WHETHER NCLT CAN WAIVE THE REQUIREMENT OF CREDITOR’S / SHAREHOLDER’S MEETING IN CASE OF MERGER /DEMERGER/AMALGAMATION

WHETHER NCLT CAN WAIVE THE REQUIREMENT OF CREDITOR’S / SHAREHOLDER’S MEETING IN CASE OF MERGER /DEMERGER/AMALGAMATION

In JVA Trading Pvt. Ltd. and C&S Electric Limited.

This case involved a scheme of amalgamation of JVA Trading with C&S Electric. JVA Trading had only four shareholders, all of who had granted their consent to the amalgamation. Hence, the question was whether the shareholders’ meeting of JVA Trading could be dispensed with. Here, after analysing the provisions of the Companies Act, 2013, the NCLT held:

 Section 230(9) of the Companies Act, 2013

In relation to the dispensation of the meeting of the equity shareholders of the Transferor Company is concerned we are not inclined to grant dispensation taking into consideration the provisions of the Companies Act, 2013 and the rules framed there under both of which expressly do not clothe this Tribunal with the power of dispensation in relation to the meeting of shareholders/members. On the other hand reference to Section 230(9) of the Companies Act, 2013 … discloses that 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 and does not provide for the dispensation of the meeting of members.

Companies (Compromises, Arrangements and 

Amalgamations) Rules, 2016)

Further, the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 more specifically Rule 5 which provides for directions to be issued by this Tribunal discloses that determining the class or classes of creditors or of members meeting or meetings have to be held for considering the proposed compromise or arrangement; or dispensing with the meeting or meetings for any class or classes of creditors in terms of sub-section (9) of section 230.

Keeping in view the above provisions, dispensation of the meetings of members of the company cannot be entertained by NCLT.

This effectively means that the NCLT can never dispense with the holding of a meeting of a class of shareholders or creditors (except under section 230(9)) even if such a meeting turns out to be an empty formality. This will certainly add to the costs and inefficiencies in effecting a scheme of arrangement. Under the Companies Act, 1956, courts did regularly grant dispensation despite the absence of any express provision in that legislation or the accompanying rules. It is not as if the affected minority shareholders are without any recourse. It is always possible for them to raise their objections when the scheme is taken up for consideration by the NCLT after the requisite classes of shareholders and creditors have approved it.

Whether NCLT has General Powers to dispense 

the creditor's Meeting ?

From a legal perspective, the NCLT does have general powers that it is at liberty to exercise in order to give effect to a scheme, for example in rule 24(2) of the rules pertaining to compromises and arrangements. However, the NCLT seems to be constrained by the existence of sub-section (9) of section 230, which expressly provides for dispensation of creditors’ meetings so long as they have been consented to by 90% of the creditors in value. The NCLT’s position is that this is only dispensation possible, and no other.

Section 230(9) of the Companies Act, 2013 … discloses that 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 and does not provide for the dispensation of the meeting of members.

Thus , we can come to a conclusion that NCLT will not have any 
authority to dispense with the requirement of creditors meeting except under Section 230(9) of the Companies Act, 2013.

RANSOME Cyber Attack - Incident Response Requirements in Indian Law by Affected Companies

RANSOME Cyber Attack - Incident Response Requirements in Indian Law by Affected Companies

Yesterday’s Ransome cyber-attack. There are legal & regulatory requirements on affected Indian companies to report cyber incident under Information Technology Act, RBI guidelines and telecom license conditions. The relevant reporting authority depends upon the nature of the business of the company. There are stringent penalties (including imprisonment) if such incidents are not reported in certain cases.

Incident Reporting under CERT Rules

In India, section 70-B of the Information Technology Act, 2000 (the “IT Act”) gives the Central Government the power to appoint an agency of the government to be called the Indian Computer Emergency Response Team. In pursuance of the said provision the Central Government issued the Information Technology (The Indian Computer Emergency Response Team and Manner of Performing Functions and Duties) Rules, 2013 (the “CERT Rules”) which provide the location and manner of functioning of the Indian Computer Emergency Response Team (CERT-In). Rule 12 of the CERT Rules gives every person, company or organisation the option to report cyber security incidents to the CERT-In. It also places an obligation on them to mandatorily report the following kinds of incidents as early as possible:

·         Targeted scanning/probing of critical networks/systems;

·         Compromise of critical systems/information;

·         Unauthorized access of IT systems/data;

·         Defacement of website or intrusion into a website and unauthorized changes such as inserting malicious code, links to external websites, etc.;

· Malicious code attacks such as spreading of virus/worm/Trojan/botnets/spyware;

·         Attacks on servers such as database, mail, and DNS and network devices such as routers;

·         Identity theft, spoofing and phishing attacks;

·         Denial of Service (DoS) and Distributed Denial of Service (DDoS) attacks;

·         Attacks on critical infrastructure, SCADA systems and wireless networks;

·         Attacks on applications such as e-governance, e-commerce, etc.

Incident Reporting under Intermediary Guidelines

Section 2(1)(w) of the IT Act defined the term “intermediary” in the following manner;

“Intermediary” with respect to any particular electronic record, means any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web hosting service providers, search engines, online payment sites, online-auction sites, online market places and cyber cafes.

Rule 3(9) of the Information Technology (Intermediaries Guidelines) Rules, 2011 (the “Intermediary Guidelines”) also imposes an obligation on any intermediary to report any cyber incident and share information related to cyber security incidents with the CERT-In. Since neither the Intermediary Guidelines not the IT Act specifically provide for any penalty for non-conformity with Rule 3(9) therefore any enforcement action against an intermediary failing to report a cyber security incident would have to be taken under section 45 of the IT Act containing a penalty of Rs. 25,000/-.

Incident Reporting under the Unified License

·         Clause 39.10(i) of the Unified License Agreement obliges the telecom company to create facilities for the monitoring of all intrusions, attacks and frauds on its technical facilities and provide reports on the same to the Department of Telecom (DoT). Further clause 39.11(ii) provides that for any breach or inadequate compliance with the terms of the license, the telecom company shall be liable to pay a penalty amount of Rs. 50 crores (Rs. 50, 00, 00,000) per breach.

A recent example of such an attack that we have seen from India is the recent data breach involving an alleged 3.2 million debit cards in India. In the case of this hack the payment processing networks such as National Payments Corporation of India, Visa and MasterCard, informed the banks regarding the leaks, based on which the banks started the process of blocking and then reissuing the compromised cards. It has also been reported that the banks failed to report this incident to the Computer Emergency Response Team of India (CERT-In) even though they are required by law to do so.

Courtesy: The Center for Internet & Society 

Recognition of CS as Goods and Service Tax Practitioner

Recognition of CS as Goods and Service Tax Practitioner 

Dear Professionals,

Pursuant to the Section 48 of the approved Central Goods and Service Tax Act (CGST), read with Rule 24 of the Revised Return Rules as available on www.cbec.gov.in , Any person who has passed Final Examination of the Institute of Company Secretaries of India (ICSI) is Eligible for enrolment as Goods and Services Tax Practitioner by making an application in Form GST PCT-1 to the Authorised Officer.

http://www.cbec.gov.in/


Please see my earlier post on 6 October 2016 

http://rvseckarcompanylaw.blogspot.in/2016/10/requesting-government-of-india-to.html

E-STAMPING TO BE MADE MANDATORY FOR TRANSACTIONS ABOVE RS 1 LAKH

E-STAMPING TO BE MADE MANDATORY FOR TRANSACTIONS ABOVE RS 1 LAKH

The government has made e-stamping mandatory for transactions above Rs 1 lakh.

A gazette notification has been issued in this regard after amending the Stamp rules of 1960.

The present method will continue for two more months after which e- stamping will be mandatory.

For transactions less than Rs 1 lakh, either stamp paper or e- stamp can be used. However, the amendment notification says that transactions less than Rs 1 lakh can also shifted to e-stamping method if the government issues such an order.

If the details of the title deed are submitted in the registration department’s website, people can get the user id and password.

After this, money should be paid online. As soon as the transaction is complete, the department reference number (DRN) will be issued.

The customer can download the e-stamp certificate from the registration department’s portal using the DRN. It can be downloaded only once. Facility will be provided to examine the authenticity of the e-stamp in the website.

The print of the e-stamp should be taken in A-4 size paper. The paper thickness should not be less than 100 GSM. It should have a margin of 35 mm on the left side and 15 mm on the right.

A space of 20 mm should be left on the top. With the introduction of e-stamp, those who sell stamp paper will suffer losses. However, the government will make profit as the printing of stamp paper and other related expenses can be avoided. Moreover, there is no need to fear the menace of fake stamp papers.