This is a series of articles with an attempt to apprise the readers of the important provisions added (or modified or deleted) via the multitude of Amendment Bills passed or about to be passed by the Legislature in the present on-going Session, as underneath the gamut of details written and deliberated upon in the Legislature various important provisions are foreshadowed which goes unseen from the eyes of the common populace. This multi-part article beckons to embark upon a trail to unearth these important changes.
The Companies (Amendment) Bill, 2019 [Passed]
- Re-classification of certain offences: Out of 81 compoundable offences enlisted in the 2013 Act, 16 of these have been re-categorized as ‘civil defaults’, where adjudicating officers which have been appointed by the Central Government, may now impose penalties. A few of these offences include: (i) failure to file the annual return; (ii) providing shares at a discounted rate, etc.
- Corporate Social Responsibility (CSR): The original Act necessitates companies, which have to provide for CSR, to disclose the reasons for not spending their funds fully in their annual report. The amendment now mandates the companies to transfer the unspent amount to one of the funds listed under Schedule 7 of the Act (e.g. PM Relief Fund) within six months of the financial year. However, if the funds are unspent for some other on-going project(s), then that amount will have to be transferred to an ‘Unspent CSR Account’ within thirty days after the end of the financial year and are to be spent within three years. If the amount is kept unspent post the three year period, then the said amount is to be transferred to one of the funds listed under Schedule 7 of the Act. Violation, if any, would attract a fine between Rs. 50,000 to Rs. 25,00,000 and every defaulting officer may also be punished with imprisonment of up to three years or fine between Rs. 50,000 to Rs. 25,00,000 or both.
- Commencement of business: The Bill states that a company may not commence business, unless it, (i) files a declaration within 180 days of incorporation, confirming that every subscriber to the Memorandum of the company has paid for the shares agreed to be taken by him, and (ii) files a verification of its registered address with the Registrar of Companies (RoC) within 30 days of its incorporation. On failing to comply, the name of the company may be removed from the RoC.
- Registration of charges: The Bill changes the deadline for companies to register charges (e.g. mortgages) on their property from 30 days (extendable up to 300 days upon seeking permission from RoC) to 60 days (extendable by 60 days).
- Beneficial ownership: A person is required to make a declaration of his interest in a company in which he holds a beneficial interest of at least 25% shares in a company or exercises considerable influence or control over the company. The Bill mandates every company to identify such an individual who is a significant owner and mandates their compliance under the Act.
The Insolvency and Bankruptcy Code (Amendment) Bill, 2019 [Passed]
- Resolution plan: The Code provided for a resolution plan which a financial creditor may file via an application before the National Company Law Tribunal (NCLT) for initiating the insolvency process. Under the Code, the resolution plan must ensure that the operational creditors receive an amount which should not be less than the amount they would receive in case of liquidation. The Bill amends this provision to the extent that the amounts to be paid to the operational creditor should be the higher of (i) amounts receivable under liquidation; and (ii) the amount receivable under a resolution plan, if such amounts were distributed under the same order of priority (as for liquidation). Further, the Bill states that this provision would also apply to insolvency processes (i) that have not been approved or rejected by the NCLT; (ii) that have been appealed to the National Company Law Appellate Tribunal (NCLAT) or Supreme Court; and (iii) where legal proceedings have been initiated in any court against the decision of the NCLT.
- Representative of financial creditors: The Bill mandates that the representative of financial creditor (who is representing a class of creditors on the Committee of Creditors (CoC) beyond a certain number to whom debt is owed) will vote on the basis of the decision taken by the majority of the voting share of the creditors that they represent.
- Initiation of resolution process: According to the Code, the NCLT must determine the existence of default within 14 days of receiving an application for initiating insolvency proceedings. The Bill now mandates that in case the NCLT does not find the existence of default and has not passed an order within 14 days, it must record its reasons in writing for the same.
- Time limit for the process: Under the Code, the process must be completed within 180 days, which may be extended by a period of up to 90 days. The Bill now amends this and adds that the process must be wrapped up within 330 days. This time period includes time for an extension, if, granted and the time taken in legal proceedings in relation to the process. Upon the enactment of the Amendment Bill, if any case is pending for more than 330 days, then it must be resolved within 90 days.
Code of Wages, 2019 [Passed]
- Scope: The Code will apply to all the employees. Central Government will make wage-related decisions for employments in sectors such as Railways, Mines, etc. and with respect to requisite sectors, it is the State Government who will make decisions.
- As per the Code, wages include salary, allowance or any other component expressed in monetary terms, but this does not include bonus or traveling allowances, among others.
- Floor wage: As per the Code, the Union Government will fix the floor wage, taking into consideration the living standards of workers. Furthermore, it may set up different floor wages for different geographical areas. The minimum wages decided by the Central Government or the State Government must be higher than the floor wage fixed by the Central Government.
- Overtime: Either of the government at Centre or State may fix the number of hours that would account a normal working day. In case the employees work in excess of a normal working day, they will be entitled to overtime wage, which must be at least twice the normal rate of wages.
- Deductions: Under the Code, an employee’s wages may be deducted on certain grounds including but not limited to (i) fines; (ii) absence from duty; or (iii) recovery of any advances given to an employee. But, these deductions should not exceed 50% of the total wage.
- Determination of bonus: All employees whose wages do not exceed a specific monthly amount, notified by the Central or State Government, will be entitled to an annual bonus. The bonus will be at least: (i) 8.33% of his wages; or (ii) Rs. 100, whichever is higher. Furthermore, the employer will distribute a part of the gross profits amongst the employees in proportion to the annual wages. An employee can receive a maximum of 20% of his annual wages.
- Advisory Boards: The Central and State Governments will constitute Advisory Boards which will advise the respective governments on issues pertaining to (i) fixation of minimum wages; and (ii) increasing employment opportunities for women. The Central Board would consist of (i) employers; (ii) employees (in equal number as employers); (iii) independent persons; and (iv) five representatives from State Governments. Furthermore, the State Advisory Boards will consist of (i) employers; (ii) employees; and (iii) independent persons.
The Arbitration and Conciliation (Amendment), Bill 2019 [Passed]
- Arbitration Council of India (ACI): The Amendment Bill proposes to establish an independent body of ACI, for the promotion of arbitration, mediation, conciliation, and other alternative disputes redressal (ADR) mechanisms, which will function to (i) frame policies for grading arbitral institutions and accrediting arbitrators; (ii) making policies for the establishment, operation, and maintenance of uniform professional standards for all ADR matters; and (iii) maintaining a depository of arbitral awards made in India and abroad.
- Composition: (i) Chairperson who is either a Judge of the Supreme Court; or (ii) a Judge of a High Court; or (iii) Chief Justice of a High Court; or (iv) an eminent person with expert knowledge in the conduction of an arbitration proceeding. Other members will include an eminent arbitration practitioner, an academician with experience in arbitration and government appointees.
- Appointment of arbitrators: Under the original Act, the parties to the dispute were free to appoint arbitrators, and in the event of a disagreement for the same, the said parties could request the Supreme Court or the jurisdictional High Court, or any other person or an institute designated by such Court to appoint an arbitrator. Now, under the amendment Bill, the Supreme Court will designate arbitral institutions, which parties can approach for the appointment of arbitrators in international commercial arbitration and with respect to the domestic arbitration, the appointments will be made by the institution designated by the jurisdictional High Court. In the latter, where there are no arbitral institutions available, then, the Chief Justice of the said jurisdictional High Court may maintain a panel of arbitrators to perform the necessary functions of the arbitral institutions.
- Time limit: The Amendment Bill seeks to remove the time restriction for international commercial arbitration where the arbitral tribunals were mandated to make their award within a period of 12 months for all arbitral proceedings. The Bill now adds that the tribunals must endeavor to dispose off the international arbitration matters within 12 months.
Confidentiality of proceedings: The Amendment Bill necessitates that the arbitration proceedings will be kept confidential except for the details of the award in certain circumstances.
– Jashan Preet Singh Sidhu
Advocate, Punjab & Haryana High Court, Chandigarh
Associate Partner at Aggarwals & Associates, S.A.S Nagar (Mohali)