Corporate

An e-newsletter from
Lakshmikumaran & Sridharan, India
July 2024 / Issue–154

Table of Contents
Article ...............................................................................2
Analysing Budget 2024 from the lens of Ease of
Doing Business ........................................................................... 3

Notifications & Circulars..............................................7

Ratio Decidendi ............................................................13

News Nuggets ...............................................................19

 Article

Analysing Budget 2024 from the lens of Ease of Doing Business

By Noorul Hassan and Aman Gupta

Out of ten parameters of Ease of Doing Business introduced by the World Bank, this fiscal the Union Budget has
focused on a certain few namely, starting a business, getting credit, paying taxes, resolving insolvency, and to an
extent registering property. The article in this issue of Corporate Amicus analyses the Budget proposals and
discusses changes relating to attracting foreign investments, benefits proposed in tax regime, evolution in insolvency
resolution, flexible company structures, credit enhancement to MSMEs, easy exits to companies, decriminalisation
of offences, and proposal to incentivize states if they lower the stamp duty rates. According to the authors, there are
still certain parameters where we need to improve.
Article Corporate Amicus / July 2024

Analysing Budget 2024 from the lens of Ease of Doing Business

By Noorul Hassan and Aman Gupta
India has recently witnessed the Union Budget presented by Accordingly, the budget has proposed liberalization in Foreign
Finance Minister in the Parliament session. Presently, India is Direct Investment (FDI) and Overseas Investment (OI)
ranked 63 out of 190 chosen countries in the Ease of Doing regulations. We may expect inclusive amendments with more
Business rankings released by the World Bank.1 Out of ten policy, procedural, and conditional relaxations on the flow of
parameters of Ease of Doing Business introduced by the World investments. Although, in the Economic Survey 2023-24 (prior to
Bank, this fiscal the budget has focused on a certain few namely, the presentation of the budget), a recommendation for reviewing
Starting a Business, Getting Credit, Paying Taxes, Resolving ‘Press Note 3’2 to reconsider Chinese investments was laid
Insolvency, and to an extent Registering Property. There are yet down, however, the Ministry of Commerce and Industry has
certain parameters where we have staggered for growth due to recently clarified that there is no rethinking at present to support
comprehensive legislation as well as internal checks and Chinese investments in the country.3
balances. Taxation benefits
Building on that, this year’s budget is another attempt to To benefit the companies, the budget has announced the
streamline the focus to strengthen the nation’s economy and most awaited abolition of the ‘Angel Tax’ effective from FY 2024-
improve at Ease of Doing Business world rankings. 25, providing relief, especially to startups. Going ahead, these
Analysis of Budget proposals companies would be exempt from tax payment towards the
issuance of shares on premium to the investors i.e., above the fair
Attracting foreign investments
market value. This will ease the working capital pressure on the
India as a manufacturing and services hub is expected to
companies. To cater to the taxation benefits, the government has
multiply its foreign investment in the upcoming fiscal.
1 3
World Bank Report available here Press Note 3 was released during COVID-19 times prohibiting opportunistic
2
Press Note 3 available here acquisition of Indian entities by entities from land-bordering nations.

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Article Corporate Amicus / July 2024

simplified Long Term Capital Gains (LTCG) reducing it from to set up new NCLTs and strengthen the existing appellate
20% to 12.5% (without indexation benefits) on immovable tribunals. Further, new tribunals are to be established, which
properties to horizon on long-term investments. Overall, we shall be exclusively dealing with cases under the Companies Act.
have witnessed a hike in other classes of assets for payment of This will ease the pressure on the NCLTs and also speed up the
LTCG and also towards Short Term Capital Gains (STCG) on process of the matters filed before the NCLTs under the
specified financial assets. Companies Act.

On the taxation front, the biggest development to attract Flexible company structures
foreign capital is to reduce the Corporate Tax from 40% to 35% As of today, Indian company law has provided various
for foreign companies. Further, specific sectors have been corporate structures for the business to operate. Borrowing from
focused on, such as foreign shipping companies and the the jurisdiction of Singapore and the UK, this budget has
diamond industry for tax relaxation to attract more tourism and proposed a new ‘variable company structure’ to pool funds of
hence foster business opportunities. Equalisation levy of 2% on private equity. It provides options for entrepreneurs and
e-commerce supply and services has also been abolished to boost especially fund managers to explore and expand the fund
online trade and transactions. management industry in India. It unleashes the capability to
Evolution in insolvency resolution bring India to the pedestal of one of the most attractive

Evolved in 2016, the insolvency legislation in India is destinations for international fund management especially in the

measuring steady recovery rates every fiscal, while so, there is APAC region.
still a need to revitalize the resolution process. Recently, the Credit enhancement
CRISIL Report, declared that India witnessed 42% growth in FY
The budget proposed that MSMEs can now avail up to INR
2024 with 269 cases getting the NCLT nod for resolution plans
100 crore of term loans without collateral/third-party
over 189 cases in the last fiscal year.4 In this regard, it is proposed
guarantees for infrastructure development and credit guarantee

4
CRISIL Report is available here.

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Article Corporate Amicus / July 2024

to MSMEs even at the stage of Special Mention Account. This may see a recall with the introduction and enactment of the bill,
will not impede MSMEs' focus on business development while which shall put the burden off the companies and streamline
handling their financial arrangements. More SIDBI branches in efforts toward business.
MSME clusters and E-commerce export hubs to enable MSMEs Stamp Duty
to sell their products in international markets are some other
Last but not the least, the Budget has indicated the
proposals to reinforce the MSME sector.
government’s proposal to incentivize states if they lower the
Easy exits Stamp duty rates, especially for properties being purchased by a
The office of the Centre for Processing Accelerated Corporate woman. This shall boost women entrepreneurship directly and
Exit (C-PACE) was established in May 2023 to centralise the to an extent cater to one of the parameters of property
strike-off process of companies, which was a move towards ease registration.

of doing business and ease of exit for the Companies. It is The outlook and way forward
proposed that these services would also be extended for the
From the varied budget proposals, we understand that while
voluntary closure of Limited Liability Partnerships (LLPs) to
the government has streamlined its proposal towards attracting
reduce the closure time.
investments in India and overseas investment, obtaining credit,
Decriminalisation of offences taxation benefits to a certain extent and especially towards
Owing to the positive response of the Jan Vishwas startup ecosystem, and liberalization towards insolvency
(Amendment of Provisions) Act of 2023 for decriminalising and resolution, there are yet certain parameters such as Ease of
rationalising offences to enhance trust-based governance for Starting Business (rank 136), Registering Property (rank 154),
ease of living and doing business, the budget announced Jan Paying Taxes (rank 115), Trading across Borders (rank 68), and
Vishwas Bill 2.0 to seek further congruence of rationalisation and Enforcing Contracts (rank 163) where we lag behind and that
governance for ease of doing business. Unnecessary litigation need to be focused upon to improve individual rankings. India

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Article Corporate Amicus / July 2024

may analyze the implications, challenges, and solutions adopted yet to witness corresponding amendments to various legislation
by other jurisdictions to better its position. to incorporate these demands.

Through this budget, we may sense the government’s [The authors are Partner and Associate, respectively, in
approach more towards free market economics where the Corporate and M&A practice at Lakshmikumaran & Sridharan
budget attempts to meet the demands of the economy. We are Attorneys, Hyderabad]

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 Notifications
& Circulars
− Form MGT-6 of the Companies (Management and Administration) Rules, 2014 amended
− E-form BEN-2 of the Companies (Significant Beneficial Owners) Rules, 2018 amended
− Payment to MSEs – Specified Companies (Furnishing of information about payment to micro and small enterprise
suppliers) Order, 2019 amended
− Directors to update their details by 30 September – Companies (Appointment and Qualification of Directors) Rules,
2014 amended
− Nidhi companies not required to use ‘Nidhi’, subject to conditions – Companies (Incorporation Rules) 2013
amended
− Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 amended
− Master Direction on Priority Sector Lending amended
− SEBI (Foreign Portfolio Investors) Regulations, 2019 amended
− Facility for Basic Services Demat Account for Financial Inclusion and Ease of Investing – SEBI circular
− Information to be filed by schemes of AIFs availing dissolution period/additional liquidation period and
conditions for in-specie distribution of assets of AIFs – SEBI Circular
− Remittances to International Financial Services Centres under Liberalised Remittance Scheme – RBI Circular
Notifications & Circulars Corporate Amicus / July 2024

Form MGT-6 of the Companies (Management and 2018 to include entries declaring ‘change in particulars of the
Administration) Rules, 2014 amended existing Significant beneficial Owner’, ‘change of existing
holding reporting company’ and ‘ID of the Significant Beneficial
The Ministry of Corporate Affairs vide Notification No. G.S.R.
Owner’.
403, dated 15 July 2024, notified amendments to e-Form MGT-6
under the Companies (Management and Administration) Rules, Payment to MSEs – Specified Companies
2014, making the following additional disclosures mandatory: (Furnishing of information about payment to
a. Classification on the type of shares and class of shares micro and small enterprise suppliers) Order, 2019
concerned in the application under MGT-6; amended
b. Personal details of the registered owner and beneficial The Ministry of Corporate Affairs vide Notification No. S.O.
owner of shares viz. PAN, passport details, mobile 2751(E), dated 15 July 2024, has notified amendments to e-form
numbers and e-mail IDs; MSME-1 under the Specified Companies (Furnishing of
c. Beneficial Owner Identification Number, if available; information about payment to micro and small enterprise
d. Dates of declarations made by the registered owner and suppliers) Order, 2019 to include detailed particulars of the
the beneficial owner; and name of Micro and Small Enterprises (MSEs) suppliers and the

e. Date of receipt of the abovementioned declarations by amounts of all payments due where amount has been paid

the respective company. within and/or after 45 days and to declare whether the same has
been outstanding for 45 days or less and/or for more than 45
E-form BEN-2 of the Companies (Significant days. All these details are to be incorporated in the tabular
Beneficial Owners) Rules, 2018 amended format given within the said e-Form. Additionally, an
The Ministry of Corporate Affairs vide Notification No. G.S.R amendment has been made to paragraph 3 under the original
404(E), dated 15 July 2024, notified amendments to e-form BEN- Specified Companies (Furnishing of information about payment
2 under the Companies (Significant Beneficial Owners) Rules, to micro and small enterprise suppliers) Order, 2019, containing

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Notifications & Circulars Corporate Amicus / July 2024

a proviso to state that MSME-1 would need to be filed only when ‘Nidhi’ as a suffix to the names proposed for Nidhi Companies
companies have outstanding payments to micro and small under Rule 8A(1) of the Companies (Incorporation) Rules, 2014.
enterprises for a period beyond 45 days. Consequently, the Ministry vide Notification dated 16 July 2024
also notified the insertion of a proviso under Rule 4(5) of the
Directors to update their details by 30 September –
Nidhi Rules, 2014 stating that companies shall not use the words
Companies (Appointment and Qualification of
‘Nidhi Limited’ in their names unless declared under Section
Directors) Rules, 2014 amended 406(1) of the Companies Act, 2013.
The Ministry of Corporate Affairs vide Notification No. G.S.R.
Investor Education and Protection Fund Authority
412(E), dated 16 July 2024, notified amendments under Rule 12A
(Accounting, Audit, Transfer and Refund) Rules,
of the Companies (Appointment and Qualification of Directors)
Rules, 2014 stating that every individual holding a Director
2016 amended
Identification Number may update their personal mobile The Ministry of Corporate Affairs vide Notification No. G.S.R.
number or e-mail address by submitting e-Form DIR-3 KYC, on 414(E), dated 16 July 2024, has notified the substitution of ‘IEPF
or before 30th September during the financial year. Additionally, 4’ in place of ‘IEPF 3’ and ‘IEPF 1’ in place of ‘IEPF 7’ throughout
if an individual wishes to update these details post the timeline the Investor Education and Protection Fund Authority
specified during the financial year, they shall do the same by (Accounting, Audit, Transfer and Refund) Rules, 2016, due to
submitting e-Form DIR-3 KYC along with a payment of INR 500 integration of forms in the manner specified. Further, under
to the MCA. Rules 6(13), 6(13A) and 6A (12), the notification made
amendments with respect to payments stating that companies
Nidhi companies not required to use ‘Nidhi’,
can remit amount required to be credited towards the Investor
subject to conditions – Companies (Incorporation
Education and Protection Fund online, to the IEPF Authority
Rules) 2013 amended within 30 days from the date such amount becomes due.
The Ministry of Corporate Affairs vide Notification No. G.S.R.
411(E), dated 16 July 2024, notified the omission of the word

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Notifications & Circulars Corporate Amicus / July 2024

Master Direction on Priority Sector Lending Direction on Lending to Micro, Small & Medium
amended Enterprises dated 24 July 2017.

The Reserve Bank of India vide Circular No. RBI/2024-25/44, SEBI (Foreign Portfolio Investors) Regulations,
FIDD.CO.PSD.BC. No.7/04.09.01/2024-25 dated 21 June 2024 2019 amended
has notified certain amendments to the Master Direction on
Securities Exchange Board of India (‘SEBI’) vide Notification No.
Priority Sector Lending (‘PSL’), dated 4 September 2020 (‘MD’).
SEBI/LAD-NRO/GN/2024/185 dated 26 June 2024 has notified
The key amendments are listed below:
the SEBI (Foreign Portfolio Investors) (Second Amendment)
• Adjustments for weights in PSL Achievement: Regulations, 2024. The amendments outlined in the regulations
Under Para 7 of the MD, the weights for PSL credit based involve revising the conditions under which certain
on district level credit flow have been adjusted upon contributions to an applicant’s corpus are permitted.
review and will remain valid until FY 2026-27. Effective Specifically, the regulations under Regulation 4(c) now stipulate
from FY 2024-25, districts with a per capita PSL below that a single Non-Resident Indian (NRI), Overseas Citizen of
INR 9000 will now receive a higher weightage of 125%, India (OCI), or Resident Indian (RI) individual must contribute
while those with a per capita PSL above INR 42,000 will less than 25% of the total corpus, and that the combined
receive a lower weight of 90%. The lists of districts with contributions of all such individuals must not exceed 50% of the
updated weightages are detailed in Annex IA and IB of corpus of the applicant. Additionally, contributions from
the MD. resident Indians must be made through the Liberalised
• Definition of Micro, Small and Medium Enterprises Remittance Scheme and shall be in global funds with less than
(‘MSME’): 50% Indian exposure. It has also been mandated that these
contributors should not control the applicant. New provisos to
Under Para 9 of the MD, the definition of MSMEs has
the said regulation include exemptions for applicants regulated
been amended to include reference to the Master
by the International Financial Services Centres Authority and a

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Notifications & Circulars Corporate Amicus / July 2024

confirmation that existing exemptions will remain in force Charges for BSDA being the same as non-BSDA accounts for all
despite the new conditions. services except for the annual maintenance charge and contains
details regarding such valuation.
Facility for Basic Services Demat Account for
Financial Inclusion and Ease of Investing – SEBI Information to be filed by schemes of AIFs
circular availing dissolution period/additional liquidation
Securities Exchange Board of India vide Circular
period and conditions for in-specie distribution of
SEBI/HO/MIRSD/MIRSD-PoD1/P/CIR/2024/91 dated 28 June assets of AIFs – SEBI Circular
2024 comprehensively reviews the Facility of Basic Services Demat Securities Exchange Board of India (‘SEBI’) vide circular
Account (‘BSDA’) which was provided in the SEBI’s previous SEBI/HO/AFD-1/AFD-1-PoD/P/CIR/2024/100 (‘Circular’)
Circulars dated 27 August 2012 and 10 April 2019, and the Master dated 9 July 2024, mentioned the following clarifications on the
Circular for Depositories dated 6 October 2023. According to this information memorandum to be submitted by the schemes of
Circular, the eligibility criteria for a BSDA would include only AIFs entering into dissolution period and/or availing additional
those individuals having one demat account as the sole or first liquidation period, along with clarifying timelines and reports to
holder and having only one BSDA across all depositories. be submitted with respect to in-specie distribution of
Furthermore, the value of securities in the demat account must investments of AIFs:
now not exceed INR 10 lakh for both debt and non-debt securities
A. Information Memorandum for schemes of AIFs entering
combined. Depository Participants (‘DPs’) are hence, required to
into dissolution period:
open BSDAs only for eligible Beneficial Owners (‘BOs’) unless the
BOs opt for a regular demat account via email consent. DPs must In the SEBI (Alternative Investment Funds) (Second Amendment)
now also reassess existing demat accounts for the notified BSDA Regulations 2024 (‘2024 AIF Regulations’), notified on 25 April
eligibility and convert all eligible accounts to BSDAs within two 2024, AIF schemes were allowed to enter a dissolution period and
months of this Circular's effect. The Circular also provides for the SEBI's circular SEBI/HO/AFD/PoD1/CIR/2024/026 dated 26 April
charges based on Value of Holdings in the Demat Account and 2024, detailed the procedures for the same. According to

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Notifications & Circulars Corporate Amicus / July 2024

Regulation 29B(2) of the SEBI (Alternative Investment Funds) KMP are responsible for ensuring compliance with the said
Regulations, 2012, (‘2012 AIF Regulations’) AIF schemes must file provision, and the trustee or sponsor must ensure that the
an information memorandum with SEBI via a merchant banker manager's 'Compliance Test Report,' as detailed in Chapter 15 of
before expiry of the liquidation period. This Circular prescribes the Master Circular no. SEBI/HO/AFD-1-
the format for submission of the information memorandum and PoD/P/CIR/2024/39, is in adherence to the provisions
the Due Diligence Certificate under its annexures, Annexure I mentioned under this Circular.
and Annexure II, respectively.
Remittances to International Financial Services
B. Information to be submitted by schemes of AIFs availing Centres under Liberalised Remittance Scheme –
additional liquidation period:
RBI Circular
Schemes of AIFs whose liquidation periods have expired/will
The Reserve Bank of India vide Circular No. A.P. (DIR Series)
expire within 3 months from the date of notification of the 2024
Circular No. 15 dated 10 July 2024, has broadened the scope of
AIF Regulations by 24 July 2024, may be granted an additional
permissible remittances under Liberalised Remittance Scheme
liquidation period subject to the conditions outlined under the
(‘LRS’) to International Financial Services Centres (‘IFSCs’). The
abovementioned SEBI circular, dated 26 April 2024, in
Circular states that Authorised Persons may now facilitate
accordance with Regulation 29(9A) of the 2012 AIF Regulations.
remittances for all permissible purposes under the LRS,
Any scheme availing a fresh/additional liquidation period shall
including availing financial services or products as per the
submit information under the format prescribed in Annexure III
International Financial Services Centres Authority Act, 2019,
of this Circular.
within IFSCs. Further, it also notified that remittances can be
C. In specie distribution of investments of AIFs used for current or capital account transactions in any foreign
For non-mandatory in specie distribution as per Regulation 29(8) jurisdiction (excluding IFSCs) through a Foreign Currency
of the 2012 AIF Regulations, approval from at least 75% of Account held in these IFSCs. Resident individuals will continue
investors by value would be required. The manager, trustee, and to be able to open FCAs in IFSCs for all the newly permitted
purposes.

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 Ratio Decidendi

− Properties not acquired through ‘Proceeds of Crime’ cannot be subject to attachment under PMLA – Kerala
High Court
− A force majeure event does not justify retention of Performance Bank Guarantee without suffering a legal injury
– Delhi High Court
− Legal heirs of a deceased, who was party to an arbitration agreement, are classified as ‘Legal Representatives’
under Arbitration Section 2(1)(g) – Telangana High Court
− Application for termination of the Arbitrator’s mandate should be filed with the District Court, not the High
Court – Telangana High Court
Ratio Decidendi Corporate Amicus / July 2024

Properties not acquired through ‘Proceeds of predicate offences took place between 27 January 2021 and 14
November 2022. Therefore, it was found that the property was
Crime’ cannot be subject to attachment under
acquired more than a decade and a half before the alleged
PMLA offense occurred.
The Kerala High Court has held that properties subject to The High Court relied on the judgment of Hon’ble Supreme
attachment under Section 5 of the Prevention of Money Court in the case of Pavana Dibbur v. Directorate of Enforcement,
Laundering Act, 2002 (‘PMLA’) must be those acquired using 2023 SCC OnLine SC 1586 which had held that ‘Properties that
the ‘Proceeds of Crime’. The Court emphasized that the can be targeted for attachment must have been acquired using
provisions of the PMLA cannot be used arbitrarily and money obtained from criminal activities. The aim of the PMLA
unreasonably by the authorities to proceed against properties is to eliminate illegal funds and take action against assets that
not connected with any criminal activity. have been obtained/procured through unlawful means. As a
The case involved an investigation into M/s. Masters FinServ result, any profits associated with these assets will be considered
and others, during which the bank accounts of Mr. Satish Motilal proceeds of crime.’
Bidri (‘Mr. Bidri’) were frozen by an Order dated 5 September Based on the information mentioned above, the High Court
2023 (‘Order’). Aggrieved by the said Order, Mr. Bidri ruled that the order to seize the property bought in 2004 exceeds
approached the High Court under Article 226 of the the powers granted by the law and is therefore illegal and unjust.
Constitution, challenging the freezing of his bank accounts and The High Court directed the petitioner to pursue the available
the provisional order of attachment issued under Section 5 of the legal options for the frozen bank accounts as provided by the
PMLA. Subsequently, the Enforcement Directorate (ED) also law.
issued a provisional attachment order on 22 May 2024, attaching
[Satish Motilal Bidri v. Union of India – Judgement dated 28 June
the same bank accounts and immovable property of Mr. Bidri.
2024 in WP (CRL.) No. 406 of 2024, Kerala High Court]
The High Court noted that the immovable property attached
was purchased by Mr. Bidri on 5 January 2004, while the alleged

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Ratio Decidendi Corporate Amicus / July 2024

A force majeure event does not justify retention of a Section 34 petition under Arbitration Act. In the appeal, the
Single Judge allowed claim nos. 1 & 2 that were dismissed by the
Performance Bank Guarantee without suffering a
Arbitral Tribunal, but upheld the decision of Arbitral Tribunal
legal injury in rejecting claim no. 3
The Division Bench of the Delhi High Court has held that force The Single Judge while declining claim no. 3 observed that delay
majeure events, such as Acts of God, which are beyond human in commissioning the solar power plant was only on account of
control, do not justify the retention of performance bank a force majeure event. Aggrieved by the said decision of the
guarantees. The Bench also held that in such cases, parties cannot Singh Judge, the Appellant had approached the High Court.
keep the money obtained through encashment of Performance
The High Court concurred with the view of the Single Judge and
Bank Guarantees as liquidated damages without actually
held that the liquidated damages should not have been levied
suffering a legal injury.
since the delay caused was on account of a force majeure event.
NTPC Vidyut Vyapar Nigam Ltd. (‘Appellant’) entered into a The High Court further observed there was no legal injury
Power Purchase Agreement (‘PPA’) with Oswal Woolen Mills caused to the Appellants, nor were any facts presented to
Ltd. (‘Respondent’) for a solar power project. The dispute arose indicate any loss due to the delay.
out of the PPA and the Appellant approached the Arbitral
The High Court further relying on the judgment of Fatehchand v.
Tribunal for (1) reimbursement for the cost of laying
BalKrishan Das, 1963 AIR SCC 145, which had held that the
transmission lines, (2) recovery of income lost due to
sufferance of legal injury was essential for claiming damages and
transmission losses over 25 years, and (3) the refund of INR
upheld the findings of Arbitral Tribunals finding that in the case
1,82,63,000/- retained by the Appellant by encashing the
of a force majeure event, the Appellant could not claim the
Performance Bank Guarantee from the Respondent, due to the
Performance Bank Guarantee funds for the liquidated damages
delay in commissioning the solar power plant. The Arbitral
without suffering any legal injury. Consequently, the appeal was
Tribunal passed the order rejecting all the aforesaid claims of the
dismissed by the High Court.
Appellant. Aggrieved by the same, the Appellant had preferred

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Ratio Decidendi Corporate Amicus / July 2024

[NTPC Vidyut Vyapar Nigam Ltd. v. Oswal Woolen Mills Ltd. – Following his uncle's death, the Appellant inherited the property
Judgement Dated 3 July 2024 in FAO(OS) (COMM) 263/2018 & and continued to occupy it, paying all taxes and charges. The
CMAPPL. 47514/2018, Delhi High Court] Appellant filed a petition under Section 8 of the Arbitration Act,
seeking to resolve the dispute through arbitration as per the
Legal heirs of a deceased, who was party to an
agreement. The Trial Court dismissed the Suit, stating that the
arbitration agreement, are classified as ‘Legal agreement was not between the Respondent and the Appellant.
Representatives’ under Arbitration Section 2(1)(g) Aggrieved by the same, the Applicant approached the Hon’ble
High Court under Section 37 of the Arbitration Act challenging
The Telangana High Court has held that the term ‘legal
the decisions of the Trial Court.
representative’ under Section 2(1)(g) of the Arbitration Act
includes the legal heirs of a deceased person who was party to The High Court in its findings emphasized that the term ‘legal
an Arbitration Agreement. representatives’ also includes persons who manage the estate of
the deceased. The High Court observed that Section 2(1)(g) of the
The case involved a dispute concerning a flat constructed by
Arbitration Act, which provides for ‘legal representatives’ also
M/s. Innovation Builders. Mr. Parvez Adi Debara filed a Suit to
includes persons who intermeddle with the estate of the
Recover Possession and Damages for the flat, claiming
deceased. Section 40 of the Arbitration Act and the definition of
ownership as the Legal Heir of the Late Rashid H. Debara, who
‘legal representative,’ when read together, imply that the
had entered into an Agreement for the flat (‘Suit’).
enforceability of the arbitration agreement will not get
The Respondent argued that the Appellant had unlawfully
extinguished by the death of the deceased.
occupied the flat and sent a legal notice to hand over possession.
Basis the aforesaid, the High Court held that the Trial Court
As the Appellant refused, the Respondent filed a suit for
should have decided the issue considering whether the dispute
recovery.
was one where the arbitration clause was applied and whether
The Appellant stated that his late uncle had entered into an
the Appellant fell within the definition of a legal representative
Agreement of Sale for the flat and completed the payment.
under Section 2(1)(g) taking into account the provisions of

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Ratio Decidendi Corporate Amicus / July 2024

Section 40. Consequently, the order passed by the Trial Court the Arbitrator was formerly an in-house counsel of the
was set aside, and the appeal was allowed. The High Court also Respondent and was appointed as an Arbitrator in six other
held that the parties are permitted to invoke arbitration clause cases connected to the Respondent. The Arbitrator did not
for the arbitration proceeding under the terms of the agreement. advert to the said Application. Thereafter, the Applicant filed the

[Sri Parvez Ali Debara v. Innovation Builders – Judgement dated 24 present application before the High Court, seeking to terminate

July 2024 in Civil Miscellaneous Appeal No. 289 of 2023, the mandate of the arbitrator and appoint a substitute arbitrator.

Telangana High Court] It was contended that since the High Court has the power to
appoint an arbitrator under Section 11(6), the High Court alone
Application for termination of the Arbitrator’s has the power to terminate the mandate of the arbitrator.
mandate should be filed with the District Court, The High Court however observed that if Section 14(2) is read in
not the High Court conjunction with Section 2(1)(e) of the Arbitration Act, it is
evident that ‘Court’ means a Court of original jurisdiction in a
The Telangana High Court has clarified that the application for
District and includes a High Court in the exercise of its ordinary
termination of the Arbitrator’s mandate under Section 14 of the
original civil jurisdiction, having jurisdiction to decide the
Arbitration and Conciliation Act, 1996 should be filed before the
questions forming the subject matter of the arbitration. The High
District Court and not the High Court. The High Court further
Court further relied on the case of Swadesh Kumar Agarwal v.
highlighted that, despite High Courts having the power to
Dinesh Agarwal and Ors, (2022) 10 SCC 235, wherein the Hon’ble
appoint an Arbitrator under Section 11(6) of the Arbitration Act,
Apex Court had held that in case of dispute on the mandate of
they do not have jurisdiction to deal with an application for
the arbitrator under Section 14(1)(a), such a dispute has to be
terminating an arbitrator’s mandate under Section 14 of the said
raised before the ‘Court’ defined under Section 2(1)(e) of the
Act.
Arbitration Act.
During the pendency of the arbitration proceeding, the applicant
The High Court in this regard also noted that the dispute had
had filed an application under Section 14 of the Arbitration Act
arisen between the parties under Section 14(1)(a), as, according
(‘Application’) before the arbitrator inter alia on the ground that

© 2024 Lakshmikumaran & Sridharan, India

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Ratio Decidendi Corporate Amicus / July 2024

to the applicant, the arbitrator had become de jure or de facto [Naolin Infrastructure Private Limited v. Infinity Projects –
unable to perform his functions or for other reasons fails to act Judgement dated 10 July 2024 in Arbitration Application No. 43
without undue delay. of 2024, Telangana High Court]

© 2024 Lakshmikumaran & Sridharan, India

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 News Nuggets

− Employment linked incentive schemes introduced

− Budget 2024-25 provides the much-needed push to MSMEs
− Angel tax abolished
− MCA mandates companies to disclose biannually their dealings with MSMEs
− MeitY considers proposing to exclude ex-ante measures from the Digital Competition Bill
− FSSAI mulls mandating labelling of certain nutritional information in bigger and bolder fonts
− CCI to shortly introduce revised norms under the competition rules
− Telangana eyes at having its first MSME oriented policy
− SEBI considering relaxing certain disclosure norms for listed entities
News Nuggets Corporate Amicus / July 2024

Employment linked incentive schemes introduced their monthly contributions to EPFO in respect of such
new joiners over a period of 4 years at the prescribed
In its long-awaited efforts to boost the employment in India, the
rates. Under this scheme too, in case there is cessation of
government has introduced certain schemes and initiatives in its
employment of the employee within 12 months of his
Union Budget on 23 July 2024. Accordingly, the following
recruitment, the aforesaid subsidy is to be refunded by
schemes have been launched with a validity period of two years
the employer.
each:
• Scheme C: Support to Employers – Companies that
• Scheme A: First Timers Wage Subsidy – An individual
increase their workforce by at least two employees (for
joining employment for the first-time with a monthly
those with fewer than 50 employees) or five employees
salary of up to INR 1 lakh shall be eligible to get up to
(for those with 50 or more employees) shall be eligible
INR 15,000 in three instalments via direct transfer from
for a reimbursement of the EPFO employer
the Central Government. However, for drawing the
contributions up to INR 3,000 per month. However, the
second instalment, such individual shall be required to
employers availing benefits under the Scheme B (and not
undergo an online Financial Literacy course. Further, in
A) shall not be entitled to avail the benefits under this
case there is cessation of employment of the employee
Scheme.
within 12 months of his recruitment, the aforesaid
subsidy is to be refunded by the employer. [Source: Business Today, published on 23 July 2024]

• Scheme B: Job creation in manufacturing sector – The Budget 2024-25 provides the much-needed push to
employers in the manufacturing sector with at least a MSMEs
three-year Employee Provident Fund Organisation
The Union Budget 2024-25 has proposed the following actions
(EPFO) contribution history hiring at least 50 non-EPFO thereby providing a huge relief to the Micro Small and Medium
workers or 25% of their previous year's EPFO employee Enterprises (MSMEs):
count, whichever is lower shall be eligible for subsidy on

© 2024 Lakshmikumaran & Sridharan, India 20

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News Nuggets Corporate Amicus / July 2024

• A credit guarantee scheme for facilitating term loans for MCA mandates companies to disclose biannually
purchase of machinery and equipment for the MSMEs
their dealings with MSMEs
without collateral or third-party guarantee and a
guarantee from a government-promoted fund to The Ministry of Corporate Affairs (MCA) has introduced the
provide credit support during stress period has been Micro, Small and Medium Enterprise-1 (MSME-1) form on its
proposed. V3 portal mandating the companies dealing with MSMEs to now
disclose the information relating to the payments made or to be
• The loan limit under the ‘Tarun’ category of the Mudra
made to such MSMEs. The MSME-1 form requires the companies
loans has been doubled to INR 20 lakh.
to disclose details of the payment amount paid within the
• A separately constituted self-financing guarantee fund
statutory limit of 45 days, the payment amount paid after the
has been proposed that will provide, to each applicant, a
statutory limit of 45 days, the mode of payment, any payment
guarantee cover up to INR 100 crore, while the loan
amount outstanding for less than or equal to 45 days, any
amount may be even higher.
payment amount outstanding for more than 45 days and reason
[Source: The Hindu, published on 23 July 2024]
for delay in such cases.
Angel tax abolished [Source: Business Standard, published on 17 July 2024]
The Finance Minister, as part of her speech in the Union Budget MeitY considers proposing to exclude ex-ante
2024-25, has announced the abolition of angel tax on class of
measures from the Digital Competition Bill
investors providing a huge sigh of relief to the Indian start-up
ecosystem. Notably, angel tax is a provision under the Income Amidst rising concerns from the stakeholders, the Ministry of
Tax Act, 1961 that considers the investment received by startups Electronics and Information is mulling to propose to the MCA to
from external investors as ‘income from other sources’ and the exclude ex-ante (pre-emptive) provisions of the Digital
same is then taxed at a rate of 30 per cent. Competition Bill, 2024 for the time being at least. As of now, the
[Source: Business Today, published on 23 July 2024] Competition Act, 2002 is an ex-post framework which means

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News Nuggets Corporate Amicus / July 2024

that the appropriate authority takes action only after an event to amend the rules on de minimis exemptions, that basically allow
has occurred. exemption from the mandatory approval to be obtained from

[Source: Outlook, published on 15 July 2024] CCI on certain M&A deals subject to meeting certain thresholds.

[Source: Economic Times, published on 28 June 2024]

FSSAI mulls mandating labelling of certain
nutritional information in bigger and bolder fonts Telangana eyes at having its first MSME oriented
The Food Safety and Standards Authority of India (FSSAI) has
policy
approved amendments to the Food Safety and Standards As per the statement of the Minster of Industries and
(Labelling and Display) Regulations, 2020 with regard to the Information Technology, Telangana may soon have its first ever
labelling of nutritional information. Accordingly, it has been MSME policy, possibly even tabled in the next assembly session
proposed that the nutritional information regarding total sugar, of the State thereby giving the required boost to the industries
salt and saturated fat on the label of a packaged food product across various sectors in the State.
shall be in bold letters and relatively increased font size. [Source: Times of India, published on 27 June 2024]
[Source: Money Control, published on 6 July 2024]
SEBI considering relaxing certain disclosure
CCI to shortly introduce revised norms under the norms for listed entities
competition rules As per its recent consultation paper published on 23 June 2024,
The Competition Commission of India is considering tweaking the Securities and Exchange Board of India (SEBI) is considering
the norms under the Green Channel introduced in 2019 for easing certain disclosure norms for listed entities. Accordingly,
facilitating expeditious approvals in case of Mergers and the SEBI has proposed allowing listed entities more time to
Acquisitions (M&A), in order to further reduce the compliance publicly disclose litigations or disputes that they are involved in.
burden falling on the stakeholders. Further, the CCI also plans Further, it has also been proposed that public companies be

© 2024 Lakshmikumaran & Sridharan, India 22

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News Nuggets Corporate Amicus / July 2024

exempted from seeking approvals from their respective audit disclosing their compensation on a half-yearly basis as is
committees for directors and executives' remuneration, or required at present in terms of related party transactions.

[Source: Outlook, published on 27 June 2024]

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Contact Us Corporate Amicus / July 2024

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