 30
days or 90 days as the case may be.
(8) Every order of the adjudicating officer shall be duly dated and signed by him and shall
clearly state the reasons for requiring the physical appearance under sub-rule (5).
(9) The adjudicating officer shall send a copy of the order passed by him to the concerned
company, officer who is in default or any other person or all of them and to the Central
Government and a copy of the order shall also be uploaded on the website.
(10) For the purposes of this rule, the adjudicating officer shall exercise the following powers,
namely:-
(a) to summon and enforce the attendance of any person acquainted with the facts and
circumstances of the case after recording reasons in writing;
(b) to order for evidence or to produce any document, which in the opinion of the
adjudicating officer, may be relevant to the subject matter.
(11) If any person fails to reply or neglects or refuses to appear as required under sub-rule (5)
or sub-rule (10) before the adjudicating officer, the adjudicating officer may pass an order
imposing the penalty, in the absence of such person after recording the reasons for doing
so.
(12) While adjudging quantum of penalty, the adjudicating officer shall have due regard to the
following factors, namely:-
(a) size of the company;
(b) nature of business carried on by the company;

(d) nature of the default;

(e) repetition of the default;
(f) the amount of disproportionate gain or unfair advantage, wherever quantifiable,
made as a result of the default; and
(g) the amount of loss caused to an investor or group of investors or creditors as a
result of the default:
However, in no case, the penalty imposed shall be less than the minimum
penalty prescribed, if any, under the relevant section of the Act.
(13) In case a fixed sum of penalty is provided for default of a provision, the adjudicating
officer shall impose that fixed sum, in case of any default therein.
(14) Penalty shall be paid through Ministry of Corporate Affairs portal only.
(15) All sums realised by way of penalties under the Act shall be credited to the
Consolidated Fund of India.
CHAPTER 12: NATIONAL COMPANY LAW TRIBUNAL AND APPELLATE TRIBUNAL
Enforcement of the Companies (Removal of Difficulties) Orders, 2017 Vide Order S.O.
2042(E) dated 29th June , 2017
In the Companies Act, 2013, in section 434, in sub-section (1), in clause (c),-
(a) in the third proviso, for “Provided further that-”, the following shall be substituted, namely:-
“Provided also that-”;
(b) after the third proviso, the following proviso shall be inserted, namely:-
“Provided also that proceedings relating to cases of voluntary winding up of a company
where notice of the resolution by advertisement has been given under sub-section (1) of
section 485 of the Companies Act, 1956 but the company has not been dissolved before
the 1st April, 2017 shall continue to be dealt with in accordance with provisions of the
Companies Act, 1956 and the Companies (Court) Rules, 1959.”
CHAPTER 1: The Securities Contract (Regulation) Act, 1956 and the Securities Contract
(Regulation) Rules, 1957
Vide Finance Act, 2018, w.e.f 8.3.2019 following Changes are made in the SCRA-
(i) In the Securities Contracts (Regulation) Act, 1956 (hereafter in this Part referred to as the
principal Act), section 12A shall be numbered as sub-section (1) thereof and after sub-
section (1) as so numbered, the following sub-section shall be inserted, namely:-
"(2) Without prejudice to the provisions of sub-section (1) and section 23-I, the Securities
and Exchange Board of India may, by an order, for reasons to be recorded in writing,

levy penalty under sections 23A, 23B, 23C, 23D, 23E, 23F, 23G, 23GA and 23H after
holding an inquiry in the prescribed manner.".
(ii) In section 23 of the principal Act, in sub-section (1), in the long line, after the words
"Adjudicating officer", the words "or the Securities and Exchange Board of India" shall be
inserted.
(iii) In section 23A of the principal Act, in sub-clause (a), after the words "bye-laws of the
recognised stock exchange", the words "or who furnishes false, incorrect or incomplete
information, document, books, return or report" shall be inserted.
(iv) In section 23E of the principal Act, after the words "mutual fund", the words "or real estate
investment trust or infrastructure investment trust or alternative investment fund", shall be
inserted.
(v) In section 23G of the principal Act, after the words "periodical returns", the words "or
furnishes false, incorrect or incomplete periodical returns" shall be inserted.
(vi) After section 23G of the principal Act, the following section shall be inserted, namely:-
"23GA. Where a stock exchange or a clearing corporation fails to conduct its business with
its members or any issuer or its agent or any person associated with the securities markets
in accordance with the rules or regulations made by the Securities and Exchange Board of
India and the directions issued by it under this Act, the stock exchange or the clearing
corporations, as the case may be, shall be liable to penalty which shall not be less than
five crore rupees but which may extend to twenty-five crore rupees or three times the
amount of gains made out of such failure, whichever is higher.".
(vii) In section 23-I of the principal Act, in sub-section (1), for the word ''shall'', the word ''may''
(viii) In section 23J of the principal Act,-
(a) for the marginal heading, the following marginal heading shall be substituted,
namely:- "Factors to be taken into account while adjudging quantum of penalty.";
(b) for the word, figures and letter "section 23-I" the words, figures and letters "section
12A or section 23-I" shall be substituted.
(c) for the words "the adjudicating officer", the words "the Securities and Exchange Board
of India or the adjudicating officer" shall be substituted.
(ix) In section 23JA of the principal Act, after sub-section (4), the following sub-section shall
be inserted, namely:-
"(5) All settlement amounts, excluding the disgorgement amount and legal costs, realised
under this Act shall be credited to the Consolidated Fund of India.".
(x) In section 23JB of the principal Act, in sub-section (1), for the words "by the adjudicating
officer", the words "under this Act" shall be substituted.
(xi) After section 23JB of the principal Act, the following section shall be inserted, namely:-

'23JC. (1) Where a person dies, his legal representative shall be liable to pay any sum
which the deceased would have been liable to pay, if he had not died, in the like manner
and to the same extent as the deceased: Provided that, in case of any penalty payable
under this Act, a legal representative shall be liable only in case the penalty has been
imposed before the death of the deceased person.
(2) For the purposes of sub-section (1),- (a) any proceeding for disgorgement, refund or
an action for recovery before the Recovery Officer under this Act, except a proceeding for
levy of penalty, initiated against the deceased before his death shall be deemed to have
been initiated against the legal representative, and may be continued against the legal
representative from the stage at which it stood on the date of the death of the deceased
and all the provisions of this Act shall apply accordingly; (b) any proceeding for
disgorgement, refund or an action for recovery before the Recovery Officer under this Act,
except a proceeding for levy of penalty, which could have been initiated against the
deceased if he had survived, may be initiated against the legal representative and all the
provisions of this Act shall apply accordingly.
(3) Every legal representative shall be personally liable for any sum payable by him in
his capacity as legal representative if, while his liability for such sum remains
undischarged, he creates a charge on or disposes of or parts with any assets of the estate
of the deceased, which are in, or may come into, his possession, but such liability shall be
limited to the value of the asset so charged, disposed of or parted with.
(4) The liability of a legal representative under this section shall, be limited to the extent
to which the estate of the deceased is capable of meeting the liability. Explanation.-For the
purposes of this section ''Legal representative" means a person who in law represents the
estate of a deceased person, and includes any person who intermeddles with the estate
of the deceased and where a party sues or is sued in a representative character, the person
on whom the estate devolves on the death of the party so suing or sued.'.
(xii) In section 23M of the principal Act,-
(1) after the words "adjudicating officer" at both the places where they occur, the words
"or the Securities and Exchange Board of India" shall be inserted;
(2) in sub-section (2), for the words, "any of his direction or orders" the words "the
direction or order" shall be substituted.
(xiii) In section 24 of the principal Act,-
(a) for the marginal heading, the following marginal heading shall be substituted: -
"Contravention by companies;'';
(b) in sub-section (1), for the words "an offence", the words "a contravention of any of
the provisions of this Act or any rule, regulation, direction or order made thereunder"

(c) in sub-section (2), for the words ''an offence under this Act'', the words ''a
contravention of any of the provisions of this Act or any rule, regulation, direction or
order made thereunder'' shall be substituted;
(d) or the word "offence", wherever it occurs, the word "contravention" shall be
substituted.
CHAPTER 2: The Securities Exchange Board of India Act, 1992 & SEBI (LODR)
REGULATIONS, 2015
1. Enforcement of the Banning of Unregulated Deposit Schemes Ordinance, 2019
Banning of Unregulated Deposit Schemes Ordinance, 2019 dated 21st February, 2019 has
substituted Clause (e) of sub-section (4) of Section 11 of the SEBI Act, 1992 which is as
follows:
(e) attach, for a period not exceeding ninety days, bank accounts or other property of any
intermediary or any person associated with the securities market in any manner involved
in violation of any of the provisions of this Act, or the rules or the regulations made
thereunder:
Provided that the Board shall, within ninety days of the said attachment, obtain
confirmation of the said attachment from the Special Court, established under section 26A,
having jurisdiction and on such confirmation, such attachment shall continue during the
pendency of the aforesaid proceedings and on conclusion of the said proceedings, the
provisions of section 28A shall apply:
Provided further that only property, bank account or accounts or any transaction entered
therein, so far as it relates to the proceeds actually involved in violation of any of the
provisions of this Act, or the rules or the regulations made thereunder shall be allowed to
be attached.
2. Enforcement of the SEBI (LODR) (Third Amendment) Regulations, 2018
In exercise of the powers conferred by section 11, sub section (2) of section 11A and
section 30 of the SEBI Act, 1992 read with section 31 of the Securities Contracts
(Regulation) Act, 1956, the SEBI hereby makes the SEBI (LODR) (Third Amendment)
Regulations, 2018 to further amend the SEBI (LODR) Regulations, 2015 vide Notification
No. SEBI/LAD-NRO/GN/2018/21 w.e.f. 1 st June, 2018.
In the Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015:
(i) in regulation 24, in sub-regulation (5), after the word, "court/Tribunal" and before the
symbol “.”, the following words shall be added, namely,-
", or under a resolution plan duly approved under section 31 of the Insolvency Code
and such an event is disclosed to the recognized stock exchanges within one day of
the resolution plan being approved"

(ii) in regulation 24, in sub-regulation (6), after the word, "court/Tribunal" and before the
symbol “.”, the following words shall be added, namely,-
", or under a resolution plan duly approved under section 31 of the Insolvency Code
and such an event is disclosed to the recognized stock exchanges within one day of
the resolution plan being approved"
3. Enforcement of the SEBI (Listing Obligations and Disclosure Requirements) (Fifth
Amendment) Regulations, 2018
In exercise of the powers conferred by section 11, sub-section (2) of section 11A and
(Regulation) Act, 1956, the Board makes the SEBI (LODR) (Fifth Amendment) Regulations,
2018 to further amend the SEBI (LODR) Regulations, 2015 vide Notification No.
SEBI/LAD-NRO/GN/2018/30 w.e.f. 6 th September 2018.
In the SEBI (LODR) Regulations, 2015, in regulation 2, in sub-regulation (1), in clause
(h), after the words and symbols “Securitized debt instruments,” and before the word
“units”, the following words and symbols shall be inserted, namely.-
“security receipts,”
4. Enforcement of the SEBI (LODR) (Amendment) Regulations, 2018
In exercise of the powers conferred by section 11, sub section (2) of section 11A and
(Regulation) Act, 1956 (42 of 1956), the SEBI hereby makes the SEBI (LODR)
(Amendment) Regulations, 2018 to further amend the SEBI (LODR) Regulations, 2015
vide Notification No. SEBI/LAD-NRO/GN/2018/10 w.e.f. 1 st April, 2019.
In the SEBI (LODR) Regulations, 2015:
(i) in regulation 19,
(a) after the existing sub-regulation (2), the following new sub-regulation shall be
inserted, namely,-
“(2A) The quorum for a meeting of the nomination and remuneration committee
shall be either two members or one third of the members of the committee,
whichever is greater, including at least one independent director in attendance.”
(b) after the existing sub-regulation (3), the following new sub-regulation shall be
inserted, namely,-
“(3A) The nomination and remuneration committee shall meet at least once in a
year.”

(ii) in regulation 20, -

(a) in sub-regulation (1), for the words “the mechanism of redressal of grievances”
the words “various aspects of interest” shall be substituted.
(b) after the existing sub-regulation (2), the following new sub-regulation shall be
inserted, namely, -
“(2A) At least three directors, with at least one being an independent director,
shall be members of the Committee.”
(c) sub-regulation (3) shall be substituted with the following, -
“(3) The Chairperson of the Stakeholders Relationship Committee shall be
present at the annual general meetings to answer queries of the security
holders.”
(d) after sub-regulation 3, the following new sub-regulation shall be inserted,
namely-
“(3A) The stakeholders relationship committee shall meet at least once in a
year.”
(iii) in regulation 21,
(a) after the existing sub-regulation (3), the following new sub-regulation shall be
inserted, namely,-
“(3A) The risk management committee shall meet at least once in a year.”
(b) in sub-regulation (4), after the words “as it may deem fit” and before the symbol
“.”, the words “such function shall specifically cover cyber security” shall be
inserted.
(c) in sub-regulation (5), the figure “100” shall be substituted with the figure “500”.
(iv) in regulation 24, -
the existing sub-regulation (1) shall be substituted with the following, namely-
“(1) At least one independent director on the board of directors of the listed entity
shall be a director on the board of directors of an unlisted material subsidiary, whether
incorporated in India or not.
Explanation- For the purposes of this provision, notwithstanding anything to the
contrary contained in regulation 16, the term “material subsidiary” shall mean a
subsidiary, whose income or net worth exceeds twenty percent of the consolidated
income or net worth respectively, of the listed entity and its subsidiaries in the
immediately preceding accounting year.”

(v) in regulation 34, -

the existing sub-regulation (1) shall be substituted with the following new
subregulation, namely, -
“(1) The listed entity shall submit to the stock exchange and publish on its website-
(A) a copy of the annual report sent to the shareholders along with the notice of
the annual general meeting not later than the day of commencement of
dispatch to its shareholders;
(B) in the event of any changes to the annual report, the revised copy along with the
details of and explanation for the changes shall be sent not later than 48 hours
after the annual general meeting.”
(vi) In Regulation 36-
In sub-regulation (1), in clause (a), the words “for the purpose” shall be omitted and
the words “either with the listed entity or with any depository” shall be inserted.
CHAPTER 1: The Foreign Exchange and Management Act, 1999

Foreign Exchange Management (Permissible Capital Account Transactions)
(Amendment) Regulations, 2019
Reserve Bank of India makes the amendment in the FEM (Permissible Capital Account
Transactions) Regulations, 2000 through the enforcement of the Foreign Exchange
Management (Permissible Capital Account Transactions) (Amendment) Regulations, 2019 w.e.f
26-2-2019. Following are the relevant amendments -
(i) In the Para 2 (Definitions) – After the clause (d), clause (da) is added:
“(da) 'Derivative' means a financial contract, to be settled at a future date, whose value is
derived from one or more financial, or non-financial variables.”
(ii) In schedule I (classes of capital account transactions of persons resident in India) of FEM
(Permissible Capital Account Transactions) Regulations, 2000, for the existing clause (k),
the following shall be substituted:
“(k) Undertake derivative contracts”
(iii) In the schedule II ((classes of capital account transactions of persons resident outside
India) of FEM (Permissible Capital Account Transactions) Regulations, 2000, after the
existing clause (g), the following shall be added:
“(h) Undertake derivative contracts”


Amendments to the prevention of Money-Laundering Act, 2002 through the Finance Act, 2018
w.e.f. 19.04.2018
In the Prevention of Money-laundering Act, 2002,—
(a) in section 2, in sub-section (1), in clause (u), after the words “within the country”, the words
“or abroad” shall be inserted;
(b) in section 5,—
(i) in sub-section (1), after the second proviso, the following proviso shall be inserted,
namely:— “Provided also that for the purposes of computing the period of one
hundred and eighty days, the period during which the proceedings under this section
is stayed by the High Court, shall be excluded and a further period not exceeding
thirty days from the date of order of vacation of such stay order shall be counted.’’;
(ii) in sub-section (3), for the word, brackets and figure ‘‘sub-section (2)”, the word,
brackets and figure “sub-section (3)” shall be substituted;
(c) in section 8,—
(i) in sub-section (3), in clause (a), after the words “continue during”, the words
“investigation for a period not exceeding ninety days or” shall be inserted;
(ii) in sub-section (8), after the proviso, the following proviso shall be inserted, namely:—
“Provided further that the Special Court may, if it thinks fit, consider the claim of the
claimant for the purposes of restoration of such properties during the trial of the case
in such manner as may be prescribed.”;
(d) in section 19, in sub-section (3),— (i) after the words “be taken to a”, the words “Special
Court or” shall be inserted; (ii) in the proviso, after the words “from the place of arrest to
the”, the words “Special Court or” shall be inserted;
(e) in section 45, in sub-section (1), —
(i) for the words “punishable for a term of imprisonment of more than three years under
Part A of the Schedule”, the words “under this Act” shall be substituted;
(ii) in the proviso, after the words “sick and infirm,”, the words “or is accused either on
his own or along with other co-accused of money-laundering a sum of less than one
crore rupees” shall be inserted;
(f) in section 50, in sub-section (5), in the proviso, in clause (b), for the word “Director”, the
words “Joint Director” shall be substituted;
(g) section 66 shall be numbered as sub-section (1) thereof, and after sub-section (1) as so
numbered, the following sub-section shall be inserted, namely:—
“(2) If the Director or other authority specified under sub-section (1) is of the opinion, on the
basis of information or material in his possession, that the provisions of any other law for the

time being in force are contravened, then the Director or such other authority shall share the
information with the concerned agency for necessary action.”;
In “Paragraph 29 -Offence Under the Companies Act, 2013
Section 447 i.e., punishment for fraud has been inserted.
1. Enforcement of the Foreign Contribution (Regulation) Amendment Rules, 2019 vide
NOTIFICATION NO. G.S.R. 199(E) dated 7 th March, 2019
In exercise of the powers conferred by section 48 of the Foreign Contribution (Regulation)
Act, 2010, the Central Government makes the Foreign Contribution (Regulation)
Amendment Rules, 2019 to amend the Foreign Contribution (Regulation) Rules, 2011.
In the Foreign Contribution (Regulation) Rules, 2011,—
(i) in rule 7, in sub-rule (1), after the word "apply", the following words shall be inserted,
namely:—
“electronically online”;
(ii) in rule 12,—
in sub-rule (2), for the words, letters and figures "to the Central Government in Form
FC-3", the words, letters and figures "to the Central Government electronically online
in Form FC-3C" shall be substituted;
in sub-rule (4), for the letters, figures, brackets and words "` 500/- (Five Hundred
only)", the letters, figures, brackets and words "` 1500/- (One Thousand Five
Hundred rupees only)" shall be substituted;
in sub-rule (8),-
after the words "requisite fee", the letters, figures, brackets and words "and with late
fee of ` 5000/- (Five Thousand rupees only)" shall be inserted;
for the words "four months" the words "one year" shall be substituted.
(1) Enforcement of clause (a) to clause (d) of section 2 of the Code Vide notification S.O.
1570(E) , dated 15 th May , 2017
The Central Government hereby appoints the 1st April, 2017 as the date on which the
provisions of clause (a) to clause (d) of section 2 of the Code relating to voluntary
liquidation or bankruptcy shall come into force.
(2) Commencement of sections related to Fast Track Corporate Insolvency Resolution
Process Vide Notification S.O. 1910(E) dated 14 th June 2017

The Central Government hereby appoints the 14th day of June, 2017 as the date on which
the provisions of section 55 to section 58 (both inclusive) of the said Code shall come into
force.
Process u/s 55(2) of the Code Vide Notification S.O.1911(E) dated 14 th June 2017
In exercise of the powers conferred by section 55(2) of the Insolvency and Bankruptcy
Code, 2016 , the Central Government hereby notifies that an application for fast track
corporate insolvency resolution process may be made in respect of the following corporate
debtors, namely :-
(a) a small company as defined under clause (85) of section 2 of Companies Act, 2013,or
(b) a Startup (other than the partnership firm) as defined in the notification of the
Government of India in the Ministry of Commerce and Industry number G.S.R. 501(E),
dated the 23rd May, 2017, or
(c) an unlisted company with total assets, as reported in the financial statement of the
immediately preceding financial year, not exceeding rupees one crore.
(4) Issue of clarification regarding approval of resolution plans under section 30 and 31
of Insolvency and Bankruptcy Code, 2016 vide general circular IBC/01/ 2017 dated
25th October 2017
Ministry of Corporate Affairs issued a clarification in view of the requirement under section
30(2)(e) of the Code for the resolution professional to confirm that each resolution plan
received by him does not contravene any of the provisions of the law for the time being in
force.
Accordingly clarification was sought whether approval of shareholders/ members of the
corporate debtor/ company is required for a resolution plan at any stage during the process
for its consideration and approval as laid down under section 30 & 31 of the Insolvenc y
and Bankruptcy Code and after approval during its implementation, for any actions
contained in the resolution plan which would normally require specific approval of
shareholders/ members under provisions of Companies Act, 2013 or any other law.
Through the issue of this circular, it has been clarified that the approval of shareholders /
members of the corporate debtor/company for a particular action required in the resolution
plan for its implementation, which would have been required under the Companies Act,
2013 or any other law if the resolution plan of the company was not being considered under
the Code, is deemed to have been given on its approval by the Adjudicating Authority.
(5) Insolvency and Bankruptcy Code (Amendment) Act, 2018
Ministry of Law and Justice, amended the Insolvency and Bankruptcy Code, 2016
(Principal Act) through the enforcement of the Insolvency and Bankruptcy Code
(Amendment) Act, 2018 vide notification dated 19th January, 2018. This Act came into
enforcement on 23rd day of November 2017.

Significant relevant changes are as follows:

(i) Amendment in section 2 of the Principal Act
a. in clause (d), the word "and" shall be omitted;
b. for clause (e), the following clauses shall be substituted, namely:—
"(e) personal guarantors to corporate debtors;
c. partnership firms and proprietorship firms; and
d. individuals, other than persons referred to in clause (e),".
(ii) Amendment in section 5 of the Principal Act
in clause (26), for the words "any person", the words "resolution applicant" shall be
substituted.
(iii) In section 30 of the principal Act, for sub-section (4), the following sub-section
shall be substituted, namely:—
"(4) The committee of creditors may approve a resolution plan by a vote of not less
than seventy-five per cent. of voting share of the financial creditors, after considering
its feasibility and viability, and such other requirements as may be specified by the
Board:
Provided that the committee of creditors shall not approve a resolution plan, submitted
before the commencement of the Insolvency and Bankruptcy Code Ord. 7 of
(Amendment) Ordinance, 2017, where the resolution applicant is ineligible under
2017. section 29A and may require the resolution professional to invite a fresh
resolution plan where no other resolution plan is available with it:
Provided further that where the resolution applicant referred to in the first proviso is
ineligible under clause (c) of section 29A, the resolution applicant shall be allowed by
the committee of creditors such period, not exceeding thirty days, to make payment
of overdue amounts in accordance with the proviso to clause (c) of section 29A:
Provided also that nothing in the second proviso shall be construed as extension of
period for the purposes of the proviso to sub-section (3) of section 12, and the
corporate insolvency resolution process shall be completed within the period
specified in that sub-section.”
(6) The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
Vide Notification dated 17 th August, 2018, Ministry of Law and Justice here by
amended the Insolvency and Bankruptcy Code, 2016 through the enforcement of the
Insolvency and Bankruptcy Code (Second Amendment) Act, 2018.With the
enforcement of this Amendment Act, the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2018 have been repealed. This amendment Act is effective
from 6th June, 2018.


(1) In section 3(12), in the Insolvency and Bankruptcy Code, 2016(Principal Act), for the word
"repaid", the word "paid" shall be substituted.
(2) In section 5 of the principal Act,
(i) after clause (5) i.e., after the definition of Corporate applicant, the following clause
'(5A) "corporate guarantor" means a corporate person who is the surety in a
contract of guarantee to a corporate debtor;’
(ii) in clause (8) prescribing the term “Financial Debt” in the Code, in sub-clause (f), the
following Explanation shall be inserted, namely:—
'Explanation.—For the purposes of this sub-clause,—
(i) any amount raised from an allottee under a real estate project shall be deemed
to be an amount having the commercial effect of a borrowing; and
(ii) the expressions, "allottee" and "real estate project" shall have the meanings
respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate
(Regulation and Development) Act, 2016;
(iii) in clause (12) i.e., as to the “Insolvency commencement date”, the following proviso
"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;";
(iv) after clause (24), the following clause shall be inserted, namely:—
'(24A) "related party", in relation to an individual, means—
(a) a person who is a relative of the individual or a relative of the spouse of the
individual;
(b) a partner of a limited liability partnership, or a limited liability partnership or a
partnership firm, in which the individual is a partner;
(c) a person who is a trustee of a trust in which the beneficiary of the trust includes
the individual, or the terms of the trust confers a power on the trustee which may
be exercised for the benefit of the individual;
(d) a private company in which the individual is a director and holds along with his
relatives, more than two per cent. of its share capital;
(e) a public company in which the individual is a director and holds along with
relatives, more than two per cent. of its paid-up share capital;

(f) a body corporate whose board of directors, managing director or manager, in

the ordinary course of business, acts on the advice, directions or instructions of
the individual;
(g) a limited liability partnership or a partnership firm whose partners or employees
in the ordinary course of business, act on the advice, directions or instructions
of the individual;
(h) a person on whose advice, directions or instructions, the individual is
accustomed to act;
(i) a company, where the individual or the individual along with its related party,
own more than fifty per cent. of the share capital of the company or controls the
appointment of the board of directors of the company.
Explanation.—For the purposes of this clause,—
(a) "relative", with reference to any person, means anyone who is related to another,
in the following manner, namely:—
(i) members of a Hindu Undivided Family,
(ii) husband,
(iii) wife,
(iv) father,
(v) mother,
(vi) son,
(vii) daughter,
(viii) son's daughter and son,
(ix) daughter's daughter and son,
(x) grandson's daughter and son,
(xi) granddaughter's daughter and son,
(xii) brother,
(xiii) sister,
(xiv) brother's son and daughter,
(xv) sister's son and daughter,
(xvi) father's father and mother,
(xvii) mother's father and mother,
(xviii)father's brother and sister,
(xvix)mother's brother and sister, and

(b) wherever the relation is that of a son, daughter, sister or brother, their spouses
shall also be included;'
(3) In section 7(1) of the principal Act which deals with the initiation of CIRP by financial
creditor, for the words "other financial creditors", the words "other financial creditors, or
any other person on behalf of the financial creditor, as may be notified by the Central
Government," shall be substituted.
(4) In section 8(2) of the principal Act which deals with the Insolvency resolution by
operational creditor, following are the amendments—
(i) in clause (a), for the words "if any, and", the words "if any, or" shall be substituted;
(ii) in clause (b), for the word "repayment", the word "payment" shall be substituted;
In the Explanation, for the word "repayment", the word "payment" shall be substituted.
(5) In section 9(3) of the principal Act, which states of the provision related to the filing of an
application for initiation of corporate insolvency resolution process by operational
creditor—
(i) in clause (c), for the words "by the corporate debtor; and", the words "by the corporate
debtor, if available;" shall be substituted;
(ii) for clause (d), the following clauses shall be substituted, namely:—
"(d) a copy of any record with information utility confirming that there is no payment
of an unpaid operational debt by the corporate debtor, if available; and
(e) any other proof confirming that there is no payment of an unpaid operational
debt by the corporate debtor or such other information, as may be prescribed.";
(6) in section 9(5) of the principle Code which deals with the provision related to the filing of
an application for initiation of corporate insolvency resolution process by operational
creditor —
(a) in clause (i), in sub-clause (b), for the word "repayment", the word "payment" shall be
substituted;
(b) in clause (ii), in sub-clause (b), for the word "repayment", the word "payment" shall
be substituted.
(7) Section 10 (3) of the principal Act, deals with the initiation of corporate insolvency
resolution process by corporate applicant, shall be substituted with the following-
"(3) The corporate applicant shall, along with the application, furnish—
(a) the information relating to its books of account and such other documents for
such period as may be specified;
(b) the information relating to the resolution professional proposed to be appointed
as an interim resolution professional; and

(c) the special resolution passed by shareholders of the corporate debtor or the
resolution passed by at least three-fourth of the total number of partners of the
corporate debtor, as the case may be, approving filing of the application.";
(8) In Section 10 (4) related to the initiation of corporate insolvency resolution process by
corporate applicant, following amendments have been made—
(i) in clause (a), after the words "if it is complete", the words "and no disciplinary
proceeding is pending against the proposed resolution professional" shall be inserted;
(ii) in clause (b), after the words "if it is incomplete", the words "or any disciplinary
proceeding is pending against the proposed resolution professional" shall be inserted.
(9) In section 12(2) of the principal Act, related to the time limit for completion of corporate
insolvency resolution process, for the word "seventy-five", the word "sixty-six" shall be
substituted.
(10) After section 12 of the principal Act, the section 12A shall be inserted-
"12A. Withdrawal of application admitted under section 7, 9, or 10: 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 ninety per cent.
voting share of the committee of creditors, in such manner as may be specified."
(11) Section 14(3) of the principal Act which deals with the moratorium, shall be substituted,
with the following—
"(3) The provisions of sub-section (1) shall not apply to—
(a) such transaction as may be notified by the Central Government in consultation with
any financial regulator;
(b) a surety in a contract of guarantee to a corporate debtor.".
(12) In section 15(1)(c) of the principal Act which deals with the provisions related to the public
announcement, for the word "claims", the words "claims, as may be specified" shall be
substituted.
(13) In section 16(5) of the principal Act which is related to the appointment and tenure of
interim resolution professional, for the words "shall not exceed thirty days from date of his
appointment", the words and figures "shall continue till the date of appointment of the
resolution professional under section 22" shall be substituted.
(14) In section 17(2)(d) of the principal Act which deals with the management of affairs of
corporate debtor by IRP, for the words "may be specified.", the words "may be specified;
and" shall be substituted;
(15) After section 17(2)(d) which deals with the management of affairs of corporate debtor by
IRP, the following section 17(2)(e), shall be inserted,

"(e) be responsible for complying with the requirements under any law for the time being
in force on behalf of the corporate debtor."
(16) In section 21 of the principal Act, which deals with the committee of creditors, following
are the relevant amendments —
(i) in sub-section (2), — in the proviso, for the words "related party to whom a
corporate debtor owes a financial debt", the words, brackets, figures and letter
"financial creditor or the authorised representative of the financial creditor referred to
in sub-section (6) or sub-section (6A) or sub-section (5) of section 24, if it is a related
party of the corporate debtor," shall be substituted;
(ii) after this proviso under sub-section (2), the following proviso is inserted-
"Provided further that the first proviso shall not apply to a financial creditor, regulated
by a financial sector regulator, if it is a related party of the corporate debtor solely on
account of conversion or substitution of debt into equity shares or instruments
convertible into equity shares, prior to the insolvency commencement date.";
(iii) Insertion of new sub-section 6(A) & 6(B) after sub-section (6)-
"(6A) Where a financial debt—
(a) is in the form of securities or deposits and the terms of the financial debt provide
for appointment of a trustee or agent to act as authorised representative for all
the financial creditors, such trustee or agent shall act on behalf of such financial
creditors;
(b) is owed to a class of creditors exceeding the number as maybe specified, other
than the creditors covered under clause (a) or sub-section (6), the interim
resolution professional shall make an application to the Adjudicating Authority
along with the list of all financial creditors, containing the name of an insolvenc y
professional, other than the interim resolution professional, to act as their
authorised representative who shall be appointed by the Adjudicating Authority
prior to the first meeting of the committee of creditors;
(c) is represented by a guardian, executor or administrator, such person shall act
as authorised representative on behalf of such financial creditors,
and such authorised representative under clause (a) or clause (b) or clause (c)
shall attend the meetings of the committee of creditors, and vote on behalf of
each financial creditor to the extent of his voting share.
(6B) The remuneration payable to the authorised representative—
(i) under clauses (a) and (c) of sub-section (6A), if any, shall be as per the terms
of the financial debt or the relevant documentation; and
(ii) under clause (b) of sub-section (6A) shall be as specified which shall form part
of the insolvency resolution process costs.";

(iii) for sub-sections (7) and (8), the following sub-sections shall be substituted,
namely:—
"(7) The Board may specify the manner of voting and the determining of the
voting share in respect of financial debts covered under sub-sections (6) and
(6A).
(8) Save as otherwise provided in this Code, all decisions of the committee of
creditors shall be taken by a vote of not less than fifty-one per cent. of voting
share of the financial creditors:
Provided that where a corporate debtor does not have any financial
creditors, the committee of creditors shall be constituted and shall comprise
of such persons to exercise such functions in such manner as may be
specified."
(17) In section 22(2) of the principal Act, for the word, "seventy-five", the word "sixty-six" shall
be substituted;
(18) In section 23(1) of the principal Act, the following proviso shall be inserted-
"Provided that the resolution professional shall, if the resolution plan under sub-section (6)
of section 30 has been submitted, continue to manage the operations of the corporate
debtor after the expiry of the corporate insolvency resolution process period until an order
is passed by the Adjudicating Authority under section 31."
(19) In section 24(3) of the principal Act, in clause (a), for the words "Committee of creditors",
the words, brackets, figures and letter "committee of creditors, including the authorised
representatives referred to in sub-sections (6) and (6A) of section 21 and sub-section (5)"
(20) Insertion of new section 25A which deals with the Rights and duties of authorised
representative of financial creditors.
'25A. (1) Right to participate and Vote on behalf of FC: The authorised
representative(AR) under section 21(6) & 21(6A) or section 24(5) shall have the right to
participate and vote in meetings of the committee of creditors on behalf of the financial
creditor(FC) he represents in accordance with the prior voting instructions of such creditors
obtained through physical or electronic means.
(2) Duty of AR to circulate agenda & minutes to FC: It shall be the duty of the
authorised representative to circulate the agenda and minutes of the meeting of the
committee of creditors to the financial creditor he represents.
(3) AR to act on instruction of FC: The authorised representative shall not act against
the interest of the financial creditor he represents and shall always act in accordance
with their prior instructions:

Provided that if the authorised representative represents several financial creditors,

then he shall cast his vote in respect of each financial creditor in accordance with
instructions received from each financial creditor, to the extent of his voting share:
Provided further that if any financial creditor does not give prior instructions through
physical or electronic means, the authorised representative shall abstain from voting
on behalf of such creditor.
(4) To ensure recording of instruction by IRP/RP: The authorised representative shall
file with the committee of creditors any instructions received by way of physical or
electronic means, from the financial creditor he represents, for voting in accordance
therewith, to ensure that the appropriate voting instructions of the financial creditor
he represents is correctly recorded by the interim resolution professional or resolution
professional, as the case may be.
(21) Amendment in section 27(2) of the principal Act which deals with the Replacement of
Resolution Professional (RP) by Committee of creditors(CoC): This sub-section is
substituted with the following provision-
“The committee of creditors may, at a meeting, by a vote of sixty-six per cent. of voting
shares, resolve to replace the resolution professional appointed under section 22 with
another resolution professional, subject to a written consent from the proposed resolution
professional in the specified form."
(22) Amendment in section 28(3) of the principal Act which deals with the approval of committee
of creditors for certain actions , for the word, "seventy-five", the word "sixty-six" shall be
substituted.
(23) Amendment in Section 29 A, dealt with the persons not eligible to be resolution applicant
came into enforcement on 23rd day of November 2017 through the enforcement of
Insolvency and Bankruptcy Code (Amendment) Act, 2018 vide notification dated 19th
January, 2018.
(i) in clause (c),—
(a) for the words "has an account,", the words "at the time of submission of the
resolution plan has an account," shall be substituted;
(b) after the words and figures "the Banking Regulation Act, 1949", the words "or
the guidelines of a financial sector regulator issued under any other law for the
time being in force," shall be inserted;
(c) after the proviso, the following shall be inserted, namely:—'Provided further that
nothing in this clause shall apply to a resolution applicant where such applicant
is a financial entity and is not a related party to the corporate debtor.
The expression "related party" here shall not include a financial entity, regulated by
a financial sector regulator, if it is a financial creditor of the corporate debtor and is a
related party of the corporate debtor solely on account of conversion or substitution

of debt into equity shares or instruments convertible into equity shares, prior to the
insolvency commencement date.
For the purposes of this clause, where a resolution applicant has an account, or an
account of a corporate debtor under the management or control of such person or of
whom such person is a promoter, classified as non-performing asset and such
account was acquired pursuant to a prior resolution plan approved under this Code,
then, the provisions of this clause shall not apply to such resolution applicant for a
period of three years from the date of approval of such resolution plan by the
Adjudicating Authority under this Code;';
(ii) for clause (d), the following clause shall be substituted, namely:—
"(d) has been convicted for any offence punishable with imprisonment—
(i) for two years or more under any Act specified under the Twelfth Schedule; or
(ii) for seven years or more under any other law for the time being in force:
Provided that this clause shall not apply to a person after the expiry of a period
of two years from the date of his release from imprisonment:
Provided further that this clause shall not apply in relation to a connected person
referred to in clause (iii) of Explanation I;"
(iii) in clause (e), the following proviso shall be inserted, namely:—
"Provided that this clause shall not apply in relation to a connected person referred
to in clause (iii) of Explanation I;";
(iv) in clause (g), the following proviso shall be inserted, namely:—
"Provided that this clause shall not apply if a preferential transaction, undervalued
transaction, extortionate credit transaction or fraudulent transaction has taken place
prior to the acquisition of the corporate debtor by the resolution applicant pursuant to
a resolution plan approved under this Code or pursuant to a scheme or plan approved
by a financial sector regulator or a court, and such resolution applicant has not
otherwise contributed to the preferential transaction, undervalued transaction,
extortionate credit transaction or fraudulent transaction;"
(v) in clause (h),—
(a) for the words "an enforceable guarantee", the words "a guarantee" shall be
substituted;
(b) after the words "under this Code", the words "and such guarantee has been
invoked by the creditor and remains unpaid in full or part" shall be inserted;
(vi) in clause (i), for the words "has been", the word "is" shall be substituted;

(vii) the Explanation occurring after clause (j) shall be numbered as Explanation I, and
in Explanation I as so numbered, for the proviso, the following provisos shall be
'Provided that nothing in clause (iii) of Explanation I shall apply to a resolution
applicant where such applicant is a financial entity and is not a related party of the
corporate debtor:
Provided further that the expression "related party" shall not include a financial entity,
regulated by a financial sector regulator, if it is a financial creditor of the corporate
debtor and is a related party of the corporate debtor solely on account of conversion
or substitution of debt into equity shares or instruments convertible into equity shares,
prior to the insolvency commencement date;';
(viii) after Explanation I as so numbered, the following Explanation shall be inserted,
namely:—
'Explanation II—For the purposes of this section, "financial entity" shall mean the
following entities which meet such criteria or conditions as the Central Government
may, in consultation with the financial sector regulator, notify in this behalf, namely:—
(a) a scheduled bank;
(b) any entity regulated by a foreign central bank or a securities market regulator or
other financial sector regulator of a jurisdiction outside India which jurisdiction is
compliant with the Financial Action Task Force Standards and is a signatory to
the International Organisation of Securities Commissions Multilateral
Memorandum of Understanding;
(c) any investment vehicle, registered foreign institutional investor, registered
foreign portfolio investor or a foreign venture capital investor, where the terms
shall have the meaning assigned to them in regulation 2 of the Foreign Exchange
Management (Transfer or Issue of Security by a Person Resident Outside India)
Regulations, 2017 made under the Foreign Exchange Management Act, 1999.
(d) an asset reconstruction company registered with the Reserve Bank of India
under section 3 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002;
(e) an Alternate Investment Fund registered with the Securities and Exchange
Board of India;
(f) such categories of persons as may be notified by the Central Government.'.
(24) Amendment in section 30: The said section deals with the submission of resolution plan.
Following are the amendments-
(i) in sub-section (1), after the words "resolution plan", the words, figures and letter
"along with an affidavit stating that he is eligible under section 29A" shall be inserted;


(a) in clauses (a) and (b), for the word "repayment" at both the places where it
occurs, the word "payment" shall be substituted;
(b) after clause (f), the following Explanation shall be inserted, namely:—
"Explanation.—For the purposes of clause (e), if any approval of shareholders is
required under the Companies Act, 2013 or any other law for the time being in force
for the implementation of actions under the resolution plan, such approval shall be
deemed to have been given and it shall not be a contravention of that Act or law.";
(a) for the word "seventy-five", the word "sixty-six" shall be substituted;
(b) after the third proviso, the following proviso shall be inserted,
namely:—
"Provided also that the eligibility criteria in section 29A as amended by the Insolvenc y
and Bankruptcy Code (Amendment) Ordinance, 2018 shall apply to the resolution
applicant who has not submitted resolution plan as on the date of commencement of
the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018."
(25) Amendment in section 31 of the principal Act, which deals with the approval of resolution
plan—
(a) in sub-section (1), the following proviso shall be inserted, namely:—
"Provided that the Adjudicating Authority shall, before passing an order for approval
of resolution plan under this sub-section, satisfy that the resolution plan has
provisions for its effective implementation."
(b) after sub-section (3), the following sub-section shall be inserted namely:—
"(4) The resolution applicant shall, pursuant to the resolution plan approved under
sub-section (1), obtain the necessary approval required under any law for the time
being in force within a period of one year from the date of approval of the resolution
plan by the Adjudicating Authority under sub-section (1) or within such period as
provided for in such law, whichever is later:
Provided that where the resolution plan contains a provision for combination, as
referred to in section 5 of the Competition Act, 2002, the resolution applicant shall
obtain the approval of the Competition Commission of India under that Act prior to the
approval of such resolution plan by the committee of creditors."

(26) Amendment made in section 33(2) of the principal Act. This section deals with the
initiation of liquidation process. Amendments made is that after the words "decision of the
committee of creditors", the words "approved by not less than sixty-six per cent. of the
voting share" shall be inserted.
(27) In section 34 of the principal Act, which states of appointment of liquidator and fee to be
paid, following amendments are made—
a. in sub-section (1), for the words and figures "Chapter II shall", the words and figures
"Chapter II shall, subject to submission of a written consent by the resolution
professional to the Adjudicatory Authority in specified form," shall be substituted;
b. in sub-section (4),—
i. in clause (b), for the words "in writing", the words "in writing; or" shall be
substituted;
ii. after clause (b), the following clause shall be inserted, namely:—
"(c) the resolution professional fails to submit written consent under sub-section (1).";
c. in sub-section (5), for the word, brackets and letter "clause (a)", the words, brackets
and letters "clauses (a) and (c)" shall be substituted;
d. in sub-section (6), after the words "another insolvency professional", the words
"along with written consent from the insolvency professional in the specified form,"
shall be inserted.
(28) In section 42 of the principal Act, which deals with the provisions related to the appeal
against the decision of liquidator, after the words "of the liquidator", the words "accepting
or" shall be inserted.
(29) In section 45(1) of the principal Act, which deals with the Avoidance of undervalued
transactions, the words and figures "of section 43" shall be omitted.
Important Note: With respect to amendments as covered above under Insolvency and
Bankruptcy Code (Second Amendment) Act, 2018, only those amendments may be taken
into consideration which are pertaining to the provisions covered in the study material.
Also, the newly inserted sections i.e. 24A, 12A, 21 (6)(A), 21(6)(B) and 25A of the said
amendment are also applicable.
7. Amendment in Regulation – 3 of the Insolvency and Bankruptcy Board of India
(Insolvency Resolution Process for Corporate Persons) Regulations, 2016
Eligibility for resolution professional.
3.(1) An insolvency professional shall be eligible to be appointed as a resolution professional
for a corporate insolvency resolution process of a corporate debtor if he, and all partners and
directors of the insolvency professional entity of which he is a partner or director, are
independent of the corporate debtor.

Explanation– A person shall be considered independent of the corporate debtor, if he:

(a) is eligible to be appointed as an independent director on the board of the corporate debtor
under section 149 of the Companies Act, 2013 (18 of 2013), where the corporate debtor is
a company;
(i) of a firm of auditors or *secretarial auditors in practice or cost auditors of the corporate
debtor; or
(ii) of a legal or a consulting firm, that has or had any transaction with the corporate
debtor amounting to **five per cent or more of the gross turnover of such firm, in the
last three financial years.
(1A) Where the committee decides to appoint the interim resolution professional as resolution
professional or replace the interim resolution professional under section 22 or replace the
resolution professional under section 27, it shall obtain the written consent of the proposed
resolution professional in Form AA of the Schedule.
(2) A resolution professional shall make disclosures at the time of his appointment and
thereafter in accordance with the Code of Conduct.
(3) A resolution professional, who is a director or a partner of an insolvency professional entity,
shall not continue as a resolution professional in a corporate insolvency resolution process if
the insolvency professional entity or any other partner or director of such insolvency professional
entity represents any of the other stakeholders in the same corporate insolvency resolution
process.
8. Usage of the word “any other person on behalf of the financial creditor, as may be
notified by the Central Government” under section 7(1) of the IBC has been clarified by
notification issued by Ministry of Corporate Affairs. Vide Notification S.O. 1091(E), dated
27th February, 2019, the Central Government hereby notifies following persons who may
file an application for initiating corporate insolvency resolution process against a corporate
debtor before the Adjudicating Authority, on behalf of the financial creditor: -
(i) a guardian;
(ii) an executor or administrator of an estate of a financial creditor;
(iii) a trustee (including a debenture trustee); and
(v) a person duly authorised by the Board of Directors of a Company.

QUESTIONS
Multiple Choice Questions

1. Mr. Ram gave two of his friends’ cash amount of ` two lakh each for their business
purposes. Later at the time of return, he asked both of them, in lieu of the same, to buy his
product via credit card and online transfers in installments through next couple of months’
time for which he issued bills to adjust the amount in his account books.
Does this payment system through credit card and online transfer mode are covered under
Money Laundering Act?
(a) No, because payment are made through credit cards & being an online transfers, it’s
a genuine transaction.
(b) Yes, money laundering transactions done via credit card and online payments comes
under the Prevention of Money Laundering Act
(c) No, it is not money laundering as none of Mr. Ram friends are benefiting from this
transaction.
(d) No, because the transactions are not done with shell companies.
2. Mr. A. Mr. B and Mr. C are partners in XYZ partnership firm. The firm made an agreement
in writing to refer a dispute between them in business to an arbitrator. Inspite of this
agreement Mr. B files a suit against Mr. A and Mr. C relating to the dispute in a court.
Examine on the admission of the suit filed by Mr. B in the court in the light of the Arbitration
and Conciliation Act, 1996.
(a) Yes it can be admitted by the court, as the said court has jurisdiction over the matter
and it overpowers arbitration agreement
(b) Yes it can be admitted by the court, only in the case of challenge to the arbitral award
in appeal
(c) Yes, it can be admitted by the court, if Mr. A and Mr. C mutually agrees.
(d) No it cannot be admitted by the court, as the jurisdiction of court is ousted because
of existence of a valid arbitration agreement
3. Mr. Satya, file a petition for default of non –payment of the debt against Mr. X. The amount
in default claimed by petitioner was ` 30 lakh. Mr. X (Respondent) pleaded before the
adjudicating authority that the amount of claim was not belonging to the
applicant/petitioner. Mr. Satya, asserted that he himself with his son owns ` 26 Lakh to
the respondent. Though nowhere in the petition and the supportive documents, he admitted
that he himself with his Son owns ` 26 Lakh to the respondent. Considering the above

facts in the light of the Insolvency and Bankruptcy Code, state the ac tion that will be taken
by the Adjudicating Authority-
(a) NCLT will admit the application of Mr. Satya, as he jointly with his son owned the debt
to the Mr. X, so he is a valid petitioner.
(b) NCLT will admit the application filed by Mr. Satya on behalf of his son.
(c) NCLT will reject the application considering that no default has occurred against Mr.
Satya, and his stand as a financial creditor is not proved in the petition.
(d) NCLT will dismiss the application on the ground of non- existence of dispute against
Mr. Satya.
4. How many times Corporate Insolvency Resolution Process period can be extended?
(a) shall not be granted more than once
(b) shall be granted more than once
(c) shall be granted more than twice on the reasonable cause
(c) cannot be granted at all
5. Mr. Ram had resided in India during the Financial Year 2017-2018 for less than 183 days.
He again came to India on 1st May, 2018 for higher studies and business and stayed upto
15th July, 2019. State the correct answer as to the residential status of Mr. Ram in the light
of the given fact as per the Foreign Exchange Management Act, 1999.
(1) Mr. Ram can be considered as 'Person resident in India' during the financial year
2018-2019
(2) Mr. Ram cannot be considered as ‘Person resident in India' during the financial year
2018-2019
(3) Mr. Ram can be considered as ‘Person resident in India' during the financial year
2019-2020
(a) Both the statement (1) & (3) are correct
(b) Both the statement (2) & (3) are correct
(c) Only statement (1) is correct
(d) Only statement (2) is correct
6. Beauti Fashion Garments Limited has three independent directors besides eight others of
its own. Due to the urgency of transacting certain important business, a Board Meeting
was called by giving a shorter notice than the legally required. However, none of the
independent directors was present at the Meeting to deliberate upon the motion related to
that business. Despite absence of all the independent directors, a board resolution was
passed for operationalizing the business by the directors personally present at that Meeting

who were much more than the required quorum. Advise, whether the resolution passed at
the Board Meeting called at a shorter notice was valid.
(a) The resolution so passed is valid, for it was passed at the Board Meeting where the
required quorum was present.
(b) To be valid the resolution so passed needs to be circulated to all the directors and
further, it is required to be ratified by all the three independent directors.
(c) To be valid the resolution so passed needs to be circulated to all the directors and
further, it is required to be ratified by at least two independent directors.
(d) To be valid the resolution so passed needs to be circulated to all the directors and
further, it is required to be ratified by at least one independent director.
7. Sunila Interior Decorators and Furnishers Limited which has not accessed the primary
market so far, is required to appoint whole-time Key Managerial Personnel (KMPs) in view
of the fact that it has surpassed the threshold limit which necessitates such appointment.
Out of the three whole-time KMPs which it is obligated to keep on roll, it has already
appointed a Managing Director (MD) and a Company Secretary. From the given options,
choose the third KMP which needs to be appointed by the com pany under the given
circumstances.
(a) Chief Executive Officer (CEO)
(b) Chief Financial Officer (CFO)
(c) Whole-time Director (WTD)
(d) Chief Manager (CM)
8. X Ltd. amalgamated with Y Ltd. The transferee company decided to dispose of the books
and papers of the X Ltd. in order to come up with maintenance of revised book and papers
under the name of the transferee company to bring all the financial details of the
amalgamated company also in the records. State the correct statement as to decision of
the transferee company on the disposal of the Books and papers of the X Ltd.
(a) Decision of Transferee Company is invalid, as books and papers of the amalgamated
company shall be maintained for atleast three years.
(b) Decision of Transferee Company is invalid, as books and papers of amalgamated
company shall be maintained for at least eight years.
(c) Decision of Transferee Company will be valid only on the sanction of the prior
permission of the Central Government.
(d) Decision of Transferee Company will be valid only after seeking prior permission of
the requisite number of the creditors/shareholders of the amalgamated company.

9. Draft a Specimen Board Resolution passed in the meeting of the Board of Directors of a
recently incorporated BLM Limited for obtaining Goods and Service Tax (GST) Registration
in the GST System Portal.
10. Dragon Copper Limited was facing acute financial difficulty as operations were
continuously disrupted due to (a) non-availability of raw material (b) successive drought in
its marketing areas and loss of demand and (c) frequent breakdown due to non-
replacement of old plant and machinery. On the verge of liquidation, the Management
proposes one last arrangement between creditors and the company, whereby the creditors
have to forego 50% of their dues to the company. This has evoked strong protest from
some of the creditors who may block the arrangement. Examine the arrangement in the
light of the Companies Act, 2013 and advise the course of action/procedure to be adopted
by the company to implement the same.
11. Clarks Limited, has made default in filing financial statements and annual returns for a
continuous period of 4 financial years ending on 31 st March, 2019. The Registrar of
Companies having jurisdiction approached the Central Government to accord sanction to
present a petition to Tribunal (NCLT) for the winding up of the company as per the above
ground under Section 272 of the Companies Act, 2013.
Examine the validity of the RoC move, explaining the relevant provisions of the Companies Act,
2013. State the time limit for passing an order by the Tribunal under Section 273 of the
Companies Act, 2013 ?
12. Popular Limited defaulted in the repayment of term loan taken from a Bank against security
created as a first charge on some of its assets. The bank issued notice pursuant to Section
13 of the SARFAESI Act, 2002 to the Company to discharge its liabilities within a period of
60 days from the date of the notice. The company failed to discharge its liabilities within
the time limit specified.
Explain the measures to be taken by the Bank to enforce its security interest under the
said Act.
13. Mr. Daksh, an Indian National desires to obtain foreign exchange for the following
purposes:
(i) Payment to be made for securing health insurance from a company abroad.
(ii) Payment of commission on exports under Rupee State Credit Route.
Advise whether he can get foreign exchange and if so, under what condition?
14. Creative India Limited owes a sum of ` 2,80,000 to S, who assigns this debt to his two
creditors, Mr. R – to the extent of ` 1,40,000 and Mr. M - to the extent of ` 1,40,000.
Mr. M makes a demand for his money from the company by giving a legal notice. The
company could not meet Mr. M’s demand or otherwise satisfy him till the expiry of four
weeks from the date of notice. Mr. M, therefore, moves to NCLT with an application for

initiation of Insolvency and Bankruptcy Code, 2016, decide whether an application filed by
Mr. M can be accepted by NCLT.
15. A foreign company, Max Ltd. was established by few Indians in Singapore. The
management of the company used to donate a huge amount to the religious trust, in
Mumbai, India. Enumerate in the given situation in the light of the Foreign Contribution and
Regulation Act, 2010 whether the donation so made by Max Ltd. is a foreign contribution?
Is the acceptance of such donation by the Religious trust is valid?
16. Mr. Zubin (Member of SEBI) was adjudged as an insolvent by the Adjudicating authority.
As of that, a group of complainants have alleged that Mr. Zubin while rendering of his
services in office may be biased in the performance of his duties. Working in such a state
of position by him, may be detrimental to the public interest and so should be removed
from his office. Advise in the given situation, the tenability of maintenance of complaint
against Mr. Zubin.
17. On 1st day of April, 2018, Almond Food Processors limited, a company engaged in food
processor manufacturing unit entered into a joint venture agreement with Ronnie and
Coleman Company Limited, the largest manufacturer of Food processors. Both the
companies are registered under the Companies Act, 2013. Agreement carries the term that
all disputes shall be arbitrated in Delhi. In the light of the Arbitration and Conciliation Act,
1996, discuss:
(i) The type of arbitration agreement made between them.
(ii) Examine what will happen if the agreement does not have any clause relating to
arbitration where disputes arose between them concerning quality of material
supplied in 2019.
18. Referring to the provisions of the Securities Contracts (Regulation) Act, 1956 state how a
recognized stock exchange may delist the securities and how an appeal may be filed by
an aggrieved investor against the decision of stock exchange for delisting of securities.
19. Neeraj was given an offer by a company vendor to disclose him the lowest bi d quoted by
other vendors. Neeraj accessed the computer of his Executive Director and passed on the
lowest quotation to the vendor and thus helped him in quoting the lowest among all the
bids. Examine and analyse the situation and conclude how Neeraj will be held liable under
Prevention of Money Laundering Act?
20. Broadway Infrastructure Limited entered into a contract with Royal forgings, in which wife
of Mr. Patrick, a director of the company is a partner. The contract is for supply of certain
components by the firm for a period of three years with effect from 1 st September, 2018 on
credit basis. Explain the requirements under the Companies Act, 2013, which should have
been complied with by Broadway Infrastructure Limited before entering into contract with
Royal forgings.
What would be your answer in case Royal forgings is a private Limited company in which
wife of Mr. Patrick is holding shares?

Multiple Choice Answer

1. (b)
2. (d)
3. (c)
4. (a)
5. (b)
6. (d)
7. (b)
8. (c)
Descriptive Answers
9. Resolution passed at the meeting of Board of Directors of BLM Limited held at its registered
office situated ---------------------- on ----------------, 2019 at ------------- A.M.
RESOLVED THAT the Board do hereby appoint Mr. -------------- Director of the company
as Authorized Signatory for enrolment of the Company on the Goods and Service Tax
(GST) System Portal and to sign (physically or digitally as and when required) and submit
various documents electronically and/or physically and to make applications,
communications, representations, modifications or alterations and to give explanations on
behalf of the Company before the Central GST and/or the concerned State GST authorities
as and when required.
FURTHER RESOLVED THAT Mr. ______, Director of the company be and is hereby
authorized to represent the Company and to take necessary actions on all issues related
to goods and service tax including but not limited to presenting documents/records etc. on
behalf of the Company representing for registration of the Company and also to make any
alterations, additions, corrections, to the documents, papers, forms, etc., filed with tax
authorities and to provide explanations as and when required.
FURTHER RESOLVED THAT Mr. ------------, Director of the company be and is hereby
authorized on behalf of the company to sign the returns, documents, letters,
correspondences etc. physically/digitally and to represent on behalf of the company, for
assessments, appeals or otherwise before the goods and service tax authorities as and
when required.
10. Scheme of Compromise or arrangement (Section 230 of the Companies Act, 2013):
The scheme provides for sacrifice on the part of creditors as they have to forego 50% of
their dues to the company. The company is sick and therefore it can be considered as a
company liable to be wound up within the meaning of Section 230(a) of the Companies

Act, 2013. The proposed scheme involves as a compromise or arrangement with creditors
and it attracts section 230.
While the company or any creditor or member can make application to the Tribunal under
section 230 (6)(1), it is usual for the company to make an application. On such application,
the Tribunal may order that a meeting of creditors and/or members be called and held as
per directions of the Tribunal.
Company must arrange to send notice of meeting to every creditor containing a statement
setting forth the terms of compromise or arrangement explaining its effect. Material interest
of directors, Managing Director, or manager of the company in the scheme and the effect
of scheme on their interest should be fully disclosed [Section 230(1)(a). Advertisement
issued by the company must comply with the requirements of section 230(2). At the
meetings convened, as per directions of the Tribunal, majority in number representing at
least ninety percent in value of creditors present and voting (either in person or by proxy if
allowed) must agree to compromise or arrangement.
Thereafter the company must present a petition to the Tribunal for confirmation of the
compromise or arrangement. The notice of application made by the company will be served
on the Central Government and the Tribunal will take into consideration representation, If,
any made by the Central Government. The Tribunal will sanction the scheme, if it is
satisfied that the company has disclosed all material facts relating to the company e.g.
latest financial position, auditors report on accounts of the company, pendency of
investigation of company, etc.
Copy of Tribunal order must be filed with the Registrar of Companies and then only the
order will come into effect. Copy of Tribunal order must be annexed to every Memorandum
of Association issued thereafter.
If the Tribunal sanctions the scheme, it will be binding on all members and creditors even
those who were dissenting. (Case Law: S. K. Gupta Vs. K. P. Jain, AlR 1979 SC 374)
11. Validity of RoC's action: According to Section 271(d) of the Companies Act, 2013, a
Company may, on a petition under Section 272, be wound up by the Tribunal, if the
Company has made a default in filing with the Registrar its financial statements or annual
returns for immediately preceding five consecutive financial years.
In the instant case, the move by RoC to present a petition to Tribunal for the winding up of
Clarks Limited is not valid as the Company has made default in filing financial statements
and annual returns for a continuous period of 4 financial years ending on 31st March, 2019.
Time limit for passing of an Order under section 273: An order under section 273 of
the Act shall be made within ninety days from the date of presentation of the petition.
12. Sub-section (4) of section 13 of SARFAESI Act, 2002, provides that if the borrower fails
to discharge his liability in full within the 60 days, the secured creditor may take recourse
to one or more of the following measures to recover his secured debt:

(i) take possession of the secured assets of the borrower including the right to transfer
by way of lease, assignment or sale for realising the secured asset;
(ii) take over the management of the business of the borrower including the right to
transfer by way of lease, assignment or sale for realising the secured asset:
Provided that the right to transfer by way of lease, assignment or sale shall be
exercised only where the substantial part of the business of the borrower is held as
security for the debt:
Provided further that where the management of whole of the business or part of the
business is severable, the secured creditor shall take over the management of such
business of the borrower which is relatable to the security for the debt;
(iii) appoint any person (hereafter referred to as the manager), to manage the secured
assets the possession of which has been taken over by the secured creditor;
(iv) require at any time by notice in writing, any person who has acquired any of the
secured assets from the borrower and from whom any money is due or may become
due to the borrower, to pay the secured creditor, so much of the money as is sufficient
to pay the secured debt.
In the instant case, the Bank may take the above mentioned procedure to enforce its
security interest in case Popular Limited has failed to discharge its liabilities within
13. Any person may sell or draw foreign exchange to or from an authorized person if such sale
or drawal is a current account transaction. However, the Central Government may in public
interest and in consultation with the RBI, impose such reasonable restrictions for current
account transactions as may be prescribed (Section 5). The Central Government has
framed Foreign Exchange Management (Current Account Transactions) Rules, 2000.
The Rules stipulate some prohibitions and restrictions on drawal of foreign exchange for
certain purposes. In the light of provisions of these rules, the answer to the given problem
is as follows:
(i) Drawl of foreign exchange for securing health insurance from a company abroad does
not fall under any of the Schedules I, II or Ill. Therefore, such a transaction is permitted
without any restriction or condition.
(ii) Rule 3 read with Schedule I of Foreign Exchange Management (Current Account
Transactions) Rules, 2000 prohibits payment of commission on exports under Rupees
State Credit Route (except commission upto 10% of invoice value of exports of tea
and tobacco). Therefore, payment of commission on exports under Rupee State
Credit Route is prohibited unless such commission is paid for export of tea and
tobacco, and the commission does not exceed 10% of invoice value of exports.

14. Financial creditor can initiate corporate insolvency resolution process himself or jointly with
other financial creditors against corporate debtor on default of payment of debt of
` 1,00,000 or more. Assignee of financial debt is also financial creditor as per section 5
(7) of the IBC, 2016. Mr. M's application can be accepted by NCLT if company fails to pay
debt within stipulated time. Application should be supported with a copy of the assignment
or transfer agreement and other relevant documents as may be required to demonstrate
the assignment or transfer.
15. As per the definition of Foreign Contribution given in section 2(1)(h) of FCRA 2010,
"Foreign contribution” means the donation, delivery or transfer made by any foreign
source,-
(i) of any article, (except given as a gift for personal use), if the market value, in India,
of such article, on the date of such gift, is not more than such sum as may be specified
from time to time, by the Central Government by the rules made by it in this behalf:
(ii) of any currency, whether Indian or foreign; security and includes any foreign security
under the Foreign Exchange Management Act,1999
As per explanation to the section, a donation, delivery or transfer of any article, currency
or foreign security so referred to in this clause by any person who has received it from any
foreign source, either directly or through one or more persons, shall also be deemed to be
foreign contribution within the meaning of this clause.
Whereas the foreign source as per the definition given in section 2(j) of the FCRA includes
a foreign company. Since the Max Ltd. is a foreign company, so donation made by the Max
Ltd is a foreign contribution for the religious and charitable purpose.
Whereas, Religious Trust can accept foreign contribution with prior permission of Central
Government, if it is not registered under the FCRA But where if the Religious trust is
registered under the FCRA [section 11 of FCRA 2010], it may accept the foreign
contribution within the limit without seeking prior permission.
16. Removal of Member of the SEBI (Section 6 of the Securities and Exchange Board of
India Act, 1992)
According to section 6 of the Securities and Exchange Board of India Act, 1992, the Central
Government shall have the power to remove a member appointed to the Board, if he:
(i) is, or at any time has been adjudicated as insolvent;
(ii) is of unsound mind and stands so declared by a competent court;
(iii) has been convicted of an offence which, in the opinion of the Central Governmen t,
involves a moral turpitude.
(iv) has, in the opinion of the Central Government so abused his position as to render his
continuance in office detrimental to the public interest.

Before removing a member, he will be given a reasonable opportunity of being heard

in the matter.
In the present case, a group of complainants have alleged that Mr. Zubin, a member
of the SEBI is being adjudicated as an insolvent. His state of position may effect on
rendering of his services in a biased manner. This may be unfavorable to the public
interest and so should be removed from his office.
Here, above complainants may approach the Central Government for removal of Mr.
Zubin, and if the Central Government is of the opinion that Mr. Zubin was not
competent in rendering of his services/duties in a office as a member of the Board.
The Central Government may remove Mr. Zubin from his office in compliance with the
said provision.
17. There are the basic types of arbitration agreement:
(i) Arbitration clause - a clause contained within a principal contract. The parties
undertake to submit disputes in relation to or in connection with the principal contract
that may arise in future to arbitration.
(ii) Submission agreement - an agreement to refer disputes that already exist to
arbitration. Such an agreement is entered into after the disputes have arisen.
In first case, the agreement already carries the term that all disputes shall be arbitrated in
Delhi at the time of entering into joint venture agreement. This would be an arbitration
clause as it is contained in the principal contract (JVA) and no disputes have arisen till yet.
It concerns future disputes that may arise.
In the second case, the Principal contract (JVA) does not have any term relating to
arbitration. Disputes arose between the parties concerning quality of supplied goods in
2019. To resolve this dispute, parties later entered into an agreement "That all disputes
including quality of goods supplied by Ronnie and Coleman Company Limited to Almond
Food Processors Limited shall be submitted to arbitration”. The parties hereby agree to
abide by the decision of the arbitrator". Such an agreement that is made after the disputes
have arisen would be called a submission agreement.
18. According to section 21A of the Securities Contracts (Regulation) Act, 1956 the delisting
of securities may take place in the following manner:-
(1) A recognized stock exchange may delist the securities, after recording the reasons
therefore, from any recognized stock exchange on any of the ground/s as may be
prescribed under this Act.
Provided that the securities of a company shall not be delisted unless the company
concerned has been given a reasonable opportunity of being heard,
(2) A listed company or an aggrieved investor may file an appeal before the Securities
Appellate Tribunal against the decision of the recognized stock exchange delisting

the securities within fifteen days from the date of the decision of the recognized stock
exchange delisting the securities and the Provisions of section 22B to 22E of this Act,
shall apply as far as may be, to such appeals.
Provided that the Securities Appellate Tribunal may, if it is satisfied that the company
was prevented by sufficient cause from filing the appeal within the said period, allow
it to be filed within a further period not exceeding one month.
19. In the given instance, Neeraj is liable for the commission of scheduled offence specified
under Part A Para 22 of the PMLA, 2002. He is liable for an offence committed under
section 72 of the Information Technology Act, 2000. It provides for the offence for breach
of confidentiality and privacy without consent of the person concerned.
Here as per the stated facts, Neeraj acted without consent of the concerned person i.e. his
executive director and accessed the electronic records and passed on the official
information to the vendor, thus leading to the breach of confidentiality & privacy of the
company. This sharing of confidential information can produce large profits & ill gotten
gains to Mr. Neeraj. Thus his involvement is connected with the obtaining of profits from
proceeds of crime. Therefore, he is liable under sections 3 and 4 of the PMLA, 2002 which
provides rigorous imprisonment for a term which shall not be less than 3 years, but which
may extend to 7 years and shall be liable to fine.
20. The contract for supply of components entered into between Broadway Infrastructure
Limited and Royal forgings, a partnership firm (in which wife of Mr. Patrick, a director of
the company is a partner) attracts Section 184,188 and 189 of the Companies Act, 2013.
As per Section 188, company cannot enter into contract with firm for supply or purchase of
goods or material where director of company or his relative is partner of firm without
approval of Board of directors at board meeting. As per Section 184, interested directors
must disclose his interest at board meeting at which said business is to be discussed.
Interested directors should not take part in the discussion or voting at board meeting. If he
does vote, his vote shall not be counted. In case of Private limited Company interested
director can participate in the board meeting after disclosure of interest.
As per Section 189, prescribed particulars of the contract must be entered into the Register
of Contract in which directors are interested in Form MBP-4. Every entry made in Register
should be authenticated by Company Secretary of company or any other person authorized
by Board. After each entry in the register, it shall be placed before the next board meeting
and shall be signed by all the directors present thereat.
Based upon discussion of the above provisions:

If the value of the contract or transaction is exceeded than limit specified, prior approval of
shareholders is required to be obtained. Question does not suggest value of transaction.
Assuming that it is within limits specified under the Act, consent of shareholders is not
required.
If Royal forgings is a private limited company: The provision of Section 188 are
applicable to it. As the directors wife (i.e Patrick’s wife) is member of Royal forgings private
limited.
Section 184 is not applicable as Mr. Patrick, director of Broadway Infrastructure Limited is
neither director nor holding any shares in Royal Forgings Private Limited. Shares held by
Mr. Patrick's wife are not to be considered. Hence the provisions of Section 184 are not
attracted.

PART – I: RELEVANT AMENDMENTS APPLICABLE FOR MAY, 2019 EXAMINATION
amendments made in the respective subject for the period 1 st May 2017 to 31st October, 2018
This RTP of May 2019 examination will help the students to know of the significant changes,
that are relevant and applicable for May 2019 examination.
Relevant amendments: Here are the given relevant amendments arranged chapter wise.
June, 2017
According to the amendment, section 152(6) & (7) shall not apply to –
(a) a Government company, which is not a listed company, in which not less than fifty-
one per cent. of paid up share capital is held by the Central Government, or by any
State Government or Governments or by the Central Government and one or more
State Governments;
(b) a subsidiary of a Government company, referred to in (a) above.
2015 vide Notification G.S.R. 582(E) Dated 13th June, 2017
namely:-
3. Exemptions to Companies covered section 8 of the Companies Act, 2013 vide

Vide Notification G.S.R. 584(E) Dated 13 th June, 2017
annual return under section 92 of the said Act with the Registrar.
Amendment Rules, 2017 Vide Notification G.S.R. 839(E) dated 5 th July 2017
(1), namely:-
Through the issue of this circular, it is hereby clarified that a "joint venture”, would mean a


namely:-
Rules, 2014.
Provided that in case of proposed directors not having approved DIN, the
particulars of maximum three directors shall be mentioned in Form No.INC-32
(SPICe) and DIN may be allotted to maximum three proposed directors through
Form INC-32 (SPICe)”;
inserted, namely:-
company”;
2018

8. Enforcement of the Companies (Appointment and Qualification of Directors) Second

Amendment Rules, 2018 vide Notification G.S.R. 431(E) dated 7th May 2018
Directors) Second Amendment Rules, 2018 to amend the Companies (Appointment and
(a) rule 5 shall be numbered as sub-rule (1) thereof, and after sub-rule (1) as so
numbered, the following sub-rule shall be inserted, namely:-
“(2) None of the relatives of an independent director, for the purposes of sub-clauses (ii)
and (iii) of clause (d) of sub-section (6) of section 149,-
(i) is indebted to the company, its holding, subsidiary or associate company or their
promoters, or directors; or
(ii) has given a guarantee or provided any security in connection with the indebtedness
of any third person to the company, its holding, subsidiary or associate company or
their promoters, or directors of such holding company,
for an amount of fifty lakhs rupees, at any time during the two immediately preceding
financial years or during the current financial year.”
(b) In the principal rules, in rule 16, for the word “shall”, the word “may” shall be
substituted.
9. Enforcement of the Companies (Appointment and Qualification of Directors) Third
Amendment Rules, 2018 vide Notification G.S.R. 558 (E) dated 12th June 2018
Directors) Third Amendment Rules, 2018 to amend the Companies (Appointment and
In the Companies (Appointment and Qualification of Directors) Rules, 2014, in the
annexure for form DIR-3, a new form shall be substituted.
10. Enforcement of the Companies (Appointment and Qualification of Directors) fourth
Amendment Rules, 2018 vide Notification G.S.R. 615(E) w.e.f. 10th July, 2018
Directors) Fourth Amendment Rules, 2018 to amend the Companies (Appointment and
In Companies (Appointment and Qualification of Directors) Rules, 2014,
(i) The rule 11 shall be renumbered as sub-rule (1) thereof and after sub-rule (1) as so
renumbered, the following sub-rules shall be inserted, namely:-
"(2) The Central Government or Regional Director (Northern Region), or any
officer authorised by the Central Government or Regional Director (Northern Region)

shall, deactivate the Director Identification Number (DIN), of an individual who does
not intimate his particulars in e-form DIR-3-KYC within stipulated time in accordance
with Rule 12A.
(3) The de-activated DIN shall be re-activated only after e-form DIR-3-KYC is filed
along with fee as prescribed under Companies (Registration Offices and Fees)
Rules, 2014.
(ii) after rule 12, the following shall be inserted, namely:-
“12A Directors KYC:- Every individual who has been allotted a Director Identification
Number (DIN) as on 31st March of a financial year as per these rules shall, submit e-
form DIR-3-KYC to the Central Government on or before 30 th April of immediate next
financial year.
Provided that every individual who has already been allotted a Director Identification
Number (DIN) as at 31 st March, 2018, shall submit e-form DIR-3 KYC on or before
31st August, 2018.”;
(iii) In the Annexure after Form DIR-3 the Form DIR-3-KYC shall be inserted.
11. Enforcement of the Companies (Appointment and Qualification of Directors) Fifth
Amendment Rules, 2018 vide Notification G.S.R. 798 (E) dated 21st August 2018
Directors) Fifth Amendment Rules, 2018 to amend the Companies (Appointment and
(i) in the proviso to rule 12A, for the words and numbers “DIR-3 KYC on or before 31st
August, 2018, the words and numbers “DIR-3 KYC on or before 15th September,
2018” shall be substituted.
(ii) in the Annexure, for Form No.DIR-3 KYC, a new Form shall be substituted.
12. Enforcement of the Companies (Appointment and Qualification of Directors) Sixth
Amendment Rules, 2018 vide Notification G.S.R. 904(E) dated 20th September 2018
Directors) Sixth Amendment Rules, 2018 to amend the Companies (Appointment and
In the Companies (Appointment and Qualification of Directors) Rules, 2014, in the proviso
to rule 12A, for the words and figures “before 15th September, 2018,” the words and figures
“before 5th October, 2018 ” shall be substituted.


Relevant Amendment
sections
section 149 (i) for sub-section (3), the following sub-section shall be
"(3)Every company shall have at least one director who
stays in India for a total period of not less than one hundred
and eighty-two days during the financial year:
Provided that in case of a newly incorporated company the
requirement under this sub-section shall apply
proportionately at the end of the financial year in which it is
incorporated.";
(a) in clause (c), for the words "pecuniary relationship",
the words "pecuniary relationship, other than
remuneration as such director or having transaction
not exceeding ten per cent. of his total income or such
amount as may be prescribed," shall be substituted;
(b) for clause (d), the following clause shall be
"(d) none of whose relatives—
(i) is holding any security of or interest in the
company, its holding, subsidiary or associate
company during the two immediately preceding
financial years or during the current financial year:
Provided that the relative may hold security or
interest in the company of face value not
exceeding fifty lakh rupees or two per cent. of the
paid-up capital of the company, its holding,
subsidiary or associate company or such higher
sum as may be prescribed;
(ii) is indebted to the company, its holding, subsidiary
or associate company or their promoters, or
directors, in excess of such amount as may be
prescribed during the two immediately preceding
financial years or during the current financial
year;
(iii) has given a guarantee or provided any security
in connection with the indebtedness of any third

person to the company, its holding, subsidiary or

associate company or their promoters, or
directors of such holding company, for such
amount as may be prescribed during the two
immediately preceding financial years or during the
current financial year; or
(iv) has any other pecuniary transaction or
relationship with the company, or its subsidiary,
or its holding or associate company amounting to
two per cent. or more of its gross turnover or total
income singly or in combination with the
transactions referred to in sub-clause (i), (ii) or
(iii);";
(c) in clause (e), in sub-clause (i), the following proviso
"Provided that in case of a relative who is an employee, the
restriction under this clause shall not apply for his
employment during preceding three financial years.".
section 152 (a) in sub-section (3), after the word and figures "section 154",
the words and figures "or any other number as may be prescribed
under section 153" shall be inserted;
figures "or such other number as may be prescribed under
section 153" shall be inserted.
Amendment of In section 153 of the principal Act, the following proviso shall be
section 153 inserted, namely:—
identification number which shall be treated as Director
Identification Number for the purposes of this Act and in case
any individual holds or acquires such identification number, the
requirement of this section shall not apply or apply in such
manner as may be prescribed."
Section 157 (i) in sub-section (1), the words and figures, “within the time
specified under section 403” shall be omitted;
(ii) in sub-section (2), the words and figures, “before the expiry
of the period specified under section 403 with additional
fee”, shall be omitted.

Amendment of In section 160 of the principal Act, in sub-section (1), the

section 160. following proviso shall be inserted, namely:—
‘‘Provided that requirements of deposit of amount shall not apply
in case of appointment of an independent director or a director
recommended by the Nomination and Remuneration Committee,
if any, constituted under sub-section (1) of section 178 or a
director recommended by the Board of Directors of the
Company, in the case of a company not required to constitute
Nomination and Remuneration Committee.”
section 161. (i) in sub-section (2), after the words "alternate directorship for
any other director in the company", the words "or holding
directorship in the same company" shall be inserted;
(a) the words "In the case of a public company," shall be
omitted;
(b) after the words "meeting of the Board", the words "which
shall be subsequently approved by members in the immediate
next general meeting" shall be inserted.
section 164 (i) in sub-section (2), the following proviso shall be inserted,
namely:—
"Provided that where a person is appointed as a director
of a company which is in default of clause (a) or clause (b), he
shall not incur the disqualification for a period of six months
from the date of his appointment.";
(ii) in sub-section (3), for the proviso, the following proviso shall
"Provided that the disqualifications referred to in clauses (d), (e)
and (g) of sub-section (1) shall continue to apply even if the
appeal or petition has been filed against the order of
conviction or disqualification."
section 165. Explanation shall be renumbered as Explanation I and after
Explanation I as so numbered, the following Explanation shall be
"Explanation II.—For reckoning the limit of directorships of
twenty companies, the directorship in a dormant company shall

not be included."
section 167. (i) in clause (a), the following proviso shall be inserted,
namely:—
"Provided that where he incurs disqualification under sub-
section (2) of section 164, the office of the director shall
become vacant in all the companies, other than the
company which is in default under that sub-section.";
(ii) in clause (f), for the proviso the following proviso shall be
substituted, namely,—
"Provided that the office shall not be vacated by the director
in case of orders referred to in clauses (e) and (f)—
(i) for thirty days from the date of conviction or order of
disqualification;
(ii) where an appeal or petition is preferred within thirty
days as aforesaid against the conviction resulting in
sentence or order, until expiry of seven days from the
date on which such appeal or petition is disposed of;
or
(iii) where any further appeal or petition is preferred against
order or sentence within seven days, until such further
appeal or petition is disposed of."
Amendment of In section 168 of the principal Act, in sub-section (1), in the proviso, for
Section 168 the words, "director shall also forward", the words "director may also
forward" shall be substituted.
CHAPTER 2: APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL
1. Enforcement of the Companies (Appointment and Remuneration of Managerial
Personnel) Amendment Rules, 2018 vide Notification G.S.R. G.S.R 875(E) dated 12th
September 2018
The Central Government makes the Companies (Appointment and Remuneration of
Managerial Personnel) Amendment Rules, 2018 to amend the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014.
In Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014,
(i) in rule 6,
(a) for the heading ‘application to the Central Government’ the heading ‘Parameters
for consideration of remuneration’ shall be substituted.
(b) the words ‘Central Government’ shall be omitted.

(ii) in rule 7, sub-rule (2) shall be omitted

(iii) for form no.MR-2, a new form MR-2 shall be substituted.
2. Amendment in Schedule V to the Companies Act, 2013
The Central Government vide Notification No. S.O. 4822(E) dated 12th September 2018
has amended the Schedule V to the Companies Act, 2013.
Relevant Amendment
Sections
(b) for sub-clause (v), the following sub-clauses shall be
"(v) such other officer, not more than one level below the
directors who is in whole-time employment, designated as
key managerial personnel by the Board; and
section 196
(a) in sub-section (3), in clause (a), after the proviso, the following
“Provided further that where no such special resolution is
passed but votes cast in favour of the motion exceed the
votes, if any, cast against the motion and the Central
Government is satisfied, on an application made by the Board,
that such appointment is most beneficial to the company, the
appointment of the person who has attained the age of seventy
years may be made.”;
(b) in sub-section (4), for the words “specified in that Schedule”,
the words “specified in Part I of that Schedule” shall be
substituted.
Section 197
(a) in sub-section (1),—
(i) in the first proviso, the words "with the approval of the
Central Government," shall be omitted;
(ii) in the second proviso, after the words "general meeting,",
the words "by a special resolution," shall be inserted;

(iii) after the second proviso, the following proviso shall be

"Provided also that, where the company has defaulted in
obtaining the approval in the general meeting.";
(b) in sub-section (3), the words "and if it is not able to comply
with such provisions, with the previous approval of the Central
Government" shall be omitted;
(c) for sub-section (9), the following sub-section shall be substituted,
namely:—
"(9) If any director draws or receives, directly or indirectly, by
way of remuneration any such sums in excess of the limit
prescribed by this section or without approval required
under this section, he shall refund such sums to the
company, within two years or such lesser period as may be
allowed by the company, and until such sum is refunded,
hold it in trust for the company.";
(d) in sub-section (10),—
(i) for the words "permitted by the Central Government", the
words "approved by the company by special resolution
within two years from the date the sum becomes
refundable" shall be substituted;
(ii) the following proviso shall be inserted, namely:—
"Provided that where the company has defaulted in
obtaining approval of such waiver.";

(e) in sub-section (11), the words "and if such conditions are not being
complied, the approval of the Central Government had been
obtained" shall be omitted;
(f) after sub-section (15), the following sub-sections shall be
"(16) The auditor of the company shall, in his report under
section 143, make a statement as to whether the
remuneration paid by the company to its directors is in
accordance with the provisions of this section, whether
remuneration paid to any director is in excess of the limit
laid down under this section and give such other details
as may be prescribed.
(17) On and from the commencement of the Companies
(Amendment) Act, 2017, any application made to the
Central Government under the provisions of this section
[as it stood before such commencement], which is pending
with that Government shall abate, and the company shall,
within one year of such commencement, obtain the
approval in accordance with the provisions of this
section, as so amended."
Section 198
(i) in sub-section (3),—
(a) in clause (a), after the words “sold by the company”, the
words, letter, brackets and figures “unless the company is
an investment company as referred to in clause (a) of the
Explanation to section 186” shall be inserted;
(b) after clause (e), the following clause shall be inserted,
namely:—
“(f) any amount representing unrealised gains,
notional gains or revaluation of assets.”;
(ii) in sub-section (4), in clause (l), the words "which begins
at or after the commencement of this Act" shall be
omitted.
Amendment of In section 200 of the principal Act, the words "the Central
section 200. Government or" appearing at both the places shall be omitted.
section 201.

(a) in sub-section (1), for the words "this Chapter", the word and
figures "section 196" shall be substituted;
(b) in sub-section (2), in clause (a), for the words "any of the sections
aforesaid", the word and figures "section 196" shall be
substituted.

2017
Directors.
184.
2. Insertion of Paragraph 2A in the principal notification G.S.R. 464(E), dated 5th June
in filing its financial statements under section 137 of the said Act or annual return under


taken into account.
India;
Act.
(3) The provisions of this rule shall not be in derogation of the proviso to sub-section (1)
whichever is more.

7. Enforcement of the Companies (Meetings of Board and its Powers) Amendment

Rules, 2018 vide Notification G.S.R. 429 (E) dated 7th May, 2018
The Central Government makes the Companies (Meetings of Board and its Powers)
Amendment Rules, 2018 to amend the Companies (Meetings of Board and its Powers)
Rules, 2014.
In Companies (Meetings of Board and its Powers) Rules, 2014,
(i) in rule 4, the following proviso shall be inserted, namely:-
“Provided that where there is quorum in a meeting through physical presence of
directors, any other director may participate through video conferencing or other
audio visual means.”
(ii) In the principal rules, in rule 6, for the words “every listed company”, the words “every
listed public company” shall be substituted.
(iii) In the principal rules, for rule 13, the following rule shall be substituted, namely:-
“13. Special Resolution- A resolution passed at a general meeting in terms of sub-
section (3) of section 186 to give any loan or guarantee or investment or providing
any security or the acquisition under sub-section (2) of section 186 shall specify the
total amount up to which the Board of Directors are authorised to give such loan or
guarantee, to provide such security or make such acquisition:
Provided that the company shall disclose to the members in the financial statement
the full particulars in accordance with the provisions of sub-section (4) of section 186.”
Amendment of section In section 173 of the principal Act, in sub-section (2),
173 after the first proviso, the following proviso shall be
"Provided further that where there is quorum in a
meeting through physical presence of directors, any
other director may participate through video
conferencing or other audio visual means in such
meeting on any matter specified under the first proviso.".
177. (i) in sub-section (1), for the words "every listed
(ii) in sub-section (4), in clause (iv), after the proviso,
the following provisos shall be inserted, namely:—
"Provided further that in case of transaction, other
than transactions referred to in section 188, and

where Audit Committee does not approve the

transaction, it shall make its recommendations to
the Board:
Provided also that in case any transaction involving
any amount not exceeding one crore rupees is
entered into by a director or officer of the company
without obtaining the approval of the Audit
Committee and it is not ratified by the Audit
Committee within three months from the date of the
transaction, such transaction shall be voidable at
the option of the Audit Committee and if the
transaction is with the related party to any director
or is authorised by any other director, the director
concerned shall indemnify the company against
any loss incurred by it:
Provided also that the provisions of this clause
shall not apply to a transaction, other than a
transaction referred to in section 188, between a
holding company and its wholly owned subsidiary
company."
178 (i) in sub-section (1), for the words "every listed
(ii) in sub-section (2), for the words "shall carry out
evaluation of every director's performance", the
words "shall specify the manner for effective
evaluation of performance of Board, its committees
and individual directors to be carried out either by
the Board, by the Nomination and Remuneration
Committee or by an independent external agency
and review its implementation and compliance"
(iii) in sub-section (4), in clause (c), for the proviso, the
following proviso shall be substituted, namely:—
"Provided that such policy shall be placed on the
website of the company, if any, and the salient
features of the policy and changes therein, if any,
along with the web address of the policy, if any,
shall be disclosed in the Board's report.";
(iv) in sub-section (8), in the proviso, for the words
"non-consideration of resolution of any grievance",

the words "inability to resolve or consider any

grievance" shall be substituted.
Amendment of Section In section 180 of the principal Act, in sub-section (1), in
180 clause (c), for the words "paid-up share capital and free
reserves", the words "paid-up share capital, free
reserves and securities premium" shall be substituted.
184 (i) in sub-section (4), the words "shall not be less than
fifty thousand rupees but which" shall be omitted;
(ii) in sub-section (5), for clause (b), the following
clause shall be substituted, namely:—
"(b) shall apply to any contract or arrangement
entered into or to be entered into between two
companies or between one or more
companies and one or more bodies corporate
where any of the directors of the one
company or body corporate or two or more of
them together holds or hold not more than two
per cent. of the paid-up share capital in the
other company or the body corporate."
Substitution of new For section 185 of the principal Act, the following section
section for section 185. shall be substituted, namely:—
Loan to Directors '185. (1) No company shall, directly or indirectly,
advance any loan, including any loan represented by a
book debt to, or give any guarantee or provide any
security in connection with any loan taken by,—
(a) any director of company, or of a company which is
its holding company or any partner or relative of
any such director; or
(b) any firm in which any such director or relative is a
partner.
(2) A company may advance any loan including any loan
represented by a book debt, or give any guarantee or
provide any security in connection with any loan taken
by any person in whom any of the director of the
company is interested, subject to the condition that—
(a) a special resolution is passed by the company in
general meeting:
Provided that the explanatory statement to the
notice for the relevant general meeting shall
disclose the full particulars of the loans given, or

guarantee given or security provided and the

purpose for which the loan or guarantee or security
is proposed to be utilised by the recipient of the
loan or guarantee or security and any other
relevant fact; and
(b) the loans are utilised by the borrowing company for
Explanation.—For the purposes of this sub-section, the
expression "any person in whom any of the director of
the company is interested" means—
(a) any private company of which any such director is
a director or member;
(b) any body corporate at a general meeting of which
not less than twenty-five per cent. of the total
voting power may be exercised or controlled by any
such director, or by two or more such directors,
together; or
(c) any body corporate, the Board of directors,
managing director or manager, whereof is
accustomed to act in accordance with the
directions or instructions of the Board, or of any
director or directors, of the lending company.
(3) Nothing contained in sub-sections (1) and (2) shall
apply to—
(a) the giving of any loan to a managing or whole-time
director—
(i) as a part of the conditions of service extended
by the company to all its employees; or
(ii) pursuant to any scheme approved by the
members by a special resolution; or
(b) a company which in the ordinary course of its
business provides loans or gives guarantees or
securities for the due repayment of any loan and in
respect of such loans an interest is charged at a
rate not less than the rate of prevailing yield of one
year, three years, five years or ten years
Government security closest to the tenor of the
loan; or
(c) any loan made by a holding company to its wholly
owned subsidiary company or any guarantee given
or security provided by a holding company in

respect of any loan made to its wholly owned

subsidiary company; or
(d) any guarantee given or security provided by a
holding company in respect of loan made by any
bank or financial institution to its subsidiary
company:
Provided that the loans made under clauses (c)
and (d) are utilized by the subsidiary company for
(4) If any loan is advanced or a guarantee or security is
given or provided or utilised in contravention of the
provisions of this section,—
(i) the company shall be punishable with fine which
shall not be less than five lakh rupees but which
may extend to twenty-five lakh rupees;
(ii) every officer of the company who is in default shall
be punishable with imprisonment for a term which
may extend to six months or with fine which shall
not be less than five lakh rupees but which may
extend to twenty-five lakh rupees; and
(iii) the director or the other person to whom any loan
is advanced or guarantee or security is given or
provided in connection with any loan taken by him
or the other person, shall be punishable with
imprisonment which may extend to six months or
with fine which shall not be less than five lakh
rupees but which may extend to twenty-five lakh
rupees, or with both.’
186. (i) in sub-section (2), the following Explanation shall
'Explanation.—For the purposes of this sub-
section, the word "person" does not include any
individual who is in the employment of the
company.';
(ii) for sub-section (3), the following sub-section shall
'(3) Where the aggregate of the loans and
investment so far made, the amount for which
guarantee or security so far provided to or in
all other bodies corporate along with the
investment, loan, guarantee or security

proposed to be made or given by the Board,

exceed the limits specified under sub-section
(2), no investment or loan shall be made or
guarantee shall be given or security shall be
provided unless previously authorised by a
special resolution passed in a general
meeting:
Provided that where a loan or guarantee is
given or where a security has been provided
by a company to its wholly owned subsidiary
company or a joint venture company, or
acquisition is made by a holding company, by
way of subscription, purchase or otherwise of,
the securities of its wholly owned subsidiary
company, the requirement of this sub-section
shall not apply:
Provided further that the company shall
disclose the details of such loans or
guarantee or security or acquisition in the
financial statement as provided under sub-
section (4).”.
(iii) for sub-section (11), the following sub-section shall
"(11) Nothing contained in this section, except sub-
section (1), shall apply—
(a) to any loan made, any guarantee given
or any security provided or any
investment made by a banking
company, or an insurance company, or
a housing finance company in the
ordinary course of its business, or a
company established with the object of
and engaged in the business of
financing industrial enterprises, or of
providing infrastructural facilities;
(b) to any investment—
(i) made by an investment company;
(ii) made in shares allotted in
pursuance of clause (a) of sub-
section (1) of section 62 or in
shares allotted in pursuance of

rights issues made by a body

corporate;
(iii) made, in respect of investment or
lending activities, by a non-banking
financial company registered under
Chapter III-B of the Reserve Bank
of India Act, 1934 and whose
principal business is acquisition of
securities.";
(iv) in the Explanation, in clause (a), after the words
"other securities" the following shall be inserted,
namely:—
"and a company will be deemed to be principally
engaged in the business of acquisition of shares,
debentures or other securities, if its assets in the
form of investment in shares, debentures or other
securities constitute not less than fifty per cent. of
its total assets, or if its income derived from
investment business constitutes not less than fifty
per cent. as a proportion of its gross income."
188. (i) in sub-section (1), after the second proviso, the
following proviso shall be inserted, namely:—
"Provided also that nothing contained in the
second proviso shall apply to a company in which
ninety per cent. or more members, in number, are
relatives of promoters or are related parties:"
(ii) in sub-section (3), for the words "shall be voidable
at the option of the Board", the words "shall be
voidable at the option of the Board or, as the case
may be, of the shareholders" shall be substituted.
1. Enforcement of Section 212(8), (9), & (10) vide Notification S.O. 2751(E) dated 24th of
August, 2017


August 2017
and where the person arrested is the Managing Director or person in-charge of the
sign the arrest order together with personal search memo in the Form appended to these
rules and shall serve it on the arrestee and obtain written acknowledgement of service.


office.
Amendment of section 223. In section 223 of the principal Act, in sub-section (3),
after the words "may be obtained", the words "by
members, creditors or any other person whose interest
is likely to be affected" shall be inserted.
13th June, 2017
Amendment of section In section 236 of the principal Act, in sub-sections (4), (5)
236. and (6), for the words, "transferor company", wherever they
occur, the words "company whose shares are being
transferred" shall be substituted.

CHAPTER 9: COMPANIES INCORPORATED OUTSIDE INDIA

Relevant Amendment
sections
Amendment of Section 379 of the principal Act shall be renumbered as sub-section (2)
section 379. thereof and before sub-section (2) as so renumbered, the following sub-
section shall be inserted, namely:—
"(1) Sections 380 to 386 (both inclusive) and sections 392 and 393 shall
apply to all foreign companies:
Official Gazette, exempt any class of foreign companies, specified in the
Order, from any of the provisions of sections 380 to 386 and sections 392
and 393 and a copy of every such Order shall, as soon as may be after it
is made, be laid before both Houses of Parliament."
Amendment of In section 384 of the principal Act, in sub-section (2), after the word and
section 384. figures "section 92", the words and figures "and section 135" shall be
inserted.
Amendment of In section 391 of the principal Act, for sub-section (2), the following sub-
section 391. section shall be substituted, namely:—
“(2) Subject to the provisions of section 376, the provisions of Chapter
XX shall apply mutatis mutandis for closure of the place of business of
a foreign company in India as if it were a company incorporated in India
in case such foreign company has raised monies through offer or issue
of securities under this Chapter which have not been repaid or
redeemed.”

1. Notification of Section 247 vide Notification S.O. 3393(E) dated 18th October 2017
Section 247: Valuation by Registered Valuers
shall be valued by 1[a person having such qualifications and experience and
registered as a valuer in such manner, on such terms and conditions as may be
1 Substituted by the Companies (Removal of Difficulties) Second Order 2017

prescribed] and appointed by the audit committee or in its absence by the Board of
Directors of that company.
to be valued;
or becomes so interested at any time 2[during a period of three years prior to his
by him.]
the valuer shall be punishable with fine which shall not be less than twenty-five
2. Definitions
section 458 of the Companies Act, 2013 to perform the func tions under these
rules;
2 Amended through the Companies (Amendment) Act, 2017 on 9 th February, 2018

accordingly;
"valuer" means a person registered with the authority in accordance with these
(e) Is not a minor;
bankrupt;
Explanation.- For the purposes of these rules 'person resident in India' shall have
the same meaning as defined in clause (v) of section 2 of the Foreign Exchange
Management Act, 1999 (42 of 1999) as far as it is applicable to an individual;
(i) Has not been convicted by any competent court for an offence punishable with
imprisonment for a term exceeding six months or for an offence involving moral
turpitude, and a period of five years has not elapsed from the date of expiry of
the sentence:

Provided that if a person has been convicted of any offence and sentenced in
respect thereof to imprisonment for a period of seven years or more, he shall
not be eligible to be registered;
(j) Has not been levied a penalty under section 271J of Income-tax Act, 1961 (43
of 1961) and time limit for filing appeal before Commissioner of Income-tax
(Appeals) or Income-tax Appellate Tribunal, as the case may be has expired,
or such penalty has been confirmed by Income-tax Appellate Tribunal, and five
years have not elapsed after levy of such penalty; and
Explanation.- For determining whether an individual is a fit and proper person
under these rules, the authority may take account of any relevant
consideration, including but not limited to the following criteria-
(2) No partnership entity or company shall be eligible to be a registered valuer if-
(a) It has been set up for objects other than for rendering professional or financial
services, including valuation services and that in the case of a company, it is
not a subsidiary, joint venture or associate of another company or body
corporate;
(e) None of its partners or directors, as the case may be, is a registered valuer for
the asset class, for the valuation of which it seeks to be a registered valuer.
or Institute established, recognised or incorporated by law in India and at least


(a) or (b).
under these rules.
of the authority.

accepted within fifteen days of the receipt of the communication under sub- rule
shall -
(b) at all times comply with the provisions of the Act, these rules and the Bye-laws
organisation;
authority;
he is a member;
company;

followed;

(k) conclusion; and

asset classes if -
1882).


issued to them;
Companies Act, 2013, and include in its bye laws the requirements specified
12;
publicly available;
authority;


(h) display on its website, the status and specified details of every registered
valuer being its valuer members including action under rule 17 being taken
against him; and
before the authority in person or by post or courier along with a non-refundable fees


4. Enforcement of the Companies (Registered Valuers and Valuation) Second
Amendment Rules, 2018 vide Notification G.S.R. 559(E) dated 13th June, 2018
The Central Government makes the Companies (Registered Valuers and Valuation)
Second Amendment Rules, 2018 to amend the Companies (Registered Valuers and
Valuation) Rules, 2017.
In Companies (Registered Valuers and Valuation) Rules, 2017, in rule 19, in sub-rule 2,
after clause (g), the following clause shall be inserted, namely:-
“(h) Presidents of, the Institute of Chartered Accountants of India, the Institute of Company
Secretaries of India, the Institute of Cost Accountants of India as ex-officio members.”.
5. Enforcement of the Companies (Registered Valuers and Valuation) Third
Amendment Rules, 2018 vide Notification G.S.R. G.S.R. 925(E) dated 25th
September, 2018
The Central Government makes the Companies (Registered Valuers and Valuation) Third
Rules, 2017.
In the Companies (Registered Valuers and Valuation) Rules, 2017,
(i) in rule 11, for the figures, letters and word “30th September, 2018” occurring at both
the places, the figures, letters and word “31st January, 2019” shall be substituted.
(ii) In the said rules, in rule 14, in clause (f), for the words “one year”, the words “two years”

words "during a period of three years prior to his appointment

as valuer or three years after the valuation of assets was
conducted by him" shall be substituted.
section 366. (i) for the words "seven or more members", the words "two
or more members" shall be substituted;
(ii) in the proviso, after clause (vi), the following clause shall
"(vii) a company with less than seven members shall
register as a private company."
Amendment of In section 374 of the principal Act, after clause (d), the
section 374. following proviso shall be inserted, namely:—
“Provided that upon registration as a company under this Part
a limited liability partnership incorporated under the Limited
Liability Partnership Act, 2008 shall be deemed to have been
dissolved under that Act without any further act or deed.”.
Amendment of (1) Any document, required to be submitted, filed, registered or
section 403. recorded, or any fact or information required or authorised to be
registered under this Act, shall be submitted, filed, registered or
recorded within the time specified in the relevant provision on
payment of such fee as may be prescribed:
Provided that where any document, fact or information required
to be submitted, filed, registered or recorded, as the case may
be, under section 92 or 137 is not submitted, filed, registered or
recorded, as the case may be, within the period provided in those
sections, without prejudice to any other legal action or liability
under this Act, it may be submitted, filed, registered or recorded,
as the case may be, after expiry of the period so provided in
those sections, on payment of such additional fee as may be
prescribed, which shall not be less than one hundred rupees per
day and different amounts may be prescribed for
different classes of companies:
Provided further that where the document, fact or information, as
the case may be, in cases other than referred to in the first
proviso, is not submitted, filed, registered or recorded, as the
case may be, within the period provided in the relevant section,
it may, without prejudice to any other legal action or liability under
this Act, be submitted, filed, registered or recorded as the case
may be, on payment of such additional fee as may be prescribed

and different fees may be prescribed for different classes of

companies:
Provided also that where there is default on two or m ore
occasions in submitting, filing, registering or recording of the
document, fact or information, it may, without prejudice to any
other legal action or liability under this Act, be submitted, filed,
registered or recorded, as the case may be, on payment of a
higher additional fee, as may be prescribed and which shall not
be lesser than twice the additional fee provided under the first or
the second proviso as applicable.
(2) Where a company fails or commits any default to submit, file,
register or record any document, fact or information under sub-
section (1) before the expiry of the period specified in the
relevant section, the company and the officers of the company
who are in default, shall, without prejudice to the liability for the
payment of fee and additional fee, be liable for the penalty or
punishment provided under this Act for such failure or default.
inserted;
namely:—
"Provided further that where the fraud involves an
amount less than ten lakh rupees or one per cent. of the
turnover of the company, whichever is lower, and does
not involve public interest, any person guilty of such
fraud shall be punishable with imprisonment for a term
which may extend to five years or with fine which may
extend to twenty lakh rupees or with both.".
section 458 proviso shall be omitted.
Amendment of For section 435 of the principal Act, the following shall be
section 435. substituted, namely:—

Establishment of 435. (1) The Central Government may, for the purpose of providing
Special Courts speedy trial of offences under this Act, by notification, establish or
designate as many Special Courts as may be necessary.
(2) A Special Court shall consist of—
(a) a single judge holding office as Session Judge or
Additional Session Judge, in case of offences
punishable under this Act with imprisonment of two
years or more; and
(b) a Metropolitan Magistrate or a Judicial Magistrate of the
First Class, in the case of other offences,
who shall be appointed by the Central Government with the
concurrence of the Chief Justice of the High Court within whose
jurisdiction the judge to be appointed is working.".
Amendment of In section 438 of the principal Act, for the words "deemed to be a Court of
section 438. Session", the words "deemed to be a Court of Session or the court of
Metropolitan Magistrate or a Judicial Magistrate of the First Class, as
the case may be," shall be substituted.
Amendment of In section 439 of the principal Act, in sub-section (2), after the
section 439. words "a shareholder", the words "or a member" shall be inserted.
Amendment of In section 440 of the principal Act, for the words "Court of Session", at
section 440. both the places, the words "Court of Session or the Court of
Metropolitan Magistrate or a Judicial Magistrate of the First Class, as
the case may be" shall be substituted.
section 441. "with fine only", the words "not being an offence punishable with
imprisonment only, or punishable with imprisonment and also with
fine" shall be substituted.
section be inserted, namely:—
446A. "446A. The court or the Special Court, while deciding the amount
of fine or imprisonment under this Act, shall have due regard to the
Factors for following factors, namely:—
determining level of (a) size of the company;
punishment. (b) nature of business carried on by the company;
Lesser penalties for 446B. Notwithstanding anything contained in this Act, if a One Person
One Person Company or a small company fails to comply with the provisions of

Companies or small sub-section (5) of section 92, sub-section (2) of section 117 or sub-
companies. section (3) of section 137, such company and officer in default of
such company shall be punishable with fine or imprisonment or fine
and imprisonment, as the case may be, which shall not be more than
one-half of the fine or imprisonment or fine and imprisonment, as the
case may be, of the minimum or maximum fine or imprisonment or
fine and imprisonment, as the case may be, specified in such
sections.".
1. Enforcement of the Companies (Removal of Difficulties) Orders, 2017 Vide Order
S.O. 2042(E) dated 29 th June , 2017
(a) in the third proviso, for “Provided further that-”, the following shall be substituted,
namely:- “Provided also that-”;
(b) after the third proviso, the following proviso shall be inserted, namely:-
“Provided also that proceedings relating to cases of voluntary winding up of a
company where notice of the resolution by advertisement has been given under sub-
section (1) of section 485 of the Companies Act, 1956 but the company has not been
dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with
provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.”
section 409 (i) in clause (a), for the words "out of which at least three
years shall be in the pay scale of Joint Secretary to
the Government of India or equivalent or above in that
service", the words "and has been holding the rank of
Secretary or Additional Secretary to the Government
of India" shall be substituted;
(ii) for clause (e), the following clause shall be
"(e) is a person of proven ability, integrity and
standing having special knowledge and
professional experience of not less than fifteen
years in industrial finance, industrial
management, industrial reconstruction,
investment and accountancy.".

Amendment of In section 410 of the principal Act, for the words “orders of
section 410 the Tribunal”, the words “orders of the Tribunal or of the
National Financial Reporting Authority” shall be substituted.
"(3) A technical member shall be a person of proven ability,
integrity and standing having special knowledge and
professional experience of not less than twenty-five
years in industrial finance, industrial management,
industrial reconstruction, investment and
accountancy.".
section 412 following sub-sections shall be substituted, namely:—
"(2) The Members of the Tribunal and the Technical
Members of the Appellate Tribunal shall be appointed
on the recommendation of a Selection Committee
consisting of—
(a) Chief Justice of India or his nominee—
Chairperson;
(b) a senior Judge of the Supreme Court or Chief
Justice of High Court— Member;
(c) Secretary in the Ministry of Corporate Affairs —
Member; and
(d) Secretary in the Ministry of Law and Justice—
Member.
(2A) Where in a meeting of the Selection Committee, there
is equality of votes on any matter, the Chairperson
shall have a casting vote.".

CHAPTER 2: The Securities Exchange Board of India Act, 1992, SEBI (ICDR)
REGULATIONS, 2009 & SEBI (LODR) REGULATIONS, 2015
1. SEBI (Issue of Capital and Disclosure Requirements) (Amendment) Regulations,
2018 w.e.f. 12.02.2018
Vide this amendment regulation, Clause (c) of the Regulation 82 which dealt with the
conditions for qualified institutions placement has been omitted. Following was the clause
prior to the omission.
“(c) it is in compliance with the requirement of minimum public shareholding specified in
the Securities Contracts (Regulation) Rules, 1957;”


1. Foreign Exchange Management (Acquisition and Transfer of Immovable Property in
India) Regulations, 2018
As per the Notification dated 26 th of March, 2018, the Reserve Bank of India makes the
Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India)
Regulations, 2018 with the enforcement from the date of their publication in the Official
Gazette i.e., 26th of March, 2018.
2. Relevant Definitions:- In these Regulations, unless the context otherwise requires-
‘Non-Resident Indian (NRI)’ means a person resident outside India who is a citizen of
India;
‘Overseas Citizen of India (OCI)’ means a person resident outside India who is registered
as an Overseas Citizen of India Cardholder under Section 7(A) of the Citizenship Act, 1955;
'Repatriation outside India' means the buying or drawing of foreign exchange from an
authorised dealer in India and remitting it outside India through banking channels or
crediting it to an account denominated in foreign currency or to an account in Indian
currency maintained with an authorised dealer from which it can be converted in foreign
currency;
3. Acquisition and Transfer of Property in India by a Non -Resident Indian or an
Overseas Citizen of India:-
An NRI or an OCI may-
(a) acquire immovable property in India other than agricultural land/ farm house/ plantation
property:
Provided that the consideration, if any, for transfer, shall be made out of (i) funds received
in India through banking channels by way of inward remittance from any place outside
India or (ii) funds held in any nonresident account maintained in accordance with the
provisions of the Act, rules or regulations framed thereunder.
Provided further that no payment for any transfer of immovable property shall be
made either by traveler’s cheque or by foreign currency notes or by any other mode
other than those specifically permitted under this clause.
(b) acquire any immovable property in India other than agricultural land/ farm house/
plantation property by way of gift from a person resident in India or from an NRI or from
an OCI, who in any case is a relative as defined in section 2(77) of the Companies Act,
2013;
(c) acquire any immovable property in India by way of inheritance from a person resident
outside India who had acquired such property (a) in accordance with the provisions of the

foreign exchange law in force at the time of acquisition by him or the provisions of these
Regulations or (b) from a person resident in India;
(d) transfer any immovable property in India to a person resident in India;
(e) transfer any immovable property other than agricultural land/ farm house/ plantation
property to an NRI or an OCI.
4. Acquisition of Immovable Property for carrying on a permitted activity:-
A person resident outside India who has established in India in accordance with the Foreign
Exchange Management (Establishment in India of a branch office or a liaison office or a
project office or any other place of business) Regulations, 2016, as amended from time to
time, a branch, office or other place of business for carrying on in India any activity,
excluding a liaison office, may -
(a) acquire any immovable property in India, which is necessary for or incidental to
carrying on such activity;
Provided that
i all applicable laws, rules, regulations or directions for the time being in force
are duly complied with; and
ii the person files with the Reserve Bank a declaration in the form IPI as prescribed
by Reserve Bank from time to time, not later than ninety days from the date of
such acquisition.
(b) transfer by way of mortgage to an authorised dealer as a security for any borrowing,
the immovable property acquired in pursuance of clause (a).
Provided no person of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China
or Iran or Hong Kong or Macau or Nepal or Bhutan or Democratic People’s Republic
of Korea (DPRK) shall acquire immovable property, other than on lease not exceeding
five years, without prior approval of the Reserve Bank.
5. Purchase/ sale of Immovable Property by Foreign Embassies/ Diplomats/ Consulate
Generals:-
A Foreign Embassy/ Diplomat/ Consulate General may purchase/ sell immovable property
in India other than agricultural land/ plantation property/ farm house provided (i) clearance
from Government of India, Ministry of External Affairs is obtained for such purchase/ sale,
and (ii) the consideration for acquisition of immovable property in India is paid out of funds
remitted from abroad through banking channels.
6. Joint acquisition by the spouse of an NRI or an OCI:-
A person resident outside India, not being a Non-Resident Indian or an Overseas Citizen
of India, who is a spouse of a Non-Resident Indian or an Overseas Citizen of India may

acquire one immovable property (other than agricultural land/ farm house/ plantation
property), jointly with his/ her NRI/ OCI spouse.
Provided that
(i) The consideration for transfer, shall be made out of (i) funds received in India through
banking channels by way of inward remittance from any place outside India or (ii) funds
held in any non-resident account maintained in accordance with the provisions of the Act
and the regulations made by the Reserve Bank;
(ii) No payment for any transfer of immovable property shall be made either by traveler’s
cheque or by foreign currency notes or by any other mode other than those specifically
permitted under this clause;
(iii) Provided that the marriage has been registered and subsisted for a continuous period of
not less than two years immediately preceding the acquisition of such property;
(iv) Provided further that the non-resident spouse is not otherwise prohibited from such
acquisition.
7. Acquisition by a Long-Term Visa holder:-
A person being a citizen of Afghanistan, Bangladesh or Pakistan belonging to minority
communities in those countries, namely, Hindus, Sikhs, Buddhists, Jains, Parsis and
Christians who is residing in India and has been granted a Long Term Visa (LTV) by the
Central Government may purchase only one residential immovable property in India as
dwelling unit for self-occupation and only one immovable property for carrying out self-
employment subject to the following conditions:
(a) the property should not be located in and around restricted/ protected areas so notified
by the Central Government and cantonment areas;
(b) the person submits a declaration to the Revenue Authority of the district where the
property is located, specifying the source of funds and that he/ she is residing in India on
LTV;
(c) the registration documents of the property should mention the nationality and the fact that
such person is on LTV;
(d) the property of such person may be attached/ confiscated in the event of his/ her
indulgence in anti-India activities;
(e) a copy of the documents of the purchased property shall be submitted to the Deputy
Commissioner of Police (DCP)/ Foreigners Registration Office (FRO)/ Foreigners
Regional Registration Office (FRRO) concerned and to the Ministry of Home Affairs
(Foreigners Division);
(f) such person shall be eligible to sell the property only after acquiring Indian citizenship.
However, transfer of the property before acquiring Indian citizenship shall require prior
approval of DCP/FRO/FRRO concerned.

8. Repatriation of sale proceeds:-

(a) A person referred to in sub-section (5) of Section 6 of the Act, or his successor shall not,
except with the general or specific permission of the Reserve Bank, repatriate outside
India the sale proceeds of any immovable property referred to in that sub-section;
(b) In the event of sale of immovable property other than agricultural land/ farm house/
plantation property in India by an NRI or an OCI, the authorised dealer may allow
repatriation of the sale proceeds outside India, provided the following conditions are
satisfied, namely:
(i) the immovable property was acquired by the seller in accordance with the provisions
of the foreign exchange law in force at the time of his acquisition or the provisions
of these Regulations;
(ii) the amount for acquisition of the immovable property was paid in foreign exchange
received through banking channels or out of funds held in Foreign Currency Non-
Resident Account or out of funds held in Non-Resident External account;
(iii) in the case of residential property, the repatriation of sale proceeds is restricted to
not more than two such properties.
(c) In the event of failure in repayment of external commercial borrowing availed by a person
resident in India under the provisions of the Foreign Exchange Management (Borrowing
or Lending in Foreign Exchange) Regulations, 2000, as amended from time to time, a
bank which is an authorised dealer may permit the overseas lender or the security trustee
(in whose favour the charge on immovable property has been created to secure the ECB)
to sell the immovable property on which the said loan has been secured only to a (by the)
person resident in India and to repatriate the sale proceeds towards outstanding dues in
respect of the said loan and not any other loan.
9. Prohibition on acquisition or transfer of immovable property in India by citizens of
certain countries:-
No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran,
Nepal, Bhutan, Hong Kong or Macau or Democratic People’s Republic of Korea (DPRK)
without prior permission of the Reserve Bank shall acquire or transfer immovable property
in India, other than lease, not exceeding five years.
Provided this prohibition shall not apply to an OCI.
Explanation: For the purpose of this regulation the term “citizen” shall include natural
persons and legal entities.
10. Prohibition on transfer of immovable property in India:-
Save as otherwise provided in the Act or Regulations, no person resident outside India
shall transfer any immovable property in India:-
Provided that

(i) The Reserve Bank may, for sufficient reasons, permit the transfer, subject to such
conditions as may be considered necessary.
(ii) A bank which is an authorised dealer may, subject to the directions issued by the Reserve
Bank in this behalf, permit a person resident in India or on behalf of such person to create
charge on his immovable property in India in favour an overseas lender or security trustee,
to secure an external commercial borrowing availed under the provisions of the Foreign
Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000,
as amended from time to time.
(iii) An Authorized Dealer in India being the Indian correspondent of an overseas lender may,
subject to the directions issued by the Reserve Bank in this regard, create a mortgage on
an immovable property in India owned by an NRI or an OCI, being a director of a company
outside India, for a loan to be availed by the company from the said overseas lender.
Provided
(a) the funds shall be used by the borrowing company only for its core business
purposes overseas;
(b) in case of invocation of charge, the Indian bank shall sell the immovable property to
an eligible acquirer and remit the sale proceeds to the overseas lender.
(iv) A person resident outside India who has acquired any immovable property in India in
accordance with foreign exchange laws in force at the time of such acquisition or with the
general or specific permission of the Reserve Bank may transfer such property to a person
resident in India provided the transaction takes place through banking channels in India
and provided that the resident is not otherwise prohibited from such acquisition.
11. Miscellaneous:-
Any transaction involving acquisition or transfer of immovable property under these
regulations shall be undertaken:
(a) through banking channels in India;
(b) subject to payment of applicable taxes and other duties/ levies in India.
12. Saving:-
Any existing holding of immovable property in India by a person resident outside India
made in accordance with the policy in existence at the time of such acquisition would not
require any modifications to confirm to these regulations.
w.e.f. 19.04.2018

“(2) If the Director or other authority specified under sub-section (1) is of the opinion, on the basis of
information or material in his possession, that the provisions of any other law for the time being in
force are contravened, then the Director or such other authority shall share the information with the
concerned agency for necessary action.”;


1570(E) , dated 15 th May , 2017
provisions of clause (a) to clause (d) of section 2 of the Code relating to voluntar y
force.
debtors, namely :-
25th October 2017
force.
for its consideration and approval as laid down under section 30 & 31 of the Insolvenc y

in clause (26), for the words "any person", the words "resolution applicant" shall be
substituted.
Board:

(2) The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
Vide Notification dated 17 th August, 2018, Ministry of Law and Justice here by
amended the Insolvency and Bankruptcy Code, 2016 through the enforcement
of the Insolvency and Bankruptcy Code (Second Amendment) Act, 2018.With
the enforcement of this Amendment Act, the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2018 have been repealed. This amendment Act is
effective from 6th June, 2018.
(1) In section 3(12), in the Insolvency and Bankruptcy Code, 2016(Principal Act), for the word
"repaid", the word "paid" shall be substituted.
(2) In section 5 of the principal Act,
(i) after clause (5) i.e., after the definition of Corporate applicant, the following clause
'(5A) "corporate guarantor" means a corporate person who is the surety in a contract
of guarantee to a corporate debtor;’
(ii) in clause (8) prescribing the term “Financial Debt” in the Code, in sub-clause (f), the
following Explanation shall be inserted, namely:—
'Explanation.—For the purposes of this sub-clause,—
(i) any amount raised from an allottee under a real estate project shall be deemed to be
an amount having the commercial effect of a borrowing; and
(ii) the expressions, "allottee" and "real estate project" shall have the meanings
respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate
(Regulation and Development) Act, 2016;
(iii) in clause (12) i.e., as to the “Insolvency commencement date”, the following proviso
"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;";
(iv) after clause (24), the following clause shall be inserted, namely:—
'(24A) "related party", in relation to an individual, means—

(a) a person who is a relative of the individual or a relative of the spouse of the
individual;
(b) a partner of a limited liability partnership, or a limited liability partnership or a
partnership firm, in which the individual is a partner;
(c) a person who is a trustee of a trust in which the beneficiary of the trust includes
the individual, or the terms of the trust confers a power on the trustee which may
be exercised for the benefit of the individual;
(d) a private company in which the individual is a director and holds along with his
relatives, more than two per cent. of its share capital;
(e) a public company in which the individual is a director and holds along with
relatives, more than two per cent. of its paid-up share capital;
(f) a body corporate whose board of directors, managing director or manager, in
the ordinary course of business, acts on the advice, directions or instructions of
the individual;
(g) a limited liability partnership or a partnership firm whose partners or employees
in the ordinary course of business, act on the advice, directions or instructions
of the individual;
(h) a person on whose advice, directions or instructions, the individual is
accustomed to act;
(i) a company, where the individual or the individual along with its related party,
own more than fifty per cent. of the share capital of the company or controls the
appointment of the board of directors of the company.
Explanation.—For the purposes of this clause,—
(a) "relative", with reference to any person, means anyone who is related to another,
in the following manner, namely:—
(i) members of a Hindu Undivided Family,
(ii) husband,
(iii) wife,
(iv) father,
(v) mother,
(vi) son,
(vii) daughter,
(viii) son's daughter and son,
(ix) daughter's daughter and son,

(x) grandson's daughter and son,

(xi) granddaughter's daughter and son,
(xii) brother,
(xiii) sister,
(xiv) brother's son and daughter,
(xv) sister's son and daughter,
(xvi) father's father and mother,
(xvii) mother's father and mother,
(xviii)father's brother and sister,
(xvix)mother's brother and sister, and
(b) wherever the relation is that of a son, daughter, sister or brother, their spouses
shall also be included;'
(3) In section 7(1) of the principal Act which deals with the initiation of CIRP by financial
creditor, for the words "other financial creditors", the words "other financial creditors, or
any other person on behalf of the financial creditor, as may be notified by the Central
Government," shall be substituted.
(4) In section 8(2) of the principal Act which deals with the Insolvency resolution by
operational creditor, following are the amendments—
(i) in clause (a), for the words "if any, and", the words "if any, or" shall be substituted;
(ii) in clause (b), for the word "repayment", the word "payment" shall be substituted;
In the Explanation, for the word "repayment", the word "payment" shall be substituted.
(5) In section 9(3) of the principal Act, which states of the provision related to the filing of an
application for initiation of corporate insolvency resolution process by operational
creditor—
(i) in clause (c), for the words "by the corporate debtor; and", the words "by the corporate
debtor, if available;" shall be substituted;
(ii) for clause (d), the following clauses shall be substituted, namely:—
"(d) a copy of any record with information utility confirming that there is no payment
of an unpaid operational debt by the corporate debtor, if available; and
(e) any other proof confirming that there is no payment of an unpaid operational
debt by the corporate debtor or such other information, as may be prescribed.";
(6) in section 9(5) of the principle Code which deals with the provision related to the filing of
an application for initiation of corporate insolvency resolution process by operational
creditor —

(a) in clause (i), in sub-clause (b), for the word "repayment", the word "payment" shall be
substituted;
(b) in clause (ii), in sub-clause (b), for the word "repayment", the word "payment" shall be
substituted.
(7) Section 10 (3) of the principal Act, deals with the initiation of corporate insolvency
resolution process by corporate applicant, shall be substituted with the following-
"(3) The corporate applicant shall, along with the application, furnish—
(a) the information relating to its books of account and such other documents for such
period as may be specified;
(b) the information relating to the resolution professional proposed to be appointed as
an interim resolution professional; and
(c) the special resolution passed by shareholders of the corporate debtor or the
resolution passed by at least three-fourth of the total number of partners of the
corporate debtor, as the case may be, approving filing of the application.";
(8) In Section 10 (4) related to the initiation of corporate insolvency resolution process by
corporate applicant, following amendments have been made—
(i) in clause (a), after the words "if it is complete", the words "and no disciplinary proceeding
is pending against the proposed resolution professional" shall be inserted;
(ii) in clause (b), after the words "if it is incomplete", the words "or any disciplinary proceeding
is pending against the proposed resolution professional" shall be inserted.
(9) In section 12(2) of the principal Act, related to the time limit for completion of corporate
insolvency resolution process, for the word "seventy-five", the word "sixty-six" shall be
substituted.
(10) After section 12 of the principal Act, the section 12A shall be inserted-
"12A. Withdrawal of application admitted under section 7, 9, or 10: 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 ninety per cent. voting
share of the committee of creditors, in such manner as may be specified."
(11) Section 14(3) of the principal Act which deals with the moratorium, shall be substituted ,
with the following—
"(3) The provisions of sub-section (1) shall not apply to—
(a) such transaction as may be notified by the Central Government in consultation with any
financial regulator;
(b) a surety in a contract of guarantee to a corporate debtor.".

(12) In section 15(1)(c) of the principal Act which deals with the provisions related to the public
announcement, for the word "claims", the words "claims, as may be specified" shall be
substituted.
(13) In section 16(5) of the principal Act which is related to the appointment and tenure of
interim resolution professional, for the words "shall not exceed thirty days from date of his
appointment", the words and figures "shall continue till the date of appointment of the
resolution professional under section 22" shall be substituted.
(14) In section 17(2)(d) of the principal Act which deals with the management of affairs of
corporate debtor by IRP, for the words "may be specified.", the words "may be specified;
and" shall be substituted;
(15) After section 17(2)(d) which deals with the management of affairs of corporate debtor by
IRP, the following section 17(2)(e), shall be inserted,
"(e) be responsible for complying with the requirements under any law for the time being in
force on behalf of the corporate debtor."
(16) In section 21 of the principal Act, which deals with the committee of creditors, following
are the relevant amendments —
(i) in sub-section (2), — in the proviso, for the words "related party to whom a corporate
debtor owes a financial debt", the words, brackets, figures and letter "financial creditor or
the authorised representative of the financial creditor referred to in sub-section (6) or sub-
section (6A) or sub-section (5) of section 24, if it is a related party of the corporate debtor,"
(ii) after this proviso under sub-section (2), the following proviso is inserted-
"Provided further that the first proviso shall not apply to a financial creditor, regulated
by a financial sector regulator, if it is a related party of the corporate debtor solely on
account of conversion or substitution of debt into equity shares or instruments
convertible into equity shares, prior to the insolvency commencement date.";
(iii) Insertion of new sub-section 6(A) & 6(B) after sub-section (6)-
"(6A) Where a financial debt—
(a) is in the form of securities or deposits and the terms of the financial debt provide for
appointment of a trustee or agent to act as authorised representative for all the
financial creditors, such trustee or agent shall act on behalf of such financial
creditors;
(b) is owed to a class of creditors exceeding the number as maybe specified, other than
the creditors covered under clause (a) or sub-section (6), the interim resolution
professional shall make an application to the Adjudicating Authority along with the
list of all financial creditors, containing the name of an insolvency professional, other
than the interim resolution professional, to act as their authorised representative who

shall be appointed by the Adjudicating Authority prior to the first meeting of the
committee of creditors;
(c) is represented by a guardian, executor or administrator, such person shall act as
authorised representative on behalf of such financial creditors,
and such authorised representative under clause (a) or clause (b) or clause (c) shall
attend the meetings of the committee of creditors, and vote on behalf of each
financial creditor to the extent of his voting share.
(6B) The remuneration payable to the authorised representative—
(i) under clauses (a) and (c) of sub-section (6A), if any, shall be as per the terms of the
financial debt or the relevant documentation; and
(ii) under clause (b) of sub-section (6A) shall be as specified which shall form part of
the insolvency resolution process costs.";
(iii) (iv) for sub-sections (7) and (8), the following sub-sections shall be substituted,
namely:—
"(7) The Board may specify the manner of voting and the determining of the voting
share in respect of financial debts covered under sub-sections (6) and (6A).
(8) Save as otherwise provided in this Code, all decisions of the committee of
creditors shall be taken by a vote of not less than fifty-one per cent. of voting
share of the financial creditors:
Provided that where a corporate debtor does not have any financial creditors,
the committee of creditors shall be constituted and shall comprise of such
persons to exercise such functions in such manner as may be specified."
(17) In section 22(2) of the principal Act, for the word, "seventy-five", the word "sixty-six" shall
be substituted;
(18) In section 23(1) of the principal Act, the following proviso shall be inserted-
"Provided that the resolution professional shall, if the resolution plan under sub-section (6) of
section 30 has been submitted, continue to manage the operations of the corporate debtor after
the expiry of the corporate insolvency resolution process period until an order is passed by the
Adjudicating Authority under section 31."
(19) In section 24(3) of the principal Act, in clause (a), for the words "Committee of creditors",
the words, brackets, figures and letter "committee of creditors, including the authorised
representatives referred to in sub-sections (6) and (6A) of section 21 and sub-section (5)"
(20) Insertion of new section 25A which deals with the Rights and duties of authorised
representative of financial creditors.

'25A. (1) Right to participate and Vote on behalf of FC: The authorised
representative(AR) under section 21(6) & 21(6A) or section 24(5) shall have the right to
participate and vote in meetings of the committee of creditors on behalf of the financial
creditor(FC) he represents in accordance with the prior voting instructions of such creditors
obtained through physical or electronic means.
(2) Duty of AR to circulate agenda & minutes to FC: It shall be the duty of the
authorised representative to circulate the agenda and minutes of the meeting of the
committee of creditors to the financial creditor he represents.
(3) AR to act on instruction of FC: The authorised representative shall not act against the
interest of the financial creditor he represents and shall always act in accordance with
their prior instructions:
Provided that if the authorised representative represents several financial creditors, then
he shall cast his vote in respect of each financial creditor in accordance with instructions
received from each financial creditor, to the extent of his voting share:
Provided further that if any financial creditor does not give prior instructions through
physical or electronic means, the authorised representative shall abstain from voting on
behalf of such creditor.
(4) To ensure recording of instruction by IRP/RP: The authorised representative shall file
with the committee of creditors any instructions received by way of physical or electronic
means, from the financial creditor he represents, for voting in accordance therewith, to
ensure that the appropriate voting instructions of the financial creditor he represents is
correctly recorded by the interim resolution professional or resolution professional, as the
case may be.
(21) Amendment in section 27(2) of the principal Act which deals with the Replacement of
Resolution Professional (RP) by Committee of creditors(CoC): This sub-section is
substituted with the following provision-
“The committee of creditors may, at a meeting, by a vote of sixty-six per cent. of voting shares,
resolve to replace the resolution professional appointed under section 22 with another
resolution professional, subject to a written consent from the proposed resolution professional
in the specified form."
(22) Amendment in section 28(3) of the principal Act which deals with the approval of committee
of creditors for certain actions , for the word, "seventy-five", the word "sixty-six" shall be
substituted.
(23) Amendment in Section 29 A, dealt with the persons not eligible to be resolution applicant
came into enforcement on 23rd day of November 2017 through the enforcement of
Insolvency and Bankruptcy Code (Amendment) Act, 2018 vide notification dated 19th
January, 2018.
(i) in clause (c),—

(a) for the words "has an account,", the words "at the time of submission of the
resolution plan has an account," shall be substituted;
(b) after the words and figures "the Banking Regulation Act, 1949", the words "or the
guidelines of a financial sector regulator issued under any other law for the time
being in force," shall be inserted;
(c) after the proviso, the following shall be inserted, namely:—'Provided further that
nothing in this clause shall apply to a resolution applicant where such applicant is a
financial entity and is not a related party to the corporate debtor.
The expression "related party" here shall not include a financial entity, regulated by
a financial sector regulator, if it is a financial creditor of the corporate debtor and is a
related party of the corporate debtor solely on account of conversion or substitution
of debt into equity shares or instruments convertible into equity shares, prior to the
insolvency commencement date.
For the purposes of this clause, where a resolution applicant has an account, or an
account of a corporate debtor under the management or control of such person or of
whom such person is a promoter, classified as non-performing asset and such
account was acquired pursuant to a prior resolution plan approved under this Code,
then, the provisions of this clause shall not apply to such resolution applicant for a
period of three years from the date of approval of such resolution plan by the
Adjudicating Authority under this Code;';
(ii) for clause (d), the following clause shall be substituted, namely:—
"(d) has been convicted for any offence punishable with imprisonment—
(i) for two years or more under any Act specified under the Twelfth Schedule; or
(ii) for seven years or more under any other law for the time being in force:
Provided that this clause shall not apply to a person after the expiry of a period
of two years from the date of his release from imprisonment:
Provided further that this clause shall not apply in relation to a c onnected person
referred to in clause (iii) of Explanation I;"
(iii) in clause (e), the following proviso shall be inserted, namely:—
"Provided that this clause shall not apply in relation to a connected person referred
to in clause (iii) of Explanation I;";
(iv) in clause (g), the following proviso shall be inserted, namely:—
"Provided that this clause shall not apply if a preferential transaction, undervalued
transaction, extortionate credit transaction or fraudulent transaction has taken place
prior to the acquisition of the corporate debtor by the resolution applicant pursuant to
a resolution plan approved under this Code or pursuant to a scheme or plan approved
by a financial sector regulator or a court, and such resolution applicant has not

otherwise contributed to the preferential transaction, undervalued transaction,

extortionate credit transaction or fraudulent transaction;"
(v) in clause (h),—
(a) for the words "an enforceable guarantee", the words "a guarantee" shall be
substituted;
(b) after the words "under this Code", the words "and such guarantee has been invoked
by the creditor and remains unpaid in full or part" shall be inserted;
(vi) in clause (i), for the words "has been", the word "is" shall be substituted;
(vii) the Explanation occurring after clause (j) shall be numbered as Explanation I, and
in Explanation I as so numbered, for the proviso, the following provisos shall be
'Provided that nothing in clause (iii) of Explanation I shall apply to a resolution
applicant where such applicant is a financial entity and is not a related party of the
corporate debtor:
Provided further that the expression "related party" shall not include a financial entity,
regulated by a financial sector regulator, if it is a financial creditor of the corporate
debtor and is a related party of the corporate debtor solely on account of conversion
or substitution of debt into equity shares or instruments convertible into equity shares,
prior to the insolvency commencement date;';
(viii) after Explanation I as so numbered, the following Explanation shall be inserted,
namely:—
'Explanation II—For the purposes of this section, "financial entity" shall mean the
following entities which meet such criteria or conditions as the Central Government
may, in consultation with the financial sector regulator, notify in this behalf, namely:—
(a) a scheduled bank;
(b) any entity regulated by a foreign central bank or a securities market regulator or
other financial sector regulator of a jurisdiction outside India which jurisdiction is
compliant with the Financial Action Task Force Standards and is a signatory to the
International Organisation of Securities Commissions Multilateral Memorandum of
Understanding;
(c) any investment vehicle, registered foreign institutional investor, registered foreign
portfolio investor or a foreign venture capital investor, where the terms shall have
the meaning assigned to them in regulation 2 of the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident Outside India) Regulations,
2017 made under the Foreign Exchange Management Act, 1999.

(d) an asset reconstruction company registered with the Reserve Bank of India under
section 3 of the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002;
(e) an Alternate Investment Fund registered with the Securities and Exchange Board of
India;
(f) such categories of persons as may be notified by the Central Government.'.
(24) Amendment in section 30: The said section deals with the submission of resolution plan.
Following are the amendments-
(i) in sub-section (1), after the words "resolution plan", the words, figures and letter "along
with an affidavit stating that he is eligible under section 29A" shall be inserted;
(a) in clauses (a) and (b), for the word "repayment" at both the places where it
occurs, the word "payment" shall be substituted;
(b) after clause (f), the following Explanation shall be inserted, namely:—
"Explanation.—For the purposes of clause (e), if any approval of shareholders is required
under the Companies Act, 2013 or any other law for the time being in force for the
implementation of actions under the resolution plan, such approval shall be deemed to
have been given and it shall not be a contravention of that Act or law.";
(a) for the word "seventy-five", the word "sixty-six" shall be substituted;
(b) after the third proviso, the following proviso shall be inserted,
namely:—
"Provided also that the eligibility criteria in section 29A as amended by the Insolvency and
Bankruptcy Code (Amendment) Ordinance, 2018 shall apply to the resolution applicant
who has not submitted resolution plan as on the date of commencement of the Insolvency
and Bankruptcy Code (Amendment) Ordinance, 2018."
(25) Amendment in section 31 of the principal Act, which deals with the approval of
resolution plan—
(a) in sub-section (1), the following proviso shall be inserted, namely:—
"Provided that the Adjudicating Authority shall, before passing an order for approval
of resolution plan under this sub-section, satisfy that the resolution plan has
provisions for its effective implementation."
(b) after sub-section (3), the following sub-section shall be inserted namely:—
"(4) The resolution applicant shall, pursuant to the resolution plan approved under
sub-section (1), obtain the necessary approval required under any law for the time

being in force within a period of one year from the date of approval of the resolution
plan by the Adjudicating Authority under sub-section (1) or within such period as
provided for in such law, whichever is later:
Provided that where the resolution plan contains a provision for combination, as referred
to in section 5 of the Competition Act, 2002, the resolution applicant shall obtain the
approval of the Competition Commission of India under that Act prior to the approval of
such resolution plan by the committee of creditors."
(26) Amendment made in section 33(2) of the principal Act. This section deals with the initiation
of liquidation process. Amendments made is that after the words "decision of the committee
of creditors", the words "approved by not less than sixty-six per cent. of the voting share"
shall be inserted.
(27) In section 34 of the principal Act, which states of appointment of liquidator and fee to be paid,
following amendments are made—
a. in sub-section (1), for the words and figures "Chapter II shall", the words and figures
"Chapter II shall, subject to submission of a written consent by the resolution professional
to the Adjudicatory Authority in specified form," shall be substituted;
b. in sub-section (4),—
i. in clause (b), for the words "in writing", the words "in writing; or" shall be substituted;
ii. after clause (b), the following clause shall be inserted, namely:—
"(c) the resolution professional fails to submit written consent under sub-section (1).";
c. in sub-section (5), for the word, brackets and letter "clause (a)", the words, brackets and
letters "clauses (a) and (c)" shall be substituted;
d. in sub-section (6), after the words "another insolvency professional", the words "along
with written consent from the insolvency professional in the specified form," shall be
inserted.
(28) In section 42 of the principal Act, which deals with the provisions related to the appeal
against the decision of liquidator, after the words "of the liquidator", the words "accepting
or" shall be inserted.
(29) In section 45(1) of the principal Act, which deals with the Avoidance of undervalued
transactions, the words and figures "of section 43" shall be omitted.
Amendment in Regulation – 3 of the Insolvency and Bankruptcy Board of India (Insolvency
Resolution Process for Corporate Persons) Regulations, 2016 contained on Page no. 6.25 of
module 3 (New) / Not covered in the Study material of Old Scheme
Eligibility for resolution professional.
3.(1)An insolvency professional shall be eligible to be appointed as a resolution professional for a
corporate insolvency resolution process of a corporate debtor if he, and all partners and directors of

the insolvency professional entity of which he is a partner or director, are independent of the
corporate debtor.
Explanation– A person shall be considered independent of the corporate debtor, if he:
(a) is eligible to be appointed as an independent director on the board of the corporate debtor under
section 149 of the Companies Act, 2013 (18 of 2013), where the corporate debtor is a company;
(i) of a firm of auditors or *secretarial auditors in practice or cost auditors of the corporate debtor; or
(ii) of a legal or a consulting firm, that has or had any transaction with the corporate debtor amounting
to **five per cent or more of the gross turnover of such firm, in the last three financial years.
***(1A) Where the committee decides to appoint the interim resolution professional as resolution
professional or replace the interim resolution professional under section 22 or replace the resolution
professional under section 27, it shall obtain the written consent of the proposed resolution
professional in Form AA of the Schedule.
(2) A resolution professional shall make disclosures at the time of his appointment and thereafter in
accordance with the Code of Conduct.
(3) A resolution professional, who is a director or a partner of an insolvency professional entity, shall
not continue as a resolution professional in a corporate insolvency resolution process if the
insolvency professional entity or any other partner or director of such insolvency professional enti ty
represents any of the other stakeholders in the same corporate insolvency resolution process.
PART II – QUESTION AND ANSWERS
M ultiple Choice Questions

1. All the three directors of Cygnus Wires Limited generally remain out of India for developing
connections and securing business opportunities on behalf of the company. However, the
company must strictly follow the legal requirement that at least one of its directors must
stay for the specified statutory period in India. To reckon as ‘resident director’ for the
financial year 2018-19, advise the company as to which period spent in India shall count
towards statutory period.
(a) Period spent in India during the previous financial year 2017-18.
(b) Total of fifty percent each of the period spent in India during the financial year 2016-
17 and 2017-18.
(c) Period spent in India during the financial year 2018-19.
(d) Total of fifty percent each of the period spent in India during the financial year 2017-
18 and 2018-19.

2. Mr. Roop was appointed as an Additional Director of XYZ Limited in July, 2018.
Immediately after his appointment, on behalf of the Company he entered into an agreement
with NY Private Limited for supplies of raw material. In the ensuing meeting, he was
regularized as a Director. He signed Contract with Laxmi vendors. At the end of the
December 2018, management came to know that his appointment was not valid as he was
disqualified to act as a Director of any Company. He signed one more agreement in
January 2019 with Saraswati vendors. In such scenario, what will be the status of
contract/agreements he signed on behalf of XYZ Limited?
(a) All agreement/ contracts will become invalid;
(b) All agreement/ contracts will be valid;
(c) All agreement/ contracts before December 2018 will be valid;
(d) All agreement/ contracts before December 2018 will be invalid.
3. Mr. Nagar a director, decided to resign from MGT Private Limited due to preoccupation.
He sent his resignation letter dated 12 th June, 2018 to the Company stating that he will
resign w.e.f. 15th June, 2018. Due to non receipt of any communication from the Company
he dropped a mail on 17 th June, 2018, to confirm whether Company has received his letter.
Finally Company received his letter on 25 th June, 2018. In this case, from which date his
resignation will be effective?
(a) 12th June, 2018
(b) 15th June, 2018
(c) 17th June, 2018
(d) 25th June, 2018
4. Mr. Raman, is appointed as valuer in April, 2018 in ABC Ltd. He undertook the valuation
of the assets of the company in 2018. In case, Mr. Raman becom es interested in any
property, stock etc. of the company, he may not be eligible to undertake valuation in such
property of the company till:
(a) 2019
(b) 2020
(c) 2021
(d) He will never be appointed as Registered Valuer of the company.
5. Under the IBC, The resolution plan shall be approved by the Committee of Creditors by a
vote of not less than---------------percent of voting share of the financial creditors.
(a) 51%
(b) 66%
(c) 75%

(d) 95%
6. Who is empowered to designate court of session as special courts for trial of offence of
money laundering?
(a) Central government in consultation with the Chief Justice of Supreme Court
(b) High court in consultation with the Chief Justice of Supreme Court
(c) Central government in consultation with the Chief Justice of Session Court
(d) Central government in consultation with the Chief Justice of High Court
Part I: Corporate Laws
7. Mr. X, a Director of Sunrise Limited, was appointed on 1 st April, 2016, one of the terms of
appointment was that in the absence of adequacy of profits or if the company had no profits
in a particular year, he will be paid remuneration in accordance with Schedule V. The
company suffered heavy losses during the financial year ended 31 st March, 2018. The
company was not in a position to pay any remuneration, but he was paid ` 50 Lakhs for
the year, as paid to other directors. The effective capital of the company is ` 150 crores.
Referring to provisions of the Companies Act, 2013, examine the validity of the above
payment of remuneration to Mr. X.
8. Rudraksh Ltd., a public company, was incorporated for supply of solar panels for the
emerging project of government for construction of highways. However, the said project
did not turn up for two years due to some legal implications. During the said period, no any
significant accounting transaction was made and so the company did not file financial
statements and annual returns during the last two financial years. In the meantime, the
Board proposed for Mr. Ram & Mr. Rahim to be appointed as an Independent Directors for
their independent and expertise knowledge and experience for better working and
improvement of financial position of the company.
Evaluate in the light of the given facts, the following legal position:
(i) Comment upon the accountability for non- filing of financial statements and annual
returns for last two financial years of the Rudraksh Ltd.
(ii) Nature of the proposal for an appointment of Mr. Ram & Mr. Rahim in the Rudraksh
Ltd. for improvement of the company.
9. The Board of Directors of IBC Consultants Limited, registered in Maharashtra, proposes to
hold the next board meeting in the month of May, 2019.They seek your advice in respect
of the following matters:
(i) Can the board meeting be held in Delhi through video conferencing, when all the
directors of the company reside at Maharashtra.
(ii) Is it necessary that the notice of the board meeting should specify the nature of

business to be transacted?
10. The Board of Directors of APCO Limited a listed company for carrying out the valuation of
the immovable properties standing in the name of the company as required under the
provisions of the Companies Act, 2013 proposes to appoint Mr. Mehta, an individual as the
valuer. Referring to the provisions of the Companies Act, 2013 read with the Companies
(Registered Valuers and Valuation) Rules, 2017, the Audit Committee is of the opinion that
the Board of Directors does not have the right to appoint the valuer. Decide.
11. Decide the liability of the person for commission of the act during the course of inspection,
inquiry or investigation under the Companies Act, 2013:
(i) A person who is required to make statement during the course of investigation
pending against its company, is a party to the manipulation of documents related to
the transfer of securities and naming of holders in the register of members by the
company.
(ii) An employee of the company publicized among his social networking of sound
financial position of his organization in order to incite them to purchase the shares of
its company. In actuality, the company was running in loss.
12. Board of Directors of the ABC Ltd., a listed company, in their meeting passed the resolution
for an appointment of Company Secretary and the Compliance Officer for the guidance to
the Board with regards to their duties, responsibilities and powers and the conduct of the
affairs of the company. Draft the Resolution for an appointment of Mr. Nirman as Company
Secretary and Compliance Officer of the company.
13. (i) Mr. RG is a practicing Chartered Accountant and having 15 years of professional
experience. Can he be appointed as Technical Member of National Company Law
Appellate Tribunal as per section 411 of the Companies Act, 2013? Will your answer
be different, if he is appointed as Technical Member of National Company Law
Tribunal?
(ii) IJK Limited was wound up with effect from 15 th March 2018 by an order of the Court.
Mr. A, who ceased to be a member of the company from 1 st June 2017, has received
a notice from the liquidator that he should deposit a sum of ` 5000 as his contribution
towards the liability on the shares previously held by him. In this context explain
whether Mr. A can be called as a contributory, whether he can be made liable and
whether there is any limitation on his liability.
14. M/s DJ Limited, a listed company, as per the audited financial statements as on 31st March,
2018 is having issued and paid-up equity share capital comprising of 10 lakhs shares of
` 10 each and issued and paid up preference share capital of 5 Lakhs shares of ` 10 each
respectively. The members of the company after complying with the provisions of section
169 of the Companies Act, 2013 removed one Mr. Satish from the directorship of the

company on 1st August 2018 before the completion of his term of office. Mr. Satish is also
one of the members of the company holding 110000 fully paid-up equity shares. Mr. Satish
has alleged oppression on his removal and has moved the jurisdictional Honourable
National Company Law Tribunal (NCLT) under section 241 read with section 244 of the
Companies Act, 2013. The Board of Directors of the company is of the opinion that the
application is not maintainable as per the provisions of Section 244 of the Companies Act,
2013. Decide.
Also, state if any other recourse that is available with Mr. Satish under the provisions of
the Companies Act, 2013.
15. DEJY Company Limited incorporated in Singapore desires to establish a place of business
at Mumbai. You being a practising Chartered Accountant havebeen appointed by the
company as a liaison officer, for compliance of legal formalities on behalf of the company.
Examining the provisions of the Companies Act, 2013, state the documents you are
required to furnish on behalf of the company, on the establishment of a place of business
at Mumbai.
16. (i) Securities and Exchange Board of India (SEBI) has undertaken inspection of books
of accounts and records of LR Ltd., a listed public company. Specify the measures
which may be taken by SEBI under the Securities and Exchange Board of India Act,
1992 to protect the interest of investors and securities market, on completion of such
inquiry.
(ii) Upon complaints been received by SEBI, regarding the listed securities of Blue Rock
Limited at the Guwahati Stock Exchange, SEBI has passed an order to delist the
securities of the company from the said stock exchange. Blue Rock Limited is
aggrieved by the order of the SEBI. Advise the company on the further step that the
company can take against the order of SEBI to delist the securities.
Part II: Economic Laws
17. The financial creditor, Mr. Raman, was an investor and a debenture holder of ‘Optionally
Convertible Debenture Bond (OPDB)’ payable on maturity, was issued by the M/s Asset
Ltd. (corporate debtor). The zero interest OCD bonds amounted to 2 crore matured in 2016.
The liability to redeem the debentures on maturity along with a redemption premium lay on
the debtor, which was not made. Mr. Raman filed the Corporate Insolvency resolution
process before the NCLT. Advise in the light of the given facts, the following situations:
(i) State whether Mr. Raman is eligible for filing of application for initiation of CIRP?
(ii) Do the redemption of debenture payable on the maturity date amounts to debt?
18. Answer the following with reference to the provisions of the FEMA, 1999-
(i) Mr. Bharat, a person resident in India can remit amount to his son Arjun residing in
USA, to buy immovable property there.

(ii) Mr. Raghav, a resident of India went to Australia for a business deal. He realised
foreign exchange for bearing expenses while staying there for the business purpose.
After maturing the deal, he returned back to India. Mr. Raghav was left with certain
unused foreign exchange. He retained the foreign exchange with him for future use.
19. (i) On what grounds the Reserve Bank of India can cancel a certificate of registration
granted to an Asset Reconstruction Company?
(ii) X is an association having registration to transfer the Foreign Contribution received
by it to another organization? Is the valid act of X? If yes, then what is the process
to do so? Is there any restriction on transfer of funds to other organisations?
20. (i) The Adjudicating Authority appointed under the Prevention of Money Laundering Act,
2002 issued an order attaching certain properties of XYZ Limited alleged to be
involved in money laundering for a specified period. The company aggrieved by the
order of the Adjudicating Authority seeks your advice about the remedy that is
available under the Act. Advise explaining the relevant provisions of the Prevention
of Money Laundering Act, 2002.
(ii) In 2016, Company Amar, food processor manufacturing unit entered into a joint
venture agreement with Company USHA, the largest manufacturer of Food
processors for supply of parts of mixer & grinder for manufacturing its latest model.
Both the companies are registered under the Companies Act 2013. Agreement
carries the term that all disputes shall be arbitrated in Mumbai. State the type of
arbitration agreement made between them.
Answers MCQs
1. (c)
2. (c)
3. (d)
4. (c)
5. (b)
6. (d)
Descriptive answers
7. Under Section II of Part II of Schedule V to the Companies Act, 2013, the remuneration
payable to managerial personnel is linked to the effective capital of the company.
According to section 197(3) of the Companies Act, 2013, where in any financial year during
the currency of tenure of a managerial person, a company has no profits or its profits are

inadequate, it may, pay remuneration to the managerial person not exceeding ` 120 Lakh
in the year in case the effective capital of the company is between `100 crore to ` 250
crore. However, the remuneration in excess of ` 120 Lakhs may be paid if the resolution
passed by the shareholders is a special resolution.
From the foregoing provisions contained in schedule V to the Companies Act, 2013 the
payment of ` 50 Lakh in the year as remuneration to Mr. X is valid in case he accepts it,
as under the said schedule he is entitled to a remuneration of ` 120 Lakh in the year and
his terms of appointment provide for payment of the remuneration as per schedule V.
8. (i) As per the stated facts, Rudraksh Ltd. is an inactive company as per the provision
given under the Companies Act, 2013. According to the section 455 of the Companies
Act, 2013, where a company is formed and registered under this Act for a future
project or to hold an asset or intellectual property and has no significant accounting
transaction, such a company or an inactive company (which has not been carrying on
any business or operation, or has not made any significant accounting transaction
during the last two financial years, or has not filed financial statements and annual
returns during the last two financial years;) may make an application to the Registrar
for obtaining the status of a dormant company. Since in the given case, Rudraksh
Ltd. has not filed financial statements or annual returns for 2 financial years
consecutively, the Registrar shall issue a notice to that effect and enter the name in
the register maintained for dormant companies.
(ii) As per section 149(6) read with Rule 4 of the Companies (Appointment and
Qualification of Directors) Rules, 2014, the public companies of prescribed class shall
require to appoint minimum 2 Independent directors. However, vide Notification
number G.S.R. 839(E) dated 5th July, 2017, an amendment was issued through the
Companies (Appointment and Qualification of Directors) Amendment Rules, 2017
inter-alia amending rule 4 of the Companies (Appointment and Qualification of
Directors) Rules, 2014. It is provided that an unlisted public company which is a joint
venture, a wholly owned subsidiary or a dormant company will not be required to
appoint Independent Directors. So, the proposal for appointment of Independent
Director (Mr. Ram & Mr. Rahim) is not necessitated.
9. (i) There is no provision in the Companies Act, 2013 under which the board meetings
must be held at any particular place. Therefore, there is no difficulty in holding the
board meeting at Delhi even if all the directors of the company reside at Maharashtra
and the registered office is situated at Maharashtra provided that the requirements
regarding the holding of a valid board meeting and the other provisions relating to the
signing of register of contracts, taking roll calls, etc. are complied with.
(ii) Section 173 (3) of the Companies Act, 2013 provides for the giving of notice of every
board meeting of not less than seven days to every director of the company. There is
no provision in the Act laying down the contents of the notice. Hence, it may be
construed that notice may be interpreted as intimation of the meeting and does not

necessarily include the sending of the Agenda of the meeting. However, considering
the importance of Board Meetings and the responsibilities placed on the directors for
decisions taken at the meetings, it is inevitable for them to be properly prepared and
informed about the items to be discussed at the Board Meetings.
The Agenda, setting out the business to be transacted at the Meeting, and Notes on
Agenda shall be given to the Directors at least seven days before the date of the
Meeting, unless the Articles prescribe a longer period as a matter of good secretarial
practice.
The articles of association of the company may make it mandatory to do so in almost
all cases.
10. Valuation by Registered Valuers (Section 247): According to the provisions of section
247 of the Companies Act, 2013 read with the Companies (Registered Valuers and
Valuation ) Rules, 2017, where a valuation is required to be made in respect of any
property, stocks, shares, debentures, securities or goodwill or any other assets (herein
referred to as the assets) or net worth of a company or its liabilities under the provision of
this Act, it shall be valued by a person having such qualifications and experience and
prescribed and appointed by the audit committee or in its absence by the Board of Directors
of that company.
Hence, in the given instance, proposal for appointment of Mr. Mehta as the valuer by the
Board of directors of APCO Ltd. is against the said provision. In fact, valuer shall be appointed
by the audit committee or in its absence by the Board of Directors of that company.
In view of above, the opinion of the Audit Committee is correct.
11. Section 229 of the Companies Act, 2013 states that where a person who is required to
provide an explanation or make a statement during the course of inspection, inquiry or
investigation, or an officer or other employee of a company or other body corporate which
is also under investigation,—
(a) destroys, mutilates or falsifies, or conceals or tampers or unauthorisedly removes, or
is a party to the destruction, mutilation or falsification or concealment or tampering or
unauthorised removal of, documents relating to the property, assets or affairs of the
company or the body corporate;
(b) makes, or is a party to the making of, a false entry in any document concerning the
company or body corporate; or
(c) provides an explanation which is false or which he knows to be false,
-he shall be punishable for fraud in the manner as provided in section 447.
As per the above provisions:

(i) With respect to this part of the question, the person shall be liable for fraud.
Since, in the given case, he is a party in the manipulation of documents relating
to the transfer of securities and in the register of members of the company which
is under investigation.
(ii) Employee shall not be liable here, as the said company in which he is an
employee, is not undergoing investigation. Secondly, the person purchasing the
shares can act with due diligence before purchasing shares rather fully relying
on the publicity made on social networking.
12. To consider the appointment of Mr. Nirman as Company Secretary and Compliance Officer
of ABC Ltd.:
“RESOLVED THAT pursuant to the provisions of section 203 of the Companies Act, 2013
read with Rule 8 of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014, approval of the Board be and is hereby given to appoint Mr.
Nirman as Whole Time Company Secretary of ABC listed company, with effect from 11 th
January 2019, to perform the duties which shall be performed by a Company Secretary
under the Companies Act, 2013 and other duties as assigned to him by the Board from
time to time.
“RESOLVED FURTHER that Mr. Nirman be and is hereby appointed as Compliance Officer
of the company as per the Regulation 6 of the SEBI (LODR) Regulations, 2015 with effect
from 11th January 2019.
13. (i) Qualifications of Chairperson and members of Appellate Tribunal [Section 411]
Section 411 of the Companies Act, 2013 prescribes the qualifications of the
chairperson and the members of the Appellate Tribunal.
According to section 411(3), a technical member shall be a person of proven ability,
integrity and standing having special knowledge and professional experience of not
less than twenty-five years in industrial finance, industrial management, industrial
reconstruction, investment and accountancy.".
Here, in the given case, Mr. RG is having professional experience of 15 years. Hence,
Mr. RG cannot be appointed as technical member of NCLAT.
However, as per section 409, Mr. RG is eligible to be appointed as technical member
of NCLT as he is meeting up the requirement by being into practice as a Chartered
Accountant, for fifteen years.
(ii) Contributory: According to section 285 of the Companies Act, 2013, as soon as may
be after the passing of a winding up order by the Tribunal, the Tribunal shall settle a
list of contributories.
While settling the list of contributories, the Tribunal shall include every person, who
is or has been a member, who shall be liable to contribute to the assets of the
company an amount sufficient for payment of the debts and liabilities and the costs,

charges and expenses of winding up, and for the adjustment of the rights of the
contributories among themselves.
Liability of the contributory: a person who has been a member shall not be liable
to contribute if he has ceased to be a member for the preceding one year or more
before the commencement of the winding up.
In the given case, M/s, IJK Ltd. was wound up on 15 th March 2018. Whereas Mr. A
ceased to be a member of the company from 1 st June, 2017. So, according to the
above provision, Mr. A will be a contributory and be liable to contribute as the time
period of one year from the commencement of winding up has not elapsed. So Mr. A
is liable to deposit ` 5000 (if any unpaid on the shares in respect of which he is liable
as member [Section 285 (3) (d)]) as his contribution towards the liability on the shares
previously held by him.
14. According to section 244(1) (a) of the Companies Act, 2013, the following members of a
company shall have the right to apply under section 241, namely:—
-in the case of a company having a share capital, not less than one hundred members
of the company or not less than one-tenth of the total number of its members, whichever
is less, or any member or members holding not less than one-tenth of the issued share
capital of the company, subject to the condition that the applicant or applicants has or have
paid all calls and other sums due on his or their shares.
However, the Tribunal may, on an application made to it in this behalf, waive all or any of
the requirements specified above so as to enable the members to apply under section 241.
In the instant case, the equity share capital of the company is ` 1 crore (10 lakh shares of
` 10 each) and preference share capital is ` 50 Lakh (5 lakh shares of ` 10 each). The
total issued and paid up share capital is ` 1.50 crore comprising of 15 lakh shares.
Mr. Satish is holding 110000 fully paid up equity shares. His holding is less than one-tenth
of the issued share capital of the company [1/10 th of 15 Lakh i.e. 150000 shares].
Hence, his application is not maintainable as per provisions of section 244 of the
Companies Act, 2013 and therefore the opinion of Board of directors is correct.
However, as per proviso to section 244(1), Mr. Satish may make an application to the
Tribunal in this behalf for the waiver of the above condition so that he may apply under
section 241.
15. Under section 380(1) of the Companies Act, 2013 every foreign company shall, within 30
days of the establishment of place of business in India, deliver to the Registrar for
registration of the following documents:
(a) a certified copy of the charter, statutes or memorandum and articles, of the company
or other instrument constituting or defining the constitution of the company. If the
instruments are not in the English language, a certified translation thereof in the
English language;

(b) the full address of the registered or principal office of the company;
(c) a list of the directors and secretary of the company containing such particulars as
may be prescribed;
In relation to the nature of particulars to be provided as above, the Companies
(Registration of Foreign Companies) Rules, 2014, provide that the list of directors and
secretary or equivalent (by whatever name called) of the foreign company shall
contain the following particulars, for each of the persons included in such list, namely:
(1) personal name and surname in full;
(2) any former name or names and surname or surnames in full;
(3) father’s name or mother’s name and spouse’s name;
(4) date of birth;
(5) residential address;
(6) nationality;
(7) if the present nationality is not the nationality of origin, his nationality of origin;
(8) passport Number, date of issue and country of issue; (if a person holds more
than one passport then details of all passports to be given)
(9) income-tax permanent account number (PAN), if applicable;
(10) occupation, if any;
(11) whether directorship in any other Indian company, (Director Identification
Number(DIN), Name and Corporate Identity Number (CIN) of the company in
case of holding directorship);
(12) other directorship or directorships held by him;
(13) Membership Number (for Secretary only); and
(14) e-mail ID.
(d) the name and address or the names and addresses of one or more persons resident
in India authorised to accept on behalf of the company service of process and any
notices or other documents required to be served on the company;
(e) the full address of the office of the company in India which is deemed to be its principal
place of business in India;
(f) particulars of opening and closing of a place of business in India on earlier occasion
or occasions;
(g) declaration that none of the directors of the company or the authorised representative
in India has ever been convicted or debarred from formation of companies and
management in India or abroad; and

(h) any other information as may be prescribed.

16. (i) As per section 11 (4) of the Securities and Exchange Board of India Act, 1992, the
Board may, by an order, for reasons to be recorded in writing, in the interest of
investors or securities market, take any of the following measures, either pending
investigation or inquiry or on completion of such investigation or inquiry, namely:—
1. suspend the trading of any security in a recognised stock exchange;
2. restrain persons from accessing the securities market and prohibit any person
associated with securities market to buy, sell or deal in securities;
3. suspend any office-bearer of any stock exchange or self-regulatory organization
from holding such position;
4. impound and retain the proceeds or securities in respect of any transaction
which is under investigation;
5. attach, after passing of an order on an application made for approval by the
Judicial Magistrate of the first class having jurisdiction, for a period not
exceeding one month, one or more bank account or accounts of any
intermediary or any person associated with the securities market in any manner
involved in violation of any of the provisions of this Act, or the rules or the
regulations made thereunder:
However only the bank account or accounts or any transaction entered therein,
so far as it relates to the proceeds actually involved in violation of any of the
provisions of this Act, or the rules or the regulations made thereunder shall be
allowed to be attached;
6. direct any intermediary or any person associated with the securities market in
any manner not to dispose of or alienate an asset forming part of any transaction
which is under investigation.
(ii) As per the facts of the case given in the question above, the aggrieved company, i.e.
Blue Rock Limited may appeal to the Securities Appellate Tribunal (‘SAT’) against the
decision of SEBI within 45 days of date from which the order has been passed, unless
further extension has been granted by SAT on reasonable grounds.
As per Section 23L, the Tribunal shall give an opportunity of being heard to the
respondent and may pass the order confirming, modifying or setting aside the
decision of SEBI.
SAT shall also send a copy of its order to every party to appeal and to the concerned
adjudicating officer. Also, the company, Blue Rock Limited should be assured that a
speedy decision shall be taken, since the Tribunal is required to dispose of in every
6 months from the date of receipt of appeal.

17. As per Section 5(7) of the Insolvency and Bankruptcy Code, 2016, 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.
Whereas the term Financial debt defined under Sec tion 5(8) means a debt along with
interest, if any, which is disbursed against the consideration for the time value of money
and includes any amount raised pursuant to the issue of bonds, notes, debentures, loan
stock or any similar instrument.
As per the facts, Mr. Raman, was an investor and a debenture holder of ‘Optionally
Convertible Debenture Bond (OPDB)’ issued by the Asset Ltd. With the debenture payable,
as on the maturity date with interest, it was disbursed against consideration for the time
value of the money. Thus, it can be said that debentures on maturity will come under that
purview of Section 5(8)(c). Since Mr. Raman is a person to whom a financial debt is owed,
he will come within the definition of Financial creditor. Being a debenture-holder and
shareholder of the company he, being a creditor is entitled to claim debt amount. Therefore,
as per section 7, Mr. Raman is entitled to file an application to initiate CIRP against the
M/s Asset Ltd.
18. (i) According to Regulations on Acquisition and Transfer of Immovable Property outside
India, a person resident in India may acquire immovable property outside India, jointly
with a relative who is a person resident outside India, provided there is no outflow of
funds from India.
In the instant case, Mr. Bharat wants to remit money to meet his obligation of 50% in
the immovable property in USA under joint ownership with his son Arjun. Hence, as
per the regulations, Mr. Bharat cannot remit amount to buy immovable property in
USA.
(ii) Period for surrender of received/ realised/ unspent/ unused foreign exchange
by Resident individuals [Regulation 5 of Foreign Exchange Management
(Realisation, repatriation and surrender of foreign exchange) Regulations,
2015]: A Person being an individual resident in India shall surrender the
received/realised/unspent/ unused foreign exchange whether in the form of currency
notes, coins and travellers cheques, etc. to an authorised person within a period of
180 days from the date of such receipt/realisation/purchase/acquisition or date of his
return to India, as the case may be. Retention of unused foreign exchange by Mr.
Raghav is against the Law.
19. (i) Cancellation of certificate of registration (Section 4)
The Reserve Bank may cancel a certificate of registration granted to an ARC, if such
company-
(i) ceases to carry on the business of securitisation or asset reconstruction; or
(ii) ceases to receive or hold any investment from a qualified buyer; or

(iii) has failed to comply with any conditions subject to which the certificate of
registration has been granted to it; or
(iv) at any time fails to fulfil any of the conditions referred to in clauses (a) to (g) of
sub-section (3) of section 3; or
(v) fails to-
(a) comply with any direction issued by the Reserve Bank under the provisions
of this Act; or
(b) maintain accounts in accordance with the requirements of any law or any
direction or order issued by the Reserve Bank under the provisions of this
Act; or
(c) submit or offer for inspection its books of account or other relevant
documents when so demanded by the Reserve Bank; or
(d) obtain prior approval of the Reserve Bank required under sub-section (6)
of section 3.
Before cancelling a certificate of registration on the ground that the ARC has failed to
comply with the provisions of clause (c) or has failed to fulfil any of the conditions
referred to in clause (d) or sub-clause (iv) of clause (e), the Reserve Bank, unless it
is of the opinion that the delay in cancelling the certificate of registration granted
under sub-section (4) of section 3 shall be prejudicial to the public interest or the
interests of the investors or the ARC, shall give an opportunity to such company on
such terms as the Reserve Bank may specify for taking necessary steps to comply
with such provisions or fulfilment of such conditions.
(ii) Yes, X can transfer the Foreign Contribution received by it to another organization as
section 7 of FCRA, 2010. According to the provision no person who –
a. is registered and granted a certificate or has obtained prior permission under
this Act; and
b. receives any foreign contribution,
shall transfer such foreign contribution to any other person unless such other person
is also registered and had been granted the certificate or obtained the prior
permission under this Act:
Provided that such person may transfer, with the prior approval of the Central
Government, a part of such foreign contribution to any other person who has not been
granted a certificate or obtained permission under this Act in accordance with the
rules made by the Central Government.”
Restrictions on transfer: Rule 24 of FCRR, 2011, prescribes the procedure for
transferring foreign contribution to any unregistered person as under:

(1) A person who has been granted a certificate of registration or prior permission
under section 11 and intends to transfer part of the foreign contribution received
by him to a person who has not been granted a certificate of registration or prior
permission under the Act, may transfer such foreign contribution to an extent not
exceeding ten per cent of the total value thereof and for this purpose, make an
application to the Central Government in the prescribed Form.
(2) Every application made under sub-rule (1) shall be accompanied by a
declaration to the effect that- (a) the amount proposed to be transferred during
the financial year is less than ten per cent of the total value of the foreign
contribution received by him during the financial year; (b) the transferor shall not
transfer any amount of foreign contribution until the Central Governm ent
approves such transfer.
(3) A person who has been granted a certificate of registration or prior permission
under section 11 shall not be required to seek the prior approval of the Central
Government for transferring the foreign contribution received by him to another
person who has been granted a certificate of registration or prior permission
under the Act provided that the recipient has not been proceeded against under
any of the provisions of the Act.
(4) Both the transferor and the recipient shall be responsible for ensuring proper
utilisation of the foreign contribution so transferred and such transfer of foreign
contribution shall be reflected in the returns in Form to be submitted by both the
transferor and the recipient.
20. (i) Establishment of Appellate Tribunal
According to section 25 of the Prevention of Money Laundering Act, 2002, the
Appellate Tribunal constituted under sub-section (1) of section 12 of the Smugglers
and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 shall be the
Appellate Tribunal for hearing appeals against the orders of the Adjudicating Authority
and the other authorities under this Act.
Appeals to Appellate Tribunal
Section 26 deals with the right and time frame to make an appeal to the Appella te
Tribunal. The Director or any person aggrieved by an order made by the Adjudicating
Authority under this Act may prefer an appeal to the Appellate Tribunal.
The appeal shall be filed within a period of 45 days from the date on which a copy of
the order made by the Adjudicating Authority is received and it shall be in such form
and be accompanied by prescribed fees. The appeal shall be in such form and be
accompanied by such fee as may be prescribed. The Appellate Tribunal may extend
the period if it is satisfied that there was sufficient cause for not filing it within the
period of 45 days.

The Appellate Tribunal may after giving the parties to the appeal an opportunity of
being heard, pass such order as it thinks fit, confirming, modifying or setting aside the
order appealed against.
Appeals to High Court
The Act also provides further appeal. According to Section 42 any person aggrieved
by any decision or order of the Appellate Tribunal may file an appeal to the High Court
within 60 days from the date of communication of the order of the Appellate Tribunal.
In the light of the provisions of the Act explained above the company is advised to
prefer an appeal to Appellate Tribunal in the first instance.
(ii) There are two basic types of arbitration agreement are:
(a) Arbitration clause - a clause contained within a principal contract. The parties
undertake to submit disputes in relation to or in connection with the principal
contract that may arise in future to arbitration.
(b) Submission agreement - an agreement to refer disputes that already exist to
In this case, the agreement already carries the term that all disputes shall be
arbitrated in Mumbai at the time of entering into joint venture agreement. This would
be an arbitration clause as it is contained in the principal contract (JVA) and no
disputes have arisen till yet. It concerns future disputes that may arise.

PART – I: RELEVANT AMENDMENTS APPLICABLE FOR NOVEMBER, 2018
EXAMINATION
relevant and applicable for said examinations.
This RTP of November 2018 examination will help the students to know of the significant
changes, that are relevant and applicable for November 2018 examination.
Part I: Section A: Company Law
CHAPTER 1 : APPOINTMENT AND QUALIFICATION OF DIRECTORS
June, 2017
(i) According to the amendment, section 152(6) & (7) , shall not apply to –
(a) a Government company, which is not a listed company, in which not less than
fifty-one per cent. of paid up share capital is held by the Central Government,
or by any State Government or Governments or by the Central Government and
one or more State Governments;
(b) a subsidiary of a Government company, referred to in (a) above."
2015 Vide Notification G.S.R. 582(E) Dated 13th June, 2017
namely:-
Notification G.S.R. 584(E) Dated 13 TH June, 2017

Vide Notification G.S.R. 584(E) Dated 13 TH June, 2017
Amendment Rules, 2017 Vide Notification G.S.R. 839(E) dated 5 th July 2017
(1), namely:-
Through the issue of this circular, it is hereby clarified that a "joint venture, would mean a


namely:-
Rules, 2014.
Provided that in case of proposed directors not having approved DIN, the particulars
of maximum three directors shall be mentioned in Form No.INC-32 (SPICe) and DIN
may be allotted to maximum three proposed directors through Form INC-32 (SPICe)”;
inserted, namely:-
company”;
2018


Relevant Amendment
sections
Amendment In section 152 of the principal Act,—
of section 152 (a) in sub-section (3), after the word and figures "section 154", the
words and figures "or any other number as may be prescribed under
section 153" shall be inserted;
figures "or such other number as may be prescribed under section
153" shall be inserted.
Amendment In section 153 of the principal Act, the following proviso shall be
of section 153 inserted, namely:—
identification number which shall be treated as Director Identification
Number for the purposes of this Act and in case any individual holds
or acquires such identification number, the requirement of this section
shall not apply or apply in such manner as may be prescribed."
Amendment In section 160 of the principal Act, in sub-section (1), the following
of section proviso shall be inserted, namely:—
160. ‘‘Provided that requirements of deposit of amount shall not apply in
case of appointment of an independent director or a director
recommended by the Nomination and Remuneration Committee, if
any, constituted under sub-section (1) of section 178 or a director
recommended by the Board of Directors of the Company, in the case
of a company not required to constitute Nomination and Remuneration
Committee.”
Amendment In section 161 of the principal Act,—
of section (i) in sub-section (2), after the words "alternate directorship for any
161. other director in the company", the words "or holding directorship in
the same company" shall be inserted;
(a) the words "In the case of a public company," shall be omitted;
(b) after the words "meeting of the Board", the words "which shall be
subsequently approved by members in the immediate next general
meeting" shall be inserted.
Amendment In section 165 of the principal Act, in sub-section (1), the Explanation
of section shall be renumbered as Explanation I and after Explanation I as so

165. numbered, the following Explanation shall be inserted, namely:—

"Explanation II.—For reckoning the limit of directorships of twenty
companies, the directorship in a dormant company shall not be
included."
CHAPTER 2 : APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL

Relevant Amendment
Sections
(b) for sub-clause (v), the following sub-clauses shall be substituted,
namely:—
"(v) such other officer, not more than one level below the directors
who is in whole-time employment, designated as key managerial
personnel by the Board; and
CHAPTER 3 : MEETING OF BOARD AND ITS POWERS
2017
Directors.
184.


2015 Vide Notification G.S.R. 583(E) Dated 13th June, 2017
in filing its financial statements under section 137 of the said Act or annual return under

taken into account.
India;
Act.
(3) The provisions of this rule shall not be in derogation of the proviso to sub -section (1)

whichever is more.
Amendment of Section 180 In section 180 of the principal Act, in sub-section (1), in clause
(c), for the words "paid-up share capital and free reserves", the
words "paid-up share capital, free reserves and securities
premium" shall be substituted.
Amendment of Section 184 In section 184 of the principal Act,—
(i) in sub-section (4), the words "shall not be less than fifty
thousand rupees but which" shall be omitted;
(ii) in sub-section (5), for clause (b), the following clause
"(b) shall apply to any contract or arrangement entered
into or to be entered into between two companies
or between one or more companies and one or
more bodies corporate where any of the directors of
the one company or body corporate or two or more
of them together holds or hold not more than two
per cent. of the paid-up share capital in the other
company or the body corporate."
Amendment of section 188. In section 188 of the principal Act,—
(i) in sub-section (1), after the second proviso, the following
"Provided also that nothing contained in the second
proviso shall apply to a company in which ninety per cent.
or more members, in number, are relatives of promoters
or are related parties:"
(ii) in sub-section (3), for the words "shall be voidable at the
option of the Board", the words "shall be voidable at the
option of the Board or, as the case may be, of the
shareholders" shall be substituted.

CHAPTER 4 : INSPECTION, INQUIRY AND INVESTIGATION
1. Enforcement of Section 212(8), (9), & (10) vide Notification S.O. 2751(E) dated 24 th of
August, 2017
August 2017
and where the person arrested is the Managing Director or person in -charge of the

sign the arrest order together with personal search memo in the Form appended to
these rules and shall serve it on the arrestee and obtain written acknowledgement of
service.
office.
Amendment of section 223. In section 223 of the principal Act, in sub-section (3), after
the words "may be obtained", the words "by members,
creditors or any other person whose interest is likely to be
affected" shall be inserted.
CHAPTER 5 : COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS
13th June, 2017

Relevant Amendment
sections
Amendment of In section 236 of the principal Act, in sub-sections (4), (5) and (6), for
section 236. the words, "transferor company", wherever they occur, the words
"company whose shares are being transferred" shall be substituted.
CHAPTER 9 : COMPANIES INCORPORATED OUTSIDE INDIA
Relevant Amendment
sections
Amendment Section 379 of the principal Act shall be renumbered as sub-section (2) thereof
of section and before sub-section (2) as so renumbered, the following sub-section shall
379. be inserted, namely:—
"(1) Sections 380 to 386 (both inclusive) and sections 392 and 393 shall apply
to all foreign companies:
Official Gazette, exempt any class of foreign companies, specified in the Order,
from any of the provisions of sections 380 to 386 and sections 392 and 393
and a copy of every such Order shall, as soon as may be after it is made, be laid
before both Houses of Parliament."
Amendment In section 384 of the principal Act, in sub-section (2), after the word and figures
of section "section 92", the words and figures "and section 135" shall be inserted.
384.
Amendment In section 391 of the principal Act, for sub-section (2), the following sub-section
of section shall be substituted, namely:—
391. “(2) Subject to the provisions of section 376, the provisions of Chapter XX
shall apply mutatis mutandis for closure of the place of business of a foreign
company in India as if it were a company incorporated in India in case such
foreign company has raised monies through offer or issue of securities
under this Chapter which have not been repaid or redeemed.”

CHAPTER 10 : MISCELLANEOUS PROVISIONS

1. Notification of Section 247 vide Notification S.O. 3393(E) dated 18 th October 2017
Section 247: Valuation by Registered Valuers.
shall be valued by 1[a person having such qualifications and experience and
prescribed] and appointed by the audit committee or in its absence by the Board of
Directors of that company.
to be valued;
or becomes so interested at any time 2[during a period of three years prior to his
by him.]
the valuer shall be punishable with fine which shall not be less than twenty -five
1 Substituted by the Companies (Removal of Difficulties) Second Order 2017

2 Amended through the Companies (Amendment) Act, 2017 on 9th February, 2018

2. Definitions
section 458 of the Companies Act, 2013 to perform the functions under these
rules;
accordingly;
"valuer" means a person registered with the authority in accordance with these
(e) Is not a minor;


bankrupt;
Explanation.- For the purposes of these rules 'person resident in India' shall
have the same meaning as defined in clause (v) of section 2 of the Foreign
Exchange Management Act, 1999 (42 of 1999) as far as it is applicable to an
individual;
(i) Has not been convicted by any competent court for an offence punishable with
imprisonment for a term exceeding six months or for an offence involving moral
turpitude, and a period of five years has not elapsed from the date of expiry of
the sentence:
Provided that if a person has been convicted of any offence and sentenced in
respect thereof to imprisonment for a period of seven years or more, he shall
not be eligible to be registered;
(j) Has not been levied a penalty under section 271J of Income-tax Act, 1961 (43
of 1961) and time limit for filing appeal before Commissioner of Income-tax
(Appeals) or Income-tax Appellate Tribunal, as the case may be has expired,
or such penalty has been confirmed by Income-tax Appellate Tribunal, and five
years have not elapsed after levy of such penalty; and
Explanation.- For determining whether an individual is a fit and proper person
under these rules, the authority may take account of any relevant
consideration, including but not limited to the following criteria-
(2) No partnership entity or company shall be eligible to be a registered valuer if -
(a) It has been set up for objects other than for rendering professional or financial
services, including valuation services and that in the case of a company, it is
not a subsidiary, joint venture or associate of another company or body
corporate;

(e) None of its partners or directors, as the case may be, is a registered
valuer for the asset class, for the valuation of which it seeks to be a registered
valuer.
or Institute established, recognised or incorporated by law in India an d at least
(a) or (b).
under these rules.
of the authority.

accepted within fifteen days of the receipt of the communication under sub - rule
shall -
(b) at all times comply with the provisions of the Act, these rules and the Bye -laws
organisation;
authority;

he is a member;
company;


followed;
(k) conclusion; and


asset classes if -
1882).
issued to them;

Companies Act, 2013, and include in its bye laws the requirements specified
12;
publicly available;
authority;
(h) display on its website, the status and specified details of every registered
valuer being its valuer members including action under rule 17 being taken
against him; and
before the authority in person or by post or courier along with a non -refundable fees

Relevant Amendment
sections
words "during a period of three years prior to his appointment as

valuer or three years after the valuation of assets was conducted

by him" shall be substituted.
section 366. (i) for the words "seven or more members", the words "two or
more members" shall be substituted;
(ii) in the proviso, after clause (vi), the following clause shall be
"(vii) a company with less than seven members shall
register as a private company."
Amendment of In section 374 of the principal Act, after clause (d), the following
section 374. proviso shall be inserted, namely:—
“Provided that upon registration as a company under this Part a
limited liability partnership incorporated under the Limited
Liability Partnership Act, 2008 shall be deemed to have been
dissolved under that Act without any further act or deed.”.
inserted;
namely:—
"Provided further that where the fraud involves an amount
less than ten lakh rupees or one per cent. of the turnover of
the company, whichever is lower, and does not involve
public interest, any person guilty of such fraud shall be
punishable with imprisonment for a term which may extend
to five years or with fine which may extend to twenty lakh
rupees or with both.".
Amendment of In section 458 of the principal Act, in sub-section (1), the proviso
section 458 shall be omitted.
section 441. "with fine only", the words "not being an offence punishable with
imprisonment only, or punishable with imprisonment and also with
fine" shall be substituted.

section be inserted, namely:—
446A. "446A. The court or the Special Court, while deciding the amount
of fine or imprisonment under this Act, shall have due regard to the
Factors for following factors, namely:—
determining level of (a) size of the company;
punishment. (b) nature of business carried on by the company;
Lesser penalties for

One Person 446B. Notwithstanding anything contained in this Act, if a One Person
Companies or small Company or a small company fails to comply with the provisions of
companies. sub-section (5) of section 92, sub-section (2) of section 117 or sub-
section (3) of section 137, such company and officer in default of
such company shall be punishable with fine or imprisonment or fine
and imprisonment, as the case may be, which shall not be more than
one-half of the fine or imprisonment or fine and imprisonment, as the
case may be, of the minimum or maximum fine or imprisonment or
fine and imprisonment, as the case may be, specified in such
sections.".
1. Enforcement of the Companies (Removal of Difficulties) Orders, 2017 Vide Order
S.O. 2042(E) dated 29 th June , 2017
(a) in the third proviso, for “Provided further that-”, the following shall be substituted,
namely:- “Provided also that-”;
(b) after the third proviso, the following proviso shall be inserted, namely: -
“Provided also that proceedings relating to cases of voluntary winding up of a
company where notice of the resolution by advertisement has been given under sub-
section (1) of section 485 of the Companies Act, 1956 but the company has not been
dissolved before the 1st April, 2017 shall continue to be dealt with in accordance with
provisions of the Companies Act, 1956 and the Companies (Court) Rules, 1959.”
section 409

(i) in clause (a), for the words "out of which at least three
years shall be in the pay scale of Joint Secretary to
the Government of India or equivalent or above in that
service", the words "and has been holding the rank of
Secretary or Additional Secretary to the Government
of India" shall be substituted;
(ii) for clause (e), the following clause shall be
"(e) is a person of proven ability, integrity and
standing having special knowledge and
professional experience of not less than fifteen
years in industrial finance, industrial
management, industrial reconstruction,
investment and accountancy.".
"(3) A technical member shall be a person of proven ability,
integrity and standing having special knowledge and
professional experience of not less than twenty-five
years in industrial finance, industrial management,
industrial reconstruction, investment and
accountancy.".
section 412 following sub-sections shall be substituted, namely:—
"(2) The Members of the Tribunal and the Technical
Members of the Appellate Tribunal shall be appointed
on the recommendation of a Selection Committee
consisting of—
(a) Chief Justice of India or his nominee—
Chairperson;
(b) a senior Judge of the Supreme Court or Chief
Justice of High Court— Member;
(c) Secretary in the Ministry of Corporate Affairs—
Member; and
(d) Secretary in the Ministry of Law and Justice—
Member.
(2A) Where in a meeting of the Selection Committee, there
is equality of votes on any matter, the Chairperson
shall have a casting vote.".


CHAPTER 2: SEBI (Issue of Capital and Disclosure Requirements) (Amendment)
Regulations, 2018 w.e.f. 12.02.2018
Vide this amendment regulation, Clause (c) of the Regulation 82 which dealt with the conditions
for qualified institutions placement has been omitted. Following was the clause prior to the
omission.
“(c) it is in compliance with the requirement of minimum public shareholding specified in the
Securities Contracts (Regulation) Rules, 1957;”
Regulations, 2018
As per the Notification dated 26 th of March, 2018, the Reserve Bank of India makes the
Regulations, 2018 with the enforcement from the date of their publication in the Official Gazette
i.e., 26th of March, 2018.
2. Relevant Definitions:- In these Regulations, unless the context otherwise requires-
‘Non-Resident Indian (NRI)’ means a person resident outside India who is a citizen of
India;
‘Overseas Citizen of India (OCI)’ means a person resident outside India who is registered
as an Overseas Citizen of India Cardholder under Section 7(A) of the Citizenship Act, 1955;
'Repatriation outside India' means the buying or drawing of foreign exchange from an
authorised dealer in India and remitting it outside India through banking channels or
crediting it to an account denominated in foreign currency or to an account in Indian
currency maintained with an authorised dealer from which it can be converted in foreign
currency;
3. Acquisition and Transfer of Property in India by a Non-Resident Indian or an
Overseas Citizen of India:-
An NRI or an OCI may-
(a) acquire immovable property in India other than agricultural land/ farm house/ plantation
property:
Provided that the consideration, if any, for transfer, shall be made out of (i) funds received
in India through banking channels by way of inward remittance from any place outside
India or (ii) funds held in any nonresident account maintained in accordance with the
provisions of the Act, rules or regulations framed thereunder.

Provided further that no payment for any transfer of immovable property shall be
made either by traveler’s cheque or by foreign currency notes or by any other mode
other than those specifically permitted under this clause.
(b) acquire any immovable property in India other than agricultural land/ farm house/
plantation property by way of gift from a person resident in India or from an NRI or from
an OCI, who in any case is a relative as defined in section 2(77) of the Companies Act,
2013;
(c) acquire any immovable property in India by way of inheritance from a person resident
outside India who had acquired such property (a) in accordance with the provisions of the
foreign exchange law in force at the time of acquisition by him or the provisions of these
Regulations or (b) from a person resident in India;
(d) transfer any immovable property in India to a person resident in India;
(e) transfer any immovable property other than agricultural land/ farm house/ plantation
property to an NRI or an OCI.
4. Acquisition of Immovable Property for carrying on a permitted activity:-
A person resident outside India who has established in India in accordance with the Foreign
Exchange Management (Establishment in India of a branch office or a liaison office or a
project office or any other place of business) Regulations, 2016, as amended from time to
time, a branch, office or other place of business for carrying on in India any activity,
excluding a liaison office, may -
(a) acquire any immovable property in India, which is necessary for or incidental to
carrying on such activity;
Provided that
i all applicable laws, rules, regulations or directions for the time being in force
are duly complied with; and
ii the person files with the Reserve Bank a declaration in the form IPI as prescribed
by Reserve Bank from time to time, not later than ninety days from the date of
such acquisition.
(b) transfer by way of mortgage to an authorised dealer as a security for any borrowing,
the immovable property acquired in pursuance of clause (a).
Provided no person of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China
or Iran or Hong Kong or Macau or Nepal or Bhutan or Democratic People’s Republic
of Korea (DPRK) shall acquire immovable property, other than on lease not exceeding
five years, without prior approval of the Reserve Bank.

5. Purchase/ sale of Immovable Property by Foreign Embassies/ Diplomats/ Consulate

Generals:-
A Foreign Embassy/ Diplomat/ Consulate General may purchase/ sell immovable property
in India other than agricultural land/ plantation property/ farm house provided (i) clearance
from Government of India, Ministry of External Affairs is obtained for such p urchase/ sale,
and (ii) the consideration for acquisition of immovable property in India is paid out of funds
remitted from abroad through banking channels.
6. Joint acquisition by the spouse of an NRI or an OCI:-
A person resident outside India, not being a Non-Resident Indian or an Overseas Citizen
of India, who is a spouse of a Non-Resident Indian or an Overseas Citizen of India may
acquire one immovable property (other than agricultural land/ farm house/ plantat ion
property), jointly with his/ her NRI/ OCI spouse.
Provided that
(i) The consideration for transfer, shall be made out of (i) funds received in India through
banking channels by way of inward remittance from any place outside India or (ii) funds
held in any non-resident account maintained in accordance with the provisions of the Act
and the regulations made by the Reserve Bank;
(ii) No payment for any transfer of immovable property shall be made either by traveler’s
cheque or by foreign currency notes or by any other mode other than those specifically
permitted under this clause;
(iii) Provided that the marriage has been registered and subsisted for a continuous period of
not less than two years immediately preceding the acquisition of such property;
(iv) Provided further that the non-resident spouse is not otherwise prohibited from such
acquisition.
7. Acquisition by a Long-Term Visa holder:-
A person being a citizen of Afghanistan, Bangladesh or Pakistan belonging to minority
communities in those countries, namely, Hindus, Sikhs, Buddhists, Jains, Parsis and
Christians who is residing in India and has been granted a Long Term Visa (LTV) by the
Central Government may purchase only one residential immovable property in India as
dwelling unit for self-occupation and only one immovable property for carrying out self-
employment subject to the following conditions:
(a) the property should not be located in and around restricted/ protected areas so notified
by the Central Government and cantonment areas;
(b) the person submits a declaration to the Revenue Authority of the district where the
property is located, specifying the source of funds and that he/ she is residing in India on
LTV;

(c) the registration documents of the property should mention the nationality and the fact that
such person is on LTV;
(d) the property of such person may be attached/ confiscated in the event of his/ her
indulgence in anti-India activities;
(e) a copy of the documents of the purchased property shall be submitted to the Deputy
Commissioner of Police (DCP)/ Foreigners Registration Office (FRO)/ Foreigners
Regional Registration Office (FRRO) concerned and to the Ministry of Home Affairs
(Foreigners Division);
(f) such person shall be eligible to sell the property only after acquiring Indian citizenship.
However, transfer of the property before acquiring Indian citizenship shall require prior
approval of DCP/FRO/FRRO concerned.
8. Repatriation of sale proceeds:-
(a) A person referred to in sub-section (5) of Section 6 of the Act, or his successor shall not,
except with the general or specific permission of the Reserve Bank, repatriate outside
India the sale proceeds of any immovable property referred to in that sub-section;
(b) In the event of sale of immovable property other than agricultural land/ farm house/
plantation property in India by an NRI or an OCI, the authorised dealer may allow
repatriation of the sale proceeds outside India, provided the following conditions are
satisfied, namely:
(i) the immovable property was acquired by the seller in accordance with the provisions
of the foreign exchange law in force at the time of his acquisition or the provisions
of these Regulations;
(ii) the amount for acquisition of the immovable property was paid in foreign exchange
received through banking channels or out of funds held in Foreign Currency Non-
Resident Account or out of funds held in Non-Resident External account;
(iii) in the case of residential property, the repatriation of sale proceeds is restricted to
not more than two such properties.
(c) In the event of failure in repayment of external commercial borrowing availed by a person
resident in India under the provisions of the Foreign Exchange Management (Borrowing
or Lending in Foreign Exchange) Regulations, 2000, as amended from time to time, a
bank which is an authorised dealer may permit the overseas lender or the security trustee
(in whose favour the charge on immovable property has been created to secure the ECB)
to sell the immovable property on which the said loan has been secured only to a (by the)
person resident in India and to repatriate the sale proceeds towards outstanding dues in
respect of the said loan and not any other loan.

9. Prohibition on acquisition or transfer of immovable property in India by citizens of

certain countries:-
No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran,
Nepal, Bhutan, Hong Kong or Macau or Democratic People’s Republic of Korea (DPRK)
without prior permission of the Reserve Bank shall acquire or transfer immovable property
in India, other than lease, not exceeding five years.
Provided this prohibition shall not apply to an OCI.
Explanation: For the purpose of this regulation the term “citizen” shall include natural
persons and legal entities.
10. Prohibition on transfer of immovable property in India:-
Save as otherwise provided in the Act or Regulations, no person resident outside India
shall transfer any immovable property in India:-
Provided that
(i) The Reserve Bank may, for sufficient reasons, permit the transfer, subject to such
conditions as may be considered necessary.
(ii) A bank which is an authorised dealer may, subject to the directions issued by the Reserve
Bank in this behalf, permit a person resident in India or on behalf of such person to create
charge on his immovable property in India in favour an overseas lender or security trustee,
to secure an external commercial borrowing availed under the provisions of the Foreign
Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000,
as amended from time to time.
(iii) An Authorized Dealer in India being the Indian correspondent of an overseas lender may,
subject to the directions issued by the Reserve Bank in this regard, create a mortgage on
an immovable property in India owned by an NRI or an OCI, being a director of a company
outside India, for a loan to be availed by the company from the said overseas lender.
Provided
(a) the funds shall be used by the borrowing company only for its core business
purposes overseas;
(b) in case of invocation of charge, the Indian bank shall sell the immovable property to
an eligible acquirer and remit the sale proceeds to the overseas lender.
(iv) A person resident outside India who has acquired any immovable property in India in
accordance with foreign exchange laws in force at the time of such acquisition or with the
general or specific permission of the Reserve Bank may transfer such property to a person
resident in India provided the transaction takes place through banking channels in India
and provided that the resident is not otherwise prohibited from such acquisition.

11. Miscellaneous:-
Any transaction involving acquisition or transfer of immovable property under these
regulations shall be undertaken:
(a) through banking channels in India;
(b) subject to payment of applicable taxes and other duties/ levies in India.
12. Saving:-
Any existing holding of immovable property in India by a person resident outside India
made in accordance with the policy in existence at the time of such acquisition would not
require any modifications to confirm to these regulations.
w.e.f. 19.04.2018

“(2) If the Director or other authority specified under sub-section (1) is of the opinion, on the basis of
information or material in his possession, that the provisions of any other law for the time being in
force are contravened, then the Director or such other authority shall share the information with the
concerned agency for necessary action.”;
1570(E) , dated 15 th May , 2017
provisions of clause (a) to clause (d) of section 2 of the Code relating to voluntary
force.
debtors, namely :-

25th October 2017
force.
for its consideration and approval as laid down under section 30 & 31 of the Insolvency
a. in clause (26), for the words "any person", the words "resolution applicant" shall
be substituted.

Board:
PART – II: QUESTIONS AND ANSWERS
QUESTIONS
Part I: Corporate Laws
Section A: Company Law
Appointment and Qualifications of Directors
1. (i) The Promoters of M/s Frontline Limited, a listed public company propose to have the
strength of the Board of Directors as eleven. They also propose to make the Managing
Director and Whole Time directors as directors not liable to retire by rotation. Advise
on the following matters as per the provisions of the Companies Act, 2013:
(a) Maximum number of persons, who can be appointed as directors not liable to
retire by rotation.
(b) How many of the remaining directors will have to retire by rotation every year at
the Annual General Meeting (AGM)?
(c) For the purpose of increasing the strength, certain nominations were received
to nominate candidates for contesting elections. One of the nominations was

rejected by the directors as it was received after sending the notice of AGM and
that too after the working hours of the last day on which nomination should have
been received.
(d) Can the Board of Directors increase the strength of companies' directors to 18
from 11 by appointing additional directors through passing single resolution?
(ii) M/s. Bosch and Lawrence Limited, an unlisted company has a paid up equity share
capital of ` 11 crores as on 31 st March, 2013. Mr. Robert was appointed as an
Independent Director at the Annual General Meeting of the company held on 29 -09-
2015 for a period of one year. Again, he was appointed in the subsequent Annual
General Meeting held on 28-09-2016 for a period of two years as his second
consecutive term. Examine under the provisions of the Companies Act, 2013 whether
he can be again appointed in the Annual General Meeting to be held in September
2018 for another period of 2 years to complete his total term of 5 yea rs?
Appointment and remuneration of Managerial Personnel
2. (i) The Article of Association of a listed company have fixed payment of sitting fee for
each meeting of Directors subject to maximum of ` 30,000. In view of the increased
responsibilities of independent directors of listed companies, the company proposes
to increases the sitting fee to ` 45,000 per meeting. Advise the company about the
requirement under the Companies Act, 2013 to give effect to the proposal.
(ii) Mr. AMIT is the Managing Director of ANJ Limited, which is a non-government public
company. The directors of CHH Limited decided to appoint Mr. AMIT as the Managing
Director of the company, even though Mr. AMIT decided not to vacate his place of
office of Managing Director of ANJ Limited. A notice for a Board meeting specifying a
resolution containing the proposal of appointment of Mr. AMIT was served to all the
eligible directors of CHH Limited. Out of eight directors of the company, six directors
attended the meeting and out of them four directors gave consent to the resolution,
one director voted against the said appointment and another director abstained from
voting. The Board of Directors seek your opinion whether Mr. AMIT can be appointed
as the Managing Director, of the company in this situation. Referring to the applicable
provisions of the Companies Act, 2013, advise them.
Meetings of Board and its powers
3. (i) M/s. Multiplex Builders Limited is contemplating to enter into a joint venture
agreement with another construction company for the development of landed
properties located at Delhi. Since it is not possible to convene the Board Meeting
immediately, as the directors are at different place in connection with various works,
the Managing Director seeks your advice on the following matters:
(a) Whether the resolution pertaining to the joint venture agreement is required to
be passed at the Board Meeting convened for this purpose or whether it can be
passed by means of a circular resolution?

(b) What are the resolutions that are required to be passed only at the meetings of
the Board of Directors?
(c) The steps that are required to be taken to pass the Board resolution by
circulation.
Advise the Managing Director in the light of the provisions of the Companies Act,
2013.
(ii) ASK Housing Finance Limited are prepared to give housing loans to the employees
of M/s NEWS Pharmacy Limited subject to the condition that the loans are guaranteed
by M/s. NEWS Pharmacy Limited. M/s NEWS Pharmacy Limited is not a listed
company and the company will be exceeding the limits prescribed under the
Companies Act, 2013 by providing the guarantees. Advise the company about this
legal requirement under the Companies Act, 2013 to give effect to the above proposal.
What would be your advice if the company was required to provide security instead
of guarantee?
Inspection, inquiry and Investigation
4. (i) Some creditors of NTY Limited approached you to guide them to apply to the Tribunal
for seeking an order for conducting an investigation into the affairs of the company
due to the fact that the business of the company is being conducted with intention to
defraud its creditors. Referring to the provisions of the Companies Act, 2013, guide
them regarding the circumstances under which and how a person, not being a
member of the company can apply to the Tribunal to seek an order for conducting an
investigation into the affairs of a company.
(ii) A group of creditors of MBIND Bronze Limited makes a complaint to the Registrar o f
Companies, Himachal Pradesh alleging that the management of the company is
indulging in destruction and falsification of the accounting records of the company.
The complainants request the Registrar to take immediate steps to seize the records
of the company so that the management may not be allowed to tamper with the
records. The complaint was received at 11 am on 6 January, 2018 and the registrar
has attempted to enter the premise of the company but has been denied by the
company, due to not having order from the special court.
Is the contention of company being valid in terms of Companies Act, 2013? Discuss.
Compromises, Arrangements and Amalgamations
5. Cotton On Yarn Ltd., and Country Cotton Blossom Ltd., are two listed companies engaged
in the Business of Textiles. The companies are not making profits and as such their share’s
market price have gone down. A substantial portion of their share capital is held by Central
Government as well as some Public Financial Corporations. In order to increase the share
value, the Central Government wants to amalgamate the aforesaid two companies into a

single company. Examine the powers of Central Government to amalgamate the two
companies in public interest as per the provisions of the Companies Act, 2013.
Prevention of Oppression and Mismanagement
6. A group of depositors in M/s. Bright Limited, a listed company, appointed Mr. Fair, an
advocate as a representative to file an application in the National Company Law Tribunal
(NCLT) on the behalf of the depositors to bring a Class Action suit against the
management of the company as they are of the opinion that the management and conduct
of affairs of the company are being conducted in a manner which is prejudicial to the
interest of the depositors being oppressive.
Examine in the given situation, whether the appointment of Mr. Fair is valid as regards to
the filling of the application before the Tribunal in the light to the provisions of the
Companies Act, 2013?
Winding up
7. M/s Sagar Retail Mega Mart Ltd. applied for winding up on 1 st April, 2018 before the
Honourable Tribunal by passing a special resolution as per the provision of section
271(1)(a) of the Companies Act, 2013 on account of fall in business and continued losses
but not due to inability to pay debts. The company was in the business of ordinary retail
trade of multiple branded goods. A few shareholders of the company have alleged before
the Honourable Tribunal that the company had failed to maintain proper books of accounts
for over a period of more than three years immediately prior to the date of winding up
application and the sole reason cited by them in support of their allegation is that no proper
statements of all goods sold and purchased by the company have been kept as such every
officer in default must be punished as per the provisions of the Companies Act, 2013. Mr.
Ravi the CFO and officer in default do not refute the allegation of non-maintenance but is
of the opinion that this act as per the provision of the Companies Act, 2013 is not
punishable. Decide whether the opinion of the CFO is correct. Would your answer be
different had the business of the company be wholesale trade instead of ordinary retail
trade?
Producer Companies
8. Raj shree Producer Co. Ltd. was incorporated on 1 st April 2010. Its paid up capital is ` 10
lacs consists of 1 lac equity shares of ` 10 each held by 100 individuals. There are 6
directors on its Board. Referring to the provisions of the Companies Act, 1956, answer the
following:
(i) What is the quorum for the Annual General Meeting?
(ii) What is the quorum for the Board Meeting?
(iii) The Board of Directors wants to co-opt one expert in the field of agronomics, as
Director on its Board. Whether is it permissible?

(iv) Is it obligatory for this company to have internal audit of its accounts for Financial
Year 2018-19?
Companies incorporated outside India
9. Examine and state whether the following Companies can be considered as ‘Foreign
Company’ under the Companies Act, 2013:
(i) A company which is incorporated outside India employs agents in India but has no
place of business in India.
(ii) A company incorporated outside India having shareholders who are all Indian
citizens.
(iii) A company incorporated in India but all the shares are held by foreigners.
(iv) A company which has no place of business established in India, yet, is doing online
business through telemarketing in India.
Miscellaneous Provisions
10. (i) XYZ Ltd. had filed certain documents with Registrar of Companies (RoC). The said
documents were authenticated by the RoC and kept on record. In a suit against the
company the RoC produced the said documents in the court of law. XYZ Ltd. intends
to raise objection on the said documents on the ground that the documents need to
be authenticated with further proof or production of the original document as
evidence. Advice XYZ Ltd. as per the provisions of the Companies Act, 2013.
(ii) JKL Research Development Limited is a registered Public Limited Company. The
company has a unique business idea emerging from research and development in a
new area. However, it is a future project and the company has no significant
accounting transactions and business activities at present. The company desires to
obtain the status of a 'Dormant Company'. Advise the company regarding the
provisions of the Companies Act, 2013 in this regard and the procedure to be followed
in this regard.
Compounding of offences, Adjudication, Special Courts and National Company Law
Tribunal and Appellate Tribunal
11. (i) Mr. PRTJ was appointed as a member of the National Company Law Appellate
Tribunal. During the month of April, 2018, he was adjudged as an insolvent by a
competent authority. The Central Government after consultation with the Chief Justice
of India removed Mr. PRTJ from the membership of the National Company Law
Appellate Tribunal. Being aggrieved by the decision of the Central Government, Mr.
PRTJ approached you to confirm himself whether the decision of the Central
Government was appropriate since, he was not given a reasonable opportunity of
being heard as a matter of principle of natural justice. Advise him.

Also state the circumstances in which the Central Government after consultation with
the Chief Justice of India can remove any person from the office of President,
Chairperson or any Member of the National Company Law Appellate Tribunal.
Your answer should refer to the relevant provisions of the Companies Act, 2013.
11. (ii) What is the object of constituting Panel for Mediation and Conciliation under the
Companies Act, 2013? Who can file application for mediation and conciliation?
Corporate Secretarial Practice–Drafting of Notices, Resolutions, Minutes and Reports
12. Draft a resolution proposed to be passed at a General Meeting of M/s. Red Rooster Limited
a public company giving consent to the Board of Directors for borrowing upto a specified
amount in excess of the limits laid down under section 180(1)(c) of the Companies Act,
2013 and also state the borrowings, which are to be excluded from the said limits.
Section B: Securities Laws
The Securities Contract (Regulation) Act, 1956 and the Securities Contract (Regulation)
Rules, 1957
13. In public interest, HEM Stock Exchange Limited was issued an order by the Stock
Exchange Board of India to produce certain information and explanation relating to its
operation in writing. The management of the stock exchange were reluctant to part with
such information with SEBI and approached you to seek your advice in the following
matters:
(a) Duty of HEM Stock Exchange Limited to furnish periodic returns to SEBI;
(b) Power of SEBI to ask for the information asked as stated above, over and above the
periodic returns;
(c) Period for which the Stock Exchange is required to maintain the books of accounts
which may be inspected by SEBI.
(d) Duty of the Stock Exchange and the persons dealing with the stock exchange with
regard to the information sought for by SEBI.
Advise them referring to the relevant provisions of the Securities Contracts ( Regulation)
Act, 1956.
The Securities Exchange Board of India Act, 1992, SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2009 and SEBI (Listing Obligations and Disclosure
Requirement) Regulations, 2015
14. State the types and functions of the various committees constituted under the SEBI(LODR)
Regulations, 2015?


The Foreign Exchange Management Act, 1999
15. Mr. Hillary Benjamin, a citizen of India, left India for employment in U.S.A. on 1 st June,
2015. Mr. Hillary Benjamin purchased a flat at New Delhi for `60 lacs in September, 2016.
His brother, Mr. Henry Benjamin employed in New Delhi, also purchased a flat in the same
building in September 2016 for ` 65 lacs. Mr. Henry Benjamin’s flat was financed by a loan
from a Housing Finance Company and the loan was guaranteed by Mr. Hillary Benjamin.
Examine with reference to the provisions of the Foreign Exchange Management Act, 1999
whether purchase of flat and guarantee by Mr. Hillary Benjamin are Capital Account
transactions and whether these transactions are permissible.
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002
16. M/s Solomon Optimum Nutrition Limited had availed credit facilities from Royal Bank Ltd.
The company made repayment of loan to some extent and not entirely and accordingly,
the bank took recourse under the provisions of Section 13(2) of the SARFAESI Act, 2002.
Consequently, possession of the mortgaged property was taken up and was duly
advertised by the bank. The company also filed an application under Section 17(1) of
SARFAESI Act, 2002 before the debts recovery tribunal which was dismissed by the
impugned order. Being aggrieved the company approached the court. Examine in the light
of the SARFAESI Act, 2002 whether the company will succeed in the petition filed before
the court.
The Prevention of Money Laundering Act, 2002
17. Explain the term “Offence of Money Laundering” within the meaning of the Prevention of
Money Laundering Act, 2002. Mr. Alfred, a known smuggler was caught in transfer of funds
illegally exporting narcotic drugs from India to some countries in South Africa. State the
maximum punishment that can be awarded to him under Prevention of Money Laundering
Act, 2002.
Foreign Contribution Regulation Act, 2010
18. Mr. Peter, a Member of the Legislature in India, visited Sydney, Australia to attend World
Trade Conference as a representative of Government of India after obtaining due
permission of the Central Government as per the provisions of Foreign Contribution
(Regulation) Act, 2010. His expenditure on foreign travel was borne by Bret Lee Limited, a
foreign company. While attending the conference, Mr. Peter suddenly encountered chest
pain and he was immediately admitted in the nearby hospital for medical care and
treatment. The medical expenses of ` 2,00,000/- was borne by Bret Lee Limited. Mr. Peter
seeks your advice about the procedure to be followed in the above situation under the
provisions of Foreign Contribution (Regulation) Act, 2010. Please advise suitably.

The Arbitration and Conciliation Act, 1996

19. On 1st day of April, 2016, Arnold Food Processors limited, a company engaged in food
processor manufacturing unit entered into a joint venture agreement with Ronnie and
Coleman Company Limited, the largest manufacturer of Food processors for supply of
parts of mixer and grinder for manufacturing its latest model. Both the companies are
registered under the Companies Act, 2013. Agreement carries the term that all disputes
shall be arbitrated in Delhi. In the light of The Arbitration and Conciliation Act, 1996,
discuss:
(i) The type of arbitration agreement made between them.
(ii) Examine what will happen if the agreement does not have any clause relating to
arbitration where disputes arose between them concerning quality of material
supplied in 2017.
The Insolvency and Bankruptcy Code, 2016
20. What is the Insolvency Resolution Process for financial creditors?
1. (i) (a) According to Section 152(6) of the Companies Act, 2013, unless the articles
provide for the retirement of all directors at every annual general meeting, not
less than two-thirds of the total number of directors of a public company shall be
persons whose period of office is liable to determination by retirement of
directors by rotation
Directors liable to retire by rotation: 11 * 2/3 =7.3 or 8
So, maximum number of persons, who can be appointed as directors not liable
to retire by rotation: 11-8 = 3.
(b) According to Section 152(6)( c) of the Companies Act, 2013, 1/3 rd of such of the
Directors for the time being as are liable to retire by rotation, or their number is
neither three nor a multiple of three, then, the number nearest to the 1/3 rd shall
retire from office. Therefor the Directors liable to retire by rotation are 11*2/3 i.e.
7.3 or 8.
No. of directors to retire at AGM: 8 * 1/3 i.e.2.67. Hence nearest to 1/3 rd is 3.
(c) According to Section 160 of the Companies Act, 2013, a person who is not a
retiring director in terms of Section 152 shall, subject to the provisions of this
Act, be eligible for appointment to the office of a director at any general meeting,
if he has, not less than 14 days before the meeting, left at the registered office
of the company, a notice in writing under his hand signifying his candidature as
a director.

In the instant case, one nomination was rejected by the directors as it was
received after sending the notice of AGM and that too after the working hours of
the last day on which nomination should have been received i.e. 14 th day. Hence,
the contention of the directors are valid.
(d) According to Section 149(1) of the Companies Act, 2013, if the company wants
to appoint more than 15 directors, it can do so after passing a special resolution.
Hence, the Board of directors of Frontline Limited, before increasing the strength
of directors from 11 to 18 by appointing additional directors, have to pass a
special resolution.
But, these appointments cannot be done through single resolution. Each director
shall be appointed by a separate resolution unless the meeting first agreed that
the appointment shall be made by a single resolution and no vote has been cast
against such agreement. A resolution moved in contravention of this provision
shall be void, whether or not objection thereto was raised at the time it was so
moved. [Section 162 of the Act].
(ii) As per Section 149(10) of the Companies Act 2013, an Independent Director shall
hold office for a term up to five consecutive years on the Board of a company. He
shall be eligible for re-appointment on passing of a special resolution by the company
and disclosure of such appointment in the Board's report. As per section 149(11) no
independent director shall hold office for more than two consecutive terms. However,
such independent director shall be eligible for appointment after the expiration of
three years of ceasing to be an independent director.
The Ministry of Corporate Affairs in its General Circular 14/2014 dated June 09, 2014
clarified that section 149 (10) of the Act provides for a term of “up to five consecutive
years" for an independent director. As such while appointment of an independent
director for a term of less than five years would be permissible, appointment of any
term (whether for five years or less) is to be treated as one term under section 149
(10) of the Act. Further under section 149 (11) of the Act, no person hold office of
independent director for more than ‘two consecutive terms’. Such a person shall have
to demit office after the consecutive terms even if the total number years of his
appointment in such two consecutive terms is less than 10 years.
Therefore Mr. Robert cannot be appointed as an Independent Director at the AGM
proposed to be held in 2018. In such case the person completing ‘consecutive terms
of less than 10 years' shall be eligible for appointment only after the expiry of the
requisite cooling-off period of three years.
2. (i) Section 197(5) of the Companies Act, 2013 provides that a director may receive
remuneration by way of fee for attending the Board / Committee meetings or for any
other purpose as may be decided by the Board, provided that the amount of such
fees shall not exceed the amount as may be prescribed. The Central Government
through rules prescribed that the amount of sitting fees payable to a director attending

meetings of the Board or committees thereof may be decided by the Board of

Directors or the Remuneration Committee thereof which shall not exceed the sum of
` 1 lac per meeting of the Board or committee thereof. Further, the Board may decide
different sitting fee payable to independent and non-dependent directors other than
whole-time directors.
From the above, it is clear that fee to independent directors can be increased from `
30000 to ` 45000 per meeting by passing a resolution in board meeting and altering
the Articles of Association by passing special resolution.
(ii) Appointment of Key Managerial Personnel
As per Section 203(3) of the Companies Act, 2013, a whole-time key managerial
personnel shall not hold office in more than one company except in its subsidiary
company at the same time.
However, the above sub-Section (3), shall not disentitle a key managerial personnel
from being a director of any company with the permission of the Board.
Provided also that a company may appoint or employ a person as its managing
director, if he is the managing director or manager of one, and of not more than one,
other company and such appointment or employment is made or approved by a
resolution passed at a meeting of the Board with the consent of all the directors
present at the meeting and of which meeting, and of the resolution to be moved
thereat, specific notice has been given to all the directors then in India.
In the given case, unanimous consensus of all the directors present at the meeting
was lacking. Hence, Mr. Amit cannot be appointed as a Managing Director of CHH
Limited.
3. (i) The directors of the company act together as a body and generally at the meeting of
the Board duly convened, unless special powers are delegated to an individual
director or the managing director. Where it is not possible to hold board meetings
because the directors are busy elsewhere or the time for convening such a meeting
is short, it is possible that the required resolution can be passed by way of circular
resolution as provided in section 175 of the Companies Act 2013.
However, under section 179 of the Companies Act 2013, certain powers can be
exercised by the Board of directors by means of a resolution passed at meeting
convened for this purpose.
They are:
(i) to make calls on shareholders in respect of money unpaid on their shares
(ii) to authorize buy back of securities under section 68
(iii) to issue securities, including debentures, whether in or outside India
(iv) to borrow monies

(v) to invest the funds of the company and

(vi) to grant loans or give guarantee or provide security in respect of loans
(vii) to approve financial statements and the Board's report
(viii) to diversify the business of the company
(ix) to approve amalgamation, merger or reconstruction
(x) to take over a company or acquire a controlling or substantial stake in another
company.
(xi) Any other matter as prescribed in Rule 8 of the Companies (Meetings of the
Board and its Powers) Rules, 2014.
In view of the above, the Managing Director can go ahead and complete the joint
venture agreement after obtaining the approval of the board by passing a circular
resolution.
For this purpose, the proposed resolution has to be circulated in draft along wit h the
other necessary papers, if any, to all the directors in India at their usual residential
addresses.
The resolution will become valid if the same is approved by majority of the directors
and who are entitled to vote on the resolution. There after the resolution as passed
by way of circulation will be entered in the minutes book of the Board of Directors and
is enough compliance of the provisions of Companies Act, 2013 in this regard.
(ii) As per Section 186(2) of the Companies Act, 2013, no company shall directly or indirectly
(a) give any loan to any person or other body corporate;
(b) give any guarantee or provide security in connection with a loan to any other
body corporate or person; and
(c) acquire by way of subscription, purchase or otherwise, the securities of any
other body corporate,
exceeding sixty per cent. of its paid-up share capital, free reserves and securities
premium account or one hundred per cent. of its free reserves and securities premium
account, whichever is more, except with the prior approval by means of a special
resolution passed at a general meeting.
However, explanation provided in Section 186(2) of the Companies Act, 2013 states
that for the purposes of this sub-Section, the word “person” does not include any
individual who is in the employment of the Company.
As per the given facts, ASK Housing Finance Company Limited was prepared to give
housing loans to the employees of M/s NEWS Pharmacy Limited on the condition that
such loans are guaranteed by the M/s NEWS Pharmacy Limited exceeding the limits
prescribed in the Companies Act, 2013.

Here, the loans are to be guaranteed by M/s. News Pharmacy Limited for its
employees which falls within the purview of the explanations which includes
guarantees given for the employees. So, Section 186(2) shall not be applicable to it.
Hence, it can give the guarantee without any condition on the limits imposed in the
Section 186(2). Hence, there are no legal requirements to be fulfilled under the
Companies Act, 2013 to give effect to the above proposal.
Answer will remain the same, even if the company provides security instead of
guarantee as the provisions of the Section 186(2) are applicable for providing security
also.
4. (i) According to Section 213(b)(i) of the Companies Act, 2013, the Tribunal may, on
filling of an application by any other person (not being a member of company) or
otherwise, if the Tribunal is satisfied that there are circumstances suggesting that the
business of the company is being conducted with intent to defraud its creditors,
members or any other person or otherwise for a fraudulent or unlawful purpose, or in
a manner oppressive to any of its members or that the company was formed for any
fraudulent or unlawful purpose, may order after giving a reasonable opportunity of
being heard to the parties concerned, that the affairs of the company ought to be
investigated by an inspector or inspectors appointed by the Central Government and
where such an order is passed, the Central Government shall appoint one or more
competent persons as inspectors to investigate into the affairs of the company in
respect of such matters and to report thereupon to it in such manner as the Central
Government may direct.
The creditors of NTY Ltd should be guided in terms of the provisions stated above.
(ii) Section 209 of the Companies Act, 2013 states that, if the Registrar has reasonable
ground to believe that the books and papers of:
- A company or
- Relating to the key managerial personnel or
- any director or
- Auditor or
- Company secretary in practice if the company has not appointed a company
secretary
are likely to be destroyed, mutilated, altered, falsified or secreted he may, after
obtaining an order from the special court for the seizure of such books and papers:
a. enter with such assistance as may be required and search the place where such
books or papers are kept, and
b. Seize such books and papers as he considers necessary after allowing the
company to take copies of the order from the Special court.

In the given scenario, the registrar has failed to obtain possession from special court.
So, he is not authorised to enter the premises of the company and seize the books of
accounts of MBlND Bronze Limited. Hence, the contention of MBIND Bronze Limited
is valid in law.
5. Central Government may by order provide for amalgamation in public interest.
According to Section 237 of the Companies Act, 2013, where the Central Government is
satisfied that it is essential in the public interest that two or more companies should
amalgamate, the Central Government, may, by order notified in the official gazette, provide
for the amalgamation of those companies into a single company with such constitution,
with such property, powers, rights, interests, authorities and privileges and with such
liabilities, duties and obligations, as may be specified in the order.
Continuation by or against the transferee company of any legal proceedings
The order may also provide for the continuation by or against the transferee company of
any legal proceedings pending by or against any transferor company and such
consequential, incidental and supplemental provisions as may, in the opinion of the Central
Government, be necessary to give effect to amalgamation.
Same interest rights or compensation
Every member or creditor including a debenture holder of each of the transferor companies
before the amalgamation shall have, as nearly as may be, the same in terest in or rights
against the transferee company as he had in the company of which he was originally a
member or creditor and in case the interest or rights of such member or creditor in or
against the transferee company are less than the interest in or rights against the original
company, he shall be entitled to compensation to that extent, which shall be assessed by
such authority as may be prescribed and every such assessment shall be published in the
official gazette and the compensation so assessed shall be paid to the member or creditor
concerned by the transferee company.
6. In the given instance, an appointment of Mr. Fair was made by a group of depositors of
M/s. Bright Limited (listed company), as their representative to bring a Class Action Suit
against the management of the Company.
The given problem will be dealt with Section 432 read with the 245(10) of the Companies
Act, 2013. Section 432 states that a party to any proceeding or appeal before the Tribunal
or Appellate Tribunal as the case may be, may appear in person or authorize one or more
Chartered Accountant or Company Secretaries or Cost Accountants or legal practioners
or any other person to present his case before the Tribunal or Appellate Tribunal as the
case may be.
Whereas, Section 245(10) of the Companies Act, 2013, provides that an application may
be filed or any other action may be taken under this section by any person, group of
persons or any association of persons representing the persons affected by any ac t or
omission, specified in section 245(1) subject to the compliances of this section .

In view of the above, the appointment of Mr . Fair is valid and an application of Mr. Fair
who is a representative of depositors, will be admitted by the Hon’ble Tribunal, provided,
the requirement of minimum number of members filing the application under Section
245(3)(ii) is fulfilled.
7. Failure to maintain proper books of accounts [Section 338(1) of the Companies Act,
2013]
• where a company is being wound up, if it is shown that proper books of account were
not kept by the company throughout the period of two years immediately preceding
the commencement of the winding up,
• every officer of the company who is in default shall, unless he shows that he acted
honestly and that in the circumstances in which the business of the company was
carried on, the default was excusable,
• be punishable with imprisonment for a term which shall be not less than one year but
which may extend to three years and with fine which shall not be less than I lakh
rupees but which may extend to three lakh rupees.
Conditions when it shall be deemed that proper books of account have not been
kept [Section 338(2) of the Act]: For the purposes of sub-Section (1), it shall be
deemed that proper books of account have not been kept in the case of any
company,—
• where the business of the company has involved dealings in goods, statements of the
annual stock takings and, except in the case of goods sold by way of ordinary retail
trade, of all goods sold and purchased, have not been kept.
In the instant case, no proper statements of all goods sold and purchased by the
company engaged in ordinary retail trade is kept. It shall be deemed that proper
books of account have been kept as ordinary retail trade is an exception under sub-
Section (2). Thus, opinion of CFO is correct.
If the company is engaged in wholesale trade instead of ordinary retail trade, then it
is deemed that proper statements of all goods sold and purchased by the company
engaged in wholesale retail trade is not kept for more than 3 years period immediately
prior to the date of winding up application. Hence, in this case, the CFO opinion will
not hold good and will be punishable.
8. (i) As per Section 581Y of the Companies Act, 1956, unless the Articles requires a larger
number, one fourth of the total number of members of the producer company shall be
the quorum at a general meeting. In this case, the company has got 100 members
and hence, the quorum is 25.
(ii) Section 581 V of the Companies Act, 1956 provides that the quorum for a meeting of
the Board shall be one third of the total strength of directors, subject to a minimum of

three. In the given case, 1/3 of 6 directors comes to 2, but minimum required is 3,
hence, the quorum will be 3 directors for a board meeting.
(iii) Section 581 P of the Companies Act, 1956 empowers the Board of Directors of
Producer Company to co-opt one or more experts as director, but not exceeding one
fifth of the total number of directors. As there are 6 directors in the given case, hence,
co-opting one expert on the Board will be in order.
(iv) Yes, as per Section 581ZF of the Companies Act, 1956, every producer company is
required to have internal audit of its accounts carried out by a Chartered Accountant
at such intervals and in such manner as may be specified in the Articles.
9. As per Section 2(42) of the Companies Act, 2013, a foreign company means any
company or body corporate incorporated outside India which-
(a) has a place of business in India whether by itself or through an agent, physically or
through electronic mode; and
(b) conducts any business activity in India in any other manner.
(i) A company incorporated outside India and have not established a place of business
in India, is not deemed to be a Foreign Company. Thus establishing a place of
business is an essential ingredient in the definition. In the given case, the company
has not established a place of business in India though employs agents in India. It
will not be deemed to be a foreign company.
(ii) A company incorporated outside India, will not be deemed to be a Foreign Company
even though all the shareholders are Indian citizens, unless it has a place of business
in India.
(iii) A company incorporated In India but having all foreign shareholders will be deemed
to be an Indian Company as it is not incorporated outside India though it has a place
of business in India.
(iv) According to the Companies (Registration of Foreign Companies) Rules, 2014,
“electronic mode" means carrying out electronically based, whether main server is
installed in India or not, including, but not limited to:
(a) Business to business and business to consumer transactions, data inter-change
and other digital supply transactions
(b) Offering to accept deposits or inviting deposits or accepting deposits or
subscriptions in India or from citizens of India
(c) Financial settlements, web-based marketing, advisory and transactional
services, data based services and products and supply chain management,
(d) Online services such as telemarketing, telecommuting, telelmedicine, education
and information research.

(e) All related data communication services whether conducted by e-mail, mobile
devices, social media, cloud computing, data management, voice or da ta
transmission or otherwise.
Therefore, looking to the above description, a company which has no place of
business established in India, yet doing online business through telemarketing in
India will be treated as a foreign company.
10. (i) Admissibility of certain documents as evidence:
Section 397 of the Companies Act, 2013 provides for admissibility of certain
documents as evidence. According to the provisions of that section, any document
reproducing or derived from returns and documents filed by a company with the
Registrar on paper or in electronic form or stored on any electronic data storage
device or computer readable media by the Registrar, and authenticated by the
Registrar or any other officer empowered by the Central Government in such manner
as may be prescribed, shall be deemed to be a document for the purpose of this Act
and the rules made thereunder and shall be admissible in any proceedings thereunder
without further proof of production of the original as evidence of any contents of the
original of or any fact stated therein of which direct evidence is admissible.
On the ground stated above, XYZ Ltd. cannot validly raise any objection on the
documents already filed by it with the Registrar.
(ii) The provisions related to the Dormant companies is covered under section 455 of the
Companies Act, 2013. According to provisions-
1. a company is formed and registered under this Act for the purpose of a future
project or to hold an asset or intellectual property and has no significant
accounting transaction.
2. Such company or an inactive company may make an application to the Registrar
in such manner as may be prescribed for obtaining the status of a dormant
company.
3. The Registrar shall allow the status of a dormant company to the applicant and
issue a certificate after consideration of the application.
4. The Registrar shall maintain a register of dormant companies in such form as
may be prescribed.
In case of a company which has not filed financial statements or annual returns for
two financial years consecutively, the Register shall issue a notice to that company
and enter the name of such company in the register maintained for dormant
companies.
A dormant company shall have such minimum number of directors, file such
documents and pay such annual fee as may be prescribed to the Registrar to retain
its dormant status in the register and may become an active company on an

application made in this behalf accompanied by such documents and fee as may be
prescribed. However, the Registrar shall strike off the name of a dormant company
from the register of dormant companies, which has failed to comply with the
requirements of this section.
Thus, JKL Research Development Limited may follow the above procedure to obtain
the status of a ‘Dormant Company’.
11. (i) According to Section 417(1) of the Companies Act, 2013, the Central Government
may, after consultation with the Chief Justice of India, remove from office the
President, Chairperson or any Member, who—
(a) has been adjudged an insolvent; or
(b) has been convicted of an offence which, in the opinion of the Central
Government, involves moral turpitude; or
(c) has become physically or mentally incapable of acting as such President, the
Chairperson, or Member; or
(d) has acquired such financial or other interest as is likely to affect prejudicially his
functions as such President, the Chairperson or Member; or
(e) has so abused his position as to render his continuance in office prejudicial to
the public interest:
Provided that the President, the Chairperson or the Member shall not be removed on
any of the grounds specified in clauses (b) to (e) without giving him a reasonable
opportunity of being heard.
As per the proviso stated above, in case of sub-clause (a), i.e. where there is a case
of insolvency, there is no requirement of giving an opportunity of being heard by the
member of the NCLAT. Hence, the action taken by the Central Government against
PRTJ is valid.
Circumstances under which the Central government can remove the President,
the Chairperson etc.,
According to Section 417(2) of the Companies Act, 2013, the President, the
Chairperson or the Member shall not be removed from his office except by an order
made by the Central Government on the ground of proved misbehaviour or incapacity
after an inquiry made by a Judge of the Supreme Court nominated by the Chief Justice
of India on a reference made to him by the Central Government in which such
President, the Chairperson or Member had been informed of the charges against him
and given a reasonable opportunity of being heard.
In the instant case, it is advised that the decision of the Central Government to remove
(without giving reasonable opportunity of being heard) Mr. PRTJ, member of NCLAT

who was adjudged as an insolvent by a competent authority is appropriate as per the

clause (a) of Section 417(1) of the Companies Act, 2013.
(ii) Under section 442 of the Companies Act, 2013, it is provided that the Central
Government shall maintain a panel of experts for mediation between the parties
during pendency of any proceedings before the Central Government or the Tribunal
or the Appellate Tribunal under the Act. In common parlance, mediation means
intervention of some third party in a dispute with the intention to resolve the dispute.
Similarly, conciliation means the powers of adjusting or settling disputes in a friendly
manner through extra judicial means. The object behind the panel is to dispose the
matter pending before the Government / Tribunal as mentioned above.
Filing of application: Application for mediation and conciliation can be made by:
(a) any parties to the proceedings (It shall be accompanied with such fees and in
such form as may be prescribed)
(b) The Central Government or the Tribunal or the Appellate Tribunal before which
any proceeding is pending any, suo moto refer any matter pertaining to such
proceeding to such number of experts as it may deem fit.
12. Draft of ordinary resolution under Section 180(1)(c) of the Companies Act, 2013
"Resolved that the company hereby consents to the Board of Directors borrowing monies
not exceeding ` …………… (Rupees ………………………….) in excess of the aggregate
of the *paid-up capital of the company, its free reserves and securities Premium, that is to
say reserves not set apart for any specific purpose, as provided in Section 180(1)(c) of the
Companies. Act, 2013, and in addition to any temporary loans obtained from the company’s
bankers in the ordinary course of business".
Borrowings
Section 180(1)(c) does not apply to the borrowing by a company by way of temporary loans
obtained from the company's bankers in the ordinary course of business. Therefore, in
calculating the limits stipulated in this provision, temporary loans obtained fro m the
company's bankers in the ordinary course of business shall be excluded.
The expression 'temporary loans' means loans repayable on demand or within six months
from the date of the loan such as short term cash credit arrangements, the discounting of
bills and the issue of other short terms loans of a seasonal character, but does not include
loans raised for the purpose of financing expenditure of capital nature [Explanation to
Section 180 (1)(c)].
*Through the enforcement of the Companies (Amendment) Act, 2017 w.e.f
9th February, 2018, in section 180 in sub-section (1), in clause (c), for the
words "paid-up share capital and free reserves” the word “paid-up share capital, free
reserves and securities premium" is substituted.

13. The question can be answered with reference to Section 6 of the Securities Contract
(Regulations) Act, 1956 which empowers the Central Government to call for information.
Accordingly:
(a) Duty of HEM Stock Exchange Limited to furnish periodic returns to SEBI: Every
recognized stock exchange should furnish periodical returns to SEBI in the prescribed
format. These Returns contain information on current affairs of the Exchange
including volume and value of transactions, short deliveries, important decision s
taken by Board etc. [Section 6(1) of the Securities Contracts (Regulation) Act, 1956].
(b) Power of SEBI to ask for the information asked as stated above, over and above
the periodic returns: SEBI may by order in writing call for information or explanation
relating to affairs of an Exchange or its member. [Section 6(3)(a) of the Act]
(c) Period for which the Stock Exchange is required to maintain the books of
accounts which may be inspected by SEBI: Every Stock Exchange has to maintain
books of accounts for a period of 5 years and these books may be inspected by SEBI
at any point of time. [Section 6(2) of the Act]
(d) Duty of the Stock Exchange and the persons dealing with the stock exchange
with regard to the information sought for by SEBI: Every Director, Manager,
Secretary or officer of the Exchange; every member of such stock exchange; if the
member of the stock exchange is a firm, every partner, manager, secretary or other
officer of the firm and every other person or body of persons who has had dealings in
the course of business with any of the persons mentioned above whether directly or
indirectly, is bound to provide information to Enquiry officer or SEBI representative
who are looking into the affairs of the Exchange. [Section 6(4) of the Act]
14. Types of Committees under SEBI (LODR) Regulations, 2015
A. Audit Committee:
Every listed entity shall constitute a qualified and independent audit committee which
shall have:
(a) The audit committee shall have minimum three directors as members.
(b) Two-thirds of the members of audit committee shall be independent directors.
(c) All members of audit committee shall be financially literate and at least one
member shall have accounting or related financial management expertise.
(d) The chairperson of the audit committee shall be an Independent Director and he
shall be present at Annual general meeting to answer shareholder queries.
(e) The Company Secretary shall act as the secretary to the audit committee.
(f) The audit committee at its discretion shall invite the finance director or head of
the finance function, head of internal audit and a representative of the statutory

auditor and any other such executives to be present at the meetings of the
committee.
Meetings of Audit Committee:
(a) The audit committee shall meet at least four times in a year and not more than
120 days shall elapse between two meetings.
(b) The Quorum for audit committee meeting shall either be two members or one
third of the members of the audit committee, whichever is greater, with at least
2 Independent directors.
(c) The audit committee shall have powers to investigate any activity within its terms
of reference, seek information from any employee, obtain outside legal or other
professional advice and secure attendance of outsiders with relevant expertise,
if it considers necessary.
B. Nomination and Remuneration Committee:
The Board of directors shall constitute the nomination and remuneration committee
as follows:
• The committee shall comprise of at least 3 directors;
• All directors of the committee shall be Non-Executive Directors; and
• At least 50 percent of the directors shall be independent directors.
The Chairperson of the nomination and remuneration committee shall be an
independent director. The chairperson of the listed entity, whether executive or non-
executive, may be appointed as a member of the Nomination and Remuneration
Committee and shall not chair such Committee.
C. Stakeholders Relationship Committee:
The listed entity shall constitute a Stakeholders Relationship Committee to
specifically look into the mechanism of redressal of grievances of shareholders,
debenture holders and other security holders.
• The Chairperson of this committee shall be a Non-Executive director.
• The Board of Directors shall decide other members of this committee.
D. Risk Management Committee
• The Board of directors shall constitute a Risk Management Committee.
• The majority of members of Risk Management Committee shall consist of
members of the board of directors.

• The Chairperson of the Risk management committee shall be a member of the

board of directors and senior executives of the listed entity may be members of
the committee.
• The Board of directors shall define the role and responsibility of the Risk
Management Committee and may delegate monitoring and reviewing of the risk
management plan to the committee and such other functions as it may deem fit.
• The provisions of this regulation regarding risk management committee
shall be applicable to top 100 listed entities, determined on the basis of
market capitalization, as at the end of the immediate previous financial
year.
15. Section 2(e) of Foreign Exchange Management Act, 1999 states that ‘capital account
transactions' means:
(a) a transaction which alters the assets or liabilities, including contingent liabilities,
outside India of person's resident in India
(b) a transaction which alters assets or liabilities in India of persons resident outside India
and includes transactions referred to in section 6(3).
According to the said definition, a transaction which alters the contingent liability will be
considered as capital account transaction in the case of person resident in India, but it is
not so in the case of person resident outside India.
Purchase of immovable property by Mr. Hillary Benjamin in India is a capital account
transaction. It has also been specifically provided in section 6(3)(i) as a capital account
transaction.
Guarantee will be considered as a capital account transaction in the following cases:
(1) Guarantee in respect of any debt, obligation or other liability incurred by a person
resident in India and owed to a person resident outside India.
(2) Guarantee in respect of any liability, debt or other obligation incurred by a person
resident outside India.
In this case, Mr. Hillary Benjamin, a resident outside India gives a guarantee in respect of
a debt incurred by a person resident in India and owed to a person resident in India. Hence,
it would appear that guarantee by Mr. Hillary Benjamin cannot be considered as a capital
account transaction within the meaning of Section 2(e), particularly because it is a
contingent liability.
All capital account transactions are prohibited unless specifically permitted. RBI is
empowered to issue regulations in this regard [Section 6(3)]. Permissible capital account

transactions by persons resident outside India are given in Schedule II to the Foreign
Exchange Management (Permissible Capital Account Transactions) Regulations, 2000.
According to the said regulations both the purchase of immovable property by Mr. Hillary
Benjamin and guarantee by Mr. Hillary Benjamin are permissible.
16. According to section 18(1) of the Securitization and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, any person aggrieved, by any order made by
the Debts Recovery Tribunal under section 17, may prefer an appeal along with prescribed
fees to the Appellate Tribunal within 30 days from the date of receipt of the order of Debts
Recovery Tribunal.
Further, no appeal shall be entertained unless the borrower has deposited with the
Appellate Tribunal 50% of the amount of debt due from him, as claimed by the secured
creditors or determined by the Debts Recovery Tribunal, whichever is less. However, the
Appellate Tribunal may, for the reasons to be recorded in writing, reduce the amount to not
less than 25% of debt.
Thus, in the given situation Solomon Optimum Nutrition Limited can appeal to the Appellate
Tribunal (now to NCLAT) by following the above provisions.
17. Offence of Money Laundering: Section 2(i)(y) of the prevention of Money Laundering
Act, 2002 defines the term “scheduled offence”, which accordingly means -
(i) the offences specified under Part A of the Schedule; or
(ii) the offences specified under Part B of the Schedule if the total value involved in such
offences is one crore rupees or more
(iii) The offences specified under Part C of the Schedule.
This Schedule to the Act gives a list of all the above offences.
Paragraph 2 of Part A of the Schedule to the Prevention of Money Laundering Act, 2002,
covers Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985.
Whereby, illegal import into India, export from India or transshipment of narcotic drugs and
psychotropic substances (section 23) is covered under paragraph 2 of Part A.
Punishment:
Section 4 of the said Act provides for the punishment for Money- Laundering. Whoever
commits the offence of money-laundering shall be punishable with rigorous imprisonment
for a term which shall not be less than 3 years but which may extend to 7 years and shall
also be liable to fine. But where the proceeds of crime involved in money-laundering relate
to any offence specified under paragraph 2 of Part A of the Schedule, the maximum
punishment may extend to 10 years instead of 7 years.
18. Section 6 of the Foreign Contribution (Regulation) Act, 2010 prescribes that no member of
a Legislature shall while visiting any country accept, except with the prior permission of the
Central Government for any foreign hospitality. Foreign Hospitality [as per section 2(m) ]

means any offer not being a purely casual one, made in cash or kind by a foreign source
for providing a person with the costs of travel to any foreign country with free boarding
lodging or medical treatment. Therefore, prior approval is required from Cen tral
Government for the medical expenses. Provided that it shall not be necessary to obtain
any such permission for an emergent medical aid needed on account of sudden illness
contracted during a visit outside India, but where such foreign hospitality has been
received, the person receiving such hospitality shall give, within one month from the date
of receipt of such hospitality an intimation to the Central Government as to the receipt of
such hospitality, and the source from which and the manner in which such hospitality was
received by him.
As per Rule 7 of Foreign Contribution (Regulation) 2011, foreign hospitality may be
received by member of Legislature in the following manner.
In case of emergent medical aid needed on account of sudden illness during a visit abroad,
the acceptance of foreign hospitality shall be required to be intimated to the Central
Government within sixty days of such receipt giving full details including the source,
approximate value in Indian Rupees, and the purpose for which and the manner in which
it was utilized.
Hence, Mr. Peter has to follow the above procedure.
19. There are two basic types of arbitration agreement:
(i) Arbitration clause - a clause contained within a principal contract. The parties
(ii) Submission agreement - an agreement to refer disputes that already exist to
Delhi at the time of entering into joint venture agreement. This would be an arbitration
In the second case, the Principal contract (JVA) does not have any term relating to arbitration.
Disputes arose between the parties concerning quality of supplied goods in 2017. To resolve
this dispute, parties later entered into an agreement "That all disputes including quality of goods
supplied by Ronnie and Coleman Company Limited to Arnold Food Processors Limited shall
be submitted to arbitration. The parties hereby agree to abide by the decision of the arbitrator”.
Such an agreement that is made after the disputes have arisen would be called a submission
agreement.
20. A financial creditor either itself or along with other financial creditors may lodge an application
before the Adjudicating Authority (National Company Law Tribunal) for initiating corporate
insolvency resolution process against a corporate debtor who commits a default in payment of

its dues.
The financial creditor shall along with the application give evidence in support of the default
committed by the corporate debtor. He shall also give the name of the interim resolution
professional.
Where the Adjudicating Authority is satisfied that a default has occurred and the application
by the financial creditor is complete and there is no disciplinary proceedings pending
against the proposed resolution professional, it may admit such application made by the
financial creditor. Otherwise, the application may be rejected. However, the applicant may
rectify the defect within seven days of receipt of notice of rejection from the Adjudicating
Authority.

PAPER – 4: CORPORATE AND ECONOMIC LAWS
PART – I: RELEVANT AMENDMENTS APPLICABLE FOR MAY 2018 EXAMINATION

amendments made in the respective subject for the period 1 st May 2017 to 31 st October, 2017
This RTP of May 2018 examination is very important to the students to update themselves with
the relevant amendments pertaining to the Corporate and Economic Laws. This publication will
help the students to know of the significant changes, so that students may bring into line the
changes in the principal provisions.
Relevant amendments: The given list of relevant amendments contains the gist of
amendments, reference of page nos. of the study material alongwith the earlier law to enable
the students an addition/deletion/modification in the principal law.
Relevant Legislative amendments from 1 st of May 2017 to 31 st of October 2017
Corporate Laws
Sl. Heading of Details of Amendments Page no. of Earlier Law
No. Amendments the Study
material
with
reference
to relevant
provisions
(Corporate
and
Economic
Laws)
1. Exemptions to The Central Government 1.17 The Ministry of Corporate
Government amends the Notification Affairs has clarified via
Companies G.S.R. 463(E), dated 5 th Notification No. 463(E)
Vide June 2015. Following are dated 5th June, 2015, that
Notification the amendments: section 152(6) and (7) of
G.S.R. 582(E) (i) According to the the Companies Act,
Dated 13 th amendment, section 2013, shall not apply to:
June, 2017 152(6) & (7), shall not (i) A Government
apply to – company in which the
(a) a Government entire paid up share
company, which is not a capital is held by the
listed company, in which Central Government, or

not less than fifty-one per by any State Government

cent. of paid up share or Governments or by the
capital is held by the Central Government and
Central Government, or one or more State
by any State Government Governments:
or Governments or by the (ii) A subsidiary of a
Central Government and Government company,
one or more State referred above, in which
Governments; the entire paid up share
(b) a subsidiary of a capital is held by the
Government company, Government company.
referred to in (a) above."
(ii) The word "Tribunal 5.5-5.10 Usage of word “Tribunal”
“wherever it occurs in in the said sections.
sections 230 to 232, the
words "Central
Government” shall be
substituted.
Insertion of The aforesaid exceptions, modifications and adaptations shall be
Paragraph 2A applicable to a Government company which has not committed a
in the default in filing of its financial statements under section 137 of the
principal Companies Act or annual return under section 92 of the said Act
notification with the Registrar.
G.S.R.
463(E), dated
5th June 2015
2. Exemptions to (1) With respect to 3.2 173(5)- A One Person
Private Section 173(5), the Company, small company
Companies following sub- section and dormant company shall
Vide shall be substituted: be deemed to have
Notification (5) A One Person complied with the provisions
G.S.R. 583(E) Company, small of this section if at least one
Dated 13 th company, dormant meeting of the Board of
June, 2017 company and a private Directors has been
company (if such conducted in each half of a
private company is a calendar year and the gap
start-up) shall be between the two meetings is
deemed to have not less than ninety days:
complied with the Provided that nothing
provisions of this contained in this sub-
section if at least one section and in section
meeting of the Board of 174 shall apply to One

Directors has been Person Company in which

conducted in each half there is only one director on
of a calendar year and its Board of Directors
the gap between the
two meetings is not
less than ninety days:
Provided that nothing
contained in this
subsection and in
section 174 shall apply
to One person
Company in which
there is only one
director on its Board of
Directors.
(2) With respect to 3.10-3.11 174(3)- Where at any time
section 174(3)- the number of interested
It shall apply with the directors exceeds or is
exception that the equal to two thirds of the
interested director may total strength of the Board of
also be counted Directors, the number of
towards quorum in directors who are not
such meeting after interested directors and
disclosure of his present at the meeting,
interest pursuant to being not less than two,
section 184. shall be the quorum during
such time.
Explanation.—For the
purposes of this sub-
section, “interested director”
means a director within the
meaning of sub-section (2)
of section 184.
Paragraph 2A applicable to a Private company which has not committed a default
in the in filing of its financial statements under section 137 or annual
principal return under section 92 of the said Act with the Registrar.
notification
G.S.R.
464(E), dated
5th June 2015

3. Exemptions to The Central Government 1.3 & 3.35 Earlier vide

Companies amends the Notification notification dated
covered G.S.R. 466(E), dated 5 th June 5th June 2015 it was
section 8 of 2015. Following are the said that Section
the relevant amendments: 149 (1) and the first
Companies (1) Section 149(1)(b) & first Proviso to Sub-
Act, 2013 proviso shall not apply on section (1) shall not
Vide section 8 companies. apply.
Notification (2) In section 186(7)-
G.S.R. 584(E) following proviso shall be
Dated 13 th inserted-Provided that
June, 2017 nothing contained in this sub-
section shall apply to a
company in which twenty-six
per cent. or more of the paid-
up share capital is held by the
Central Government or one or
more State Governments or
both, in respect of loans
provided by such company for
funding Industrial Research
and Development projects in
furtherance objects as stated
in its memorandum of
association."
Paragraph 2A applicable to a company covered under section 8 of the said Act
in the principal which has not committed a default in filing of its financial statements
notification under section 137 or annual return under section 92 of the said Act
G.S.R. 466 with the Registrar.
(E), dated 5 th
June 2015
4. Enforcement In the Companies Act, 2013, 12.17 Second proviso to
of the in section 434, in sub-section section 434 (c) had
Companies (1), in clause (c),- start with the usage
(Removal of (a) in the third proviso, for of the words
Difficulties) “Provided further that-”, the “Provided further
Orders, 2017 following shall be substituted, that”.
Vide Order namely:- “Provided also that- After this proviso,
S.O. 2042(E) ”; the third proviso is
dated 29 th introduced
June , 2017

(b) after the third proviso,

the following proviso shall be
inserted, namely:-
“Provided also that
proceedings relating to cases
of voluntary winding up of a
company where notice of the
resolution by advertisement
has been given under sub-
section (1) of section 485 of
the Companies Act, 1956 but
the company has not been
dissolved before the 1st April,
2017 shall continue to be
dealt with in accordance with
provisions of the Companies
Act, 1956 and the Companies
(Court) Rules, 1959.”
5. Enforcement The Central Government 1.4 According to the
of the hereby makes the following Rule 4 of the
Companies rules further to amend the Companies
(Appointment Companies (Appointment and (Appointment and
and Qualification of Directors) Qualification of
Qualification Rules, 2014. Directors) Rules,
of Directors) In the Companies 2014, the following
Amendment (Appointment and class or classes of
Rules, 2017 Qualification of Directors) companies shall
Vide Rules, 2014, rule 4 shall be have at least
Notification numbered as sub-rule(1) and 2directors as
G.S.R. 839(E) after sub-rule(1) as so independent
dated 5th July renumbered, the following directors:
2017 sub-rule shall be inserted (1) the Public
namely :- Companies having
“(2) The following classes of paid up share
unlisted public company shall capital of 10crore
not be covered under sub- rupees or more; or
rule (1), namely:- (2) the Public
(a) a joint venture; Companies having
(b) a wholly owned turnover of 100
subsidiary; and crore rupees or
more; or
(3) the Public

(c) a dormant company as Companies which

defined under section have, in aggregate,
455 of the Act.” outstanding loans,
debentures and
deposits,
exceeding 50crore
rupees.
However, in case a
company covered
as under the above
rule is required to
appoint a higher
number of
independent
directors due to
composition of its
audit committee,
such higher number
of independent
directors shall be
applicable to it.
Further, any
intermittent
vacancy of an
independent
director shall be
filled-up by the
Board at the
earliest but not later
than immediate
next Board meeting
or three months
from the date of
such vacancy,
whichever is later.
However, where a
company ceases to
fulfill any of three
conditions laid
down above for
three consecutive
years, it shall not be
required to comply

with these
provisions until
such time as it
meets any of such
conditions.
For the purpose of
the above
assessment, the
paid up share
capital or turnover
or outstanding
loans, debentures
and deposits, as the
case may be, as
existing on the last
date of latest
audited financial
statements shall be
taken into account.
A company
belonging to any
class of companies
for which a higher
number of
independent
directors has been
specified in the law
for the time being in
force shall comply
with the
requirements
specified in such
law.
6. Enforcement The Central Government 3.4 Earlier Rule 3(e)
of the hereby makes the following stated - The
Companies rules further to amend the director, who
(Meetings of Companies (Meetings of desires, to
Board and its Board and its Powers) Rules, participate may
Powers) 2014. intimate his
Second Following are the intention of
Amendment amendments: participation
Rules, 2017 through the
vide electronic mode at

Notification (1) In rule 3 for clause (e), the beginning of the

G.S.R. 880(E) the following shall be calendar year and
Dated 13 th substituted, - such declaration
July 2017 “(e) Any director who intends shall be valid for
to participate in the meeting one calendar year.
through electronic mode may
intimate about such
participation at the beginning
of the calendar year and such
declaration shall be valid for
one year: Provided that such
declaration shall not debar
him from participation in the
meeting in person in which
case he shall intimate the
company sufficiently in
advance of his intention to
participate in person.”
(2) In the principal rules, for 3.12 Earlier Rule 6
rule 6, the following rule shall prescribed that the
be substituted, namely:- Board of Directors
"6. Committees of the Board. of every listed
- The Board of directors of companies and
every listed company and a following class of
company covered under rule companies shall
4 of the Companies constitute an Audit
(Appointment and Committee and a
Qualification of Directors) Nomination and
Rules, 2014 shall constitute Remuneration
an 'Audit Committee' and a Committee of the
'Nomination and Board-
Remuneration Committee of (a) all public
the Board'. companies with a
paid up capital of 10
crore rupees or
more;
(b) all public
companies having
turnover of 100
crore rupees or
more;

(c) all public

companies, having
in aggregate,
outstanding loans
or borrowings or
debentures or
deposits exceeding
50 crore rupees or
more.
7. Enforcement The Central Government 4.14 Not notified
of Section notified the provisions of sub-
212(8), (9), & sections (8), (9) and sub-
(10) vide section (10) of section 212 of
Notification the Companies Act, 2013 with
S.O. 2751(E) effect from 24th day of
dated 24 th of August, 2017.
August, 2017
8. Enforcement In exercise of the powers Reference of Earlier not notified
of the conferred under sub-section Relevant
Companies (1) of section 469 read with provision 212
(Arrests in section 212 of the Companies on page no.
connection Act, 2013, Central 4.14 of the
with Government enforced the Study material
Investigation Companies (Arrests in
by Serious connection with Investigation
Fraud by Serious Fraud
Investigation Investigation Office) Rules,
Office) Rules, 2017.
2017 Vide According to the Rule where
Notification any person has been guilty of
G.S.R. any offence punishable under
1062(E) dated section 212 of the Act, he
24th Of August may be arrested as per the
2017 respective rules.
For details see
http://www.mca.gov.in/Ministr
y/pdf/SFIORule_25082017.p
df
9. Exemptions Vide Notification number Related to the Before amendment
given to G.S.R. 839(E) dated 5th July, amendment there was a single
certain 2017 an amendment was given in point rule. It does not
unlisted public issued through the no. 7 (Above) prescribe the

companies Companies (Appointment and nature of unlisted

under the Qualification of Directors) public company and
Companies Amendment Rules, 2017 the meaning of joint
(Appointment inter-alia amending rule 4 of venture.
and the Companies (Appointment
Qualification and Qualification of Directors)
of Directors Rules, 2014.
)Rules, 2014 The said amended Rule 4
from provides that an unlisted
appointment public company which is a
of joint venture, a wholly owned
Independent subsidiary or a dormant
Directors Vide company will not be required
notification of to appoint Independent
circular Directors.
09/2017 dated Through the issue of this
5th September circular, it is hereby clarified
2017 that a "joint venture,, would
mean a joint arrangement,
entered into in writing,
whereby the parties that have
joint control of the
arrangement, have rights to
the net assets of the
arrangement. The usage of
the term is similar to that
under the Accounting
Standards.
10. Enforcement Restriction on number of Reference of Earlier not notified
of the layers for certain classes of relevant
Companies holding companies- section 186 on
(Restriction (1) On and from the date of page no. 3.32
on number of commencement of these
layers) Rules, rules, no company, other than
2017 in a company belonging to a
exercise of class specified in sub-rule(2)
the powers , shall have more than two
conferred layers of subsidiaries:
under proviso Provided that the provisions
to clause (87) of this sub-rule shall not affect
of section 2 a company from acquiring a
Vide company incorporated
notification

G.S.R. outside India with

1176(E), subsidiaries beyond two
dated 20 th layers as per the laws of such
September country:
2017. Provided further that for
computing the number of
layers under this rule, one
layer which consists of one or
more wholly owned
subsidiary or subsidiaries
shall not be taken into
account.
(2) The provisions of this
rule shall not apply to the
following classes of
(a) a banking company as
defined in the Banking
Regulation Act, 1949
(b) a non-banking financial
company as defined in
the Reserve Bank of
India Act, 1934 which is
registered with the
Reserve Bank of India
and considered as
systematically important
non-banking financial
company by the
Reserve Bank of India;
(c) an insurance company
being a company which
carries on the business
of insurance in
accordance with
provisions of the
Insurance Act, 1938 and
the Insurance
Regulatory
Development Authority
Act, 1999
(d) a Government company
referred to in clause (45)

of section 2 of the
Companies Act.
(3) The provisions of this
rule shall not be in derogation
of the proviso to sub-section
(1) of section 186 of the Act.
(4) Every company, other
than a company referred to in
sub-rule (2), existing on or
before the commencement of
these rules, which has
number of layers of
subsidiaries in excess of the
layers specified in sub-rule
(1) –
(i) shall file, with the Registrar
a return disclosing the details
specified therein, within a
period of one hundred and
fifty days from the date of
publication of these rules in
the Official Gazette;
(ii) shall not, after the date of
commencement of these
rules, have any additional
layer of subsidiaries over and
above the layers existing on
such date; and (iii) shall not,
in case one or more layers
are reduced by it subsequent
to the commencement of
these rules, have the number
of layers beyond the number
of layers it has after such
reduction or maximum layers
allowed in sub rule (1),
whichever is more.
(5) If any company
contravenes any provision of
these rules the company and
every officer of the company
who is in default shall be
punishable with fine which

may extend to ten thousand

rupees and where the
contravention is a continuing
one, with a further fine which
may extend to one thousand
rupees for every day after the
first during which such
contravention continues.
11. Notification of The Central Government - Earlier Not notified
Section 247 hereby appoints the 18th
vide October, 2017 as the date on
Notification which the provisions of
S.O. 3393(E) section 247 of the said Act
dated 18 th shall come into force.
October 2017
12. Notification of In exercise of the powers - Earlier Not notified
the conferred by section 247, the
Companies Central Government hereby
(Registered enforced the Companies
Valuers and (Registered Valuers and
Valuation) Valuation) Rules, 2017.
Rules, 2017 Respective rule contains 6
vide chapters. For detailed rule
notification click the following link
G.S.R http://www.mca.gov.in/Ministr
1316(E) dated y/pdf/RegisteredValues_191
18th October, 02017.pdf
2017
13. Notification of In section 247(1), for the word - Earlier section
the “a person having such 247(1) stated as
Companies qualifications and experience follows: Where a
(Removal of and registered as a valuer in valuation is
Difficulties) such manner, on such terms required to be made
Second and conditions as may be in respect of any
Order, 2017 prescribed”, the words “a property, stocks,
Vide Order person having such shares,
S.O. 3400(E) qualifications and debentures,
dated 23rd experience, registered as a securities or
October 2017 valuer and being a member of goodwill or any
an organisation recognised, other assets (herein
in such manner, on such referred to as the
terms and conditions as may assets) or net worth

be prescribed” shall be of a company or its

substituted. liabilities under the
provision of this
Act, it shall be
valued by a person
having such
qualifications and
experience and
registered as a
valuer in such
manner, on such
terms and
conditions as may
be prescribed and
appointed by the
audit committee or
in its absence by
the Board of
Directors of that
company.
Economic Laws
14. Enforcement The Central Government 6.8 Earlier it was not
of clause (a) hereby appoints the 1st April, notified
to clause(d) of 2017 as the date on which the
section 2 of provisions of clause (a) to
the Code Vide clause (d) of section 2 of the
notification Code relating to voluntary
S.O. 1570(E) , liquidation or bankruptcy shall
dated 15 th come into force.
May , 2017
15. Commencem The Central Government 6.32 Not Notified
ent of sections hereby appoints the 14th day
related to Fast of June, 2017 as the date on
Track which the provisions of
Corporate section 55 to section 58 (both
Insolvency inclusive) of the said Code
Resolution shall come into force.
Process Vide
Notification
S.O. 1910(E)
dated 14 th
June 2017

16. Commencem In exercise of the powers 6.32 Earlier Central

ent of sections conferred by section 55(2) of Government has not
related to Fast the Insolvency and notified any such
Track Bankruptcy Code, 2016 , the notification as to the
Corporate Central Government hereby making of an application
Insolvency notifies that an application for for fast track corporate
Resolution fast track corporate insolvency resolution
Process u/s insolvency resolution process process
55(2) of the may be made in respect of the
Code Vide following corporate debtors,
Notification namely :-
S.O.1911(E) (a) a small company as
dated 14 th defined under clause
June 2017 (85) of section 2 of
Companies Act, 2013,or
(b) a Startup (other than the
partnership firm) as
defined in the
notification of the
Government of India in
the Ministry of
Commerce and Industry
number G.S.R. 501(E),
dated the 23rd May,
2017, or
(c) an unlisted company
with total assets, as
reported in the financial
statement of the
immediately preceding
financial year, not
exceeding rupees one
crore.
17. Issue of Ministry of Corporate Affairs 6.28- 6.29 -
clarification issued a clarification in view
regarding of the requirement under
approval of section 30(2)(e) of the Code
resolution for the resolution professional
plans under to confirm that each
section 30 and resolution plan received by
31 of him does not contravene any
Insolvency

and of the provisions of the law for

Bankruptcy the time being in force.
Code, 2016 Accordingly clarification was
vide general sought whether approval of
circular shareholders/ members of
IBC/01/ 2017 the corporate debtor/
dated 25 th company is required for a
October 2017 resolution plan at any stage
during the process for its
consideration and approval
as laid down under section 30
& 31 of the Insolvency and
Bankruptcy Code and after
approval during its
implementation, for any
actions contained in the
resolution plan which would
normally require specific
approval of shareholders/
members under provisions of
Companies Act, 2013 or any
other law.
Through the issue of this
circular, it has been clarified
that the approval of
shareholders / members of
the corporate
debtor/company for a
particular action required in
the resolution plan for its
implementation, which would
have been required under the
Companies Act, 2013 or any
other law if the resolution plan
of the company was not being
considered under the Code,
is deemed to have been given
on its approval by the
Adjudicating Authority.

PART – II: QUESTIONS AND ANSWERS

QUESTIONS
CORPORATE LAWS
SECTION – A: COMPANY LAW
Appointment and Qualifications of Directors & Remuneration of Managerial Personnel

1. (i) The composition of the Board of Directors of a listed company as on 31-03-2017
comprised of (i) Mr. A, Director, (ii) Mr. B, Director (iii) Mr. C, Director (iv) Mr.· D,
Director, (v) Mrs. E, Independent Director, (vi) Mr. F, Independent Director and (vii)
Mr. G, Independent Director.
Mr. D & Mrs. E vacated their office of Director on 15-04-2017.
You are required to examine with reference to the provisions of the Companies Act,
2013 the vacations of the offices of Mr. D & Mrs. E and discuss the course of action
that can be taken up by the Company in this regard?
(ii) Discuss the legal position in the given situations with reference to the provisions of
the Companies Act, 2013:
(a) Mr. Arthav, a director resigns after giving due notice to the company and he
forwards a copy of resignation in e-form DIR-11 to the Registrar of Companies
(RoC) within the prescribed time. Besides, the company fails to intimate about
the resignation of Mr. Arthav to RoC.
(b) The Board of Directors of Superwood Limited decides to appoint on its Board,
Mr. Ramakant as a nominee director upon the request of a bank which has
extended a long term financial assistance to the company. The Articles of
Association of the company do not confer upon the Board any such power. Also,
there is no formal agreement between the company and the bank for any such
nomination.
2. (i) There are four directors in Shine Paper Limited. Mr. Madhav, being the director in
station, has been authorized to draw and endorse cheque or other negotiable
instruments on account of the company and also to direct registration of transfer of
shares and signing the share certificates etc. Evaluate whether he will be treated as
managing director of the company? Also recommend the procedure of appointment
of a managing director in a company in the light of the Companies Act, 2013.
(ii) Excel limited is a listed company with a turnover of ` 60 crores in the FY 2016-2017.
The company appoints Ms. R as the women director on 1 st March 2017. Ms. R is

already a director in twelve companies including ten public companies. Also, Ms. R
is chartered accountant in practice.
Further, also, Ms. R, is a director in Supreme Ltd. where he is acting in a professional
capacity. Since lots of proposal for the holding of directorship in various companies
are lined up before the Ms. R, so in order to retain him, Remuneration and nomination
committee proposed to enhance the remuneration of Ms. R from 4 Lac per month to
6 Lac per month. However, Supreme Limited was running in losses for last 2 years.
Evaluate in the light of the given facts, the following situations with reference to the
provisions of the Companies Act, 2013-
(1) The validity of an appointment of Ms. R in Excel Limited.
(2) Analysis the proposition of enhancement of the remuneration of Ms. R in
Supreme Ltd.
Meetings of Board and its powers
3. Examine the following aspect related to convening of board meeting with reference to the
provisions of the Companies Act, 2013:
(i) The Chairman of Greenhouse Limited convened a board meeting and two weeks'
notice was served on all directors of the company. Two of the independent directors
on the board objected on the grounds that no proper agenda for the meeting was
circulated.
(ii) Purple Florence Limited proposes to hold its board meeting at a shorter notice through
video conferencing.
Inspection, inquiry and Investigation
4. Origin paper Ltd. has been incurring business losses for past couple of years. The
company therefore, passes a special resolution for voluntary winding up. Meanwhile,
complaints were made to the tribunal and to the Central Government about foul play of the
directors of the company, which adversely affected the interests of shareholders of the
company as well as public. In this situation advise whether investigation may be initiated
against the company under the provision of the Companies Act, 2013. Further decide
whether application can be made to Tribunal for Relief in the above affairs of the company
once the investigation is initiated against the company.
Compromises, Arrangements and Amalgamations
5. A meeting of members of Evergreen Limited was convened under the orders of the Court
for the purpose of considering a scheme of compromise and arrangement. The meeting
was attended by 300 members holding 9,00,000 shares. 120 members holding 7,00,000
shares in the aggregate voted for the scheme. 140 members holding 2,00,000 shares in
aggregate voted against the scheme. 40 members holding 1,00,000 shares abstained from

voting. Determine with reference to the relevant provisions of the Companies Act, 2013
whether the scheme was approved by the requisite majority?
Prevention of Oppression and Mismanagement
6. The issued and paid up capital of Crown Jewels Limited is ` 5 crores consisting of 5,00,000
equity shares of ` 100 each. The said company has 500 members. A petition was
submitted before the Tribunal signed by 80 members holding 10,000 equity shares of the
company for the purpose of relief against oppression and mismanagement by the majority
shareholders. Examining the provisions of the Companies Act, 2013, decide whether the
said petition is maintainable. Also explain the impact on the maintainability of the above
petition, if subsequently 40 members, who had signed the petition, withdrew their consent.
Winding Up
7. Winding up proceedings has been commended by the Tribunal against Paramount Limited,
a government company (Central Government is a member). Even after completion of one
year from the date of commencement of winding up proceedings, it has not possible to
conclude the same. The liquidator is of the opinion that the statement shall be filed with
tribunal and registrar only.
(i) Decide validity to the opinion made by the liquidator and penalty that can be imposed
on the liquidator for contravention of the provision as per the Companies Act, 2013.
(ii) Discuss, if the Paramount Limited is a non-government company?
Producer Companies
8. Discuss the following aspects of the working of a PQR Producer Company Ltd. under the
Companies Act, 1956:-
(i) Criteria for appointment of Secretary as also the legal position, if its financial position
is unsatisfactory.
(ii) Can the Board of Directors of the company direct its member to surrender his shares
to the company, if so, under what circumstances?
(iii) Provisions relating to donation to any institution, as also to a political party.
(iv) Provisions relating to investment of general reserves, as also investment in the
shares of a company, other than a Producer company.
Companies incorporated outside India
9. (i) As per provisions of the Companies Act, 2013, define the status of Hillways Ltd., a
Company incorporated in London, which has a share transfer office at Mumbai?
(ii) LMP Paper Ltd. is a company registered in Thailand. Although, it has no place of
business established in India, yet it is doing online business through telemarketing in
India. Explain whether it will be treated as a Foreign Company under the Companies
Act, 2013?

(iii) In case, a foreign company does not deliver its documents to the Registrar of
Companies as required under section 380 of the Companies Act, 2013, state the
penalties prescribed under the said Act, which can be levied.
Miscellaneous Provisions
10. (i) An officer of a company was allotted one room for two years in a guest house owned
by the Company at some other city where he used to stay while on tour. It came to
notice of the company that he had not vacated the said room after the expiry of two
years and is holding the unauthorized possession of that room and has been
permitting to stay outsiders in the said room, at a rent of ` 500 per day. The record
shows that he had permitted the outsider for 45 days and collected ` 22,500 and
retained the said amount with him. As per the letter of allotment, there was no such
clause which can be invoked against him for making any recovery on account of such
wrongful occupation. Analyse in the given situation whether manager of the company
can seek recovery from the officer of the company under any of the provisions of his
employment or the Companies Act.
(ii) Mr. Z, a director of Southern Highway Tolls Private Limited, is duly authorized by the
Board of directors to prepare and file returns, report or other documents to the
Registrar of Companies on behalf of the company. Though he filed all the required
documents to Registrar in time, however, subsequently it was found that the filed
documents were false and inaccurate in respect to material particulars (knowing it to
be false) submitted to the Registrar. Discuss the penal provision under the
Companies Act, 2013 in the light of the given situation.
Compounding of offences, Adjudication, Special Courts and National Company Law
Tribunal and Appellate Tribunal
11. (i) Mr. D was appointed as a Technical Member of the National Company Law Tribunal
(NCLT) on 1st July, 2012 for a period of 5 years. He will be completing 62 years on
30th June, 2017. Explain whether he can be re-appointed on the NCLT on completion
of his tenure in 2017?
(ii) Identify the powers of the Central Government under the Companies Act, 2013
regarding:
(a) To appoint company prosecutors
(b) To Appeal against acquittal
Corporate Secretarial Practice–Drafting of Notices, Resolutions, Minutes and Reports
12. (i) Mr. Shukla is working as General Manager (Finance and Accounts) in Target Limite d.
The Board of directors of the said company propose to entrust him with the duty of
ensuring compliance with the provisions of the Companies Act, 2013 so that the books

of accounts, balance sheet, statement of profit and loss and the cash flow statements
can be prepared and maintained in accordance with law. Prepare a Board Resolution
for the said purpose considering the above facts.
(ii) Mr. N is appointed as an additional Director by the Board of Directors of MNR
Company Limited at its meeting held on 1st October, 2017 for a period as permitted
by law. The Articles of Association has conferred the power to appoint the additional
director on the Board of Directors of MNR Company Limited. Prepare a Board
resolution for the said purpose in the light of the given facts.
SECTION – B: SECURITIES LAWS
The Securities Contract (Regulation) Act, 1956 and the Securities Contract (Regulation)
Rules, 1957
13. (i) A company Cookies Private Limited has two shareholders, Mr. Rock and Mr. Salt.
Mr. Rock decides to sell his part of shares in Cookies Private Limited to another
company, Crispy Private Limited for a specified monetary consideration. State how
should Mr. Rock proceed to document the transaction so as to make it legally binding
on both the parties under the Securities Contract (Regulation) Act, 1956?
(ii) Mr. Vivaan is having 400 shares of Travel Everywhere Limited and the current price
of these shares in the market is ` 100. Vivaan’s goal is to sell these shares in 6
months’ time. However, he is worried that the price of these shares could fall
considerably, by then. At the same time, Vivaan doesn’t want to sell off these shares
today, as he conjectured that the share price might appreciate in the near future.
Determine how should Mr. Vivaan protect his security and reduce the risk of loss on
the share price under the Securities Contract (Regulation) Act, 1956?
The Securities Exchange Board of India Act, 1992, SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2009 and SEBI (Listing Obligations and Disclosure
Requirement) Regulations, 2015
14. (i) On completion of 60 years of age as on 31 st March 2014, Mr. Jain retired as Professor
from a university. From 1 st April 2014, he was appointed as Chairman of the Securities
and Exchange Board of India for a period of three years. Under the, provisions of the
Securities and Exchange Board of India Act, 1992, decide whether he can be re-
appointed on the same post after expiry of the original tenure? Also discuss whether
it could be possible for him to relinquish the office before expiry of his tenure?
(ii) List the quarterly compliances for a listed entity under the SEBI (Listing Obligations
and Disclosure Requirements) Regulations, 2015?

ECONOMIC LAWS
The Foreign Exchange Management Act, 1999
15. Ms. Ashima daughter of Mr. Mittal (an exporter), is residing in Australia since long. She
wants to buy a flat in Australia. Since she is unmarried, she wants to make her father Mr.
Mittal a joint holder in that flat, for which entire proceeds are to be paid by her.
(i) State the provisions of FEMA governing such type of transaction?
(ii) On Applying the relevant provisions, can Mr. Mittal join her daughter in acquiring
such a flat in Australia?
(iii) Mr. Mittal, wants to receive advance payments against his exports from a buyer
outside India. Explain the relevant provisions?
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002
16. Popular Limited defaulted in the repayment of term loan taken from a Bank against security
created as a first charge on some of its assets. The bank issued notice pursuant to Section
13 of the SARFAESI Act, 2002 to the Company to discharge its liabilities within a period of
60 days from the date of the notice. The company failed to discharge its liabilities within
Identify and explain the measures to be taken by the Bank to enforce its security interest
under the said Act.
The Prevention of Money Laundering Act, 2002
17. (i) The Adjudicating Authority appointed under the Prevention of Money Laundering Act,
2002 issued an order attaching certain properties of XYZ Limited alleged to be
involved in money laundering for a specified period. The company aggrieved by the
order of the Adjudicating Authority seeks your advice about the remedy that is
available under the Act. Analyse and apply the relevant provisions of the Prevention
of Money Laundering Act, 2002 in relation to the above given situation.
(ii) Sohan Lal, a farmer, was found involved in embezzlement of opium cultivated by him.
State the punishment that can be awarded to him under the Prevention of Money
Laundering Act, 2002.
Foreign Contribution Regulation Act, 2010
18. (i) Discuss whether foreign remittances received from a relative are to be treated as
foreign contribution as per the FCRA, 2010?
(ii) In the light of the Foreign contribution Regulation Act, 2010, discuss whether foreign
contribution be received in and utilised from multiple Bank Accounts?

The Arbitration and Conciliation Act, 1996

19. In 2016, Company Amar, food processor manufacturing unit entered into a joint venture
agreement with Company USHA, the largest manufacturer of Food processors for supply
of parts of mixer & grinder for manufacturing its latest model. Both the companies are
registered under the Companies Act 2013. Agreement carries the term that all disputes
shall be arbitrated in Mumbai. Discuss the type of arbitration agreement made between
them.
Examine what will happen if the agreement does not have any clause relating to arbitration
and disputes arose between them concerning quality of material supplied in 2017?
The Insolvency and Bankruptcy Code, 2016
20. (i) Wisdom Ltd. commits a default against the debts taken from the financial creditors.
Mr. F, a financial creditor initiated the corporate insolvency resolution process against
the Wisdom Ltd. Mr. X, another financial creditor, thereof files an application for
initiating corporate insolvency resolution process with the Adjudicating Authority.
Examine with reference to the validity as to the filing of an application by Mr. X for
initiation of corporate insolvency resolution process?
(ii) Standard International Ltd. who is a foreign trade creditor having its office in Hong
Kong wanted to file a petition under insolvency and bankruptcy code 2016 on default
of the debtor in India. It moved a petition under section 9 of the code seeking
commencement of insolvency process. The foreign company was not having any
office or bank account in India. Because of this, it couldn’t submit a “certificate from
financial institution “as required under the code. Examine whether the petition is
permissible under the Insolvency & Bankruptcy Code, 2016?
SUGGESTED ANSWER/HINTS
1. (i) The provision of the Companies Act, 2013 governing the appointment of Women
Director and Independent Directors are as under:
(a) The second proviso to section 149(1) of the Companies Act, 2013 provides that
such class or classes of companies as may be prescribed, shall have atleast
one women director. Rule 3 of Companies (Appointment and Qualification of
Directors) Rules, 2014 provides that the following class of companies shall
appoint at least one women director –
(1) every listed company;
(2) every other public company having-
 paid-up share capital of one hundred crore rupees or more; or
 turnover of three hundred crore rupees or more:

It further provides that any intermittent vacancy of a women director shall be

filled-up by the Board at the earliest but not later than immediate next Board
meeting or three months from the date of such vacancy whichever is later.
In this case the Company is a listed and under the provisions of the Companies
Act, 2013, it is required to have at least 1 Women Director in its Board.
(b) The provision of section 149(4) provides that every listed company shall have at
least 1/3 rd of the total number of Directors as Independent Directors.
As per the facts stated in the question, composition of board of directors of listed
company as on 31-3-2017 comprised of total 7 directors. Out of which 4 were
directors and 3 were independent directors. Later Mr. D (Director) and Mrs. E
(Independent Director) vacated their offices of director on 15-4-2017.
So accordingly, listed company as stated above, shall have at least one women
director and one-third of the total number of directors as independent directors
in the Board. However, on 15-4-2017, total number of directors left were 5 due
to vacation of Mr. D and Mrs. E. Further, Rule 3 of the Companies (Appointment
and Qualification of Directors) Rules, 2014, provides that if there is an
intermittent vacancy of a women director, it shall be filled up by the Board at the
earliest but not later than immediate next board meeting or three months from
the date of such vacancy whichever is later.
As per the requirement of the above sections, there is compliance of section
149(4) as 1/3rd of the total number of directors comprises of (1/3x5) 1.6 rounded
off as 2, which complies with the minimum requirement of 2 independent
directors in the board, however, pertaining to women director, Board have to fill
up the intermittent vacancy at the earliest but not later than immediate next
board meeting or three months from the date of such vacancy whichever is later.
(ii) (a) Resignation of Director (Section 168 of the Companies Act, 2013)
A director may resign from his office by giving a notice in writing to the company.
The Board shall on receipt of such notice take note of the same. The company
shall within 30 days from the date of receipt of notice of resignation from a
director, intimate the Registrar in Form DIR -12 and post the information on its
website, if any.
Such director shall also forward a copy of his resignation along with detailed
reasons for the resignation to the Registrar within 30 days from the date of
resignation in Form DIR-11 along with the prescribed fee. The resignation of a
director shall take effect from the date on which the notice is received by the
company or the date, if any, specified by the director in the notice, whichever is
later.
In the present case, Mr. Arthav, a director resigns after giving due notice to the
company and he forwards a copy of resignation in e-form DIR-11 to the RoC

within the prescribed time.

If the company fails to intimate about the resignation of Mr. Arthav to RoC, even
then the resignation of Mr. Arthav shall take effect from the date on which the
notice is received by the company or the date, if any, specified by Mr. Arthav i n
the notice, whichever is later.
(b) According to section 161 (3) of the Companies Act, 2013, subject to the articles
of a company, the Board may appoint any person as a director nominated by
any institution in pursuance of the provisions of any law for the time being in
force or of any agreement or by the Central Government or the State
Government by virtue of its shareholding in a Government company.
The Articles of Association of Superwood Limited do not confer upon the Board
of Directors any such power. Hence, the Board cannot appoint Mr. Ramakant as
a nominee director even on the request of a bank which has extended a long
term financial assistance to the company.
2. (i) Managing Director [Section 2(54)]: Section 2(54) of the Companies Act, 2013
defines a “Managing Director” as a director who is entrusted with substantial powers
of management of the affairs of the company by:
(a) virtue of articles of a company, or
(b) an agreement with the company, or
(c) a resolution passed in its general meeting, or by its Board of Directors, and
includes a director occupying the position of the managing director, by whatever
name called.
Explanation to Section 2 (54) clarifies that substantial powers of the management
shall not be deemed to include the power to do such administrative acts of a routine
nature when so authorised by the Board such as:
(i) the power to affix the common seal of the company to any document or
(ii) to draw and endorse any cheque on the account of the company in any bank or
(iii) to draw and endorse any negotiable instrument or
(iv) to sign any certificate of share or
(v) to direct registration of transfer of any share.
In the instant case, Mr. Madhav, a director in Shine Paper Limited has been
authorized to draw and endorse cheque or other negotiable instruments on account
of the company and also to direct registration of transfer of shares and signing the
share certificates etc.

Hence, according to explanation to section 2(54), Mr. Madhav will not be treated as
managing director of the company as he is authorized to do administrative acts of a
routine nature.
Procedure of appointment of a managing director [Section 196(4)]
(1) Subject to the provisions of section 197 and Schedule V, a managing director
shall be appointed, and the terms and conditions of such appointment and
remuneration payable be approved by the Board of Directors at a meeting.
(2) The terms and conditions and remuneration approved by Board of Directors as
above shall be subject to the approval of shareholders by a resolution at the
next general meeting of the company.
(3) In case such appointment is at variance to the conditions specified in the
Schedule V of the Companies Act, 2013, the appointment shall be approved by
the Central Government.
(4) The notice convening Board or general meeting for considering such
appointment shall include the terms and conditions of such appointment,
remuneration payable and such other matters including interest, of a director or
directors in such appointments, if any.
(5) A return in the prescribed form (Form No. MR.1) along with the prescribed fee
shall be filed with the Registrar within sixty days of such appointment.
(ii) (1) Number of directorships: As per section 165(1) of the Companies Act, 2013,
no person shall hold office as director, including any alternate directorship, in
more than 20 companies at the same time.
Out of the limit of 20, the maximum number of public companies in which a
person can be appointed as a director shall not exceed 10. [Proviso to section
165(1)]
Private companies that is either holding or subsidiary company of a public
company shall be included in reckoning the limit of public companies in which a
person can be appointed as a director.
In the instant case, Ms. R was appointed as a women director on 1 st March, 2017
in Excel Limited. She was already holding directorship in twelve companies
including ten public companies.
As Ms. R was already a director in ten public companies, her appointment in
Excel Limited is not valid as it will lead to her directorship in 11 public companies.
In this case, either she can choose between the companies in which she wishes
to continue to hold the office of director or resign her office as director i n the
other remaining companies to maintain the limit of holding of directorship.
(2) Remuneration : In the given case, since, the company has suffered losses in

the last two years, the company will pay remuneration to its directors in
accordance with the provisions of Schedule V to the Companies Act, 2013.
In case of a managerial person who is functioning in a professional capacity, no
approval of Central Government is required, if such managerial person is not
having any interest in the capital of the company or its holding company or any
of its subsidiaries directly or indirectly or through any other statutory structures
and not having any, direct or indirect interest or related to the directors or
promoters of the company or its holding company or any of its subsidiaries at
any time during the last two years before or on or after the date of appointment
and possesses graduate level qualification with expertise and specialised
knowledge in the field in which the company operates. [Item B of Section II of
Schedule V]
The total remuneration that supreme Limited is intending to pay to Ms. R is 72
lakhs per annum, from the current remuneration of 48 lakhs per annum. Since
Ms. R is working in professional capacity and the remuneration has been
proposed by the remuneration Committee, no approval of Central Government
is required. Also, the case shall be in compliant of Schedule V, Central
Government approval will not be required even when there is increase in
remuneration payable.
3. (i) According to section 173 (3) of the Companies Act, 2013, a meeting of the Board
shall be called by giving not less than 7 days’ notice in writing to every director at his
address registered with the company and such notice shall be sent by hand delivery
or by post or by electronic means.
According to the question, two of the independent directors on the Board has objected
on the grounds that no proper agenda for the meeting was circulated.
The Companies Act, 2013 does not specifically provide for sending agenda along with
the notice of the meeting. However, generally as a good secretarial practice, the
notice is accompanied with the agenda of the meeting. Thus, the contention of the
independent directors objecting on the grounds that no agenda for the meeting was
circulated, does not hold good.
Further, the Chairman of Greenhouse Limited has convened the Board meeting by
serving a two weeks’ notice (i.e. more than 7 days). Hence, the meeting shall be valid.
(ii) According to section 173 of the Companies Act, 2013,
(a) The directors can participate in a meeting of the Board either in person or
through video conferencing or other audio visual means, as may be prescribed,
which are capable of recording and recognising the participation of the directors
and of recording and storing the proceedings of such meetings along with date
and time. Further, Central Government may provide for matters which cannot be
dealt in a meeting through video conferencing or other audio visual means.

(b) A meeting of the Board shall be called by giving not less than 7 days’ notice in
writing to every director at his address registered with the company.
Provided that a meeting of the Board may be called at shorter notice to transact urgent
business subject to the condition that at least one independent director, if any, shall
be present at the meeting. Further, in case the independent directors are not present
at such a meeting of the Board, decisions taken at such a meeting shall be circulated
to all the directors and shall be final only on ratification thereof by at lea st one
independent director, if any.
Hence, Purple Florence Limited can hold a board meeting at a shorter notice through
video conferencing, for transacting urgent business subject to the condition that at
least one independent director, if any, shall be present at the meeting. Further, if the
independent directors are absent from the meeting of the Board, decision taken at
such a meeting shall be circulated to all the directors and shall be final only on
ratification thereof by at least one independent director, if any.
4. According to section 226 of the Companies Act, 2013, an investigation may be
initiated notwithstanding, and no such investigation shall be stopped or suspended
by reason only of, the fact that—
(i) an application has been made under section 241;
(ii) the company has passed a special resolution for voluntary winding up; or
(iii) any other proceeding for the winding up of the company is pending befo re the
Tribunal.
In the instant case Origin Paper Ltd. has been incurring business losses for past
couple of years. The company passed a special resolution for voluntary winding up.
Meanwhile complaints were made to the Tribunal and to the Central Governm ent
about foul play of the directors of the company, which adversely affected the interests
of shareholders of the company as well as the public.
As the company has passed a special resolution for voluntary winding up of the
company, then also the investigation may be initiated against the company under
section 226 of the Companies Act, 2013.
Yes as per the above provision, though investigation was initiated against the
company, it shall not bar members to file an application to Tribunal for Relief under
section 241 of the companies Act, 2013.
According to the said section, any member of a company may apply to the Tribunal
for an order on the complains that—
(i) the affairs of the company have been or are being conducted in a manner
prejudicial to public interest or in a manner prejudicial or oppressive to him or
any other member or members or in a manner prejudicial to the interests of the
company; or

(ii) the material change taken place in the management or control of the company,
whether by an alteration in the Board of Directors, or manager, or in the
ownership of the company’s shares, or if it has no share capital, in its
membership, or in any other manner whatsoever, 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,
The Central Government, 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 ap ply to the
Tribunal for an order.
Where any members of a company are entitled to make an application, any one or
more of them having obtained the consent in writing of the rest, may make the
application on behalf and for the benefit of all of them.
5. As per section 230 (6) of the Companies Act, 2013 where majority of persons at a meeting
held representing 3/4th in value, voting in person or by proxy or by postal ballot, agree to
any compromise or arrangement and if such compromise or arrangement is sanctioned by
the Tribunal by an order. The majority of person representing 3/4 th Value shall be counted
of the following:
 the creditors, or
 class of creditors or
 members or
 class of members, as the case may be,
The majority is dual, in number and in value. A simple majority of those voting is sufficient.
Whereas the ‘three-fourths’ requirement relates to value. The three-fourths value is to be
computed with reference to paid-up capital held by members present and voting at the
meeting.
In this case 300 members attended the meeting, but only 260 members voted at the
meeting. As 120 members voted in favor of the scheme the requirement relating to majority
in number (i.e. 131) is not satisfied.
260 members who participated in the meeting held 9,00,000 shares, three-fourth of which
works out to 6,75,000 while 120 members who voted for the scheme held 7,00,000 shares.
The majority representing three-fourths in value is satisfied.
Thus, in the instant case, the scheme of compromise and arrangement of Evergree n
Limited is not approved as though the value of shares voting in favor is significantly more,
the number of members voting in favor do not exceed the number of members voting
against.

6. Right to apply for oppression and mismanagement: As per the provisions of Section
244 of the Companies Act, 2013, in the case of a company having share capital, members
eligible to apply for oppression and mismanagement shall be lowest of the following:
100 members; or
1/10th of the total number of members; or
Members holding not less than 1/10th of the issued share capital of the company.
The share holding pattern of Crown Jewels Limited is given as follows:
` 5,00,00,000 equity share capital held by 500 members
The petition alleging oppression and mismanagement has been made by some members
as follows:
(i) No. of members making the petition – 80
(ii) Amount of share capital held by members making the petition – ` 10,00,000
The petition shall be valid if it has been made by the lowest of the following:
100 members; or
50 members (being 1/10 th of 500); or
Members holding ` 50,00,000 share capital (being 1/10 th of ` 5,00,00,000)
As it is evident, the petition made by 80 members meets the eligibility criteria specified
under section 244 of the Companies Act, 2013 as it exceeds the minimum requirement of
50 members in this case. Therefore, the petition is maintainable.
The consent to be given by a shareholder is reckoned at the beginning of the proceedings.
The withdrawal of consent by any shareholder during the course of pro ceedings shall not
affect the maintainability of the petition [Rajamundhry Electric Corporation Vs. V.
Nageswar Rao A.I.R. (1956) Sc. 2013.].
7. Section 348 of the Companies Act, 2013 states that, if the winding up of a company is not
concluded within one year after its commencement then the Company Liquidator shall file
a statement in such form containing such particulars as may be prescribed. Such statement
shall be filled within two months of the expiry of such year and it shall be filled continuously
thereafter until the winding up is concluded, at intervals of not more than one year or at
such shorter intervals as may be prescribed. The statement shall be duly audited, by a
person qualified to act as auditor of the company and position of with respect t o the
proceedings in the liquidation.
The statement shall be filled with the tribunal in the case of a winding up by the Tribunal.
A copy shall simultaneously be filed with the Registrar and shall be kept by him along with
the other records of the company.
Where a statement relates to a Government company in liquidation, the Company
Liquidator shall forward a copy thereof,

 to the Central Government, if that Government is a member of the Government

company;
 to any State Government, if that Government is a member of the Government
company; or
 to the Central Government and any State Government, if both the Governments are
members of the Government company.
Paramount Limited is a Government Company
In the current scenario, we can understand that the Paramount Limited is a government
company in which Central Government is a member and hence statement is also required
to file to the Central Government along with the Tribunal and Registrar. So, the opin ion by
the Company Liquidator is not tenable in the eyes of the law and he is liable for penal
action under the Act.
The company liquidator shall be punishable with fine which may extend to five thousand
rupees for every day during which the failure continues.
Paramount Limited is a Non-Government Company
In the current scenario, the Paramount Limited is a non-government company hence
statement is only required to file with the Tribunal and Registrar only. So, the opinion by
the Company Liquidator is tenable in the eyes of the law and he is not liable for any penal
action under the Act.
8. (i) Secretary of a producer company (Section 581X of the Companies Act, 1956 ):
Every producer company having an average annual turnover exceeding five crore
rupees in each of three consecutive financial years shall have a whole-time secretary,
who possesses membership of the Institute of Company Secretaries of India
constituted under the Company Secretaries Act, 1980. If a producer company fails to
comply with this, the company and every officer of the company who is in default shall
be punishable with fine which may extend to five hundred rupees for every day during
which the default continues.
In any proceedings against a person in respect of an offence, under this sect ion, it
shall be a defence to prove that all reasonable efforts to comply with the provisions
of section were taken or that the financial position of the company was such that it
was beyond its capacity to engage a whole-time secretary.
(ii) Surrender of shares [Section 581ZD (5) of the Companies Act, 1956]: Where the
Board of a producer company is satisfied that—
(a) any member has ceased to be a primary producer; or
(b) any member has failed to retain his qualifications to be a member as specified
in articles, the Board shall direct the surrender of shares together with special
rights, if any, to the producer company at par value or such other value as may
be determined by the Board.

Provided that the Board shall not direct such surrender of shares unless the member
has been served with a written notice and given an opportunity of being heard.
(iii) Donations or subscription by producer company (Section 581ZH of the
Companies Act, 1956): A producer company may, by special resolution, make
donation or subscription to any institution or individual for the purposes of—
(a) promoting the social and economic welfare of producer member or producers or
general public; or
(b) promoting the mutual assistance principles.
Provided that the aggregate amount of all such donation and subscription in any
financial year shall not exceed three per cent of the net profit of the producer company
in the financial year immediately preceding the financial year in which the donation or
subscription was made.
Further, no producer company shall make directly or indirectly to any political party
or for any political purpose to any person any contribution or subscription or make
available any facilities including personnel or material.
(iv) Investment in other companies, formation of subsidiaries, etc.
(Section 581ZL): The producer company has to follow the following provisions under
this section.
(1) The general reserves of any producer company shall be invested to secure the
highest returns available from approved securities, fixed deposits, units, bonds
issued by the Government or co-operative or scheduled bank or in such other
mode as may be prescribed.
(2) Any producer company may, for promotion of its objectives acquire the shares
of another producer company.
(3) Any producer company may subscribe to the share capital of, or enter into any
agreement or other arrangement, whether by way of formation of its subsidiary
company, joint venture or in any other manner with any body corporate, for the
purpose of promoting the objects of the producer company by special resolution
in this behalf.
9. (i) In terms of the definition of a foreign company under section 2 (42) of the Companies
Act, 2013 a “foreign company” means any company or body corporate incorporated
outside India which:
(a) Has a place of business in India whether by itself or through an agent, physically
or through electronic mode; and
(b) Conducts any business activity in India in any other manner.

According to section 386 of the Companies Act, 2013, for the purposes of Ch apter
XXII of the Companies Act, 2013 (Companies incorporated outside India), “Place of
business” includes a share transfer or registration office.
From the above definition, the status of Hillways Ltd. will be that of a foreign company
as it is incorporated outside India, has a place of business in India and it may be
presumed that it carries on a business activity in India.
(ii) As per Section 2(42) read with the Companies (Registration of Foreign Companies)
Rules, 2014 of the Companies Act, 2013, any company or body corporate
incorporated outside India which has a place of business in India whether by itself or
through an agent, physically or through electronic mode; and conducts any business
activity in India in any other manner is a foreign company.
Further the above said rules states the meaning of “electronic mode”. It means
carrying out electronically based, whether main server is installed in India or not,
including, but not limited to –
(a) business to business and business to consumer transactions, data interchange
and other digital supply transactions;
(b) offering to accept deposits or inviting deposits or accepting deposits or
subscriptions in securities in India or from citizens of India;
(c) financial settlements, web based marketing, advisory and transactional services,
data base services and products, supply chain management;
(d) online services such as telemarketing, telecommuting, telemedicine, education
and information research; and
(e) all related data communication services whether conducted by e-mail, mobile
devices, social media, cloud computing, document management, voice or data
transmission or otherwise.
Looking to the above description, it can be said that being involved in business activity
through telemarketing, LMP Paper Ltd., will be treated as foreign company.
(iii) The Companies Act, 2013 lays down the governing provisions for foreign companies
in Chapter XXII which is comprised of sections 379 to 393. The penalties for non -
filing or for contravention of any provision for this chapter including for non-filing of
documents with the Registrar as required by section 380 and other sections in this
chapter are laid down in section 392 of the Act which provides that if a foreign
company contravenes the provisions of this Chapter, the foreign company shall be
punishable with a fine which shall not be less than ` 1,00,000 but which may extend
to ` 3,00,000 and in the case of a continuing offence, with an additional fine which
may extend to ` 50,000 for every day after the first during which the contravention
continues and every officer of the foreign company who is in default shall be
punishable with imprisonment for a term which may extend to six months or with fine

which shall not be less than ` 25,000 but which may extend to ` 5,00,000, or with
both.
10. (i) Penalty for wrongful withholding of property: Section 452 of the Companies Act,
2013 provides for Penalty for wrongful withholding of property. According to the
section:
(1) If any officer or employee of a company -
(a) Wrongfully obtains possession of any property, including cash of the company;
or
(b) having any such property including cash in his possession, wrongfully
withholds it or knowingly applies it for the purposes other than those expressed
or directed in the articles and authorized by this Act, he shall, on the complaint
of the company or of any member or creditor or contributory thereof, be
punishable with fine which shall not be less than 1 lakh rupees but which may
extend to 5 lakh rupees.
(2) The Court trying an offence may also order such officer or employee to deliver
up or refund, within a time to be fixed by it, any such property or cash wrongfully
obtained or wrongfully withheld or knowingly misapplied, the benefits that h ave
been derived from such property or cash or in default, to undergo imprisonment
for a term which may extend to 2 years.
Hence, as per the provisions of the Companies Act, 2013 and not giving any
emphasis on the terms of employment, the manager of the company can recover
possession of the room and the cash wrongfully obtained and the benefits that
have been derived from such property or cash.
(ii) Penalty for false statements (Section 448 of the Companies Act, 2013)
According to section 448 of the Companies Act, 2013, save as otherwise provided in
this Act, if in any return, report, certificate, financial/statement, prospectus, statement
or other document required by, or for, the purposes of any of the provisions of this
Act or the rules made there under, any person makes a statement, -
(b) which omits any material fact, knowing it to be material,
he shall be liable under section 447.
In the present case, Mr. Z, a director of Southern Highway Tools Private Limited filed
returns, report or other documents to Registrar in time, however, subsequently it was
found that the filed documents were false and inaccurate in respect to material
particulars (knowing it to be false) submitted to the Registrar.
Hence, Mr. Z shall be liable under section 447 for false statements.

Penal Provisions: As per Section 447, any person who is found to be guilty under
this section shall be punishable with imprisonment for a term which shall not be less
than 6 months but which may extend to 10 years and shall also be liable to fine which
shall not be less than the amount involved in the fraud, but which may extend to 3
times the amount involved in the fraud, provided that, where the fraud involves public
interest, the term of imprisonment shall not be less than 3 years.
Hence, Mr. Z a director of Southern Highway Tools Private Limited shall be
punishable with imprisonment and fine prescribed as aforesaid.
11. (i) According to Section 413(1) of the Companies Act, 2013, the President and every
other Member of the Tribunal shall hold office for a term of five years from the date
on which he enters upon his office and shall be eligible for re appointment for another
term of five years.
Under section 413 (2), a Member of the Tribunal shall hold office as such until he
attains, -
(1) in the case of the President, the age of sixty-seven years;
(2) in the case of any other Member, the age of Sixty-five years.
In the instant case, Mr. D was appointed as a technical Member of the NCLT on
1st July, 2012 for a period of 5 years. He will be completing 62 years on 30 th June,
2017. He can also be re-appointed after his initial term of five years is over. But since
he shall be attaining the age of 65 years as on 30 th June, 2020, he will have to step
down from the post on his attaining the age of 65 years i.e. on 30 th June, 2020.
(ii) (a) Power of Central Government to appoint company prosecutors: This
section lays down the provisions seeking to provide that the Central Government
may appoint company prosecutors with the same powers as given under the Cr.
PC on Public Prosecutors.
(1) Appointment of company prosecutors: The Central Government may
appoint (generally, or for any case, or in any case, or for any specified class
of cases in any local area) one or more persons, as company prosecutors
for the conduct of prosecutions arising out of this Act; and
(2) Powers and Privileges: The persons so appointed as company
prosecutors shall have all the powers and privileges conferred on Public
Prosecutors appointed under section 24 of the Cr. PC.
(b) Appeal against acquittal: According to section 444 of the Companies Act,
2013, the Central Government may, in any case arising under this Act, direct –
(1) any company prosecutor, or
(2) authorise any other person either by name or by virtue of his office, to
present an appeal from an order of acquittal passed by any court, other

than a High Court.

Appeal presented by such prosecutor or other person shall be deemed to have
been validly presented to the Appellate Court.
12. (i) Board Resolution
Resolution passed at the meeting of Board of Directors of Target Limited held at its
registered office situated at ……………………… on ………….(date) at …………
(Time).
“Resolved that pursuant to section 128(6) and 129 of the Companies Act, 2013, Mr.
Shukla, who is already the General Manager (Finance and Accounts) of the company,
be and is hereby entrusted with additional duties of ensuring compliance with the
provisions of the Companies Act, 2013 so that the books of accounts, balance sheet,
statement of profit and loss and the cash flow statements are maintained in
accordance with the provisions of law.”
“Further Resolved that the said Mr. Shukla be and is hereby entrusted with the
authority to do such acts things or deeds as may be necessary or expedient for the
purpose of discharging his above referred duties.”
Sd/
Board of Directors
Target Limited
(ii) Board Resolution for appointment of Additional Director:
"Resolved that pursuant to the Articles of Association of the company and section
161(1) of the Companies Act, 2013, Mr. N is appointed as an Additional Director of
the MNR Company Limited with effect from 1st October, 2017 to hold office up to the
date of the next annual general meeting or the last date on which the annual general
meeting should have been held, whichever is earlier.
Resolved further that Mr. N will enjoy the same powers and rights as other directors.
Resolved further that Mr.__________ Secretary of MNR Company Limited be and is
hereby authorised to electronically file necessary returns with the Registrar of
Companies and to do all other necessary things required under the Act."
13. (i) As per the stated facts, Mr. Rock decides to sell his part of the share in other
company. So, such an understanding of transfer of the shares of Cookies Private
Limited held by Mr. Rock to Crispy Private Limited shall be recorded in Share
Purchase Agreement (SPA), which is a legally binding contract, and lists down all the
terms and conditions which are relevant to the sale of shares, such as –
 the exact description of shares, i.e. the number of shares, price per share,
premium amount, if any;

 the conditions that must be satisfied before the sale takes place;
 the date on which the sale will be completed;
 the manner in which the transfer will be made;
 any indemnities or protections available to the parties;
 the representations and warranties made by either party; and
 the conditions upon which the agreement will terminate.
(ii) In this case, Mr. Vivaan may opt for ‘Option’ derivative contract, which is an
agreement to buy or sell a set of assets at a specified time in the future for a specified
amount. However, it is not obligatory for him to hold the terms of the agreement, since
he has an ‘option’ to exercise the contract. For example, if the current market price
of the share is ` 100 and he buy an option to sell the shares to Mr. X at ` 200 after
three-month, so Vivaan bought a put option.
Now, if after three months, the current price of the shares is ` 210, Mr. Vivaan may
opt not to sell the shares to Mr. X and instead sell them in the market, thus making a
profit of ` 110. Had the market price of the shares after three months would have
been ` 90, Mr. Vivaan would have obliged the option contract and sold those shares
to Mr. X, thus making a profit, even though the current market price was below the
contracted price. Thus, here, the shares of Travel Everywhere Limited is the
underlying asset and the option contract is a form of derivative.
14. (i) Appointment of Chairman: As per Section 5 of the SEBI Act, 1992 and the rules
prescribed under the SEBI Act, 1992, the Chairman may hold office for a period of
three years subject to the maximum age limit of 65 years and can be re-appointed by
the Central Government.
Also, as per Section 4(5) of the Act, the Chairman shall be persons of ability, integrity
and standing who have shown capacity in dealing with problems relating to securities
market or have special knowledge or experience of law; finance; economics,
accountancy, administration or in any other discipline which, in the opinion of the
Central Government, shall be useful to the Board.
In the instant case, Mr. Jain retired as professor from a university on completion of
60 years of age as on 31 st March, 2014 appointed as Chairman of SEBI from 1st April,
2014 for a period of 3 years.
This appointment is valid as on the date of appointment, he is of 60 years of age and
he, as a retired professor, is a person of ability, integrity and standing and have
special knowledge or experience of law; finance; economics, accountancy,
administration or in any other discipline.

If Mr. Jain is reappointed as a chairman after expiry of the original tenure of 3 years,
he can be re-appointed but only upto 65 years of age i.e. upto 31 st March, 2019 (i.e.
only for two years).
Right to Relinquish the office: The Chairman shall equally have the right to
relinquish office at any time before the expiry of their tenure by giving a notice of three
months in writing or salary and allowances in lieu thereof to the Central Government.
(ii) Quarterly compliances– Listed Entity
A Listed company has to comply with the following quarterly compliances under the
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 :
1. Regulation 13(3):- Grievance Redressal Mechanism
The listed entity shall file with the recognized stock exchange(s) on a quarterly
basis, within 21 days from the end of each quarter, a statement giving the
number of investor complaints pending at the beginning of the quarter, those
received during the quarter, disposed of during the quarter and those remaining
unresolved at the end of the quarter.
2. Regulation 27(2):- Other Corporate Governance Requirements
A listed entity shall submit quarterly compliance report on corporate governanc e
in the format as specified by the Board from time to time to the recognized stock
exchange(s), within 15 days from close of quarter.
3. Regulation 31(1): Holding of Specified Securities and Shareholding Pattern.
A listed entity shall submit a statement showing holding of securities and
shareholding pattern separately for each class of securities:-
(a) One day prior to listing of its securities on the stock exchange(s);
(b) On a quarterly basis, within 21 days from the end of each quarter; and,
(c) Within 10 days of any capital restructuring of the listed entity resulting in a
change exceeding 2 % per cent of the total paid-up share capital.
4. Regulation 33(3): Financial Results
The listed entity shall submit quarterly and year-to-date standalone financial
results to the stock exchange within 45 days of end of each quarter, other than
the last quarter.
5. Regulation 32(1): Statement of Deviation(S) Or Variation(S)
A listed entity shall submit to the stock exchange the following statement(s) on
a quarterly basis for public issue, rights issue, preferential issue etc. -
(a) indicating deviations, if any, in the use of proceeds from the objects stated in
the offer document or explanatory statement to the notice for the general
meeting, as applicable;

(b) indicating category wise variation (capital expenditure, sales and marketing,
working capital etc.) between projected utilization of funds made by it in its offer
document or explanatory statement to the notice for the general meeting, as
applicable and the actual utilization of funds.
15. (i) The provisions governing the 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 referred to in sub-section (4) of
Section 6 of the FEMA or referred to in clause (b) of regulation 4 acquired by
a person resident in India on or before 8th July, 1947 and continued to be held
by him with the permission of 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.
(c) 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 provision 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.
(ii) In the light of above discussions in 1(c), it is quite clear that Mr. Mittal, a resident in
India, can join his daughter who is a resident outside India, in acquiring a Flat at
Australia.
(iii) Advance payment against export:
The following are the provisions governing the advance payments against exports :
(1) Where an exporter receives advance payments (with or without interest) from a
buyer/ third party named in the export declaration made by the Exporter, outside
India, the exporter shall be under the obligation to ensure that:
(i) The shipment of goods is made within one year from the date of receipt of
advance payment.
(ii) The rate of interest, if any, payable on the advance payment does not
exceed the rate of interest London Inter-Bank Offered Rate (LIBOR) + 100

basis points and

(iii) The documents covering the shipment are routed through the authorised
dealer through whom advance payment is received.
Provided that in the event of the exporter’s inability to make the shipment, partly
or fully, within one year from the date of receipt of advance payment or towards,
no remittance towards refund of un-utilised portions of advance payment or
towards payment of interest, shall be made after the expiry of the period of one
year, without the prior approval of the Reserve bank of India.
(2) Notwithstanding anything contained in clause (i) of sub-regulation (1), an
exporter may receive advance payment where the export agreement itself duly
provides for shipment of goods extending beyond the period of one year from
the date of receipt of advance payment.
16. Sub-section (4) of section 13 of SARFAESI Act, 2002, provides that if the borrower fails
to discharge his liability in full within the 60 days, the secured creditor may take recourse
to one or more of the following measures to recover his secured debt:
(i) take possession of the secured assets of the borrower including the right to transfer
by way of lease, assignment or sale for realising the secured asset;
(ii) take over the management of the business of the borrower including the right to
transfer by way of lease, assignment or sale for realising the secu red asset:
Provided that the right to transfer by way of lease, assignment or sale shall be
exercised only where the substantial part of the business of the borrower is held as
security for the debt:
Provided further that where the management of whole of the business or part of the
business is severable, the secured creditor shall take over the management of such
business of the borrower which is relatable to the security for the debt;
(iii) appoint any person (hereafter referred to as the manager), to ma nage the secured
assets the possession of which has been taken over by the secured creditor;
(iv) require at any time by notice in writing, any person who has acquired any of the
secured assets from the borrower and from whom any money is due or may become
due to the borrower, to pay the secured creditor, so much of the money as is sufficient
to pay the secured debt.
In the instant case, the Bank may take the above mentioned procedure to enforce its
security interest in case Popular Limited has failed to discharge its liabilities within the time
limit specified.
17. (i) Section 25 of the Prevention of Money Laundering Act, 2002 empowers the Central
Government to establish an Appellate Tribunal to hear appeal against order of the
Adjudicating Authority and other authorities under the Act.

Section 26 deals with the right and time frame to make an appeal to the Appellate
Tribunal. Any person aggrieved by an order made by the Adjudicating Authority may
prefer an appeal to the Appellate Tribunal within a period of 45 days from the date on
which a copy of the order is received by him. The appeal shall be in such form and
be accompanied by such fee as may be prescribed. The Appellate Tribunal may
extend the period if it is satisfied that there was sufficient cause for not filing it within
the period of 45 days.
The Appellate Tribunal may after giving the parties to the appeal an opportunity of
being heard, pass such order as it thinks fit, confirming, modifying or setting aside
the order appealed against.
The Act also provides further appeal. According to Section 42 any person aggrieved
by any decision or order of the Appellate Tribunal may file an appeal to the High Court
within 60 days from the date of communication of the order of the Appellate Tribunal.
In the light of the provisions of the Act explained above the company is advised to
prefer an appeal to Appellate Tribunal in the first instance.
(ii) Section 4 of the Prevention of Money Laundering Act, 2002 provides for the
punishment for Money-Laundering. Whoever commits the offence of money-
laundering shall be punishable with rigorous imprisonment for a term which shall not
be less than 3 years but which may extend to 7 years and shall also be liable to fine.
But where the proceeds of crime involved in money-laundering relate to any offence
specified under paragraph 2 of Part A of the Schedule, the maximum punishment may
extend to 10 years instead of 7 years.
Paragraph 2 of Part A of Schedule to the Prevention of Money Laundering Act, 2002,
covers Offences under the Narcotic Drugs and Psychotropic Substances Act, 1985
Whereby, embezzlement of opium by cultivator (section 19) is covered under
paragraph 2 of Part A.
In the present case, Sohan Lal, a farmer, who was involved in embezzlement of opium
cultivated by him shall be liable for the rigorous imprisonment for a term which may
extend to 10 years and shall also be liable to fine.
18. (i) No. As per Section 4(e) of the Foreign Contribution Regulation Act, 2010 and Rule 6
of Foreign Contribution Regulation Rules, 2011, even the persons prohibited under
section 3, i.e., persons not permitted to accept foreign contribution, are allowed to
accept foreign contribution from their relatives. However, in terms of Rule 6 of Foreign
Contribution Regulation Rules, 2011, any person receiving foreign contribution in
excess of one lakh rupees or equivalent thereto in a financial year from any of his
relatives shall inform the Central Government in prescribed Form within thirty days
from the date of receipt of such contribution.
(ii) The foreign contribution should be received only in the exclusive single foreign
contribution account of a Bank (also called designated FC account), as mentioned in

the order for registration or prior permission granted and should be separately
maintained by the associations. However, one or more accounts (called Utilization
Account) in one or more banks may be opened by the association for ‘utilising’ the
foreign contribution after it has been received in the designated FCRA bank account,
provided that no funds other than that foreign contribution shall be received or
deposited in such account or accounts and in all such cases, intimation is to be given
online within 15 days of opening of such account.
19. There are two basic types of arbitration agreement are:
(a) Arbitration clause - a clause contained within a principal contract. The parties
(b) Submission agreement - an agreement to refer disputes that already exist to
Mumbai at the time of entering into joint venture agreement. This would be an arbitration
In the second case, the Principal contract (JVA) does not have any term relating to
arbitration. Disputes arose between the parties concerning quality of supplied goods in
2017. To resolve this dispute, parties later entered into an agreement “That all disputes
including quality of goods supplied by Company USHA to Company Amar shall be
submitted to arbitration. The parties hereby agree to abide by the decision of the arbitrator.”
Such an agreement that is made after the disputes have arisen would be called a
submission agreement.
20. (i) In the given problem, on commission of default by the Wisdom Ltd., Mr. F filed an
application for initiating corporate insolvency resolution process before adjudicating
authority. Further, Mr. X another financial creditor moved an application for initiation
of insolvency resolution process against the Wisdom Ltd.
According to the section 6 of the Code, where any corporate debtor commits a default,
a financial creditor, Operational creditor or the Corporate debtor itself may initiate
insolvency resolution process against such corporate debtor.
But as per Section 13 of the Code, once an application is admitted by the Adjudicating
authority, it shall by an order declare a moratorium for the purposes referred to in
section 14. Then causes a public announcement of the initiation of CIRP by IRP and
call for the submission of claims under section 15 and appoint an IRP in the manner
as laid down in section 16 of the Code. Public announcement lays down all the
relevant information related to the CIRP. So that the all creditors entitled under the
law can raise their claim in this case.

So, no further application for initiation of CIRP can be initiated by Mr. X., however he
is entitled under the law to raise his claim in this case against the Wisdom Ltd.
(ii) Section 1 of the Insolvency and Bankruptcy Code, 2016 specifies of the extent,
commencement and applicability of the Code. According to this, it extends to the
whole of India and shall apply for insolvency, liquidation, voluntary liquidation or
bankruptcy of any company incorporated under the Companies Act, 2013 or under
any previous law.
In view of this, the IBC Code, 2016 applies to the corporate debtor incorporated under
the Companies Act, 2013 or under any previous laws.
As per the definition of the Creditor given in section 3(10) of the Insolvency and
Bankruptcy Code, 2016, it means any person to whom a debt is owed and includes a
financial creditor, an operational creditor, a secured creditor, an unsecured creditor,
and a decree holder. So, Standard International Ltd. is a creditor under the purview
of the Code.
As per the facts given in question, Standard International Ltd., is a foreign trade
creditor. He wanted to file a petition under the under Section 9 of the Insolvency and
Bankruptcy Code, 2016 for commencement of Insolvency process against the
defaulter in India. Standard International Ltd. was not having any office or bank
account in India.
As per the requirement of section 9 of the Code, along with application certain
documents were needed to be furnished by the creditor to the Adjudicating authority.
Being a foreign trade creditor, Standard International Ltd was also required to provide
a copy of certificate from the financial institutions maintaining accounts of the creditor
confirming that there is no payment of an unpaid operational debt by the corporate
debtor. Since, Standard International Ltd. was not having any office or bank account
in India, it cannot furnish certificate from financial institution as defined under the
section 3(14) of the code. So, Petition under section 9 of the Code is not permissible.

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PAPER 4: CORPORATE AND ECONOMIC LAWS

FINAL (NEW COURSE)

Part I – I : RELEVANT AMENDMENTS FOR NOVEMBER 2021 EXAMINATION

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© The Institute of Chartered Accountants of India

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© The Institute of Chartered Accountants of India

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(ii) for Table (A):, the following shall be substituted, namely.-

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Through series of Notifications i.e., the Companies (Appointment and Qualification of

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© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

charges by the Members of the Executive Committee or Governing Council and

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© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Pre-Packaged insolvency resolution process for MSMEs in the Code based on

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© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(d) it is eligible to submit a resolution plan under section 29A;

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(d) such other information and documents as may be specified.

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(i) as named in the application, if no disciplinary proceeding is pending against him;

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© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

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(b) section 17;

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(a) the basis for evaluation of resolution plans

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PART – II : QUESTIONS AND ANSWERS

CASE SCENARIO/ MULTIPLE CHOICE QUESTIONS

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(c) Appointing of Advocate on Records at Supreme Court as Independent director is

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(b) 25th March 2021

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(b) When arbitrator fails to pass the award within 12 months

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(a) Only (3)

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