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 The Council Contents
President
l Makarand Lele
Vice President ISSN 0972-1983

CHARTERED SECRETARY
®
l Ahalada Rao V.

Members
(in alphabetical order)
[ Registered under Trade Marks Act, 1999 ]
l Anurag Agarwal
l Ashish C. Doshi Vol. : XLIX n No. 01 n Pg 1-160 n January-2019
l Ashish Garg
l Atul H Mehta From the President 08
l Gopalakrishna Hegde
l

l
Gopal Krishna Agarwal
Mahavir Lunawat
Articles41
l

l
Mamta Binani
Rajesh Sharma
Research Corner 95
Rajiv Bajaj
Legal World 97
l

l Ramasubramaniam C.
l Ranjeet Kumar Pandey
l S. K. Agrawala From the Government 107
l Satwinder Singh
l Shyam Agrawal (Dr.) News from the Institute 127
l Vijay Kumar Jhalani
l Vineet K. Chaudhary Global Connect 140
l Yamal Ashwinkumar Vyas
Officiating Secretary
QR Code/Weblink of Chartered Secretary Journal
l Ashok Kumar Dixit

https://www.icsi.edu/JournalsBulletins/CharteredSecretary.aspx

01
10 Editorial Advisory Board Annual Subscription
Chairman ‘Chartered Secretary’ is normally published in the first week of every month. n Non-
l Santosh Kumar Agrawala
receipt of any issue should be notified within that month.  n Articles on subjects of inter-
Members
(in alphabetical order) est to company secretaries are welcome. n Views expressed by contributors are their
l D K Jain (Dr.) own and the Institute does not accept any responsibility. n The Institute is not in any way
l G R Bhatia responsible for the result of any action taken on the basis of the advertisements published
l Gopal Jiwarajka in the journal. n All rights reserved. n No part of the journal may be reproduced or copied
l Gopal Krishna Agarwal in any form by any means without the written permission of the Institute. n The write ups
l H M Choraria
of this issue are also available on the website of the Institute.
l J K Mittal
l K Narayana Swamy
l N K Jain Edited, Printed & Published by
l P K Mittal Ashok Kumar Dixit* for The Institute of Company Secretaries of India,
l Pritivi Haldea ‘ICSI House’, 22, Institutional Area, Lodi Road, New Delhi- 110 003.
l Ram Moorthy Phones : 41504444, 45341000, Grams : ’COMPSEC’
l Ravi Kumar Mandavilli Fax : 91-11-24626727
l R C Gupta E-Mail : info@icsi.edu
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l Vinod K Singhania (Dr.)

Editor & Publisher

Mode of Citation: CSJ (2019)(01/--- (Page No.)
l Ashok Kumar Dixit*

Legal Correspondent
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submitted to the licensing authority.
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CHARTERED SECRETARY JANUARY 2019 I 3
IMAGES

01 02

03 04

05 06
1. Meeting of CS Ashok Kumar Dixit with M. Venkaiah Naidu ( Hon’ble Vice President of India).
2. CS Makarand Lele and CS Ashok Kumar Dixit meeting with with P.P. Chaudhary (Hon’ble Union minister of State for Law and Justice and Corporate Affairs).
3. Meeting of ICSI delegation with Suresh Prabhu (Hon’ble Minister of Commerce & Industry and Civil Aviation).
4. CS Ashok Kumar Dixit presenting a book “Premier on Company Law” to Piyush Goyal (Hon’ble Union Minister for Railways & Coal).
5. CS Makarand Lele presenting a book “Premier on Company Law” to Injeti Srinivas (Secretary, Ministry of Corporate Affairs). Also present on the occasion CS Banu
Dandona & Deepa Khatri.
6. Meeting of ICSI delegation with Hon’ble Justice Mahesh Mittal Kumar (President, NCLT).

4 I
JANUARY 2019 CHARTERED SECRETARY
 IMAGES
07

08 09

10
7. ICSI signs ICSI Signature Award MOU with Savitribai Phule Pune University, Pune.
8. Meeting of ICSI delegation with Adi Godrej (Chairman, Godrej Group).
9. SME Directors Summit inaugurated by Subhash Desai (Hon’ble Minister for Industries & Mining, Govt. Of Maharashtra).
10. Group photo of First meeting of Core Group On Identifying Opportunities Under Insurance Laws.

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CHARTERED SECRETARY JANUARY 2019 5
IMAGES

11

12 13

14 15
11. 3rd IP Conclave chaired by Honourable Justice M. M. Kumar( President, NCLT) and addressed by M.S. Sahoo (Chairman, IBBI) and NCLT Members at Hyderabad.         
12. CS Ashish Doshi addressing at “THIRD ROADSHOW ON COMPETETION LAW” on 18th December 2018 at Ahmedabad.
13. Group photo of IIM Expert Talk with ICSI on Contemporary Financial Acts at IIM Indore.
14. Photo of 1st Meeting of the ICSI to harmonise and simplify the corporate and non-corporate structures in India on 28th December, 2018 at ICSI-CCGRT.
15. ICSI signs MoU with Vipra Chamber of Commerce and Industry (VCCI) at 29th Regional Conference of Company Secretaries.

6 I
JANUARY 2019 CHARTERED SECRETARY
 IMAGES
16 17

18 19

20
16. CS Makarand Lele addressing at 29th Regional Conference of Company Secretaries organised by EIRC of ICSI at ITC Sonar, Kolkata.
17. Inauguration of the ICSI Auditorium at Bhubaneswar Chapter. Standing from Left: CS Ashok Purohit, CS Ashok Kumar Dixit, CS Makarand Lele, Surjya
Narayan Patro (Hon’ble Minister Food Supplies & Consumer Welfare, Co-operation, Govt. of Odisha), CS Santosh Kumar Agrawala, R Vineel Krishna (IAS,
MD OMC Limited & CEO, Bhubaneswar Smart City Limited).
18. Corporate Secretary’s Toolkit Training of Trainers Programme held at The Claridges, New Delhi. Standing from Left: CS Sonia Baijal, Catherine Musakali
(Advocate, High Court of Kenya and Fellow, Institute of Certified Secretaries of Kenya, Founder, Dorion Associates),CS Makarand Lele, Brenda Bowman
(Specialist in Adult Learning and Professional Development, USA) and CS Ashok Kumar Dixit.
19. 13th Meeting of the Core Group on Vision New ICSI 2022 held at ICSI Head Office, Lodi Road, New Delhi.
20. Group photograph of ICSI-CSIA Corporate Secretaries Toolkit training of trainers programme held at New Delhi on January 14-16,2019.

I
CHARTERED SECRETARY JANUARY 2019 7
FROM THE PRESIDENT

·¤æØðÙ ßæ¿æ ×Ùâðç‹ÎýØñßæüÐ Õéh÷Øæˆ×Ùæ ßæ Âý·¤ëçÌSßÖæßæÌ÷Ð

·¤ÚUôç× Ølˆâ·¤Ü´ ÂÚUS×ñÐ ÙæÚUæ؇æØðçÌ â×ÂüØæç×ÐÐ
(Mukundmala)
(Whatever I do with my Body, Speech, Mind or Sense Organs; Whatever I do using my Intellect, Feelings of Heart or
unconsciously through the natural tendencies of my Mind; Whatever I do, I do all for others And
I Surrender them all at the Lotus Feet of Sri Narayana)

Dear Professional Colleagues,

A
s I sit to pen down the last address of mine through
the pages of this coveted journal of the Institute,
not only are the moments of the 18th ICSI National
Awards for Excellence in Corporate Governance and 3rd
ICSI CSR Excellence Awards still fresh but so is each
and every day of accomplishment in the year gone by…
From some of the simplest moments of meetings with
the officials of the Ministry to put across the requests and
representations of stakeholders to those involving grand
scale planning and action like the National Convention,
each of them has not only been equally significant but
memorable all the way through…
thoughts, views and opinions on countless forums, holding
meaningful discussions with officials; both national and
international, not only have given me an opportunity to
show to the world and beyond that the Institute of Company
Secretaries of India has not just been around for 50 years
but is 56,000 members and 3.5 lakh students strong; but
that the Institute is the caretaker of one of the strongest
pillars of the economy, i.e. governance and that we or our
members or our activities and initiatives are not limited to
just Companies Act or even the entire Corporate Laws.
The month gone by…

When I had stepped upon this position, the biggest challenge
was placed by the Hon’ble Prime Minister of the nation, Shri
Narendra Modi through each of his statement which had
bundles of expectations and which while honouring us to
the core had raised us to a pedestal wherefrom the Institute
held the onus to play multiple roles and ace them with grace
and élan. An year hence, and looking back through the
pages of memories and achievements, while it may seem
that its only 365 days that have gone by and there might be
a plenty of road to be travelled ahead of us; but to me, we
have come a long way…
While alone one usually introspects and plans for the
future ahead, but the biggest of realisations regarding the
achievements earned and value created dawn upon in the
most unusual moments. Meetings with dignitaries, sharing
CG & CSR Awards and the ICSI Golden Jubilee Year
Accomplishment Ceremony
The ICSI National Awards for Excellence in Corporate
Governance though have become a legacy of sorts and
considered one of the biggest events of the year, are
one of the many ways the Institute promotes the cause
of good governance by acknowledging and recognizing
the significant and innovative practices undertaken by
the corporates on the governance front. Not only this, the
younger counterparts, i.e., the CSR Excellence Awards
have been ICSI’s own way to provide impetus to the
Government’s initiative of enhancing activities in this arena
through mandatory law.
While I had shared with you last month the successful
culmination of the Jury Meeting for these Awards, it was

8 I
JANUARY 2019 CHARTERED SECRETARY

hard for me to contain the excitement and wait till the
Presentation ceremony befitting the nature of these Awards
took place and appropriate honour was accorded to the
winners.
With patience bearing beautiful fruits, the Award
Presentation Ceremony of the 18th ICSI National Awards
for Excellence in Corporate Governance and 3rd ICSI CSR
Excellence Awards for the year 2018 and the ICSI Golden
Jubilee Year Accomplishment Ceremony were hosted at
The Taj Mahal Palace, Mumbai on January 10, 2019 with
great fervour and grandeur. It was indeed an honour to
have both national and international dignitaries amongst us
to recognize the winners, award them and even guide the
nation through this podium as we all tread on to the path of
growth and development holding strong onto the guiding
light of not just good but best governance.
I sincerely extend my heartfelt thanks to Dr. Mohan Kaul,
President, India Professionals Forum, UK and Shri G N
Bajpai, Former Chairman, SEBI and LIC for presiding over
as Guests of Honour and being a part of this wondrous
event which made its way into the pages of the history of
the Institute and the corporate India as well. I also take this
opportunity to congratulate the corporate awardees and
their Company Secretaries. My special thanks to Shri Adi
Godrej, Chairman, Godrej Group for very kindly accepting
the Lifetime Achievement Award.
ICSI Convocations – North, East, West (NEW)
They say “convocation is an event that makes you feel an
achiever. Not because you gained a degree, it is because
you have achieved mastery over defeating the demons that
block the road of success”. The Convocation ceremonies
of the Institute are no different. However, the sense of
achievement is not just for the members of the Institute
who are to make a difference in the corporate world, this
moment forward, but also for the Institute as a whole for it
is the entity that gains strength through its members, their
presence and the wise, efficient and effecting dispensing
off with their roles and responsibilities.
Beginning with the Northern Region and moving towards the
Eastern and even further to the Western, the enthusiasm or
the exhilaration of the youth, the younger generations or
the future torchbearers was always a delight to witness.
It is in moments like these that I feel proud and smile to
myself while thanking the Almighty for making me a part of
this magnanimous Institute. My heartiest congratulations to
all the newly admitted Associates and Fellows of the ICSI!
National Conclave on Corporate Insolvency and
Valuation
I have on occasions more than one believed and stated
that having wholly owned subsidiaries for any organisation
or Institution is similar to the relationship shared by parents
and their kids. The ICSI Registered Valuers Organisation
(ICSI RVO) and the ICSI Institute of Insolvency
Professionals (ICSI IIP), are no different. These young,
budding and growing offshoots of the ICSI have perfected
in their intended roles and have been on a continuous
spree of bringing moments of pride for the Institute, not
only through their exceedingly well performing members
and ever-increasing numbers but also with the sprawling
I
CHARTERED SECRETARY JANUARY 2019
FROM THE PRESIDENT
variety of initiatives undertaken. One such initiative
which seeks special mention and applaud is the recently
conducted National Conclave on Corporate Insolvency and
Valuation at Pune jointly by both the entities and in further
collaboration with the IPA ICAI-Cost and ICAI-Cost RVO
under the guidance of IBBI.
While coming across as mutually exclusive fields or arenas
of activity, both valuation and insolvency found common
ground in this conclave, not to mention a host of futuristic
opportunities and avenues for synergy creation as well. I
wish both the entities and their members all the best for
their future endeavours.
Core Group on Identifying Opportunities under
Insurance Laws
AS you are all aware, the Institute is constantly on a lookout
for opportunities and avenues beyond the aegis of company
law; Insurance, Banking and Real Estate Sector with their
unique nature, stature, set of laws and issues & challenges
come across as untreaded areas seeking attention.
Where the 50th Foundation Day of the Institute witnessed
the signing of a host of MoUs with various Insurance
companies to support the members of the Institute and the
Golden Jubilee Year Accomplishment Ceremony served as
a forum to launch a dedicated website for the same, the
Institute also constituted a dedicated Core Group for the
identification of opportunities under the Insurance Laws of
the country. We definitely look forward to having meaningful
discussions for identifying the opportunities for profession
in these Sectors.
Dubai Visit
Needless to say, the Institute has been active on the global
front with its initiatives as it is on the home ground. The
recent visit to Dubai (UAE) was nothing short of fulfilling.
Meetings with dignitaries of the likes of Shri Navdeep
Suri (Ambassador of India to UAE, Abu Dhabi), Shri Vipul
(Consul General of India, Dubai), Mr. Vikram Bhansali
(Chief Representative – International Markets, DIFC),
Dr. Lindsey McPherson (Director, ACTVET) and Mr.
Narasimha Das (Associate Partner, Crowe) have given us
opportunities to show to the world the true presence and
perseverance of the Institute in its activities and its futuristic
approach towards governance. We look forward to creating
many more opportunities for the profession by securing
recognition as vocational qualification and by commencing
operations of ICSI overseas centre.
Corporate Secretary’s Toolkit Training of Trainers
(ToT) Programme
We all very well have understood and realised the fact
that holding a degree is not enough but what is required
is constant updation, be it of knowledge or skills. Such
updation and upgradation calls for appropriate and in-time
training; and hence the ToT.
I had shared with you earlier the Institute’s endeavour to
bring on Board the Corporate Secretaries International
Association (CSIA) and the International Financial
Corporation (IFC) in a collaborative initiative, i.e., through
the Training of Trainers (ToT) Programme. It is indeed
a pleasure filled moment to share that, a first of its kind
initiative, the three day Corporate Secretary’s Toolkit
Training of Trainers (ToT) Programme was organised at
9
FROM THE PRESIDENT
The Claridges, New Delhi to not only clarify the true duties
and responsibilities of Corporate Secretaries but also
develop their skills with emphasis on their role in developing
good corporate governance practices in their organisations
and entities. We hope to create a pool of trained Corporate
Secretaries in India through this initiative.
Inauguration of the renovated Bhubaneswar Chapter
and Auditorium
The year started on an expansive note, if the infrastructure
of the Institute might be discussed. The Chapter at
Bhubaneswar not only scaled heights by adding a floor,
but has made well-in-time made arrangements to organize
events of grander scale. The magnificent Auditorium
speaks volumes of their futuristic approach which finds
perfect alignment with the vision of the ICSI.
Launch of Embassy Connect and Chamber Connect
Logo
Both, Embassy Connect and Chamber Connect are
initiatives of the Institute that I hold close to my heart;
primarily because they have given us an opportunity to
collaborate and to create synergies to promote “New India”
by capitalizing inherent strengths for mutual benefits,
support the implementation of various policy initiatives
of Government of India and which in totality would lead
to nation building. Not only this, these initiatives also
create opportunities for our members to build national and
international professional and business relationships.
The event of the Award Presentation Ceremony and ICSI
Golden Jubilee Year Accomplishment Ceremony witnessed
the launch of dedicated logos for each of these initiatives
which I believe shall evolve as full-fledged brands in the
years to follow.
Launch of Certificate Courses
Needleless to say, the nation is witnessing various emerging
areas which require lot of skilled and trained professionals
for the industries. Understanding this skill gap and with an
intent to fill-in the same, the ICSI launched two Certificate
courses at the Accomplishment Ceremony of the ICSI
Golden Jubilee Year, one of them being ‘Certified MSME
Professional’. With this certificate course we look forward
to create a new breed of MSME Certified Professionals to
empower the MSME sector in India.
The second one is a Certificate Course on “Certified
Corporate Compliance Assistant” intended to create a
cadre of technically trained persons to assist the Company
Secretaries, both in employment and in practice. The idea
is to provide candidates such technical training so as to
upgrade their skills and make them competent to assist the
CS in day-to-day activities.
The future ahead
The profession of Company Secretaries is standing tall
and has reached to a level where we can proudly call it
indispensible as we stand to have accomplished the
Golden Jubilee Year. The dynamics of the profession have
undergone multitude of positive changes and it is the result
of these changes that the Company Secretaries are no
longer considered mere ‘Compliance Officers’. Gone are
the days of starving to create and attain recognitions, rather
I feel proud to say that we now hold an unequivocal position
10
in the corporate India. And it is the unstinting efforts of each
member and student which have rendered it possible.
The past half decade or so, majorly the era post the
Companies Act, 2013 has been an era of recognitions for
our brigade... Be it KMP, Expert, Secretarial Auditor (both
under the Act and the SEBI (LODR) Regulations), inclusion
in Senior Management Team, woman directors, Insolvency
Professionals, Registered Valuers, and so on. But, even
with all these seeds planted, it is important that we put in
the requisite amount of efforts to nurture what has been
sown. Large scale upskilling and constant updation &
upgradation shall to a large extent render possible for us as
professionals to justify these recognitions and live up to the
expectations of Industry and regulators.
Another new area is the opportunity of advocacy at NCLT,
which needs to be managed with caution and care. A young
weapon or a budding area for us, advocacy has been the
forte of Lawyers for more than a century and hence shall
require great dedication on our part to establish ourselves
in this area.
Artificial Intelligence or AI is coming across in a significant
manner and will take away our traditional processing jobs,
which means that there would be new waves of change. I
am sure that Company Secretaries as trained professionals
will keep their position intact and raise the bar to height.
While I have no doubt in the perpetuity of the areas of
Insolvency and Valuation as fields of professional activity,
I truly hope and wish that all Company Secretaries master
themselves to serve the nation as Insolvency Professionals
and Registered Valuers.
Moving ahead with a strong force, I wish that we look
forward to achieve consolidation of Brand ‘CS’ in all walks
of life, not only in India but across the globe. And while we
may commend ourselves and pat our backs, dedicated and
focussed efforts shall forever be needed to keep this brand
alive in the minds across.
I feel pleased to share that we have already made visionary
changes in the syllabus and curriculum and very soon we
look forward to establish new training mechanism for our
students. The need of the hour is for our members and
students to look beyond their existing arenas, readjust
their mindsets and prepare themselves to enter into new
‘Avatar’.
The entire world is ready to recognize us as governance
professionals and expecting the members of ICSI to rule
with their strong set of values and ethics. The days are not
far when CS shall be accepted as ‘Governance Professional’
in each country who care and respect compliance and
risk management and hold ethics and governance in high
regard. All this and more is a result of 50 years of dedication
to our vision and mission and governance.
I also look forward to many more reforms in the Indian policy
forums to promote ease of doing business and even further
to render corporate forms a lucrative option for conducting
business and hence promoting conversion.
Research and knowledge dissemination should forever
I
JANUARY 2019 CHARTERED SECRETARY

remain as focus areas to strengthen the brand ‘CS’ and
I am confident that value additions through multifarious
forums shall continue to happen in the coming future.
A big thank you…
Pan-India initiatives to promote national governance to
undertaking those to enhance global connectivity and even
partnering with professional bodies and other educational
entities holding high growth perspectives, has been
on our to-do list all through. Each month gone by, each
achievement shared has been equally special, not a bit
more, not an iota less for each one has had an equal share
of efforts from Team ICSI.
Working with a Team which is energetic and self-driven
makes feats unachievable, achievable. And through these
few page,s I would take this opportunity to thank the all the
HoDs and the entire Team of the Secretariat of ICSI headed
by the Officiating Secretary, along with the Consultants and
Advisors who have put in not only their man-hours but their
wholehearted efforts into each thought rolled across the
Board. Each and every event, big or small, has been able
to taste success and mark itself into the pages of the history
of this magnificent institution courtesy the passionate and
unswerving determination of the entire national force of
ICSI.
Our three cherished wholly owned subsidiaries, ICSI
Governance Research and Knowledge Foundation (ICSI
GRKF), ICSI Institute of Insolvency Professionals (ICSI
IIP), and ICSI Registered Valuers Organisation (ICSI RVO)
have soared greater heights and made their presence
felt. A special thanks to all the members of the Governing
Boards and various Expert Groups formed thereunder.
A President is not just the representative of the Council but
his efforts and his performance are pillared on the support
of the entire Central Council, Regional Councils and even
those playing their respective roles in the Chapters. My
heartfelt appreciation to each one of my council colleagues
and government nominees for the strength provided and
faith instilled in me. I extend my profound gratitude to each
one of you and your support systems for having given
you the leverage to pursue your roles and responsibilities
towards the Institute with thorough enthusiasm and zeal. I
would also take a moment to commend the efforts of our
past secretaries, presidents and the councils too, for it is
their dedication and grit that we can very proudly boast of
having been around for 50 years...
It was indeed a blessing to have dedicated Committees and
Boards of the Institute comprising experts to look into some
of the most important and significant matters of the Institute.
My wholehearted gratitude towards all the members of
the Appellate Authority, Disciplinary Committee, Board of
Discipline and Quality Review Board (QRB) and all other
Committees, sub-committees, Task Forces, Core Groups
and Expert Groups.
My vote of thanks cannot find culmination without extending
my gratefulness to the honourable Ministers, Secretaries
and coveted officials of the various Ministries and their
Directorates and Departments. A very special vote of
thanks to our coveted regulatory support system, members
of MCA, SEBI, NSE, BSE, NCLT, RBI, IBBI, IRDA, MCX,
I
CHARTERED SECRETARY JANUARY 2019
FROM THE PRESIDENT
NSDC and all those who have been our pillar of support in
all our endeavours aimed at playing our designated roles
for our stakeholders.
Forming partnerships has always turned out to be the best
way of creating the synergy effect and send positive ripples
across and the Institute too has resorted to this schema for
gaining benefits for our stakeholders, be it on national or
global front. I would like to thank and extend my heartfelt
appreciation towards the revered Consulate and Embassy
Officials for their support, motivation and faith instilled in us
at ICSI in our varied international ventures.
While holding governance close to our heart, it goes without
saying that the prime task is to impart quality education
to our students and look out for better avenues for them.
While the various initiatives of the Institute undertaken
for its students are well known, be it new Courses or
MoUs signed, it is a matter of great pride to have formed
collaborative ventures and gained recognitions across the
educational institutions, universities and colleges of the
nation. My words of gratitude would be incomplete without
thanking the Heads of these institutions for their meaningful
presence and forming of long-term relations.
I would further extend my best wishes to all the members
elect of the upcoming council of the ICSI with the confidence
that the elected members shall truly understand the nature,
dignity and the roles and responsibilities that shall come to
them with their designated positions.
A big thanks to all of you for giving me this opportunity
and making my tenure as the President of this beloved
Institution memorable and wonderful !!
On a personal note, I would take this moment to
acknowledge the great support extended by my partners,
colleagues, staff members, my parents, my best half and
my sons, who gave me the confidence to go ahead and
contribute to this pious profession of mine.
With a great sense of satisfaction that I could contribute
my small efforts for the furtherance and development of my
own profession, I am laying down my office as President on
the appointed date.
ú §Î×÷ Ù××÷ ú
The above Agnihotra Mantra stands in line with the shloka
with which I had begun this address. “This is not mine, this
life, this nation. Nothing is mine, nothing is for me. My life is
for the world. Rest is of the universe.”
And on that note, wishing all of you a splendidly successful
year ahead !!!
 Yours Sincerely
 CS Makarand Lele
 President, ICSI
11
RECENT INITIATIVES TAKEN BY ICSI
Recent Initiatives Taken by ICSI
F urther to the details published in the Chartered
Secretary, January, 2019 issue, we are pleased
to share the following initiatives taken by the Institute
during the month of December, 2018:
1. Meeting with Dignitaries
• Shri Venkaiah Naidu, Hon’ble Vice President of
India
• Shri Arun Jaitley, Hon’ble Minister of Finance and
Corporate Affairs
• Shri Piyush Goyal, Hon’ble Union Minister of
Railways & Coal
• Shri Ajay Tyagi, Chairman, SEBI
• Justice Shri Mahesh Mittal Kumar, Hon’ble
President, National Company Law Tribunal
• Shri PP Chaudhary, Hon’ble Minister of State for
Law and Justice and Corporate Affairs
• Shri Subhash Desai, Hon’ble Minister for Industries
and Mining, Government of Maharashtra
• Shri Injeti Srinivas, Secretary, Ministry of Corporate
Affairs
• Shri Adi Godrej, Chairman, Godrej Group
2. Visit of ICSI Delegation to Dubai
Institute while striving for academic and professional
excellence of its key stakeholders, i.e., students
and members, aims to expand the opportunities for
Governance Professionals in not just national territory
but beyond as well. And for an organisation setting
best professional standards for the corporate and
even for the promotion of national governance, it
becomes imperative that the Institute itself strives to
meet the internationally set benchmarks.
ICSI delegation led by CS Makarand Lele, President,
ICSI visited Dubai on January 5-7, 2019. During the
visit delegation met with followings:
• H.E. Shri Navdeep Suri, Ambassador of India to
UAE, Abu Dhabi
• H.E. Shri Vipul, Consul General of India, Dubai
• Mr. Vikrant Bhansali, Chief Representative -
International Markets, Dubai International Financial
Centre Authority (DIFC)
• Dr. Lindsey McPherson, Director, Abu Dhabi
Centre for Technical and Vocational Education
and Training (ACTVET)
• Mr. Narasimha Das Associate Partner,Crowe
3. Jury Meeting of 18th ICSI National Awards for
Excellence in Corporate Governance & 3rdICSI CSR
Excellence Awards held on December 7, 2018
In order to provide momentum to the questionnaires
received with regard to 18thICSI National Awards for
Excellence in Corporate Governance and 3rdICSI
CSR Excellence Awards, and for evaluating and
finalising the winners and front-runners of the
Awards, the Jury Meeting of the Experts under the
chairmanship of Shri G N Bajpai, Former Chairman,
SEBI, was held on December 7, 2018 at New Delhi.
The presentation ceremony of the awards was held
on January 10, 2019 at Mumbai.
12
4. ICSI International Newsletter
Rightly said that awareness of our strength makes us
to work our effort that gets the right result at the right
time. Therefore, in order to make our professional
commune, related stakeholders and world at large, to
be well informed about the reforms taking place in our
regulatory regime related to governance in general
and corporate governance in specific, the Institute has
decided to publish the International Newsletter. The
first edition (December, 2018 Issue) of International
Newsletter was released by Shri G N Bajpai, Hon’ble
Chairman, Jury- ICSI National Awards for Excellence
in Corporate Governance on December 7, 2018.
5. Report of Task Force on National Company Law
Tribunal (NCLT) submitted to Hon’ble President, NCLT
The Institute had constituted a Task Force on National
Company Law Tribunal (NCLT) with the purpose
of making recommendations to Hon’ble NCLT on
resolving the practical difficulties being faced by its
members on account of diverse practices being
followed at various benches of NCLT in respect of
filing of cases, procedures etc. Consequent upon the
detailed deliberations, the Task Force prepared its
Report. The Report of the Task Force was accordingly
submitted to Hon’ble Justice Shri M M Kumar,
President, NCLT on December 20, 2018. Hon’ble
President, NCLT thoroughly appreciated the initiative
and assured that the Report will be circulated among
all NCLT benches for the benefit of all stakeholders.
6. Core Group on Producer Companies
Considering the object of easing the conduct of
business for Producer Companies, the Institute has
constituted a Core Group on Producer Companies,
which intends to provide proper resolution of difficulties
being faced by various producer companies and
also to look into the need to enact a new set of rules
and regulations for Producer Companies. The first
meeting of the Core Group was held on December
27, 2018 at Mumbai.
7. Financial Markets Submit, 2018
To catalyse policy level discussions on further
strengthening of India’s Financial Markets, Institute
joined hands with Confederation of Indian Industry in
organising 9thEdition of Financial Markets Summit on
the theme ‘Innovation, Reforms and Adoption – Key
to Financing Growth Through Financial Markets’ on
December 7, 2018 at Mumbai.
8. Corporate Secretary’s Tool Kit Training of Trainers
(TOT) Programme
ICSI is organising three days residential Corporate
Secretary’s Tool Kit Training of Trainers (TOT) in
association with Corporate Secretaries International
Association (CSIA) which is a joint project of CSIA
and International Finance Corporation (IFC), on
January 14-16, 2019 at The Claridges, New Delhi.
It aims to clarify the duties of Corporate Secretaries,
I
JANUARY 2019 CHARTERED SECRETARY

develop their skills and emphasise their role in
developing good corporate governance practices in
their organisations.
9. Launch of Insurance Portal
With a view to provide better Professional and
Personal safety cover like Professional Indemnity
Cover, Medical Insurance, Motor Insurance and others
to its Members, Students and other Stakeholders
at discounted premium, the Institute entered into
MoUs with various Insurance Companies for different
Insurance Products. The Institute launched the web
portal to access various Insurance Products on 10th
January, 2019 at Mumbai. The Insurance Products
can be purchased online at the weblink: http://bit.
ly/icsiinsurance or alternatively, access ‘Insurance’
under ‘Useful Links’ at www.icsi.edu
10. ICSI Initiatives towards GST
In standing shoulder to shoulder with the government
towards directed implementation of GST Pan India,
the Institute is persistent in building the capacity of
its members, students and related stakeholders by
advancing their understanding about GST and also
by constantly apprising them with updates in GST
through various initiatives. Few of our major initiatives
in this direction are listed as below:
• GST Newsletter – Initiated from April, 2017, the
GST Newsletter has been published in 20 issues
so far, with December, 2018 issue being the latest.
• GST Educational Series – 387 Issues have been
brought so far.
• GST Point - Around 133 sessions of GST Point
have successfully been completed so far.
• GST App – Has almost 19745 active users on its
roll till present.
In addition to this, the Institute is regularly organising
various workshops, seminars & programmes on GST
in order to keep its members & students updated on
GST law.
11. Third (3rd) International Company Secretaries
Olympiad for Academic Session 2018-19
As you are aware that CS Olympiad has been
established with the objective of enabling the student
community to discover their potential in areas
pertaining to Company Secretaryship and governance
and identifying their interest to choose their stream
of education. Registering the Grand Success of First
(1st) and Second (2nd) International CS Olympiad,
the First Phase of the 3rd International Company
Secretaries Olympiad for Academic Year 2018-2019
was successfully held on December 20, 2018. The
Second Phase of the Olympiad is scheduled for
January 30, 2019. The minutiae of CS Olympiad is
also available through a dedicated portal at www.
csolympiad.info.
12. Study Material for Students of Professional
Programme Syllabus – 2017
The soft copy of the study material for Professional
Programme under the New Syllabus of the Institute
was released by Shri G N Bajpai, Hon’ble Chairman,
Jury- ICSI National Awards for Excellence in Corporate
Governance on December 7, 2018. The soft copy of
I
CHARTERED SECRETARY JANUARY 2019
RECENT INITIATIVES TAKEN BY ICSI
the study material for Professional Programme has
been uploaded under the Academic Corner of the
Institute’s website at the following link:https://www.
icsi.edu/study-material-professional-programme-
new-syllabus-2017/
13. Release of Hard copy of Study Material for
Professional Programme under ICSI-New Syllabus-
2017
The new curriculum for Executive and Professional
Programme was notified by the Institute with an
objective to inculcate in its students and more aptly
the professionals of tomorrow with the right kind
of knowledge, skills and training to make them
competent enough to render value added services to
corporate sector. The hard copy of the study material
of Professional programme will be released on 18th
January, 2019.
14. Webcast for CS students appearing in December,
2018 Examination
In view to assist the students towards the smooth
conduct of December, 2018 Examinations, the
Institute has organised a webcast on December
11, 2018 at New Delhi. The webcast which was
addressed by a panel of experts has received and
meticulously resolved a number queries of the
students related to December, 2018 Examination.
To facilitate the students who could not watch the
webcast online, the recording of the webcast has
been made available on YouTube at the link https://
youtu.be/1j2nBOJRqBg.
15. ICSI Signature Award Scheme
Under the ICSI Signature Award Scheme, in which
the Institute felicitates the top rank holders in B.Com.
Final Examinations in reputed universities and also
specialized programmes/ papers of IITs / IIMs with
the award of a Gold Medal and a Certificate, the
Signature Award has been instituted in Twenty Six
(26) Universities so far.
During the month of December, 2018, following
feathers have been added to the scheme:
• One Agreement has been signed with Savitribai
Phule Pune University, Pune, Maharashtra.
• One Gold Medal was awarded during the
Convocation of Tezpur University, Assam.
16. ICSI Study Centre Scheme
As you are aware that under the Study Centre
Scheme of the Institute, which was initiated to break
the distance barrier for students belonging to cities
/ locations in which the representative offices of the
Institute are not in existence, Eighty-Six (86) Study
Centres have been established by the month of
November, 2018. Taking the total count to Eighty-
Eight (88) Study Centres by the end of year 2018,
following study centres have been opened in the
month of December, 2018.
• Sai Academy for Professional Education,
Nachhipur, Post Office, Bhatapatana, District
Khurda, Bhubaneswar, Odisha
• Keonjhar Degree Commerce College,
CTG Foundation, New Colony, Sidelane of
Sishubhawan, District Keonjhar, Odisha
13
 The Year that was...
YEARLY INITIATIVES TAKEN BY ICSI
The January edition is a moment to reminisce the happenings, the achievements
and the laurels collected during the year gone by. Here’s sharing, the accomplishments and
moments of triumph with all of you...
1. Interaction with Dignitaries
Taking forward our pursuit for exploring opportunities for
the profession and also for joint participation in flagship
government initiatives, the Institute met the following
dignitaries:
(*In Alphabetical Order)
• Shri Abhinav Gupta, PS to Hon’ble Minister of State for
Law, Justice & Corporate Affairs.
• Shri Ajay Tyagi, Chairman, Securities and Exchange
Board of India
• Shri Alok Agrawal, Delhi Higher Judicial Services.
• Shri Amardeep Bhatia, Director, SFIO
• Shri Ananta Barua, Whole Time Member, Securities
and Exchange Board of India
• Shri Arun Jaitley, Hon’ble Union Minister for Finance
• Shri Arun Luharuka, President, The Federation
of Telengana and Andhra Pradesh Chamber of
Commerce and Industry
• Shri Atul Pande, President, Vidarbha Industries
Association
• Shri Bhupender Yadav, Hon’ble Member of Parliament
(Rajya Sabha)
• His Excellency Shri Charanjeet Singh, Deputy High
Commissioner, High Commission of India, London
• Shri Dharmendra Pradhan, Hon’ble Union Minister of
Petroleum and Natural Gas, Skill Development and
Entrepreneurship, Government of India.
• Shri Dnyaneshwar M. Mulay, Secretary (CPV & OIA),
Ministry of External Affairs, Government of India.
• Brigadier H.S. Kahlon, Deputy Director General,
Rehabilitation & Welfare Section, IHQ of MoD (Army)
• Shri Injeti Srinivas, Secretary, Ministry of Corporate
Affairs
• Shri K. V. R. Murty, Joint Secretary, Ministry of
Corporate Affairs
• Ms. Lakshmi Kaul, Head & Representative - UK,
Confederation of Indian Industry
• Prof. (Judge) Mervyn E. King SC Chairman, King
Committee on Corporate Governance & Former Judge,
Supreme Court of South Africa
• Justice M. M. Kumar, Hon’ble President, NCLT
• Dr. Mohan Kaul, President, Indian Professionals
Forum, United Kingdom
• Mr. Neil Stevenson, Managing Director, Global
Implementation, International Integrated Reporting
Council at London
• Prof. (Dr.) Nitin R. Karmalkar, Vice Chancellor,
SavitribaiPhule Pune University
• Shri P.K. Gupta, Managing Director, State Bank of
India
• Shri P P Chaudhary, Hon’ble Union Minister of State for
Law and Justice and Corporate Affairs, Government of
India
• Shri Prakash Javadekar, Hon’ble Union Minister of
Human Resource Development
• Ms. Prerna Sian, CEO, Vaahan
• Prof. (Dr.) Ranveer Singh, Vice Chancellor, National
14
Law University, Delhi
• Colonel R. K. Nayar, Rehabilitation & Welfare Section,
IHQ of MoD (Army)
• Shri Sandip Bhandare, President, Goa Chamber of
Commerce and Industry
• CMA Sanjay Gupta, Hon’ble President, ICAI-CMA
• Shri Shailendra Singh, Additional Secretary,
Department of Industrial Policy and Promotion, Ministry
of Commerce and Industry, Government of India.
• Smt. Shobana Kamineni, President, Confederation of
Indian Industry
• Shri S.K. Mohanty, Whole Time Member, Securities
and Exchange Board of India.
• Dr. Subhash Chandra Khuntia, Chairman, Insurance
Regulatory and Development Authority of India
• Shri Surinder S. Rathi, Delhi Higher Judicial Services
• The Rt. Hon. Lord Swraj Paul of Marylebone, PC &
Founder and Chairman, The Caparo Group Plc., UK
• Shri Umashankar Gupta, Hon’ble Minister, Revenue,
Science and Technology, Government of Madhya
Pradesh
• Shri Vipul, Hon’ble Consul General of India to Dubai
• Dr. V. R. Narasimhan, Former Chief (Regulations),
National Stock Exchange Limited
2. Initiative with Ministry of Corporate Affairs
a) Suggestions/ Representations Submitted
With a view to explore professional opportunities for our
esteemed members and to participate in vivid initiatives
of the Government in ensuring better governance, the
Institute submitted its suggestions and representations
as mentioned below:
• Representation on Condonation of Delay Scheme,
2018;
• Representation on Due Date Extension for Filing of
AOC-4 XBRL e-Forms under the Companies Act,
2013;
• Suggestions on the Draft Companies (Authorized
To Register) Second Amendment Rules, 2018;
• Suggestions on the Need for or Desirability of Appeal
Mechanism under Section 233 of the Companies
Act, 2013;
• Representation on Notification of Revised Section
403 (Fee for Filing, etc.) in view of the Companies
(Amendment) Act, 2017;
• Representation on Revision of the Companies
(Registration Offices and Fees) Rules, 2014;
• Representation on the Requirement of giving
Advertisement in Newspaper for shifting of
Registered Office of Companies;
• Representation regarding Further Relaxation of
Additional fee and Extension of the last date of
Filing of AOC-4 XBRL e-Forms using Ind AS under
the Companies Act, 2013;
• Representation to Ministry of Corporate Affairs for
Amendments in Companies Rules;
• Representation to Ministry of Corporate Affairs with
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JANUARY 2019 CHARTERED SECRETARY

regard to Amendments to be made in e-Forms;
• Representation to Ministry of Corporate Affairs on
Facilitation, Co-ordination and Knowledge Support
relating to DIR 3, KYC Complications;
• Representation to Ministry of Law and Justice seeking
recognition of Company Secretaries under the
Qualifications and Experience of Arbitrator under The
Arbitration and Conciliation (Amendment) Bill, 2018;
• Representation to Directorate General Labour
Welfare seeking Authorization of Practising Company
Secretaries for Conducting Social Audit and act as a
Social Audit Unit (SAU) under Draft Framework for
Social Audit on Implementation of BOCW Act;
• Suggestions with respect to certain issues in GST
Laws to the Ministry of Finance;
b) Views on Reports and Other Significant Aspects of
Law
n Draft Report of the Group Constituted for review of
Companies (Acceptance of Deposits) Rules, 2014
n Report of the Committee to Review Offences under
the Companies Act, 2013
n Need for, or desirability and relevance of an Appeal
Mechanism under section 233(1) of the Companies
Act, 2013
n ICSI views regarding section 403 of the Companies
Act, 2013
n ICSI views on CSR provisions under the Companies
Act, 2013 for consideration by MCA Steering
Committee on CSR
n Various aspects relating to DIR- 3 KYC
n ICSI views on amendments pertaining to Schedule
V of Companies Act, 2013
c) Development of the ICLS Backgrounder
A Backgrounder for the officers of the Indian Company
Law Services has been developed under the Guidance
of the Secretary, ICSI and Director, ICLS Academy.
d) CSI representation in various MCA Committees
ICSI while being a part of various Committees of
MCA constituted during the year provided logistic and
technical support as well. The list is as under:
• Legal sub-committee of High level Committee on
CSR
• Committee constituted to revisit IEPF rules
• Support team for MCA Committee for
decriminalisation of offences
• MCA group to examine the Companies (Acceptances
of Deposits) Rules, 2014
• Task Force on Ease of Doing Business in MCA
• Committee for finalizing Business Responsibility
reporting (BRR) format for Listed and unlisted
companies under the Chairmanship of Shri
Gyaneshwar Kumar Singh, Joint Secretary, MCA
• Suggestions had been given on the draft NVGs by
ICSI
• ICSI is a member on the said Committee
• Further, ICSI shall also render necessary technical,
secretarial assistance and logical support
• A High Level Committee on CSR-2018 (HLC-2018)
has been constituted under the Chairmanship of
Shri Injeti Srinivas, Secretary, MCA to review the
existing framework and guide as well as formulate
the roadmap for a coherent policy on CSR.
I
CHARTERED SECRETARY JANUARY 2019
YEARLY INITIATIVES TAKEN BY ICSI
e) MOU with MCA for Recruitment and Training of
Young Professionals for Central Registration
Centre of MCA
An MOU was signed with the Ministry for engaging the
services of Company Secretaries for working as “CRC
Executives” at the Central registration Centre of MCA
on contractual basis. The entire process of recruitment
and training of ICSI members as CRC professionals
has been handed over by the Ministry to the ICSI.
f) Project to analyze glitches in Company Formation
assigned by DIPP
Worked on DIPP project on analysis of incorporation of
companies and post registration requirements in Delhi and
Mumbai for World Bank’s report on ease of doing business
g) Webinars (ICSI Knowledge/Awareness Initiatives
in collaboration with MCA)
n Process reengineering of incorporation of Limited
Liability Partnership (LLP)
n DIR-3 KYC
n Companies (Amendment) Act, 2017
n Condonation of Delay Scheme, 2018
h) Others initiatives
n Draft guidelines for empanelment of experts at MCA
(March, 2018)
n Office Assistance from ICSI in MCA
n Advertisement Work for Ministry of Corporate
Affairs
3. ICSI represents in SEBI - Primary Market Advisory
Committee (PMAC) Meeting
With the aim and objective to advise SEBI on issues
related to regulation and development of primary market
in India and to ensure simplification and transparency
in systems and procedures in the primary market, the
Securities and Exchange Board of India has Primary
Market Advisory Committee (PMAC), consisting of the
experts of related fields. The Institute represented at the
first meeting of PMAC, held on February 6-7, 2018 at
SEBI Bhawan, Mumbai. Post that the representation and
participation of the Institute in SEBI- PMAC is persistent.
4. ICSI Meeting with Group of Ministers on GST return
simplification
In order to finalize a single-page Return Form for
businesses under GST, a Ministerial Panel under Bihar
Deputy Chief Minister Sushil Modi met tax experts and
representatives from industry on April 17, 2018 at Vigyan
Bhawan, New Delhi. The Team ICSI attended the
meeting, which was organized for seeking the views of
experts and industry on GST Return Simplification and
made a presentation before the Group of Ministers on
Simplification of Return Filing under GST.
5. Meeting with Department-related Parliament
Standing Committee on Industry
ICSI delegation met the Department-related Parliamentary
Standing Committee on Industry for the examination of
‘Professionalization of Board of CPSEs’. ICSI delegation
in its submissions focused on adoption of Secretarial
Standards in the meetings of CPSEs, reducing Board
Size and imparting training, amongst others.
15
YEARLY INITIATIVES TAKEN BY ICSI
6. Panel for Investor Education and Protection Fund
Authority
As you are aware that the Ministry of Corporate Affairs
has constituted an IEPF Committee to review the practical
difficulties involved under the provisions of the Companies
Act, 2013. The Institute is extending all support to IEPF
Authority in simplifying the processes involved. The
Institute is also formulating its suggestions and preparing
representation to the Ministry regarding the alterations
and amendments required to be made in relevant rules.
7. Training Program in Collaboration with Ministries,
Government Bodies etc.
a) ICSI-SCOPE Training Programme for Senior
Management Personnel of CPSEs
8. Days observed of National
The Institute joined hands with SCOPE for organizing a
Training Programme for Senior Management Personnel
of CPSEs on January 29-30, 2018. The training
programme covered various aspects of Company Law
and its impact on CPSEs in the relative association
with ease of doing business. The delegates includes
Senior Management Personnel, Chief Financial
Officers and Company Secretaries from various Public
Sector Enterprises.
b) NLC India Limited’s National Seminar on
Enriching Knowledge through Sharing of Best
Practices in Corporate Governance and Financial
management
Understanding the need to continuously update the
knowledge by sharing of best practices adopted
amongst financial professionals from every sector,
Neyveli Lignite Corporation India Limited organized
the seminar on 17th & 18th February, 2018 at Neyveli,
Chennai with ICSI as a Knowledge Partner. CS
Ahalada Rao V., Vice President, ICSI addressed the
participants at the event.
c) Training Program on ‘Practical Aspects of
Corporate Governance under Companies Act,
2013 and SEBI (LODR) Regulations, 2015’
The Institute in association with Standing Conference
of Public Enterprises (SCOPE) organised Two Days
Training Programme on October 5-6, 2018 at New
Delhi addressing the Practical Aspects of Corporate
Governance under Companies Act, 2013 and SEBI
(LODR) Regulations, 2015. The program which was
intended for senior management covered varied topics
ranging from Board Composition, Board processes,
recent developments under Companies Act and
Listing Regulations with a special reference to the
challenges faced by Central Public Sector Enterprises
related to governance.
16
d) Residential Training Programme on Corporate
Social Responsibility
Considering the dynamic nature of the provisions
pertaining to CSR under the Companies Act and Rules
framed there under, as well as the ever-changing
dimensions of the concept, the Institute in collaboration
with Department of Public Enterprises organised
a Three Days Residential Training on Corporate
Social Responsibility for management personnel of
PSUs from October 22 to 24, 2018 at ICSI-Centre for
Corporate Governance Research and Training, Navi
Mumbai. The three days program aimed at providing
the participants with much needed insight into the
thoughts, intentions, needs, aspirations and practical
aspects of both sides was well steered by the faculties
from Regulatory Authorities and Corporate sector.
and International
Importance
a) International Women’s Day
Over the decades, when the celebration of International
Women’s Day aims to appreciate and applause
contribution and achievements of women as a
stepping stone towards developed society, Institute is
taking lead in rejoicing this appreciation, respect and
gratitude towards women on International Women’s
Day every year. Accordingly, the Institute celebrated
International Women’s Day, 2018, wherein Mega events
were organized across the country through Regional
Councils and Chapters in the proud felicitation of women
with tendering ovation, encouragement and vote of
confidence for their empowerment at par. In addition to
this, a Special edition of Chartered Secretary dedicated
to Women Empowerment has also been published.
b) Celebration of National Panchayati Raj Diwas,
2018
The Institute in an attempt to promote best practices
of Self–Governance in Gram Panchayats, organized
various programs at its Regional Offices and Chapters
on the occasion of 9th National Panchayati Raj Diwas
on April 24, 2018. These programs were conducted in
consonance with the ICSI- Model Governance Code
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JANUARY 2019 CHARTERED SECRETARY

for Meetings of Gram Panchayats.
c) International Yoga Day, 2018
9. Initiatives for Students
“Yoga lets people discover the sense of Oneness with
yourself, the world and the nature”. Pursuant to the
inception of International Yoga Day since 2015, it is
heartening to note that the cultures and nations across
the world are coming forward in relishing a constructive
bond of oneness among the people, the world and the
nature. The Institute in enduring upon its support to the
government towards the welfare of mankind at large has
also celebrated the 4th International Day of Yoga, 2018 on
June 21, 2018 by organizing yoga sessions Pan India for
its members, students, officials and other stakeholders.
d) 72nd Independence Day, 2018
Independence Day holds great significance to all of us, as
it is the day when our Tricolour Indian National Flag was
raised at the Red Fort in Delhi. Bringing into line, the rich
saga of India’s accomplishments year by year and decade
by decade with Institute’s golden journey in the service
of the nation, the Institute celebrated 72nd Independence
Day on August 15, 2018 through the flag hosting at the
Head Quarters, Regional Offices and Chapters pan India.
e) Hindi Pakhwada Diwas,2018
Hindi Day is celebrated every year on September
14. This is because India’s Constituent Assembly
announced that Hindi written in Devanagari script is
the official language republic of India. The Constituent
Assembly of India adopted Hindi as the official language
of the Republic of India on September 14, 1949. ICSI
celebrated Hindi Diwas at the Head Quarters, Regional
Offices and Chapters pan India through Hindi Essay
competition, Hindi word translation etc.
f) Rashtriya Ekta Diwas (National Unity Day), 2018
Considering the significance of unity in the inclusive growth
of the nation and respecting the role of Sardar Vallabhbhai
Patel in keeping India united, the Institute observed
Rashtriya Ekta Diwas (National Unity Day) on October
31, 2018 with organizing a Pledge Taking Ceremony
administered by the Officiating Secretary through video
conferencing in all the offices of the Institute Pan India.
g) ‘Samvidhan Divas’ 2018
As you are aware that Constitution Day (National Law
Day), also known as Samvidhan Divas, is celebrated in
India on 26th November every year to commemorate
the adoption of Constitution of India. In order to pay our
tribute to the architects of the Constitution and also to
honour this day of law and order, the Institute observed
the Constitution Day, 2018 by organizing a Pledge
Taking Ceremony administered by the Officiating
I
CHARTERED SECRETARY JANUARY 2019
YEARLY INITIATIVES TAKEN BY ICSI
Secretary, ICSI through video conferencing in all the
offices of the Institute Pan India
h) CSI observed Communal Harmony Week, 2018
With a view to foster and reinforce the spirit of communal
harmony and advance the national integration among the
stakeholders at large, the Institute observed ‘Communal
Harmony Week’ from November 19-25, 2018
a) Fees Waiver Scheme for Students of State of
Jammu & Kashmir and North-Eastern States: A
Tale of Success
In order to provide equal opportunities to the youth from
North Eastern States and State of Jammu and Kashmir,
to come to the mainstream and to encourage them
for joining the CS Course, the Institute has launched
a Fee Waiver Scheme for the related students. This
Fee Waiver Scheme, which stood operative till March
31, 2018, has shown an immense success with many
students taking benefit of this scheme and have
registered themselves in CS course since the launch
of the Scheme. Consequently, the Institute is also in
an active process for opening study centres to cater
the academic needs of the students of such areas.
b) 2nd CS Olympiad – Result Declaration and Prize
Distribution
In view to establish brand CS amongst the student
community in the schools, the Institute started this
initiative of CS Olympiad with a focus towards involving
schools and students of Class 11th & 12th. Persistent
upon the success and positive response of the first
ever CS Olympiad conducted in year 2016-2017, the
Second CS Olympiad was conducted in more than
1300 schools, subsuming the participation of more than
34,000 students from different parts of the country. The
results of CS Olympiad have been declared and the
Accolades to the Toppers of Second CS Olympiad
were awarded in a glittering function held on June 3,
2018 at India Habitat Centre, New Delhi.
c) ICSI Student Month, 2018: A Tale of
Accomplishment
The month of July is celebrated as Student Month
throughout the country every year, with the aim at
the inclusive development of students through their
engagement in various activities organized by the
Institute. Taking this initiative forward, this year too,
several activities for the students have been organized
during ICSI Student Month, 2018 on Pan India basis
at Regional and Chapters offices of the Institute.
Indicative details of some major activities of Student
Month is as under:
• Blood Donation Camp were organized across India
to pay tribute and to honor the doctors who save
millions of lives.
• Career Awareness Week has been observed during
the month. Further, in order to create awareness
about the profession of company secretaries,
special interactive sessions have been conducted
in various colleges Pan India.
• Class Room Teaching has uniformly commenced
at Regional/Chapter Offices, along with arranging
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YEARLY INITIATIVES TAKEN BY ICSI
Faculty Induction Program to enhance the quality of
coaching imparted to the students. f) ICSI Signature Award Scheme
• Kargil Vijay Divas was observed with organising
an essay writing competition on the theme ‘Due
Diligence in Armed Forces’.
• Online Quiz was held for students during the month
on daily basis, wherein thousands of students
participated.
• Orientation Program and Guidance Sessions with
the assistance of corporate houses were organised
for students.
• Parent-Students Meet were arranged to recognize
the contribution of parents in supporting the students
during the course of their career.
• Samadhan Divas as a special day for Grievance
Redressal was arranged, wherein each and
every office of ICSI and Call Centre ensured zero
pendency of complaints. 
• Student Competitions including Elocution
Competition, Quiz Contests, Moot Court
Competition, Essay Writing Competition,
PowerPoint Competitions, Video Byte Competitions
and like were organised.
• In our complete solidarity with ‘Swatch Bharat
Abhiyan’ of the Government, Cleanliness drives The Institute launched an ICSI Signature Award Scheme
were organised in the Regional / Chapter Offices of in January, 2016 under which top rank holders in B.Com.
the Institute. Final Examinations in reputed universities and also
• Training Programs on Communication and Soft specialised programmes/ papers of IITs / IIMs are awarded
Skills were held for sharpening and empowering a Gold Medal and a Certificate. Some of the prominent
Communication / Soft Skills of the students as a universities and Institutes wherein ICSI Signature award
professional. scheme have been recently instituted are:
• ‘Van Mahotsav Divas’ was organised to • Indian Institute of Management (IIM), Indore,
create awareness among the stakeholders on Madhya Pradesh
adopting sustainable development and the need for • Indian Institute of Management (IIM) Tiruchirappalli,
undertaking ‘Go Green’ activities wherever feasible to Tamil Nadu
save Mother Earth for the sake of future generations.  • Indian Institute of Management (IIM), Raipur,
Chhattisgarh.
d) 3rd International Company Secretaries Olympiad – • To the topper of Panjab University, Chandigarh.
MoU with Science Olympiad Foundation • Sri Venkateswara University, Gandhi Road, Tirupati,
CS Olympiad is one such initiative of the Institute that Andhra Pradesh.
caters to create awareness about the profession of • Gujarat University, Navrangpura, Ahmedabad,
Company Secretaries among thousands of Schools and Gujarat.
Students. Taking this initiative forward for the Academic
Year 2018-19, the Institute has renewed and signed 10. Introduction of New Syllabus
Memorandum of Understanding (MoU) with Science
Olympiad Foundation for conducting the 3rd International
Company Secretaries Olympiad as scheduled on
December 20, 2018 and January 31, 2019.

e) Study Centre Scheme

As you are aware, that in order to break the distance
barrier for students belonging to cities / locations in
which the representative offices of the Institute are not
in existence, the Institute launched the Study Centre
Scheme, under which Study Centres have been
established in collaboration with reputed colleges in
different locations covering the remote places including
Lakshadweep, Andaman & Nicobar Islands, North
Eastern States, Daman and Dui and Puducherry.
Taking this initiative towards proud laurels, the month of
July, 2018 has witnessed the opening of 75th Study Center
of ICSI at Swami Vivekanand Government Commerce
College, Viriyakhedi, Ratlam, Madhya Pradesh.
Another center was opened at BhartiyaSikshaSankul,
Chandpura, Sikar, and Rajasthan.
a) ICSI New Syllabus - Brochure
Consequent upon the recommendations of ICSI Syllabus
Review Board, the Institute came up with its new curriculum
for Executive and Professional Program students to
ensure the cutting-edge knowledge insights providing
empowered Governance professionals who would march
ahead with renewed excellence towards New ICSI 2022.
First copy of the syllabus brochure was presented to Shri
Prakash Javadekar, Hon’ble Union Minister of Human
Resource and Development, who has highly appreciated

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 YEARLY INITIATIVES TAKEN BY ICSI
the new syllabus for having encompassed all the recent 13. ICSI National Conclave on Ethics and Governance
developments and significant arenas.

b) Orientation Programme on ICSI New Syllabus

In view to provide a 360 degree rounded set of
education and development to CS students, Institute
came up with its new syllabus for Executive and
Professional Program. Further, to address various
aspects emerging from the new syllabus and apprise
the students with their views and clarifications on
the same, an Orientation Programme on ICSI New
Syllabus (2017) was organized on March 6, 2018.
The Institute, with an aim of aligning its dynamism, efforts
c) Study material for Students under New Syllabus 2017 and energies towards transforming governance culture on
With the objective of providing a 360 degree rounded set one hand and steady significance of ethics at workplace
of education and also to assist the students who have on the other, organised a National Conclave on Ethics
either registered or switched over under New Syllabus and Governance during July 13-14, 2018 at Tirupati on
with effect from, September 1, 2018, the Institute has the theme ‘Professional Ethics – Need of the Hour’. Shri
prepared the study material of Executive Program and M.M. Nayak, Chairman and Managing Director, Andhra
Professional Programme under New Syllabus, 2018. Pradesh Power Distribution Co. Ltd., addressed the
participants as the Chief Guest.
11. Global Exhibition on Services – The India Opportunity
The Institute participated in the Global Exhibition on 14. ICSI Capital Markets Week, 2018
Services (GES) organized by Department of Commerce,
Ministry of Commerce and Industry in partnership with
Government of Maharashtra, Service Export Promotion
Council and Confederation of Indian Industry, during May
15-18, 2018 at Mumbai. The exhibition, inaugurated by
Shri Ram Nath Kovind, Hon’ble President of India has
launched 12 Champion Service Sectors. The Institute,
in addition to setting up of ICSI Stall at the exhibition
showcasing the services provided by the Institute and the
professionals, has also represented at the session ‘Legal
Services: Navigating Compliance Challenges under the
ever evolving landscape of Governance, Technology In order to strengthen the structure of good governance in
Disruptions and Emerging Regulations’ on May 16, 2018. the capital market leading to a balance between economic
and social goals, the Institute has been observing Capital
12. Golden Jubilee Year – National Conference of Markets Week annually as one of the mega events
Practising Company Secretaries (19th Edition) throughout the country. Taking this initiative forward in
the Golden Jubilee Year of the Institute, the ‘ICSI Capital
Markets Week – 2018’ was organised during July 23-29,
2018, on the theme ‘Global Contours of Capital Market:
Signpost of Good Governance’. Mega programs were
organised at Kolkata, Chennai, Nagpur and New Delhi.

The mega program at Nagpur during the Capital Markets
Week, was observed as National Infrastructure & Capital
Market Summit on July 28, 2018.

National Conference of the Practising Company Secretaries 15. Golden Jubilee Year – National Convention of
is one of the flagship events of the Institute towards capacity Company Secretaries (46th Edition) and International
building of its members. It is an annual congregation of Conference (6th Edition)
members in practice for capturing the contemporary trends
in the related field of knowledge and practice. This year, in
commemoration of 50 years of Institutes’ journey, the Golden
Jubilee Year - National Conference of Practising Company
Secretaries (19th Edition) was magnificently inaugurated
at The LaLit Mumbai, on May 18-19, 2018 in the graceful
presence of Dr. Satyapal Singh, Hon’ble Union Minister of
State for HRD, government of India, as Chief Guest and
Shri Ajay Tyagi, Chairman SEBI as the Guest of Honour.
This two days Conference on the theme of ‘PCS: A Value
Driven Professional’, has made successful deliberations on
the integral role of professionals in the emerging trends of The Institute organized its Golden Jubilee Year - National
governance and compliance. Convention of Company Secretaries (46th Edition) and

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CHARTERED SECRETARY JANUARY 2019 19
YEARLY INITIATIVES TAKEN BY ICSI
International Conference (6th Edition) on August 30-31
and September 01, 2018 at Bhubaneswar, Odisha on
the theme ‘A Journey of 50 Glorious years - Connecting
from Grassroots to Global’ to offer a wide platform for
the exchange of ideas, facts and information related to
the glorious journey of the Institute as a premier body in
the field of governance and compliance, connecting from
grassroots to global, along with deliberating the role of
professionals in emerging trends of good governance.
The Inaugural Session saw the presence of Shri Naveen
Patnaik, Hon’ble Chief Minister of Odisha as Chief Guest
along with Shri Arun Misra, Chairman, Tata Steel SEZ
Limited as the Guest of Honor.
The theme was very well articulated in the deliberations and
discussions of the experts in various technical sessions.
A Special Session dedicated to ‘Skill Development in
India’ was addressed by Shri Dharmendra Pradhan
Hon’ble Minister of Petroleum & Natural Gas and Skill
Development & Entrepreneurship.
The Valedictory Session was beheld with the gracious
presence of Hon’ble Governor of Odisha, His Excellency
Prof. Ganeshi Lal as the Chief Guest along with Dr.
Achyutananda Samanta, Member of Parliament, Rajya
Sabha as Guest of Honour.
The three days Convention witnessed the august
gathering of CEOs and CFOs of leading corporate houses
of the country, accomplished Company Secretaries from
across India, Doyens of the Industry, Academicians,
Members and Students.
16. Symposiums on Quality of Professional Services
The profession of Company Secretaries has witnessed
exponential growth over the years. With the elevation of
the profession of Company Secretaries as ‘Key Managerial
Personnel’ under the Companies Act, 2013, Company
Secretaries are poised to act as conscience keepers
of the corporate world. The reliance that the regulators
placed on practicing professionals today, bears testimony
to the fact that Company Secretaries as extended arms
of the regulators, need to rise to shoulder this onerous
responsibility, by adhering to the highest standards of
ethical and professional behavior and professionalism
while rendering professional services.
Under this perspective and with a view to improving the
quality of professional services rendered by the members,
the Quality Review Board of the Institute decided to
organize a series of ‘Symposiums on Quality of Professional
Services’ at various locations throughout the country.
Four symposiums were held at Kolkata, New Delhi,
Mumbai and Hyderabad.
17. 50th Foundation Day of the ICSI
The Institute of Company Secretaries of India recently
celebrated its 50th Foundation Day on October 4, 2018
at Mumbai. The 50th Foundation Day which is a carnival
in the life of the organization not only makes the entire
commune to look back on significant milestone of their
hard work, dedication and good work, but also serves a
platform for us in looking forward on building celebrative
milestone in the upcoming journey of the Institute’s with its
vision New ICSI 2022.
18. 18th ICSI National Awards for Excellence In
Corporate Governance  & 3rd ICSI CSR Excellence
20
Awards
The Institute organized its 18th ICSI National Awards for
Excellence in Corporate Governance and 3rd ICSI CSR
Excellence Awards on January 10, 2019 at The Taj Mahal
Palace, Mumbai, in the august presence, Dr. Mohan
Kaul, President, India Professionals Forum, United
Kingdom and Shri G N Bajpai, Former Chairman, SEBI.
The ICSI Lifetime Achievement Award was conferred on
Shri Adi Godrej, Chairman, Godrej Group for Translating
Excellence in Corporate Governance into Reality. In the
18th edition of the ICSI National Awards for Excellence
in Corporate Governance, Cipla Limited and Dabur India
Limited were adjudged as Best Governed Companies
and the Certificates of Recognition for were presented
to ACC Limited, Hindustan Unilever Limited, Indian Oil
Corporation Limited, Tata Metaliks Limited, and The
Indian Hotels Company Limited.
 
The 3rd CSR Excellence Awards were won by GMR
Hyderabad International Airport Ltd. (Emerging Category),
The Tata Power Company Limited (Medium Category),
and Ambuja Cements Limited (Large Category).
19. Secretarial Standard on Board’s report (SS-4)
In order to promote the standardised practices in
preparation of Board’s Report, the ICSI has issued the
Secretarial Standard on Report of the Board of Directors
(SS-4) effective from October 1, 2018 for voluntary
adoption by the Companies.
20. ICSI Auditing Standards Board
4 (Four) Auditing Standards are in the draft stage which
would applicable on voluntary basis for audits undertaken
by members of the Institute.
CSAS-1 : Auditing Standard on Audit Engagement
CSAS-2 : Auditing Standard on Audit Process and
Documentation
CSAS-3 : Auditing Standard on Forming of Opinion
CSAS-4 : Auditing Standard on Secretarial Audit
21. Interactive Workshop on Secretarial Standards –
Concerns & Clarifications
Organized by PHD Chamber, the workshop held on 20
February 2018 at PHD House, New Delhi addressed
various issues pertaining to the revised secretarial
standards SS-1 and SS-2 as well as the newly launched
secretarial standard SS-3, in associate partnership
with ICSI. Attended by 50 corporate professionals, the
clarifications on the concerns raised was provided by not
just Industry experts. 
22. Joint Program
• Jointly organised a Seminar with Institute of Directors
(IoD) on Board Diversity on the theme “Driving a
Sustainable Organisation through Board Diversity”
• Jointly organised workshops with NSE and BSE on
Secretarial Audit in Delhi and Mumbai.
• Symposium on Companies Act, 2013: NCLT and
NCLAT - Law & Practice jointly with National Company
Law Tribunal Bar Association (NCLTBA).
• Jointly with IBBI organised National Seminar on
Insolvency & Bankruptcy Code, 2016 in Bhubaneswar
and National Conclave on Insolvency and Bankruptcy
Code, 2016 was also organised in Mumbai.
• Joint Seminars with PHD Chambers of Commerce &
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Industry:
a. Workshop series on “Corporate Laws & Regulations,
2016 (Recent Amendments)”.
b. Institutional partner for the Seminar on, “Is the
Corporate Sector Over Regulated?”
c. Associate partner on “National Company Law
Tribunal – Challenges &The Way Forward
Implications” and Seminar on “Insolvency and
Bankruptcy Code: Emerging Issues and its Impact.
• ASSOCHAM: Institutional partner in National
Conference on ‘Corporate Compliance
Management - The Strategic Regulatory
Remediation’ and for the 5th National Summit
on Mergers and Acquisitions “The Catalyst to
Economic Growth”.
• FICCI: Support partner in the Conference on
‘Ease of Doing Business: Distance to Destination’.
23. Research Publication on ‘Premier on Company Law’
ICSI Premier on Company Law (With Commentary on
Companies Act, 2013)- The book while highlighting the
conceptual aspects of the law contains lucid commentary
on all possible facets provided by a team of experts in the
area of Company Law.
24. Strategic Leadership Program for Young Company
Secretaries
The Institute in collaboration with National Law University,
Delhi organized a Strategic Leadership Program for Young
Company Secretaries, a three (3) days joint certification
course from April 26-28, 2018 at New Delhi. This course
aims to develop functional competencies in the core and
emerging areas of corporate law and practice along with
enhancing the leadership qualities for organizational
development and institution building.
25. ICSI CHAMBER CONNECT
The ICSI and Chambers of Commerce and Industry, as
institutions, need to keep pace with emerging new business,
economic and regulatory paradigm, by capitalizing inherent
strengths for mutual benefits and nation building. It is in this
direction with the objective of creating synergy between the
industry and professionals and support the implementation
of various policy initiatives of Government of India, ICSI
has launched a new initiative ‘CHAMBER CONNECT’. The
Institute will support chambers in ease of doing business
and in implementation of governance and compliance
among their corporate members. It will also support MSME
category members in all legal, financial and governance
aspects and undertake industry specific joint workshops/
seminars and research project and training programmes
on Company law, Corporate Governance, Corporate Social
Responsibility (CSR), GST etc. The Chambers and ICSI
will facilitate representation of their members on various
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CHARTERED SECRETARY JANUARY 2019
YEARLY INITIATIVES TAKEN BY ICSI
Committees and participation in National/ International
Conferences on reciprocal basis. It will also support
exchange of Journals, case studies, research publications
and other academic and research inputs.
26. ICSI GST INITIATIVE
a) ICSI-ASSOCHAM National Conclave on GST – A
Series
In furtherance to our efforts for commemorating the first
anniversary of GST roll out in the nation, the Institute
as an Institutional Partner joined hands with Associated
Chamber of Commerce of India in organizing a series
of National Conclave on GST Pan India. The first
program in the series aiming at providing ground level
feedback to the government and a platform to Industry
to have valuable insight into the operation of GST, was
efficaciously organized on June 27, 2018 at New Delhi.
b) ICSI – PHD National Conclave on GST
The Institute joined hands with PHD Chamber of
Commerce and Industry for venerating the occasion of
the efficacious completion of one year of GST roll out
in India with organizing ‘National Conclave on GST –
Growing Stronger Together’ on June 29, 2018 at PHD
House, New Delhi.
c) ICSI - GST Newsletter
As a part of the capacity building initiatives under the
new indirect tax regime and while standing shoulder to
shoulder with Government of India towards the ‘One
Tax One Nation’ motto, the Institute, launched the
publication of a monthly newsletter dedicated to the
Goods & Services Tax (GST).
d) ICSI - GST Educational Series
The Institute, as a capacity building initiative, started a
daily GST Educational Series which being well received
by the stakeholders as well as public at large. The
series have been successful and academically useful.
More than Three Hundred issues of GST Educational
Series has been brought out so far, which are also
available on the GST Corner of the ICSI website at
https://www.icsi.edu/GSTEducationalSeries.aspx
e) ICSI - GST Point
With the objective of rendering hand in hand support to
the government for ensuing the effective implementation
of GST Laws and to advance various initiatives of the
Institute to educate the public at large about the diverse
facts and facets of Goods and Services Tax (GST), the
Institute had launched a GST Point as a uniform platform
to reply to the queries, difficulties and challenges faced
by consumers, manufacturers, traders, MSMEs, public
at large, professionals, etc. in understanding and
implementation of the Goods and Services Tax Laws.
More than seventy five (75) sessions of GST Point
have successfully been completed so far. The same is
receiving tremendous response from the stakeholders.
The queries received and answered by experts cover
a wide range of topics including registration, filing, and
input tax credit along with other GST modalities.
f) ICSI GST APP
With a view to apprise public at large with latest news,
articles, regulations and various publications on GST
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YEARLY INITIATIVES TAKEN BY ICSI
by Institute, the ICSI GST App has been launched as
ready reference on GST for the users. The App, which
is available on android and IOS platforms, has almost
19636 users till date.
27. Educational Series - Prevention of Sexual
Harassment of Women at Workplace
Pursuant to the recommendations of ICSI - Task Force
on Prevention of Sexual Harassment of Women at
Workplace, the Institute has in addition to its regular
measures in this direction decided to give more focussed
attention to create awareness about Prevention of Sexual
Harassment of Women amongst students and members.
In this direction, the Institute initiated the publication of the
‘Prevention of Sexual Harassment of Women at Workplace
(POSH) Educational Series’. This weekly Educational
Series will highlight various legislations and remedies
available to a woman along with an Executive Summary.
28. Courses launched
a) ICSI – Contact Program for Certificate Course on
Certified CSR Professional
In order to create the visibility and awareness among
the professionals regarding the significance of CSR in
general and Certified CSR Professional in specific, the
Institute has organized a One Day Contact Program for its
newly launched  Three (3) Months Certificate Course
on Certified CSR Professional at Noida and Mumbai
on November 14, 2018 and on November 16, 2018
respectively. The modules of Certified CSR Professional
Course were also launched to venerate the inauguration
of the Contact Program at Noida.
b) First Batch of Certificate Course in GST launched
With a view to equip Company Secretaries with the
skills and develop competency in the area of GST,
ICSI and BSE Institute Limited (BIL) a wholly owned
subsidiary of BSE Limited have joined hands to offer a
Certificate course in GST for members and professional
programme students of ICSI. The certificate course
in GST is an advanced level course and shall test a
candidate’s knowledge of various concepts of GST.
The first batch of the course received an overwhelming
response and commenced on December 8, 2018.
c) Educational Course on ‘Valuation of Securities or
Financial Assets’
Taking forward the capacity building initiatives of the
Institute, the ICSI – Registered Valuers Organization
(ICSI RVO) conducted Classroom Training for the
Educational Course on ‘Valuation of Securities or
Financial Assets’ at various places like New Delhi,
Chennai, Hyderabad respectively. Post the successful
conduct of these Classroom Training in the previous
months, another session of this Classroom Training
has been organized from September 18 – 26, 2018 at
Noida.
29. Webinars
a) Webinar on Input Tax Credit – Tax Saver for
Corporates & PCS
The Institute as part of its capacity building of its
members organised a webinar on ‘Input Tax Credit –
Tax Saver for Corporates & PCS’ on July 6, 2018 at New
22
Delhi. CS Makarand Lele, President, ICSI addressed
the webinar and technical session was addressed by
guest speaker CS P.K. Mittal, Member, ICSI-GST Core
Advisory Group. The webinar was viewed by members
and students in large number and the queries raised by
the participants were well addressed by the speakers.
b) Webinar on Prevention of Sexual Harassment of
Women at Workplace
With a view to create awareness and to sensitize
the members, particularly the female members in
employment as well as in practice about the Prevention
of Sexual Harassment of Women at Workplace Act and
latest judicial pronouncements, the Institute organized
a webinar on ‘Prevention of Sexual Harassment
of Women at Workplace’ on July 14, 2018. CS
Raqshanda Niazi, Chairperson and CS Rachna Roy,
Member of the ICSI Taskforce on Prevention of Sexual
Harassment of Women at Workplace addressed the
webinar and interacted with members and students, to
clarify queries.
c) Webinar on Amendments in Direct Taxation
(Finance Act, 2017)
In view to keep the students updated with reference
to the amendments in Direct Taxation, the Institute
organized a webinar on ‘Amendments in Direct
Taxation (Finance Act, 2017)’ on August 02, 2018 at
New Delhi. The webinar addressed by Dr. Girish Ahuja,
was viewed by students at large and various queries
raised by the viewers were efficaciously addressed
and resolved by the expert.
d) The Companies Act, 2013: Enable Evaluate and
Excel
Initiated in April, 2017, the idea of this Webinar series
was to develop a better understanding of the law
amongst the members and students of the Institute as
regards the crossover from Companies Act, 1956 to
that of 2013.
30. Publications
a) ICSI Model Code
• Model Governance Code for Meetings of Gram
Panchayats
• Code of Business Ethics
• Corporate Governance Code from Ancient Scripture
b) Other Publications
• A Guide to Board Evaluation
• Certificate Course in GST
• Certificate Course on Certified CSR Professionals
– (Admission Announcement)
• The Companies Act, 2013 and The Companies
Rules
• The Companies Act, 2013 (updated till August
2018) by ICSI
• The Companies Rules (updated till August 2018) by
ICSI
• Company Law Premier (2018 Edition)
• Company Secretary – A Professional Catalyst in
Capital Markets
• Company Secretary in Practice: Ready Reckoner
• Corporate Saviour Series
• Diploma in Internal Audit
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JANUARY 2019 CHARTERED SECRETARY

• Exposure Draft of ICSI Guidance on Diligence
Report on Governance For Banks–
• FAQs on the Companies Act, 2013
• FAQs on Electronic Way Bill
• FAQs on Limited Liability Partnerships
• FAQs on Producer Company
• FAQs on Section 8 Company
• GST - Simplified Approach and Practical Guide
for GST Accounts Assistant Practical Aspects of
Insolvency Law
• GST Educational Series
• Guidance Note on General Meetings
• Guidance Note on Meetings of Board of Directors
• Guidance Note on Secretarial Audit (4th Edition)
• Handbook on GST Compliances
• ICSI RVO Connect Newsletter for Valuation
Professionals
• Ready Reckoner for Private Companies
• Referencer on Boards Report
• SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015- A Brief Analysis
• Secretarial Standard on Report of the Board of
Directors(SS - 4)
• Souvenir: Golden Jubilee Year National Conference
of Practicing Company Secretaries (19th Edition)
• Thought Leadership
• Transfer Pricing
• Vastu Avam Seva Kar Margdarshika
31. ICSI Task Forces and Committees
a) ICSI Task Force Prevention of Sexual Harassment
of Women at Workplace
With a view to create awareness on the provisions
of Sexual Harassment of Women at Work Place
(Prevention, Prohibition and Redressal) Act, 2013
amongst its members and students,  the Institute
has constituted a ‘Task Force on Prevention of
Sexual Harassment of Women at Workplace’. This
Task Force aims to create awareness about the Act
and latest judicial pronouncements by conducting
national/ regional/ chapter level seminars/ webinars
and to sensitise the members, particularly the female
members in employment as well as in practice about
the Act, and their role in implementation of the Act in its
true spirit, among other related objectives.
b) ICSI Direct Tax Committee
Continuing with our out-and-out support for the
Government towards a reformative tax regime in India,
the Institute formed its first ever Direct Tax Committee.
The Committee consisting of experts of the related
field, aims at giving suggestions to the government on
Direct Tax Code with special focus on Ease of Doing
Business in India.
c) Task Force on RERA
The Real Estate Regulation and Development Act,
2018 was implemented by the Indian government
in a bid to protect the interests of homebuyers apart
from making operations in the real estate sector
transparent and boost revenues. It also makes it much
harder for builders or promoters to dupe customers
or delay project execution. Apart from that, RERA
also protects the monetary interests of homebuyers.
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More than 30,000 realty projects and 25,000 agents
across the country have come under the ambit of the
RERA. Company Secretaries have been recognised
to represent their clients before any real estate
regulatory authority for real estate project or real estate
appellate tribunal. The Institute has constituted a Task
Force on RERA with a view to Develop the format of
a compliance certificate issued by an independent
professional (Company Secretary in Practice) on the
lines of Secretarial Audit and to recommend to Real
Estate Regulator, a Compliance mechanism pertaining
to all laws, rules and regulations applicable to real
estate companies and other intermediaries working as
corporate entities in the arena.
d) Task Force on Insurance
During the last few years the role and scope of
Compliance in the Insurance market has been rapidly
reshaped. The typical job of compliance officers used
to be predominantly a “check the box” mixed to policy
issuing, it now involves the setup and verification of the
practical application of the control environment through
numerous reviews against a broader set of laws and
regulations. Compliance, under a modern perspective
of its role as a proactive means of prudential
surveillance aimed to prevent, localize and minimise
non-compliance and reputational risks, is called to
continuously monitor a number of laws, regulations,
regulatory requirements and internal policies. During a
meeting of the ICSI delegation led by CS Makarand
Lele, President, ICSI and CS Ahalada Rao V., Vice
President, ICSI with the Chairman, IRDA a need was
felt to have in place a compliance certificate issued
by an independent professional (such as a Company
Secretary in Practice) on the lines of Secretarial Audit.
Accordingly, the Institute has constituted a Task Force
with eminent experts to deliberate and recommend,
to IRDA, a Compliance mechanism pertaining to all
laws, rules and regulations applicable to insurance
companies and other intermediaries working as
corporate entities in the Insurance arena
32. ICSI – Memorandum of Understanding
a) ICSI Signed MOUs for Insurance products
With a view to provide better Professional and Personal
safety cover like Professional Indemnity Cover,
Medical Insurance, Motor Insurance and others to its
Members, Students and Stakeholders, the Institute has
entered into MoUs of tie-ups with various Insurance
Companies. The MoUs were signed by CS Makarand
Lele, President, ICSI and respective signatories from
various Insurance Companies on October 4, 2018, at
Mumbai for different Insurance Products as per the
following details:
1. The Oriental Insurance Company
a. Professional Indemnity
b. Office Package Policy
c. Medical Insurance
d. Other general products
2. New India Insurance
a. Professional Indemnity
b. Medical Insurance
c. Motor Insurance
d. Other General Products
3. Bajaj Alliance General Insurance
23
YEARLY INITIATIVES TAKEN BY ICSI
a. Cyber Insurance – for Individuals
b. Director’ and Official’s Liability Policy
4. Aditya Birla Health Insurance
a. Super Top up Health Insurance Policy
5. Tata AIG General Insurance Company
a. Motor Insurance Policy
6. SBI Life Insurance
a. Term Life Insurance
b) ICSI signed MoU with Lovely Professional
University, Jalandhar
In order to advance the understanding and expertise
of members and students in the related field through
pursuing doctoral degree, the Institute entered into a
Memorandum of Understanding (MoU) with Lovely
Professional University (LPU), Jalandhar, Punjab. The
MoU was signed by CS Ashok Kumar Dixit, Officiating
Secretary, ICSI and Dr. Monica Gulati, Registrar, LPU
on November 28, 2018.
Through this MoU, LPU will accord necessary
recognition to Company Secretary Qualification as
equivalent to Post Graduate Degree for the purpose of
admission to Ph.D. in Management/ Commerce/ Law
along with endowing the opportunities of knowledge
building via Joint Workshops, Seminars, Continuing
Education and Training programs and similar Academic
Programs for Professionals.
c) Signing of the Memorandum of Understanding
between ICSI and BSE Institute Ltd.
For conducting various courses, the MoU between
ICSI and BSE Institute was signed on 4th of October
2018, at Mumbai regarding GST Course. ICSI was
represented by CS Makarand Lele, President, ICSI
and BSE Institute by Vinod Nair, Head, Academics,
BSE Institute Ltd
33. Other Initiatives and Events
a) Launch of CS TOUCH App
With the objective of providing a one-source platform to
members and students, for enabling them to avail and
share the information on-the-go, the Institute launched
CS Touch App. The App facilitating the access of
knowledge on the move, is available for download in
Android as well as in iOS.
b) Utkarsh – 2: Attaining Vision 2022 through Change
Management
With the chief objective to explicitly define the roadmap
for attaining Vision 2022 through collaborative team
work and to also adapt the change positively across
the organisation, the Institute organized a Two Days’
Workshop cum Training Session ‘Utkarsh- 2 on the
theme ‘Attaining Vision 2022 through Change
Management’. The two day event was scheduled
for all Regional Directors/ Executive Officers /In-
24
charge of Chapters & Career Counselling Officers of
ICSI during February 16-17, 2018 at Noida.
34. International initiatives
a) International Newsletter
Rightly said that awareness of our strength makes us
to work our effort that gets the right result at a right
time and therefore, in order to make our professional
commune, related stakeholders and public at large, to
be well informed about the international initiatives we
are initiating in the larger interest of good governance,
the Institute has released the first edition (December,
2018 Issue) of International Newsletter for advancing
the capacity of our professionals and ensuing their
utmost dedication and commitment for the sustainable
and empowered governance throughout the globe.
b) 12th International Conference on Corporate Social
Responsibility & Presentation of Golden Peacock
Awards
The event held at Bengaluru on February 9 – 10, 2018
in associate partnership with the ICSI was focused
on the theme of ‘Responsible CSR: A New Agenda
Beyond Governance’. The various Plenary Sessions
of the two-day event were intended at covering all
aspects of corporate governance and CSR. The 12th
Plenary Session ‘Making CSR Happen: Case studies
of Excellence’ was chaired by CS Ahalada Rao V., Vice
President, ICSI who also gave the special remarks at
the Closing session.
c) Dubai Global Convention, 2018
The Institute joined hands with Institute of Directors as
an Associate Partner in organizing the Dubai Global
Convention, 2018 (28th World Congress on Leadership
for Business Excellence and Innovation) during April
17-19, 2018 at Dubai, UAE. This global business
meet along with the presentation of Golden Peacock
Awards has outstandingly captured the theme of
‘Transformative Leadership for Fostering Creativity,
Innovation & Business Excellence’.
d) ICSI participated at 100 Most Influential in UK-India
Relations
The Institute was represented by its President, CS
Makarand Lele in an event ‘100 Most Influential in UK-
India Relations’ held at London on June 18, 2018. The
event was organized by India Inc., which is a London
based media house and produces incisive content
and events on investment, trade and policy matters
relating to India’s increasingly globalized economic
and strategic agenda.
e) ICSI – Meeting with Members in UK
The President, ICSI during his visit to UK, hold meeting
with members of the Institute based in UK on June 19,
2018.
f) CSI - Golden Jubilee Year International Conference
(13th Edition)
As you are aware that the Institute every year
organizes an International Conference on the emergent
issues and developments in the field of Corporate
Governance and other related issues of the economic
sphere. Subsequent to the successful count of twelve
such conferences, this year, the Golden Jubilee Year
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JANUARY 2019 CHARTERED SECRETARY

International Conference (13th Edition) was organized
on June 20, 2018 at London (UK) on the theme of
“Business Responsibility Reporting: An Analysis for
Value-Added Governance”. The conference was
attended by 44 delegates.
g) ICGN Annual Conference, 2018
The Institute participated in ICGN Annual Conference
held at Milan, Italy during June 25-27, 2018. The
Conference, which is hosted by Assogestioni in
partnership with UniCredit aimed to attract over 450
investors, companies and capital market stakeholders
from around the world. CS Makarand Lele, President,
ICSI and CS Ashish Doshi, Council Member, ICSI
represented the Institute.
h) Afro Asian Federation of Company Secretaries
The Institute is dynamic in making constant efforts
towards spreading the wings of profession of Company
Secretaries beyond national boundaries. With this aim
as central and to support the Government’s Initiative
under Champion Sector Service to enhance export
of services along with the enhancing employment
opportunities for Indian Company Secretaries, the
Institute initiated discussion for the formation of Afro-
Asian Federation of Company Secretaries during
Golden Jubilee Year National Convention of Company
Secretaries (46th Edition) and International Conference
(6th Edition), held on August 30-31 & September 1,
2018 at Bhubaneswar.
The broad objective of the federation shall be the
development and promotion of the profession of
governance professionals, best company secretarial
practices and good corporate governance practices
in the Afro-Asian region, with a specific focus on the
development of profession of Company Secretaries in
South Asian/African countries.
i) President, ICSI Re-elected as Secretary, CSIA
CS Makarand Lele, President of the Institute of
Company Secretaries of India (ICSI) has been re-
elected as Secretary of Corporate Secretaries
International Association (CSIA). The election took
place in the Annual General Meeting of CSIA held on
September 27, 2018.
j) ICSI receives Membership of the ‘International
Valuation Standards Council’
The Golden Jubilee Year of the Institute has made
our milestones more golden with adding the feathers
of ever-increasing accomplishment and recognitions
nationally and internationally. One among many is the
recent feather added to the cap of our professional
commune when the Institute of Company Secretaries
of India received membership of the coveted
‘International Valuation Standards Council (IVSC)’.
k) ICSI and ICSA Memorandum of Understanding
The Institute is persistent in pursuing bilateral
Memorandum of Understanding with Company
Secretaries’ Institutes in other jurisdictions ensuring
mutual recognition of qualifications and market access
for members in respective jurisdictions on reciprocal
basis. In this context, as you are aware that Institute
had entered into a Memorandum of Understanding
I
CHARTERED SECRETARY JANUARY 2019
YEARLY INITIATIVES TAKEN BY ICSI
(MOU) with the Institute of Chartered Secretaries
and Administrators (ICSA) UK division in the year
1998 for reciprocal paper wise exemption to acquire
membership of respective Institutes.
In view of the launch of New Syllabus, 2017 for the
Company Secretaryship Course, both ICSI and ICSA
after various rounds of discussion, decided to include
subjects as per New Syllabus of ICSI in existing MOU
and also to provide an extension of standing MoU
with other nine divisions of ICSA namely Australia,
New Zealand, Southern Africa, Zimbabwe, UKRIAT,
Canada, Hong Kong/China, Malaysia and Singapore.
l) ICSI – UK NARIC
The Institute has always strived for academic and
professional excellence for its key stakeholders,
i.e., Students and Members. In this regard, with the
aim of expanding the opportunities for Governance
Professionals in foreign jurisdictions, the Institute
had engaged UK NARIC (The National Recognition
Information Centre for the United Kingdom) a
renowned UK national agency responsible for providing
information and expert opinion on qualifications
and skills worldwide, to conduct an independent
benchmarking study, evaluating the comparability of
the ICSI Executive and Professional Programmes of
the Company Secretary ship Course in the context of
the UK and UAE education systems. This recognition
of the CS qualification will enable the cross border
movement of the CS professionals and globalization of
the profession of Company Secretaries.
m) 18th London Global Convention and Golden
Peacock Awards
The Institute joined hands with the Institute of
Directors in organizing the 18th Edition of London
Global Convention on Corporate Governance and
Sustainability from October 24 to 27, 2018 in London,
which also venerated the presentation of Golden
Peacock Awards and a Global Business Meet at House
of Lords.
CS Makarand Lele, President, ICSI addressed the
delegates on Session- Future of the Strategic Board:
Shared Leadership Issues during the 18th London
Global Convention-2018.
n) ICSI Represented in National Conference of the
Governance Institute of Australia, 2018
Taking forward our professional league at the
international platform, President ICSI represented
the Institute at the prestigious ‘Governance Institute
of Australia’s National Conference, 2018’, during
November 29-30, 2018 at Melbourne, Australia. In this
annual forum, which brought together over 500 leaders
in Corporate Governance and risk management from
across industry sectors, one dedicated session on ‘The
Expansion of the Business Universe and Consequent
Challenges of Governance’ was addressed by CS
Makarand Lele, President ICSI.
During this visit to Australia, the ICSI delegation led
by President, ICSI also met His Excellency Shri B.
Vanlalvawna, Consul General of India in Sydney.
25
YEARLY INITIATIVES TAKEN BY ICSI
35. IIP
a) CSI-IPA Insolvency Professionals Training
Program
The Institute through its Insolvency Professionals
Agency (ICSI IPA) and World Bank Group (WBG)
jointly with the Insolvency and Bankruptcy Board
of India (IBBI) and INSOL International (INSOL)
convened a specialised Training Programme on the
Insolvency and Bankruptcy Code, 2016 in Mumbai
from January 22-24, 2018. The Training Programme
had an array of global experts who shared their
insights and practical experiences on corporate
insolvency resolution process (CIRP), liquidation and
cross-border insolvency.
36. RVO
In order to enable the members of ICSI, other professionals
and eligible persons to register as Registered Valuers,
ICSI has incorporated a not-for-profit private limited
company under Section 8 of the Companies Act, 2013,
by the name ‘ICSI Registered Valuers Organization’.
The entire shareholding of the said company is held by
ICSI. This is a new area of opportunity which recognizes
Company Secretaries to be registered valuers for the
asset class viz. Securities and Financial Assets.
Initiatives:  similar objects or engaged in similar activities, in the area
• Developed comprehensive Study material for ‘Valuation of
Securities or Financial Assets’, as per the syllabus notified
by IBBI
• Conducted classroom training for Educational Course on
‘Valuation of Securities or Financial Assets’ at New Delhi,
Chennai, Bhubaneswar, Noida, Kolkata, Hyderabad and a
batch is upcoming at Bengaluru and Pune
• Around 100 members have been imparted training, Also
many members have achieved success in clearing the
examination conducted by IBBI and have become full-
fledged Registered Valuers
• ICSI RVO has come up with ‘RVO Connect’ – ICSI RVO’s
monthly  E-newsletter as a capacity building initiative for its
members
• Framed various policies viz. Disciplinary Policy, Monitoring
Policy and Grievance Redressal Policy as mandated
• Rendered support to IBBI in various aspects relating to
framing of question bank, syllabus modification, framing of
ongoing valuation standards etc.
• ‘National Conclave on Insolvency and Valuation’ is scheduled
to be held on January 8, 2019 at Pune
37. Educational Course on ‘Valuation of Securities or
Financial Assets’
As you are aware that the Educational Course on
‘Valuation of Securities or Financial Assets’ is a pre-
requisite for appearing in the IBBI examination. Hence,
with a view to assist the members to gain deep insights
and thorough understanding with facts and facets of
valuation of securities or financial assets, the Institute
launched its Educational Course on ‘Valuation of
Securities or Financial Assets’ on June 11, 2018 in the
august presence of Shri Ashishkumar Chauhan, MD &
26
CEO, BSE at BSE International Convention Hall, Mumbai.
38. Classroom Training for Educational Course on
‘Valuation of Securities or Financial Assets’
Taking forward the capacity building initiatives of the
Institute, the ICSI – Registered Valuers Organization (ICSI
RVO) conducted Classroom Training for the Educational
Course on ‘Valuation of Securities or Financial Assets’
at various places like New Delhi, Chennai, Hyderabad
respectively. Post the successful conduct of these
Classroom Training in the previous months, another
session of this Classroom Training has been organized
from September 18 – 26, 2018 at Noida.
39. ICSI - GRKF
ICSI Governance Research and Knowledge Foundation
(“Foundation”) is a company promoted by the Institute of
Company Secretaries of India (ICSI), which is registered
under erstwhile Section 25 of the Companies Act, 1956
(now section 8 of the Companies Act, 2013). It was
incorporated on September 23, 2013. It’s a Company
limited by Guarantee. The Registered Office of the
Foundation is situated at ICSI House, 22, Institutional
Area, Lodi Road, New Delhi 110003. The main object
of the Foundation is “to generate, spread and impart
knowledge, directly or in association with person(s) having
of corporate laws, governance, management, business
sustainability and corporate social responsibility, capital
and financial markets, auditing, fiscal and economic
laws and policies, information and control systems and
allied disciplines through research, publications, training,
education or in any other manner”.
The Foundation has shifted its Registered Office from
Maharashtra to Delhi which is effective from April 05,
2018. Also, the Foundation has adopted new set of
Articles of Association, effective from April 04, 2018.
The Foundation organized two Directors’ Orientation
Programmes (DOP) at Mumbai which was beneficial for
persons in the Board of various Companies and would be
helpful for those who are aspiring to take senior positions
in various companies and practicing professions.
One of the Directors’ Orientation Programme was
organized on Monday, November 20, 2017 at BSE,
Mumbai. Mr. Ashishkumar Chauhan, MD & CEO, BSE
was the Chief Guest. Reading Material was distributed to
the participants who attended the Programme.
The other Directors’ Orientation Programme was
organised on Friday, June 08, 2018 at NSE, Mumbai in
the benign presence of Mr. Vikram Limaye, MD & CEO,
NSE as the Chief Guest of the Day. Directors’ Toolkit
was distributed to the participants who attended the
Programme.
The Foundation applied for ‘GRKF’ trademark with the
Registrar of Trade Mark, Mumbai under three classes i.e.
Class 16, Class 35 and Class 41 and received certificate
of registration of trademark in Class 16.
Recently, the Foundation has also filed an application for
the registration of the Foundation under Section 12A &
80G of the Income Tax Act, 1961.
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JANUARY 2019 CHARTERED SECRETARY
 “New year, new resolutions,
new beginnings,
new opportunities,
new you...”

While life offers a new opportunity every moment, to live, to relish and
to cherish, we usually demarcate newness along the lines of bigger time
frames. New day, new month, new year, new decade, and so on... Bigger the
time frame, greater the zeal and more the happiness...

With the dawn of this new year 2019, I wish all of you a very extraordinarily
wonderful and rejuvenating year ahead.An year where we as professionals
not only fulfil our responsibilities towards our corporates concerned but
towards the entire nation as responsible citizens of this great country. Time
and again during my various communiqués, I have reiterated the fact that
being a professional doesn’t mean just being good at our jobs but being
excellent in all our spheres of our life and beyond.

On this stupendous day, when we all hold hands to enter into a new era of
time, I urge each one of you to look beyond your prescribed roles, break the
shackles of guided roles and responsibilities, tread into areas of opportu-
nities untreaded and mark yourselves in the history to be remembered for
being a true professional and even more a true leader.

For as Walter Lippmann puts it, “The final test of a leader is that he leaves
behind him the conviction and the will to carry on.”

On that note, wishing all of you a very Happy New Year 2019 filled with new
hopes and aspirations !!!

Good Luck !!!

CS Makarand Lele
President

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CHARTERED SECRETARY JANUARY 2019 27
 Dear Professional Colleagues,

Sub: Insurance Portal for ICSI Stakeholders

With a view to provide better Professional and Personal safety cover like Professional Indemnity Cover, Medical
Insurance, Motor Insurance and others to its Members, Students and other Stakeholders, the Institute entered into
MoUs of tie-up with various Insurance Companies for different Insurance Products as per the following details:

1. The Oriental Insurance Company 2. New India Insurance

a. Professional Indemnity a. Professional Indemnity
b. Office Package Policy b. Medical Insurance
c. Other general products c. Motor Insurance
d. Other General Products
3. Bajaj Allianz General Insurance 4. Aditya Birla Health Insurance
a. Cyber Insurance – for a. Super Top up Health
Individuals Insurance Policy
b. Director’ and Official’s
Liability Policy

5. Tata AIG General Insurance Company 6. SBI Life Insurance

a. Motor Insurance Policy a. Term Life Insurance

The Portal to access various Insurance Products was launched on 10th of January, 2019 during the 3rd ICSI CSR
Excellence Awards Ceremony at Mumbai. Please visit the insurance Portal for detailed offers and coverage of policies
at the following link: http://bit.ly/icsiinsurance

I wish you safer and tension free years ahead.

CS Makarand Lele
President

*Disclaimer: ICSI is a facilitator between its Stakeholders and the Insurance Companies. The interested stakeholders
are advised to exercise their own discretion in buying the Insurance products and compare the final offer
of these Insurance Companies with market offering before making a purchase. ICSI shall not be a party to
the contract between the Buyers and Insurance Companies.

28 I
JANUARY 2019 CHARTERED SECRETARY
 Glimpses of 18th ICSI National Awards
for Excellence in Corporate Governance &
3rd ICSI CSR Excellence Awards

I
CHARTERED SECRETARY JANUARY 2019 29
 Glimpses of 18th ICSI National Awards
for Excellence in Corporate Governance &
3rd ICSI CSR Excellence Awards

30 I
JANUARY 2019 CHARTERED SECRETARY
 Glimpses of 18th ICSI National Awards
for Excellence in Corporate Governance &
3rd ICSI CSR Excellence Awards

I
CHARTERED SECRETARY JANUARY 2019 31
 Glimpses of 18th ICSI National Awards
for Excellence in Corporate Governance &
3rd ICSI CSR Excellence Awards

32 I
JANUARY 2019 CHARTERED SECRETARY
 Glimpses of 18th ICSI National Awards
for Excellence in Corporate Governance &
3rd ICSI CSR Excellence Awards

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CHARTERED SECRETARY JANUARY 2019 33
 National Conclave
“ Corporate Insolvency and Valuation”

34 I
JANUARY 2019 CHARTERED SECRETARY
 ICSI Convocation 2018 – Northern,
Eastern and Western Region

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CHARTERED SECRETARY JANUARY 2019 35
AT A GLANCE
Articles P-41
Are Non-executive and Independent 43
Directors Liable as ‘Insiders’ under the
SEBI Regulations of 2015?
Dr. K R Chandratre
I nsider trading is an evil by which any stock market is
infected to cause grave damage to the common investor.
It erodes the confidence of the investor and undermines its
credibility. By the promulgation of the Securities and Exchange
Board of India (Insider Trading) Regulations, SEBI attempted
to give a concrete shape, by a legislative measure, to one
of the specific functions which section 11 of the Securities
and Exchange Board of India Act, 1992 requires SEBI to
discharge. The 1992 Regulations were replaced in 2015 by
new Regulations 2015 which are currently prevalent. The
object of this measure is to prevent and curb the menace of
insider trading in shares. The Supreme Court’s judgment in
Chintalapati Srinivas Raju v. Securities and Exchange Board
of India highlights the distinction between executive and non-
executive directors when a non-executive director has no
means of having UPSI.
Critical Analysis of Amendments in SEBI 49
Listing Regulations in 2018
Emphasis on Accepted
Recommendations of
Kotak Committee
Narendra Singh & Prativa Jena
D uring last one and a half decades, calendar year 2018
was very eventful in terms of insertion of better Corporate
Governance Practices in SEBI Listing Regulations. Under the
Chairmanship of Shri Uday Kotak, SEBI’s Kotak Committee
gave intriguing recommendations which became topic for
deliberation of corporate fraternity during entire Sharad Ritu of
2017-18. Most of the recommendations of the Committee were
accepted and SEBI proactively notified the same on 9th May,
2018 giving ample time to listed entities to ensure compliances.
Compliances of the same would enable sustainable growth
of enterprises and at the same time safeguard interests of
various stakeholders. This will enhance the confidence in
Indian markets resulting to increase in the India’s position in
the World Bank’s Ease of Doing Business Index.
Positive Progress Made in 2018 in 54
implementing provisions of the IBC
Delep Goswami & Anirrud Goswami
O ne of the recent enactments is the Insolvency and
Bankruptcy Code, 2016 which is concerned with
recovery of huge outstanding dues running into lakhs or
crores of rupees from the corporate debtors. Fortunately in
2018, some significant judgements have been pronounced
by the Supreme Court of India, the High Court of Delhi and
the National Company Law Appellate Tribunal interpreting
many important provisions of the Code and it is hoped
that such judicial interpretations will expedite successful
implementation of the provisions of the IBC within the
mandatory time frame. The article deals with this important
36
aspect considered significant for corporate professionals,
including Company Secretaries.
Few Major Arguments under Insolvency 58
and Bankruptcy Code, 2016 in the
Recent Year
Chhaya Kakadia
I n recent years the Government has made numerous
amendments, one such, by promulgating ordinances in
Insolvency and Bankruptcy Code, 2016. While the intent of
the amendment was lauded, it also came under criticism for
poor drafting. In this article major arguments are highlighted
wherein hitherto protected homebuyers under RERA are
now given decisive power under the code, however there is
no proper mention regarding the responsibility of exercising
such power. Also dilemma of introduction of Section
29A wherein definition of related party is very vague and
wide, consequently barring genuine bidders and reducing
recovery rates from stressed assets and effective date of
applicability of Limitation Act under the code have also been
discussed.
IBC and Reform Impact on 62
M&A - 2018
Dr. Subir Kumar Banerjee
I norganic growth is the only way forward for companies in
India whether Inbound or Outbound. Recently, a series of
Legislative Regulations and Reforms have pushed the M&A
activities in India. A unique way of M&A has been thrashed in
the country in the form of “Great India Sale” of the companies
who could not pay their dues to Banks. The caveat is original
founders will not be allowed to participate in bids. To avoid
the time lag in disposing the companies, a strict timeline has
been made mandatory. The bidding process has stirred the
business community world over. Off the shelf availability
of companies for Acquisition is a rarity. Besides, Indian
consumption story is going through a consolidation phase.
FDI is pouring in this sector. Investment bankers are almost
going through sleepless nights. SEBI, RBI, and Government
are on overdrive to liberalize. The result is here. Financial
System will get massive relief from the woes of NPA.
Key Challenges to Corporate 67
Governance in India
Rabindra Kumar
L arge corporate investors are becoming a challenge to the
management of the company because they are influencing
the decision of the company. Corporate Governance is
necessary to build public confidence in the corporation which
was shaken due to numerous corporate frauds in recent
years. It is important to revive the confidence of investors.
Society having greater expectations from corporate, expect
that corporates take care of the environment, pollution,
quality of goods and services, sustainable development, etc.
the Code to conduct corporate is important to fulfil all these
expectations. Takeovers of the corporate entity created
lots of problems in the past. It affects the right of various
stakeholders in the company. This factor also pushes the
need of Corporate Governance in the country.
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JANUARY 2019 CHARTERED SECRETARY
 71
Corporate Governance in Mergers and
Acquisitions
Jaladhi Shukla
S trong Corporate Governance is critical for business
success. The interplay of the complex relationships
among the company, its directors, management, promoters,
investors and other stakeholders, determines the strength of
its Corporate Governance. Eventually, it leads to the long term
success of the company. Mergers and Acquisitions is a very
structured, strategic and multi-dimensional process involving or
rather drawing people from several functional areas internally
as well as externally. While governance has an important role
in routine corporate administration, other events which occur
less frequently in the corporate life-cycle also bring into sharp
focus, the difference between companies following robust
governance practices and those with inadequate governance
systems. One such category of events is a merger or an
acquisition (M&A) – an M&A transaction can often stress-test
the Corporate Governance Practices of both the acquirer and
the target. The article analyses how Corporate Governance
and in particular board structure affect M&A deals.
Angel Tax, Valuations and Way Forward 75
Chander Sawhney
S ection 56(2) (viib) of the Income Tax Act, 1961 states that
where a closely held company receives any consideration
for issue of shares to a Resident, in excess of the Fair Market
Value of such shares, the excess amount received by the
company shall be treated as its income under the head
other sources and taxable at 30% plus applicable surcharge/
cess. However the Tax authorities are also considering the
Value post facto based on the price of latest transaction in
that Start-up. By doing so, the Department is disregarding
the valuation on the date of issue of shares which does not
seem to be the spirit of law and is also contrary to the settled
principles of valuation as valuation is always date specific.
With limited history and high dependency on capital and future
opportunities, the start-ups business models are highly volatile
and difficult to value. This requires considerable experience
and application of straight forward DCF model. In practice,
experienced valuers apply DCF for start-ups under different
probabilities by factoring in qualitative aspects as well and
also doing sanity check using market based valuation models
before concluding value. Thus besides the understanding of
how Valuation works by the valuers and also the income tax
officers the CBDT needs to further relax the conditions of Inter-
Ministerial Board of Certification for enabling more start-ups
to register and once the conditions are met the transaction
should not be questioned post facto. This would also result in
ease of doing business.
Angel Tax: Paradigm 77
Continues and Intensifies
Sohini Mandal
‘A ngel Tax’ has been one of the most debated major
issues for start-ups this past year. Section 56(2)(viib)
of the Income Tax Act, 1961 was introduced via the Finance
Act, 2012, with a view to deter the generation and use of
unaccounted money, and tax share premium in excess of fair
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CHARTERED SECRETARY JANUARY 2019
AT A GLANCE
market value at the highest rate, irrespective of the slab of
income. This article attempts to comprehensively elucidate
the issues relating to angel-tax faced by start-ups. The author
argues that the industry experience with the provision has been
fraught with several restraints and uncertainties with respect to
valuation of shares which have had a severe adverse impact
on ease of doing business for start-ups. The author draws
references to the subsequent developments in this regard,
including, the exemption to start-ups under the Start-Up India
Action Plan, 2016. Finally, the article stresses on the severe
need to reconcile the interests of ease of doing business with
the provisions of angel-tax by the Government.
Cyber laws – Effective Weapon to 80
Combat Challenges Posed by Intelligent
Machines
Dr. Rajkumar Adukia
A s computers have evolved from 1st Generation
Computers to 5th Generation Computers, they have
taken the entire world into their stride from high to low. On one
hand it has opened up infinite possibilities and opportunities
and on the other they have created threats. The internet is
spinning the web deeper and deeper and is creating more
and more information. The personal information quickly
becomes public and is exposing itself to be manipulated. The
law makers and law abiders are faced with new challenges
posed by the ever changing digital world. On one hand they
have to promote business which makes use of this personal
information to deliver customised goods and services and
at the same time safeguard the personal information like a
fiduciary. This article discusses cyber space, threats posed
to personal data, social media, responsibility of intermediaries
through whom this data on social media is shared, liked and
forwarded. The article also speaks about the remedy our law
makers have brought forward by enacting The Draft Personal
Data Protection Bill, 2018 and the amendments made to the
Information Technology (Intermediary Guidelines) Rules,
2011.
The Era of E-Minutes 85
Dr. Joffy George
T aking minutes is more art than science. The major
issue at stake here is not so much the taking of
minutes but what is done after that to ensure accuracy and
security. If your meetings are run using a board portal, this
makes accessing your reference material much easier, as
you will have access at the click of a button. Board portals
provide a range of governance features, including secure
document libraries which allow you to securely store and view
reference material, such as meeting papers, archived minutes,
induction documentation, policies and legislation. If you aren’t
using a minute taking application or a board portal you will
find it beneficial to prepare a master template for each of the
meetings for which you take minutes. Meeting organizers
no longer have to replicate information in separate minute
taking documents. Instead, they can import their minutes into
the secure board portal, including a participants list and the
meeting agenda. Minute takers can then take notes during the
meeting within the application, linking to specific agenda and
action items. After the meeting, one can organize the notes
into minutes and link to each agenda item, assign actions, and
distribute securely through the application.
37
AT A GLANCE
Compounding of Offences – An Easy 88
Way of Settling Disputes
Hem Raj Tuteja
C ompounding is a mechanism whereby parties with mutual
agreement can settle their disputes amicably with or
without the intervention of the Courts. Compounding is the
short cut method of avoiding the litigation. There is no denying
the fact that litigations are increasing day by day and courts are
over-burdened. Compounding helps in reducing this burden if
compounding is done before the trial by the court, wherein both
the parties to the dispute willingly agree to mitigate the dispute
amicably without being adjudicated by the court. Compounding
saves the parties from the hassle of spending a lot of money,
time and energy in lengthy proceedings. Compounding has
proved to be a ‘silver-lining around the cloud’ in India where
there are thousands of cases pending in the courts. Generally,
the offences which are of private nature and relatively not
serious are made compoundable. Almost all the economic
laws provide the benefits of compounding of offences.
Legal World P-97
n LMJ 01:01:2019 If a company is defamed by any publication,
director has right to file defamation case against the
publisher.[SC]
n LW 01:01:2019 The shareholders and promoters are not the
creditors and thereby the ‘Resolution Plan’ cannot balance
the maximization of the value of the assets of the ‘Corporate
Debtor’ at par with the ‘Financial Creditors’ or ‘Operational
Creditors’ or ‘Secured Creditors’ or ‘Unsecured Creditors’.
They are also ineligible to submit the ‘Resolution Plan’ to
again control or takeover the management of the ‘Corporate
Debtor’. [NCLAT]
n LW 02:01:2019 It is thus clear that under the scheme of
Section 434 (as amended) and Rule 5 of the 2016 Transfer
Rules, all proceedings under Section 20 of the SIC Act
pending before the High Court are to continue as such until
a party files an application before the High Court for transfer
of such proceedings post 17.08.2018. Once this is done,
the High Court must transfer such proceedings to the NCLT
which will then deal with such proceedings as an application
for initiation of the corporate insolvency resolution process
under the Code.[SC]
n LW 03:01:2019 Once there are findings returned by the
TRAI which lead to the prima facie conclusion that the IDOs
have indulged in anti-competitive practices, the CCI can be
activated to investigate the matter.[SC]
n LW 04:01:2019 The Officers / Directors can only be liable
if the CCI were to come to the conclusion that they were
the key persons who were In-charge and responsible for the
conduct of the business of the Company.[Del]
n LW 05:01:2019 It is only the case where specific/special
remedies are provided for and which are opted by an
aggrieved person that judicial authority can refuse to relegate
the parties to the arbitration.[SC]
n LW 06:01:2019 One composite suit can be filed by a plaintiff
against one defendant by joining two causes of action, one
of infringement of the registered design of the plaintiff and
the second of the defendant passing off its goods as that of
the plaintiff on account of the goods of the defendant being
fraudulent or obvious imitation i.e. identical or deceptively
similar, to the goods of the plaintiff. [Del]
38
n LW 07:01:2019 In the instant case, as the cause of action
for the plaint is based on the dishonour of cheques under
138 of NIA, the suit is not based on any contract between
the parties, the bar under Section 69 (2) of the Act would not
apply.[Del]
n LW 08:01:2019 When the High Court exercises its jurisdiction
over a Tribunal extending its jurisdiction over more than one
State, then the High Court in the State where the first court is
located should be the proper forum.[Ker]
From the Government P-107
n Amendments in the Companies (Incorporation) Rules, 2014
– reg. name availability
n Companies (Registration of Charges) Second Amendment
Rules, 2018
n Companies (Incorporation) Fourth Amendment Rules,
2018.
n Relaxation of additional fees and extension of last date
of in filing of CRA-4 (Cost Audit Report in XBRL format) -
regarding.
n Extension of the last date of filing of Form NFRA-1-reg.
n Delegation of powers to Regional Directors
n Disclosure of significant beneficial ownership in the
shareholding pattern
n Clarification on clubbing of investment limits of Foreign
Portfolio Investors (“FPIs”)
n Cyber Security and Cyber Resilience framework of Stock
Exchanges, Clearing Corporations and Depositories
n Cyber Security Operations Center for SEBI registered
intermediaries
n Review of risk management framework for Equity
Derivatives Segment
n Early Warning Mechanism to prevent diversion of client
securities
n Change of Name in the Beneficial Owner (BO) Account with
Depositories
n Review of Offer for Sale (OFS) of Shares through Stock
Exchange Mechanism
n Creation of segregated portfolio in mutual fund schemes
n Physical settlement of stock derivatives
Other Highlights P-127
n MEMBERS RESTORED DURING THE MONTH
OF NOVEMBER 2018
n CERTIFICATE OF PRACTICE SURRENDERED
DURING THE MONTH OF NOVEMBER 2018
n KNOW YOUR MEMBER (KYM)
n ETHICS & SUSTAINABILITY CORNER
n GST CORNER
n CG CORNER
n GLOBAL CONNECT
n EIRC GAZETTEE NOTIFICATION
n NIRC GAZETTEE NOTIFICATION
n SIRC GAZETTEE NOTIFICATION
I
JANUARY 2019 CHARTERED SECRETARY
 I
CHARTERED SECRETARY JANUARY 2019 39
 COMPANY SECRETARIES BENEVOLENT FUND
Safeguarding and caring for your well being

Company Secretaries Benevolent Fund

Saathi Haath Badhana

âæÍè ãUæÍ ÕɸUæÙæ
The Company Secretaries Benevolent Fund (CSBF) provides safety net to Company Secretaries who are
members of the Fund and their family members in distress.

CSBF
• Registered under the Societies Registration Act, 1860
• Recognised under Section 12A of the Income Tax Act, 1961
• Subscription/Contribution to Fund qualifies for the deduction under section 80G of the Income Tax Act,
1961
• Has a membership of over 12,000

Eligibility
A member of the Institute of Company Secretaries of India is eligible for the membership of the CSBF.

How to join
• By making an application in Form A (available at www.icsi.edu/csbf) along with one time subscription of
`10,000/-.
• One can submit Form A and also the subscription amount of `10,000/- ONLINE through Institute’s
web portal: www.icsi.edu. Alternatively, he can submit Form A, along with a Demand Draft or Cheque
for `10,000/- drawn in favour of ‘Company Secretaries Benevolent Fund’, at any of the Offices of the
Institute/ Regional Offices/Chapters.

Benefits
• `7,50,000 in the event of death of a member under the age of 60 years
• Upto `3,00,000 in the event of death of a member above the age of 60 years
• Upto `40,000 per child (upto two children) for education of minor children of a deceased member
• Upto `60,000 for medical expenses in deserving cases
• Limited benefits for Company Secretaries who are not members of the CSBF

Contact
For further information/clarification, please write at email id csbf@icsi.edu or contact Mr. Saurabh Bansal,
Executive on telephone no.0120-4082135.

For more details please visit www.icsi.edu/csbf

40 I
JANUARY 2019 CHARTERED SECRETARY
 ARTICLES
1
n ARE NON-EXECUTIVE AND INDEPENDENT IRECTORS LIABLE AS ‘INSIDERS’ UNDER THE SEBI REGULATIONS OF 2015?
n CRITICAL ANALYSIS OF AMENDMENTS IN SEBI LISTING REGULATIONS IN 2018 EMPHASIS ON ACCEPTED
RECOMMENDATIONS OF KOTAK COMMITTEE
n POSITIVE PROGRESS MADE IN 2018 IN IMPLEMENTING PROVISIONS OF THE IBC
n FEW MAJOR ARGUMENTS UNDER INSOLVENCY AND BANKRUPTCY CODE, 2016 IN THE RECENT YEAR
n IBC AND REFORM IMPACT ON M&A - 2018
n KEY CHALLENGES TO CORPORATE GOVERNANCE IN INDIA
n CORPORATE GOVERNANCE IN MERGERS AND ACQUISITIONS
n ANGEL TAX, VALUATIONS AND WAY FORWARD
n ANGEL TAX: PARADIGM CONTINUES AND INTENSIFIES
n CYBER LAWS – EFFECTIVE WEAPON TO COMBAT CHALLENGES POSED BY INTELLIGENT MACHINES
n THE ERA OF E-MINUTES
n COMPOUNDING OF OFFENCES – AN EASY WAY OF SETTLING DISPUTES

I
CHARTERED SECRETARY JANUARY 2019 41
 Articles in Chartered Secretary
Guidelines for Authors
1. Articles on subjects of interest to the profession of company secretaries are published in the Journal.
2. The article must be original contribution of the author.
3. The article must be an exclusive contribution for the Journal.
4. The article must not have been published elsewhere, and must not have been or must not be sent
elsewhere for publication, in the same or substantially the same form.
5. The article should ordinarily have 2500 to 4000 words. A longer article may be considered if the subject so
warrants.
6. The article must carry the name(s) of the author(s) on the title page only and nowhere else.
7. The articles go through blind review and are assessed on the parameters such as (a) relevance and
usefulness of the article (from the point of view of company secretaries), (b) organization of the article
(structuring, sequencing, construction, flow, etc.), (c) depth of the discussion, (d) persuasive strength
of the article (idea/ argument/articulation), (e) does the article say something new and is it thought
provoking, and (f) adequacy of reference, source acknowledgement and bibliography, etc.
8. The copyright of the articles, if published in the Journal, shall vest with the Institute.
9. The Institute/the Editor of the Journal has the sole discretion to accept/reject an article for publication in
the Journal or to publish it with modification and editing, as it considers appropriate.
10. The article shall be accompanied by a summary in 150 words and mailed to nitin.jain@icsi.edu
11. The article shall be accompanied by a ‘Declaration-cum-Undertaking’ from the author(s) as under:

Declaration-cum-Undertaking
1. I, Shri/Ms./Dr./Professor........................... declare that I have read and understood the Guidelines for Authors.
2. I affirm that:
a. the article titled”............” is my original contribution and no portion of it has been adopted from any
other source;
b. this article is an exclusive contribution for Chartered Secretary and has not been/nor would be sent
elsewhere for publication; and
c. the copyright in respect of this article, if published in Chartered Secretary, shall vest with the Institute.
d. the views expressed in this article are not necessarily those of the Institute or the Editor of the
Journal.
3. I undertake that I:
a. comply with the guidelines for authors,
b. shall abide by the decision of the Institute, i.e., whether this article will be published and/or will be
published with modification/editing.
c. shall be liable for any breach of this ‘Declaration-cum-Undertaking’.
Signature

42 I
JANUARY 2019 CHARTERED SECRETARY

Are Non-executive and Independent
Directors Liable as ‘Insiders’ under the
SEBI Regulations of 2015?
In Chintalapati Srinivas Raju v. Securities and Exchange Board of India [2018] 210 Comp Cas 285; AIR 2018 SC 2411,
the Supreme Court has dealt with a vital issue concerning SEBI Insider Trading Regulations, namely whether a
non-executive director of a listed company who is not in possession of any unpublished price-sensitive information
can be held liable for breach of the Regulations on the charge of insider trading.
Dr K R Chandratre,* FCS
Practising Company Secretary, Pune
krchandratre@gmail.com
INTRODUCTION
I
nsider trading is an evil by which any stock market is
infected to cause grave damage to the common investor.
It erodes the confidence of the investor and undermines its
credibility. It is often said that insider trading is not as rampant
in any other stock market in the world as in the Indian market.
By the promulgation of the Securities and Exchange Board
of India (Insider Trading) Regulations, 1992, SEBI attempted
to give a concrete shape, by a legislative measure, to one of
the specific functions which section 11 of the Securities and
Exchange Board of India Act, 1992 requires SEBI to discharge.
The 1992 Regulations were replaced in 2015 by the SEBI
(Prohibition of Insider Trading) Regulations, 2015 which are
currently prevalent.
The object of this measure is to prevent and curb the menace
of insider trading in shares. To remedy the malady of insider
trading, the Regulations provide for various measures. In
particular, the Regulations render insider trading a criminal
offence in certain circumstances, punishable under the SEBI
Act. The Regulations also clothe the SEBI with the powers of
investigation to unearth and prove the crime of insider trading,
though the task is very arduous.
In simple terms, insider trading implies illegal buying and selling
of shares based on privileged information, which is known only
to a few who belong to a limited circle of ‘insiders’ in a company.
Insider is a person in possession of corporate information not
generally available to the public, as a director, an accountant,
or other officer or employee of a corporation. This is clearly
dealing in company securities with a view to making a profit
or avoiding a loss while in possession of information that, if
*Past President, The Institute of Company Secretaries of India.
I
CHARTERED SECRETARY JANUARY 2019
ARTICLE
generally known, would affect their price. The information is,
of course, ‘price-sensitive information’ as it is likely to have an
impact on the market price of the share.
A classic exposition of the concept of insider trading is to be
found in a White Paper that was prepared in the UK in 1977
on the Conduct of Company Directors. That type of conduct
was not then the subject of any legal sanctions, although
it was causing serious concern in the country. The White
Paper stated: “Insider dealing is understood broadly to cover
situations where a person buys or sells securities when he,
but not the other party to the transaction, is in possession of
confidential information which affects the value to be placed on
those securities. Furthermore, the confidential information in
question will generally be in his possession because of some
connection which he has with the company whose securities
are to be dealt in (e.g. he may be a director, employee or
professional adviser of that company) or because someone
in such a position has provided him, directly or indirectly, with
the information. Public confidence in directors and others
closely associated with companies requires that such people
should not use inside information to further their own interests.
Furthermore, if they were to do so, they would frequently be in
breach of their obligations to the companies, and could be held
to be taking an unfair advantage of the people with whom they
were dealing.”
Those who involve themselves in insider dealing are criminals:
no more and no less. The principles of confidentiality and
trust, which are essential to the operations of the commercial
world, are betrayed by insider dealing and public confidence
in the integrity of the system which is essential to its proper
function is undermined by market abuse. ... When they seek to
make a profit out of the knowledge and trust reposed in them,
or indeed when they do so recklessly, their criminality is not
reduced or diminished merely because they are individuals of
good character. … The message must be clear: when it is done
deliberately, insider dealing is a species of fraud; it is cheating.1
Regulation 3 of the SEBI (Prohibition of Insider Trading)
Regulations, 2015 (‘PIT Regulations’) prohibits communication,
provision, or allowing access by an insider, to any unpublished
price sensitive information (UPSI), relating to a company
or securities listed or proposed to be listed, to any person
including other insiders except where such communication is
in furtherance of legitimate purposes, performance of duties or
discharge of legal obligations.
1
The UK Court of Appeal Criminal Division in R v. Christopher
McQuoid 2009] EWCA Crim 1301
43
 Are Non-executive and Independent Directors Liable as ‘Insiders’ under the SEBI Regulations of 2015?
The 2015 Regulations of SEBI on Insider
ARTICLE
Trading do specifically apply to all (executive,
non-executive and independent) directors of
listed companies. A director is an ‘insider’
and definition of ‘connected person’ in the
Regulations includes a director of a listed
company that allows him/her, directly or
indirectly, access to unpublished price sensitive
information (UPSI) concerning the company.
Regulation 4 prohibits trading in securities that are listed or
proposed to be listed on a stock exchange, by an insider when
in possession of UPSI.
It will be noticed that, both the regulations 3 and 4, which are
key provisions of the PIT Regulations, prohibit use of UPSI.
NON EXECUTIVE DIRECTOR’S LIABILITY UNDER SEBI
REGULATIONS ON INSIDER TRADING
Directors of listed companies are prone to expose themselves
to the Securities and Exchange Board of India (Prohibition of
Insider Trading) Regulations, 2015, which, like in UK, create,
indulging in insider trading, amongst others, by directors, a
criminal offence, besides disgorging the profit made out of sale
of shares by resorting to insider trading.
The 2015 Regulations of SEBI on Insider Trading do specifically
apply to all (executive, non-executive and independent)
directors of listed companies. A director is an ‘insider’ and
definition of ‘connected person’ in the Regulations includes
a director of a listed company that allows him/her, directly or
indirectly, access to unpublished price sensitive information
(UPSI) concerning the company.
Under the previous (1992) as well as current (2015) Regulations
on Insider Trading, directors are classified as ‘connected
persons’. The 1992 Regulations defined ‘insider’ provided thus:
“insider” means any person who,—
(i) is or was connected with the company or is deemed to have
been connected with the company and who is reasonably
expected to have access to unpublished price sensitive
information in respect of securities of a company, or
(ii) has received or has had access to such unpublished price
sensitive information.” and it is likely to materially affect the price of the company’s
DEFINITION OF “UNPUBLISHED PRICE
SENSITIVE INFORMATION”
The expression “unpublished price sensitive information” is
defined in regulation 2(1)(n) as “any information, relating to
a company or its securities, directly or indirectly, that is not
generally available which upon becoming generally available,
is likely to materially affect the price of the securities and shall,
ordinarily including but not restricted to, information relating to
the following: – (i) financial results; (ii) dividends; (iii) change
in capital structure; (iv) mergers, de-mergers, acquisitions,
delistings, disposals and expansion of business and such other
transactions; (v) changes in key managerial personnel; and (vi)
44
material events in accordance with the listing agreement.
Regulation 2(1) (e) defines “generally available information”
as information that is accessible to the public on a non-
discriminatory basis.
ANALYSIS OF THE DEFINITION
Under the SEBI Regulations, no insider can be held guilty of an
offence of insider trading unless he has dealt in a company’s
securities on the basis of unpublished price-sensitive
information in his possession or received by him.
The word “price” refers to the price of the security in the stock
market. Price sensitive information is the information that needs
to be kept secret and dealt with carefully; information having
a capacity of easily affecting share price; such information is
capable of affecting or influencing the price of the company’s
shares when made public; the information which is likely to
affect share prices if it were made public.
In order to be considered as unpublished price sensitive
information, it must not have been made public and must be of
a precise nature, relate to the company and be likely, if made
public, to have a significant effect on the price of the company’s
securities. A mere recommendation to take shares on the basis
of an expert analysis cannot be considered to be unpublished
price sensitive information.2
The information should, however, affect the price of securities
materially, i.e. substantially, considerably, greatly, significantly,
to a great extent. The effect of the information on the price
should be ‘material’. Material fact means any important piece
of information that a member of the company must know to
exercise judgment and which the company must disclose to
the member to enable him to decide whether or not to vote on
the resolution and which way to vote if he wishes to do so. It is
a fact of substantial import; of much consequence; important;
pertinent or essential; likely to influence the subject.
INFORMATION DEEMED TO BE PRICE SENSITIVE
Under sub-clause (n) of regulation 2(1), in order that any
information is deemed to be price sensitive information, it
must be relating to any of the specified matters. Whether
any information is price sensitive, notwithstanding that it
relates to one or more of the specified matters will always
be a question of fact to be answered having regard to the
facts and circumstances in each case. The information must,
however, relate to one or more of the matters enumerated
in the definition. Furthermore, the information must be such
that it is not generally known or published by the company,
securities.3
The six types of information enumerated in the definition
clause (n) of regulation 2(1) are deemed to be price sensitive
information. Thus, by a legal fiction, these types of information
will be considered to be price sensitive per se. The word
“deemed” is sometimes used in a statute to put beyond doubt
a particular construction that might otherwise be uncertain
or to give a comprehensive description that includes what is
obvious, what is uncertain and what is, in the ordinary sense,
2
Ipourgos Ikonomikon v. Georgakis (Case No C-391/104) [2007] All ER (EC)
1106; [2007] 2 BCLC 692 (ECJ).
3
Rakesh Agarwal v. SEBI [2004] 49 SCL 351; (2004) 1 Com LJ 193 (SAT).
I
JANUARY 2019 CHARTERED SECRETARY

impossible.4
A TRICKY QUESTION
The dilemma insiders often face is, how to decide whether
any information upon becoming generally available, is likely to
materially affect the price of the securities. In particular, it is not
easy to determine whether and if so how far, any undisclosed
information is likely to materially affect the price of the securities
under regulation 2(1) (n). There are two key words: ‘likely’
and ‘materially’. The ordinary meaning of ‘likely’ is probably
or apparently destined (usually followed by an infinitive):
something not likely to happen; seeming like truth, fact, or
certainty; reasonably to be believed or expected; believable;
having a high probability of occurring or being true; very
probable; distinctly possible, to be expected. And the ordinary
meaning of the word ‘materially’ is to an important degree;
considerably; having real importance or great consequences;
in a considerable or important degree.
Court of Justice of the European Union Decision
EU Parliament Directive 2003/6/EC contains provisions
on insider trading. Recitals 2, 12 and 24 in the preamble to
Directive 2003/6 state:
“(2)    An integrated and efficient financial market requires
market integrity. The smooth functioning of securities markets
and public confidence in markets are prerequisites for
economic growth and wealth. Market abuse harms the integrity
of financial markets and public confidence in securities and
derivatives.
(12)   Market abuse consists of insider dealing and market
manipulation. The objective of legislation against insider dealing
is the same as that of legislation against market manipulation:
to ensure the integrity of Community financial markets and to
enhance investor confidence in those markets.
(24)   Prompt and fair disclosure of information to the public
enhances market integrity, whereas selective disclosure by
issuers can lead to a loss of investor confidence in the integrity
of financial markets.”
The first subparagraph of Article 2(1) of that directive provides:
‘Member States shall prohibit any person referred to in the
second subparagraph who possesses inside information from
using that information by acquiring or disposing of, or by trying
to acquire or dispose of, for his own account or for the account
of a third party, either directly or indirectly, financial instruments
to which that information relates.’
The first subparagraph of Article 6(1) of that directive provides:
‘Member States shall ensure that issuers of financial
instruments inform the public as soon as possible of inside
information which directly concerns the said issuers.’
The expression ‘inside information’ is defined as ‘information
of a precise nature which has not been made public, relating,
directly or indirectly, to one or more issuers of financial
instruments or to one or more financial instruments and which,
if it were made public, would be likely to have a significant
effect on the prices of those financial instruments or on the
4
N S Bindra’s Interpretation of Statutes, 9th edition, page 68.
I
CHARTERED SECRETARY JANUARY 2019
Are Non-executive and Independent Directors Liable as ‘Insiders’ under the SEBI Regulations of 2015?
ARTICLE
price of related derivative financial instruments’.
In Jean-Bernard Lafonta v. Autorité des marchés financiers
[2015] Bus LR 483, the Court of Justice of the European Union
has recently dealt with a case in which the expression ‘likely
to have effect on prices of instruments’ was considered. The
question for consideration was, whether information could only
be regarded as “precise” for the purposes of article 1 of Directive
2003/6 and article 1(1) of Commission Directive 2003/124 if it
was possible to predict whether it would increase or decrease
the price of the relevant financial instruments once it was made
public. It was contended that there was no need to make public
the information on the financial operation at issue, since it had
not been precise enough to know how the price of the underlying
securities would change when the information was made public.
It was submitted to the Court that, information cannot be regarded
as precise unless it enables the holder of that information to
anticipate the direction of a change in the prices of the financial
instrument concerned, since only information that meets that
condition would enable the holder to determine whether that
financial instrument should be acquired or disposed of and, as a
result, gives the holder of that information an advantage over all
the other actors on the market.
However, rejecting the above submission, the Court of Justice
of the European Union held, that if it were accepted that
information was to be regarded as precise only if it made it
possible to anticipate the direction of a change in the prices
of the instruments concerned, the objectives behind the
provision, namely protecting the integrity of the European
Union financial markets and to enhance investor confidence in
those markets, would be undermined; that in the light of that,
and the plain and ordinary meaning of article 1(1) of Directive,
“precise” information was not restricted to information which
made it possible to determine the likely direction of a change
in the prices of the financial instruments concerned; that the
only information that could be regarded as imprecise was
information that was vague or general, from which it was
impossible to draw a conclusion as regards its possible use.
The Court stated that, the purpose of that Directive was to
protect the integrity of the EU financial markets and to enhance
investor confidence in those markets. That confidence depends
on, inter alia, investors being placed on an equal footing and
protected against the improper use of insider information. The
Court held that, the definition of ‘inside information’ under that
provision comprises four essential elements: (i) the information
must be of a precise nature; (ii) the information must not have
been made public; (iii) it must relate, directly or indirectly, to
one or more financial instruments or their issuers; and (iv) it
must be information which, if it were made public, would be
likely to have a significant effect on the prices of those financial
instruments or on the price of related derivative financial
instruments.
One of the ingredients of the definition of ‘unpublished price
sensitive information’ in the PIT Regulations, is that UPSI, in
order to attract regulations 3 and 4, must be such that it is not
generally available, and when it becomes generally available, it
is likely to materially affect the price of the securities. Thus, it has
the potential of materially affecting the price of the securities of
a company, but it would not be necessary to prove that it is not
possible to measure the movement in the price in order it to be
called ‘material’. It will be noticed that the words ‘likely to have a
significant effect on the price of financial instruments’ in the EU
45
ARTICLE Are Non-executive and Independent Directors Liable as ‘Insiders’ under the SEBI Regulations of 2015?
Directive are almost identical to the words ‘likely to materially
affect the price of the securities’ in the SEBI Regulations on
Insider Trading.
INDIAN SUPREME COURT’S TOPICAL DECISION ON
NON EXECUTIVE DIRECTOR’S LIABILITY
The nicety of the two definitions was explained by the Supreme
Court in its recent judgment, Chintalapati Srinivas Raju v.
Securities and Exchange Board of India [2018] 210 Comp Cas
285;AIR 2018 SC 2411. The judgment highlights the distinction
between executive and non-executive directors when executive
directors take the former for a ride by not disclosing true state
of affairs of the company to the non-executive directors or by
fabricating the financial statements and the non-executive
directors have no means of knowing about it, and thereby
cannot be said to be in possession of UPSI.
The Supreme Court held that, under the 1992 Regulations,
such a non-executive director cannot be held liable for insider
trading. But, notably, the judgment is conspicuous in saying
that under the 2015 Regulations such exoneration would not
be tenable. The Supreme Court pointed out that the definition
of ‘insider’ under the 1992 Regulations was in two parts.
The first part had reference to any person who is connected
with the company or is deemed to be connected with the
company. However, the second limb of the definition also had
to be satisfied, which was that such person must reasonably
be expected to have access to unpublished price sensitive
information by virtue of such connection in respect of securities
of a company. It has been held in a series of judgments that
the word and should be given its ordinary meaning and should
be understood in a conjunctive sense, unless it would lead to
an absurd situation or an unintelligible result. Further, under
the second part of the definition, the connected person must
be reasonably expected to have access to unpublished price
sensitive information. The expression reasonably expected
cannot be a mere ipse dixit5 there must be material to show that
such person can reasonably be so expected to have access to
unpublished price sensitive information.
5
Meaning a dogmatic and unproven statement.
46
The Supreme Court pointed out that as a non-executive
director, the appellant had attended only six out of ten board
meetings of the company for the period that he was a non-
executive director and he was not involved in any business
development, diversification plans and advice on new ventures
of the company.
POSITION UNDER 2015 REGULATIONS
Regulation 2(1) (g) of the 2015 Regulations define ‘insider’ as
“any person who is:
i) a connected person; or
ii) in possession of or having access to unpublished price
sensitive information.”
The definition is exhaustive one and the two clauses of the
definition are separated by the disjunctive ‘or’ as against ‘and’
used in the 1992 Regulations. So, satisfaction of either of them
would suffice bring a person within the ambit of this definition.
As stated in the Maxwell’s Interpretation of Statutes, in ordinary
usage, ‘and’ is conjunctive (that connects words, phrases and
clauses in a sentence) and ‘or’ is disjunctive (that separates
words, phrases and clauses in a sentence). Thus ‘and’
connects two or more items and makes a cumulative group
of them whereas ‘or’ separates two or more items and makes
them alternative to one another. Normally the word “and”
should be given its ordinary meaning and should be understood
in a conjunctive sense.6 The expression ‘and’ has generally a
cumulative effect, requiring the fulfilment of all the conditions
that it joins together and it is the antithesis of ‘or’7. It has been
held in a series of judgments that the word ‘and’ should be
given its ordinary meaning and should be understood in a
conjunctive sense, unless it would lead to an absurd situation
or an unintelligible result.
The definition of ‘insider’ is crucial inasmuch as unless a person
falls within the ambit of this definition, he cannot be brought
within the ambit of regulation 3 for having indulged in an act of
insider trading. The definition is exhaustive, which is indicated
by the use of the word ‘means’ and therefore unless person
alleged to be an insider falls within the ambit of either of the two
limbs of the definition.
The definition of ‘insider’ has two parts.
• According to sub-clause (i) of the definition, a person is an
insider if he is a connected person as per the definition in
regulation 2(1) (d), discussed above.
• According to sub-clause (ii) of the definition, a person is
an insider if he is in possession of or having access to
unpublished price sensitive information.
So far as the first part is concerned, a person who falls within the
ambit of the definition of “connected person” will automatically
become an insider.
Clause (i) of definition of ‘insider’: Definition of ‘connected
person’
But clause (i) of the definition of ‘insider’ applies to ‘connected
person’. So, every connected person is an insider.
6
Maharaja Sir Pateshwari Prasad Singh v. State of Uttar Pradesh [1963] 50
ITR 731 (SC)
7
M. Satyanarayana v. State of Karnataka (1986) 2 SCC 512;AIR 1986 SC
1162
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JANUARY 2019 CHARTERED SECRETARY

In order to be considered as unpublished
price sensitive information, it must not have
been made public and must be of a precise
nature, relate to the company and be likely, if
made public, to have a significant effect on
the price of the company’s securities. A mere
recommendation to take shares on the basis of
an expert analysis cannot be considered to be
unpublished price sensitive information.
According to clause (d) of Regulation 2, the expression
“Connected Person” means,-
“(i) Any person who is or has during the six months prior to
the concerned act been associated with a company,
directly or indirectly, in any capacity including by reason
of frequent communication with its officers or by being
in any contractual, fiduciary or employment relationship
or by being a director, officer or an employee of the
company or holds any position including a professional or
business relationship between himself and the company
whether temporary or permanent, that allows such person,
directly or indirectly, access to unpublished price sensitive
information or is reasonably expected to allow such access;
(ii) Without prejudice to the generality of the foregoing, the
persons falling within the following categories shall be
deemed to be connected persons unless the contrary is
established:
(a) an immediate relative of connected persons specified
in clause (i); or
(b) a holding company or associate company or subsidiary
company; or
(c) an intermediary as specified in section 12 of the Act or
an employee or director thereof; or
(d) an investment company, trustee company, asset
management company or an employee or director
thereof; or
(e) an official of a stock exchange or of clearing house or
corporation; or
(f) a member of board of trustees of a mutual fund
or a member of the board of directors of the asset
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Are Non-executive and Independent Directors Liable as ‘Insiders’ under the SEBI Regulations of 2015?
ARTICLE
management company of a mutual fund or is an
employee thereof; or
(g) a member of the board of directors or an employee, of
a public financial institution as defined in section 2 (72)
of the Companies Act, 2013; or
(h) an official or an employee of a self-regulatory
organization recognised or authorized by the Board; or
(i) a banker of the company; or
(j) a concern, firm, trust, Hindu undivided family, company
or association of persons wherein a director of a
company or his immediate relative or banker of the
company, has more than ten per cent of the holding or
interest.”
The definition of “connected person” is in two parts. Clause (i)
sets out a general definition and clause (ii) contains a deeming
provision bring within the ambit of the definition all those
persons/parties who have been specified in clause (ii). These
persons/parties would be deemed to be connected persons by
virtue of their being specified in the definition.
The thrust of clause (i) of the definition is direct or indirect
association with the company. Any person who is currently
or has been within six months backward associated with the
company in any capacity is a connected person.
The association may be on account of frequent communication
by such person with the company’s officers; or it may be
because such person is, in any contractual, fiduciary or
employment relationship; or a director, officer or an employee
of the company; or having any position including a professional
or business relationship with the company (temporary or
permanent).
The words “shall be deemed” in the second part of the definition,
however, is a deeming provision or a legal fiction. A provision in
a statute which contains the word ‘deemed’ is called a deeming
provision or legal fiction. To deem means to regard or consider
(something) in a specified way; to treat something as if it were
something else; assuming a fact which does not really exist.
Generally, the deeming provision is intended to enlarge the
meaning of the particular word or to include matters therein
which otherwise might not fall within the main provision.8
Every person under clause (ii) would be treated as connected
person would not need any evidence. If a person disputes his
position as a connected person, he will have to prove it.
Clause (ii) of definition of ‘insider’
According to clause (ii) of the definition of ‘insider’, it means
any person who is in possession of or having access to
unpublished price sensitive information. Thus, this part of the
definition treats a person as insider if he is-
• in possession of UPSI; or
• having access to UPSI.
Both these ingredients require some evidence to establish
possession or access of a person (including a company
director) who is alleged to have indulged in insider trading.
To possess in the present context means to have knowledge
of. The possession of, or having access to, unpublished price
sensitive information has to be proved when a person is alleged
to have indulged in insider trading.
8
Government of Andhra Pradesh v. Corporation Bank [2007] 137 Comp Cas 189 (SC)
47
ARTICLE Are Non-executive and Independent Directors Liable as ‘Insiders’ under the SEBI Regulations of 2015?
However, having access to unpublished price sensitive
information is a matter which can be proved by the facts and
circumstances of the case and there is no limit to drawing
an inference that a person has had access to unpublished
price sensitive information on account of his actions and
circumstances. Access means the ability, right, or permission to
approach, enter, speak with, or use; freedom or ability to obtain
or make use of something. A way or the means of access is
not material. There are innumerable ways of getting access
to information relating to the company. Any personal contact
or connection whether as a relative, colleague, friend or even
a stranger would be sufficient to get access to information
concerning a company and if such information is unpublished
price sensitive, it may bring the person who has traded on
the basis of such information within the net of the definition of
insider. A group of people having some common activity done
together (for example Facebook or WhatsApp group members
or friends or members of a group of people going for laughter
club or walk together every morning or to a club in the evening)
might make them insiders if one of them has knowledge of
inside information concerning the company and he shares it
with the other group members.
Since communicating unpublished inside information
concerning the company or passing or tipping such information
by its possessor to another person is also an offence under the
PIT Regulations, a person who is given such information and
who uses it for dealing (either buying and selling, or selling and
buying or only buying or selling) would bring the doer of such
act within the net of insider.
SUPREME COURT’S OBSERVATIONS ON DEFINITION OF
‘INSIDER’ UNDER 2015 REGULATIONS
Pointing out the difference between the definition of ‘insider’
in the 1992 Regulations and the one in the 2015 Regulations,
in Chintalapati Srinivas Raju’s case, the Supreme Court
observed, that,
“There could be no doubt that the definition of “connected
person” contained in regulation 2(c) (of the 1992 Regulations)
would cover the appellant (who was a non-executive director
of the company) under sub-clause (i) thereof, as the appellant
was undoubtedly a director of SCSL up to 2003. An “insider”
according to the Securities and Exchange Board of India
(Prohibition of Insider Trading) Regulations, 2015 was a
person who was a connected person or a person who was in
possession of or having access to unpublished price sensitive
information. Obviously, after 2015, an “insider” need not satisfy
the second test of the 1992 Regulations and it was enough
that such person be a “connected person” as defined. The
disjunctive “or” contained in the 2015 Regulations must be
contrasted with the expression “and” contained in the 1992
Regulations. Therefore, the majority view of the Appellate
Tribunal, giving effect to only the first part of regulation 2(e) (i)
of the 1992 Regulations, could not be sustained in law.”
These observations of the Supreme Court are going to cause
a worry to non-executive directors (including independent
directors). However, the observation that “The expression
reasonably expected cannot be a mere ipse dixit,9 there must
be material to show that such person can reasonably be so
9
An assertion without proof; an unsupported statement that rests solely on the
authority of the individual who makes it.
48
expected to have access to unpublished price sensitive
information” can be taken aid of to infer that to prove a
guilt under regulation 4 of the 2015 Regulations, it would
be necessary to prove that a director accused of insider
trading was in possession of UPSI, because regulation 4
provides that “No insider shall trade in securities that are
listed or proposed to be listed on a stock exchange when in
possession of unpublished price sensitive information. The
expression “when in possession of unpublished price sensitive
information” indicate that it must prove that a director accused
of insider trading had in possession of UPSI when he traded
in the securities of the company, despite that the definition
of ‘connected person’ in regulation 2(1) (d) (i) does rope in
directors of companies (including non-executive directors and
independent directors) and thereby bring them within the net
of the definition of ‘insider’. As noted above, the definition of
‘insider’ brings within its net any having access to unpublished
price sensitive information.
CONCLUSION
Under the 2015 Regulations, all directors of a listed company
are covered under clause (i) of the definition of ‘connected
person’. So, prima facie, all directors (executive as well as
non-executive, including independent) are insiders. But the
question is: are all directors to be deemed to be insiders, and
they are to be presumed to be insiders just by virtue of their
position as directors so that no proof as to the possession of or
access to UPSI is required?
Undoubtedly, non-executive directors are ‘connected’ with
the company and are privy to information concerning the
company, some of which is price-sensitive that comes into
their possession. Agenda papers and presentations made at
the board and various committee meetings is the major source
of such information. However, amongst the board members
of a company, executive directors (managing and whole-time
directors) have greater access to price-sensitive information
than the non-executive directors. Emphasising the legal status
and role of non-executive directors in a company, the Supreme
Court said that, “Non-executive directors are, therefore, persons
who are not involved in the day-to-day affairs of the running of
the company and are not in charge of and not responsible for
the conduct of the business of the company.”
Clause (i) of the definition of ‘connected person’ qualifies all
categories of persons mentioned in it by the statement: “that
allows such person, directly or indirectly, access to unpublished
price sensitive information or is reasonably expected to allow
such access.”
So, it appears that the allegation of a non-executive director
being a connected person (and thereby an insider) and therefore
presumed to be in possession of or having access to UPSI, has
to be supported by some evidence that the position of a person
as a director has allowed him directly or indirectly, access to
UPSI or that such position is reasonably expected to allow such
access. If this is true, then what the Supreme Court has said
in the abovementioned case, that “The expression reasonably
expected cannot be a mere ipse dixit, there must be material to
show that such person can reasonably be so expected to have
access to unpublished price sensitive information”, must be
said to be a test to be applied to determine whether a director
is an insider or not, even in relation to the definition of ‘insider’
under the 2015 Regulations.  CS
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JANUARY 2019 CHARTERED SECRETARY
 ARTICLE
Critical Analysis of Amendments in SEBI
Listing Regulations in 2018
Emphasis on Accepted Recommendations
of Kotak Committee
The year 2018 was very eventful in terms of insertion of better Corporate Governance practices in SEBI Listing
Regulations. Most of the recommendations of the Kotak Committee were accepted and SEBI proactively notified
the same on 9.5.2018 giving ample time to listed entities to ensure compliances. Compliances of the same would
enable sustainable growth of enterprises and at the same time safeguard interests of various stakeholders. This
will enhance the confidence in Indian markets resulting to increase in the India’s position in the World Bank’s ease
of doing business index. In this Article, the Authors intend to critically analyse the major amendments notified
on 9.5.2018 and also touch upon the other major amendments made by the SEBI during the Calendar Year 2018.

in May 1999 under the Chairmanship of Shri Kumar Mangalam Birla.

After considering recommendation of the Committee, in February
2000, SEBI introduced new Clause 49 in the Listing Agreement
which existed for close to one and a half decades. During this
period, there were not many major amendments in entire Listing
Agreement barring the amendments which took place based on
the (a) recommendation of Shri Narayana Murthy Committee in
the year 2003; and (b) provisions inserted due to enactment of the
Companies Act, 2013 (‘the Act’). On 2nd September, 2015, SEBI
notified SEBI (Listing Obligations and Disclosure Requirements)
Narendra Singh*, FCS Regulations, 2015 (‘Listing Regulations’) in place of the then Listing
Company Secretary & Compliance Officer Agreement.
Wockhardt Limited, Mumbai
narendras@wockhardt.com On 2nd June, 2017, SEBI formed Committee on Corporate
Governance under the Chairmanship of Shri Uday Kotak with
the aim of improving standards of corporate governance of listed
entities. As mandated, the Committee submitted its report in
~4 months on 5th October, 2017. The report contained some
thought provoking and out-of-the-box thinking recommendations
which became discussion topic of corporate fraternity during entire
Sharad Ritu of 2017-18.

SEBI in its Board meeting held on 28th March, 2018 accepted

several recommendations of Kotak Committee Report (‘Committee
Report’ or ‘Report’) which were notified on 9th May, 2018.

Prativa Jena*, ACS In this Article, the Authors intend to critically analyse the major
Company Secretary, Wockhardt Group Company, Mumbai amendments notified on 9th May, 2018 and also touch upon the
pjena@wockhardt.com other major amendments made by SEBI during Calendar Year
2018, as summarized below:-

INTRODUCTION
A ship is always safe at shore but that is not what it’s built for.
 - Albert Einstein
DEFINITIONS
The major amendments in definition are summarized below:-
a. INDEPENDENT DIRECTOR (ID)
In the definition of ID, the concept of board inter-lock has been

T
he term ‘Corporate Governance’, in India, became buzz word
in late nineties when Securities and Exchange Board of India
(‘SEBI’) appointed the Committee on Corporate Governance
* The views expressed in this article are solely the views of the Authors and are
not connected in any way with the views of the Company/or the Group where
the Authors are employed.
introduced by inserting sub-clause (viii) in Regulation 16(1)(b) as
under:
“(viii) who is not a non-independent director of another company
on the board of which any non-independent director of the listed
entity is an independent director:”

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CHARTERED SECRETARY JANUARY 2019 49
 Critical Analysis of Amendments in SEBI Listing Regulations in 2018 Emphasis on Accepted Recommendations of Kotak Committee
SEBI in its Board meeting held on 28th March,
ARTICLE
2018 accepted several recommendations of
Kotak Committee Report which were notified
on 9th May, 2018.
The above means that “a person cannot be termed as ID of the
Company who is either Executive Director (‘ED’)/ Non-Executive
Director (‘NED’) of another listed entity whose ED/NED is an ID on
the Board of the Company. This has been illustrated in the Report
as under:-
“For instance, if Mr. A is an executive director on Co. A (being a
listed entity) and is also an independent director on Co. B, then no
non-independent director of Co. B can be an independent director
on the board of Co. A.”
As this amendment came into force effective 1st October, 2018,
every listed entity will have to re-look at the composition of its
Board of Directors (‘the Board’) and its Committee.
b. RELATED PARTY
Apart from the related party as defined in Section 2(76) of the Act or
accounting standard, it now includes “person or entities belonging
to promoter group who holds 20% or more of the shareholding of
listed entity”.
c. MATERIAL SUBSIDIARY
The definition of material subsidiary has been amended by replacing
the word “twenty” with “ten” and the amended definition is:-
“material subsidiary shall mean a subsidiary, whose income or
net worth exceeds ten percent of the consolidated income or net
worth respectively, of the listed entity and its subsidiaries in the
immediately preceding accounting year.”
The amended definition will be effective from 1st April, 2019 and
accordingly unlisted subsidiary shall periodically place before the
Board of the listed entity, a statement of all significant transactions
and arrangements entered into by the unlisted subsidiary.
“significant transaction or arrangement” shall mean any individual
transaction or arrangement that exceeds or is likely to exceed
10% of the total revenues or total expenses or total assets or total
liabilities, as the case may be, of the unlisted subsidiary for the
50
immediately preceding accounting year.
Nonetheless, for the purpose of appointment of ID of the listed
entity on the Board of an unlisted material subsidiary (whether
incorporated in India or not), threshold of material subsidiary
continues to be 20%.
d. SENIOR MANAGEMENT
Regulation 16(1)(d) has been amended by replacing the words
“executive directors, including all functional heads” with the words
“chief executive officer/managing director/whole time director/
manager (including chief executive officer/manager, in case they
are not part of the board) and shall specifically include company
secretary and chief financial officer:”
CFO and CS, being Key Managerial Personnel (‘KMP’), it was apt
to include them in the said definition irrespective of their designation
in the entity.
AMENDMENTS RELATING TO DIRECTORS
Changes in the provisions relating to Director(s) are deliberated
below:
a. INDEPENDENT WOMEN DIRECTORS
With the enactment of the Act, the requirement of having one
woman director on prescribed classes of companies was
introduced. Legislative intent of introduction of this requirement
was on the theme of women empowerment. Subsequently, SEBI,
on 17th April, 2014 revised the then Clause 49 wherein requirement
of having at least one woman director on the Board of listed entities
were also introduced.
Nonetheless, to ensure the compliance of the same, in many
entities women relative of promoters of the Company were inducted
as women director.
In view of this, based on the Committee’s Report, SEBI has inserted
the following proviso in Regulation 17:
“Provided that the Board of directors of the top 500 listed entities
shall have at least one independent woman director by April 1,
2019 and the Board of directors of the top 1000 listed entities shall
have at least one independent woman director by April 1, 2020”.
Hence, top 500 listed entities would have to induct one independent
woman director by 31st March, 2019.
Wherever “top … listed entities” is referred to in this Article means
“top … entities by market capitalization calculated as on 31st March
of the preceding financial year (‘FY’)”.
b. THE BOARD OF DIRECTORS
• The Board of top 1000 listed entities (effective 1st April, 2019)
and the top 2000 listed entities (effective 1st April, 2020) to
comprise not less than 6 directors.
• Listed entity to seek approval of the shareholders by way
of special resolution for appointment or continuing the
directorship of any person as NED who has attained the age
of 75 years.
Approval of the Shareholders is needed for existing NED who
has attained or will attain age of 75 years on or before 31st
March, 2019.
• Effective 1st April, 2020, top 500 listed entities to ensure that
the Chairperson of the Board is NED and not related to the
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JANUARY 2019 CHARTERED SECRETARY
 Critical Analysis of Amendments in SEBI Listing Regulations in 2018 Emphasis on Accepted Recommendations of Kotak Committee
MD or the CEO of the Company. This effectively means that
Chairperson to be NED; and the Chairperson & MD/ CEO
cannot be relatives (as defined in the Act) in the same listed
entity.
Additionally, some of the other better practices introduced are
as under:
• A person cannot be a director in more than 8 listed entities
effective 1st April, 2019 and in not more than 7 listed entities
effective 1st April, 2020 which includes alternate directorship.
Further, a person shall not serve as an ID in more than 7 listed
entities
• Quorum for every meeting of the Board of the top 1000 listed
entities effective 1st April, 2019; and of the top 2000 listed
entities effective 1st April, 2020 shall be 1/3rd of total strength or
3 directors, whichever is higher, including at least one ID
• Effective 1st October, 2018, no person shall be appointed or
continue as an alternate director for an ID
• The Board to specifically state their recommendation for each
item of special business to be transacted at general meeting in
the explanatory statement.
c. REMUNERATION TO DIRECTORS
Approval of the shareholders by way of Special Resolution is
needed if:
• annual remuneration payable to a single NED exceeds 50%
of the total annual remuneration payable to all NEDs (to be
obtained every year);
• fees or compensation payable to EDs who are promoters or
members of the promoter group exceeds Rs.5 crore or 2.5%
of the net profits, whichever is higher; or where there is more
than one such director, the aggregate annual remuneration to
such directors exceeds 5% of the net profits.
“Significant transaction or arrangement” shall
mean any individual transaction or arrangement
that exceeds or is likely to exceed 10% of
the total revenues or total expenses or total
assets or total liabilities, as the case may be,
of the unlisted subsidiary for the immediately
preceding accounting year.
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CHARTERED SECRETARY JANUARY 2019
ARTICLE
d. DECLARATION OF INDEPENDENCE AND D&O
INSURANCE
In Regulation 25, sub-regulation (8), (9) and (10) have been
inserted as summarised below:-
• ID needs to submit declaration confirming that he meets the
criteria of independence in the 1st Board meeting of every FY
or whenever there is any change in circumstances which may
affect his status as an ID
• The Board to take on record, after due assessment of veracity,
the declaration and confirmation submitted by ID. This is now
additional responsibility entrusted on the Board to check the
veracity of declaration of independence given by ID
• Keeping in view the enormous duties and responsibility
entrusted on the IDs, effective 1st October, 2018, it is
mandatory for top 500 listed entities to obtain Directors and
Officers Insurance (D&O Insurance) for all IDs. Further, the
Board to finalise the quantum & risk that should be covered in
D&O Insurance.
CHANGES INTRODUCED IN THE COMMITTEES
The following amendments have been introduced in the Board
Committees:-
a. AUDIT COMMITTEE
The composition, frequency, power and role of the Audit
Committee are exhaustively covered in the Act and Listing
Regulations. Nonetheless, the role of the Committee is
enhanced by inserting “review the utilization of loans and/
or advances from/investment by the holding company in the
subsidiary exceeding Rs. 100 crore or 10% of the asset size of
the subsidiary, whichever is lower”.
b. NOMINATION AND REMUNERATION COMMITTEE (NRC)
The NRC is required to meet at least once in a year and the
quorum of NRC meeting shall be either 2 or 1/3rd of the total
members of the Committee, whichever is greater, including at
least one ID.
The role of NRC, inter-alia, now includes recommending to the
Board, all remuneration, in whatever form, payable to senior
management.
c. STAKEHOLDERS RELATIONSHIP COMMITTEE (SRC)
The SRC is required to meet at least once in a year. The
Committee to (i) comprise of at least 3 directors, with at
least one ID, (ii) the Chairperson to be present at the AGM
to answer queries of the security holders; and (iii) look into
various aspects of interest of security holders.
The role of SRC has been expanded which includes resolving
the grievances of security holders, reviewing measures to
reduce unclaimed dividend, effective exercise of voting rights,
timely receipts of annual report and statutory notices by the
shareholders, etc.
d. RISK MANAGEMENT COMMITTEE (RMC)
Keeping in view the importance of Risk Management, the
requirement to constitute RMC has been extended to top 500
listed entities (instead of top 100) and function of RMC to cover
cyber security also. The Committee is mandated to meet at
least once in a year as against none earlier.
Hence, top 500 entities would require to constitute RMC by
31st March, 2019.
RELATED PARTY TRANSACTIONS (RPT)
Regulation 23, which deals with RPT, has been amended as
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 Critical Analysis of Amendments in SEBI Listing Regulations in 2018 Emphasis on Accepted Recommendations of Kotak Committee
Effective 1st April, 2020, top 500 listed entities
ARTICLE
to ensure that the Chairperson of the Board
is NED and not related to the MD or the CEO
of the Company. This effectively means that
Chairperson to be NED; and the Chairperson &
MD/ CEO cannot be relatives (as defined in the
Act) in the same listed entity.
summarized below:
• Existing “Policy on materiality of RPT” requires amendment
wherein clear threshold as approved by the Board have to be
inserted. Further, Policy needs to be reviewed by the Board at
least once in every 3 years
• Payment(s) made to related party with respect to brand usage
or royalty exceeding 2% (individually or taken together with
previous transactions during FY) of annual consolidated
turnover shall be considered material and consequently
requires shareholders’ approval
• The words “the related parties shall abstain from voting on”
have been substituted with the words “no related party shall
vote to approve”. This amendment has huge ramification
particularly in the entities where related parties have difference
of opinion on any RPT requiring shareholders’ approval
• Effective half year ending 31st March, 2019 and onward,
disclosures of RPT, on a consolidated basis, need to be
submitted to the Stock Exchanges and publish on the website
within 30 days from the date of publication of financial results
for the half year.
However, it would have been apt if such disclosure is mandated
to be submitted within 48 hours of publication of results instead of
30 days.
SECRETARIAL AUDIT
Pursuant to provisions of Section 204 of the Act, every listed
company; and every public company having paid-up share capital
of Rs.50 crore or more; or turnover Rs.250 crore or more are
required to annex secretarial audit report with its Board’s report.
Now with the introduction of Regulation 24A, every material unlisted
subsidiaries (whether public or private), incorporated in India shall
also annex secretarial audit report with its annual report effective
year ending on 31st March, 2019.
DISCLOSURES TO THE STOCK EXCHANGES
Following are the major additional disclosures to be disseminated
to the Stock Exchanges:
a. Effecting year ending on 31st March, 2019, every listed entity
to submit to the Stock Exchanges and publish on its website a
copy of Annual Report and AGM notice before despatching the
same to the Shareholders. This amendment in Regulation 34
was needed as submission of Annual Report within 21 working
days of its adoption was too regressive disclosures.
Further, if there are any change(s) in the Annual Report, then
revised copy along with the details and explanation for the
changes to be sent not later than 48 hours after the AGM.
b. Disclosures submitted to the Stock Exchanges need to be in
searchable format; and disclosures, as specified, shall be filed
in XBRL format.
c. In case of appointment/re-appointment of statutory auditors,
explanatory statement to AGM notice to contain (i) proposed
52
fees payable and the terms of appointment; (ii) in case of a
new auditor, any material change in the fee payable to such
auditor from that paid to the outgoing auditor along with the
rationale for change; and (iii) basis of recommendation for
appointment including credentials of the auditor(s) proposed
to be appointed.
d. Top 100 listed entities to hold their AGM within 5 months from
the date of closing of FY and provide a one-way live webcast
of the proceedings of the AGM.
e. Regulation 33(3) relating to submission of financial results
have been made amply clear that the listed entities are
required to submit quarterly and year-to-date (standalone
and consolidated) results. Further, listed entities are required
to ensure (i) to include, by way of a note to quarterly results,
statement of cash flows for half-year; (ii) at least 80% of each
of the consolidated revenue, assets and profits have been
subjected to limited review; (iii) to disclose in the results of
last quarter of FY, the aggregate effect of material adjustments
made in the results of that quarter which pertains to earlier
period; and (d) auditor to undertake a limited review of the
audit of all the entities whose accounts are being consolidated.
f. Without materiality, the following events need to be
disseminated to the Stock Exchanges:
• Resignation of the auditor: The detailed reasons for
resignation of auditor, as given, need to be disclosed
as soon as possible within 24 hours of receipt of such
reasons from the auditor
• Resignation of ID: The detailed reasons for the
resignation of ID, as given, and a confirmation that there
is no other material reason(s) other than those provided in
the amendment notified on 9th May, 2018, there appears
to be typographical error in the heading inserted under
sub-clause (7B) of Schedule III, Part A, Clause A i.e. “(7B)
Resignation of auditor including reasons for resignation”
instead of “(7B) Resignation of independent director
including reasons for resignation”.
g. Publication of details in website
• Details of all credit ratings obtained for all outstanding
instruments and any revision therein
• Separate audited financial statements of each subsidiary
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JANUARY 2019 CHARTERED SECRETARY
 Critical Analysis of Amendments in SEBI Listing Regulations in 2018 Emphasis on Accepted Recommendations of Kotak Committee
to be uploaded at least 21 days prior to the AGM.
DISCLOSURES IN ANNUAL REPORT
Following are the major disclosures to be included in the Annual
Report:
a. MANAGEMENT DISCUSSION AND ANALYSIS (MDA)
MDA to contain details of
• significant changes (i.e. change of 25% or more as
compared to the immediate previous FY) in key ratios
such as Debtors Turnover, Inventory Turnover, Interest
Coverage, Current Ratio, Debt-Equity, Operating Profit
Margin(%) and Net Profit Margin(%); and
• change in Return on Net Worth as compared to previous
year along with explanation.
b. CORPORATE GOVERNANCE REPORT
Corporate governance report to contain:
• Names of the listed entities where the person is a director
and the category of directorship held
• A chart setting out the skills/expertise/competence
identified by the Board in the context of its business and
those actually available with the Board. Effecting year
ending 31st March, 2020, name of the Directors who
have such skills/expertise/competence also need to be
disclosed
• Confirmation by the Board that in their opinion, IDs
fulfil the conditions for IDs and are independent of the
management
• Detailed reasons for resignation of an ID who resigns
before expiry of his tenure along with confirmation by such
director that there are no other material reasons other
than those provided
• List of all credit ratings obtained including any revisions
thereto during the relevant FY, for all debt instruments
or any fixed deposit or scheme/ proposal involving
mobilization of funds, whether in India or abroad
• Details of utilization of funds raised through preferential
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CHARTERED SECRETARY JANUARY 2019
ARTICLE
allotment or qualified institutions placement (‘QIP’)
• Certificate from PCS that none of the directors on the
Board have been debarred or disqualified from being
appointed or continuing as directors by SEBI or MCA or
any such statutory authority
• The details of recommendation of any Committee of the
Board which have not been accepted by the Board and
reasons thereof
• Total fees for all services paid by the company and its
subsidiaries, on a consolidated basis, to the statutory
auditor and entities in the network firm of which the
statutory auditor is a part.
c. Disclosure of transactions with any person or entity belonging
to promoter group which holds 10% or more of shareholding in
annual report.
d. Utilisation of funds raised through preferential allotment or
QIP, need to be disclosed in every year’s Annual Report until
funds are fully utilized.
OTHER AMENDMENTS
Though the major amendments in the Listing Regulations introduced
on 9th May, 2018 by the SEBI are deliberated above, nonetheless
some of the other major amendments introduced in the same are (i)
manner of achieving minimum public shareholding; (ii) amply clear
conditions for re-classification of any person as promoter/public;
and (iii) except in case of transmission or transposition, requests
for transfer of securities cannot be processed unless securities are
in demat form effective 1st April, 2019.
Above all, on the basis of experience gained and to streamline
the process and maintain uniform approach, SEBI has mandated
the Stock Exchanges to levy fine and/or other action for non-
compliances of various provisions of Listing Regulations and
laid down Standard Operating Procedure for suspension; and
revocation of suspension of trading of specified securities.
CONCLUSION
All progress takes place outside the comfort zone.
 - Michael John Boba
Under the Chairmanship of Shri Uday Kotak, the Committee
comprised of who’s who of corporate world, the report of
the Committee was very precise and edifying as for each
recommendation, the Report contained current regulatory
provisions, recommendation and rationale, proposed amendments
in Listing Regulations and tentative date from which the
recommendation may come into force. Keeping in view the
criticality of above amendments, SEBI has provided ample time
to entities to gear up to ensure compliances as most of the
amendments were either applicable effective 1st October, 2018 or
are applicable effective 1st April, 2019. Further, it would be apt if for
entities listed on both NSE and BSE, there is common platform for
dissemination of disclosures concurrently instead of submitting the
same information to NSE and BSE separately. Since notification of
Listing Regulations in 2015, SEBI has made various amendments
and issued clarifications. It would, however, be apt if consolidated
Listing Regulations is issued every year, as on a particular date,
for ease of reference of all the Stakeholders. Nonetheless,
compliances of above in letter and spirit would not only enable
sustainable growth of enterprise but would also safeguard interests
of various stakeholders. This would enhance the overall confidence
in Indian markets resulting to the increase in India’s position in the
World Bank’s ease of doing business index. CS
53
ARTICLE

Positive Progress Made in 2018 in

implementing provisions of the IBC
The Insolvency and Bankruptcy Code, 2016 is concerned with recovery of huge outstanding dues running into
lakhs or crores of rupees from the corporate debtors. Fortunately in 2018, some significant judgements have been
pronounced by the Supreme Court of India, the High Court of Delhi and the National Company Law Appellate
Tribunal interpreting many important provisions of the Code and it is hoped that such judicial interpretations will
expedite successful implementation of the provisions of the IBC within the mandatory time frame. The authors
of the article deal with this important aspect considered to be significant for corporate professionals, including
Company Secretaries. 

wherever deemed necessary, reference has also been made to

some of the important judicial pronouncements connected with
the recovery of bad debts by banks and financial institutions.
IMPORTANT SUPREME COURT JUDGEMENT
INTERPRETING SECTION 29A OF THE IBC
The Supreme Court of India in its judgement dated 4th October,
2018, in the case of Arcelor Mittal Pvt. Ltd. v. Satish Kumar Gupta
(2018-98- taxmann.com-99) dealt with not only the important
issue regarding eligibility criteria of the resolution applicant under
Delep Goswami, FCS Section 29A of the IBC for bidding in the resolution plan of a debt-
Advocate, Supreme Court of India, New Delhi ridden company, but also dealt with other important issues relating
delepgoswami@gmail.com to interpretation of some of the provisions of the IBC. It needs to be
highlighted here that in order to prevent the erstwhile promoters
of the debtor company and the persons acting in concert with
them, from bidding in the resolution application process, Section
29A was introduced in the IBC, whereby, many disqualifications
were inserted to disentitle the resolution applicants to be persons
connected with the promoters of the debtor company. In the
aforementioned Supreme Court case, the provision of Section
29A of the IBC which came up for interpretation was “a person
shall not be eligible to submit a resolution plan, if such person, or
any other person, acting jointly or in concert with such person…”
(i.e., various sub-clauses mentioned in Section 29A).

The Supreme Court of India, in its aforesaid judgement, while

Anirrud Goswami interpreting Section 29A of the IBC held that: “The opening lines
Advocate, Goswami & Goswami, New Delhi of Section 29A of the Amendment Act refer to a de facto as
anirrudgoswami@gmail.com opposed to a de jure position of the persons mentioned therein.
This is a typical instance of a “see through provision”, so that one
is able to arrive at persons who are actually in “control”, whether
INTRODUCTION jointly, or in concert, with other persons. A wooden, literal,
interpretation would obviously not permit a tearing of the corporate

F
rom the perspective of the corporate sector in India
and particularly for the corporate professionals and
the company secretaries associated with the corporate
sector, the year 2018 has been a landmark year, not only
because of the numerous legislations impinging on the working
of the corporate sector that were enacted, but also because many
ordinances were promulgated to fulfil the urgency and need for
ease in doing business and to suit the needs of globalisation of
Indian business.
While it would be appropriate to have a comprehensive paper on
the impact of all such major changes in the working of the Indian
industry, yet for the purpose of this article, only some of the major
developments in the area of implementation of the Insolvency
and Bankruptcy Code, 2016 (“IBC”) have been highlighted and
veil when it comes to the “person” whose eligibility is to be gone
into. However, a purposeful and contextual interpretation, such
as is the felt necessity of interpretation of such a provision as
Section 29A, alone governs. For example, it is well settled that a
shareholder is a separate legal entity from the company in which
he holds shares. This may be true generally speaking, but when
it comes to a corporate vehicle that is set up for the purpose
of submission of a resolution plan, it is not only permissible but
imperative for the competent authority to find out as to who are
the constituent elements that make up such a company. In such
cases, the principle laid down in Salomon v. A Salomon and Co.
Ltd. [1897] AC 22 will not apply. For it is important to discover in
such cases as to who are the real individuals or entities who are
acting jointly or in concert, and who have set up such a corporate
vehicle for the purpose of submission of a resolution plan.”

54 I
JANUARY 2019 CHARTERED SECRETARY

in order to prevent the erstwhile promoters
of the debtor company and the persons
acting in concert with them, from bidding in
the resolution application process, Section
29A was introduced in the IBC, whereby,
many disqualifications were inserted to
disentitle the resolution applicants to be
persons connected with the promoters of
the debtor company.
SUPREME COURT ALLOWS PIERCING OF CORPORATE
VEIL IN ANALYSING SECTION 29A OF IBC
Thus, the Supreme Court pierced the corporate veil and
analysed the complex structure of both the competing resolution
applicants and held that “since Section 29A (c) is a see through
provision, great care must be taken to ensure that persons who
are in charge of the corporate debtor for whom such resolution
plan is made, do not come back in some other form to regain
control of the company without first paying off its debts.” Further,
the Supreme Court held that “it is important for the competent
authority to see that persons who are otherwise ineligible and
hit by sub-clause (c), do not wriggle out of the proviso to sub-
clause (c) by other means, so as to avoid the consequences of
the proviso. For this purpose, despite the fact that the relevant
time for the ineligibility under sub-clause (c) to attach is the time
of submission of the resolution plan, antecedent facts reasonably
proximate to this point of time can always be seen to determine
whether the persons referred to in Section 29A are, in substance,
seeking to avoid the consequences of the proviso to sub-clause
(c) before submitting a resolution plan. If it is shown, on facts
that at a reasonably proximate point of time before submission
of the resolution plan, the affairs of the persons referred to in
Section 29A are so arranged, as to avoid paying off the debts
of the non-performing assets concerned, such persons must be
held to be ineligible to submit a resolution plan, or otherwise both,
the purpose of the first proviso to sub-section (c) of Section 29A,
as well as the larger objective sought to be achieved by the said
clause in public interest, will be defeated.
RESOLUTION PROFESSIONAL CANNOT DECIDE MERITS
OF RESOLUTION PLANS
With regard to the role and duty of the resolution professional,
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Positive Progress Made in 2018 in implementing provisions of the IBC
ARTICLE
especially if the resolution plan received by him conform to the
norms set out in IBC and its connected regulations, the Supreme
Court in the aforesaid judgement held that “what has now to be
determined is whether any challenge can be made at various
stages of the corporate insolvency resolution process. Suppose
a resolution plan is turned down at the threshold by a resolution
professional under Section 30(2). At this stage is it open to
the concerned resolution applicant to challenge the resolution
professional’s rejection? It is settled law that a statute is designed
to be workable and the interpretation thereof should be designed
to make it so workable.”
The Supreme Court further stated that “given the time limit
referred to above and given the facts that the resolution applicant
has no vested right that his resolution plan be considered, it
is clear that no challenge can be preferred to the adjudicating
authority at this stage. A writ petition under Article 226 filed
before a High Court would also be turned down on the ground
that no right, much less a fundamental right, is affected at this
stage. This is also made clear by the first proviso to Section
30(4), whereby a resolution professional may only invite fresh
resolution plans, if no other resolution plan has passed muster.
However, it must not be forgotten that a resolution professional
is only to “examine” and “confirm” that such resolution plan
conforms to what is provided by Section 30(2). Under Section
25(2) (i), the resolution professional shall undertake to present all
resolution plans at the meetings of the Committee of Creditors.
That is followed by Section 30(3) which states that the resolution
professional shall present to the Committee of Creditors, for its
approval, such resolution plans which confirm the conditions
referred to in sub-section (2). This provision has to be read in
conjunction with Section 25(2) (i) and with the second proviso to
Section 30(4), which provides that where a resolution applicant is
found to ineligible under Section 29A(c), 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 Section 29A(c). A conspectus of
all these provisions would show that the resolution professional
is required to examine that the resolution plan submitted by
various applicants is complete in all respects before submitting
it to the Committee of Creditors. The resolution professional is
not required to take any decision, but merely to ensure that the
resolution plans submitted are complete in all respects before
they are placed before the Committee of Creditors, who may
or may not approve it…his prima-facie opinion is to be given
to the Committee of Creditors that a law has or has not been
contravened. Section 30(2) (e) does not empower the resolution
professional to “decide” whether resolution plan does or does not
contravene the provisions of law”.
The Supreme Court, in the aforesaid judgement, further held that
even though it is not necessary for the resolution professional
to give reasons while submitting a resolution plan to the COC, it
would be in the fitness of things if he appends the due diligence
report carried out by him with respect to each of the resolution
plans under consideration and state briefly as to why it does, or
does not conform to the law.
WHEN CAN AN AGGRIEVED RESOLUTION APPLICANT
APPROACH COURT FOR RELIEF
With regard to the question as to when the aggrieved resolution
applicant can approach the Court, the aforesaid Supreme Court
judgement held that the aggrieved resolution applicant can
approach the National Company Law Tribunal (NCLT), i.e., the
55
 Positive Progress Made in 2018 in implementing provisions of the IBC
ARTICLE
Adjudicating Authority for relief only after a resolution plan has
been considered by the COC after voting and not prior to that.
The Adjudicating Authority acting quasi-judicially can determine
whether the resolution plan violates provisions of any law,
including Section 29A of the IBC, after hearing arguments from
the resolution applicant as well as the COC. An appeal from such
decision can be preferred to the NCLAT by the aggrieved party
and the decision of the NCLAT can further be challenged under
Section 62 before the Supreme Court on question of law arising
out of such order of the NCLAT.
TIME LIMIT OF 270 DAYS
On the question as to whether adhering to the time limit set out in
the IBC for approval of the resolution plan was mandatory or not,
the Supreme Court held that “in fact, even the literal language of
Section 12(1) makes it clear that the provision must be read as
being mandatory.” Further, sub-section (3) of Section 12 makes
it clear that the duration of 180 days may be extended further
“but not exceeding 90 days” making it clear that a maximum of
270 days is laid down statutorily. Further, proviso to Section 12
makes it clear that the extension shall not be granted for more
than once. The Supreme Court also observed that “What is
important to note that a consequence is provided in the event that
the said period ends either receipt of a resolution plan or after
rejection of a resolution plan under Section 31. This consequence
is provided in Section 33, which makes it clear when either of
these two contingencies occurs, the corporate debtor is required
to be liquidated in the manner laid down in Chapter III. Section
12, construed in the light of the object sought to be achieved by
the Code, and in the light of consequence provided in Section
33, makes it clear that the periods previously mentioned are
mandatory and cannot be extended.” However, the Supreme
Court further held that ‘the act of the Court shall harm no man’
and this is a maxim firmly rooted in our jurisprudence and that
a reasonable and balanced construction of the statute would
therefore lead to the result that, where a resolution plan is
upheld by the Appellate Authority, either by way of allowing or
dismissing an appeal before it, the time taken in litigation ought
to be excluded, as otherwise a good resolution plan may have
to be shelved resulting in corporate death and the consequent
displacement of employees and workers.
RBI FULLY EMPOWERED TO ISSUE DIRECTIONS TO
BANKS TO PROCEED AGAINST DEFAULTERS UNDER IBC
In another recent decision dated 9th October 2018, the Delhi High
Court in Asian Colour Coated Ispat Ltd. v. Reserve Bank of India
[2018] 99 taxmann.com 278 (Delhi) was hearing a writ petition
challenging the Reserve Bank of India directions to banks to file
proceedings under the IBC against a list of defaulting borrowers.
The Delhi High Court held that since such Reserve Bank of India
directions were based on expert advice, it was within its scope
and powers to issue such a directive and any challenge to such a
directive was not maintainable since such list contained in RBI’s
directive to banks was not arbitrary.
NCLAT HOLDS THAT IBC AIMS AT MAXIMIZATION OF
VALUE OF ASSETS
Recently, the National Company Law Appellate Tribunal
(“NCLAT”) in its decision dated 14th November, 2018, passed
in the case of Binani Industries Ltd. (BIL) v. Bank of Baroda
[(2018) 99 Taxmann.com 164] held that the object of the IBC is
reorganisation and insolvency resolution of corporate persons,
partnership firms and individuals in a time bound manner “for
maximization of value of assets” of each person to promote
entrepreneurship, availability of credit and balance the interest
56
Object of the IBC is reorganisation and
insolvency resolution of corporate persons,
partnership firms and individuals in a time
bound manner “for maximization of value
of assets” of each person to promote
entrepreneurship, availability of credit and
balance the interest of all stakeholders.
of all stakeholders. The NCLAT further observed that the recent
Ordinance on IBC explicitly aims to promote “resolution” over
“liquidation”. It further held that the objective of resolution in the
IBC is maximization of the value of assets of the corporate debtor
and thereby, ultimately to pay all the creditors. The NCLAT further
highlighted that such ‘resolution plan’ is not maximization of value
for a ‘stakeholder’ or “a set of stakeholders such as creditors”.
Thus, the first priority is “resolution” and the second priority is
“maximization of the value of the assets of the corporate debtor”.
The third objective of a ‘resolution plan’ under IBC is “promoting
entrepreneurship, availability of credit and balance the interest of
all stakeholders”.
PRIORITIZATION OF OBJECTIVES OF RESOLUTION PLAN
The NCLAT held that this order of prioritization of objectives of
a resolution plan “is sacrosanct”. In this regard, the NCLAT also
referred the Supreme Court of India’s judgement in Arcelor Mittal
Pvt. Ltd. v. Satish Kumar Gupta (2018-98- taxmann.com-99),
wherein, the Supreme Court had observed that “the corporate
debtor consists of several employees and workmen whose daily
bread is dependent on the outcome of the CIRP. If there is a
resolution applicant who can continue to run the corporate debtor
as a ‘going-concern’, every effort must be made to try and see
that this is made possible.”
ROLE OF FINANCIAL CREDITORS AS PART OF COC
The NCLAT in the aforesaid judgement dated 14th November,
2018, considered the role of financial creditors as members of
the COC. It referred to the Bankruptcy Law Reforms Committee
(BLRC) Report which conceptualized the IBC and provided the
rationale for the creation of committee of financial creditors and
the need to give powers to the COC to ultimately keep the entity
of the corporate debtor as a going concern or to liquidate it.
The NCLAT further noted that the BLRC Report reasoned that
the members of the COC should have creditors both with the
capability to assess viability, as well as to be willing to modify
terms of existing liabilities in negotiations and that the process
be rapid and efficient and that the IBC will provide that the COC
should be restricted to the financial creditors. The BLRC Report
also stressed that the IBC will ensure a collective process and that
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JANUARY 2019 CHARTERED SECRETARY

the law must ensure that all the key stakeholders will participate
to collectively assess viability and that all creditors who have
capability and the willingness to restructure their liabilities must
be part of the negotiating process and that the liabilities of all
creditors who are not part of the negotiation process must also
be met in any negotiated solutions.
RESOLUTION PLAN TO BALANCE INTERESTS OF
ALL STAKEHOLDERS
Further, it was observed by the NCLAT that IBC aims at
promoting availability of credit and that credit comes from
the financial creditors and the operational creditors. Either
creditor is not enough for business and both kinds of credits
need to be on a level playing field. Operational creditors need
to provide goods and services and if they are not treated well
or discriminated, they will not provide goods and services on
credit and the objective of promoting availability of credit will
be defeated. It was further stressed by the NCLAT that the IBC
is for reorganization and insolvency resolution of corporate
persons…for maximization of value of assets of such persons
to …balance interest of all stakeholders. It is possible to
balance the interest of all stakeholders if the resolution plan
maximizes the value of the assets of the corporate debtor. One
cannot balance interest of all stakeholders if the resolution
plan maximizes the value of one stakeholder or a set of
stakeholders, such as financial creditors only. One stakeholder
or a set of stakeholders cannot benefit unduly at the cost of
other stakeholders. Further, the IBC prohibits any action to
foreclose, recover or enforce any security interest during
the resolution period and thereby prevent a creditor from
maximizing his interest.
Therefore, the NCLAT in the aforesaid judgement held that “the
liabilities of all creditors who are not part of the Committee of
Creditors must also be met in the resolution” and that while the
financial creditors can modify the terms of existing liabilities,
the other creditors cannot take risk of postponing payment for
better future prospects, i.e., while the financial creditors can
take a haircut and take their dues in future, the other operational
creditors need to be paid immediately. A creditor cannot maximize
his own interest in view of the moratorium. Further, if one type of
credit is given preferential treatment, the other type of credit will
disappear from the market and this will be against the objective
of promoting availability of credit. Also, the IBC aims to balance
the interest of all stakeholders and does not maximize the value
for financial creditors alone. Therefore, the dues of operational
creditors must get at least similar treatment as compared to the
dues of the financial creditors.
NCLAT ON WHAT CONSTITUTES A RESOLUTION PLAN?
With regard to what constitutes a “resolution plan”, the NCLAT
in the aforesaid judgement observed that functionally, the
resolution plan must resolve insolvency (rescue a failing, but
viable business) and should maximize the value of assets of
the corporate debtor and should promote entrepreneurship,
availability of credit and balance the interests of all the
stakeholders. The NCLAT held and emphasized that it is not a
sale. No one is selling or buying the corporate debtor through
a resolution plan. It is resolution of the corporate debtor as a
going concern. One does not need a resolution plan for selling
the corporate debtor. If it were a sale, one can put it on a trading
platform. Whosoever pays the highest price would get it. There
is no need for voting or application of mind for approving a
resolution plan, as it will be sold at the highest price. One would
not need CIRP, interim resolution professional, resolution
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CHARTERED SECRETARY JANUARY 2019
Positive Progress Made in 2018 in implementing provisions of the IBC
ARTICLE
professional, interim finance, calm period, essential services,
COC or resolution applicant and detailed regulated process for
the purpose of a sale. It is possible that under a resolution plan,
certain rights in the corporate debtor or assets or liabilities of
the corporate debtor are exchanged, but that is incidental. It
is not an auction. Depending on the facts and circumstances
of the corporate debtor, there may be different types of
resolution plans and that each plan has a different likelihood
of turnaround, depending on credibility and track record of the
resolution applicant and feasibility and viability of the resolution
plan, which is not amenable to bidding or auction. It requires
application of mind by the financial creditors who understand
the business well. Further, it is not recovery. When creditors
recover their dues, one after another or simultaneously, from
the available assets of the firm, nothing may be left in due
course. Thus, while recovery bleeds the corporate debtor to
death, resolution plan endeavours to keep the corporate debtor
alive. In fact, the IBC prohibits and discourages recovery in
several ways. Further, the NCLAT emphasized that it is not
“liquidation”, because liquidation brings the life of a corporate
to an end and it destroys organizational capital and renders
resources idle till reallocation to alternate uses. Further, it is
inequitable as it considers the claims of a set of stakeholders
only, if there is any surplus after satisfying the claims of a prior
set of stakeholders fully. The IBC does not allow liquidation
of corporate debtor directly. It allows liquidation only upon
failure of CIRP. It rather facilitates and encourages resolution
in several ways.
In the aforesaid judgement, it was also observed by the NCLAT
that the IBC and the Insolvency and Bankruptcy Board of India
(IBBI) guidelines do not prescribe differential treatment between
similarly situated “operational creditors” or the “financial creditors”
on one or other grounds.
IBBI REGULATIONS CANNOT OVERRIDE IBC PROVISIONS
In another significant decision in Central Bank of India v.
Resolution Professional of Sirpur Paper Mills Ltd. and Ors.
(Company Appeal (AT) (Insolvency) No. 526 of 2018), the
NCLAT noted that the IBBI may enact regulations, but it should
be consistent with the IBC and the Rules framed thereunder by
the Central Government to carry out the provisions of the IBC
and thus, the regulations made by the IBBI cannot override and
cannot be inconsistent with the IBC. The legislation having not
made any discrimination between same set of groups, such as
“financial creditor” or “operational creditor, the IBBI regulations
cannot mandate that the resolution plan should provide liquidation
value to the operational creditors or liquidation value to the
dissenting financial creditors. Such regulations, being against
Section 240(1) of the IBC, cannot be taken into consideration
and any resolution plan which provides liquidation value to the
dissenting financial creditors, cannot be approved, being illegal.
CONCLUSION
The aforementioned judgements auger well for resolving the
controversies surrounding approval of resolution plans submitted
by resolution applicants under Corporate Insolvency Resolution
Process and it is hoped that frictions on the role of resolution
professional, committee of creditors and providing of repayment
of the dues of the operational creditors, etc. will now be resolved
quickly and within the mandatory time frame. The Central
Government and the IBBI is also alive to make such positive
changes to enable recovery of huge outstanding debts due
from defaulting corporate debtors while attempting to keep the
corporate debtor alive as a going concern.  CS
57
 Few Major Arguments under Insolvency and
ARTICLE
Bankruptcy Code, 2016 in the Recent Year
Introducing a modern bankruptcy framework is one of the most significant reforms put in place by the Government.
However, with two years of rolling after introduction of Insolvency and Bankruptcy Code, 2016, the Code still remains a
work in progress. Despite the recent amendments to the Code, and regulation changes by the Insolvency and Bankruptcy
Board of India, there are still several grey areas in the Code. In this article few such areas are argued attentively.
Chhaya Kakadia, ACS
Company Secretary
Kiran Gems Pvt. Ltd, Mumbai
chhayalakhani247@gmail.com
INTRODUCTION
I
ndeed promulgation of the Insolvency and Bankruptcy Code,
2016 (IBC) has marked as a turning point for corporate
India, due to which fear have started installing in the minds
of promoters for losing grip on their Company and consequently
they are prompted to settle or resolve their dues before action is
initiated under IBC. However there have been many lacunae in
the IBC per se due to which amendments to the law have been
energetically pushed out by way of promulgation of Insolvency
and Bankruptcy Code (Amendment) Act, 2017 (2017 IBC) and
Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
(2018 IBC). The amendments have brought in a slew of positive
changes to the Code, which will significantly boost the framework
of insolvency resolution as had been envisaged under the Code.
With two years of rolling of IBC, the outcome of IBC has played
a vital role to improve ranking of India on the World Bank’s
“Doing Business 2019” report released on 31st October, 2018.
As per the report, India’s rank in Ease of Doing Business
table raised up by 23 spots and moved up to 77th position as
compared to 100th position last year by improving its rank in six
out of ten parameters relating to starting and doing business in
India. As per estimates, the IBC has helped address stressed
assets worth approximately ₹3 trillion directly or indirectly, since
the new law came into force in December 2016. In 2018, the
overall recovery was to the tune of Rs. 80,000 crore, with a
major contribution from Bhushan Steel Rs 35,400 crore against
dues of Rs 44,480 crore), Electrosteels Steel (Rs 5,320 crore
against dues of Rs 10,270 crore), Monnet Ispat (Rs 2,870 crore
against dues of Rs 12,270 crore) ) and from the landmark case
of Binani Cement wherein UltraTech Cement had not only met
the liabilities of committee of creditors but also of operational
creditors without any haircut i.e. Rs 7,950 crore against dues
of Rs 6,950 crore, being the major assets exchanging hands.  a step in the right direction, as it gives to home buyers
Also as per Reserve Bank of India (RBI) data, recovery is
58
fair enough till September but not very remarkable. Financial
creditors have realised Rs. 584 billion against admitted claims
of Rs. 1.3 trillion. Compared to a pre-IBC regime recovery
rate of 26 per cent, the IBC hasn’t fared badly. However, less
than five per cent of the cases have been resolved so far (52
out of 1,198). Also RBI had released a first list of 12 cases
to be prioritised by lenders for reference to IBC. Together
these constitute 25% of the country’s Non-Performing Assets.
However, in most of these cases the time threshold of 180/270
days has been exceeded due to ongoing litigations. With
the IBC encroaching into the functioning of the Act, clashes
between the two legislations, and subsequent confusion in
their manner of working is inevitable.
LET US NOW LOOK AT THE MAJOR ARGUMENTS WHICH
HAVE LANDED TO LITIGATIONS
1. Position of Homebuyers under IBC in spite of existence
of another legislation to protect their interest i.e. Real
Estate (Regulations and Development) Act, 2016
(RERA)
Under the native IBC, the National Company Law Tribunal
(NCLT) and the National Company Law Appellate Tribunal
(NCLAT) adopted a strict interpretation in the context
of the definition of ‘financial creditors’ and ‘operational
creditors’, wherein financial creditor included banks or
other financial institutions or persons who have provided
loans or other form of debt to the corporate debtor and
the term ‘operational creditor’ included only entities that
provide goods or services to a corporate debtor. In other
words, the term ‘operational debt’ was held to not include
any advance paid by a purchaser of goods or recipient of
services under the IBC. Such a purchaser was therefore
barred from initiating Insolvency Resolution Process
against the corporate debtor.
However vide the amendments made by the 2018 IBC,
one more category of ‘other creditors’ was introduced by
the Insolvency and Bankruptcy Board, i.e. creditors who
are neither financial nor operational creditors which would
enable the home buyers and other allottees (refers to
buyers and long-term lessees under real estate projects) to
be able to invoke Section 7 of IBC and file an application in
NCLT for initiating corporate insolvency resolution process
against a defaulting company or promoters. Further,
they have representation in the committee of creditors
through an authorised representative (the authorised
representative being a resolution professional appointed
by the NCLT, as per the stated process).
As far as homebuyers are concerned, the 2018 IBC is
decisive powers which were hitherto restricted only to
financial creditors. It is doubtless to say that in real estate
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As per Reserve Bank of India (RBI) data, recovery is
fair enough till September but not very remarkable.
Financial creditors have realised Rs. 584 billion
against admitted claims of Rs. 1.3 trillion.
Compared to a pre-IBC regime recovery rate of 26
per cent, the IBC hasn’t fared badly. However, less
than five per cent of the cases have been resolved
so far (52 out of 1,198).
projects, financial institutions alone cannot simply decide
the fate of projects. Even if resolution plans contemplate
bringing in a new developer to complete projects to
facilitate repayment, undoubtedly flat owners must have
a say in deciding such new developer. Also, as per the
second proviso of section 8 of RERA, in case of revocation
of registration of a real estate project under RERA, the
association of allottees have the first right of refusal for
carrying out the remaining development work and as per
section 11 (4) (h) of RERA, mortgage cannot be created
over units in respect of which agreement to sell has been
executed by the promoters/developers and even if such
mortgage is created the same shall not affect the right and
interest of the concerned allottees. The amendments made
by the 2018 IBC inter alia brings IBC in closer sync with the
right of homebuyers or allottees as the case may be under
RERA wherein they have right to demand entire refund
amount paid by the homebuyers or allottees (together with
interest at prescribed rates), and interest to be claimed for
any delayed possession. In that sense, the 2018 IBC does
attempt to balance the interest of homebuyers or allottees
as the case may be and financial lenders by allowing
participation of both in the committee of creditors meeting.
It is widely said that great power comes with great
responsibility and if power is not handled with responsibility
then possession of power will land up into controversy. In
view of the aforesaid the probable points of arguments in
balancing between IBC and RERA are as under:
• If the rights given to homebuyers are not exercised
responsibly, with the willingness and capability, it could
seriously jeopardise the interests of other creditor’s
especially financial creditors who are already on shaky
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ground post-RERA
• Keeping in mind the tight deadlines prescribed under
the IBC which is one of the strongest merits of this
reformed insolvency law, the formation and operation
of cumbersome committee of creditors with so many
individual voters could itself effectively derail and
delay the whole resolution process
• It would also be interesting to note how amendment
in 2018 IBC is interpreted in different circumstances,
i.e., depending on the stage of construction, whether
agreement to sell is executed or not and if only allotment
letters were given by the promoter/developer who
would be a corporate debtor, whether an association of
the allottees have been formed or not.
Additionally, inconsistency in the manner of resolution of
a real estate company under RERA and IBC is also a big
challenge. RERA can be efficient for resolving project/
asset level concerns of home buyers, which is not possible
under IBC, since it deals only at the company level and
thus company sale is the only option. This is also a key
reason for some big real estate companies not finding the
right bidders or the value as there may be different sets
of bidders interested in individual projects/assets and not
keen on the entire basket of projects.
Also in case of bidder request for extension of project
timelines under IBC, does the approval of such a plan
mean that the RERA authority too is bound by it and any
orders or judgments it may have passed to the contrary or
awarding interests/penalties stands extinguished? Some
of these concerns become important considering that not
many home buyers choose to exercise their rights under
IBC. For instance, in the Jaypee Infratech Limited case,
pursuant to opening of the web portal by the Supreme
Court, only 8% of the home buyers opted for refunds.
• Another interesting aspect would be to see how the
banks and financial institutions that fund the allottees
for purchase of units react to this. There may be
instances where the loans are not being repaid by the
allottees on time, therein, one needs to also examine
it from another aspect, wherein the loans are under
default and such financial institutions want to step in
as allottees by invoking their rights.
2. Outspread Interpretation of Section 29A barring
Genuine Resolution Applicants
One of the primary objectives of the IBC is to facilitate
the adoption of a resolution plan for the corporate debtor.
The resolution plan is to serve as a benefit to not only the
creditors but also to the already stressed corporate debtor.
Originally, section 5(25) of the IBC defined a resolution
applicant as any person who submits a resolution plan
to the resolution professional and section 5(26) defined
a resolution plan as a plan proposed by any person for
insolvency resolution of the corporate debtor as a going
concern. The said definition of the resolution applicant did
not prescribe any specific criteria or qualification, due to
which any party including the promoters of the corporate
debtor or any related party could propose a resolution plan.
This lacuna in the law gave an opportunity of backdoor
entry to the defaulting promoters to submit a resolution plan
and acquire assets of the corporate debtor at significantly
discounted prices.
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ARTICLE Few Major Arguments under Insolvency and Bankruptcy Code, 2016 in the Recent Year
With a view to restrain the said loophole and based on
practical consideration process, the Government brought
forth 2017 IBC and later 2018 IBC wherein section 29A
was inserted and amended into the IBC respectively.
Section 29A laid down a broad range of disqualifications
for a person to be an eligible resolution applicant. Further,
section 5(25) has been amended to read that a resolution
applicant is one who submits a resolution plan to the
resolution professional upon an invitation made under
section 25(2)(h). Section 25(2) (h) was amended to the
effect that the resolution professional invite resolution plans
from such applicants who fulfil the criteria laid down by the
resolution professional with the approval of the committee
of creditors keeping in consideration the complexity and
the scale of business of the corporate debtor. Therefore,
a prospective resolution applicant in order to be eligible to
submit a resolution plan shall not only meet the criteria laid
down by the resolution professional under section 25(2)(h)
but shall also not fall under any of the categories laid down
by section 29A for disqualification.
Section 29A as it stands amended by the Insolvency and
Bankruptcy Code (Amendment) Ordinance, 2018 lays
down a very broad range of disqualification criteria for
prospective applicants which are both complex as well as
multi-layered leaving a wide scope for litigation.
There are in Total Four Layers of Ineligibility
• First layer of ineligibility, wherein the person itself is
ineligible
• Second layer of ineligibility gets activated where a
“connected person” is ineligible
• Third layer of ineligibility attracts a person being a
“related party” of connected persons; and
• Fourth layer of ineligibility stimulates a person acting
jointly or in concert with a person suffering from
abovementioned first layer or second layer or third
layer ineligibility.
A detailed explanation of different layers mentioned above
are explained below:
The term “connected person” who is disqualified from
making a resolution application, which adds major layer
of disqualified persons have been defined so as to include
three categories as follows
i) as a person who is a promoter or a who is a person
in management or who is a person in control of
ineligible resolution applicant or
ii) a person who shall be a promoter or person who
shall be in management or person who shall be in
control of the corporate debtor who suffers from
disqualification under Section 29A or
iii) holding company or subsidiary company or
associate company or related party as the case
may be of persons mentioned in (i) and (ii) above shall
become disqualified applicants.
Due to category mentioned in point (iii) above, one more
major layer to the category of disqualified applicants is
effectively added. Further, the term “Related party” has
been defined in Section 5(24). However, the definition is
specific to corporate debtor, i.e. the definition specifies
the persons who shall be treated as “related party’ of the
corporate debtor. Hence, where the persons referred to in
60
category (i) and (ii) are persons other than the corporate
debtor, the definition under section 5(24) becomes
irrelevant. Therefore where one of the persons is a
company, “related party” shall be interpreted in terms of
section 2(76) of the Companies Act, 2013 and where none
of the persons is a company, the definition of the term
“related party” has been left open to interpretation, once
again leaving ample scope for litigation. Also in the context
of natural persons, generally the term “relative” is used.
However, the legislation has consciously exempted
Scheduled Banks, Asset Reconstruction Companies
and Alternative Investment Funds Companies from the
scope of Section 29A. It means that even if Scheduled
Banks, Asset Reconstruction Companies and Alternative
Investment Funds Companies are holding company or
subsidiary company or associate company of ineligible
resolution applicant or disqualified corporate debtor, they
are qualified to be resolution applicant due to exemption
provided under Section 29A.
Another larger ambiguity is attributable to the terms
“acting jointly or in concert”, as nowhere in IBC or in
its subsequent amendments there is clear explanation
or definition given in this respect, consequently ample of
scope for litigation is left open. However, IBC provides that
words or expressions not defined under the IBC shall have
the meaning assigned to them under other acts identified
under the IBC including the SEBI Act, 1992. Therefore,
the definition of person acting in concert will have to be
borrowed from the SEBI (Substantial Acquisition of Shares
and Takeovers) Regulations, 2011 that defines person
acting in concert as persons who have the common
objective or purpose of acquisition of shares or voting
rights in or exercising control over a company pursuant to
an agreement or understanding, formal or informal, directly
or indirectly co-operate for acquisition of shares or voting
rights in or exercise of control of the company. 
Due to excessively enlarged scope of disqualification under
Section 29A, the prospective resolution applicants have
reduced drastically on the basis of generalized criteria for
disqualification wherein it does not differentiate between a
genuine applicant and one with antecedents. However a
rationalized view was expressed by the NCLT in the matter
of RBL Bank Ltd v. MBL Infrastructure Ltd  C.P (IB)-170-
KB-2017 (Interim Order) wherein it was expressed that it
cannot be the intention of the legislature to disqualify the
promoters as a class but to rather exclude those class of
persons who may affect the credibility of the resolution
process given their antecedents.
Further, in recognition of the importance of micro, small
and medium enterprises (MSMEs) to the Indian economy
and the unique challenges faced by them, the applicability
of section 29A has been restricted only to disqualify wilful
defaulters from bidding for MSMEs. Such relaxation was
given with recognition of the fact that usually only promoters
of an MSME are likely to be interested in acquiring it.
Now let us take a sight at questions which have remained
unanswered though remain a substantial ground for
challenging the decision of Adjudicating Authority.
(a) Whether a person is liable to cure the non-performing
asset of only that account for which it is bidding or all
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the accounts, as first proviso of Section 29A(c) says
that “the person shall be eligible to submit a resolution
plan if such person makes payment of all overdue
amounts with interest thereon and charges relating to
non-performing asset accounts before submission of
resolution plan.”
(b) Whether the person ineligible to make a bid by virtue
of Section 29A of the IBC becomes eligible merely by
selling or transferring shares of the company whose
accounts have been declared as non-performing
assets?
(c) What is the point of time from which the ineligibility
has to be ascertained? The language of the section
suggests that only present status of the resolution
applicant has to be seen. No lookback period has
been prescribed.
CONCLUSION
It is important to note that section 29A laid down a multiple
layered and comprehensive standard of disqualification that will
exclude bona fide resolution applicants as well. The application
of section 29A might also debar crucial stakeholders to bid
for the revival of the company. At the end, it is necessary for
the Adjudicating Authority to make the interpretations of the
respective statutes in such a way, so as not to make the provisions
superfluous. It is, after all, imperative to respect the legislative
intent and not to render any of the provisions redundant and it is
the need of the hour to maximise the objectives of the IBC.
3. The Interface between Limitation Act, 1963 and IBC
Before Insolvency and Bankruptcy Code (Second
Amendment) Act, 2018 came into force there was a
confusion w.r.t. applicability of Limitation Act, 1963 under
IBC regime.
There were two different schools of thoughts adopted by
different benches of NCLT and NCLAT for considering the
admission of time-barred debts, wherein few authorities
were of the view that any claim that was barred by
time, being unenforceable, could not be deemed by the
Adjudicating Authority and therefore cannot be made
the basis for evoking IBC before the Tribunal and IBC is
related to the commencement of Corporate Insolvency
Resolution Process (CIRP) and it is a platform for re-
establishing and revival of businesses, and is not the Act
for the money claim recovery. Whereas others were of the
view that IBC is a complete code in itself and it is clearly
evident by the legislative intent, the statutory framework
and the principles driving the design of IBC. Therefore in
the absence of any provisions in IBC, the Limitation Act,
1963 would not be applicable to initiation of CIRP and to
the IBC, leaving the floodgate of claims open at NCLT and
NCLAT arising out of time barred debt.
Due to the confusion in this regard the Insolvency Law
Committee had deliberated the above issue of non-insertion
of explicit provision in IBC giving creditors right to make
an application for time-barred debts too and therefore the
Committee agreed to insert new Section 238A under 2018
IBC wherein it clearly stated that Limitation Act, 1963 shall
apply to all proceedings and appeals under IBC.
However another question arose under 2018 IBC was with
respect to effective date of applicability. If we construe the
substantive nature of amendment, Section 238A would not
serve its object unless it is construed as being retrospective,
as otherwise, existing applications made and accepted by
NCLT and NCLAT seeking to revive time barred claims
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ARTICLE
would have to be allowed. Also it is pertinent to note that
law of limitation is procedural in nature, therefore it should
be applicable retrospectively from the date of enactment of
the IBC itself and not merely from the date of amendment.
Noting that “Road to Success is Always under Construction”
we look ahead for below mentioned areas under
consideration in the year 2019 from the Government.
1. Judicially, NCLT and its appellate body NCLAT require
more than double members. These adjudicating
bodies are under-staffed and require a serious up-
gradation w.r.t. quality and number of staff. Therefore
the year 2019 will not only test the spirit of the IBC, but
also of the adjudicating bodies and it would be curious
to see how the Government is placing the policies
towards hiring quality staff.
2. Infrastructure problems need to be addressed
immediately by the Government as huge workload
is getting difficult to handle in limited available
infrastructure.
3. The NCLT has helped resolve insolvency and
bankruptcy proceedings involving more than ₹80,000
crore in the year 2018 and the kitty is expected to swell
beyond ₹1 trillion in 2019 with several big-ticket default
cases pending.
For instance a high-profile case of Essar Steel Ltd
is expected to be completed by early 2019. There
was a highest bid for Essar Steel Ltd of Rs. 42,000
crore along with about an additional Rs. 8,000 crore
towards capital expenditure by a foreign company with
an Indian connection, i.e. ArcelorMittal, who is facing
an uncertain future, as promoters of Essar Steel’s
promoter Ruias have made a compelling offer to pay
the company’s entire debt of estimated Rs. 54,000
crore. Also separately, a group of operational creditors
and Essar Steel Shareholders have challenged
the Committee of Creditors and the resolution
professional’s decision to accept the ArcelorMittal
resolution plan. Also in November, Standard Chartered
Bank, the third-largest secured financial creditor of
Essar Steel, filed an application before the bankruptcy
court alleging that the resolution professional and the
Committee of Creditors approved a resolution plan
without complying with the provisions of IBC.
4. Section 29A shall be reviewed in the interest of
maximization of value of the assets of the corporate
debtor.
5. Settlement schemes should be included in Insolvency
framework in the future wherein the banks and the
corporate debtor would sit together to work out a debt
settlement plan. With introduction of such scheme
the government have to face numerous challenges
as banks need a court approved mechanism to
take haircuts and any haircuts outside the court
will invite future investigations by Central Bureau of
Investigation/Central Vigilance Committee. In fact, the
failure of many restructuring schemes was the inability
of bankers to take a haircut.
6. A comprehensive framework should be adopted to
deal with cross border insolvency issues by adopting
the UNCITRAL Model Law of Cross Border Insolvency.
Such inclusion of the Cross Border Insolvency Chapter
in the IBC, 2016, will be a major step forward and
will bring Indian Insolvency Law at par with matured
jurisdictions globally. CS
61
ARTICLE
IBC and Reform Impact on M&A - 2018
Is the recent rush of business community towards becoming big, bigger and biggest bane or boon for society
and for the business itself? Economic theory’s message that economies of scale is a virtue for every business
organization simultaneously also preaches that mega corporations may misuse their muscle to increase prices,
reduce employee pay, dilute innovation and influence Government policies – all of which may cripple society. In
2018 and slightly earlier years, business organisations in India are growing and growing not for growth sake only
but under ‘No Option Situation’. Let us take a closer look.
Dr. Subir Kumar Banerjee, ACS
Practising Company Secretary, Mumbai
subirkumar.banerjee@gmail.com
C
orporate Restructuring means to rearrange, rebuild, reorganize,
restructure, change. To create new strategy, to face competitive
environment and change market conditions, Corporate requires
restructuring and re-organization. Corporate Restructuring can be
Internal Restructuring and External Restructuring.
While Internal Restructuring include a) New Investment in Plant &
Machinery b) R&D of Products & Processes c) Hiving off Non-core
businesses d) Divestment e) Sell-offs f) Demerger etc., External
Restructuring includes a) M & A b) Joint Venture c) Strategic Alliance.
While M&A are the mother of all, others have their significance and
importance in their respective areas. Unlike people, companies can
in theory live forever. But most die young, because the corporate
world, unlike society at large, is a fight to the death.
a) Why Nokia and BlackBerry died while Apple is on a high?
b) Kodak is at death’s door; Fujifilm, its old rival, is thriving.
Why? Because the formers could not keep pace with new
technologies, the later are ahead through technologies with
innovations. There is no place of complacency. As mentioned
above, mostly companies die prematurely. At least with
unavoidable uncertainty organic human being have an average
age of around 80. Apart from start-ups, the other companies
also are destroyed automatically and suddenly in this extremely
competitive world. Periodical and appropriate restructuring is
the only answer. To name a few, look at the companies like
Bharat Forge and Motherson Sumi System, they are always in
the news for M&A and prospering.
NEED FOR CORPORATE RESTRUCTURING
1. Operational Synergy (Timken Acquiring ABC Bearings Ltd)
2. Access to new Technology (Tata Steel buying Anglo Dutch
steel producer Corus Group Plc (Corus)
3. Managing Disruption (Delta Airlines, USA)
4. Survival Strategy (Vodafone-Idea merger)
5. Expand new market (Tata Motors-Jaguar Land Rover Deal)
6. Diversification is the Key (Why is Reliance Industries taking a
$15 billion investment risk with Jio?)
62
7. Get Out of Non-core ((Larsen & Toubro Limited sold UltraTech
CemCo Ltd to Grasim Industries)
8. Value Unlocking (Dabur Demerger).
Why Facebook acquired WhatsApp with $19-billion deal? Still there
is no revenue from WhatsApp to Facebook. Still it is viable since
WhatsApp was close and fierce competitor of Facebook. However,
having achieved the objective, Facebook is now thinking of a
business model of charging the customers in WhatsApp.
Apart from other tools of restructuring, why M&A? The answer is
Inorganic growth. M&As have become an integral part of the Indian
economy. Based on macroeconomic indicators, India is on a growth
trajectory, with the M&A trend likely to continue.
There has been a spate of high-profile M&A transactions in India
in the last few years, whether domestic or international. With the
Government continually working towards reforms on all fronts, be
it in its regulatory policies to attract foreign investors, providing an
impetus to the manufacturing sector with Make in India, improving
India’s Ease of Doing Business rankings, or providing solace to the
much-beleaguered infrastructure sector by paving the path for real
estate investment trusts (REITs)/infrastructure investment trusts
(InvITs), there is no looking back.
REGULATORY REVAMP STIRRING M&A
1. FEMA (Transfer or Issue of Security by a Person Resident
Outside India) Regulations, 2017
The Foreign Exchange Management Act, 1999 (FEMA)
administers foreign investment into India. One of the significant
regulations under FEMA is Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside
India) Regulations, 2000 (FDI Regulations 2000), which deals
with foreign investment in India and provides for sectoral
limits, pricing and reporting requirements, etc. Reserve Bank
of India (RBI), has notified on 7 November 2017, the Foreign
Exchange Management (Transfer or Issue of Security by a
Person Resident outside India) Regulations, 2017 (TISPROI
Regulations 2017).
The FDI Regulations 2017 supersede the prevalent FDI
Regulations 2000 and Foreign Exchange Management
(Investments in Firms or Proprietary Concern in India)
Regulations, 2000, as amended. The TISPROI Regulations
2017 has brought in major changes in connection with foreign
investment in India by non-resident. The TISPROI has brought
in few new concepts viz. defining FDI, Foreign Portfolio
Investment, Listed Indian Companies, etc.
The New Regulations, in supersession of the Old Regulations,
has been well presented and gives a consolidated view of the
transfer or issue of securities by a person resident outside India.
The New Regulations clarifies several aspects of FDI and aims
towards further simplification. The FDI limit is to be calculated
on a fully diluted basis. Also, the differentiation between FDI
and FPI offers greater clarity. The New Regulations seek to
align concepts contemporary to the Companies Act and the
SEBI Regulations.
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JANUARY 2019 CHARTERED SECRETARY

The FDI Regulations 2017 supersede the
prevalent FDI Regulations 2000 and Foreign
Exchange Management (Investments in Firms
or Proprietary Concern in India) Regulations,
2000, as amended. The Foreign Exchange
Management (Transfer or Issue of Security by
a Person Resident Outside India) Regulations,
2017 [ TISPROI] has brought in major changes
in connection with foreign investment in India
by non-resident. The TISPROI has brought in few
new concepts viz. defining FDI, Foreign Portfolio
Investment, Listed Indian Companies, etc.
2. FDI in several sectors: 2015 onwards -
From the beginning of 2015, the Government announced
fresh liberalization of FDI rules throwing open food retail,
airlines, private security firms, and defence companies to
higher overseas investment. Other sectors in which FDI norms
have been relaxed include e-commerce in food products,
broadcasting carriage services, private security agencies and
animal husbandry.
Here’s a look at the changes in FDI:
n Up to 100% FDI in defence sector
n Up to 74% FDI in brownfield pharmaceuticals under
automatic route
n 100% FDI in brownfield airport projects under automatic
route
n 100% FDI in civil aviation
n FDI up to 49% in civil aviation under automatic route,
beyond 49% through govt approval
n Local sourcing norms for FDI in single brand retail
for products having “state of art” and “cutting edge”
technologies
n 100% FDI under automatic route for cable networks, DTH
and mobile TV
Foreign investment is considered crucial for India, which needs
around $1 trillion for overhauling its infrastructure sector such
as ports, airports and highways to boost growth. A strong inflow
of foreign investments will help improve the country’s balance
of payments situation and strengthen the rupee value against
other global currencies, especially the US dollar.
3. India’s Cross-Border Merger Regulations, 2018
Under the Companies Act, 1956 only inbound mergers were
permitted. The new law, Companies Act, 2013 (“Act”) has now
made both Inbound and outbound mergers possible, but with a
caveat. Pursuant to Section 234 of the Act, foreign companies
from only certain jurisdictions notified by the Indian Government
can be the “transferee company”. Subsequently, the Companies
(Compromises, Arrangements and Amalgamations) Rules, 2016
(“CAA Rules”) were enacted to facilitate the sanctioning of both
inbound and outbound mergers and other arrangements before
the National Company Law Tribunal (“NCLT”). Thereafter,
the Reserve Bank of India (“RBI”) also notified the Foreign
Exchange Management (Cross Border Merger) Regulations,
2018 (“CMR”) in order to address specific issues that may arise
in such cross-border deal.
CMR defines an inbound merger as a merger between an Indian
and a foreign company where the resultant company is an
Indian company, and which takes over the assets and liabilities
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IBC and Reform Impact on M&A - 2018
ARTICLE
of the merging companies. An outbound merger is a merger
between an Indian and a foreign company where a foreign
entity is the resultant company. Deemed approval means that
any cross-border merger which adheres to the regulations will
be deemed to be approved by RBI provided concerned officers
of the merging companies must submit a compliance certificate
to NCLT to this effect.
This legislation is a milestone and will facilitate bringing FDI
since most of their challenges of doing business in India have
been sorted out through this reform.
4. The Goods and Services (GST) Tax
Why GST is a revolutionary idea will be known if we are aware of
Pre-GST atmosphere. There were a) Multiplicity of Central and
State Indirect Taxes, b) No comprehensive input tax system, c)
Cascading of tax by levy of VAT on Excise Duty, Service Tax,
d) No integration between goods and services tax, e)Narrow
tax base.
Goods and Services Tax (GST) is the tax levied when a consumer
buys a good or service. It has become a comprehensive indirect
tax levy on manufacture, sale and consumption of goods as well
as services. GST replaced all indirect taxes levied on goods
and services by the Indian Central and State Governments.
GST with a single comprehensive tax brought it all under a
single umbrella, eliminating the cascading effect of taxes on the
production and distribution prices of goods and services.
It will have following positive effects:
1. Reduction in Cascading of Taxes and Overall Reduction in
Price.
2. Same tax structure across country making One Nation,
One tax.
3. More revenue collection and reduced cost of collection due
to massive use of Software Technologies.
4. Uniformity of taxes and Compliances will reduce compliance
costs for industry.
5. There is already a major shift from the unorganized sector
to the organized one. Because of improved efficiency and
productivity, India’s rank as a forerunner market for FDI
has become prominent. By overhauling the tax structure,
the Government has encouraged more foreigners to push
more investment (FDI )in India.
6. Tendency to escape taxes has substantially reduced and
better mechanism has been introduced to control over
those who avoid tax.
7. Transparency in “Doing Business” has created
competitiveness in Industry.
8. Differentiate between Goods & Services no longer required.
9. Wide tax compliance because of enthusiasm among
traders of the inbuilt mechanism which gives them input tax
credit along the value chain.
All these effects taken together have leaped India’s Ranking of
‘Ease of Doing Business’ continuously and encouraged FDI in a
massive way leading to recent M&As.
5. Other Legislative Reforms
Takeover rules, delisting, accounting guidelines, anti-monopoly
laws, etc. are the regulations which have been restructured.
Recently, several sectors have been opened up and clubbed
under the automatic route. There is a thinking by Government to
merge certain industrial and labour laws. The purpose is to convert
44 laws into 4 laws. This will be a big reform and a sensitive area
and hence may be done in 2019 or so. This upcoming reform will
go a long way in the way we do business in India.
In the area of direct tax, there is proposal to restructure and
make it simpler to avoid complication. In this area, serious efforts
have been done in the past. Further series of actions are on.
There is a move to make India friendlier for more M&A deals.
63
ARTICLE IBC and Reform Impact on M&A - 2018
6. Performance of Twenty-Two Months of IBC (2016) till end of 2018
The Insolvency and Bankruptcy Code, 2016 (No. 31 of 2016)
from 28th May, 2016 is an Act to consolidate and amend the
laws relating to reorganization and insolvency resolution of
corporate persons, partnership firms and individuals in a time
bound manner for maximization of value of assets of such
persons, to promote entrepreneurship, availability of credit and
balance the interests of all the stakeholders including alteration
in the order of priority of payment of Government dues and to
establish an Insolvency and Bankruptcy Board of India, and for
matters connected therewith or incidental thereto.
Apart from other objectives, primary aim is to dispose of ever
mounting NPA of Financial Institutions on war footing basis.
With clear cut and a strict 180+90 days ‘resolve-or-liquidate’
mission, the Code has been commended all across be it the
Indian Industry, different world forums including The World
Bank and IMF, and the birth of IBC, 2016 promoted to India’s 23
place jump in 2019’s (assessed during May of 2018) ‘Ease of
Doing Business’ ranking.
2018’S ‘EASE OF DOING BUSINESS’ RANKING
Initially, there were teething problems of resolving resolutions. After
some amendments of the IBC Code, the operational problems got
resolved. IBC got boost from three sources. Firstly, the IBC has
had the support from various high-level stakeholders such as the
Government, the regulators and the judiciary. Secondly, some of
the initial restructuring and insolvency proceedings show the IBC’s
efficacy and efficiency. Thirdly, exemption from the open-offer
requirement by the Securities and Exchange Board of India (SEBI)
have made stressed asset M&As attractive.
More than 1000 companies so far since May 2016 were referred to
the NCLT and the number is pouring in.
Finding a unique opportunity in IBC, 2016, mostly bankers are
already arranging a massive and great Indian sale of assets of
borrowers who have defaulted in payment of loans. The steel,
power, shipbuilding and construction companies are in focus. The
responses from prospective buyers are encouraging. So far Tata
Steel, the world’s biggest steelmaker, Arcelor Mittal, Vedanta
Group(the Metal giant) and Aditya Birla Group to name a few have
already participated in the bids. Out of the $14.3 billion bids placed
so far, deals worth more than $13 billion have been completed by
November 2018 alone. These include deals involving Bhushan Steel
($7.4 billion), Reliance Communications ($3.7 billion) and Fortis
Healthcare ($1.2 billion).
Courtesy IBC, looking at the huge responses from prospective
buyers, bankers have resolved to put in the first phase 40 biggest
64
defaulters on the block amounting to more than $60 billion. This
flurry of activities in the M&A arena was unprecedented. This flow
of events has positively affected the M&As in other areas where
IBC has no role, but IBC ambience is there. The series of legislative
reforms and other reforms have invited FDI in a big way and other
domestic inflows. As a result, the figure $83 billion of M&A in 2017
has been surpassed in 2018 and reached around $128 billion. The
total of deals through IBC constituted 10% of the M&A deals of 2018.
The speed with which IBC resolutions is taking shape, next year
(2019), the share of IBC resolutions of completed deals will be likely
to be bigger than in 2018. This will have snowball effect on the total
deal value of 2019 in the pipeline in 2018 with NCLT and others.
WHO CAN BID?
Not everybody is eligible to participate. The insolvency law was
amended in November to prevent errant founders – former owners
who were unable to stay current on their loans from regaining control
of firms. All the companies in default have other potential suitors.
Company Potential Suitors
Bhushan Steel JSW Steel Ltd., India Resurgence Fund,
Tata Steel, Bhushan employees-backed
consortium
Essar Steel Arcelor Mittal, VTB Capital, Tata Steel,
Vedanta, SAIL
Monnet Ispat Aion & JSW Steel
Electrosteel Vedanta, Tata Steel, Renaissance
Steel India, Edelweiss Alternative
Asset Advisors
Bhushan Power JSW Steel, Tata Steel
& Steel
Jaypee Infratech Tata Housing, Lodha Group, Jaiprakash
Associates-JSW Infrastructure
ABG Shipyard Liberty House, Mahindra & Mahindra Ltd.,
Shapoorji Pallonji Group
Amtek Auto Liberty House, Deccan Value Investors
Jyoti Structure Netmagic Solutions CEO Sharad Kumar
Sanghi led consortium
LEGAL CHALLENGES IMPACTING M&A IN INDIA
The problem is that there are no uniform stamp duty rates in all states,
which have made inter-state M&As unviable at times. Furthermore,
the market is not still mature. M&A in India is under compulsion to
get different nods from courts, approvals from the regulators, and
there are procedural bottlenecks and series of compliances. One
problem is unreasonable time required for regulatory approvals.
While doing Due Diligence in M&A deals, you will not know how
many cases are lying under dispute in different courts. There is no
mechanism for this. The acquiring company may suddenly discover
after the deal that the target company has a litigation in foreign
country. In M&A deal between Ranbaxy and Daiichi Sankyo, later
came to know after the deal that in one of the US Courts, Ranbaxy
has a dispute pending. Hence, even after reasonable Due Diligence
by professionals, the acquiring company will not know with certainty
how much liability of the target company is there. Accordingly, the
pricing, swap ratio, etc. will materially get affected.
INDIA RANKS 11TH IN 2018 AT KEARNEY
FDI CONFIDENCE INDEX
India has fallen out of top 10 destinations for Foreign Direct
Investments (FDI) in terms of its attractiveness according to 2018
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JANUARY 2019 CHARTERED SECRETARY

Apart from other tools of restructuring, why
M&A? The answer is Inorganic growth.
M&As have become an integral part of the
Indian economy. Based on macroeconomic
indicators, India is on a growth trajectory,
with the M&A trend likely to continue.
Kearney FDI Confidence Index, in which it was ranked 11th, down
from 8th in 2017 and 9th in 2016. The index was released by report
published by global consultancy firm A T Kearney.
DETAILS OF THE REPORT:
• Fall in India’s rankings may be due to teething troubles
in implementation of Goods and Services Tax (GST) and
Government’s demonetization decision in 2016
• Several of India’s reforms such as removing Foreign
Investment Promotion Board (FIPB) and liberalizing FDI
limits in key sectors such as retail, aviation, and biomedical
industries have maintained India’s high rankings in terms of FDI
attractiveness
• In future, potential investors are likely to be cautious as
they are monitoring political risks such as upcoming general
election in India
• But sheer size of Chinese and Indian markets, will continue to
draw investors and they will remain highest-ranking emerging
markets on the index.
2018 A. T. KEARNEY FDICONFIDENCE INDEX ®
Ranking
MOMENTUM OF M&A IN 2018
Recent bankruptcy law, liberalization of Foreign Direct Investment
(FDI) norms, battle in the e-commerce industry for market share and
huge fund at Asia oriented private equity funds has given rise to
unique scope for clicking M&A contracts in India.
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CHARTERED SECRETARY JANUARY 2019
IBC and Reform Impact on M&A - 2018
ARTICLE
With $104 billion M&A transaction value achieved already around
October,2018, it has already crossed last year (2017) figures.
Because, the momentum of IBC cases resolutions is being realized
and GST has been stabilized substantially. The IBC factor is going
to soothe banking sector’s pain to a large extent by substantially
reducing NPA. NCLT resolutions mean more acquisitions, more
deals. Major NCLT cases are in Pharma, Cement and Steel sectors.
Deals are with Fortis Healthcare, Ultra-tech Cement, Binani Cement,
Bhushan Steel, Tata Steel, Essar Steel to name a few. Retail sector
caters 1.3 billion either as customers or through logistic route. This
sector is on a consolidation spree and will generate more M&A
transactions. In fact, with Walmart $16 billion deal with Flipkart, it
has fuelled the fire in Amazon, Alibaba, Softbank. They are now
desperate for a slice of cake of Indian retail story and hence in bits
and pieces, varieties of M&A are happening with small companies.
ACQUISITIONS IN PROGRESS (2018) NOT FINALIZED
UK pharmaceutical giant GlaxoSmithKline Plc is looking for bids
for a controlling stake in its $4.2 billion Indian consumer-health
unit, as per market report. Kraft Heinz Co. is actively looking for an
acquisition in India and simultaneously trying to offload its stake for
about $1 billion. Similarly, bankrupt Essar Steel India Ltd. has drawn
attention from Arcelor Mittal.
2018 OVERSEAS M&A COMPLETED WITH
EUROPE INCLUDE
• Schneider Electric SA of France taking over Larsen & Toubro
Ltd.’s electrical and automation business for USD2.1 billion
• Motherson Sumi Systems Ltd.’s acquisition of French company
Reydel Automotive Group for USD201 million
• Energy Efficiency Services Ltd (EESL EnergyPro Assets Ltd)
took control of the UK’s Edina Power Services for USD76 million
• JSW Steel Ltd.’s acquisition with Italy’s Aferpi SpA for USD67
million.
Overseas M&A completed with Europe
65
 IBC and Reform Impact on M&A - 2018

OUTLOOK FOR 2019

ARTICLE
Looking at the M&A scenario explained above of 2018, it appears that
India is on a strong wicket. Unique opportunity has been offered by
NCLT route of selling the companies where no original promoters are
allowed to bid. So long, as per recent record of speed of resolution of
cases suggests (in 2018), bidders are happy. Number of cases pending
for resolution at NCLT or like are enough to carry the year 2019.
2018 and 2019’s ‘Ease of Doing Business’ ranking of India is fabulous.
This is going to improve further in years to come. Indian Consumption
and Pharma sectors are in consolidation mode. A lot of deals are in
pipelines and those deals will make 2019 a happy year for Investment
bankers. Besides, Asia specific PEs are flush with fund and eager to
shell out money for M&A deals. Reforms and legislative liberalization
are the call of the day. These reforms are congenial for M&A. However,
following factors may spoil the party to some extent.
a) Coming Election may force ruling party go for populist measures.
This may affect adversely GDP.
b) Surging oil price is an uncertainty and it may affect negatively
fiscal situation.
c) If trade war continues, it will disturb inflow of FDI in country like
India.
d) If the speed of resolution of IBC cases slow down or prolong for
legal or regulatory reasons, the fund otherwise available now for
acquisition will be diverted or invested elsewhere.
Looking at the trend of 2018 in M&A, mostly Consumer, Pharma,
Retail, e-commerce, ed-tech, fin-tech and probably telecom could be in
limelight in 2019. However, it is expected that outlook of M&A for 2019
Source: Thomson Reuters will be optimistic and favourable since the atmosphere is buoyant. CS
Top 19 High Value Deals -2018 (Final Deal Price)
Acquirer Target Sector Value Deal Type % Stake REFERENCES:
($ mn) 1. India set for $100bn-plus M&A deals in 2018, By Bloomberg,
Walmart Flipkart E commerce 16,000 Majority Stake 77% https://www.arabianbusiness.com
Bharti Indus Towers Telecom 14,600 Merger 100% 2. M&As poised to cross $100 billion-mark in 2018,4th
ONGC Ltd HPCL Energy/Gas 5,780 Acquisition 51% October,2018
Tata Steel Ltd Bhushan Steel Manufacturing 5,515 Majority Stake 73% 3. h t t p s : / / w w w . l i v e m i n t . c o m / C o m p a n i e s /
UP Limited Arysta Cropscience Agri. Pesticide 4200 Acquisition 100%
IuQ7k4nI4GKgNdHGXAL2WN/MAs-poised-to-cross-100-
Ltd.(USA)
billionmark-in-2018.htm
Unilever Ltd GSK Ltd. (Horlicks) FMCG 3800 Acquisition 100%
Reliance Jio R Com. Ltd Telecom 3750 Acquisition N.A.
4. https://www.grantthornton.co.uk/insights/2018-setting-new-
Adani T. Ltd R. Infra Ltd Energy 2938 Acquisition 100% records-for- indian-ma/ 2018 setting new records for Indian
(Mumbai Power) M&A, 2nd August,2018, Anuj Chande
Hindalco Aleris Corporation 2600 Acquisition 100% 5. Grant Thornton India LLP, Grant Thornton Dealtracker, 2018
Industries (USA) 6. http://www.forbesindia.com/blog/legalese/mergers-and-
Manipal Fortis Healthcare Hospital 2300 Acquisition 100% acquisitions-outlook-in-india-for-2018/
Hospital Ent. Ltd. 7. https://www.pwc.in/publications/2018/decoding- the-code-
Ltd. survey-on- twenty-one-months-of-ibc-in-india.html
Schneider L&T Ltd. (E&A) Manufacturing 2,121 Acquisition 100% 8. https://www.taxmann.com
E SA 9. https://www.vccircle.com/how-bankruptcy-law-and-reforms-will-
ReNew Power Ostro Energy 1,662 Acquisition 100% spark-m-as-across-sectors Rajesh Begur How bankruptcy law
V P. Ltd. Energy P. Ltd.
and reforms will spark M&As across sectors
IDFC Bank Ltd Capital First Ltd BFSI 1,460 Merger N.A
10. www.forbesindia.com/article/special/gst-a-critical-reform-
Macquarie NHAI Toll Road 1400 Acquisition 100%
(PE)
that-GST: A critical reform that will drive economic growth By
UltraTech Century Textile Manufacturing 1,306 Acquisition 100% RASHESH SHAH
Cement Ltd. I Ltd 11. https://www.atkearney.com/foreign-direct-investment-
Ultra-tech Binani Cement Manufacturing 1132 Acquisition 100% confidence-index/full-report
Cement 12. https://www.hrblock.in
KKR/Radiant Max Healthcare Hospital 550 Acquisition Majority 13. https://www.bloombergquint.com/markets/how-india-s-
Life Care Pvt. Ltd. Stake bankruptcy-law-redo-may-spur-m-a-heyday-quicktake
Ltd. 14. What’s is up for sale -India’s Economic Survey 2017-18
Cipla arm Avenue Pharmaceutical 215 Acquisition 100% 15. https://www.financialexpress.com/industry/ibc-boost-how-
InvaGen Therapeutics
indias-distressed-merger-and acquisition-market-received-
Motherson Reydel Automotive Auto Ancillary 201 Acquisition 100%
Sumi System
gained-from-bankruptcy- law/1368756/
Ltd. 16. https://www.pwc.in/assets/pdfs/publications/2018/deals-in-india.pdf
Total 71530 17. h t t p s : / / w w w . p w c . i n / a s s e t s / p d f s / t r s / m e r g e r s - a n d -
acquisitions-tax/mergers-and-acquisitions-the-evolving-
*** Total ($mn 71530 out of 12800 in 2018) indian-landscape.pdf

66 I
JANUARY 2019 CHARTERED SECRETARY
Key Challenges to Corporate
Governance in India
On paper, India has the most stringent regulations in the world for corporate governance. Indians are amongst the
most law abiding citizens outside India because they fear the consequences of breaking the law. Large corporate
investors are becoming a challenge to the management of the company because they are influencing the decision
of the company. Corporate governance is necessary to build public confidence in the corporation which was
shaken due to numerous corporate frauds in recent years. It is important for reviving the confidence of investors.
Rabindra Kumar, FCS
Company Secretary, Vasudha Pharma Chem Limited, Hyderabad
cs@vasudhapharma.com
“Affirmative action must be rooted in the principles of justice and equality.” -
- Nelson Mandela
W
ith 20 million shareholders India is one of the largest
emerging markets. The concern of Corporate Governance
in India was coupled with industrial reforms in 1991.
Corporate Governance is a process set up for the firms based on
certain systems and principles by which a Company is governed.
The guidelines ensure that the Company is directed and controlled
in a way so as to achieve the goals and objectives to add value
to the Company and also benefit the stakeholders in the long
term. In a nutshell, corporate governance is about ensuring that
the company management is acting in the larger interests of
shareholders. For better understanding first we understand the
Seven Characteristics of Corporate Governance:
DISCIPLINE
Corporate discipline is a commitment by a company’s senior
management to adhere to behavior that is universally recognized and
accepted to be correct and proper. This encompasses a company’s
awareness of, and commitment to, the underlying principles of good
governance, particularly at senior management level.
“All involved parties will have a commitment to adhere to
procedures, processes, and authority structures established
by the organization.”
TRANSPARENCY
Transparency is the ease with which an outsider is able to
make meaningful analysis of a company’s actions, its economic
fundamentals and the non-financial aspects pertinent to that
business. This is a measure of how good management is at
making necessary information available in a candid, accurate and
timely manner – not only the audit data but also general reports
and press releases. It reflects whether or not investors obtain a
true picture of what is happening inside the company.
“All actions implemented and their decision support will
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CHARTERED SECRETARY JANUARY 2019
ARTICLE
be available for inspection by authorized organization and
provider parties.”
INDEPENDENCE
Independence is the extent to which mechanisms have been put
in place to minimize or avoid potential conflicts of interest that
may exist, such as dominance by a strong chief executive or large
share owner. These mechanisms range from the composition
of the board, to appointments to committees of the board, and
external parties such as the auditors. The decisions made, and
internal processes established, should be objective and not allow
for undue influences.
“All processes, decision-making, and mechanisms used will
be established so as to minimize or avoid potential conflicts
of interest.”
ACCOUNTABILITY
Individuals or groups in a company, who make decisions and
take actions on specific issues, need to be accountable for their
decisions and actions. Mechanisms must exist and be effective to
allow for accountability. These provide investors with the means
to query and assess the actions of the board and its committees.
“Identifiable groups within the organization - e.g., governance
boards who take actions or make decisions - are authorized
and accountable for their actions.”
RESPONSIBILITY
With regard to management, responsibility pertains to behavior that
allows for corrective action and for penalizing mismanagement.
Responsible management would, when necessary, put in place
what it would take to set the company on the right path. While the
board is accountable to the company, it must act responsively to
and with responsibility towards all stakeholders of the company.
“Each contracted party is required to act responsibly to the
organization and its stakeholders.”
FAIRNESS
The systems that exist within the company must be balanced in
taking into account all those that have an interest in the company
and its future. The rights of various groups have to be acknowledged
and respected. For example, minority shareowner interests must
receive equal consideration to those of the dominant share owner(s).
“All decisions taken, processes used, and their implementation
will not be allowed to create unfair advantage to any one
particular party.”
SOCIAL RESPONSIBILITY
A well-managed company will be aware of, and respond to, social
67
 Key Challenges to Corporate Governance in India
A corporate has a lot of shareholders
ARTICLE
with different attitudes towards corporate
affairs. Corporate Governance protects the
shareholders’ democracy by implementing it
through its code of conduct.
Large corporate investors are becoming a
challenge to the management of the company
because they are influencing the decision of
the company. Corporate Governance set the
code to deal with such situations.
issues, placing a high priority on ethical standards. A good corporate
citizen is increasingly seen as one that is non-discriminatory, non-
exploitative, and responsible with regard to environmental and
human rights issues. A company is likely to experience indirect
economic benefits such as improved productivity and corporate
reputation by taking those factors into consideration.
THE NEED FOR CORPORATE GOVERNANCE IN INDIA
In the last decade, corporate fraud and governance failure occurred
frequently which is why we require good corporate governance in
the country. India provides proper norms and laws aligned with
international requirements to govern a corporate. Some of the
important reasons are discussed below which raised the need for
corporate governance in India.
A corporate has a lot of shareholders with different attitudes
towards corporate affairs. Corporate Governance protects the
shareholders’ democracy by implementing it through its code of
conduct. Large corporate investors are becoming a challenge to
the management of the company because they are influencing the
decision of the company. Corporate Governance set the code to
deal with such situations.
Corporate governance is necessary to build public confidence in
the corporation which was shaken due to numerous corporate
frauds in recent years. It is important for reviving the confidence
of investors.
Society having greater expectations from corporate, they expect
that corporates take care of the environment, pollution, quality of
goods and services, sustainable development etc. code to conduct
corporate is important to fulfil all these expectations. Takeovers of
the corporate entity created lots of problems in the past. It affects
the right of various stakeholders in the company. This factor also
pushes the need of corporate governance in the country.
Globalization made the communication and transport between
countries easy and frequent, so many Indian companies are listed
with international stock exchanges which also triggers the need
for corporate governance in India. The huge flow of international
capital in Indian companies are also affecting the management of
Indian Corporates which require a code of corporate conduct.
CORPORATE GOVERNANCE FRAMEWORK IN INDIA
The Indian framework on Corporate Governance has been
vastly in sync with the international standards. Broadly, it can be
described as under:
The Companies Act, 2013 has provisions concerning Independent
Directors, Board Constitution, General Meetings, Board Meetings,
68
Board Processes, Related Party Transactions, Audit Committees,
etc.
SEBI (Securities and Exchange Board of India) Guidelines ensure
the protection of investors and have mandated the companies to
adhere to the best practices mentioned in the guidelines.
Accounting Standards issued by the ICAI (Institute of Chartered
Accountants of India). The disclosure of financial statements is
also made mandatory by the ICAI backed by the Companies Act
2013, Section 129.
Standard Listing Agreement of Stock Exchanges applies to the
companies whose shares are listed on various stock exchanges.
Secretarial Standards Issued by the ICSI (Institute of Company
Secretaries of India) issues standards on ‘Meetings of the board of
Directors’, General Meetings’, etc.
WHY DOES INDIA HAVE A CORPORATE
GOVERNANCE PROBLEM?
On paper, India has among the most stringent regulations in
the world for corporate governance.
Unfortunately, in practice, returns to the minority shareholders
depend on the benevolence of the promoter. If the promoter needs
to return to the equity markets and adequately weighs the shadow
of the future, minority shareholders receive informal protection.
In the recent past, we have seen a plethora of cases where stocks
were hammered in a short span of time. Companies like Yes Bank,
ICICI Bank, P C Jewellers, Fortis, and even stocks like Infosys
and Tata group companies were not spared. YES Bank and Axis
Bank were cases where RBI had refused to extend the tenure of
CEOs. In case of ICICI, there were serious allegations that many
transactions were not in the interest of the bank’s profitability.
Even for Infosys, institutions were worried that the board was
allying with the founder-promoters rather than worrying about
shareholders. Smaller companies like PC Jewellers had made
opaque deals and group transactions with limited disclosure.
The common thread between these events is “Weak Corporate
Governance.” Independent directors represent the interests
of minority shareholders. But, as was generally observed,
these directors normally toe the promoter’s line. In exceptional
circumstances when they do not, even someone powerful and
connected can be dismissed because promoters ‘control’ the
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JANUARY 2019 CHARTERED SECRETARY

In practice, returns to the minority
shareholders depend on the benevolence
of the promoter. If the promoter needs to
return to the equity markets and adequately
weighs the shadow of the future, minority
shareholders receive informal protection.
Annual General Meeting. Such events have a chilling effect on
the ‘independence’ of directors, as it reiterates to everyone the
power of promoters in India.
The problem in India, and also much of the world, is that
companies engage in symbolic governance to meet external
demands for increasing accountability. But, this comes at the
cost of real governance through decoupling. Decoupling is
when formal structures are adopted in response to external
stakeholder demands, while actual practices are tailored to
the needs of internal stakeholders. Indians are amongst the
most law abiding citizens outside India because they fear the
consequences of breaking the law.
CULTURE OF ORNAMENTAL DIRECTORS
Most Indian promoters have chosen the option to follow form
over spirit in implementing clause 49 (a great governance
code by itself) and have stuffed their boards with ornamental
directors (eminent people in their respective careers) whose
independence is often questionable in deciding promoter-
minority shareholder conflict of interest situations.
Corporate governance issues arise due to various reasons.
Firstly, independent directors are people with a high reputation
and immense experience who generally sit on multiple boards.
The last thing they want is to be seen as trouble makers for
the management. The best step that independent directors
have taken in the face of such conflicts is to resign from the
board. Secondly, institutional shareholders have not been very
assertive on the boards. FPIs typically leave the corporate
governance issues to proxy firms. Domestic institutions
prefer not to disrupt the existing management to protect their
investment value. Thirdly, proxy firms are yet to take off in India
and the handful of proxy firms, at best, play the role of a sounding
board for shareholders. Last but not the least, managements
have not really worried about corporate governance since there
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CHARTERED SECRETARY JANUARY 2019
Key Challenges to Corporate Governance in India
ARTICLE
is no direct and established correlation between Corporate
Governance Standards and the market value of the stock.
Markets have seen stocks turning out to be multi-baggers with
a good product story and little focus on corporate governance.
However, what is happening in the last few years is that any
negative news flows on the corporate governance front has
been leading to sharp value destruction. This was observed
with respect to the stocks of Yes Bank, Dewan Housing, and P
C Jewellers among others. That may force boards to become
a lot more vigilant. One can safely argue that the equity cult is
yet to spread in a big way and hence the impact of corporate
governance on small shareholders is minimal. But here, the
core point goes for a toss. There is a massive retail influx into
equity mutual funds and that makes them indirect shareholders.
If bad governance destroys the value of stocks and bonds, then
it indirectly impacts the NAVs of mutual funds.
The challenges of corporate governance are significant though,
irrespective of the intent with which the overt or covert actions
were conducted. These cover a wide spectrum of distinct but
related issues and primarily centre around a three-by-three
matrix in terms of the motivation for deviant behaviour and
those groups whose actions can influence proper direction and
control.
The three broad categories of motivators for misgovernance
are to do with outright frauds, undue enrichment and imposition
of will by retired founders on boards. And the behaviour of
three groups that can influence the outcomes significantly are
the conduct of independent directors and the efficacy of this
institution as a disciplining mechanism in a promoter-controlled
board; conduct of auditors and members of the audit committee
in certifying the financial statements; role of the regulator in
terms of proactive and reactive measures appropriate to a given
situation.
It would be contextually relevant to briefly recount the broad
issues for some of the cases mentioned above. Satyam related
to falsification of accounts including overstatement of revenues,
diversion of funds to related parties; Kingfisher and United
Spirits mainly related to illegal inter-corporate funding to related
parties, falsifications of accounts; Fortis and Ricoh were similar
with the latter being high on the scale of frauds. Of course,
being listed entities, all these had stock price implications also
as an underlying theme.
KEY ISSUES THAT CORPORATE GOVERNANCE
NEEDS TO FOCUS ON
Although there exists many issues in the field of Corporate
Governance especially in India, an effort has been made to
highlight only the major ones here:
Board Performance
The requirement of at least one woman director is necessary,
and also the balance of executive and non-executive directors
are not maintained. Evaluation is not performed from time to
time and transparency is lost somewhere. The performance
is not result oriented. These requirements are not always met
with.
Independent Directors
Independent directors are appointed for a reason which does
not seem to be fulfilled in the current scenario. Even after SEBI
guidelines being issued to the corporates, for the appointment
of an audit committee or giving of a comprehensive definition
69
ARTICLE Key Challenges to Corporate Governance in India

of the independent directors, the actual situation appears to be

worse.

Accountability to Stakeholders
The accountability is not restricted to that of the shareholders or
the company, it is for the society at large and also the environment.
The directors are not to keep in mind their own interests but also
the interests of the community.

Risk Management
The risk management techniques are to be mandatorily undertaken
by the directors as per the Company Law and they have to mention
in their report to shareholders as well. This is not being done in the
most sincere manner required for the job.

Privacy and Data Protection

This is an important governance issue. Cybersecurity has evolved
to be the most important aspect of modern governance. Good
governance can only be achieved once the directors and other
leaders in the company are well known about the hazards in this field.

Corporate Social Responsibility (CSR)
Being among few countries to legislate CSR, it is mandatory for
companies to invest minimum 2% of the profits in the last 3 years
for CSR activities. Otherwise proper reasons should be mentioned
in the reports in case of failure. The companies seem to be
reluctant towards making such investments.
SOME CRITICAL ISSUES THAT THE CORPORATE
GOVERNANCE FRAMEWORK NEEDS TO FOCUS ON
Is the board performing in the larger interests of the shareholders?
For example, in case of IL&FS, not a single red flag was raised
by any board member. Better corporate governance could have
easily resolved the issue. Ensuring that independent directors are
actually non-partisan. In fact, the onus should be on independent
directors to keep a tab on the promoter directors. That is only
possible with a more transparent framework for evaluating
independent directors. Does the company have adequate risk
management systems in place? In case of IL&FS, independent
directors were required to red flag the maturity mismatch. With
respect to ICICI Bank, independent directors almost dismissed
the allegations till the pressure built up. Corporate governance
should place major focus on cyber security. We have seen how
data has been misused in case of Facebook and Yahoo. It may be
extremely mission critical as we move into an increasingly data-
driven world. What could really be the need of the hour is a central
regulatory authority to oversee corporate governance issues.
In line with the issues mentioned above, there is a greater onus
upon the directors of the companies to adapt to the standards and
best practices provided in various laws and guidelines. Other than
the laws and norms prescribed by various institutions from time to
time, the companies are also expected to act responsibly towards
the society as a whole because the corporates are so huge in the
current times, that they affect each and every individual citizen
of the country equally. The burden on the companies is already
reduced as they are made to follow a set of guidelines and they
are not required to make any amends to that. It is also required that
the stakeholders also participate in the decision making processes
to make it a contributory job altogether.
CONCLUSION
The more the level of corporate governance, the stronger is the
company in the eyes of the shareholders of the company. The
independent and the active directors are the ones who infuse and
The problem in India, and also much of
the world, is that companies engage in
symbolic governance to meet external
demands for increasing accountability. But,
this comes at the cost of real governance
through decoupling. Decoupling is when
formal structures are adopted in response
to external stakeholder demands, while
actual practices are tailored to the needs of
internal stakeholders.
contribute towards displaying the corporate as that of having a
positive outlook. When it comes to investment, the investors also
seek to find the companies with stronger corporate governance in
them. The corporate governance requirements in India deliberate
the companies to audit their work culture and give the shareholders
community a more positive outlook as their actions have moral
and legal implications. The new norms after the Companies
Act, 2013 came into picture, are very balanced and innovative.
They have helped reform the growth of Indian companies as per
international standards. Shareholders are involved in the decision
making of the companies and various safeguards have been put
in order so that the interests of the shareholders and the society
as a whole is not sidelined. Corporate Governance imbibes
the much-required transparency in the corporates. It pushes
India ahead in the race of emerging economies of the world. It
is clear that good corporate governance makes good sense.
The name of the game for a company in the 21st Century will
be to conform while it performs. If management is about running
the business, governance is about seeing that it is run properly.
However, despite all the shortcomings in the overall contemporary
governance environment in our polity, one is still hopeful of the
Indian corporate sector’s willingness to adopt reforms in this
crucial area. Once there is an acknowledgement that we are a
third world Asian country and that there are no short-term fixes
for driving what is really a fundamental change of mind-set and
behaviour of the promoters, political class and managers in any
corporate setup in our socio-cultural context, many solutions can
emerge in the interim.  CS

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Corporate Governance in Mergers and
Acquisitions
Mergers and Acquisitions (M&A) have become important tools to respond to the increasing global competition, rapid
expansion into foreign markets and the economic survival of firms. An M&A transaction can often stress-test the corporate
governance practices of both the acquirer and the target. The aim of the present article is to analyse how corporate
governance and in particular board structure affect M&A deals.
Jaladhi Shukla*, FCS
Company Secretary
Adani Transmission Limited, Ahmedabad
jaladhi.shukla@gmail.com.
INTRODUCTION
C
orporate governance refers to the top management
process that manages and mediates value creation
for, and value transference among, various corporate
claimants (including the society-at-large), in a context that
simultaneously ensures accountability toward these claimants.
Corporate Governance experts usually focus on the importance
of good governance in the day-to-day management of a
company. While governance has an important role in routine
* The views expressed in this article are solely the views of the Author and are
not connected in any way with the views of the Company/or the Group where
the Author is employed.
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ARTICLE
corporate administration, other events which occur less
frequently in the corporate life-cycle also bring into sharp focus,
the difference between companies following robust governance
practices and those with inadequate governance systems. One
such category of events is a merger or an acquisition (M&A)
– an M&A transaction can often stress-test the Corporate
Governance Practices of both the acquirer and the target.
Some studies estimate that between 70%-90% of all
acquisitions fail to result in the expected growth of the resulting
entity.1 While parties to an M&A transaction usually base their
decision to enter into the transaction on expectations of future
performance and business risks arising from the transaction,
there is a case to be made for lessening parties’ focus on
sophisticated financial models and projects, and looking instead
at whether there are differences in corporate cultures that will
impede successful integration and growth. Mis-matches may
arise from varying and unexpected sources, including fierce
competition in the same industry, differences in Corporate
Governance Systems, contrasting cultures, and divergent
approaches to compensation and employment policies or a
combination of several factors.
Parties who do not have a deep understanding of their
counterpart’s Corporate Governance Mechanism, are fated
to encounter challenges in post-M&A integration and efforts
to realise business synergies. While this principle may seem
intuitive, instances are rife of acquirers and targets who find out,
after an M&A transaction is concluded, that there are significant
challenges to integrating their respective management and
governance styles.
As Indian companies continue to focus on strong Corporate
Governance Standards, firms who have a reputation for
robust governance practices will find it easier to stand out and
command a “governance premium” in a crowded market. A
history of strong governance standards serves as a reliable
signalling mechanism and provides a real timing and strategic
advantage, particularly in competitive M&A transactions.
Sellers with a reputation for strong Corporate Governance
are likely to find the buyers easier in an adverse market, with
an ability to negotiate warranty or indemnity claim limits or
insurance premiums in a beneficial manner.
Corporate Governance is a two way street –
71
 Corporate Governance in Mergers and Acquisitions
While evaluating an M&A transaction, the
ARTICLE
Board must keep in mind, its fiduciary duties
towards shareholders and ensure that
directors’ personal interests, if any, do not
dilute the Board’s broader duties of care, skill
and diligence.
GETTING ON “BOARD” WITH GOOD GOVERNANCE
Corporate Governance Rules function as toothless paper tigers
unless paired with efficacious tiger tamers - in this case, the
Board. A deep-rooted culture of Corporate Governance exists
only if the rank and file of a company keeps governance norms
in mind while discharging their functions and are cognizant of
due oversight by the Board. The New Act recognizes the role
of the Board in ensuring that Corporate Governance Standards
are maintained, and mandates approval of the Board and
shareholders for various categories of transactions, including
M&A, which would result in a disposal of substantial assets
or undertakings, and material transactions with related parties.
While the law suggests that the Board should adopt a proactive
and “compliance-focused” approach while considering an
M&A transaction, lapses in a Board’s governance standards
often become apparent only when viewed on a retrospective
basis after such transaction goes bust or shareholders’ value
gets eroded as a result of such transaction. For instance, in
2016, 2 listed companies engaged in the education sector
put on hold, an announced merger plan, seeking time to
evaluate the financial results of one of the merging entities.
This deferral was not viewed positively and questions were
raised on the announcement of the merger and subsequent
fall in stock prices of both companies, as well as stake sales
by the promoter immediately preceding the announcement.
Resignations of directors from the Board of one of the entities
after the announcement also raised eyebrows as to the
intention of parties at the time of entering into the merger.
The announcement of an M&A transaction often results in past
governance lapses of the combining parties coming into focus.
For instance, when a diversified listed company proposed to
merge a promoter entity into itself in 2013, the proxy advisory
firms questioned certain related party transactions entered into
by the promoter entity in the 3 years preceding the proposed
72
merger, though these did not directly pertain to the transaction
announced. Further, actions taken by the Boards leading up
to an announcement are also increasingly being scrutinized
closely. For example, there are several recent instances in
which Boards have issued denials of a prospective transaction
mere weeks before announcing the execution of transaction
documents – thereby diluting stakeholders’ reliance on such
announcements. In addition to the above, proxy advisory firms
have begun to highlight lapses in the Boards’ governance
standards in their reports and have also increased their scrutiny
of the valuation reports, fairness opinions and approvals
from the Audit Committee and the Boards for proposed M&A
transactions.
While evaluating an M&A transaction, the Board must keep in
mind, its fiduciary duties towards shareholders and ensure that
directors’ personal interests, if any, do not dilute the Board’s
broader duties of care, skill and diligence. The Boards would be
well-advised to implement mechanisms that ensure decisions
regarding M&A are based on fair and unbiased evaluation that
can withstand robust scrutiny. The Boards should rely upon
or constitute specialist committees such as Audit Committee
and the Risk Management Committee for decision-making
relating to M&A. The Boards may also consider constituting
dedicated sub-committees (possibly comprising a majority of
non-executive or independent directors) to review proposed
M&A transactions and to work closely with executive reams in
determining deals that should be pursued seriously. Evaluation
alone does not complete the Board’s role in an M&A transaction,
and the Board of the acquirer in particular is also entrusted with
the responsibility of implementing integration after completion
of the transaction.
THE DANGERS OF CRUISE CONTROL
Boards cannot afford to act as a mere rubber stamp in relation
to M&A, and recent experience demonstrates that minority
shareholders are increasingly questioning the transactions
approved by the Board. SEBI’s thought process on this topic
also appears to have evolved to impose greater liability on the
Board – this is evidenced in the SEBI Listing Regulations, which
direct the Board to “step back” to assist executive management
by challenging the assumptions underlying strategic initiatives
(such as acquisitions) and risk appetite, thereby tasking the
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JANUARY 2019 CHARTERED SECRETARY

Board as a gatekeeper to review decisions relating to M&A.
Further, the independent directors on a Board carry an additional
load of scrutiny while reviewing any proposed M&A transaction.
Under the New Act, the independent directors are required to
have relevant expertise and experience in one or more fields
of finance, law, management, sales, marketing, administration,
research, corporate governance, technical operations or other
disciplines related to the company’s business. Accordingly, in
addition to their role as disinterested contributors to decision
making, independent directors should also leverage their
expertise as strategic advisors in M&A transactions. Non-
executive directors can also be independent participants and
ensure that decisions are taken without conflict of interest.
Ideally, this oversight should continue over the implementation
and integration period following the M&A transaction, and
the independent directors should not shy away from seeking
justifications from the management team for actions taken,
and to test actual outcomes against assumptions made while
evaluating the M&A transaction.
TAKING THE HIGH ROAD - PROCEDURAL AND
SUBSTANTIVE BEST PRACTICES
Historically, regulators and other judicial authorities in India
have deferred to the commercial wisdom of the Board and
shareholders for approval of M&A, except where transactions
were colourable or otherwise looking to circumvent legal
restrictions. However, given recent trends of increased public
and regulatory scrutiny of M&A transactions, it would be
prudent for a Board to ensure that its decision-making is not
only fair, but is also seen to be fair, i.e. decisions in relation to a
transaction meet standards of both procedural and substantive
fairness.
In this respect, the procedural best practices include:
1. Avoiding undue haste in decision making relating to M&A
where circumstances do not demonstrate an emergent
situation – the directors should feel free to require that
more than one meeting is held, to consider a proposed
M&A transaction, particularly where there is complex
information to be reviewed before making a decision – This
needs to be balanced, of course, against risks of leakage
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Corporate Governance in Mergers and Acquisitions
ARTICLE
of information relating to the transaction.
2. Recusal of interested directors at discussions as well as
voting regarding the transaction, which is a mandatory
requirement under the New Act.
3. Maintaining detailed documentation of discussions at the
meetings for initiation and approval of the M&A transaction,
including objections voiced by directors, concerns in
respect of the transaction or specific deal terms, and the
factors underlying key assumptions, if any.
4. Seeking to review documentation proposed for the
transaction, and in particular terms of the documents that
may result in the company incurring liabilities or protecting
against key risks. It is also increasingly common practice
for the Boards to require an independent valuation report
for the consideration underlying an M&A transaction,
particularly where listed entities are involved.
Substantive fairness requires that the interests of various
stakeholders (including shareholders and employees) are
considered and addressed by the Board – note that while
fairness can often be demonstrated by establishing that the
consideration for the transaction is fair and delivers good value,
this may not always be sufficient material to demonstrate that a
transaction is desirable. The Boards should review deal terms
carefully and seek derailed justifications for a typical terms
or payments for assets that cannot be easily valued (e.g. for
goodwill, brand equity, etc.). The commercial rationale for the
transaction should be fully discussed and deliberated and
the Board must not shy away from seeking expert opinions,
if required. One of the primary duties of the Board is to ensure
that interests of the minority shareholders are not neglected.
The SEBI Listing Regulations also provide special rights
to minority shareholders in case of transactions where the
interests of the promoter shareholders may differ from that of
the company or the minority shareholders, such as schemes
of arrangement involving related parties or compensation
agreements for profit sharing in connection with dealings in
the securities of the company. However, in addition to minority
shareholders, there are other stakeholders in a company, such
as employees, and the actions of a company may also impact
the public at large – the Board should take cognizance of the
possible impact of the M&A transaction on all stakeholders while
considering a transaction, and should evaluate and ensure that
the negative impacts are minimized during implementation.
It would be relevant for the Board to undertake or review a long-
The SEBI Listing Regulations also provide
special rights to minority shareholders in case
of transactions where the interests of the
promoter shareholders may differ from that
of the company or the minority shareholders,
such as schemes of arrangement involving
related parties or compensation agreements
for profit sharing in connection with dealings
in the securities of the company.
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 Corporate Governance in Mergers and Acquisitions

While the earlier norm for listed companies

ARTICLE
term assessment of the value creation by M&A transactions
completed during its watch, and temper the tendency of the
company’s executives to be either overly risk-averse or risk-
was to disclose as few details as possible,
taking, in determining whether to proceed with transactions. in relation to a potential M&A transaction
Strategic M&A transactions should be assessed for consistency
and compatibility in the target and the acquirer’s views of the
and as late as possible, SEBI and the stock
target’s business and its growth trajectory post effectiveness of exchanges have now forced changes to this
the transaction. Lastly, the target’s Board should not undertake a
passive role in the transaction, believing that their role is restricted
approach, by actively seeking information
to approving the proposal of the acquirer with the biggest purse. from the parties named in media speculation
The Target’s Board should evaluate M&A proposals in their
entirety instead of focusing on the quantum of compensation,
relating to a potential M&A transaction.
and proceed with the option that provides synergy for growth of
the business, and the maximum benefits for the largest number no matter how bumpy or well-paved the road, would be
of stakeholders and the company as a whole. Corporate Governance. The driver of this vehicle would be
the Management of the resultant entity, with the Board and
Mechanisms can be broadly grouped into: independent directors providing navigation inputs. Of course,
no journey is complete without passengers, and accordingly,
Internal External the various stakeholders in a company, come along for the ride.
Mechanism Mechanism While one may wonder whether the role of backseat drivers in
1. The structure and role of 1. Regulatory approvals our imaginary vehicle is alternately fulfilled by the promoters
the boards & various com- 2. Capital market mecha- or minority shareholders, a Vigilant Board equipped with a
mittees nism & disclosure norms strong Governance Framework can, in most cases, ensure
2. The role of the CEO & 3. Outside expert opinions the absence of unforeseen accidents and consequences of an
KMPs and valuation reports M&A transaction.
3. The nature of employment 4. Stakeholder relationship
practices management
4. Incentive and reward 5. Product integration
measures

HEADLIGHTS AND SIGNPOSTS: DISCLOSURES IN

THE M&A CONTEXT
The Boards would also be well-advised to keep in mind, the
increased regulatory focus on timely and accurate public
disclosures of M&A transactions. Such disclosures are the
most visible form of compliance with Corporate Governance
Norms, and companies should be mindful of the possible impact
when deciding the timing and extent of disclosures. While
the earlier norm for listed companies was to disclose as few
details as possible, in relation to a potential M&A transaction
and as late as possible, SEBI and the stock exchanges have
now forced changes to this approach, by actively seeking
information from the parties named in media speculation
relating to a potential M&A transaction. Heightened scrutiny
from institutional investors and proxy advisory firms regarding
such disclosures, and incomplete or delayed disclosures are
unlikely to escape unobserved. There are no bright-line tests
that can guide parties to a potential M&A transaction involving CONCLUSION
a listed entity on whether any disclosures are required before One of the real challenges in M&A is doing good deals and
binding agreements have been executed. The requirement for avoiding bad ones. The Board of Directors can become the
disclosures must be evaluated periodically, based on factors strong point of the company that helps it to achieve corporate
including the relative significance of the transaction vis-à-vis and economic goals and improve M&A performance as well.
the likelihood of the transaction coming to fruition. The guiding The recent M&A deals highlight the fact that better Corporate
principle for all disclosures is to disclose all information which is Governance enhances shareholder wealth and that the market
exclusively known to the listed entity which may be necessary tends to respond better to M&A by companies with better
to enable the shareholders to appraise its position while, at the Corporate Governance practices. CS

same time, ensuring that the listed company is not required

at any time to make an untrue statement or denial. A prudent
Board would ensure that protocols are in place to ensure timely
disclosures to responses provided to market rumours, as
appropriate.
If M&A transactions were to be the welding of two-wheeled
vehicles, to create a faster, more load-bearing multi-wheeled
vehicle, the axle that ensures smooth running of the vehicle,
REFERENCES
n R. L. Martin, M&A: The One Thing You Need to Get
Right, Harvard Business Review, (June 2016) (available
at: https://hbr.org/2016/06/ma-the-one-thing-you-need-to-
get-right); C. M. Christensen et al.,
n The Big Idea: The New M&A Playbook, Harvard
Business Review, (March 2011) (available at: https://hbr.
org/2011/03/the-big-idea-the-new-ma-playbook).

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Angel Tax, Valuations and Way Forward
Angel Tax is affecting the growth and sustenance of Start-ups in India. The Government has also partially acknowledged
it lately but the implementation of specific provisions of Income Tax Law in India by the Income Tax Officers and also
their judgement over basis of valuation of the companies has led to a lot of noise and uncertainty for companies and
Investor community.
Chander Sawhney, FCS patents, copyrights, trademarks, licences, franchises or any other
Partner & Head – Valuation & Deals, Corporate Professionals
New Delhi Further Fair Market Value is defined under Rule 11 UA(2) of the
chander@indiacp.com
BACKGROUND ON VALUATION, VALUATION PRACTICES
AND VALUATION STANDARDS
I
t is worth mentioning that even though Valuation is taking
place since last six decades in India, however neither there
has been any formal Registration of Valuers with any central
Authority nor any formal education or training in the field of Valuation
in India leading to non-standardized valuations. Different Regulators
in India require Valuation to be conducted using one or more
methods. At some places, the valuation method has been left to be
determined by the valuers themselves. However nowhere specific
guidance is given on Valuation application which is left over to the
understanding, experience and wisdom of the Valuer.
The above led to emergence of concept of “Registered Valuers”
under the Companies Act, 2013 to regulate the practice of Valuation
in India. With effect from 18th October, 2017 the Companies
(Registered Valuers and Valuation) Rules, 2017 (Rules) have also
come in force. These Rules prescribe eligibility, training, examination
and Registration requirements with the Authority (IBBI). The
Registered Valuers are required to follow valuation standards and
a model code of conduct has also been prescribed for Regulation of
the Profession.
The Government is also seized of the matter and is in the process
to frame Valuation Standards in India. The Ministry of Corporate
Affairs (MCA) has already formulated a “committee to advise on
Valuation matters” by making recommendations in formulation and
laying down of valuation standards and policies for compliance by
companies and registered valuers in accordance with Rule 19 of
the Companies (Registered Valuers and Valuation) Rules, 2017.
The committee includes representatives of CBDT, RBI, SEBI, IBBI,
MCA, IRDAI as well as the representatives/nominee of Industry and
Registered Valuer Organisations (RVOs). Strictly speaking, as of
now, the Registered Valuer provisions cover the Companies Act,
2013 and Insolvency and Bankruptcy Code, 2016. However, once
these get streamlined, the other Regulators are also expected to
converge their respective regulations.
LEGAL PROVISIONS LEADING TO ANGEL TAX DEMANDS
1. Position of Law
Section 56(2)(viib) of the Income Tax Act, 1961 states that where a
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ARTICLE
closely held company receives any consideration for issue of shares
to a Resident, in excess of the Fair Market Value of such shares, the
excess amount received by company shall be treated as its income
under the head other sources and taxable at 30% plus applicable
surcharge/cess.
The Explanation to Section 56(2)(viib) states that the Fair Market
Value shall be the value as may be prescribed or as may be
substantiated by the company to the satisfaction of the Assessing
Officer based on the value, on the date of issue of shares, of its
assets, including intangible assets being goodwill, know-how,
business or commercial rights of similar nature.
Income Tax Rules, 1962 which gives an option to the assesse to
choose either Book Value based method or Discounted Free Cash
Flow (DCF) Method. In case of DCF, the same shall be acceptable
only if certified by a SEBI Registered Merchant Banker. It may be
noted that Section 56(2)(viib) is not attracted if consideration is
received from venture capital companies, venture capital funds or
a class of persons notified by the government. Vide notification no.
24/2018/F.No. 370142/5/2018-TPL (Pt.) dated May 24, 2018, the
CBDT had retrospectively exempted angel investors from the Angel
Tax from 11th April, 2018 subject to fulfilment of certain terms and
conditions and approval granted by the Inter-Ministerial Board of
Certification (IMB).
The Problem
Despite the exemption notification, and a number of recognised
start-ups, only 2 start-ups have got approval from IMB. One of the
major deterrents in such approval is that the approval is Investor
specific and requires a lot of details of Investors including their
PAN, Registration documents, ITR, Net Worth, etc. Further there
are additional conditions like the aggregate post issue share capital
and premium of the start-up should not exceed ten crore rupees,
eligibility of Investor in terms of average returned income of twenty
five lacs for the preceding three financial year or net worth of two
crores on the last date of the preceding financial year.
Even after considering that the start-up meets the additional
conditions, the Angel Investors are not comfortable sharing their
specific details with the Income Tax Department. Further despite the
fact that once all the conditions are met, a start-up gets exemption
from Angel Tax, the tax department is still asking the start-up to
obtain a Valuation report from a SEBI Registered Merchant Banker
in accordance with Rule 11UA of the Income Tax Rules.
Additional Income Tax notices are also being sent on a case to case
basis to start-ups and also valuers asking for information under
section 142(1)/133(6) of the Income Tax Act. Mostly such notices
have been sent in cases where start-ups have seen down-rounds
(i.e. where their valuation has reduced from prior round of funding).
So the start ups are being assessed on a post facto basis.
Recently, the CBDT issued a statement that no coercive action
related to tax recovery would be taken till an expert panel resolves
this issue. “CBDT recognizes that start-ups are going to bring a lot
of innovation to the country and, therefore, have to be supported in
every possible manner.”
A panel of eminent experts from IITs and IIMs will be formed
soon to prepare a new framework for recognition of start ups, the
75
 Angel Tax, Valuations and Way Forward
The Ministry of Corporate Affairs (MCA) has
ARTICLE
already formulated a “committee to advise on
Valuation matters” by making recommendations
in formulation and laying down of valuation
standards and policies for compliance
by companies and registered valuers in
accordance with Rule 19 of the Companies
(Registered Valuers and Valuation) Rules, 2017.
The committee includes representatives of
CBDT, RBI, SEBI, IBBI, MCA, IRDAI as well as
the representatives/nominee of Industry and
Registered Valuer Organisations (RVOs).
CBDT statement said.
2. Assessment of Investment Transactions as Anti Abuse
Measure
Section 56(2)(viib) was introduced in 2012 as an anti-abuse
measure wherein it was suspected that black money is being routed
in disguise of Investments.
The Problem
a. Post Facto Valuation Assessment by Tax Authorities
Even though the explanation to Section 56(2)(viib) states that
the Fair Market Value shall be the value as may be prescribed
or as may be substantiated by the company to the satisfaction of
the Assessing Officer based on the value, on the date of issue of
shares, the Tax authorities are also considering the Value post facto
based on the price of latest transaction in that Start-up. By doing so,
the department is disregarding the valuation on the date of issue
of shares which does not seem to be the spirit of law and is also
contrary to the settled principles of valuation as valuation is always
date specific. Subsequent events not known at the date of valuation
cannot have any impact on the valuation on date of issue of shares
and hence not relevant for assessment purposes. The markets are
dynamic and hence the price of assets (including shares) will always
move up and down.
More than anyone else the above interpretation is hurting early stage
start-ups the most as their valuation changes very fast with growth
in their business, market dynamics, competition, etc. The start-ups
prepare their financials month by month to track their performance.
In fact change in their valuation can be exponential as they get new
Investors and new source of funding.
Reference is invited to a recent judgement of Hyderabad ITAT in
the matter of DQ Entertainment (International) Ltd. wherein ITAT
emphasised that the value at the time of making the business
decision is important, opines,”when the values are replaced
subsequently, it is not valuation but evaluation i.e. moving the post
of result determined out of projections”; further held “for valuation
of intangibles, only the future projections can be adopted and such
valuation cannot be reviewed with actuals after 3 or 4 years down
the line”; relies on coordinate bench ruling in Social Media India Ltd
and Bangalore ITAT ruling in Tally Solutions (P) Ltd.
b. Disregarding Valuation done by Valuers
Herein the lack of Valuation Standards in India has a big role to play
as the tax authorities are questioning the application of Discounted
Cash Flow Model. Questions are being asked about the basis of
assumptions of the cash flows as well as the choice of discount
rates, growth rates, etc.
Again with limited history and high dependency on capital and future
opportunities, the start-ups business models are highly volatile
76
and difficult to value. This requires considerable experience and
application of straight forward DCF model can through abnormal
numbers. In practice, experienced valuers apply DCF for start-ups
under different probabilities by factoring in qualitative aspects as well
and also doing sanity check using market based valuation models
before concluding value.
Even though a lot of valuers are taking the stand that they valued the
company based on the assumptions and future growth projections
provided by the management however it must be known that the
International Valuation Standards, 2017 (IVS) issued by the IVSC
state that it is the responsibility of the valuer to validate the projections
provided by the management. The Valuer is solely responsible for
the selection of cost of capital and growth rates and must be aware
of the Industry and market dynamics.
Reference is invited to a recently judgement of Delhi ITAT wherein
a valuation report was rejected in the matter of “Agro Portfolio Pvt.
Ltd.” obtained by the taxpayer to defend the share premium amount
on issue of shares. The grounds of rejection was that no independent
enquiry, even on test check basis, was made by the valuer to verify
the reasonableness of the figures furnished by the management.
WAY FORWARD
Thus besides the understanding of how Valuation works by the
valuers and also the income tax officers the CBDT needs to
further relax the conditions of IMB for enabling more start-ups to
register and once the conditions are met the transaction should not
be questioned post facto. In business sense, there should be no
discrimination between resident Indian investors and venture capital
(VC) funds registered with the SEBI. Globally, many countries have
created a strong angel investment ecosystem by providing tax
deductions and exemptions due to which many entrepreneurs are
even setting up their companies overseas wherein fund raising is
also easier and faster and Investors prefer to invest locally as they
are familiar with the cultural and geographical environment and it
also avoids currency fluctuations. The government must act speedily
in order to avoid brain and capital drain.
The fact that capital is getting treated as income and is brought
under the tax net is a real challenge. The same is also applicable
in case of recent transactions wherein FDI is also being questioned
as “unexplained cash credits” by the Income Tax Authorities even
though section 56(2)(viib) is not attracted to Non Residents. Herein
also the Tax Authorities are matching the actual numbers (post
facto) with the projected ones and adding the difference amount to
tax. However in a few Judgements, ITAT has deleted such additions
emphasising that the value at the time of making the business
decision is important, opines, “when the values are replaced
subsequently, it is not valuation but evaluation i.e. moving the post
of result determined out of projections”.
Reference is also invited to the judgement of Bombay High Court in
the matter of “Vodafone India Services Pvt. Ltd.”(VISPL) wherein the
Bombay HC categorically held that issue of shares at a premium by
the VISPL in favour of its Associated Enterprise did not give rise to
any “income” from an International Transaction, and therefore, there
was no need to invoke Transfer Pricing provisions. This judgement
clearly segregated issue of capital as a capital account transaction.
The GAAR provisions are already there under Income Tax Act
that should be used to check specific transactions above specified
threshold for any such tax avoidance practices. General notices
to start-ups and other companies is not a correct way to meet
revenue demands. The government launched the Start-up India
initiative in January 2016 to build a strong ecosystem for nurturing
innovation and entrepreneurship and it is high time that we create
an enabling ecosystem for businesses by promoting India as an
Investor friendly Country by enabling ease of doing business in
true spirit and on the ground. CS
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JANUARY 2019 CHARTERED SECRETARY
Angel Tax: Paradigm Continues
and Intensifies
The article aims to bring to the fore, the core issues faced by Start-ups due to the controversial ‘angel tax’ provision,
i.e. Section 56(2)(viib) of the Income Tax Act, 1961. It traces out the chronological developments relating to the
provision including the exemption under Start-up India Action Plan, 2016, and other notifications issued by the
DIPP and CBDT. It also provides industry insights with respect to the matter.
Sohini Mandal
Advocate, Associate Partner, NovoJuris Legal, Mumbai.
sohini@novojuris.com
T
he year 2018 was an interesting year for start-ups and
one of the issues that attracted most attention within
the start-up and angel investor ecosystem, was the
saga of ‘angel tax’. The relevant provision is laid out in Section
56(2)(viib) of the Income Tax Act, 1961 (the “Act”), which was
introduced through the Finance Act 2012, following from the
Budget Speech of 2012-2013 of the then Minister of Finance
Mr. Pranab Mukherjee. Emphasis was placed in the Speech
on various challenges of a global recession that the Indian
economy was striving not to get affected by at the concerned
point of time in reference. The tone was very clear on how the
Indian economy was then at a juncture to take hard decisions
to address elements of black money and corruption in public
life. A series of measures were therefore proposed “to deter
the generation and use of unaccounted money”, including
“increasing the onus of proof on closely held companies for
funds received from shareholders as well as taxing share
premium in excess of fair market value”, taxable at the highest
rate, irrespective of the slab of income.1
With this context, let us take a look at Section 56(2)(viib)
(the “Section”), which reads as follows:-
“Income from other sources.
56. (1) ……
(2) In particular, and without prejudice to the generality of
the provisions of sub-section (1), the following incomes,
shall be chargeable to income-tax under the head “Income
from other sources”, namely:-
……
(viib) where a company, not being a company in which the
public are substantially interested, receives, in any previous
year, from any person being a resident, any consideration
for issue of shares that exceeds the face value of such
1
Budget 2012-2013, Speech of Pranab Mukherjee, Minister of Finance, March 16, 2012, as
available at https://www.finmin.nic.in/sites/default/files/bs1.pdf?download=1 (visited on June
12, 2018).
CHARTERED SECRETARY JANUARY 2019 I 77
ARTICLE
shares, the aggregate consideration received for such
shares as exceeds the fair market value of the shares:
Provided that this clause shall not apply where the consideration
for issue of shares is received—
(i) by a venture capital undertaking from a venture capital
company or a venture capital fund; or
(ii) by a company from a class or classes of persons as may be
notified by the Central Government in this behalf.
Explanation.—For the purposes of this clause,—
(a) the fair market value of the shares shall be the value-
(i) as may be determined in accordance with such method as
may be prescribed; or
(ii) as may be substantiated by the company to the satisfaction
of the Assessing Officer, based on the value, on the date
of issue of shares, of its assets, including intangible assets
being goodwill, know-how, patents, copyrights, trademarks,
licences, franchises or any other business or commercial
rights of similar nature, whichever is higher;”
Two aspects of the Section have gained prominence in the
ensuing years and especially in 2018, pursuant to certain
notifications and legislative changes: - (a) computation of
fair market value; and (b) applicability of the provision to
investments raised from ‘angel investors’ (hence the name
‘angel tax’).
Methods prescribed for computation of fair market value, as
mentioned in explanation (a)(i) of the Section are set out in
Rules 11U and 11UA of the Income Tax Rules, 1962. Rule
11UA, earlier, provided for the computation of valuation of
unquoted equity shares, either as per the mathematical
formula (provided in the Rule), or as determined by a
merchant banker or an accountant as per the Discounted
Cash Flow (DCF) method, at the option of the assessee.
However, when read with explanation (a)(ii) of the Section,
the computation has to be the higher of the methods
prescribed, or as may be substantiated to the satisfaction
of assessing officers (AOs) on the basis of certain specified
parameters.
Thus, in order to be compliant with the Section, early stage
companies started moving ahead with chartered accountant
determined valuations for investments raised from resident
angel investors, following the DCF method. This was also
in parity with the requirement for the private placement
process under Rule 13 of the Companies (Share Capital
and Debenture) Rules, 2014. However, understanding
varied start-up business ideas and models with focus on
 Angel Tax: Paradigm Continues and Intensifies

Rule 11UA, earlier, provided for the

ARTICLE
intellectual property or goodwill or business or commercial
rights requires expert knowledge and placing reliance on
the satisfaction of the AO opened a raft of various demand
computation of valuation of unquoted equity
notices. The risk still remained to the extent valuations shares, either as per the mathematical formula
could not be substantiated to the satisfaction of the
AOs, upon receipt of a notice in this regard. On a literal
(provided in the Rule), or as determined by
interpretation, this may be considered as taking a step a merchant banker or an accountant as per
towards understanding the business perspective by the
AOs while putting in place right checks and balances for
the Discounted Cash Flow (DCF) method, at
curbing money laundering and corruption. However, any the option of the assessee. However, when
element of satisfaction, has its own nuances. It brings in a
certain amount of discretion that is required to be exercised
read with explanation (a)(ii) of the Section,
with caution, especially in the context of varied business the computation has to be the higher of
ideas and models that could be novel in the Indian context
and therefore would require a greater understanding
the methods prescribed, or as may be
and knowledge of the intellectual property or goodwill or substantiated to the satisfaction of assessing
business or commercial rights thereof. The understanding
would also have to be on the basis of different commercial
officers (AOs) on the basis of certain
contexts, such as implementation of anti-dilution rights. specified parameters.
Such rights are typically available to financial investors and
often entail issuance of additional shares at minimum price,
to give effect to commercially agreed upon rights.

Much has been written on the multiple incidents of start-

ups receiving notices under Section 56(2)(viib), having to
justify commercially driven business decisions. This led
to various representations to the Government by industry
bodies, to take a re-look and if possible bring down Section
56(2)(viib).

The first sigh of relief came with the introduction of the Start-
up India Action Plan launched by Prime Minister Narendra
Modi on 16 January 2016 (the “Action Plan”), as part of a
flagship initiative of the Government of India for boosting
the start-up ecosystem in India.

• The Action Plan brought forth a definition of ‘Start-up’

and conditionalities based on which a Start-up could be
considered for recognition under the Action Plan. The Action
Plan also recognised that it is difficult to determine FMV of
shares in the context of Start-ups, which might very well be
just at the conceptualization or development stage and in
most cases capital investments in Start-ups would be made
at much higher valuations than what could be traditionally
considered as FMV, which is the exact scenario that falls
under the ambit of Section 56(2)(viib)
• With this background, the Action Plan extended the
exemption under Section 56(2)(viib) to investments made
by incubators in Start-ups as well
• What followed a few months later was a Notification dated
14 June 2016, issued by the Central Board of Direct Taxes
(CBDT) that further extended the exemption, in the context
of recognised Start-ups to ‘person’ as defined under Section
2(31) of the Income Tax Act, 1961. This includes individual,
hindu undivided family, company, firm, association of
persons, local authority, and any other artificial juridical
person.
This led many early stage companies to strive for recognition
under the Action Plan. It almost became a parallel legislation
taking recognised Start-ups under its ambit and promoting the
Start-up ecosystem for ease of doing business. Unrecognised
start-ups/early stage companies, however, continued to struggle
with the woes of the angel tax regime.
Amidst all this, the Department of Industrial Policy and
Promotion (DIPP) issued a Notification dated 11 April 2018
that introduced the following additional nuances for recognised
‘Start-ups’ also:-
A. Any ‘Start-up’ falling under the ambit of the definition
provided as such in the Notification and being a private
limited company, can now be considered for an ‘approval’
for the purposes of Section 56(2)(viib), if certain
conditionalities are fulfilled. The conditionalities include
– (a) the aggregate amount of paid up share capital and
share premium after the proposed issue, not exceeding Rs.
10 Crores;
‘Proposed’ could be read as ‘prior approval’, meaning a
recognised ‘Start-up’ would now have to wait for an approval
before they can raise seed level funds from resident angel
investors, which are many a times, crucial for jet-setting the
business. Speedy execution and implementation being the
foremost criteria for raising such seed level funds by early stage
companies, introducing an element of ‘prior approval’ could be
massively counter-productive. Further, the process appears to
be each investment based and not a one-time approval.
Effectively, this also means that for a start-up company to get
relief under Section 56(2)(viib) now it would have to go through
a 2 layer approval process. One for the recognition by DIPP,
that requires it to be not more than 7 years old, turnover in
any financial year not exceeding Rs. 25 Crores, and working

78 I
JANUARY 2019 CHARTERED SECRETARY

towards innovation, development or improvement of products or
processes or services, or if it is a scalable business model with
a high potential of employment generation or wealth creation.
The second layer of approval would be as mentioned above. It
may be noted here that approval has been specifically denied
by the Inter-Ministerial Board of Certification2 (the “Board”) in
cases where investment has been raised prior to 11 April 2018.3
B. The investor/proposed investor has to have an average
returned income of at least Rs. 25 Lakhs for the 3 preceding
financial years or the net worth of at least Rs. 2 Crores on
the last date of the preceding financial year;
Although the rationale behind introduction of such
thresholds might be akin to the general theme of deterring
the generation and use of unaccounted money, the question
that one might have is whether the intent is to then tax and
therefore restrict peer to peer or friends and family driven or
similar early stage investments, below the given threshold.
Quite interestingly, the form in which a Start-up has to apply
for the approval not only includes disclosure of such details
of the investor, as mentioned above, but it also requires
the name, PAN and address of the existing shareholders
(without any qualification as to resident or non-resident)
along with the price point at which they had invested.
‘Angel investors’ have traditionally been those individual
investors or network of individual investors who provide
growth capital to early stage companies, often at ideation
and pre-commercialization stages of product development
or service deployment. These funds, therefore, are crucial
for survival of early stage companies. The investment
community has been of the considered view that restricting
the scope of who may or may not be an angel investor, for
the purpose of providing the exemption under the Section,
further reduces the pool of funds available at early stages
and also limits the investor appetite to invest and thereby
foster the growth of the start-up ecosystem in India.
C. a registered Start-up, now, would also have to obtain a
report from a merchant banker specifying the FMV in
accordance with Rule 11UA.
Within a couple of months from the above-mentioned DIPP
Notification, the CBDT issued 2 Notifications dated 24
May 2018, one omitting the word ‘or an accountant’ from
Rule 11UA, and the other extending the exemption under
The investment community has been of the
considered view that restricting the scope of
who may or may not be an angel investor, for
the purpose of providing the exemption under
the Section, further reduces the pool of funds
available at early stages and also limits the
investor appetite to invest and thereby foster
the growth of the start-up ecosystem in India.
2 The DIPP notification dated 11 April 2018 also provides for approvals to be provided by an
Inter Ministerial Board of Certification to be formed with 8 members from the DIPP, Ministry of
Corporate Affairs, Reserve Bank of India, Securities and Exchange Board of India, CBDT, etc.
3 Matter of Linkloud Solutions Private Limited, taken up during the 29th IMB meeting –
Available at https://www.startupindia.gov.in/content/dam/invest-india/Templates/public/IMB/
imb_decisions/29thIMB_DecisionMeeting.pdf
CHARTERED SECRETARY JANUARY 2019 I 79
Angel Tax: Paradigm Continues and Intensifies
ARTICLE
Section 56(2)(viib) to consideration received in accordance
with the approval granted by the (the “Board”) under the
DIPP Notification. It may be noted that these Notifications
do not have retrospective effect.
However, despite obtaining merchant banker or chartered
accountant certificates (as permitted prior to 24 May 2018),
a plethora of demand notices and assessment orders have
been issued to both registered and unregistered start-ups
in the recent months. In most cases the bone of contention
is the method of valuation adopted by AOs, challenging the
ones in the valuation certificates provided by companies.
It appears that the commercial understanding of valuation
for entrepreneurs and investors that are driven by many
aspects of the viability of the product/service, competitor
analysis, etc. have been disregarded.
Reference may be placed, in this respect, to the Order of
the Income Tax Appellate Tribunal in matters such as ACIT
v. Golden Line Studio Private Limited (I.T.A. No. 6146/
Mum/2016), where the difference in valuation of equity and
preference shares has been clearly highlighted along with
the importance of giving effect to the nature of transaction
and to draw support from other provisions of the Act while
assessing under Section 56(2)(viib). The CBDT has also
issued instructions stating “no coercive measure to recover
the outstanding demand would be taken”4. However, these
seem to have had little effect on the stance of AOs.
Various stakeholders have multiple times represented
earlier, that this provision is against the principles of income-
tax concept, wherein the ‘investments/capital receipts’ are
being taxed as ‘income’.
In our view, the situation now demands attention and
closer evaluation by the Government, so that while curbing
corruption and money laundering, ease of doing business
in India is also given importance to. It may be noted that
the severity and rigour of private placement mechanism, as
brought in by the Companies Act 2013 was lacking at the
point of time when the Section was introduced and therefore
there is a request from industry to consider removal of the
Section. If not anything else, there needs to be clarity on
the intent of the Section and the specific situations that
might get covered under it so that genuine investments are
not questioned and taxed. CS
4 Letter issued on 6 February 2018 (F. No. 173/14/2018-ITA.I) by Shri Vinay Sheel Gautam, the
then Under Secretary (ITA.I), CBDT, to all Principal Chief Commissioners of Income Tax.
 Cyber laws – Effective Weapon to Combat
ARTICLE
Challenges Posed by Intelligent Machines
The present article speaks about various laws that have been incorporated to deal with the challenges  posed by
Information technology. It discusses cyber space, threat posed to personal data, social media, responsibility of
intermediaries through whom this data on social media is shared liked and forwarded. The article also speaks about
the remedy our law makers have brought forward by enacting The Draft Personal Data Protection Bill, 2018 and the
amendments made to the Information Technology (Intermediary Guidelines) Rules 2011.
Dr. Rajkumar Adukia, FCS
Mumbai
fcsrajkumaradukia@gmail.com
INTRODUCTION
I
n 1850s, Charles Darwin, a British naturalist proposed the
theory of biological evolution through natural selection. He
called evolution as “descent with modification”, the idea
that species change over time, give rise to new species, and
share a common ancestor. And the term “survival of the fittest” as
mechanism of natural selection. Modern science is amazed to see
how human beings have evolved with modification. The theory of
evolution seems to be omnipresent at all levels from humans to
computers from farming to industries and from the generations of
computers. Therefore the term evolution is used to define something
that has witnessed and has undergone change or modification.
The 150 year old theory makes its foothold stronger with the way
“Ages” have been modified from stone age to information age. At
the dawn of 21st century the computers evolved to create various
“generation” of computers. With computers silently seeping into
the lives of people and information floating around everywhere,
21st century soon transformed to information age. With computers
and internet being the integral part of life of humans in this century,
it has connected the world like never before. The individuals in
general and the business in particular have benefited from the
geography less environment where only the best can be purchased
and only the best can be sold.
When the economies became digital the physical boundaries
of markets vanished and the business became global. In initial
years the internet was used for mundane jobs and to perform
repetitive task. Since birth, computers and the internet itself have
gone through major changes. Computers evolved from very large
size machines to now being palm size. What started as a network
for military operations has become worldwide web. With these
changes information is exchanged like never before. With every
new generation of computers, their capacity to perform tasks
has undergone a wider change. The 4th Generation computer
which used microprocessors has created breakthrough in the
way computers became available to commoners and are used to
80
develop business. The 5th Generation of computers with Artificial
Intelligence are advanced versions of their earlier versions and
are used in defence and some specific industries where utmost
precision is required.
A gamut of various activities on the internet is called as cyber
space. A cyber space is the space created by computer networks.
Humongous amount of activities could be performed in this cyber
space. E-Commerce is one of the areas which has contributed
largely in changing the landscape of doing business. E commerce
is the platform for doing business through the medium of cyber
space. E-commerce has created virtual markets beyond the
boundaries of the nation. The businesses have benefited through
e-commerce as they are able to reach larger customers, enter
new markets without the actual need to enter the territory of other
country. E-commerce can take place various forms like B2B where
the transaction takes place between two businesses, B2C where
transactions take place between business and consumers, C2C
where the customers use the e-commerce platform for sale to
other consumers. The number and nature of transactions through
web portals has evolved through years. One can sell from pin to
pen, provide services and in recent times even borrow and lend
money.
The 5th generation computer has introduced us to the field of
Artificial Intelligence, Data Mining, Robotics, etc. some of which
are discussed below:
ARTIFICIAL INTELLIGENCE
Artificial intelligence (AI) is an area of computer science that
emphasizes the creation of intelligent machines that work and
react like humans. Some of the activities computers with artificial
intelligence are designed to include:
• Speech recognition
• Learning
• Planning
• Problem solving
Artificial intelligence (AI) makes it possible for machines to learn
from experience, adjust to new inputs and perform human-
like tasks. Most AI examples that we hear about today – from
chess-playing computers to self-driving cars – rely heavily
on  deep learning and natural language processing. Using these
technologies, computers can be trained to accomplish specific
tasks by processing large amounts of data and recognizing
patterns in the data.
DATA MINING
Data mining is the process of finding anomalies, patterns and
correlations within large data sets to predict outcomes. Using
a broad range of techniques, you can use this information to
increase revenues, cut costs, improve customer relationships,
reduce risks and more. It is the process of digging through data to
discover hidden connections and predict future trends. It comprises
three intertwined scientific disciplines: statistics (the numeric
I
JANUARY 2019 CHARTERED SECRETARY

E-commerce has created virtual markets
beyond the boundaries of the nation.
The businesses have benefited through
e-commerce as they are able to reach
larger customers, enter new markets
without the actual need to enter the
territory of other country.
study of data relationships), artificial intelligence (human-like
intelligence displayed by software and/or machines) and machine
learning (algorithms that can learn from data to make predictions).
The complex data sets are collected that help to uncover relevant
insights. Data mining is used by Retailers, banks, manufacturers,
telecommunications providers and insurers, to discover
relationships among everything from pricing, promotions and
demographics to how the economy, risk, competition and social
media are affecting their business models, revenues, operations
and customer relationships.
Big data
Big data is a term that describes the large volume of data – both
structured and unstructured. Big data can be analysed for insights
that lead to better decisions and strategic business moves. The
importance of big data lies in the fact that what we do with the data
that you have. Data can be taken from any source and analysed
to find answers that enable cost reductions, time reductions, new
product development and optimized offerings and smart decision
making. When big data is combined with high-powered analytics,
it helps accomplish the business-related tasks such as:
• Determining root causes of failures, issues and defects in
near-real time
• Generating coupons at the point of sale based on the
customer’s buying habits
• Recalculating entire risk portfolios in minutes
• Detecting fraudulent behavior before it affects your
organization
ROBOTICS
Robotics is an interdisciplinary branch
of  engineering and science that includes mechanical
engineering,  electronics engineering,  computer science, and
others. Robotics deals with the design, construction, operation,
and use of robots, as well as computer systems for their
control, sensory feedback and information processing.
These technologies are used to develop machines that can
substitute for humans and replicate human actions. Robots can
be used in any situation and for any purpose. They are used in
dangerous environments such as bomb detection and deactivation,
manufacturing processes, or where humans cannot survive.
Robots can take on any form but some are made to resemble
humans in appearance. Such robots attempt to replicate walking,
lifting, speech, cognition, and basically anything a human can do.
INTERNET OF THINGS(IOT)
The Internet of Things (IoT) is the network of physical
devices, vehicles, home appliances, and other items
embedded with electronics,  software,  sensors,  actuators,
and  connectivity which enables these things to connect and
exchange data, creating opportunities for more direct integration
of the physical world into computer-based systems, resulting
in efficiency improvements, economic benefits and reduced
human exertion.
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CHARTERED SECRETARY JANUARY 2019
Cyber laws – Effective Weapon to Combat Challenges Posed by Intelligent Machines
LEGAL CHALLENGES FACED BY TECHNOLOGICAL
ARTICLE
ADVANCEMENT
Although e-transactions became very popular, they did not
have legal validity until the same could be included in the laws
that governed the transactions on the internet. One of the most
important issues faced by legal professionals in the early days
of e-commerce was to enforce contracts. One of the elements of
a valid contract is the acceptance. In case of web transactions
the acceptance is indirect. It happens when a user clicks on
“pay” button or clicks “Accept” button on the web. To integrate
the concepts of law, various existing statutes were required to be
amended and new once had to be introduced. Cyber laws had
to be introduced to put a check on the malicious activities on the
internet. The laws prevailing in the area of cyber space area are
called cyber laws. They bring within their ambit all the users of
cyber space worldwide.
The growth of Electronic Commerce has propelled the need for
vibrant and effective regulatory mechanisms which would further
strengthen the legal infrastructure, so crucial to the success of
Electronic Commerce. All these governing mechanisms and legal
structures come within the domain of Cyber laws.
Cyber laws are important because they touch almost all the
aspects of transactions and activities involving the internet,
World Wide Web and cyberspace. Every action and reaction in
cyberspace has some legal and cyber legal angles. In India the
Information Technology Act, 2000 was incorporated and Reserve
Bank of India Act and Indian Evidence Act were amended to
include evidence in electronic format. The objective of Information
Technology Law in India is
- To protect the legal recognition to E-transactions
- To provide legal recognition to digital signature as a valid
signature to accept agreements online
- To protect online privacy and stopping cyber crimes
- To give legal recognition to keeping accounting books in
electronic form by bankers as well as other organizations.
DATA PRIVACY - A CHALLENGE OF NEW GENERATION
With transactions going digital, a lot of data are being exchanged
over the internet. In initial years business used this information
only as data bases and were very passive in processing the
information. They were mainly used for statistical purposes. But in
recent times the information is being converted into data (i.e. into
a format which can be used for a specific purpose) into a matter
of seconds. In fact these days an individual gives away data even
without his own knowledge.
An act as simple as eating at restaurants, buying goods online or
even hailing a taxi gives out precious data about oneself. All the
transactions that we enter into using either smartphones or the
computers require individual to fill in personal data about date of
birth, age, sex, residential address, phone numbers and financial
information. This gives away information about individual choices
about what colour one likes to wear, what size fits him/her, what
food he/she likes to eat, etc. In other words an individual gives
away his privacy even without his knowledge.
Businesses on the other hand are using this data for commercial
purposes. The bombarding of advertisements about a product
or services which you would have clicked upon while surfing
through the internet hound you everywhere. Not just this, there are
websites where if you have entered your date of birth and the size
of dress that fits you, the website runs an algorithm by which it puts
before you analysis about what your age is, your ideal weight, if
you are near or far away from your healthy weight, what nutrition
should you follow, exercise plan. It also would give you addresses
of nutritionists and Gymnasiums near your area of residence.
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ARTICLE Cyber laws – Effective Weapon to Combat Challenges Posed by Intelligent Machines
Such kind of bombarding of information may not seem harmful in
first instance but it definitely affects an individual’s privacy. That is
why economies all over the world are increasingly moving towards
making laws that protect the privacy of individuals.
How is Data Collected
Most of the information that is collected is given away by the
individual by filling forms either online or offline. It can take the
form of registration forms, KYC documents while you purchase,
feedback forms, online surveys, downloading of various apps.
Then with the help of computers vast quantity of information is
processed in order to identify correlations and discover patterns in
all fields of human activity.
WHAT HAPPENS TO THE INFORMATION
THAT IS COLLECTED
The information is stored in vast data bases and can be mined
using technology. Algorithms are being used to comb data.
Enterprises around the world are using technology for its proper
mining and the use of data is evolving every day. Proprietary
algorithms are being developed to comb this data and analyse the
trends, patterns and hidden nuances by businesses.
Many of these activities are beneficial to individuals, allowing their
problems to be addressed with greater accuracy. For instance,
the analysis of very large and complex sets of data is done today
through Big Data analytics. The results of these analysis can
enable businesses and government to gain insights into areas
such as health, transport system, farming, rural development,
weather forecasts, food security, etc.
The reality of the digital environment today, is that almost every
single activity undertaken by an individual involves some sort
of data transaction or the other. The Internet has given birth to
entirely new markets: those dealing in the collection, organisation,
and processing of personal information, whether directly, or as a
critical component of their business model.
There are a large number of benefits to be gained by collecting
and analysing personal data from individuals. Pooled datasets
allow quicker detection of trends and accurate targeting. For
instance, an individual‘s personal locational data could be used
for monitoring traffic and improving driving conditions on the road;
banks can use Big Data techniques to improve fraud detection;
insurers can make the process of applying for insurance easier by
using valuable data from pooled data sets.
Huge data is processed by government as well. In fact the state
is the largest processor of data. Such personal data is used by
government for such purposes as targeted delivery of social
benefits, effective planning and implementation, counter terrorism
operations, etc.
NEED TO PROTECT PERSONAL DATA
Sharing data may bring benefits – the products and services
are tailor made thus reducing the time and effort one spends
in identifying what suits him. In today’s world often one cannot
transact even simple tasks without giving away your personal
information in one or the other form. But sharing of data is not
without risks. Your personal data reveals a lot about you, your
thoughts and your life. These data can easily be exploited to harm
you, and that’s especially dangerous for vulnerable individuals
and communities, such as journalists, activists, human rights
defenders, and members of oppressed and marginalized groups.
That is why these data must strictly be protected.
When data that should be kept private gets in the wrong hands,
bad things can happen. A data breach at a government agency
can, for example, put top secret information in the hands of an
enemy state. A breach at a corporation can put proprietary data in
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the hands of a competitor.
Major sources of information which are compromised and are
most prone to breaches are:
• Healthcare records
• Criminal justice investigations and proceedings
• Financial institutions and transactions
• Biological traits, such as genetic material
• Residence and geographic records
• Social media profiles and information
• Location-based services
• Web surfing behavior or user preferences using persistent
cookies
In the light of challenges faced by many countries across the
globe, the countries have started to bring in laws that ensure that
the personal data of its citizens is protected. In some countries
like the European Union the personal data protection is viewed as
the fundamental right stemming from the right to protect dignity. In
countries like United States of America, data protection is meant
to stop the government from barging into the lives of its citizens.
INDIA’S STANCE ON PERSONAL DATA PROTECTION
The Indian Constitution works on two planks – one it states that
“State” is facilitator of human progress and second that State is
prone to excess. Hence it is checked by effectuating by vertical
and horizontal separation of powers. Also the Constitution of India
grants every individual fundamental right which it can exercise
against the State.
Right to privacy had not been recognized as fundamental right until
the Supreme Court gave its decision in Justice K.S. Puttaswamy
(Retd.) v. Union of India [WRIT PETITION (CIVIL) NO 494 OF
2012]. Article 21 of the Constitution states that “No person shall
be deprived of his life or personal liberty except according to
the procedure given by law. It means that even the State while
exercising its right has to follow certain procedure as laid down
by law. Right to privacy stems from right to personal liberty.
Liberty of every citizen within the framework of being lawful and
constitutional. Hence India has followed an approach of being
facilitator to businesses and at the same time protecting the rights
of its citizens. Thus businesses have to process data only for the
purpose and only to the extent required for a particular act. Hence
Cyber laws are important because
they touch almost all the aspects of
transactions and activities involving the
internet, World Wide Web and cyberspace.
Every action and reaction in cyberspace
has some legal and cyber legal angles.
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JANUARY 2019 CHARTERED SECRETARY

the terms Data Fiduciary and Data Principal have been used in the
draft Personal Data Protection Bill, 2018.
The challenge for regulators is to frame mechanisms wherein
it is possible to utilize data while simultaneously protecting an
individual’s privacy preferences and their personally identifiable
information. Hence, the laws and regulations related to Privacy
and Data Protection are constantly changing, as lawmakers
endeavor strict and diligent compliance with data privacy and
security regulations.
DATA PROTECTION COMMITTEE AND THE DRAFT
PERSONAL DATA PROTECTION BILL, 2018
Although India has passed Information technology Act in 2000,
yet it did not completely cover the aspects of Personal Data
Protection. To address this issue, Government of India had
constituted a Committee of Experts under the Chairmanship
of former Supreme Court Justice Shri B N Srikrishna in August
2017 to study various issues relating to data protection in India
and make specific suggestions on principles to be considered for
data protection in India. The Committee released a White Paper in
November 2017 and the Government proposed the draft Personal
Data Protection Bill 2018 on 27th July 2018 to protect citizens’ data
and privacy. The Bill provides for regulations of users’ personal
data that is collected by various third parties, including the state.
The proposed Bill contains provisions with respect to grounds
for processing of personal data, sensitive personal data and
personal and sensitive personal data of children. Transparency
and accountability measures have been laid down and restrictions
have been placed on transfer of personal data outside India. The
Bill envisages establishment of a Data Protection Authority that
would function as India’s privacy regulator.
It also lays down provisions on data storage, making it mandatory
for a copy of personal data to be stored in India, and called for
amendments to other laws, including the Right to Information.
Though the Bill does not mention it directly, the report also
suggests changes in the Aadhaar Act.
PROPOSED AMENDMENT TO THE INFORMATION
TECHNOLOGY (INTERMEDIARY GUIDELINES)
(AMENDMENT) RULES 2018
Social media has been a platform where massive information
is exchanged every minute. These platforms have acted as an
effective means of expressing opinions and creating consensus
in public. It is credited to some of the important movements in
the country like Anti-corruption movement by Anna Hazare. But
at the same time it has also been seen as increasing lynching
incidents. Under the name of freedom of speech social media
has stirred communal tensions, attacked innocent people and
spread hatred. Since social media is the fastest means of
communication today, it has immense power to make or break
any situation or for forming a public opinion. However it should
be used responsibly. A great responsibility has to be borne by
all the intermediaries involved in running social media websites.
In order to combat this unique challenge of controlling the free
social media, the Central Government has proposed amendments
to The Information Technology (Intermediary Guidelines) Rules,
2011. The proposed amendment was also in response to the
judgement by The Supreme Court in Tehseen Poonawalla case
and Prajwala Letter case. The Supreme Court in its judgement
on 17 July 2018 in Tehseen Poonawalla case held that It shall be
the duty of the Central Government as well as State Governments
to take steps to curb and stop dissemination of irresponsible and
explosive messages, videos and other material on various social
media platforms which have a tendency to incite mob violence and
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CHARTERED SECRETARY JANUARY 2019
Cyber laws – Effective Weapon to Combat Challenges Posed by Intelligent Machines
ARTICLE
lynching of any kind. The Supreme Court in Prajwala letter case on
December 11 2018, held that The Government of India may frame
necessary guidelines/SOP and implement them within two weeks
so as to eliminate child pornography, rape and gang rape imagery,
videos, sites, content hosting platforms and other applications.
• The draft Rules have been prepared keeping in mind the
judgements given by SC
• Highlights of the rules:
a. Draft Rule 3 requires for due diligence to be exercised
by the Intermediaries – it requires the intermediary to
publish the rules and regulations, privacy policy and
user agreement to all its users and the users shall not
host, display, upload, modify, publish, transmit, update or
share any information that
i. is harmful, harassing, blasphemous, defamatory,
obscene, pornographic, paedophilic, libellous,
invasive of another’s privacy, hateful, or racially,
ethnically objectionable, disparaging, relating or
encouraging money laundering or gambling, or
unlawful in any way.
ii. which harms minors.
iii. infringes Intellectual property rights.
iv. violates any law for the time being in force.
v. impersonates the other person.
vi. contains computer virus that can destroy or limit the
functionality of any computer.
vii. threatens the unity, integrity, defence, security or
sovereignty of India, friendly relations with foreign
states.
viii. threatens public health or safety; promotion
of cigarettes or any other tobacco products or
consumption of intoxicant including alcohol and
Electronic Nicotine Delivery System (ENDS) & like
products that enable nicotine delivery.
Electronic Nicotine Deliver System(ENDS) also
called e-cigarettes, personal vaporizers, vape pens,
e-cigars, e-hookah, or vaping devices, are products
that produce an aerosolized mixture containing
flavored liquids and nicotine that is inhaled by the
user. ENDS can resemble traditional tobacco
products like cigarettes, cigars, pipes, or common
gadgets like flashlights, flash drives or pens.
b. The intermediary shall not knowingly host or publish any
information or shall not initiate the transmission, select
the receiver of transmission, and select or modify the
information contained in the transmission.
c. The intermediary shall inform its users that in case of non-
compliance with the rules and regulations, or violation of
privacy policy or user agreement, they shall have the
right to terminate the user access and usage rights.
d. Where the intermediary has received a lawful order from
the government agencies it shall provide such information
and assistance within 72 hours from the receipt of such
order.
The request has to me made in writing or through
electronic means and shall specify the purpose of seeking
such information.
The intermediaries shall trace the originator of unlawful
information for the government agencies seeking such
information.
e. Rule 7 of the draft rules states that the intermediary who
has more than 50 lakh users in India shall be a company
incorporated under the Companies Act 2013, shall
have a permanent address in India and shall appoint
a person in India who shall be a nodal person for 24x7
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ARTICLE Cyber laws – Effective Weapon to Combat Challenges Posed by Intelligent Machines
coordination with law enforcement agencies and officers
to ensure compliance to their orders/requisitions made in
accordance with provisions of law or rules.
f. When an intermediary receives actual knowledge in the
form of a court order or is notified by a government agency
under Section 79(3)(b) of the Information Technology
Act, it shall remove or disable access to unlawful acts.
g. The intermediary shall deploy technology based
automated tools or appropriate mechanisms, with
appropriate controls, for proactively identifying and
removing or disabling public access to unlawful
information or contents.
NEW AGE OF DIGITAL CURRENCIES AND
CHALLENGES POSED
A cryptocurrency (or crypto currency) is a digital asset designed
to work as a medium of exchange that uses strong cryptography
to secure financial transactions, control the creation of additional
units, and verify the transfer of assets. Bitcoin is a crypto
currency, a form of electronic cash. It is a decentralized digital
currency without a central bank or single administrator that can
be sent from user-to-user on the peer-to-peer bitcoin network
without the need for intermediaries. Bitcoins have been used
as means of exchange for quite sometime and were used as
means of exchange to buy online, at some of the book stores,
music CDs and even tickets. However in his 2018-19 Budget
Speech, Union Finance Minister said .. The Government does
not consider crypto currencies legal tender or coin and will take
all measures to eliminate use of these crypto assets in financing
illegitimate activities or as part of the payment system. As a
result The Reserve Bank of India barred Banks and Financial
Institutions from being a part of bitcoin network. This created a
bottleneck for bitcoin companies like Zebpay and Unocoin who
has several customers trading with them in bitcoins. To enable
Indians to buy and sell bitcoins Unocoin setup its first ATM or
Kiosks in October 2018.
CHALLENGES FACED BY REGULATOR
The Reserve Bank of India had placed a ban on the Banks
and Financial Institutions from being a part of bitcoin network.
It means that the banks and financial institutions should stop
providing services to firms and individuals who deal in bitcoins
and other such virtual money. The result of this decision by RBI
means banks will no longer clear transactions to purchase or sell
bitcoins through their payment systems. The decision affects
the exchanges that allow users to buy and sell virtual currencies
through bank accounts who will have to stop doing that. People
who hold bitcoins can choose to retain them but won’t be able to
convert it into rupees or trade in the Indian currency. In spite of
this the companies like Zebpay and Unocoin have reported that
they have seen surge in their clients. With the closure of banking
channels, these companies have resorted to intermediaries like
peer 2 Peer platforms that will serve as exchange medium for their
bitcoins. It is yet to be seen how the Government and the regulator
will combat this challenge posed by the digital currencies.
OPPORTUNITIES FOR COMPANY SECRETARIES
UNDER THE CYBER LAWS
Various changes and new enactments have opened up new
opportunities for the profession. The company secretaries have
to keep a keen watch on the developments happening across the
globe. Since business has become global, the flow of information
on personal data has become more complex. With the rolling out
of General Data Protection Regulations (GDPR) from 28th May
2018 by the European Union, all the organizations who have
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footprints in European market have come in the ambit of GDPR.
The organizations which hold, store and process personal data of
the European Citizens are required to follow the GDPR. One of
the central aspects of the data protection regulations is that the
data should be collected after the need for collecting data is being
conveyed to the data fiduciary. It means when an organization
intends to collect personal data, the person from whom such data
is collected has to have a complete knowledge of how the data
is collected, the manner in which it will be stored, the manner in
which it shall be processed and the purpose for which it can be
used. The answer to these questions is written in privacy policy.
A privacy policy is a statement or a legal document that discloses
some or all of the ways a party gathers, uses, discloses, and
manages a customer or client. It fulfills a legal requirement to
protect a customer or client’s privacy. This is one of the lucrative
areas for professional development.
The Company Secretaries can provide their services in the
following fields:
1. In getting the existing data processing companies on whose
board they are appointed to make them GDPR compliant.
2. To set up processes within their organizations that ensure the
privacy being embedded into the design itself.
3. While setting up of new businesses the practising company
secretaries can advise them on how to comply with law of
personal data protection.
4. Ensure compliance with the provisions of the Information
Technology Act 2000.
5. To advise companies on circulation of sensitive messages,
especially with those data mining companies which work on
analyzing elections and predicting the outcomes.
The theory of evolution brought with it the theory of survival of
fittest. The evolution emphasized that change was inevitable.
It laid out that for anyone to survive adopting the change was
the only means of survival. Incorporating a change makes you
equipped to fight challenges of survival. This theory holds true
for the profession of CS too. The more one adapts to the new
environment, learns new technology, understands new laws and
procedures, the more he evolves to be the fittest to survive. Lastly
it can be said that every change brings opportunity, which will help
the professionals break the traditional roles. With the opportunities
in Cyber space, company secretaries as professionals can
transcend into global markets with their immense knowledge.
Let the company secretaries march towards better horizons with
confidence and utmost faith in them. CS
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The Era of E-Minutes
Taking minutes is more art than science. The major issue at stake here is not so much the taking of minutes but what
is done after that to ensure accuracy and security. An effective minute taker needs to think ahead and be prepared. The
importance of preparation is critical to the quality of the final minutes. Developing your own toolkit with everything
you need for taking minutes of the meeting will ensure the quality and accuracy of the final minutes.
Dr. Joffy George, FCS
Company Secretary & Jt. General Manager, TELK
Ernakulam, Kerala.
mastersjoffy@gmail.com
INTRODUCTION
Minute taking is a highly important function in any organization.
People frequently find themselves called upon to take minutes,
with little guidance on how they are expected to produce an
accurate record of what took place. Ambiguous agreements, a
vague agenda, interruptions and a poor chairman are just some
of the factors that can make this a daunting task. The role of the
minute taker can vary from organization to organization. The
common view is that it involves attending the meeting, taking the
notes and then typing up the final minutes. Whilst these activities
are central to the role, there are many others which may fall
under the purview of the minute taker. Many of these will relate
to administrative tasks to be carried out before, during and after
the meeting. Successful minute taking requires a professional
approach and the application of a broad range of skills.
Taking minutes is more an art than science. The major issue at
stake here is not so much the taking of minutes but what is done
after that to ensure accuracy and security. Prompt drafting and
delivery is crucial. The agenda items are written in advance and
any presentation that are going to be seen by the board can be
included. Only the actual discussion forming part of the meeting
needs to be recorded later. This preparation of lot of materials
ahead of time helps the job of getting the minutes drafted in a
much easier way.
The overall purpose of minutes is to preserve an accurate and
official record of decisions made and actions taken. As such,
minutes are direct prima facie evidence that a meeting was held,
who attended and what happened in the meeting. A number of
legal requirements and concepts support this overall purpose.
Best practices will include having relevant members of
management comment on the first draft. In most organizations, it
becomes very apparent who makes clarity-enhancing comments
to minutes and who is just editing for style. Clarity comments are
more acceptable while style comments can be rejected in a major
proportion. This is especially important in order to ensure that the
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CHARTERED SECRETARY JANUARY 2019
ARTICLE
minutes remain consistent from meeting to meeting.
Use the three fundamentals of “Accurate”, “Accessible”
and  “All the same” when you prepare minutes. You will have
a strong foundation of practice and good process if your minutes
ever come into question. Your board and management will
appreciate how easy the minutes are to read and understand.
Most importantly, you will make your own life easier, because
research is simpler when resolutions are short, clear and stand
out on the page. Similarly, comments are fewer when language
is clear and precise.
WHAT ARE MINUTES?
Minutes are the written record of the business transacted at a
meeting and of the decisions reached. They are the permanent
record of the proceedings. Good minute taking is a deceptively
difficult and time-consuming task. It is far more than an
administrative formality. Although there is no statutory format
for minute writing, minutes should be clear, concise and free
from ambiguity. All relevant dates and figures should be stated
and should not be left ill-defined. Minutes must be impartial. No
alterations should be made to minutes, except to correct obvious
errors. This should be done before signature, with the alterations
being initialed by the chairman. Once signed, minutes shall not
be altered and any subsequent revisions should be dealt with by
amending minutes at a subsequent meeting.
PURPOSE OF MINUTE TAKING
The purpose of minute taking is to provide an accurate, impartial
and balanced internal record of the business transacted at a
meeting. The degree of detail recorded will depend, to a large
extent, on the needs of the organization, the sector in which it
operates the requirements of any regulator and the working
practices of the chairman, the board and the corporate secretary.
At a minimum, minutes should include the key points of discussion,
decisions made and, where appropriate, the reasons for them
and the agreed actions, including a record of any delegated
authority to act on behalf of the company. Distortion, confusion
and reinterpretation can often occur when memory alone is relied
upon and this is why a professional approach needs to be taken
in the production of minutes.
Minutes must be:
u Objective
u Clear
u Concise
u Complete
Minutes should be written:
u Impersonally
u In the past tense
Minutes should contain:
u The name of the company
u The type of meeting
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 The Era of E-Minutes
Although there is no statutory format for minute
ARTICLE
writing, minutes should be clear, concise and
free from ambiguity. All relevant dates and
figures should be stated and should not be
left ill-defined. Minutes must be impartial. No
alterations should be made to minutes, except
to correct obvious errors. This should be done
before signature, with the alterations being
initialed by the chairman. Once signed, minutes
shall not be altered and any subsequent
revisions should be dealt with by amending
minutes at a subsequent meeting.
u The day and place of meeting
u Those present or in attendance
u Relevant details of the discussion
u The full terms of resolutions adopted, etc.
EFFECTIVE MINUTE TAKER
Key skills of a good minute taker include being able to:
u Listen to multiple voices at the same time and capture both
their arguments and their tone
u Summarise an argument accurately and record decisions
taken and action points on which to follow up
u Identify which parts of the discussion are material and which
should be recorded
u Have the confidence to ask for clarification
u Have the confidence to stand firm when someone asks them to
deviate from what they believe to be an accurate record.
THE WRITING STYLE
Minutes need to be written in such a way that someone who was
not present at the meeting can follow the decisions that were
made. Minutes can also form part of an external audit and a
regulatory review, and may also be used in legal proceedings.
When writing minutes, it is important to remember that a formal,
permanent record is being created, which will comprise part of the
‘corporate memory’. Minutes should give an accurate, balanced,
impartial and objective record of the meeting, but they should
also be reasonably concise. The importance of accuracy should
not be underestimated, as the minutes of a meeting become
the definitive record of what happened at that meeting and who
attended. Courts will rely on them as being conclusive evidence
86
unless proved otherwise. Exactly how minutes are written will be
a matter of style and practice for the organization.
Historically, the convention has been that:
u Minutes should be written in past tense and in the conditional
mood for future actions, i.e., would and should, rather than will
and shall.
u The board has collective responsibility for its decisions;
therefore, the naming of individuals should be avoided
wherever possible, although this is not the rule in some specific
cases.
u Minutes should be sequentially numbered for ease of reference.
MEDIOCRE APPROACH
Minutes are not a literal transcript of who said what. Such a
drafting is difficult and may dampen frank discussion of the
issues. On the other hand, if minutes are without detail, they
create an impression of inattention to the issues. Minutes need to
suggest the nature of the discussion and capture a sense of the
meeting. Some want minutes to be a record of what was decided
and why. They are interested in them for business information
and decision-making.
BIGGER THE BETTER
There is definitely a trend for minutes to be longer and more
detailed these days, especially among larger public companies.
Minutes of Public Companies are quite lengthy and describe
decisions and who voted for and against them. Few don’t fully
appreciate the trend and have remained far too reticent. “Less is
more” may be a great maxim for modern architecture but it doesn’t
work for corporate minutes in the current litigious environment.
There has to be detailed minutes of all audit committee
proceedings, given that the audit committee is responsible for
questioning and interacting with a company’s Auditor. If the
minutes reflect a discussion as to how the audit differences
between management and the external Auditor are resolved,
that’s the best protection for the audit committee.
DIRECTORS’ REVIEW
Directors have the duty to act honestly and in good faith with a
view to the best interests of the company; and, exercise the care,
diligence and skill that a reasonably prudent person would exercise
in comparable circumstances. Minutes provide critical proof that
directors have diligently carried out these duties. World-wide,
the statutes and wording will vary in each jurisdiction. However,
every incorporating law will set out the duties of directors and
most will have some version of acting in good faith and exercising
reasonable care.
Directors are free to augment the record with their own notes.
Few Directors keep own noting of briefings and discussions at
meetings as a safeguard. It is noteworthy that the Directors have
the opportunity to review the minutes before its confirmation.
Directors can check that the minutes are the accurate summary of
the meeting that took place and the actions and discussions that
happened. This process is critical and has to be ensured before
minutes are confirmed by the Board and put in the minutes book
for all eternity.
A strong set of minutes demonstrates the due diligence of your
directors, supports their business judgment and protects your
organization. Minutes are direct evidence of appropriate practice
on everything from procedural matters, like calling an annual
meeting or appointing an officer, to satisfying your auditors that
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JANUARY 2019 CHARTERED SECRETARY

you have proper controls over reporting. Every size and type of
organization will make sure its minutes are accurate, but how
specific and formal the minutes are will depend on the organization
and the potential consequences of poor minutes.
THIRD PARTY REVIEW
Company Secretaries have to keep the legal sense so that their
minutes drafting will be appropriately reacting to the changes in
the litigation environment. Overall, the minutes shall be a balanced
account of all proceedings at the meeting. It is advisable to arrange
for a review of the draft minutes by a legal expert since Company
Secretary himself may not always be able to view their own drafting
objectively. A third party review can be helpful at most instances.
It is time that companies need to ask themselves to what extent
they reflect a board acting on behalf of the shareholders, as well
as using minutes to provide comfort for directors.
THE ULTIMATE MINUTE TAKING TOOLKIT
An effective minute taker needs to think ahead and be prepared.
The importance of preparation is critical to the quality of the final
minutes. Developing your own toolkit with everything you need for
minuting the meeting will ensure the quality and accuracy of the
final minutes.
Reference Material Checklist:
u Your original notes from the meeting
u Your structured notes
u The minutes of the previous meeting
u Your checklist of useful words
u Your checklist of useful phrases
u The list denoting the meanings of all the abbreviations, symbols
and personalized shorthand phrases used in the note-taking
process
u All the documents that were circulated with the agenda
u Any notes regarding verbal reports given at the meeting
u Any other information which you deem to be helpful.
USE OF TECHNOLOGY FOR MANAGING MINUTES
The process of taking minutes varies a lot from company to
company. Some Company Secretaries make extensive use of
technology to manage the minutes and treat them similarly to other
corporate records. Others simply keep the minutes in hardcopy
under lock and key. Latter approach is still the most common, but
it is starting to change as the problems inherent with hardcopy
become more obvious and as demands for information increase.
While using technology for managing minutes, the following
principles may be noted:
u All materials provided to the board/committee for information
or consideration should be collected and retained by the
Company Secretary. They should be stored and protected in a
manner that deters tampering  then take notes during the meeting within the application, linking
u Meeting briefing materials, meeting presentations, monthly
operating updates and similar materials should be preserved
with details
u Objective of the management should be to ensure that the
board has, on a timely basis, all material data relevant to
issues that they will be acting on. If the board is not satisfied
with the information being provided, it is their responsibility to
instruct management on changes they desire
u All board and committee minutes should be prepared promptly
and presented for review and approval of all board members at
the board’s next regular meeting. Committee actions pursuant
to authority delegated by the board should be presented for the
information of all board members
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CHARTERED SECRETARY JANUARY 2019
The Era of E-Minutes
ARTICLE
u Proposed resolutions should be incorporated in the Agenda
itself, allowing directors the opportunity to consider their import
as well as the proper substance and wording 
u Once board and committee minutes have been approved, their
integrity should be safeguarded, and they should not be altered
in any manner without the express approval of the board
u Final minutes should be made accessible to the board and
management who are responsible for carrying out the board’s
directions, without being ‘filtered’.
Advanced records management technology helps to ensure the
accuracy and security of board minutes. Once the draft is done
it enters the document management system. Any changes made
to the draft after it enters the system will be automatically noted
making it easy to track version control. As soon as the minutes
are finalized an uneditable scan shall be made which can be
added to the records management system.
Certain companies tape record their meetings which is transcribed
so that there are very few errors or changes that need to be made
once the minutes are written. After the minutes are approved
a scan is taken and stored on the server and then the minutes
themselves are stored in a locked, fireproof room.
Though different methods yield benefits, a major advantage to
using technology is the ease with which searches can be done. It
is not uncommon that you need to go back into the minutes and
find where the board discussed certain issues. On the other side,
going back through years of hard copy books would be much
more tedious.
IMPORTANCE OF A MINUTE TAKING TEMPLATE
If your meetings are run using a board portal, this makes accessing
your reference material much easier, as you will have access at
the click of a button. Board portals provide a range of governance
features, including secure document libraries which allow you
to securely store and view reference material, such as meeting
papers, archived minutes, induction documentation, policies and
legislation. If you aren’t using a minute taking application or a board
portal you will find it beneficial to prepare a master template for
each of the meetings for which you take minutes. This will give you
a clearly defined structure and layout at the outset. All the correct
headings will be in place and some of the information will remain
the same for each meeting. You will need to make adjustments
and updates and you will still have to create your summary of the
discussion for each of the agenda items. Having the structure in
place will make you feel that you’ve made some progress even
before you start. Meeting organizers no longer have to replicate
information in separate minute taking documents. Instead, they
can import their minutes into the secure board portal, including
a participants list and the meeting agenda. Minute takers can
to specific agenda and action items. After the meeting, you can
organize your notes into minutes and link to each agenda item,
assign actions, and distribute securely through the application.  CS
REFERENCES
Heather Baker (2012) Successful Minute Taking and Writing.
How to Prepare, Write and Organize Agendas and Minutes of
Meetings. Learn to Take Notes and Write Minutes of Meetings
Delores Dochterman Benson (2011) The Art of Taking Minutes 
Joanna Gutmann (2013) Taking Minutes of Meetings (Creating
Success)
Joffy George (2015) The Art of Drafting Minutes: Guidance Tool
for Professional Students & Professionals (Amazon)
87
ARTICLE
Compounding of Offences – An Easy
Way of Settling Disputes
In India litigations are increasing day by day and courts are becoming overburdened. Compounding of offences is a mechanism
which helps in reducing the burden on courts, since parties to the litigations, by mutual agreement, settle the disputes amicably
with or without the intervention of courts. Thus, compounding saves the parties from the sluggish judicial process which is
creaking at the seams and the larger good that is sought to be achieved by providing for compounding of offences.
Hem Raj Tuteja, FCS
Company Secretary, Jodhpur
hrtuteja@gmail.com
INTRODUCTION
I
ndia is known as the most legislated country where
hundreds of enactments are in the statute book
requiring the people to comply with. Multiplicity
of law tends people to evade compliance. This gives rise to
prosecutions. Consequently, Courts are overburdened and
cases are mounting day by day. On the one hand, pending
cases remain pending for years and, new cases creep in
every day. As a result, aggrieved persons suffer and the guilty
persons are rarely brought to book. Under these circumstances
compounding of offences is the best course of action as it helps
avoiding litigation by mutual understanding and agreement
between the parties to settle disputes outside the courts.
The Parliament has introduced the concept of compounding
of offences in various economic and commercial laws, and
this has proved to be a silver lining around the cloud, since
compounding saves time and energy. The disputes end at
their point of origin and parties need not to go to courts and
thus, burden of courts is reduced. Compounding of offences
helps not only in reducing the burden of the courts, but also in
imparting justice to the aggrieved parties.
COMPOUNDING OF OFFENCES – MEANING OF
Compounding means an agreement or amicable settlement
between the complainant and the accused whereby the
complainant agrees not to sue the accused. The accused and
the complainant then make a joint application to the court that
the parties have agreed that the case may not be proceeded
with. Thus, in compounding, mutual agreement between the
parties is essentially required. However, when Government
imposes fine under the provisions of an economic law, there
is no need of any agreement as such. Generally, offences
which are of private nature and relatively not serious are made
compoundable.
ADVANTAGES OF COMPOUNDING
88
Parties are saved from hassle of spending a lot of money, time
and energy in a lengthy legal proceeding. In India, thousands
of cases are pending in the courts and if disputes are settled
amicably through compounding, the time and energy of the
Courts can be saved.
IS COMPOUNDING ETHICAL?
Some scholars are of the view that compounding of offences
allows the guilty persons with money power to purchase
freedom by paying small compounding fee. This act of such
people is putting premium on misconduct. They believe that the
purpose of law is to punish the guilty and not to make him free
against money power. On the other hand, there is a school of
thought who believe that compounding is a justifiable act when
there is an amicable agreement between the parties concerned
and offences involved are not grave enough to warrant severe
punishment.
COMPOUNDABLE OFFENCES
Compoundable offences are those offences where, the
complainant enters into a compromise and agrees to have
the charges dropped against the accused. However, such
compromise should be a bona fide compromise and not for any
consideration to which the complainant is not entitled to.
Section 320 of Criminal Procedure Code looks at compoundable
offences as less serious offences. The Code classifies them in
to two categories, as follows:
(i) Offences compoundable without the permission of the
court: for example: offences involving adultery, offences
causing hurt, defamation, criminal trespass.
(ii) Offences compoundable with the permission of the
court: for example: offences of theft, criminal breach of
trust, voluntary causing grievances, assault on a woman
with the intention of outraging her modesty, dishonest
misappropriation of property of others.
WHERE TO MAKE COMPLAINT
Application for compounding the offences shall be made before
the same court before which the trial is pending. Once an
offence has been compounded, it shall have the same effect,
as if the accused has been acquitted of the charges.
NON-COMPOUNDABLE OFFENCES
All cognizable offences cannot be compounded. In respect of
cognisable offence a police officer has the authority to make
an arrest without a warrant and to start an investigation with
or without the permission of the court. The police can file
First Information Report (FIR) only for cognizable offences.
Such offences are not compoundable. Therefore, any
offence committed by a company or an officer shall not be
compoundable if investigation against such company or officer
has been initiated or is pending.
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JANUARY 2019 CHARTERED SECRETARY

In compounding, mutual agreement
between the parties is essentially
required. However, when Government
imposes fine under the provisions of an
economic law, there is no need of any
agreement as such. Generally, offences
which are of private nature and relatively
not serious are made compoundable.
All those offences, which are not mentioned in the list under
section 320 of Criminal Procedure Code are non-compoundable
offences.
In non-compoundable offences, no compromise is allowed.
Even the court is not empowered to compound such offences.
Full trial is held which ends with the acquittal or conviction of
the offender, based on the evidence produced.
COMPOUNDING OF OFFENCES UNDER
COMPANIES ACT, 2013
Section 441 of the Companies Act, 2013 empowers the
National Company Law Tribunal (NCLT)/ Regional Director to
compound certain offences. These powers are as follows:
(i) OFFENCES WHICH ARE COMPOUNDABLE
Any offence punishable under the Act (whether committed
by a company or any officer thereof) with fine only may
either before or after the institution of any prosecution, be
compounded by-
(a) the NCLT
(b) Regional Director (when the maximum amount of
fine which may be imposed for such offence does not
exceed five lakh rupees)*
(ii) OFFENCES WHICH ARE NOT COMPOUNDABLE
Any offence which is punishable with imprisonment only,
or with imprisonment and also with fine, shall not be
* Now “Twenty Five Lakh Rupees” vide The Companies (Amendment) Ordinance, 2018.
CHARTERED SECRETARY JANUARY 2019I
Compounding of Offences – An Easy Way of Settling Disputes
ARTICLE
compoundable.
Any offence by any company or its officer shall not be
compounded if the investigation against such company
has been instituted or is pending under the Act.
If a person has already compounded an offence he is
not eligible to apply for compounding an offence of a
similar nature for a period of three years from the date of
compounding of first offence. Any second or subsequent
offence committed after the expiry of a period of three
years from the date on which the offence was previously
compounded shall be deemed to be a first offence.
PROCESS OF COMPOUNDING
(a) Every application for the compounding shall be made to
the Registrar, who shall forward the same together with the
comments thereon, to the NCLT or the Regional Director
or any officer authorised by the Central Government, as
the case be.
(b) Where any offence is compounded, whether before or
after the institution of any prosecution, an intimation
thereof shall be given by the company to the Registrar
within seven days from the date on which the offence is so
compounded.
(c) Where an offence is compounded before the institution
of any prosecution, no prosecution shall be instituted in
relation to such offence, against the offender in relation to
whom the offence is so compounded.
(d) Where the compounding of any offence is made after the
institution of any prosecution, such compounding shall be
brought by the Registrar in writing, to the notice of the court
in which the prosecution is pending and on such notice of
the compounding of offence being given, the company or
its officer in relation to whom the offence is so compounded
shall be discharged.
COMPOUNDING OF OFFENCES UNDER FEMA, 1999
Under Foreign Exchange Management Act, 1999 (FEMA),
compounding means to settle a matter by money payment in
lieu of other liability. This meaning clearly defines the concept of
compounding as a mechanism that provides the offender with
an opportunity to avoid prosecution for the offence committed
by him/her after paying off the monetary payment. It is an
agreeable settlement for the purpose of preventing examination
and prosecution for an offence. However, compounding is not
an inherent right under FEMA.
BASIC CONCEPTS UNDER FEMA ARE AS UNDER:
• Persons who have violated the provisions of FEMA are
allowed to settle the offence by paying monetary penalty
and will be relieved from the burden of litigation provided
that they admit that they have flouted the provisions of
FEMA. Section 15 stipulates that:
(i) Any person who has contravened the provisions of
FEMA as defined under section 13 of the Act should
give application to the officer authorised by RBI and
the officer, within one hundred eighty days from the
receipt of application, shall allow compounding of
offence.
(ii) Where a contravention has been compounded under
sub-section (i), no proceeding or further proceeding,
as the case may be, shall be initiated or continued,
against the person committing the contravention so
compounded under this section.
The Central Government has been consulting RBI
from time to time for simplifying the procedure of
89
ARTICLE Compounding of Offences – An Easy Way of Settling Disputes
compounding of offences under FEMA so that citizens
and corporate community may not feel difficulty in
compounding process and may reduce the transaction
costs. The Government, while streamlining the
procedure keeps in mind the attitude of offenders so
that wilful, mala fide and fraudulent transactions may
not be the part of such process. Accordingly, RBI has
been vested with the responsibility of administering
compounding of contravention cases under FEMA.
While the compounding process is to be completed
within 180 days from the receipt of application for
compounding, the sum worked out after compounding
has to be paid within 15 days from the order of
compounding.
The order passed by the RBI will be applicable for a
period of three years. If second offence is committed
after expiry of three years, it will be deemed as a first
(fresh) contravention and not a repetition of the earlier
one.
COMPOUNDING OF OFFENCE UNDER CRIMINAL
PROCEDURE CODE, 1973
Legal provision regarding compounding of offences
under section 320 of the Code of Criminal Procedure, 1973
(hereinafter called the Code)
A composition is an arrangement whereby there is settlement
of the differences between the injured party and the person
against whom the complaint is made. It is not necessary that
Police can file First Information Report
(FIR) only for cognizable offences.
Such offences are not compoundable.
Therefore, any offence committed by
a company or an officer shall not be
compoundable if investigation against
such company or officer has been
initiated or is pending.
90
composition should be in writing. It may be oral.
If both the parties agree that there has been compromise,
then the Court has to dispose of the case in terms of that
compromise and the petitioner is to be acquitted. If, on the
other hand, parties differ, then the court has to call upon them
to lead evidence and then records a finding of the evidence.
Section 320 of the Code contains a list of compoundable
offences. The offences other than those mentioned in the list
contained in Section 320 cannot be compounded. The offences
punishable under laws other than the Penal Code are not
compoundable. Only the persons named in the third column
of section 320 can legally compound an offence under section
320. Admittedly, any person may set the criminal law in motion,
but no person other than those whose name is borne in the
third column of section 320 can compound an offence. When
there is compromise between the parties, court may allow the
acquittal of accused. A case may be disposed of at any time
before sentence is pronounced, even whilst the Magistrate is
writing the judgment.
The compounding of offence signifies that the person against
whom the offence has been committed has received some
gratification, not necessarily of a pecuniary character, to act as
an inducement for his desiring to abstain from a prosecution,
provided that offence under section 320 of the Code is
compoundable.
The object of section 320 is to promote friendliness between
the parties so that peace between them is restored.
COMPOUNDING OF OFFENCE UNDER INCOME
TAX ACT, 1961
Section 279(2) of the Income Tax Act, 1961 provides that any
offence under Chapter XXII of the Act may, either before or
after the institution of proceedings be compounded by the Chief
Commissioner of Income Tax/Director General of Income Act.
As per section 2(15A) and 2(21) of the Act, Chief Commissioner
of Income Tax includes Principal Chief Commissioner of
Income Tax and Director General of Income Tax.
COMPOUNDING IS NOT A MATTER OF RIGHT
Compounding of offence is not a matter of right. However,
offence may be compounded by the competent authority on
his satisfaction of the eligibility condition prescribed in the
guidelines prescribing procedure of compounding offences
under Direct Laws, 2014. Keeping in view the factors such as
conduct of the person, nature and magnitude of the offence
and facts and circumstances of each case.
ELIGIBLILITY CONDITIONS FOR COMPOUNDING
(i) The person seeking to compound the offence is required
to make an application in the prescribed form to the Chief
Commissioner of Income Tax or Director General of Income
Tax having jurisdiction over the case for compounding of
offences.
(ii) Before making the application, the person should have paid
the outstanding tax, interest, penalty and any other sum
due and relating to the offence for which the compounding
is sought.
(iii) The person has to present an undertaking to pay the
compensation charges including the compounding fee,
the prosecution establishment expenses and litigation
expenses including counsel’s fee, if any, determined and
communicated by the Chief Commissioner of Income Tax/
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JANUARY 2019 CHARTERED SECRETARY

Director General of Income Tax concerned.
(iv) The person has to undertake to withdraw appeal filed
by him, if any, in case the same has a bearing on the
offence sought to be compounded. In case such appeal
mixed ground, some of which may not be related to the
offence under consideration, the undertaking may not be
taken without appropriate modification in grounds of such
appeal.
COMPOUNDING PROCEDURE
(i) The applicant seeking compounding shall submit
application to the Assessing Officer/Assistant or Deputy
Director, who in turn, shall prepare checklist and submit
the same along with the application to the compounding
authority.
(ii) The competent authority shall issue speaking order in the
prescribed format within the time prescribed by the Board
from time to time. In absence of such prescription, within
180 days of the receipt of application. However, while
passing order on the compounding application, the period
of time allowed to the assesse for paying the compounding
charges shall be excluded from the limitation specified
above.
(iii) Where Compounding application is found to be acceptable,
the competent authority shall intimate the compounding
charges to the applicant with the instruction to pay the
same within 60 days of such intimation. Under exceptional
circumstances, the competent authority may extend
this period up to a further period of 120 days. Extension
beyond this limit is not permissible except with the previous
approval of the Member (Invigilation) CBDT on a proposal
of the competent authority concerned.
(iv) However, wherever, the compounding charges are paid
beyond 60 days as extended by the competent authority
the applicant shall have to pay additional compounding
charges at the rate of 2% per month of the unpaid amount
of compounding charges.
(v) The compounding authority shall pass the compounding
order within 30 days of the payment of compounding
charges. If the compounding charges are not deposited
within time allowed, the application is rejected after giving
the applicant an opportunity of being heard. The order
of rejection shall be brought to the notice of the Court
forthwith through prosecution Counsel in the cases where
prosecution has been instituted.
COMPOUNDING OF OFFENCES UNDER GOODS AND
SERVICES TAX (GST) ACT, 2017
1 Section 138 of the GST Act, 2017 and Rule 162 of the
GST Rules 2017 deal with the compounding of offences.
Though the term ‘Compounding of Offences’ has not been
defined under the Statute or Rules made thereunder, but
it is understood that ‘Compounding’ means payment of
sum of money in monetary terms instead of undergoing
prosecution for an offence committed. Application for
compounding of an offence can be either before or after
institution of the prosecution proceedings.
2 Specified offences can be compounded only once for that
purpose the application shall be filed in Form No. GST-
CPD-01.
3 The Commissioner, on receipt of application, shall call
for a report from the concerned officer with reference to
the particulars furnished in the application. The officer
concerned may also call for any other relevant information
relating to the application.
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Compounding of Offences – An Easy Way of Settling Disputes
In non-compoundable offences, no
ARTICLE
compromise is allowed. Even the court
is not empowered to compound such
offences. Full trial is held which ends with
the acquittal or conviction of the offender,
based on the evidence produced.
4 The officer concerned shall afford an opportunity of being
heard to the applicant. The applicant shall give his/her
explanation and if such explanation is found satisfactory,
the officer concerned shall look into the factors that the
applicant has fully cooperated in the proceedings and
has also made full and true disclosure of the facts relating
to the case. After being satisfied that the case is fit for
compounding, the officer shall submit his report to the
Commissioner. The Commissioner shall pass necessary
order in Form No.GST-CPD-02 indicating the compounding
amount and thus shall grant immunity from prosecution.
If the report of the officer concerned is negative, the
application shall be rejected by the Commissioner within
90 days of the receipt of application stating grounds of
rejection.
However, before allowing the application, it has to be
ensured by the Department that the tax amount, interest
thereon, if any, and penalty, if any, stand paid by the
applicant.
5 After grant of immunity to the applicant, if it is found that
the applicant has, in the course of proceedings concealed
any material fact or made non-disclosure of any particulars
or has given false evidence, the immunity so granted shall
stand forfeited. Thereupon, such person may be tried of
the offence that was committed by him in connection with
the compounding proceedings and the provisions of the
Act would apply as if no immunity was ever granted.
6 After grant of immunity to the applicant, the Department
shall issue an order that compounding amount be paid
within 30 days from the receipt of such order. The applicant,
after receipt of the order shall pay the compounding
amount and submit to the Commissioner, the proof of such
payment within time specified in the order. If the applicant
fails to make payment as ordered or fails to submit proof
of payment, the order of Commissioner shall be treated as
void.
7 On verification that payment has been made as ordered,
91
ARTICLE Compounding of Offences – An Easy Way of Settling Disputes
the Department shall not hold any proceedings.
8 The amount of Compounding fee under the provisions
shall be such as may be prescribed, subject to : Section 320(9) of CrPC which states that no offence shall be
• The minimum amount not being less than Rs.1000 or 50%
of the tax amount whichever is higher; and
• The maximum amount not being less than Rs.30,000 or
150% of the tax amount whichever is higher. AT LITIGATION STAGE?
OFFENCES NOT ATTRACTING COMPOUNDING
• Where a person has already availed compounding in
respect of supply value exceeding Rupees One Crore
• Where a person has been convicted by a Court under GST
Act
• Where the GST Act has prescribed the particular class of
persons
• Where a person has been permitted to compound offences
under section 132 of GST Act
• Where a person has been accused of committing an
offence under this Act which is an offence under any other
law for the time being in force
• Where a person has been accused of committing an
offence under section 132(1)(g).
COMPOUNDING OF OFFENCES UNDER NEGOTIABLE
INSTRUMENTS ACT, 1881
Prior to insertion of Section 147 in the Negotiable Instruments
Act, 1881, provisions of Section 320 of the Cr.PC were applied
for the Compounding of Offences under Negotiable Instruments
Act, 1881. For this purpose Section 320(1) and (2) contain
a table indicating various offences punishable under Indian
Penal Code. The offences mentioned therein can be divided
into two categories namely – minor and serious offences. In
case of serious offences compounding is permissible only with
the permission of High Court on application by the victim. As
the dishonour of cheque arises out of commercial transaction
between two private parties, the Legislature thought it fit
to amend the Negotiable Instruments Act, 1881(NI Act).
Therefore, two amendments were made in the NI Act, one in
1989 and another in 2003. The amendments inserted Section
147 providing that as the NI Act is a special law, the provisions
of the same will override the effect of Section 320(9) of CrPC,
specially keeping in mind that Section 147 of the NI Act carries
a non-obstante clause.
As Section 147 of NI Act contains non-obstante clause, the
compounding of offences would be controlled under that
section. The scheme contemplated under Section 320 of
CrPC will not be applicable in the strict sense to the offences
committed under NI Act. Moreover, Section 147 of NI Act
is in the nature of enabling provision that provides for the
RBI has been vested with the responsibility
of administering compounding of
contravention cases under FEMA. While
the compounding process is to be
completed with 180 days from the receipt
of application for compounding, the sum
worked out after compounding has to
be paid within 15 days from the order of
compounding.
92
compounding of offences prescribed under the same Act,
thereby serving an exception to the general rule provided in
compounded except as provided in this Section.
WHETHER COMPOUNDING UNDER NI ACT POSSIBLE
The Supreme Court, in Damodar S. Prabhu v. Sayed Babulal
H., (Appeal No. 963 of 2010) decided on May 3, 2010, observed
that the interest of justice would indeed be better secured if
the parties resort to compounding of offences committed
under Section 138 of NI Act by using section 147 of the NI
Act instead of engaging in protracted litigation before several
forums, thereby causing undue delay, expenditure and strain
on the part of the judicial system. The Court further held that
Section 147 of the NI Act enables the compounding of offences
committed under section 138 of the NI Act, 1881.
In O.P Dholakia v. State of Haryana (2000) 1 SCC 672, a
Division Bench of SC had permitted the compounding of
offences even though the petitioner’s conviction was upheld by
all the three designated forums. After noting that the petitioner
had already entered into compromise with the complainant, the
Bench had rejected the State’s argument that court need not
interfere with the conviction and sentence since it was open to
the parties to enter into a compromise at earlier stage and they
had not done so. The court permitted the parties to compound
on the basis of the fact that parties had already entered into
compromise for settlement.
Similarly, reliefs were granted in Sivasankaran v. State of Kerala
& Anr. (2002) 8 SCC 164, Kishore Kumar v. J.K. Corporation
Ltd. (2004) 12 SCC 494 and Sailesh Shyam Parsekar v.Baban
(2005) 4 SCC 162.
In Vinay Devanna Nayak v. Ryot Seva Sehkari Bank Ltd. (2008)
2 SCC 305, Supreme Court held that compounding of offence
should not be denied at the appellate stage. Presumably,
Parliament also realised this aspect and inserted section 147
in the NI (Amendment & Misc. Provisions Act) 2002. It was
also held in K.M. Ibrahim v. K.P. Mohammed & Anr. 2009 (14)
SCALE 262 that compounding of offences at latter stage of
litigation is also permissible under NI Act.
COMPOUNDING OF OFFENCES UNDER SEBI ACT, 1992
Section 24A of the Securities and Exchange Board of India
Act, 1992 (SEBI Act, 1992) permits compounding of offences
by the court where prosecution proceedings are pending.
Compounding of offences can take place after filing of criminal
complaint with SEBI. It can cover appropriate prosecution
cases filed by SEBI before criminal court. Any person who is
notified that a proceeding will be initiated against him or any
party to the proceeding already initiated/instituted can propose
in writing for the settlement. The main objective is to avoid the
difficult and lengthy process of criminal prosecution and further
time, cost and mental agony.
FACTORS TO BE TAKEN INTO COSIDERATION FOR
COMPOUNDING OF OFFENCES
• Whether violation is intentional
• What is the conduct of parties in the investigation process
• Whether the circumstances are beyond the control of the
party
• Gravity of charges: like fraud, market manipulation or
insider trading
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JANUARY 2019 CHARTERED SECRETARY

Any person may set the criminal law in motion, but
no person other than those whose name is borne
in the third column of section 320 can compound
an offence. When there is compromise between
the parties, court may allow the acquittal of
accused. A case may be disposed of at any time
before sentence is pronounced, even whilst the
Magistrate is writing the judgment.
• Violator’s history of violation; whether he/she had good
track record and the violation has been committed first
time
• What is the nature of violation, whether technical or minor
in nature or whether the violation attracts severe penalty
• Consideration of the amount of investors’ harm or party’s
gain
• Whether there are processes helpful in minimising the
degree of violation or reduce the quantum of violation in
future
• Party’s attitude to make compliance with the compliance
schedule
• Economic benefits accruing to the party from delayed or
avoided compliance
• Conditions where necessary to deter future non-compliance
by the same or another party
• Satisfaction of claim of investigators regarding payment of
money due to them or delivery of securities to them
• Compliance of the civil enforcement action by the accused
• Whether the party has been charged against any violation
of other regulations and has been penalised under any
enactment.
COMPOUNDING PROPOSED BY THE PARTY
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Compounding of Offences – An Easy Way of Settling Disputes
ARTICLE
Where compounding is proposed by the party, he/she
should make application to the court, where the complaint is
pending, with a copy to “Division of Prosecution, Enforcement
Department” at SEBI’s Mumbai address. SEBI’s Enforcement
Department shall forward the application to be placed before
the high powered committee. The terms of compounding
as recommended by the committee and approved by the
Competent Authority would be placed before the Court by the
Prosecution Division by way of written but humble statement.
The court after consideration of submission of Prosecution
Division of SEBI, shall pass orders as it deems fit. After the
court’s order compounding action is taken.
CONCLUSION
Compounding of offences is a shortcut method of avoiding
litigation. Since litigation is a costly way of settling the
disputes and compounding enables reconciliation between
the transgressor and the transgressed. It is a mechanism
of settlement of disputes in amicable way for the purpose
of averting prosecution against the accused. But there are
scholars who think otherwise. They believe that through
compounding the guilty persons purchase their freedom
by paying small compounding fees that puts premium on
misconduct. Thus, they feel that compounding gives way
to unethical actions, since the wrong doers use their money
power to avert their offences. They believe that compounding
of offences is not an amicable way to the settlement of disputes
but the Americanisation of judicial system in India. Frankly
speaking, the process of compounding of offences needs
debatable discussion. The discussion should ensure that guilty
persons should invariably be brought to book and in no case he/
she should go scot free. When an offender seeks its acquittal
by way of monetary power, a strict examination should be
conducted to see whether his acquittal is justified or unethical.
However, the matter should be seen in a wider context of the
prevailing sluggish judicial process which is creaking at the
seams and the larger good that is sought to be achieved by
providing for compounding of offences. There is no denying the
fact that all offences are not compoundable. For example, when
imprisonment is compulsory as a punishment of a particular
offence under an enactment, the no compounding of offence
is permissible. In other words, the compounding is provided
only in such offences where the law has provided certain fines/
penalties in monetary terms and if the guilty person is tried
through prosecution, it may take years together, thus delaying
the justice and defeating the purpose of imposing punishment.
Therefore, in such cases at least guilty persons are brought to
book and made to pay a price. Sanguinely, it can be concluded
that the system of compounding of offences would be useful in
reducing the burden of the courts. CS
CORRIGENDUM
With respect to the Article titled “Recent Changes
in the Company Law – Way Forward” published
in Chartered Secretary Journal, December 2018
edition, kindly take note that the tabular presentation
of overview of Companies (Amendment) Ordinance,
2018 published in the said article was taken from
the content originally published by Corporate
Professional and inadvertently, reference to original
source was not provided in the Article.
93
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n THE ICSI-RESEARCH CELL

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CHARTERED SECRETARY JANUARY 2019 95
RESEARCH CORNER

CORPORATE SAVIOUR
ICSI RESEARCH PUBLICATIONS

T
he Institute, as part of its “Support Government Policy” initiative towards Champion
Sectors and with a view to develop industry specific knowledge through research, creating
awareness among the members about the contribution the Company Secretary can make
in specific industry, capacity building of members in the specific industry, securing recognitions
for members in specific industry sector, and sensitisation of regulatory authorities about the
contribution the Company Secretaries can make in specific industry, has brought out following
research publications.

The soft copies of these publications are available at https://www.icsi.edu/publication_

icsi/ and icsi.corporatesaviour.com.

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JANUARY 2019 CHARTERED SECRETARY
 LEGAL WORLD
3
n JOHN THOMAS v. Dr. K. JAGADEESAN [SC]
n LALIT MISHRA & ORS v. SHARON BIO MEDICINE LTD. & ORS. [NCLAT]
n JAIPUR METALS & ELECTRICALS EMPLOYEES ORGANISATION v. JAIPUR METALS & ELECTRICALS LTD & ORS [SC]
n COMPETITION COMMISSION OF INDIA v. BHARTI AIRTEL LTD & ORS [SC]
n MAHYCO MONSANTO BIOTECH (INDIA) PVT LTD v. COMPETITION COMMISSION OF INDIA & ORS [DEL]
n EMAAR MGF LAND LIMITED v. AFTAB SINGH [SC]
n CARLSBERG BREWERIES A/S v. SOM DISTILLERIES AND BREWERIES LTD [Del-FB]
n HINDUSTAN INFRASTRUCTURE CONSTRUCTION CORPORATION LTD v. M/S. R.S. WOODS INTERNATIONAL & ORS [DEL]
n THOMAS CHACKO v. THE CHIEF MANAGER, BANK OF INDIA & ORS [KER]

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LEGAL WORLD
Corporate
Laws
LMJ 01:01:2019
JOHN THOMAS v. Dr. K. JAGADEESAN [SC]
Appeal (Crl.) 688 of 2001(Arising out of SLP (Crl.) No.1875 of 2001)
K.T.Thomas & R. P. Sethi, JJ. [Decided on 12/07/2001]
Equivalent citations: (2001) 6 SCC 30; 2001 SCC (Crl) 974; (2001)
106 Comp Cas 619.
Companies Act,1956 read with Indian Penal Code, 1860- defamatory
publication against a reputed hospital- director filed defamation
case against the publisher- whether director has locus standi to file
such case- Held, Yes.
Brief facts:
A renowned hospital in the Metropolis of Madras (Chennai)
has been caricatured in a newspaper as the abattoir of human
kidneys for trafficking purposes. When the Director of the Hospital
complained of defamation, the publisher of the newspaper sought
shelter under the umbrage that the libel is not against the Director
personally, but against the hospital only and hence he cannot
feel aggrieved. The accused/publisher, who raised the objection
before the trial court, on being summoned by the court to appear
before it, succeeded in stalling the progress of the trial by clinging
to the said contention which the trial magistrate has upheld. But
the High Court of Madras disapproved the action of the magistrate
and directed the trial to proceed. Hence the accused has come up
to this Court by filing the special leave petition.
Decision: Appeal dismissed.
Reason: publication. That part of the decision rests entirely on the facts of
The appellant contended that the imputations contained in the
publication complained of are not per se defamatory. After reading
the imputations we have no doubt that they are prima facie
libellous. The only effect of an imputation being per se defamatory
is that it would relieve the complainant of the burden to establish
that the publication of such imputations has lowered him in the
estimation of the right thinking members of the public. However,
even if the imputation is not per se defamatory, that by itself would
not go to the advantage of the publisher, for, the complaining
person can establish on evidence that the publication has in fact
amounted to defamation even in spite of the apparent deficiency.
So the appellant cannot contend, at this stage, that he is entitled
to discharge on the ground that the imputations in the extracted
publication were not per se defamatory.
The contention focussed by the learned senior counsel is that
the respondent, who filed the complaint, has no locus standi to
complain because he is only a Director of K.J. Hospital about which
the publication was made and that the publication did not contain
any libel against the complainant personally. It is not disputed that
98
the complainant is the Director of K.J. Hospital.
Explanation 2 in Section 499 of the IPC reads thus:
“Explanation 2. - It may amount to defamation to make an
imputation concerning a company or an association or collection
of persons as such.”
In view of the said Explanation, it cannot be disputed that a
publication containing defamatory imputations as against a
company would escape from the purview of the offence of
defamation. If the defamation pertains to an association of persons
or a body corporate, who could be the complainant? This can be
answered by reference to Section 199 of the Code. The first sub-
section of that section alone is relevant, in this context. It reads
thus:
“199. Prosecution for defamation. - (1) No court shall take
cognizance of an offence under Chapter XXI of the Indian Penal
Code (45 of 1860) except upon a complaint made by some person
aggrieved by the offence.”
The collocation of the words “by some persons aggrieved”
definitely indicates that the complainant need not necessarily
be the defamed person himself. Whether the complainant has
reason to feel hurt on account of the publication is a matter to
be determined by the court depending upon the facts of each
case. If a company is described as engaging itself in nefarious
activities its impact would certainly fall on every Director of the
company and hence he can legitimately feel the pinch of it.
Similarly, if a firm is described in a publication as carrying on
offensive trade, every working partner of the firm can reasonably
be expected to feel aggrieved by it. If K.J. Hospital is a private
limited company, it is too farfetched to rule out any one of its
Directors, feeling aggrieved on account of pejoratives hurled at
the company. Hence the appellant cannot justifiably contend
that the Director of the K.J. Hospital would not fall within the wide
purview of “some person aggrieved” as envisaged in Section
199(1) of the Code.
The learned senior counsel made a last attempt to save the
appellant from prosecution on the strength of the decision of this
Court in K.M. Mathew v. State of Kerala {1992 (1) SCC 217}. In
that case prosecution against Chief Editor was quashed for want
of necessary averments in the complaint regarding his role in the
that case and it cannot be imported to this case. It is pertinent to
point out, in this context, that the appellant did not have any such
point either when he first moved the High Court for quashing the
proceedings or when he moved the trial court for discharge. Hence
it is too late in the day for raising any such point, even apart from
non-availability of that defence to the appellant on merits. We,
therefore, dismiss this appeal.
LW 01:01:2019
LALIT MISHRA & ORS v. SHARON BIO MEDICINE LTD. & ORS.
[NCLAT]
Company Appeal (AT) (Insolvency) No. 164 of 2018
S.J. Mukhopadhaya & Bansi Lal Bhat. [Decided on 19/12/2018]
Insolvency and Bankruptcy Code, 2016- Resolution plan- personal
guarantor claimed his subrogation right- whether tenable-Held, No.
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Brief facts:
The Appellants are the promoters of ‘Sharon Bio Medicine Ltd.’-
(‘Corporate Debtor’). In the appeal they have challenged the
order passed by the National Company Law Tribunal [NCLT],
whereby and where under, the ‘Resolution Plan’ submitted by
the 3rd Respondent- ‘Successful Resolution Applicant’ has been
approved.
The Appellants have challenged the order of approval of the
‘Resolution Plan’ on two counts namely— (i) The Appellants,
promoters were the shareholders and for them no amount has
been provided under the ‘Resolution Plan’; and (ii) Some of the
Appellants, promoters are also ‘personal guarantors’ who have
been discriminated.
Decision:Appeal dismissed.
Reason: of the value of the assets of the ‘Corporate Debtor’ at par with
The restructuring of the financial debt as part of the ‘Resolution
Plan’ approved by the Adjudicating Authority under the ‘I&B Code’
does not envisage complete discharge of the liability of personal
guarantors of the ‘Corporate Debtor’. This will be evident from
Clause 12 of Section 5 of the ‘Resolution Plan’ which deals with
‘treatment of security’. Therein it is mentioned that all securities/
collaterals/ margin money/ fixed deposit with lien provided by
the Company shall be deemed to be released immediately on
Effective Date. It is subsequently mentioned that the personal
guarantee provided by the existing promoters of the Company,
shall result in no liability towards the ‘Company’ or the ‘Resolution
Applicants’. This ‘treatment of security’ and with regard to personal
guarantee provided by the existing promoters of the Company is
alleged to be in violation of Section 140 and Section 133 of the
‘Indian Contract Act’.
However, the aforesaid submissions cannot be accepted,
as on approval of the ‘Resolution Plan’, the claim of the entire
stakeholders stand cleared and the ‘Personal Guarantor’
thereafter cannot claim that they have been discriminated. All the
stakeholders have already been cleared by the 3rd Respondent-
‘Successful Resolution Applicant’. It was open to them to say that
the personal guarantee will not result into any liability towards the
‘Company’ or the ‘Resolution Applicant’.
It was not the intention of the legislature to benefit the ‘Personal
Guarantors’ by excluding exercise of legal remedies available
in law by the creditors, to recover legitimate dues by enforcing
the personal guarantees, which are independent contracts. It is
a settled position of law that the liabilities of guarantors is co-
extensive with the borrower.
This Appellate Tribunal held that the resolution under the ‘I&B
Code’ is not a recovery suit. The object of the ‘I&B Code’ is, inter
alia, maximization of the value of the assets of the ‘Corporate
Debtor’, then to balance all the creditors and make availability
of credit and for promotion of entrepreneurship of the ‘Corporate
Debtor’. While considering the ‘Resolution Plan’, the creditors
focus on resolution of the borrower ‘Corporate Debtor’, in line with
the spirit of the ‘I&B Code’.
The present appeal has been preferred by the promoters, who
are responsible for having contributed to the insolvency of the
‘Corporate Debtor’. The ‘I&B Code’ prohibits the promoters from
gaining, directly or indirectly, control of the ‘Corporate Debtor’,
or benefiting from the ‘Corporate Insolvency Resolution Process’
or its outcome. The ‘I&B Code’ seeks to protect creditors of the
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LEGAL WORLD
‘Corporate Debtor’ by preventing promoters from rewarding
themselves at the expense of creditors and undermining the
insolvency processes.
For the aforesaid reasons, it will be evident from the ‘I&B Code’
that the powers of the promoters as the members of the Board
of Directors of the ‘Corporate Debtor’ are suspended. The voting
right of the shareholders, including promoter shareholders, are
suspended and shareholders’ approval is deemed to have been
granted for implementation of the ‘Resolution Plan’ as apparent
from explanation to Section 30(2)(f) of the ‘I&B Code’. The
promoters, being ‘related parties’ of the ‘Corporate Debtor’, have
no right of representation, participation or voting in a meeting of
the ‘Committee of Creditors’.
Admittedly, the shareholders and promoters are not the creditors
and thereby the ‘Resolution Plan’ cannot balance the maximization
the ‘Financial Creditors’ or ‘Operational Creditors’ or ‘Secured
Creditors’ or ‘Unsecured Creditors’. They are also ineligible
to submit the ‘Resolution Plan’ to again control or takeover the
management of the ‘Corporate Debtor’.
In the aforesaid background, if no amount is given to the
promoters/ shareholders and the other equity shareholders who
are not the promoters have been separately treated by providing
certain amount in their favour, the Appellant cannot claim to have
been discriminated.
LW 02:O1:2019
JAIPUR METALS & ELECTRICALS EMPLOYEES ORGANISATION
v. JAIPUR METALS & ELECTRICALS LTD & ORS [SC]
Civil Appeal No. 12023 of 2018 [Arising out of SLP(C) No.18598 of
2018]
R F Nariman & M R Shah, JJ. [Decided on 12/12/2018]
Companies act,2013 read with Insolvency and Bankruptcy
Code, 2016- winding up of sick company- pending in High Court-
application moved to transfer the same to NCLT- refused- whether
correct-Held, No.
Brief facts:
The present appeal has been filed by an employees’ union
challenging the judgment of the High Court of Judicature for
Rajasthan, in which the High Court has refused to transfer winding
up proceedings pending before it to the National Company Law
Tribunal (“NCLT”), and has set aside an order of the NCLT by
which order a financial creditor’s petition under Section 7 of the
Insolvency and Bankruptcy Code, 2016 (“Insolvency Code” or
“Code”) has been admitted.
Decision: Appeal allowed.
Reason:
It is clear that under Section 434 as substituted by the Eleventh
Schedule to the Code vide notification dated 15.11.2016, all
proceedings under the Companies Act, 2013 which relate to
winding up of companies and which are pending immediately
before such date as may be notified by the Central Government in
this behalf shall stand transferred to the NCLT. The stage at which
such proceedings are to be transferred to the NCLT is such as
may be prescribed by the Central Government.
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It is clear that the present case relates to Rule 5(2) alone. Despite
the fact that Section 20 of the SIC Act speaks of a company
being wound up under the Companies Act, 1956 under the just
and equitable provision, which is Section 433(f) of the Companies
Act, 1956, yet, since cases that fall under Section 20 of the SIC
Act are dealt with separately under Rule 5(2), they cannot be
treated as petitions that have been filed under Section 433(f) of
the Companies Act, 1956, which are separately specified under
Rule 6. The High Court is therefore not correct in treating petitions
that are pursuant to Section 20 of the SIC Act as being pursuant to
Section 433(f) of the Companies Act, 1956 and applying Rule 6 of
the 2016 Transfer Rules.
However, though the language of Rule 5(2) is plain enough,
it has been argued before us that Rule 5 was substituted on
29.06.2017, as a result of which, Rule 5(2) has been omitted.
The effect of the omission of Rule 5(2) is not to automatically
transfer all cases under Section 20 of the SIC Act to the NCLT,
as otherwise, a specific rule would have to be framed transferring
such cases to the NCLT, as has been done in Rule 5(1). The
real reason for omission of Rule 5(2) in the substituted Rule 5 is
because it is necessary to state, only once, on the repeal of the
SIC Act, that proceedings under Section 20 of the SIC Act shall
continue to be dealt with by the High Court. It was unnecessary
to continue Rule 5(2) even after 29.06.2017 as on 15.12.2016,
all pending cases under Section 20 of the SIC Act were to
continue to be dealt with by the High Court before which such
cases were pending. Since there could be no opinion by the
BIFR under Section 20 of the SIC Act after 01.12.2016, when
the SIC Act was repealed, it was unnecessary to continue Rule
5(2) as, on 15.12.2016, all pending proceedings under Section
20 of the SIC Act were to continue with the High Court and
would continue even thereafter. This is further made clear by the
amendment to Section 434(1) (c), with effect from 17.08.2018,
where any party to a winding up proceeding pending before
a Court immediately before this date may file an application
for transfer of such proceedings, and the Court, at that stage,
may, by order, transfer such proceedings to the NCLT. The
proceedings so transferred would then be dealt with by the
NCLT as an application for initiation of the corporate insolvency
resolution process under the Code. It is thus clear that under the
scheme of Section 434 (as amended) and Rule 5 of the 2016
Transfer Rules, all proceedings under Section 20 of the SIC Act
pending before the High Court are to continue as such until a
party files an application before the High Court for transfer of
such proceedings post 17.08.2018. Once this is done, the High
Court must transfer such proceedings to the NCLT which will
then deal with such proceedings as an application for initiation
of the corporate insolvency resolution process under the Code.
The High Court judgment, therefore, though incorrect in applying
Rule 6 of the 2016 Transfer Rules, can still be supported on this
aspect with a reference to Rule 5(2) read with Section 434 of the
Companies Act, 2013, as amended, with effect from 17.08.2018.
However, this does not end the matter. It is clear that Respondent
No. 3 has filed a Section 7 application under the Code on
11.01.2018, on which an order has been passed admitting such
application by the NCLT on 13.04.2018. This proceeding is an
independent proceeding which has nothing to do with the transfer
of pending winding up proceedings before the High Court. It was
open for Respondent No. 3 at any time before a winding up order
is passed to apply under Section 7 of the Code.
The ingenious argument that since Section 434 of the Companies
Act, 2013 is amended by the Eleventh Schedule of the Code, the
100
amended Section 434 must be read as being part of the Code
and not the Companies Act, 2013, must be rejected for the reason
that though Section 434 of the Companies Act, 2013 is substituted
by the Eleventh Schedule of the Code, yet Section 434, as
substituted, appears only in the Companies Act, 2013 and is part
and parcel of that Act. This being so, if there is any inconsistency
between Section 434 as substituted and the provisions of the
Code, the latter must prevail. We are of the view that the NCLT
was absolutely correct in applying Section 238 of the Code to an
independent proceeding instituted by a secured financial creditor,
namely, the Alchemist Asset Reconstruction Company Ltd. This
being the case, it is difficult to comprehend how the High Court
could have held that the proceedings before the NCLT were without
jurisdiction. On this score, therefore, the High Court judgment has
to be set aside. The NCLT proceedings will now continue from the
stage at which they have been left off. Obviously, the company
petition pending before the High Court cannot be proceeded with
further in view of Section 238 of the Code. The writ petitions that
are pending before the High Court have also to be disposed of in
light of the fact that proceedings under the Code must run their
entire course. We, therefore, allow the appeal and set aside the
High Court’s judgment.
Competition & Consumer
Protection Laws
LW 03:O1:2019
COMPETITION COMMISSION OF INDIA v. BHARTI AIRTEL
LTD & ORS [SC]
Civil Appeal No(S). 11843 of 2018 (Arising out of SLP (C) No. 35574
of 2017) with connected appeals
Bench: A.K. Sikri & Ashok Bhushan, JJ. [Decided on 05/12/2018]
Competition Act,2002 read with TRAI Act- telecom sector- allegation
of cartel- investigation by CCI- whether CCI has jurisdiction – Held,
Yes only after TRAI returns a finding thereto – initial jurisdiction
rests with TRAI.
Brief facts:
Reliance Jio Infocomm Limited (hereinafter referred to as ‘RJIL’)
and two other individual complainants has filed information under
Section 19(1) of the Competition Act, 2002 (hereinafter referred to
as the ‘Competition Act’) before the Competition Commission of
India (for short, ‘CCI’) alleging anti- competitive agreement/cartel
having been formed by three major telecom operators, namely,
Bharti Airtel Limited, Vodafone India Limited and Idea Cellular
Limited (Incumbent Dominant Operators) (hereinafter referred to
as the ‘IDOs’). These were registered by the CCI as Case Nos. 80-
81, 83 and 95 respectively. These IDO’s and Cellular Operators
Association of India [COAI] filed writ petitions before the High court
on the ground that the CCI did not have any jurisdiction to deal with
such a matter. The High Court has allowed these writ petitions and
quashed/set aside the order passed by the CCI and consequently
notices issued by the Director General of the CCI have also been
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JANUARY 2019 CHARTERED SECRETARY

quashed. CCI appealed to the Supreme Court.
Our discussion: IDOs and COAI supported the IDOs in that endeavour. It would
Jurisdiction of the CCI is the principal issue which is the bone of
contention.
In the instant case, dispute raised by RJIL specifically touches
upon these aspects as the grievance raised is that the IDOs
have not given POIs as per the licence conditions resulting into
non- compliance and have failed to ensure inter se technical
compatibility thereby. Not only RJIL has raised this dispute, it has
even specifically approached TRAI for settlement of this dispute
which has arisen between various service providers, namely, RJIL
on the one hand and the IDOs on the other, wherein COAI is also
roped in. TRAI is seized of this particular dispute.
It is a matter of record that before the TRAI, IDOs have refuted the
aforesaid claim of RJIL. Their submission is that not only required
POIs were provided to RJIL, it is the RJIL which is in breach as it
was making unreasonable and excessive demand for POIs.
We are of the opinion that as the TRAI is constituted as an expert
regulatory body which specifically governs the telecom sector, the
aforesaid aspects of the disputes are to be decided by the TRAI
in the first instance. These are jurisdictional aspects. Unless the
TRAI finds fault with the IDOs on the aforesaid aspects, the matter
cannot be taken further even if we proceed on the assumption that
the CCI has the jurisdiction to deal with the complaints/information
filed before it. It needs to be reiterated that RJIL has approached
the DoT in relation to its alleged grievance of augmentation of
POIs which in turn had informed RJIL vide letter dated September
06, 2016 that the matter related to inter-connectivity between
service providers is within the purview of TRAI. RJIL thereafter
approached TRAI; TRAI intervened and issued show-cause
notice dated September 27, 2016; and post issuance of show-
cause notice and directions, TRAI issued recommendations dated
October 21, 2016 on the issue of inter-connection and provisioning
of POIs to RJIL. The sectoral authorities are, therefore, seized of
the matter. TRAI, being a specialised sectoral regulator and also
armed with sufficient power to ensure fair, non-discriminatory
and competitive market in the telecom sector, is better suited to
decide the aforesaid issues. After all, RJIL’s grievance is that inter-
connectivity is not provided by the IDOs in terms of the licenses
granted to them. TRAI Act and Regulations framed thereunder
make detailed provisions dealing with intense obligations of the
service providers for providing POIS. These provisions also deal
as to when, how and in what manner POIs are to be provisioned.
They also stipulate the charges to be realised for POIs that are to
be provided to another service provider. Even the consequences
for breach of such obligations are mentioned.
We, therefore, are of the opinion that the High Court is right in
concluding that till the jurisdictional issues are straightened and
answered by the TRAI which would bring on record findings on the
aforesaid aspects, the CCI is ill-equipped to proceed in the matter.
Having regard to the aforesaid nature of jurisdiction conferred
upon an expert regulator pertaining to this specific sector, the High
Court is right in concluding that the concepts of “subscriber”, “test
period”, “reasonable demand”, “test phase and commercial phase
rights and obligations”, “reciprocal obligations of service providers”
or “breaches of any contract and/or practice”, arising out of
TRAI Act and the policy so declared, are the matters within the
jurisdiction of the Authority/TDSAT under the TRAI Act only. Only
when the jurisdictional facts in the present matter as mentioned in
this judgment particularly in paras 56 and 82 above are determined
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CHARTERED SECRETARY JANUARY 2019
LEGAL WORLD
by the TRAI against the IDOs, the next question would arise as to
whether it was a result of any concerted agreement between the
be at that stage the CCI can go into the question as to whether
violation of the provisions of TRAI Act amounts to ‘abuse of
dominance’ or ‘anti-competitive agreements’.
This takes us to the next level of the issue, viz. whether TRAI
has the exclusive jurisdiction to deal with matters involving anti-
competitive practices to the exclusion of CCI altogether because
of the reason that the matter pertains to telecom sector?
The matter cannot be examined by looking into the provisions
of the TRAI Act alone. Comparison of the regimes and purpose
behind the two Acts becomes essential to find an answer to this
issue. We have discussed the scope and ambit of the TRAI Act
in the given context as well as the functions of the TRAI. No
doubt, we have accepted that insofar as the telecom sector is
concerned, the issues which arise and are to be examined in the
context of the TRAI Act and related regime need to be examined
by the TRAI. At the same time, it is also imperative that specific
purpose behind the Competition Act is kept in mind. This has been
taken note of and discussed in the earlier part of the judgment. As
pointed out above, the Competition Act frowns the anti-competitive
agreements. It deals with three kinds of practices which are treated
as anti-competitive and are prohibited.
The CCI is specifically entrusted with duties and functions, and
in the process empower as well, to deal with the aforesaid three
kinds of anti-competitive practices. The purpose is to eliminate
such practices which are having adverse effect on the competition,
to promote and sustain competition and to protect the interest of
the consumers and ensure freedom of trade, carried on by other
participants, in India. To this extent, the function that is assigned
to the CCI is distinct from the function of TRAI under the TRAI Act.
The CCI is supposed to find out as to whether the IDOs were
acting in concert and colluding, thereby forming a cartel, with the
intention to block or hinder entry of RJIL in the market in violation
of Section 3(3)(b)of the Competition Act. Also, whether there
was an anti-competitive agreement between the IDOs, using the
platform of COAI. The CCI, therefore, is to determine whether
the conduct of the parties was unilateral or it was a collective
action based on an agreement. Agreement between the parties,
if it was there, is pivotal to the issue. Such an exercise has to
be necessarily undertaken by the CCI. In Haridas Exports, this
Court held that where statutes operate in different fields and have
different purposes, it cannot be said that there is an implied repeal
of one by the other. The Competition Act is also a special statute
which deals with anti-competition. It is also to be borne in mind
that if the activity undertaken by some persons is anti-competitive
and offends Section 3 of the Competition Act, the consequences
thereof are provided in the Competition Act. Section 27 empowers
the CCI to pass certain kinds of orders, stipulated in the said
provision, after inquiry into the agreements for abuse of dominant
position.
Obviously, all the aforesaid functions not only come within the
domain of the CCI, TRAI is not at all equipped to deal with the
same. Even if TRAI also returns a finding that a particular activity
was anti-competitive, its powers would be limited to the action
that can be taken under the TRAI Act alone. It is only the CCI
which is empowered to deal with the same anti-competitive act
from the lens of the Competition Act. If such activities offend the
provisions of the Competition Act as well, the consequences
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under that Act would also follow. Therefore, contention of the
IDOs that the jurisdiction of the CCI stands totally ousted cannot
be accepted. Insofar as the nuanced exercise from the stand point
of Competition Act is concerned, the CCI is the experienced body
in conducting competition analysis. Further, the CCI is more likely
to opt for structural remedies which would lead the sector to evolve
a point where sufficient new entry is induced thereby promoting
genuine competition. This specific and important role assigned
to the CCI cannot be completely wished away and the ‘comity’
between the sectoral regulator (i.e. TRAI) and the market regulator
(i.e. the CCI) is to be maintained.
The conclusion of the aforesaid discussion is to give primacy
to the respective objections of the two regulators under the two
Acts. At the same time, since the matter pertains to the telecom
sector which is specifically regulated by the TRAI Act, balance is
maintained by permitting TRAI in the first instance to deal with and
decide the jurisdictional aspects which can be more competently
handled by it. Once that exercise is done and there are findings
returned by the TRAI which lead to the prima facie conclusion
that the IDOs have indulged in anti-competitive practices, the
CCI can be activated to investigate the matter going by the
criteria laid down in the relevant provisions of the Competition
Act and take it to its logical conclusion. This balanced approach
in construing the two Acts would take care of Section 60 of the
Competition Act as well.
We, thus, do not agree with the appellants that CCI could have
dealt with this matter at this stage itself without availing the inquiry
by TRAI. We also do not agree with the respondents that insofar
as the telecom sector is concerned, jurisdiction of the CCI under
the Competition Act is totally ousted. In nutshell, that leads to the
conclusion that the view taken by the High Court is perfectly justified.
LW 04:O1:2019
MAHYCO MONSANTO BIOTECH (INDIA) PVT LTD v.
COMPETITION COMMISSION OF INDIA & ORS [DEL]
LPA 637/2018 & CM. Nos. 47926/2018 and 47927/2018
Rajendra Menon (CJ) & V. Kameswar Rao, J. [Decided on 18/12/2018]
Competition Act, 2002- section 48 - vicarious liability- directors and
officers of offending enterprise- whether applicable to contravention
of sections 3 & 4 also- Held, Yes.
Brief facts:
These appeals have been filed by the appellants challenging the
order passed by the learned Single Judge whereby the learned
Single has dismissed the writ petitions by relying upon the judgment
of the Coordinate Bench of this Court in Cadila Healthcare Ltd.
and Anr. V. Competition Commission of India, LPA No. 160/2018.
Main Issue: the main issue was “Whether Section 48 of the
Competition Act, which provides for vicarious liability of persons
in-charge and responsible for the conduct of business of the
Company, will apply only on contravention of orders of CCI or
DG under Sections 42 to 44 of the Competition Act and not to
contravention of Sections 3 and 4 of the Competition Act.”
Decision: Appeal dismissed.
Reason:
We may state at the outset that, we proceed to answer this issue,
102
on the premise that Officers / Directors can be proceeded against,
along with Company. We also say that the Officers / Directors can
only be liable if the CCI were to come to the conclusion that they
were the key persons who were In-charge and responsible for the
conduct of the business of the Company.
On a perusal of Section 27 of the Act, it is clear that it stipulates,
the CCI on a finding that there is a contravention of Section 3 or
Section 4, can pass orders against an ‘enterprise’ and a ‘person’
i.e. individual, who has been proceeded against, imposing penalty.
There cannot be any dispute that if the Company and the Officers/
Directors are being proceeded against for violation of Sections 3
and 4, there has to be a consequence for violation. The appellant’s
plea was that the word ‘turnover’ would not be applicable to
Officers / Directors. The appellant’s plea appears to be appealing
on a first blush, but on a deeper consideration, if we agree with this
submission then the very provision of penalty to be imposed on the
Officers / Directors being ‘persons’ in terms of Section 27(b) would
be rendered otiose / nugatory. In other words, there would not be
any stipulation of penalty to be imposed on Officers / Directors
even if they are found to be violating Sections 3 and 4. That cannot
be the intent of Sections 27(b) and 48. Such a stipulation, surely
requires a purposive interpretation.
Insofar as the plea that Section 48 as it falls under Chapter VI,
only relates to the contravention of Sections 42 to 44 of the Act,
is also not appealing, inasmuch as the Section contemplates “on
contravention of the provisions of the Act”, one shall be liable to be
proceeded against and punished accordingly. The contravention of
the provisions of the Act includes Sections 3 and 4, as is clear from
Section 46, which is also in Chapter VI, stipulates lesser penalty
for violating Section 3 in certain eventualities. If the interpretation
as sought to be advanced, is to be accepted / agreed to, then
Section 48 shall become nugatory, and there shall be no penalty
for violating the Act.
Suffice it to state, in view of our conclusion above, the judgments
so relied upon by the appellants have no applicability. We see
no reason, to refer the writ petition for consideration by a larger
Bench. In view of our discussion above, we are of the view, that
the impugned order needs no interference. The appeals are
dismissed. No costs.
LW 05:O1:2019
EMAAR MGF LAND LIMITED v. AFTAB SINGH [SC]
Review Petition (C) Nos. 2629-2630 of 2018 IN Civil Appeal
Nos.23512-23513 of 2017
Ashok Bhushan & U U Lalit, JJ. [Decided on 10/12/2018]
Consumer Protection Act, 1985 read with Arbitration and
Conciliation Act, 1996- Flat buyer’s agreement-consumer dispute-
agreement contained arbitration clause- purchaser filed consumer
complaint- whether liable to be referred to arbitration-Held, No.
Brief facts:
A Buyer’s agreement was entered into between the appellant and
the respondent. In the Buyer’s agreement, there was an arbitration
clause providing for settlement of disputes between parties under
the 1996 Act. On 27.07.2015, the respondent filed a Consumer
Complaint before the NCDRC against the appellant praying for
delivery of possession of the built up Villa, adjustment of excess
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JANUARY 2019 CHARTERED SECRETARY

payment and compensation for deficiency of service. Appellant
filed an application under Section 8 of the 1996 Act for referring the
matter to arbitration for and on behalf of the appellant. The single
judge referred the issue to the larger Bench and the larger bench
dismissed the application on the ground that the consumer dispute
is not arbitrable. On appeal, The Supreme Court also concurred
with the National commission but the appellant sought a review of
the judgement under the present review petition.
Decision: `Petition dismissed.
Reason:
This Court in the series of judgments as noticed above
considered the provisions of Consumer Protection Act, 1986 as
well as Arbitration Act, 1996 and laid down that complaint under
Consumer Protection Act being a special remedy, despite there
being an arbitration agreement the proceedings before Consumer
Forum have to go on and no error committed by Consumer Forum
on rejecting the application. There is reason for not interjecting
proceedings under Consumer Protection Act on the strength
an arbitration agreement by Act, 1996. The remedy under
Consumer Protection Act is a remedy provided to a consumer
when there is a defect in any goods or services. The complaint
means any allegation in writing made by a complainant has also
been explained in Section 2(c) of the Act. The remedy under the
Consumer Protection Act is confined to complaint by consumer
as defined under the Act for defect or deficiencies caused by a
service provider, the cheap and a quick remedy has been provided
to the consumer which is the object and purpose of the Act as
noticed above.
Not only the proceedings of Consumer Protection Act, 1986
are special proceedings which were required to be continued
under the Act despite an arbitration agreement, there are large
number of other fields where an arbitration agreement can either
stop or stultify the proceedings. For example, any action of a
party, omission or commission of a person which amounts to an
offence has to be examined by a criminal court and no amount of
agreement between the parties shall be relevant for the said case.
For example, there may be a commercial agreement between two
parties that all issues pertaining to transaction are to be decided
by arbitration as per arbitration clause in the agreement. In case
where a cheque is dishonoured by one party in transaction,
despite the arbitration agreement party aggrieved has to approach
the criminal court. Similarly, there are several issues which are
non- arbitrable. There can be prohibition both express or implied
for not deciding a dispute on the basis of an arbitration agreement.
We have already noted several categories of cases, which are
not arbitrable. While referring to judgment of this Court in Booz
Allen & Hamilton Inc v. SBI Home Finace ltd & Ors (2011) 5 SCC
532 those principles have again been reiterated by this Court in A.
Ayyasamy v.A.Paramasivam & Ors (2016) 10 SCC 386.
The amendment in Section 8 cannot be given such expansive
meaning and intent so as to inundate entire regime of special
legislations where such disputes were held to be not arbitrable.
Something which legislation never intended cannot be accepted
as side wind to override the settled law. The submission of the
petitioner that after the amendment the law as laid down by this
Court in National Seeds Corporation Limited(supra) is no more a
good law cannot be accepted. The words “notwithstanding any
judgment, decree or order of the Supreme Court or any Court”
were meant only to those precedents where it was laid down that
the judicial authority while making reference under Section 8 shall
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CHARTERED SECRETARY JANUARY 2019
LEGAL WORLD
entitle to look into various facets of the arbitration agreement,
subject matter of the arbitration whether the claim is alive or dead,
whether the arbitration agreement is null and void. The words
added in Section 8 cannot be meant for any other meaning.
We may, however, hasten to add that in the event a person entitled
to seek an additional special remedy provided under the statutes
does not opt for the additional/special remedy and he is a party to
an arbitration agreement, there is no inhibition in disputes being
proceeded in arbitration. It is only the case where specific/special
remedies are provided for and which are opted by an aggrieved
person that judicial authority can refuse to relegate the parties
to the arbitration. We, thus, do not find that any error has been
committed by the NCDRC.
General
Laws
LW 06:O1:2019
CARLSBERG BREWERIES A/S v. SOM DISTILLERIES AND
BREWERIES LTD [Del-FB]
C.S. (COMM) 690/2018 & I.A. No.11166/2018
S. Ravindra Bhat, Hima Kohli,Vipin Sanghi,Valmiki. J. Mehta & Vibhu
Bakhru, JJ. [Decided on 14/12/2018]
Infringement of design and passing off of the plaintiff’s trade
dress- composite suit filed- whether maintainable-Held, Yes.
Brief facts:
The reference to this larger, Special Bench of five judges, was
occasioned by the detailed speaking order of a learned Single
Judge, in the present suit, which sought the reliefs of infringement
of design and a decree for injunction against passing off. The
learned Single Judge, by the order dated 02.05.2017, referred
the question as on the whether the decision in Mohan Lal v. Sona
Paint, 2013 (55) PTC 61 (Del) (FB) - hereafter “Mohan Lal” on
the aspect of maintainability of a composite suit in relation to
infringement of a registered design and for passing off, where the
parties to the proceedings are the same needs re-consideration
by a larger bench in the light of Order II Rule 3 CPC, which permits
joinder of causes of action. The decision in Mohan Lal (supra) was
by a Full Bench of three judges, which held that “infringement of
design” and “passing off” cannot be combined in a composite suit.
The present suit (out of which this reference arose) was filed,
complaining of infringement of a registered design as well as
passing off (of the plaintiff’s trade dress) in respect of the bottle
and overall get up of the “Carslberg” mark. The defendant
objected to the frame of the suit, pointing out that per Mohan
Lal (supra), the two claims (for passing off and reliefs regarding
design infringement) could not be combined in one suit. The
single judge analysed parties‟ submissions and felt that the
issue decided in Mohan Lal (supra) required a second look; he
therefore, referred the matter for appropriate orders to the Chief
103
LEGAL WORLD
Justice.
Decision: Composite suit is maintainable.
Reason: sale by the defendant in effect results in the infringement of both
The issue therefore which is required to be squarely addressed
by this Full Bench is as to whether there would arise common
questions of facts and law in the two causes of action of
infringement of registered design and passing off so that these
two causes of action can be joined under Order II Rule 3 CPC,
and which is an issue which was not decided either in Dabur
India Limited v. K.R. Industries, (2008) 10 SCC 595 or in the
case of Dhodha House v. S.K. Maingi, (2006) 9 SCC 41. Before
however we go on this aspect, the general law with respect to
joinder of causes of action under Order II Rule 3 CPC can be
usefully referred to and as held in the case of Prem Lata Nahata
& Anr v. Chandi Prasad Sikaria, (2007) 2 SCC 551.
The ratio of the judgment in the case of Prem Lata Nahata & Anr
(supra) is that with respect to entitlement or otherwise of joinder
of causes of action, the question to be asked is as to whether the
evidence to be led in the two causes of action would be common,
and if the substantial evidence of two causes of action would be
common, then there can be joinder of causes of action under
Order II Rule 3 CPC. Putting it negatively if the evidence is for the
most part different of the two causes of action, then there cannot
be joinder of causes of action.
Therefore since the crux of the matter for joinder of causes of
action under Order II Rule 3 CPC is to see if common questions
of law and facts arise in two separate causes of action and
whereupon there can be joinder of causes of action under Order
II Rule 3 CPC in one composite suit which joins two causes of
action, therefore we now proceed to examine as to whether there
would exist common questions of law and fact in the two causes
of action of infringement of registered design and passing off. For
so deciding first it would be necessary to refer to the meaning of
cause of action.
Let us now accordingly examine as to what are the bundle of
facts, or the bundle of material facts, in the two causes of action
of infringement of a registered design and passing off, and as to
whether there would arise common questions of law and fact in
the two bundle of facts of the two causes of action of infringement
of registered design and passing off.
To decide the issue of existence of common questions of law and
fact in the two causes of action of infringement of a registered
design and passing off, at this stage it would be instructive to
refer to a judgment passed by the Division Bench of this Court in
the case of M/s. Jay Industries v. M/s. Nakson Industries, 1992
SCC Online Del 84; AIR 1992 Del 338 because this judgment
lays down the ratio for the issue at hand as to when there can be
joinder of causes of action.
A reading of the observations made in the judgment of M/s. Jay
Industries (supra) shows that the Division Bench was of the view
that two different causes of action in fact can be a part of the
same transaction. The same transaction is that transaction of
the selling of goods by the defendant by packing and labelling
them in such a manner which infringes the trademark and the
copyright of the plaintiff. In such facts there would be common
bundle of facts in the two causes of action of infringement of
trademark and copyright, because there is a single and same
transaction of sale of the goods by the defendant of its goods in
104
cartons under being similar to the cartons in which the plaintiff
sells its goods and which as per plaintiff results in violation of
his rights in his registered trade mark and copyright in his label.
The Division Bench has concluded that since the transaction of
the trademark rights and violation of copyright of the plaintiff,
therefore under Order II Rule 3 CPC it is permissible to join the
two causes of action against the same defendant and that in
fact in such cases the joinder of causes of action would result in
avoidance of multiplicity of proceedings.
It is therefore seen that once a transaction of sale which is
impugned by the plaintiff results in infringement of two rights of
the plaintiff of infringement of plaintiff’s trademark and violation
of plaintiff’s copyright, since there would be common questions of
law and facts because it is the transaction of sale with its bundles
of facts which is impugned being common in both the causes of
action, therefore joinder of causes of action can take place under
Order II Rule 3 CPC, and ought to be done because this will
avoid multiplicity of proceedings.
The reference is answered by holding that one composite suit
can be filed by a plaintiff against one defendant by joining two
causes of action, one of infringement of the registered design of
the plaintiff and the second of the defendant passing off its goods
as that of the plaintiff on account of the goods of the defendant
being fraudulent or obvious imitation i.e. identical or deceptively
similar, to the goods of the plaintiff.
LW 07:01:2019
HINDUSTAN INFRASTRUCTURE CONSTRUCTION
CORPORATION LTD v. M/S. R.S. WOODS INTERNATIONAL
& ORS [DEL]
C.R.P. No.19/2018 & C.M. Nos.4276-4277/2018
Vinod Goel, J. [Decided on 13/12/2018]
Indian Partnership Act, 1932 read with Negotiable instruments Act,
1881- dishonour of cheque- civil suit filed by unregistered partnership
firm- whether suit is barred under section 69(2) –Held, No.
Brief facts:
In the suit filed by the Respondent, the petitioners/defendants
Nos. 2 & 3 have filed an application under Order VII Rule 11 CPC
for rejection of the plaint on the ground that the suit is barred
under Section 69 (2) of the Indian Partnership Act, 1932 (‘the
Act’).
By the impugned order, the learned ADJ dismissed the application
of the petitioners by relying upon a judgment of the Kerala High
Court in Afsal Baker v. Maya Printers 2016 SCC OnLine Ker
29914. The petitioners have challenged the above judgement in
the present revision petition.
Decision: Petition dismissed.
Reason:
The above provision i.e. Section 69 deals with the effect of non-
registration of a partnership firm and bars filing of a suit by or on
behalf of such firm to enforce a right arising from a contract by or
on behalf of such firm against any third party.
Admittedly the respondents/plaintiff has filed a Civil Suit for
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recovery of Rs.24,41,967/- against the petitioners/defendant
on account of dishonour of cheques bearing no.482933 dated
18.11.2013 for Rs.5 lacs, no.482934 dated 19.11.2013 for Rs.5
lacs, no.482935 dated 20.11.2013 for Rs.5 lacs , no.709846
dated 18.11.2013 for Rs.5 lacs and no.709845 dated 20.11.2013
for Rs.4,41,967/-, total of which comes to Rs.24,41,967/-, which
is the suit amount.
The Kerala High Court in Afzal Baker (surpa) observed as under:-
“10. In the instant case, as noticed above, by virtue of Section 30
and 37 of the Negotiable Instruments Act, on the dishonour of a
cheque, the statute creates a liability on the drawer, apart from
the general law of contracts. The right to sue on the contract is
available and open to the party. However, apart from that, the
statute creates a liability as against the drawer of the instrument.
If the suit is on the original cause of action based on the original
contract between the parties, there is no doubt, the suit would
be hit by Section 69 (2) of the Indian Partnership Act. But, in the
instant case, what is sought to be enforced is the liability created
under the Negotiable Instruments Act. It is not a case where suit
is filed on the original cause of action by producing the cheques
as a piece of evidence to prove the liability under the original
contract. Here, the suit itself is laid on the instrument. A reading
of the plaint leaves no room for doubt regarding that. The bar
under Section 69(2) of the Indian Partnership Act would apply
only where the suit is sought to be laid on a contract and not
in a case where statutory right/liability is sought to be enforced.
In the instant case, the suit being purely based on the liability
under Section 30 and 37 of the Negotiable Instruments Act, it is
a suit based on statutory liability dehors the contract between the
parties. The suit cannot be held to be barred under Section 69(2)
of the Indian Partnership Act.”
In the instant case, the respondent is seeking enforcement of
the liability of the petitioners created under Section 30 and 37 of
the Negotiable Instruments Act, 1881 as the cause of action for
the plaint is based on the dishonour of the said cheques. Since,
the suit is not based on any contract between the parties, the bar
under Section 69 (2) of the Act would not apply.
In view of this, I do not find any illegality or infirmity in the
impugned order. Accordingly, the revision petition along with
application, being C.M. No.4276/2018, is dismissed with no order
as to costs.
LW 08:01:2019
THOMAS CHACKO v. THE CHIEF MANAGER, BANK OF
INDIA & ORS [KER]
OP (DRT).No. 45 of 2018
Dama Seshadri Naidu, J. [Decided on 01/11/2018]
Constitution of India- Article 227- supervisory powers of the
High court- DRT having seat at Ernakulum- DRAT having seat at
Chennai- matter emanating from Ernakulum- whether High Court
of Kerala has jurisdiction to direct DRAT at Chennai- Held, Yes.
Brief Facts:
A wary purchaser of a secured asset is caught in the litigious
cross fire between the borrowers and the banker. Spent his
money, burnt his fingers (as he claims), and now wants to
salvage the situation. The purchaser wants to withdraw from
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LEGAL WORLD
the sale and get his money back. But he faces uncertainty. After
suffering an adverse order before the DRT, the Bank has filed
an appeal before the DRAT, Chennai. And its disposal assumes
importance for the purchaser to press his claim for refund. He
wants the Appellate Tribunal to dispose of the appeal early. Now
the question is, Can this Court, in Kerala, assume supervisory
jurisdiction over the Appellate Tribunal in Chennai, Tamil Nadu?
A question of territorial jurisdiction must be resolved.
Decision: Petition allowed.
Reason:
Plainly read, Article 227 confers on every High Court
superintendence over all courts and tribunals throughout the
“territories” over which the High Court exercises its jurisdiction.
Then, should we reckon “territories” in the literal, geographical
sense or in the figurative, legal sense as fiction.
In Ambica Industries v. Commissioner of Central Exercise (2007)
6 SCC 769, the appellant carried on business at Lucknow.
A dispute involving the appellant, however, arose before the
CESTAT, New Delhi. The Tribunal exercises its jurisdiction
over the cases from the State of Uttar Pradesh, National Capital
Territory of Delhi, and the State of Maharashtra. Against the
Tribunal’s order, the appellant filed an appeal under Section 35G
of the Central Excise Act before the Delhi High Court. A Division
Bench held that it had no territorial jurisdiction; it dismissed the
appeal. So the matter reached the Supreme Court.
In the above factual backdrop, Ambica Industries has held that
as for Article 227 of the Constitution of India, as also Clause
(2) of Article 226, the High Court exercises its discretionary
jurisdiction over the orders passed by the Subordinate Courts
within its territorial jurisdiction. And even if any part of the cause
of action has arisen within its territory that will suffice. But this
principle cannot be applied, holds Ambica Industries, when the
High Court exercises its jurisdiction over a Tribunal extending
its jurisdiction over more than one State. Then, “the High Court
situated in the State where the first court is located” should be
the proper forum.
Without much ado, I may hold that Ambica Industries’s assertion
clinches the issue: when the High Court exercises its jurisdiction
over a Tribunal extending its jurisdiction over more than one
State, then the High Court in the State where the first court is
located should be the proper forum. Indeed, here the first or
the primary forum is the DRT, Ernakulum. So this Court can
eminently exercise its supervisory jurisdiction over the DRAT,
Chennai. Here, the petitioner wants a direction to the Appellate
Tribunal to dispose of the appeal early.
That said, this Court cannot be oblivious to the docket pressure
the Appellate Tribunal faces. Nor can it set impracticable dead-
lines, for adjudication is not akin to answering a multiple-choice
question paper. It is much more. A back-breaking, brain-racking
exercise.
So I queried with the learned Central Government Counsel about
the Appellate Tribunal’s convenience and the feasibility of an
early disposal. He has, presumably on instructions, submitted
that the Appellate Tribunal will dispose of the AIR (SR) No.460 of
2017 in three months’ time.
Under these circumstances, I hold that the DRAT, Chennai,
will dispose of the AIR (SR) No.460 of 2017 expeditiously in
three months.
105
 ANNOUNCEMENT
Quality Review Board of ICSI invites applications for Empanelment of “Quality Reviewers”

The Ministry of Corporate Affairs has constituted the Quality Review Board of ICSI to make
recommendations to the Council with regard to the quality of services provided by the members
of the Institute; to review the quality of services provided by the members of the Institute including
secretarial services; and to guide the members of the Institute to improve the quality of services
and adherence to the various statutory and other regulatory requirements.

With a view to carry out the abovementioned functions, the Quality Review Board contemplates
to avail the services of senior members of the profession to assess the quality of services being
rendered by Company Secretaries both in practice and in employment.

Eligibility criterion for Quality Reviewers-

A Quality Reviewer shall fulfil the criteria mentioned in para I or para II:-

I. An individual desiring to be empanelled as quality reviewer shall:

a) Be a Fellow member of ICSI; and
b) Possess at least fifteen years of post-membership experience as Company Secretary in
Practice or employment in the Secretarial Department of a Company or as a combination
of practice and employment in the Secretarial Department of a Company; and
c) Be currently in practice of the profession of company secretaries.”

II. An individual desiring to be empanelled as quality reviewer shall be

a) An empanelled Peer Reviewer in terms of the Guidelines for Peer Review of Attestation
Services by PCS has completed minimum 2 assignments of Peer Review.

Provided that the term of Quality Reviewer shall be three years subject to maximum six (6) months
from the date of surrender of Certificate of Practice.

The Quality Review Board shall pay to the Quality Reviewer a consolidated fee of Rs. 25,000/- per
quality review assignment to cover the cost of travel, local transport, accommodation and food,
taxes, communications, printing, cost of submission of report etc. subject to submission of Final
Report to the satisfaction of the Board.

Interested persons may kindly apply in the format available at https://goo.gl/TJQVsd and send it
to Director, Professional Development, Perspective Planning & Studies, The Institute of Company
Secretaries of India, C-36, Sector-62, Noida-201 309.

Contect Details : qrb@icsi.edu/ 0120-4082172/27

106 I
JANUARY 2019 CHARTERED SECRETARY
 GOVERNMENT
FROM THE
4
n COMPANIES (COST RECORDS AND AUDIT) AMENDMENT RULES, 2018
n COMPANIES (REGISTERED VALUERS AND VALUATION) FOURTH AMENDMENT RULES, 2018
n NATIONAL FINANCIAL REPORTING AUTHORITY RULES(NFRA) 2018
n STANDARDISED NORMS FOR TRANSFER OF SECURITIES IN PHYSICAL MODE
n GUIDELINES FOR ENHANCED DISCLOSURES BY CREDIT RATING AGENCIES (CRAS)
n DISCLOSURES REGARDING COMMODITY RISKS BY LISTED ENTITIES
n DISCLOSURE OF REASONS FOR DELAY IN SUBMISSION OF FINANCIAL RESULTS BY LISTED ENTITIES
n OPERATING GUIDELINES FOR ALTERNATIVE INVESTMENT FUNDS IN INTERNATIONAL FINANCIAL SERVICES CENTRES.
n FUND RAISING BY ISSUANCE OF DEBT SECURITIES BY LARGE ENTITIES
n INTEROPERABILITY AMONG CLEARING CORPORATIONS
n TRADING HOURS FOR COMMODITY DERIVATIVES SEGMENT
n CYBER SECURITY & CYBER RESILIENCE FRAMEWORK FOR STOCK BROKERS / DEPOSITORY PARTICIPANTS

I
CHARTERED SECRETARY JANUARY 2019 107
FROM THE GOVERNMENT
Corporate
Laws
01
Amendments in the Companies (Incorporation)
Rules, 2014 – reg. name availability
[Issued by the Ministry of Corporate Affairs dated 17.12.2018.]
NOTICE INVITING COMMENTS
Draft amendment to rule 8 of the Companies (Incorporation)
Rules, 2014 is attached as an Annexure-A to this notice.
This amendment intends to bring more clarity to the rules
related to name availability by:
(i) inclusion of illustrations in the rules;
(ii) providing a clear test to determine as to whether the applied
name resembles too nearly with the name of an existing
company; and
(iii) bringing more clarity in the rule related to “general names”/
descriptive names and trademark applicability;
Suggestion/Comments on the proposed amendments along
with justification in brief may be sent latest by 31st December,
2018 through email at reservation.name@mca.gov.in.
It is requested that the name, contact number, email address
and postal address of the sender may be indicated clearly at the
time of sending suggestions/comments in the following format:-
Format for sending suggestions/comments
1. Name, contact number, email address and postal address
of stakeholder
2. Suggestions/comments as under:-
Serial Clause/Sub- Suggestion/ Justification
Number Clause comments
ANNEXURE-A
In the Companies (Incorporation) Rules, 2014, for rule 8, the
following rules shall be substituted, namely:-
“8. Names which resemble too nearly with the name of an
existing company.
(1) A name applied for shall be deemed to resemble too
nearly with the name of an existing company, if, and only
if, after comparing the name applied for with the name of
an existing company by disregarding the matters set out in
sub-rule (2), the names are same.
(2) The following matters are to be disregarded:
(a) the words like Private, Pvt, Pvt., (P), OPC Pvt. Ltd.,
IFSC Limited, IFSC Pvt. Limited, Producer Limited,
Limited, Unlimited, Ltd, Ltd., LLP, Limited Liability
Partnership, company, and company, & co, & co., co.,
co, corporation, corp, corpn, corp, group;
108
(b) whether a word is in the plural or singular number in
one or both names;
Illustrations
(i) Green Technology Ltd. is same as Greens
Technology Ltd. and Greens Technologies Ltd.
(ii) Pratap Technology Ltd. is the same as Prataps
Technology Ltd. and Prataps Technologies Ltd.
(c) type and case of letters, spacing between letters,
punctuation marks and special characters used in one
or both names;
Illustrations
(i) ABC Ltd. is same as A.B.C. Ltd. and A B C Ltd.
(ii) TeamWork Ltd. is same as Team@Work Ltd. and
Team-Work Ltd.
(d) use of different tenses in the names;
Illustration
Ascend Solutions Ltd. is same as Ascended Solutions
Ltd. and Ascending Solutions Ltd.
(e) using different phonetic spellings including use of
misspelled words of an expression;
Illustrations
(i) Chemtech Ltd. is same as Chemtec Ltd., Chemtek
Ltd., Cemtech Ltd., Cemtek Ltd., Kemtech Ltd.,
and Kemtek Ltd.
(ii) Bee Kay Ltd is same as BK Ltd, Be Kay Ltd., B Kay
Ltd., Bee K Ltd., B.K. Ltd. and Beee Kay Ltd.
(f) whether one or both names includes a host name such
as ‘www’ or a domain extension such as ‘net’, ‘org’,
‘dot’ or ‘com’;
(g) the addition of commonly used prefixes, including
salutations, before an existing name such as New,
Modern, Nav, Shri, Sri, Shree, Sree, Om, Jai, Sai, Hari,
Mr., Mrs., Ms., Dr., Prof. or any other such commonly
used prefixes;
Illustrations
(i) Vijay Corporation Ltd is same as Shree Vijay
Corporation Ltd, Modern Vijay Corporation Ltd and
Dr. Vijay Corporation Ltd.
(ii) Manjushree Industries limited is not the same as
Manju Industries limited.
(iii) Vijay Corporation Ltd is not the same as Deep
Vijay Corporation Limited.
(h) the order of words in the names;
Illustrations
(i) Ravi Builders and Contractors Ltd. is same as
Ravi Contractors and Builders Ltd.
(ii) Ravi Builders and Contractors Limited is not the
same as Ravi Shankar Builders and Contractors
limited
(i) the use of the definite or indefinite article in the names;
Illustration
Congenial Tours Ltd. is same as A Congenial
Tours Ltd. and The Congenial Tours Ltd.
(j) a slight variation in the spelling of the two names
including a grammatical variation thereof;
Illustration
Color Technologies Ltd. is same as Colour
Technologies Ltd as there is a slight variation in
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JANUARY 2019 CHARTERED SECRETARY

the spelling.
(k) complete translation or transliteration, and not part
thereof, of an existing name, in Hindi or in English
Illustrations
(i) National Electricity Corporation Ltd. is same as
Rashtriya Vidyut Nigam Ltd.
(ii) Hike Construction Ltd. is not the same as Hike
Nirman Ltd.
(l) Addition of the name of a place to an existing name,
which did not contain the name of any place;
Illustrations
(i) If Salvage Technologies Ltd. is an existing name,
it is same as Salvage Technologies Delhi Ltd and
Salvage Delhi Technologies Ltd.
(ii) Retro Pharmaceuticals Ranchi Ltd. is not the same
as Retro Pharmaceuticals Chennai Ltd.
(m) addition or deletion of words like global, international
or any other word which symbolizes the geographical
reach of the company, in an existing name;
Illustration
(i) If Hardnut Finance Ltd is an existing name, it is
the same as Hardnut Finance Pan-India Ltd or
Hardnut Finance International Ltd.
(ii) If Glory Construction International Ltd. is an
existing name, it is the same as Glory Construction
Ltd. but not the same as Glory Construction Global
Ltd.
(n) addition or deletion of numerals in an existing name;
Illustration
(i) If Thunder Services Ltd is an existing name, it is
same as Thunder11 Services Ltd.
(ii) If Style Garments11 Ltd. is an existing name, it is
same as Style Garments Ltd.
Provided that clauses (f) to (h) and clauses (k) to (n) shall
not be disregarded while comparing the names, if a no
objection by way of a Board resolution has been provided
by an existing company.
8A. Undesirable names.
(1) The name shall be considered undesirable, if-
(a) it attracts the provisions of section 3 of the
Emblems and Names (Prevention and Improper
Use) Act, 1950 (12 of 1950);
(b) subject to section 35 of the Trade Marks Act, 1999
(47 of 1999), if the name includes a trade mark
registered under the Trade Marks Act, 1999 (47 of
1999) and the rules framed thereunder in the same
class of goods or services in which the activity of
the company is being carried out or is proposed to
be carried out, unless the consent of the owner or
applicant for registration, of the trade mark, as the
case may be, has been obtained and produced by
the promoters;
(c) it includes any word or words which are offensive
to any section of the people;
(d) the proposed name is identical with or too
nearly resembles the name of a limited liability
partnership:
Provided that the provisions of rule 8 shall apply
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CHARTERED SECRETARY JANUARY 2019
FROM THE GOVERNMENT
mutatis mutandis while determining whether a
proposed name is too nearly resembling the name
of a limited liability partnership;
(e) the proposed name is identical with or too nearly
resembles with a name which is for the time being
reserved in accordance with rule 9:
Provided that the provisions of rule 8 shall apply
mutatis mutandis while determining whether a
proposed name is too nearly resembling with a
reserved name;
(f) the company’s main business is financing, leasing,
chit fund, investments, securities or combination
thereof, but the proposed name is not indicative of
such related financial activities, viz., Chit Fund or
Investment or Loan, etc.;
(g) the company’s name is indicative of activities
financing, leasing, chit fund, investments, securities
or combination thereof, but the company’s main
business is not related to such activities;
(h) it resembles closely the popular or abbreviated
description of an existing company or limited
liability partnership;
(i) the proposed name is identical with or too nearly
resembles the name of a company or limited
liability partnership incorporated outside India
and reserved by such company or limited liability
partnership with the Registrar:
Provided that if a foreign company is incorporating
its subsidiary company in India, then the original
name of the holding company as it is may be
allowed with the addition of word India or name of
any Indian state or city, if otherwise available;
Provided further that provisions of rule 8 shall
apply mutatis mutandis while determining whether
a proposed name is too nearly resembling the
name of a company or limited liability partnership
incorporated outside India;
(j) any part of the proposed name includes the
words indicative of a separate type of business
constitution or legal person or any connotation
thereof e.g. co-operative, sehkari, trust, LLP,
partnership, society, proprietor, HUF, firm, Inc.,
PLC, GmbH, SA, PTE, Sdn, AG etc.;
Explanation.- For the purposes of this sub-clause,
it is hereby clarified that the name including phrase
‘Electoral Trust’ may be allowed for Registration of
companies to be formed under section 8 of the Act,
in accordance with the Electoral Trusts Scheme,
2013 notified by the Central Board of Direct Taxes
(CBDT):
Provided that name application is accompanied
with an affidavit to the effect that the name to
be obtained shall be only for the purpose of
registration of companies under Electoral Trust
Scheme as notified by the Central Board of Direct
Taxes;
(k) the proposed name contains the words ‘British
India’;
(l) the proposed name implies association or
connection with an embassy or consulate or a
foreign government;
(m) the proposed name includes or implies association
or connection with or patronage of a national hero
or any person held in high esteem or important
personages who occupied or are occupying
109
FROM THE GOVERNMENT
important positions in Government;
(n) the proposed name is identical to the name of
a company dissolved as a result of liquidation
proceeding and a period of two years have not
elapsed from the date of such dissolution:
Provided that if the proposed name is identical
with the name of a company which is struck off in
pursuance of action under section 248 of the Act or
under section 560 of the Companies Act, 1956(1
of 1956) then the same shall not be allowed before
the expiry of twenty years from the publication in
the Official Gazette being so struck off;
(o) it is identical with or too nearly resembles the
name of a limited liability partnership in liquidation
or the name of a limited liability partnership which
is struck off up to a period of five years;
(p) the proposed name include words such as
‘Insurance’, ‘Bank’, ‘Stock Exchange’, ‘Venture
Capital’, ‘Asset Management’, ‘Nidhi’, ‘Mutual
fund’ etc., unless a declaration is submitted by
the applicant that the requirements mandated
by the respective regulator, such as IRDA, RBI,
SEBI, MCA etc. have been complied with by the
applicant;
(q) the proposed name includes the word “State”, in
case the company is not a government company;
(r) the proposed name is containing only the name
of a continent, country, state, city such as Asia
limited, Germany Limited, Haryana Limited,
Mysore Limited;
(s) Use of descriptive names, where the name merely
consists of commonly used words to describe an
activity.
Explanation 1: The term “commonly used words”
refers to use of generic expressions which may be
used by any other company to describe its trade.
Explanation 2: While determining whether a name
is descriptive or not, the objects of the proposed
company or the order of words appearing in a
name shall not be relevant.
Illustrations
(i) The names Silk Manufacturers Private Limited
and Manufacturers Silk Ltd. are descriptive
names as they merely describe an activity
which may also be carried out by any other
company and the order of the words is not
relevant while determining a descriptive name.
(ii) The names Technical Vista Ltd or Vista
Technical are not descriptive as the names do
not merely consist of commonly used words
and the order of the words is not relevant while
determining whether a name is descriptive.
(iii) The name Drinking Water Plant Ltd. is a
descriptive name, even if the object of the
company is not related to making drinking
water plant as it consists of commonly used
words and objects of the proposed company
is not relevant while determining whether a
name is descriptive.
(t) the proposed name includes name of any foreign
country or any city in a foreign country, the
same shall be allowed if the applicant produces
any proof of significance of business relations
with such foreign country like Memorandum Of
110
Understanding with a company of such country:
Provided that the name combining the name of
a foreign country with the use of India like India
Japan or Japan India shall be allowed if, there
is a government to government participation or
patronage and no company shall be incorporated
using the name of an enemy country.
Explanation.- For the purposes of this clause,
enemy country means so declared by the Central
Government from time to time.
(u) the proposed name of a section 8 company under
the Act does not include the words foundation,
Forum, Association, Federation, Chambers,
Confederation, council, Electoral trust and the like
etc.
(v) the proposed name of a Nidhi company under the
Act does not have the last words “Nidhi Limited” as
a part of its name.
(w) the proposed name has been released from the
register of companies upon change of name of a
company and three years have not elapsed since
the date of change unless a specific direction
has been received from the competent authority
in the course of compromise, arrangement and
amalgamation.
(2) The applicant shall declare in affirmative or negative (to
affirm or deny) whether they are using or have been using
in the last five years , the name applied for incorporation
of company or LLP in any other business constitution like
Sole proprietor or Partnership or any other incorporated
or unincorporated entity and if, yes details thereof and No
Objection Certificate from other partners and associates
for use of such name by the proposed Company or LLP,
as the case may be, and also a declaration as to whether
such other business shall be taken over by the proposed
company or LLP or not.
8B. Word or expression which can be used only after
obtaining previous approval of the Central Government.
In terms clause (b) to sub-section (3) of section 4, the
following words and combinations thereof shall not be
used in the name of a company in English or any of the
languages depicting the same meaning unless the previous
approval of the Central Government has been obtained for
the use of any such word or expression-
(a) Board;
(b) Commission;
(c) Authority;
(d) Undertaking;
(e) National;
(f) Union;
(g) Central;
(h) Federal;
(i) Republic;
(j) President;
(k) Rashtrapati;
(l) Small Scale Industries;
(m) Khadi and Village Industries Corporation;
(n) Financial, Corporation and the like;
(o) Municipal;
(p) Panchayat;
(q) Development Authority;
(r) Prime Minister or Chief Minister;
(s) Minister;
(t) Nation;
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JANUARY 2019 CHARTERED SECRETARY
 FROM THE GOVERNMENT
(u) Forest corporation;
(v) Development Scheme;
(w) Statute or Statutory;
(x) Court or Judiciary;
(y) Governor;
(z) the use of word Scheme with the name of Government
(s) , State , India, Bharat or any government authority or
in any manner resembling with the schemes launched by
Central, state or local Governments and authorities; and
(za) Bureau.”


02
Companies (Registration of Charges) Second
Amendment Rules, 2018

[Issued by the Ministry of Corporate Affairs vide F. No.01/10/2013, Part-I CL-V

dated 18.12.2018. Published in the Gazette of India Extraordinary, Part - II,
Section - 3, Sub Section (ii) vide Notification No. G.S.R. 1218(E) dated 19.12.2018]

In exercise of the powers conferred by sub-sections (1) and (2) of

section 469 of the Companies Act, 2013 (18 of 2013), the Central
Government hereby makes the following rules further to amend
the Companies (Registration of Charges) Rules, 2014, namely:—
1. (1) These rules may be called the Companies (Registration
of Charges) Second Amendment Rules, 2018.
(2) They shall come into force from the date of their
publication in the Official Gazette.
2. In the Companies (Registration of Charges) Rules, 2014, for
‘Form No.CHG-4’, the following form shall be substituted,
namely:-

K. V. R. MURTY
 Joint Secretary

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CHARTERED SECRETARY JANUARY 2019 111
 03
Companies (Incorporation) Fourth Amendment
FROM THE GOVERNMENT
Rules, 2018.
[Issued by the Ministry of Corporate Affairs vide F. No. 1/13/2013 CL-V, Part-I,
Vol.II dated 18.12.2018. Published in the Gazette of India Extraordinary, Part - II,
Section - 3, Sub Section (i) vide Notification No. G.S.R. 1219(E) dated 19.12.2018]
In exercise of the powers conferred by clause (41) of section 2,
section 3, sub-section (1) of section 7, section 10A, section 14
and sub-sections (1) and (2) of section 469 of the Companies
Act, 2013 (18 of 2013), the Central Government hereby
makes the following rules further to amend the Companies
(Incorporation) Rules, 2014, namely: -
1. (1) These rules may be called the Companies
(Incorporation) Fourth Amendment Rules, 2018.
(2) They shall come into force on the date of their publication
in the official Gazette.
2. In the Companies (Incorporation) Rules, 2014 (hereinafter
referred to as the said rules), after rule 23, the following
rule shall be inserted, namely:-
“23A. Declaration at the time of commencement of
business.-The declaration under section 10A by a director
shall be in Form No.INC-20A and shall be filed as provided
in the Companies (Registration Offices and Fees) Rules,
2014 and the contents of the said form shall be verified by
a Company Secretary or a Chartered Accountant or a Cost
Accountant, in practice:
Provided that in the case of a company pursuing objects
requiring registration or approval from any sectoral
regulators such as the Reserve Bank of India, Securities
and Exchange Board of India, etc., the registration or
approval, as the case may be from such regulator shall
also be obtained and attached with the declaration.”
3. In the said rules, after rule 39, the following rules shall be
inserted, namely:-
“40.Application under sub-section (41) of section 2 for
change in financial year
(1) The application for approval of concerned Regional
Director under sub-section (41) of section 2 , shall be filed
in e-Form No.RD-1 along with the fee as provided in the
Companies (Registration Offices and Fees) Rules, 2014
and shall be accompanied by the following documents,
namely:-
(a) grounds and reasons for the application;
(b) a copy of the minutes of the board meeting at which
the resolution authorising such change was passed,
giving details of the number of votes cast in favour and
or against the resolution;
(c) Power of Attorney or Memorandum of Appearance, as
the case may be;
(d) details of any previous application made within last
five years for change in financial year and outcome
thereof along with copy of order.
(2) Where the Regional Director on examining the
application, referred to in sub-rule (1), finds it necessary
to call for further information or finds such application to
be defective or incomplete in any respect, he shall give
112
intimation of such information called for or defects or
incompleteness, on the last intimated e-mail address
of the person or the company, which has filed such
application, directing the person or the company to furnish
such information, or to rectify defects or incompleteness
and to re-submit such application within a period of fifteen
days, in e-Form No. RD-GNL-5.
Provided that a maximum of two re-submissions shall be
allowed.
(3) (a) In case where such further information called for
has not been provided or the defects or incompleteness
has not been rectified to the satisfaction of the Regional
Director within the period allowed under sub-rule (2), the
Regional Director shall reject the application with reasons
within thirty days from the date of filing application or
within thirty days from the date of last re-submission made
as the case may be.
(b) In case where the application is found to be in order,
Regional Director shall allow and convey the order
within thirty days from the date of application or within
thirty days from the date of last re-submission, as the
case may be.
(c) where no order for approval or re-submission or
rejection has been explicitly made by the Regional
Director within the stipulated time of thirty days, it shall
be deemed that the application stands approved and
an approval order shall be automatically issued to the
applicant.
(4) The order conveyed by the Regional Director shall be
filed by the company with the Registrar in Form No.INC-28
within thirty days from the date of receipt of the order
along with fee as provided in the Companies (Registration
Offices and Fees) Rules, 2014.
41. Application under Section 14 for conversion of
public company into private company. (1) An application
under the second proviso to sub-section (1) of section
14 for the conversion of a public company into a private
company, shall, within sixty days from the date of passing
of special resolution, be filed with Regional Director in
e-Form No. RD-1 along with the fee as provided in the
Companies (Registration Offices and Fees) Rules, 2014
and shall be accompanied by the following documents,
namely:-
(a) a draft copy of Memorandum of Association and
Articles of Association , with proposed alterations
including the alterations pursuant to sub-section (68)
of section 2;
(b) a copy of the minutes of the general meeting at which
the special resolution authorising such alteration was
passed together with details of votes cast in favour
and or against with names of dissenters;
(c) a copy of Board resolution or Power of Attorney
dated not earlier than thirty days, as the case may be,
authorising to file application for such conversion;
(d) declaration by a key managerial personnel that
pursuant to the provisions of sub-Section (68) of section
2, the company limits the number of its members to
two hundred and also stating that no deposit has been
accepted by the company in violation of the Act and
rules made thereunder;
(e) declaration by a key managerial personnel that there
I
JANUARY 2019 CHARTERED SECRETARY

has been no non-compliance of Sections 73 to 76A,
177, 178, 185,186 and 188 of the Act and rules made
thereunder;
(f) declaration by a key managerial personnel that no
resolution is pending to be filed in terms of sub-section
(3) of section 179 and also stating that the company was
never listed in any of the Regional Stock Exchanges
and if was so listed, all necessary procedures were
complied with in full for complete delisting of the
shares in accordance with the applicable rules and
regulations laid down by Securities Exchange Board
of India:
Provided that in case of such companies where no key
managerial personnel is required to be appointed, the
aforesaid declarations shall be filed any of the director.
(2) Every application filed under sub-rule (1) shall set
out the following particulars, namely:-
(a) the date of the Board meeting at which the
proposal for alteration of Memorandum and
Articles was approved;
(b) the date of the general meeting at which the
proposed alteration was approved;
(c) reason for conversion into a private company,
effect of such conversion on shareholders,
creditors, debenture holders, deposit holders and
other related parties;
(d) details of any conversion made within last five
years and outcome thereof along with copy of
order;
(e) details as to whether the company is registered
under section 8.
(3) There shall be attached to the application, a list
of creditors, debenture holders, drawn up to the
latest practicable date preceding the date of filing of
application by not more than thirty days, setting forth
the following details, namely:-
(a) the names and address of every creditor and
debenture holder of the company;
(b) the nature and respective amounts due to them in
respect of debts, claims or liabilities;
(c) in respect of any contingent or unascertained
debt, the value, so far as can be justly estimated
of such debt:
Provided that the company shall file an affidavit,
signed by the Company Secretary of the company,
if any, and not less than two directors of the company,
one of whom shall be managing director, where
there is one, to the effect that they have made a
full enquiry into affairs of the company and, having
done so, have formed an opinion that the list of
creditors and debenture holders is correct, and that
the estimated value as given in the list of the debts
or claims payable on contingency or not ascertained
are proper estimates of the values of such debts
and claims that there are no other debts, or claims
against, the company to their knowledge.
(4) A duly authenticated copy of the list of creditors
and debenture holders shall be kept at the registered
office of the company and any person desirous of
inspecting the same may, at any time during the
ordinary hours of business, inspect, and take extracts
from the same on payment of ten rupees per page to
the company.
(5) The company shall, atleast twenty-one days before
the date of filing of the application_
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CHARTERED SECRETARY JANUARY 2019
FROM THE GOVERNMENT
(a) advertise in the Form No.INC.25A, in a vernacular
newspaper in the principal vernacular language in
the district and in English language in an English
newspaper, widely circulated in the State in which
the registered office of the company is situated;
(b) serve, by registered post with acknowledgement
due, individual notice on each debenture holder
and creditor of the company; and
(c) serve, by registered post with acknowledgement
due, a notice to the Regional Director and
Registrar and to the regulatory body, if the
company is regulated under any law for the time
being in force.
(6) (a) Where no objection has been received from any
person in response to the advertisement or notice
referred to in sub-rule (5) and the application is
complete in all respects, the same may be put up
for orders without hearing and the concerned
Regional Director shall pass an order approving
the application within thirty days from the date of
receipt of the application.
(b) Where the Regional Director on examining the
application finds it necessary to call for further
information or finds such application to be
defective or incomplete in any respect, he shall
within thirty days from the date of receipt of the
application, give intimation of such information
called for or defects or incompleteness, on the
last intimated e-mail address of the person or
the company, which has filed such application,
directing the person or the company to furnish such
information, to rectify defects or incompleteness
and to re-submit such application within a period
of fifteen days in e-Form No.RD-GNL-5:
Provided that maximum of two re-submissions
shall be allowed.
(c) In cases where such further information called
for has not been provided or the defects or
incompleteness has not been rectified to the
satisfaction of the Regional Director within the
period allowed under sub- rule (6), the Regional
Director shall reject the application with reasons
within thirty days from the date of filing application
or within thirty days from the date of last re-
submission made, as the case may be.
(d) Where no order for approval or re-submission
or rejection has been explicitly made by the
Regional Director within the stipulated period of
thirty days, it shall be deemed that the application
stands approved and an approval order shall be
automatically issued to the applicant.
(9) (i) Where an objection has been received or
Regional Director on examining the application has
specific objection under the provisions of Act, the
same shall be recorded in writing and the Regional
Director shall hold a hearing or hearings within a period
thirty days , as required and direct the company to file
an affidavit to record the consensus reached at the
hearing, upon executing which, the Regional Director
shall pass an order either approving or rejecting the
application along with reasons within thirty days from
the date of hearing, failing which it shall be deemed
that application has been approved and approval
order shall be automatically issued to the applicant.
(ii) In case where no consensus is received for
113
FROM THE GOVERNMENT
conversion within sixty days of filing the application
while hearing or otherwise, the Regional Director
shall reject the application within stipulated period
of sixty days:
Provided that the conversion shall not be allowed if any
inquiry, inspection or investigation has been initiated
against the company or any prosecution is pending
against the company under the Act.
(10) On completion of such inquiry, inspection
or investigation as a consequence of which no
prosecution is envisaged or no prosecution is pending,
conversion shall be allowed.
(11) The order conveyed by the Regional Director
shall be filed by the company with the Registrar in
Form No.INC-28 within fifteen days from the date of
receipt of approval along with fee as provided in the
Companies (Registration Offices and Fees) Rules,
2014.”.
4. In the said rules, after Form No.INC-20, in annexure,
the following forms shall be inserted, namely:-

114 I
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 FROM THE GOVERNMENT


 K. V. R. MURTY
 Joint Secretary

I
CHARTERED SECRETARY JANUARY 2019 115
 04
Relaxation of additional fees and extension
FROM THE GOVERNMENT
date of its publication in the Official Gazette.
of last date of in filing of CRA-4 (Cost Audit  K. V. R. MURTY
Report in XBRL format) - regarding. Joint Secretary

07
Disclosure of significant beneficial ownership in
[Issued by the Ministry of Corporate Affairs vide General Circular No. 11/2018
dated 10.12.2018.] the shareholding pattern

1. Keeping in view the requests received from various
stakeholders seeking extension of time for filing Cost
Audit Report for the financial year ended 31.03.2018
on account of various factors, it has been decided to relax
the additional fees payable by companies on CRA-4
(Cost Audit Report in XBRL format) upto 31.12.2018,
wherever additional fee is applicable.
2. This issues with the approval of the competent authority
 Affairs has notified the Companies (Significant Beneficial
 K M S NARAYANAN
Assistant Director (Policy)
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
HO/CFD/CMD1/CIR/P/2018/0000000149 dated 07.12.2018.]
1. Vide SEBI Circular No. CIR/CFD/CMD/13/2015 dated
November 30, 2015, a format has been prescribed
for disclosure of holding of specified securities and
shareholding pattern under Annexure-I to the circular.
2. Vide notification dated June 14, 2018, Ministry of Corporate
Owners) Rules, 2018 under which various requirements
pertaining to disclosures regarding Significant Beneficial
Owners have been specified.

05
Extension of the last date of filing of Form
NFRA-1-reg.
[Issued by the Ministry of Corporate Affairs vide General Circular No. 12/2018
dated 13.12.2018.]
1. The Ministry of Corporate Affairs has received several
representations regarding extension of the last date of
filing of Form NFRA-1, which is required to be filed under
sub-rule (2) and sub-rule (3) of rule 3 of the National
Financial Reporting Authority Rules, 2018.
2. The matter has examined and it is stated that the time
limit for filing Form NFRA-1 will be 30 days from the date
of deployment of this form on the website of Ministry/
National Financial Reporting Authority (NFRA) for all
bodies corporate governed by the said rule (excluding
companies as defined under sub-section (20) of section 2
of the Companies Act, 2013, which are not required to file
this Form).
3. This issues with the approval of Competent Authority.
PRANAY CHATURVEDI
Deputy Director
3. In the interest of transparency to the investors in the
securities market, the following is specified:
3.1. All listed entities shall disclose details pertaining to
significant beneficial owners in the format prescribed
at Annexure to this circular.
3.2. The format specified in the Annexure to this circular
shall be Table V under clause 5 of the format of holding
of specified securities specified in the aforesaid
circular No. CIR/CFD/CMD/13/2015 dated November
30, 2015. The circular No. CIR/CFD/CMD/13/2015
dated November 30, 2015 shall stand modified to that
extent.
3.3. All the terms specified in this circular shall have the
same meaning as specified in Companies (Significant
Beneficial Owners) Rules, 2018.
4. The Stock Exchanges are advised to bring the provisions
of this Circular to the notice of listed entities and also to
disseminate the same on its website.
5. This Circular shall come into force with effect from the
quarter ended March 31, 2019.
6. This Circular is issued in exercise of the powers conferred
under Section 11 and Section 11A of the Securities and
Exchange Board of India Act, 1992 read with Regulation
31 and Regulation 101(2) of the Securities and Exchange

06
Board of India (Listing Obligations and Disclosure
Delegation of powers to Regional Directors Requirements) Regulations, 2015.
7. This Circular is available on SEBI website at www.sebi.
gov.in under the categories “Listing Regulations” and
“Legal”.
[Issued by the Ministry of Corporate Affairs vide F. No. 1/06/2014-CL-V, Part-I  PRADEEP RAMAKRISHNAN
dated 18.12.2018. Published in the Gazette of India Extraordinary, Part - II, Deputy General Manager
Section - 3, Sub Section (ii) vide Notification No. S.O. 6225 (E) dated 20.12.2018 ] Annexure
Table V- Statement showing details of significant
1. In exercise of the powers conferred by section 458 of the beneficial owners
Companies Act, 2013 (18 of 2013), the Central Government Sr Details of the significant Details of the registered Particulars of the shares in which Date of
hereby delegates to the Regional Directors at Mumbai, .No beneficial owner owner significant beneficial interest is held creation /
(I) (II) by the beneficial owner acquisition
Kolkata, Chennai, New Delhi, Ahmedabad, Hyderabad (III) of significant
and Shillong, the powers and functions vested in it under Name PAN Nationality Name PAN Nationality Number Shareholding as a % of total beneficial

the first proviso to clause (41) of section 2 and second of no. of shares (calculated as interest
(IV)
shares per SCRR, 1957) as a % of
proviso to sub-section (1) of section 14 of the said Act, (A+B+C2)
subject to the condition that the Central Government may
revoke such delegation of powers or may itself exercise
the powers under the said sub-section, if in its opinion such
a course of action is necessary in the public interest.
2. This notification shall come into force with effect from the

116 I
JANUARY 2019 CHARTERED SECRETARY
08
Clarification on clubbing of investment limits of
Foreign Portfolio Investors (“FPIs”)
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
HO/IMD/FPIC/CIR/P/2018/150 dated 13.12.2018.]
1. This has reference to SEBI circulars No CIR/IMD/FPIC/
CIR/P/2018/64 dated April 10, 2018 on Know Your Client
(KYC) requirements for Foreign Portfolio Investors (FPIs)
and No SEBI/HO/IMD/FPIC/CIR/P/2018/66 dated April
10, 2018 providing Clarification on clubbing of investment
limits of foreign Government/ foreign Government related
entities.
2. SEBI Board in its meeting held on December 12, 2018,
has after considering the interim recommendations of
SEBI Working Group under the chairmanship of Shri H R
Khan (hereinafter referred as HR Khan group) in relation to
the circular No CIR/IMD/FPIC/CIR/P/2018/64 dated April
10, 2018 on Know Your Client (KYC) requirements for
Foreign Portfolio Investors (FPIs) and comments received
from public decided that Beneficial ownership criteria in
Prevention of Money-laundering (Maintenance of Records)
Rules, 2005 (hereinafter referred as PMLA Rules) should
be made applicable for the purpose of KYC only and not
for clubbing of investments of FPIs.
3. Accordingly, in supersession of the directions contained in
SEBI circular No CIR/IMD/FPIC/CIR/P/2018/64 dated April
10, 2018 and in partial modification of SEBI circular No
SEBI/HO/IMD/FPIC/CIR/P/2018/66 dated April 10, 2018
providing Clarification on clubbing of investment limits of
foreign Government/ foreign Government related entities,
it is clarified that:-
a. Clubbing of investment limit for FPIs will be on the basis
of common ownership of more than 50% or based on
common control. However, clubbing of investment
limit of FPIs having common control shall not be done
in case of (a) FPIs which are appropriately regulated
public retail funds or (b) FPIs which are public retail
funds majority owned by appropriately regulated
public retail funds on look through basis or (c) FPIs
which are public retail funds and investment managers
(IMs) of such FPIs are appropriately regulated.
Explanation:
(1). Public retail funds mean (i) mutual funds or unit
trusts which are open for subscription to retail
investors and do not have specific investor type
requirements e.g. accredited investors etc, (ii)
insurance companies where segregated portfolio
with one to one correlation with a single investor is
not maintained and (iii) pension funds.
(2) Control includes the right to appoint majority
of the directors or to control the management
or policy decisions exercisable by a person or
persons acting individually or in concert, directly
or indirectly, including by virtue of shareholding or
management rights or shareholders agreements
or voting agreements or in any other manner.
b. In case, two or more FPIs including foreign
Governments/ their related entities are having direct
or indirect common ownership of more than 50% or
control, all such FPIs will be treated as forming part
of an investor group and the investment limits of all
such entities shall be clubbed at the investment limit
as applicable to a single foreign portfolio investor.
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c. In cases where Government of India enters into
agreements or treaties with other sovereign
Governments and where such agreements or treaties
specifically recognize certain entities to be distinct
and separate, SEBI may, during the validity of such
agreements or treaties, recognize them as such,
subject to conditions as may be specified by it.
d. The investment by foreign Government agencies
shall be clubbed with the investment by the foreign
Government/ its related entities for the purpose of
calculation of 10% limit for FPI investments in a single
company, if they form part of an investor group.
e. The investment by foreign Government/ its related
entities from provinces/ states of countries with federal
structure shall not be clubbed if the said foreign entities
have different ownership and control.
f. In respect of any breach of the investment limit
mentioned above, the FPI’s shall have the following
two options:-
i. FPI in breach shall have to divest its holding within
five trading days from the date of settlement of the
trades to bring its shareholding below 10% of the
paid up capital of the company, or,
ii. The said investments shall be treated as Foreign
Direct Investment from the date of breach.
4. The necessary amendments in SEBI (Foreign Portfolio
Investors) Regulations, 2014 will be notified separately.
5. This circular is issued in exercise of powers conferred
under Section 11(1) of the Securities and Exchange Board
of India Act, 1992 to protect the interests of investors in
securities and to promote the development of, and to
regulate the securities market.
6. A copy of this circular is available at the links “Legal
FrameworkgCirculars” and “Info forgF.P.I” on our website
www.sebi.gov.in. The DDPs/ Custodians are requested to
bring the contents of this circular to the notice of their FPI
clients.
 ACHAL SINGH
 Deputy General Manager
09
Cyber Security and Cyber Resilience framework
of Stock Exchanges, Clearing Corporations and
Depositories
[Issued by the Securities and Exchange Board of India vide Circular No. CIR/
MRD/CSC/148/2018 dated 07.12.2018.]
1. Recognizing the need for a robust Cyber Security and Cyber
Resilience framework at Market Infrastructure Institutions
(MIIs), i.e., Stock Exchanges, Clearing Corporations and
Depositories, vide SEBI Circular CIR/MRD/DP/13/2015
dated July 06, 2015, a detailed regulatory framework on
cyber security and cyber resilience was prescribed.
2. With the view to further strengthening the aforesaid
framework, particularly in respect of monitoring of cyber
threats and cyber resiliency, the matter was discussed with
SEBI’s Technical Advisory Committee (TAC), SEBI’s High
Powered Committee on Cyber Security (HPSC-CS) and
the MIIs.
3. Accordingly, it has been decided that MIIs shall have a
Cyber Security Operation Center (C-SOC) that would be a
24x7x365 set-up manned by dedicated security analysts to
identify, respond, recover and protect from cyber security
incidents.
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4. The C-SOC shall function in accordance with the framework
specified in SEBI Circular CIR/MRD/DP/13/2015 dated July
06, 2015. Illustrative list of broad functions and objectives
to be carried out by a C-SOC are mentioned hereunder:
4.1. Prevention of cyber security incidents through
proactive actions:
(a) Continuous threat analysis,
(b) Network and host scanning for vulnerabilities and
breaches,
(c) Countermeasure deployment coordination,
(d) Deploy adequate and appropriate technology
at the perimeter to prevent attacks originating
from external environment and internal controls
to manage insider threats. MIIs may implement
necessary controls to achieve zero trust security
model.
4.2. Monitoring, detection, and analysis of potential
intrusions / security incidents in real time and through
historical trending on security-relevant data sources.
4.3. Response to confirmed incidents, by coordinating
resources and directing use of timely and appropriate
countermeasures.
4.4. Analysis of the intrusions / security incidents (including
Forensic Analysis and Root Cause Analysis) and
preservation of evidence.
4.5. Providing situational awareness and reporting on cyber
security status, incidents, and trends in adversary
behavior to appropriate organizations including to
CERT- In and NCIIPC.
4.6. Engineer and operate network defense technologies
such as Intrusion Detection Systems (IDSes) and data
collection /analysis systems.
4.7. MIIs to adopt security automation and orchestration
technologies in C-SOC to automate the incident
identification, analysis and response as per the
defined procedures.
5. Further to the above, the C-SOC of MII shall, at the
minimum, undertake the following activities:
5.1. In order to detect intrusions / security incidents in
real time, the C-SOC should monitor and analyze
on a 24x7x365 basis relevant logs of MII’s network
devices, logs of MII’s systems, data traffic, suitable
cyber intelligence (intel) feeds sourced from reliable
vendors, inputs received from other MIIs, inputs
received from external agencies such as CERT-In,
etc. The cyber intelligence (intel) feeds may include
cyber news feeds, signature updates, incident reports,
threat briefs, and vulnerability alerts.
5.2. To this end, appropriate alert mechanisms should be
implemented including a comprehensive dashboard,
tracking of key security metrics and provide for cyber
threat scorecards.
5.3. The C-SOC should conduct continuous assessment
of the threat landscape faced by the MII including
undertaking periodic VAPT (Vulnerability Assessment
and Penetration Testing).
5.4. The C-SOC should have the ability to perform Root
Cause Analysis, Incident Investigation, Forensic
Analysis, Malware Reverse Engineering, etc. to
determine the nature of the attack and corrective and/
or preventive actions to be taken thereof.
5.5. The C-SOC should conduct periodic (at the minimum
quarterly) cyber attack simulation to aid in developing
cyber resiliency measures. The C-SOC should develop
and document mechanisms and standard operating
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procedures to recover from the cyber-attacks within
the stipulated RTO of the MII. The C-SOC should also
document various scenarios and standard operating
procedures for resuming operations from Disaster
Recovery (DR) site of MII.
5.6. The C-SOC should conduct periodic awareness and
training programs at the MII and for its members
/ participants / intermediaries with regard to cyber
security, situational awareness and social engineering.
5.7. The C-SOC should be capable to prevent attacks
similar to those already faced. The C-SOC should also
deploy multiple honey pot services which are dynamic
in characteristics to avoid being detected as honey pot
by attackers.
6. As building an effective C-SOC requires appropriate mix
of right people, suitable security products (Technology),
and well-defined processes and procedures (Processes),
an indicative list of areas that MIIs should consider while
designing and implementing a C-SOC are as follows:
6.1. The MII shall ensure that the governance and
reporting structure of the C-SOC is commensurate
with the risk and threat landscape of the MII. The
C-SOC shall be headed by the Chief Information
Security Officer (CISO) of the MII. The CISO shall be
designated as a Key Managerial Personnel (KMP)
and relevant provisions relating to KMPs in the SEBI
Securities Contracts (Regulation) (Stock Exchanges
and Clearing Corporations) Regulations, 2012 and the
subsequent circulars issued by SEBI relating to KMPs,
shall apply to the CISO.
6.2. While the CISO is expected to work closely with various
departments of MIIs, including MII’s Network team,
Cyber Security team and Information Technology (IT)
team, etc., the reporting of CISO shall be directly to
the MD & CEO of the MII.
6.3. The roles and responsibilities of CISO may be drawn
from Ministry of Electronics and IT notification No.
6(12)/2017-PDP-CERT-In dated March 14, 2017.
6.4. The C-SOC should deploy appropriate technology
tools of adequate capacity to cater to its requirements.
Such tools shall, at the minimum, include Security
Analytics Engine, Malware detection tools, Network
and User Traffic Monitoring and Behavior Analysis
systems, Predictive Threat Modelling tools, Tools for
monitoring of System parameters for critical systems
/ servers, Deep Packet Inspection tools, Forensic
Analysis tools, etc.
6.5. Each MII is advised to formulate a Cyber Crisis
Management Plan (CCMP) based on its architecture
deployed, threats faced and nature of operations.
The CCMP should define the various cyber events,
incidents and crisis faced by the MII, the extant cyber
threat landscape, the cyber resilience envisaged,
incident prevention, cyber crisis recognition, mitigation
and management plan. The CCMP should be approved
by the respective Standing Committee on Technology
/ IT- Strategy Committee of the MIIs and the governing
board of the MII. The CCMP should also be reviewed
and updated annually.
6.6. The C-SOC should have well-defined and documented
processes for monitoring of its systems and networks,
analysis of cyber security threats and potential
intrusions / security incidents, usage of appropriate
technology tools deployed by C-SOC, classification of
threats and attacks, escalation hierarchy of incidents,
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response to threats and breaches, and reporting
(internal and external) of the incidents.
6.7. The C-SOC should employ domain experts in the field
of cyber security and resilience, network security, data
security, end-point security, etc.
6.8. The MIIs are also advised to build a contingent C-SOC
at their respective DR sites with identical capabilities
w.r.t. the primary C-SOC in line with the SEBI Circular
CIR/MRD/DMS/12/2012 dated April 13, 2012 read
with SEBI Circular CIR/MRD/DMS/17/2012 dated
June 22, 2012. Additionally, the MIIs should perform
monthly live-operations from their DR-C-SOC.
6.9. The C-SOC should document the cases and escalation
matrices for declaring a disaster.
7. In view of the feedback received from MIIs, it has been
decided that MIIs may choose any of the following models
to set-up their C-SOC :
(i) MII’s own C-SOC manned primarily by its internal
staff,
(ii) MII’s own C-SOC, staffed by a service provider, but
supervised by a full time staff of the MII. (Refer to 7.3)
(iii) C-SOC that may be shared by the MII with its group
entities (that are also SEBI recognized MIls),
(iv) C-SOC that may be shared by the MII with other SEBI
recognized MII(s).
7.1. The responsibility of cyber security of an MII,
adherence to business continuity and recovery
objectives, etc. should lie with the respective MII,
irrespective of the model adopted for C-SOC.
7.2. The respective risk committee(s) of the MII should
evaluate the risks of outsourcing the respective
activity.
7.3. The MII may outsource C-SOC activities in line
with the guidelines as given in Annexure-A.
8. A report on the functioning of the C-SOC, including details
of cyber-attacks faced by the MII, major cyber events
warded off by the MII, cyber security breaches, data
breaches should be placed on a quarterly basis before the
board of the MII.
9. The system auditor of the MII shall audit the implementation
of the aforesaid guidance in the annual system audit of the
MII. The Scope and/or Terms of Reference (ToR) of the
annual system would accordingly be modified to include
audit of the implementation of the aforementioned areas.
10. Further, in continuation to the requirement specified at
para 52 of the Annexure A to the aforementioned SEBI
Circular dated July 06, 2015, the C-SOC shall share
relevant alerts and attack information with members /
participants / intermediaries of the MII, other MIIs, external
cyber response agencies such as CERT-In, and SEBI.
11. MIIs are directed to take necessary steps to put in place
appropriate systems and processes for implementation
of the circular, including necessary amendments to the
relevant bye-laws, rules and regulations, if any, within six
months from the date of the circular. In case wherein a MII
currently has a C-SOC set-up that is different from that
mentioned at para 7(i) - 7(iv), such MIIs are directed to
adopt and transit to one of the models mentioned at para
7(i) - 7(iv) within a period of one year from the date of
issuance of this circular.
12. This circular is being issued in exercise of powers conferred
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CHARTERED SECRETARY JANUARY 2019
FROM THE GOVERNMENT
under Section 11 (1) of the Securities and Exchange Board
of India Act, 1992 and Section 19 of the Depositories Act,
1996 to protect the interests of investors in securities
and to promote the development of, and to regulate the
securities market.
 BITHIN MAHANTA
Deputy General Manager
Annexure A
1. Level of support definitions for outsourcing/in-house are as
follows:
1.1. Security Analyst Level 1 (L1): This function may be
mostly outsourced
(a) Monitoring SIEM Solution console for identifying
the security events generated by the log sources
integrated with SIEM tools.
(b) Identification of security events that are false +ve
before qualifying event as an incident.
(c) Identify the exceptions which are identified as
an event (e.g. VA scanning performed by SEBI
appointed 3rd party which may be identified as
port scanning attack) .
(d) Perform first level event analysis before qualifying
the incidents.
(e) Qualifying the event as an incident using
Knowledgebase.
(f) Escalating exceptions & Events to L2 level.
(g) Log Incident tickets in service management tool
and assign it to the respective team.
(h) Follow-up for the closure of the incident tickets
generated.
1.2. Security Analyst Level 2 (L2): Combination of
Outsource / In-House
(a) Exception Analysis.
(b) Analysis of extended events.
(c) Confirmation of False +ve & update Knowledge
Base.
(d) Qualify Incident & provide mitigation suggestions.
(e) Escalate incident to next level.
(f) Update /configuration correlation rules after
approval.
1.3. Security Analyst Level 3 (L3): Combination of
Outsource / In-House
(a) Analysis of escalated Incidents.
(b) Define correlation rules.
(c) Analysis of impact on SIEM over all correlation
rules and operations for the correlation rules
suggested by Level 2 Analyst.
(d) Approve correlation rules after the impact analysis
(e) Perform impact analysis before deployment of
correlation rules.
(f) Perform impact analysis for update and upgrade of
SIEM & Advance security solutions components.
(g) Define Mitigation suggestions for newly identified
incidents.
(h) Approve the reports before sharing with others.
1.4. SOC Manager (L4) : In-house
(a) Lead and manage Security Operations Centre.
(b) Provide strategic directions to SOC team and
organization for security posture improvements.
(c) To identify key contacts for incident escalation
and change management activities.
(d) Ensure compliance to SLA.
(e) Ensure process adherence and process
improvisation to achieve operational objectives.
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(f) Revise and develop processes to strengthen the
current Security Operations.
(g) Responsible for team and vendor management.
(h) Responsible for overall use of resources and
initiation of corrective action where required for
Security Operations Center.
(i) Escalate to the other IT Infra. Management teams
or application maintenance teams, as necessary.
(j) Overall responsibility for delivery of in scope
activities as a part of this engagement.
(k) Point of contact for problem escalation and
reporting.
1.5.
Security Subject Matter Expert for Security
technologies: In-house with reliance on external
expertise
(a) Subject Matter Expert (SME) for SIEM and
Advance security solutions.
(b) Assist you with troubleshooting steps to be
performed by you in order to re-establish
connectivity between the SIEM System and
SEBI’s locations.
(c) Provide software-level management for the SIEM
System components;
(d) Verify data collection and log continuity;
(e) Manage user access including user and group
permissions updates;
(f) Review application performance, capacity,
and availability make recommendations as
appropriate;
(g) Review SIEM System disk space usage;
(h) Verify time synchronization among SIEM System
components;
(i) Perform archival management and retrieval per
change management process;
(j) Provide problem determination / problem source
identification for the SIEM System, consisting
of creating tickets & tracking progress of Open
tickets
(k) Managing tickets to resolution / closure, in
accordance with the processes as defined in the
Integrated and Transition vendor announcements
& manage SIEM System update alerts;
(l) Install application patches and software updates
in order to improve performance, or enable
additional functionality
Illustrative Training Requirements
Security Analyst Level 1 (L1):
1) SEC401: Security Essentials Bootcamp Style
https://www.sans.org/event/cyber-defence-
canberra-2018/course/security-essentials-bootcamp-style
2) SEC301: Introduction to Cyber Security
https://www.sans.org/course/introduction-cyber-security
Security Analyst Level 2 (L2):
1) SEC542: Web App Penetration Testing and Ethical
Hacking
https://www.sans.org/event/cyber-defence-
canberra-2018/course/web-app-penetration-testing-
ethical-hacking
2) SEC566: Implementing and Auditing the Critical Security
Controls - In-Depth
https://www.sans.org/private-training/course/
implementing-auditing-critical-security-controls
3) SEC575: Mobile Device Security and Ethical Hacking
120
https://www.sans.org/private-training/course/mobile-
device-security-ethical-hacking
Security Analyst Level 3 (L3):
1) SEC504: Hacker Tools, Techniques, Exploits, and Incident
Handling
https://www.sans.org/event/cyber-defence-
canberra-2018/course/hacker-techniques-exploits-
incident-handling
2) FOR508: Advanced Digital Forensics, Incident Response,
and Threat Hunting
https://www.sans.org/event/digital-forensics-summit-2018/
course/advanced-incident-response-threat-hunting-
training
3) SEC501: Advanced Security Essentials - Enterprise
Defender
https://www.sans.org/private-training/course/advanced-
security-essentials-enterprise-defender
4) MGT414: SANS Training Program for CISSP® Certification
https://www.sans.org/course/sans-plus-s-training-
program-cissp-certification-exam
SOC Manager (L4):
1) Cyber Security Specialist
http://www.leaderquestonline.com/it-career-training/
cybersecurity-specialist/
2) Managing Security Operations: Detection, Response, and
Intelligence
https://www.sans.org/event/rocky-mountain-2018/course/
managing-security-operations-detection-response-and-
intelligence
3) SIEM with Tactical Analytics
https://www.sans.org/private-training/course/siem-with-
tactical-analytics
4) SEC511: Continuous Monitoring and Security Operations
https://www.sans.org/course/continuous-monitoring-
security-operations
5) SEC599: Defeating Advanced Adversaries - Implementing
Kill Chain Defenses
https://www.sans.org/course/defeating-advanced-
adversaries-kill-chain-defenses
10
Cyber Security Operations Center for SEBI
registered intermediaries
[Issued by the Securities and Exchange Board of India vide Circular No.CIR/MRD/
CSC/151/2018 dated 14.12.2018.]
1. Recognizing the need for a robust Cyber Security and Cyber
Resilience framework at Market Infrastructure Institutions
(MIIs), i.e. Stock Exchanges, Clearing Corporations and
Depositories, SEBI vide Circular CIR/MRD/DP/13/2015
dated July 06, 2015, prescribed a detailed regulatory
framework on cyber security and cyber resilience.
2. With the view to further strengthening cyber security in
securities market the Cyber Security and Cyber Resilience
framework has been extended to Stock Brokers/
Depository Participants vide circular SEBI/HO/MIRSD/
CIR/PB/2018/147 dated December 03, 2018.
3. During the discussions held with the market participants,
it was gathered that compliance with the cyber security
guidelines may be onerous for smaller intermediaries
because of the lack of knowledge in cyber security and
also the cost factor involved in setting up own Security
Operations Center (SOC). These intermediaries may
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JANUARY 2019 CHARTERED SECRETARY

utilize the services of Market SOC which is proposed to be
set up by MIIs with the objective of providing cyber security
solution to such intermediaries. The intermediaries’
membership in Market SOC is non mandatory.
4. The particulars of the Market SOC will be as follows:
4.1. The Market SOC shall be set up as a separate entity
and MIIs shall have at least 51% stake in the new
entity.
4.2. Intermediaries who don’t have capability to set up a
SOC on their own can opt for the Market SOC.
4.3. The Market SOC should be in accordance to the circular
SEBI/HO/MIRSD/CIR/PB/2018/147 dated December
03, 2018 and should ensure that participating
intermediaries are in compliance to the said circular,
should they opt for the market SOC. Market SOC
would provide only the technology perspective for the
abovementioned cyber security guidelines and the
people & process perspectives of cyber security as
mandated by the aforementioned circular would still
be have to be managed by the intermediaries.
4.4. The Market SOC should be evolving continuously in
order to be able to manage new security controls and
guidelines that may issue by SEBI from time to time.
4.5. The Market SOC to ensure that intermediaries
participating in their SOC should adhere to the
minimum IT guidelines and security protocols all the
time.
4.6. MII will carry out audit of their Market SOC activity
annually and submit the report to SEBI.
4.7. The Market SOC will issue an audit report as
prescribed in the circular SEBI/HO/MIRSD/CIR/
PB/2018/147 dated December 03, 2018, to the
participating intermediary.
4.8. If an intermediary is subscribed to Market SOC, audit
report submitted by intermediary through the Market
SOC would be deemed compliant.
4.9. Approval for the Market SOC which is to be set up as
a separate entity would be in terms of Regulation 38 of
Securities Contracts (Regulation) (Stock Exchanges
and Clearing Corporations) Regulations, 2018.
5. MIIs are directed to take necessary steps to put in place
appropriate systems and processes for implementation
of the circular, including necessary amendments to the
relevant bye-laws, rules and regulations, if any, within six
months from the date of the circular.
6. This circular is being issued in exercise of powers conferred
under Section 11 (1) of the Securities and Exchange Board
of India Act, 1992 and Section 19 of the Depositories Act,
1996 to protect the interests of investors in securities
and to promote the development of, and to regulate the
securities market.
 BITHIN MAHANTA
 Deputy General Manager
11
Review of risk management framework for
Equity Derivatives Segment
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
HO/MRD/DRMNP/CIR/P/2018/155 dated 17.12.2018.]
1. The Principles for Financial Market Infrastructures (PFMI)
inter alia prescribe that a central counterparty (CCP) should
identify and consider a number of elements, including
Margin Period of Risk (MPOR) or close-out period, when
constructing an appropriate margin system to address
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CHARTERED SECRETARY JANUARY 2019
FROM THE GOVERNMENT
risks that arise from the products cleared. The assumed
MPOR or close-out period should incorporate the market
depth and characteristics of the products cleared. A CCP
should consider multiple MPOR assumptions or seek to
ensure that a single MPOR assumption is appropriate for
all cleared products in case it clears products with different
market characteristics.
2. The PFMI further prescribe that a CCP should adopt a
margin system and parameters that are risk-based and
generate margin requirements that are sufficient to cover
its potential future exposures to participants in the interval
between the last margin collection and the close-out of
positions following a participant default. A CCP should
also consider the potential market liquidation costs that it
assumes to incur while liquidating a participant’s portfolio.
3. In order to bring MPOR in greater conformity with the
PFMI, the Risk Management Review Committee (RMRC)
of SEBI recommended that the MPOR may be increased
to 2 (two) days as compared to current MPOR of 1 (one)
day.
4. SEBI circular SEBI/DNPD/Cir-26/2004/07/16 dated July
16, 2004 inter alia prescribes that the Stock Exchanges/
Clearing Corporations may offer a choice to the members
to opt for payment of mark to market margin (MTM) either
before the start of trading on the next day (T+0) or, on
the next day (T+1) with scaled up margins to cover the
potential for losses over the time elapsed in the collection
of MTM.
5. Based on the aforementioned recommendation made by
RMRC and in consultation with the Clearing Corporations,
it has been decided that Exchanges/ Clearing Corporations
shall estimate the appropriate MPOR, subject to a
minimum of 2 days, for each equity derivative product
based on liquidity therein and scale up the initial margins
and exposure margins accordingly. For initial margins, the
revised MPOR shall be given effect by way of scaling up
the Price Scan Range (PSR) used for computing the Worst
Scenario Loss.
6. It has further been decided to stipulate PSR for computation
of initial margins across index options and index futures
contracts as three standard deviations (3σ) or 5% of the
underlying value, whichever is higher. The Short Option
Minimum Charge (SOMC) for index option contracts also
stands revised to 5%.
7. Additionally, in order to make risk management framework
more robust, the payment of MTM shall now mandatorily
be made by all the members on T+0 basis i.e. before start
of trading on the next day.
8. Stock Exchanges and Clearing Corporations are directed
to:
a) take necessary steps to put in place systems for
implementation of the circular, including necessary
amendments to the relevant bye-laws, rules and
regulations;
b) bring the provisions of this circular to the notice of
their members and also disseminate the same on their
websites; and
c) communicate to SEBI, the status of implementation of
the provisions of this circular in the Monthly Report.
9. The provision(s) of this circular shall come into effect from
January 21, 2019.
10. This circular is being issued in exercise of powers conferred
under Section 11(1) of the Securities and Exchange Board
of India Act, 1992, to protect the interests of investors
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FROM THE GOVERNMENT
in securities and to promote the development of, and to
regulate the securities market. This circular is available
on SEBI website at www.sebi.gov.in under the category
“Circulars”.
 SANJAY PURAO
 General Manager
12
Early Warning Mechanism to prevent diversion
of client securities
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
HO/MIRSD/DOP/CIR/P/2018/153 dated 17.12.2018.]
1. There have been instances where stock brokers had
diverted clients’ securities received as collaterals towards
margin obligations and / or settlement obligations, for
raising loan against shares on their own account and / or
for meeting securities shortages in settlement obligations
on its own account. However, such instances of diversion
of securities come to light when stock broker failed in
meeting the margin and/ or settlement obligations to Stock
Exchange / Clearing Corporation.
2. It has been decided to put in place an Early Warning
Mechanism and sharing of information between Stock
Exchanges, Depositories and Clearing Corporations to
detect the diversion of client’s securities by the stock broker
at an early stage so as to take appropriate preventive
measures. The threshold for such early warning signals
shall be decided by the Stock Exchanges, Depositories
and Clearing Corporations with mutual consultation.
3. Early warning signals, for prevention of diversion of clients’
securities, may include the following:
3.1. Deterioration in financial health of the stock broker/
depository participant based on any of the following
parameters:
a) Significant reduction in net worth over previous
half-year / year.
b) Significant losses in the previous half years /
years.
c) Delay in reporting of Annual Report, Balance
Sheet, Internal Audit Reports, Risk Based
Supervision (RBS) data and any other data related
to its financial health to the Stock Exchanges /
Depositories.
d) Failure to submit information sought by the Stock
Exchange / Depositories on its dealing with related
parties / promoters.
e) Significant mark-to-market loss on proprietary
account/ related party accounts
f) Repeated instances of pay-in shortages.
g) Significant trading exposure or amount of loans
or advances given to and investments made in
related parties/ group.
h) Sudden activation of significant number of dormant
client’s accounts and / or significant activity in the
dormant account/s.
i) Significant number of UCC modifications.
j) Resignation of Statutory Auditors or Directors.
3.2. Early warning signals in relation to securities pledge
transactions by the stock broker to be identified by
the Depositories and shall be shared with Stock
Exchanges which may include:
a) Alerts for stock brokers maintaining multiple
122
proprietary demat accounts and opening any new
demat account in the name of stock broker for
client purpose.
b) Movement of shares to / from a large number
of clients’ demat accounts or large value shares
to stock broker proprietary accounts and vice a
versa.
c) Transfer of large value of shares through off-
market transfers other than for settlement
purposes.
d) Invocation of pledge of securities by lenders
against stock broker or his clients.
e) Significant depletion of client’s shares in the stock
broker client account maintained by the stock
broker.
3.3. Increase in number of investor complaints against
the stock broker / depository participant alleging un-
authorized trading / unauthorized delivery instructions
being processed and non-receipt of funds and
securities and non-resolution of the same.
3.4. Alerts generated from the monthly / weekly
submissions made by stock broker under Risk Based
Supervision (RBS) or Enhanced Supervision to the
Stock Exchanges.
a) Non-recovery of significant dues from debit
balance clients over a period of time.
b) Significant dues to credit balance clients over a
period of time.
c) Failure by stock broker to upload weekly data
regarding monitoring of clients’ funds as specified
in SEBI’s circular on Enhanced Supervision, for 3
consecutive weeks.
d) Pledging securities in case of clients having credit
balance and using the funds so raised against
them for own purposes or for funding debit
balance of clients.
e) Mis-reporting / wrong reporting about the client
funds / securities.
f) Significant increase in RBS score.
3.5. Stock broker’s terminal disabled for certain number
of days in any segment / Stock Exchange in previous
quarter.
4. Stock Exchanges and Depositories shall frame an internal
policy / guidelines regarding non-cooperation by stock
brokers and depository participants during inspections
which shall lay down the time period, the type of documents
critical for closing the inspections, which if not submitted,
can be treated as non-cooperation.
4.1. Failure to submit data sought for inspections especially
relating to bank / demat accounts, client ledgers etc.
despite repeated reminders.
4.2. Failure to provide reasonable access to the records or
any office premises.
5. Stock Exchanges / Clearing Corporations / Depositories,
shall devise a mechanism to detect diversion of clients’
securities and to share information among themselves in
respect of:
5.1 Diversion of pay-out of securities to non-client
accounts
5.2 Mis-matches between gross (client-wise) securities
pay-in and pay-out files of a stock brokers generated
by the Clearing Corporation which shall be compared
with actual transfer of securities to/from the client’s
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JANUARY 2019 CHARTERED SECRETARY

depository accounts by the Depository. The cases of
any mismatch found out by the Depository shall be
informed to the concerned Stock Exchange / Clearing
Corporation.
5.3 Stock Exchange shall seek clarification from the
concerned stock broker on the mismatches reported
by Depository and identify transfer to a non-client /
third party, without any trade obligation.
5.4 Such information on wrong / fraudulent / unauthorized
transfer shall be shared by the Stock Exchange with
other Stock Exchange/s.
6. Any other alerts as the Stock Exchanges / Clearing
Corporations and Depositories may deem fit.
7. Alerts triggered at one Stock Exchange / Clearing
Corporation / Depository through early warning mechanism
shall be immediately shared with other Stock Exchanges /
Depositories with respect to the stock broker / depository
participant.
8. Based on the analysis of the early warning data, if it is
established that the stock broker’s financial health has
deteriorated and/ or he has made unauthorized transfer
of funds / securities of the client, in such cases Stock
Exchanges / Depositories shall jointly take preventive
actions on the stock broker which may include one or more
of, but not limited, to the following:
8.1. Actions to be initiated by the Stock Exchanges like:
a) Blocking of certain percentage of available
collaterals towards margin.
b) Check securities register in respect of securities
received and transferred against pay-in / pay-out
against settlement and client’s securities received
as collateral.
c) Check details of funds and securities available
with the clearing member, Clearing Corporation
and the Depository of that stock broker.
d) Impose limits on proprietary trading by the stock
broker.
e) Prescribe and monitor shorter time duration for
settlement of Running Account of clients.
f) Conduct meeting with the designated directors of
the stock broker to seek appropriate explanation.
g) Uniform action of deactivation of trading
terminals by all Stock Exchanges based on
the communication received from other Stock
Exchange.
h) Initiate inspection of the stock broker / depository
participant.
i) Cross check information submitted by stock broker
with other independent sources like collateral
details with the Clearing Corporation, transactions
in Bank and Depositories, with statement collected
directly etc.
j) Where client money and securities diversion is
suspected, appoint forensic auditor to trace trails
of entire funds and securities of clients.
8.2. Actions to be taken by the Depositories:
a) Restriction on further pledge of client securities
from the client’s account by freezing the stock
broker client account for debit.
b) Imposition of 100% concurrent audit on the
depository participant.
c) Cessation / restriction on uses of Power of
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CHARTERED SECRETARY JANUARY 2019
FROM THE GOVERNMENT
Attorney (POA) given to stock broker by clients
mapped to such brokers only to meet settlement
obligation of that client. Clients to issue instructions
electronically or through Delivery Instruction Slip
(DIS) for delivery of shares for off market transfers.
8.3. Any other measures that Stock Exchanges / Clearing
Corporations / Depositories may deem fit.
9. Stock Exchanges, Clearing Corporations and Depositories
are directed to implement the above early warning
mechanism and preventive actions, with effect from
February 01, 2019.
10. This circular is being issued in exercise of powers conferred
under Section 11 (1) of the Securities and Exchange Board
of India Act, 1992 and Section 19 of the Depositories Act, to
protect the interests of investors in securities and to promote
the development of, and to regulate the securities market.
 D RAJESH KUMAR
 General Manager
13
Change of Name in the Beneficial Owner (BO)
Account with Depositories
[Issued by the Securities and Exchange Board of India vide Circular No. CIR/
MRD/DP/158/2018 dated 27.12.2018.]
1. This has reference to circular no. CIR/MRD/DP/27/2012
dated November 1, 2012 wherein SEBI has prescribed the
documents required in order to simplify the procedure for
change of name in Beneficial Owner’s (BO) account with
Depositories.
2. One of the documents required for change of name in
Beneficial Owner’s (BO) account with Depositories on
account of reasons other than marriage is document
related to publication of name change in official gazette.
Depositories have now represented that for some
investors residing in the State of Karnataka and Punjab,
the name change is published by the State Government in
the Official Gazette only for Government employees and
not for private persons in case of change of name of an
individual.
3. Accordingly, it has been decided that in case of change
of name of an individual in these states for reasons other
than marriage, the same may be allowed for the individual
in the BO account subject to the submission of following
documents:
i. Request letter for change of name;
ii. Sworn affidavit executed before the Notary Public/
Magistrate of First Class/ Executive Magistrate
mentioning the reason for change of name and his
complete address;
iii. Paper publication in one local newspaper and one
national newspaper; and
iv. KYC in changed name.
4. The Depository Participants (DPs) shall collect the self-
attested copies of above documents and maintain the
same in their records after verifying with the original
documents.
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5. The Depositories are directed to-
i. Implement the above provisions within three months
from the date of issue of this circular.
ii. Ensure that they have the system to keep audit trail of
the name change in the BO account similar to that of
address change or any other change of coordinates;
iii. Make amendments to the relevant Bye-Laws,
Business Rules and DP Operating Instructions for
the implementation of the above decision, as may be
applicable or necessary;
iv. Bring the provisions of this circular to the notice of
the DPs and also to disseminate the same on their
website.
6. This circular is being issued in exercise of powers conferred
under Section 11(1) of the Securities and Exchange Board
of India Act, 1992 read with Section 19 of the Depositories
Act, 1996 in the interests of investors in securities and to
promote the development of, and to regulate the securities
market.
 BITHIN MAHANTA
 Deputy General Manager
14
Review of Offer for Sale (OFS) of Shares
through Stock Exchange Mechanism
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
HO/MRD/DOPI/CIR/P/2018/159 dated 28.12.2018.]
1. Comprehensive guidelines on Offer for Sale of Shares
through stock exchange mechanism were issued vide
circular no CIR/MRD/DP/18/2012 dated July 18, 2012.
These guidelines have been modified from time to time
based on the representation/suggestion received from
various stakeholders.
2. Considering that the OFS mechanism has been successfully
used to divest stake by promoters and large shareholders
of top 200 companies by market capitalization, market
representations indicated that its use may be extended
to a wider set of companies. Further, market feedback
indicated that clarity may be brought in conditions relating
to cancellation of OFS in light of modifications to framework
carried out vide circular dated February 15, 2016.
3. Accordingly, the OFS framework is modified as follows:
a. OFS mechanism shall be available to companies with
market capitalization of Rs.1000 crores and above,
with the threshold of market capitalization computed
as the average daily market capitalization for six
months period prior to the month in which the OFS
opens.
b. If the seller fails to get sufficient demand from non-
retail investors at or above the floor price on T day,
then the seller may choose to cancel the offer, post
bidding, in full (both retail and non-retail) on T day and
not proceed with offer to retail investors on T+1 day.
4. Para 3.1 of circular dated August 08, 2014 and Para 11 of
circular dated July 18, 2012 stand modified accordingly. All
other conditions for sale of shares through OFS framework
contained in the circulars CIR/MRD/DP/18/2012 dated July
18, 2012, CIR/MRD/DP/04/2013 dated January 25, 2013,
CIR/MRD/DP/17/2013 dated May 30, 2013, CIR/MRD/
124
DP/ 24 /2014 August 08, 2014, CIR/MRD/DP/32 /2014
December 01, 2014, circular CIR/MRD/DP/12/2015 dated
June 26, 2015, circular CIR/MRD/DP/ 36 /2016 dated
February 15, 2016 and CIR/MRD/DP/ 65 /2017 dated June
27, 2017 remain unchanged.
5. Stock Exchanges are advised to:
a. take necessary steps and put in place necessary
systems for implementation of above.
b. make necessary amendments to the relevant bye-
laws, rules and regulations for the implementation of
the above.
c. bring the provisions of this circular to the notice of the
member brokers of the stock exchange and also to
disseminate the same on their website.
6. This circular is issued in exercise of the powers conferred
under Section 11(1) of the Securities and Exchange Board
of India Act, 1992.
7. This circular is available on SEBI website at www.sebi.
gov.in under the categories “Legal Framework” and
“Takeovers”.
 AMIT TANDON
 Deputy General Manager
15
Creation of segregated portfolio in mutual fund
schemes
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
HO/IMD/DF2/CIR/P/2018/160 dated 28.12.2018.]
A. In order to ensure fair treatment to all investors in case of
a credit event and to deal with liquidity risk, it has been
decided to permit creation of segregated portfolio of debt
and money market instruments by mutual funds schemes.
B. For the purpose of this circular,
1. The term ‘segregated portfolio’ shall mean a portfolio,
comprising of debt or money market instrument
affected by a credit event, that has been segregated in
a mutual fund scheme.
2. The term ‘main portfolio’ shall mean the scheme
portfolio excluding the segregated portfolio.
3. The term ‘total portfolio’ shall mean the scheme
portfolio including the securities affected by the credit
event.
C. AMC may create segregated portfolio in a mutual fund
scheme subject to the following:
1. Segregated portfolio may be created, in case of a
credit event at issuer level i.e. downgrade in credit
rating by a SEBI registered Credit Rating Agency
(CRA), as under:
a. Downgrade of a debt or money market instrument
to ‘below investment grade’, or
b. Subsequent downgrades of the said instruments
from ‘below investment grade’, or
c. Similar such downgrades of a loan rating.
2. In case of difference in rating by multiple CRAs, the
most conservative rating shall be considered. Creation
of segregated portfolio shall be based on issuer
level credit events as detailed at paragraph C-1 and
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implemented at the ISIN level.
3. Creation of segregated portfolio shall be optional and
at the discretion of the AMC. It should be created only
if the Scheme Information Document (SID) of the
scheme has provisions for segregated portfolio with
adequate disclosures.
4. AMCs shall have a detailed written down policy on
creation of segregated portfolio and the same shall be
approved by the trustees.
5. Process for creation of segregated portfolio
a. AMC shall decide on creation of segregated
portfolio on the day of credit event. Once an AMC
decides to segregate portfolio, it shall
i. seek approval of trustees prior to creation of
the segregated portfolio.
ii. immediately issue a press release disclosing
its intention to segregate such debt and
money market instrument and its impact on
the investors. The mutual fund should also
disclose that the segregation shall be subject
to trustee approval. Additionally, the said
press release shall be prominently disclosed
on the website of the AMC.
iii. ensure that till the time the trustee approval
is received, which in no case shall exceed 1
business day from the day of credit event, the
subscription and redemption in the scheme
shall be suspended for processing with
respect to creation of units and payment on
redemptions.
b. Once trustee approval is received by the AMC,
i. Segregated portfolio shall be effective from
the day of credit event
ii. AMC shall issue a press release immediately
with all relevant information pertaining to the
segregated portfolio. The said information
shall also be submitted to SEBI.
iii. An e-mail or SMS should be sent to all unit
holders of the concerned scheme.
iv. The NAV of both segregated and main
portfolio shall be disclosed from the day of the
credit event.
v. All existing investors in the scheme as on the
day of the credit event shall be allotted equal
number of units in the segregated portfolio as
held in the main portfolio.
vi. No redemption and subscription shall be
allowed in the segregated portfolio. However,
in order to facilitate exit to unit holders in
segregated portfolio, AMC shall enable
listing of units of segregated portfolio on the
recognized stock exchange within 10 working
days of creation of segregated portfolio and
also enable transfer of such units on receipt
of transfer requests.
c. If the trustees do not approve the proposal to
segregate portfolio, AMC shall issue a press
release immediately informing investors of the
same.
6. Valuation and processing of subscriptions and
redemptions
a. Notwithstanding the decision to segregate the
debt and money market instrument, the valuation
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CHARTERED SECRETARY JANUARY 2019
FROM THE GOVERNMENT
should take into account the credit event and the
portfolio shall be valued based on the principles of
fair valuation (i.e. realizable value of the assets) in
terms of the relevant provisions of SEBI (Mutual
Funds) Regulations, 1996 and Circular(s) issued
thereunder.
b. All subscription and redemption requests for which
NAV of the day of credit event or subsequent day
is applicable will be processed as per the existing
circular on applicability of NAV as under:
i. Upon trustees’ approval to create a
segregated portfolio -
n Investors redeeming their units will get
redemption proceeds based on the NAV
of main portfolio and will continue to hold
the units of segregated portfolio.
n Investors subscribing to the scheme will
be allotted units only in the main portfolio
based on its NAV.
ii. In case trustees do not approve the proposal
of segregated portfolio, subscription and
redemption applications will be processed
based on the NAV of total portfolio.
7. Disclosure Requirements
In order to enable the existing as well as the prospective
investors to take informed decision, the following shall
be adhered to:
a. A statement of holding indicating the units held by
the investors in the segregated portfolio along with
the NAV of both segregated portfolio and main
portfolio as on the day of the credit event shall be
communicated to the investors within 5 working
days of creation of the segregated portfolio.
b. Adequate disclosure of the segregated portfolio
shall appear in all scheme related documents, in
monthly and half-yearly portfolio disclosures and
in the annual report of the mutual fund and the
scheme.
c. The Net Asset Value (NAV) of the segregated
portfolio shall be declared on daily basis.
d. The information regarding number of segregated
portfolios created in a scheme shall appear
prominently under the name of the scheme at all
relevant places such as SID, KIM-cum-Application
Form, advertisement, AMC and AMFI websites,
etc.
e. The scheme performance required to be disclosed
at various places shall include the impact of
creation of segregated portfolio. The scheme
performance should clearly reflect the fall in NAV
to the extent of the portfolio segregated due to
the credit event and the said fall in NAV along
with recovery(ies), if any, shall be disclosed as a
footnote to the scheme performance.
f. The disclosures at paragraph 7(d) and 7(e)
above regarding the segregated portfolio shall be
carried out for a period of at least 3 years after
the investments in segregated portfolio are fully
recovered/ written-off.
g. The investors of the segregated portfolio shall be
duly informed of the recovery proceedings of the
investments of the segregated portfolio. Status
update may be provided to the investors at the
time of recovery and also at the time of writing-off
of the segregated securities.
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8. TER for the Segregated Portfolio
a. AMC shall not charge investment and advisory
fees on the segregated portfolio. However, TER
(excluding the investment and advisory fees) can
be charged, on a pro-rata basis only upon recovery
of the investments in segregated portfolio.
b. The TER so levied shall not exceed the simple
average of such expenses (excluding the investment
and advisory fees) charged on daily basis on the
main portfolio (in % terms) during the period for
which the segregated portfolio was in existence.
c. The legal charges related to recovery of the
investments of the segregated portfolio may be
charged to the segregated portfolio in proportion to
the amount of recovery. However, the same shall
be within the maximum TER limit as applicable to
the main portfolio. The legal charges in excess of
the TER limits, if any, shall be borne by the AMC.
d. The costs related to segregated portfolio shall in
no case be charged to the main portfolio.
9. Monitoring by Trustees
a. In order to ensure timely recovery of investments
of the segregated portfolio, trustees shall ensure
that:
i. The AMC puts in sincere efforts to recover the
investments of the segregated portfolio.
ii. Upon recovery of money, whether partial or
full, it shall be immediately distributed to the
investors in proportion to their holding in the
segregated portfolio. Any recovery of amount
of the security in the segregated portfolio
even after the write off shall be distributed to
the investors of the segregated portfolio.
iii. An Action Taken Report (ATR) on the efforts
made by the AMC to recover the investments
of the segregated portfolio is placed in every
trustee meeting till the investments are fully
recovered/ written-off.
iv. The trustees shall monitor the compliance
of this circular and disclose in the half-
yearly trustee reports filed with SEBI, the
compliance in respect of every segregated
portfolio created.
b. In order to avoid mis-use of segregated portfolio,
trustees shall ensure to have a mechanism in
place to negatively impact the performance
incentives of Fund Managers, Chief Investment
Officers (CIOs), etc. involved in the investment
process of securities under the segregated
portfolio, mirroring the existing mechanism for
performance incentives of the AMC, including
claw back of such amount to the segregated
portfolio of the scheme.
10. AMCs desirous of having a provision of segregated
portfolio in existing scheme shall ensure that all relevant
disclosures are made in the SID of such schemes. The
provision to enable creation of segregated portfolio in
the existing scheme shall be subject to compliance
with Regulation 18(15A) of SEBI (Mutual Funds)
Regulations, 1996.
11. The existence of the provisions for segregated
portfolio should not encourage the AMCs to take
undue credit risk in the scheme portfolio. Any mis-use
of the provisions of segregated portfolio, would be
126
considered serious and stringent action may be taken.
D. This circular is issued in exercise of powers conferred
under Section 11 (1) of the Securities and Exchange Board
of India Act, 1992, read with the provisions of Regulation
77 of SEBI (Mutual Funds) Regulations, 1996, to protect
the interests of investors in securities and to promote the
development of, and to regulate the securities market.
 HARINI BALAJI
 General Manager
16
Physical settlement of stock derivatives
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
HO/MRD/DOPI/CIR/P/2018/161 dated 31.12.2018.]
1. Please refer to SEBI circular SEBI/HO/MRD/DP/
CIR/P/2018/67 dated April 11, 2018 captioned ‘Review of
Framework for Stocks in Derivatives Segment’.
2. In furtherance to the aforesaid circular, it has been decided
that physical settlement shall be made mandatory for all
stock derivatives.
3. Accordingly, stock derivatives which are presently being
cash settled shall move to physical settlement in the
following manner:
(i) Stocks which are being cash settled shall be ranked in
descending order based on daily market capitalization
averaged for the month of December 2018.
(ii) Based on the ranking arrived at sub-para 3(i) above,
the bottom 50 stocks shall move to physical settlement
from April 2019 expiry onwards, the next 50 stocks
from the bottom shall move to physical settlement
from July 2019 expiry onwards, and the remaining
stocks shall move to physical settlement from October
2019 expiry onwards.
4. Derivatives introduced on new stocks, meeting the
enhanced eligibility criteria (specified vide circular SEBI/
HO/MRD/DP/CIR/P/2018/67 dated April 11, 2018) after
the date of this circular, shall also be physically settled.
5. All other conditions specified in the SEBI circular SEBI/
HO/MRD/DP/CIR/P/2018/67 dated April 11, 2018 shall
continue to remain in force.
6. Stock Exchanges are directed to:
(i) take necessary steps to put in place systems for
implementation of the circular, including necessary
amendments to the relevant bye-laws, rules and
regulations;
(ii) bring the provisions of this circular to the notice of the
stock brokers/clearing members and also disseminate
the same on their website;
(iii) communicate to SEBI the status of implementation
of the provisions of this circular through monthly
development report.
7. This circular is issued in exercise of the powers conferred
under Section 11(1) of the Securities and Exchange Board
of India Act 1992, read with Section 10 of the Securities
Contracts (Regulation) Act, 1956 to protect the interests of
investors in securities and to promote the development of,
and to regulate the securities market.
8. This circular is available on SEBI website at www.sebi.gov.
in at “Legal FrameworkgCirculars”.
 SANJAY PURAO
 General Manager
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 NEWS FROM THE
INSTITUTE
5
n MEMBERS RESTORED DURING THE MONTH OF NOVEMBER 2018
n CERTIFICATE OF PRACTICE SURRENDERED DURING THE MONTH OF NOVEMBER 2018
n KNOW YOUR MEMBER (KYM)
n NOTICE

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 39 A 15537 SH. DEEPAK SHARMA EIRC
NEWS FROM THE INSTITUTE
40 A 15569 MS. NEHA DHAWAL KAMATH WIRC
41 A 15879 SH. ABHINAV MAHESH KAPADIA WIRC

Institute 42
43
A
A
15954 MS. NITU GUPTA
17510 MS. DEEPTI VERMA
NIRC
NIRC

News 44
45
A
A
17830 SH. SANDEEP VASANT GURAV
17902 SH. VIJAY SARATHI VADLAMANI
WIRC
SIRC
46 A 17961 SH. S. RAVI SIRC
47 A 18201 MS. SHAZIA KHATOON WIRC
MEMBERS RESTORED DURING THE MONTH OF NOVEMBER 2018
48 A 19255 MS. UMA RAMASUBRAMANIAM WIRC
Sr. A/F MEM. MEM. NAME REGN. 49 A 19419 SH. SIDHESHWAR BHALLA NIRC
No. No.
50 A 19638 MS. MADHVI GOYAL NIRC
1 A 163 SH. N N UPADHYAY SIRC
51 A 20200 SH ASHOK KUMAR LOHIYA EIRC
2 A 1543 SH. K S RANGANATHAN WIRC
52 A 20771 MS. PRATHIMA YEDDULA SIRC
3 A 2939 SH. DARSHAN V MEHTA WIRC
53 A 20810 SH. B V S SUBRAHMANYAM GADE SIRC
4 A 3222 SH. K K SETH WIRC
54 A 20936 MS. SMRITI VASHISHT NIRC
5 A 3249 SH. P M KADAM WIRC
55 A 21215 SH. D MURALI SIRC
6 A 3474 SH. BHASKAR GANGADHAR EKANDE WIRC
56 A 21333 SH. HARISH RAMANATHAN IYER WIRC
7 A 3908 SH. A SUBRAMANIAM SIRC
57 A 21365 SH RAKESH JAGETIYA WIRC
8 A 4664 SH. V GOPALSWAMY SIRC
58 A 21964 SH. K N SRIVATHSAN SIRC
9 A 4701 SH. NIRMAL KUMAR GANGWAL WIRC
59 A 22037 MR. MANISH KUMAR KHAITAN EIRC
10 A 5761 MS. HUTOXSHI R WADIA WIRC
60 A 22192 MS. SHEETAL DAGA NIRC
11 A 5808 SH. M SANKARANARAYANAN SIRC
61 A 22591 SH. SAGAR SHARMA WIRC
12 A 5823 SH. B N. GOEL EIRC
62 A 22801 SH. HABIB  JAN WIRC
13 A 6258 SH GOPAL BANSAL NIRC
63 A 23550 MS. GOPIKA RATHI NIRC
14 A 6504 SH. K V GANESH SIRC
64 A 23615 SH. SUBODH PRADIP DANDAWATE WIRC
15 A 7480 SH. NARENDRA DAHYABHAI SHAH WIRC
65 A 23622 MR. ANAND BALGOVIND UPADHYAY WIRC
16 A 8283 SH. VINAY KUMAR AGARWAL EIRC
66 A 23769 SH. PRASHANT SAINI NIRC
17 A 8370 SH. SANDEEP SABHARWAL NIRC
67 A 23897 MS. MADHURI SHEKHAR NAWARE WIRC
18 A 8626 SH. NISHIKANT NARAYAN KALE WIRC
68 A 24309 MS. VARSHA JAIN NIRC
19 A 8632 SH. SUBIR BANERJEE NIRC
69 A 24617 SH. AJIT KUMAR SINGH NIRC
20 A 9279 SH. A CHINNAPPAN SIRC
70 A 25531 SH. NIRANJAN KUMAR AGARWAL EIRC
21 A 9633 SH. AJAY MALHOTRA WIRC
71 A 25720 MS. NEELIMA A VARMA SIRC
22 A 9875 SH. N RAJKUMAR WIRC
72 A 26298 MS. VRUSHALI HEMANT JOSHI WIRC
23 A 10135 MS. C V NAGAMANI SIRC
73 A 26306 MS. NEHA BHATIA NIRC
24 A 10154 SH. G V VIJAYA RAGHAV SIRC
74 A 26385 MS. AKANKI JAIN NIRC
25 A 10384 SH. RAJENDRA KUMAR KHANDELWAL WIRC
75 A 26411 MR. BRAJMOHAN SINGH NIRC
26 A 10545 SH. NARINDER KUMAR KAPOOR NIRC
76 A 26808 MRS. RASHMITA SANTOSH PRAJAPATI WIRC
27 A 10719 SH. MANOJ KUMAR JAIN EIRC
77 A 27361 MS. SHEETAL SINGH NIRC
28 A 10893 SH. TULSI S DADLANI WIRC
78 A 27548 SH. SATYABAN ROUT EIRC
29 A 11260 SH. NARAYANAN M S CHANDRA SIRC
79 A 27560 MS. NIDHI MAHESHWARI WIRC
30 A 11350 SH. KISHOR MADHAV THATTE WIRC
80 A 27838 MRS. PRIYA CHOUDHARY NIRC
31 A 11739 SH. TUSHAR DEVENDRAKANT WIRC
AVASIA 81 A 27862 MR. YOGESH KUMAR NIRC
32 A 11918 SH. K GURURAJ SIRC 82 A 27863 MS. DIPTI TILAK SIRC
33 A 12417 SH. S KANNAN WIRC 83 A 28104 MS. JYOTI PRAHALAD ASAWA WIRC
34 A 12947 SH. ABHAY GEBILAL GANDHI WIRC 84 A 28296 MR. RAMU AKKILI SIRC
35 A 13061 SH. NAVEEN KALSIE NIRC 85 A 28885 MR. KUSHAGRA RASTOGI NIRC
36 A 13904 SH. RAJESH KUMAR SINHA EIRC 86 A 28933 MS. SHRUTI PANDEY NIRC
37 A 14213 SH. RAHUL DUBEY WIRC 87 A 30042 MS. SUMAN CHOUDHARY NIRC
38 A 14290 MS. DIMPLE SHANKARLAL TRIVEDI WIRC 88 A 30567 MR. GAYATRI PRASAD JOSYULA SIRC

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89 A 31013 MS. NIVEDITA RAVINDRA KETKAR WIRC 138 A 52118 MS. RESHMA RAYALU SIRC

NEWS FROM THE INSTITUTE

90 A 31424 MS. DHWANI NAINESHBHAI SHAH WIRC 139 A 52207 MS. PRIYA GUPTA WIRC
91 A 31497 MR. DEBAJYOTI SINHA EIRC 140 A 52370 MS. LEENA MITESH  GANDHI SIRC
92 A 31525 MR. KARAN NARANG NIRC 141 A 52539 MS. SHILPI BAID NIRC
93 A 31954 MS. ASHMIKA PODDAR EIRC 142 A 53195 MR. SHARIT SHARMA NIRC
94 A 31989 MS. RASIKA RAMCHANDRA JOSHI WIRC 143 A 53603 MR. RAGHUNATH P SIRC
95 A 32128 MR. RAVI VASWANI SIRC 144 A 53985 MR. SATYAUMANADH ACHANTA WIRC
96 A 32596 MS. PRIYANKA JAISWAL EIRC 145 A 54266 MS. ANKITA SRIVASTAVA NIRC
97 A 33185 MR. KODURI VENKATA HARI BABU WIRC 146 A 54721 MS. SWATI RAJPAL NIRC
98 A 33370 MS. SURBHI ARORA NIRC 147 F 567 SH. HANUMAN PRASAD VYAS WIRC
99 A 33582 MR. RAMESH C SIRC 148 F 1257 SH. R GOEL WIRC
100 A 33623 MS. KRITIKA SHARMA NIRC 149 F 1300 SH. K C SURESH SIRC
101 A 33712 MR. GEORGE JOHN SIRC 150 F 1912 SH. SAJJAN KUMAR KHANDELWAL EIRC
102 A 33730 MS. SHIVANI KHANNA EIRC 151 F 2435 SH. RAJ KUMAR SAIGAL NIRC
103 A 34251 MR. RAM BABURAO WAGHAMODE SIRC 152 F 2461 SH. N A TARKAS WIRC
104 A 35452 MR. MOHANA ANANDA REDDY SATTI SIRC 153 F 2996 SH. MOHAN KUMAR NANDA EIRC
105 A 35469 MR. PALADUGU VENKATA SUBBA RAO SIRC 154 F 3026 SH. GOPALACHARI SAMPATH SIRC
106 A 35559 MS. UPASNA THAKRAL NIRC 155 F 3520 SH. VISWANATHAN RAJAN SIRC
107 A 36147 MS. RAMASWAMY KANAKATHARA SIRC 156 F 4141 SH. V SUNDER SIRC
108 A 36620 MS. REENA KAUSHIK SHAH WIRC 157 F 4242 SH. BIPIN JIVANBHAI PATEL WIRC
109 A 36721 MR. JASWANT SINGH KAMBOJ NIRC 158 F 4259 SH. R KARUNANITHI SIRC
110 A 37100 MS. RITU BHARATBHAI NAYAK WIRC 159 F 4420 SH. MANOJ MAHESHWARI NIRC
111 A 37122 MS. SHAKSHI SHARMA EIRC 160 F 4465 MS. POONAM MEHTA NIRC
112 A 37125 MS. GARIMA KAKARANIA NIRC 161 F 4497 SH. AJAY AGGARWAL SIRC
113 A 37618 MS. SWETA BANTHIA EIRC 162 F 4940 SH. SATEESH RAMANAND WIRC
CHIRPUTKAR
114 A 37627 MS. MONIKA YADAV NIRC
163 F 5313 SH. SACHIN GUPTA NIRC
115 A 37927 MR. K ANIL KUMAR SIRC
164 F 5572 SH. ADITYA SHARMA EIRC
116 A 38089 MR. VINAY DNYANESH KULKARNI WIRC
165 F 5823 SH. P S SUMAN SIRC
117 A 38942 MR. MUDASSIR AHMAD PADDER NIRC
166 F 6078 SH. ASHISH PANDEY WIRC
118 A 40780 MR. KAMALJIT SINGH NIRC
167 F 7177 SH. GOURAV KHATRI NIRC
119 A 41450 MS. NISHA CHOPRA NIRC
168 F 8907 MS. SHRADDHA JAYAVANT DALVI WIRC
120 A 41604 MS. SHRUTI SHARMA NIRC
169 F 8956 MS. DEEPAROOP PRADEEP MITRA WIRC
121 A 44405 MR. ATUL MUDGAL NIRC
170 F 9907 SH. KIRAN KUMAR MOHANTY WIRC
122 A 44888 MR. GOPAL SUNILCHANDRA RATHI WIRC
CERTIFICATE OF PRACTICE SURRENDERED DURING THE
123 A 45049 MR. MANISH KUMAR NIRC
MONTH OF NOVEMBER 2018
124 A 45076 MS. TAMMANA RAVALI SIRC
SL. NAME ACS/ COP REGN.
125 A 45127 MR. KEDAR KASHINATH NATU WIRC No. FCS NO. NO.
126 A 45190 MS. KRITIKA TRIPATHI NIRC 1 MR. KEKIN PRAKASH PATEL A -37872 17667 WIRC
127 A 45700 MR. VISMAY ASHOKKUMAR MAKWANA WIRC 2 MR. AJIT GARG A -55191 20496 NIRC
128 A 45779 MS. NIKKI KEJRIWAL EIRC 3 MRS. PRATEEKSHA KEDIA A -36866 14320 NIRC
129 A 45791 MS. DISHA ARORA NIRC 4 MR. MUKUL SURYAPRAKASH KEWALRAMANI A -39051 20441 WIRC
130 A 46906 MS. RUPALI DINKARRAO GADGIL WIRC 5 MS. VARSHA SHARMA A -53775 19897 NIRC
6 SH. DIGISH H SHAH A -9889 8407 WIRC
131 A 47035 MS. B SWAPNA RAJARAM BANSODE WIRC
7 MS. APARNA MADHUSUDAN A -44474 19399 SIRC
132 A 48543 MS. PADMAJA SRINIVASAN SIRC
8 MRS. PINAL R PAREKH A -25327 10095 WIRC
133 A 49491 MS. BHAVNEET MANES NIRC
9 MR. MUKESH SAKHARAM TANDALEKAR A -48601 17767 WIRC
134 A 49551 MR. M RAGHAV SANTHOSH SIRC
10 SH. RAJENDRA KUMAR MOHANTY A -22928 19185 EIRC
135 A 50459 MS. NISHA NIRC
11 MS. KOMAL HARDIKKUMAR PATEL A -51302 18593 WIRC
136 A 50955 MS. ASHA SINGH NIRC
12 MS. DEEPIKA GARG A -26922 18740 NIRC
137 A 51136 MR. NIRAV MUKESH DHOLAKIA WIRC
13 MR. DIPAKKUMAR MOHANLAL SANGHANI A -50568 18468 WIRC
14 MS. SUTAMA CHOWDHURY A -52907 19565 EIRC

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 15 MS. TRIPTI GUPTA A -45752 19669 NIRC 32 MS. MEENU KHANDELWAL A -46531 17952 NIRC
NEWS FROM THE INSTITUTE
16 MS. KARISHMA HEMRAJ BHANDARI A -52993 20039 WIRC 33 MS. BABITA SHARMA A -48271 17879 SIRC
17 MR. HARIOM SHARMA A -41738 20550 NIRC 34 MS. REENA KUMARI SINGH A -53284 19661 EIRC
18 MS. ANKITA SUNIL CHAUDHARY A -40631 20613 WIRC 35 MS. AAYUSHI AGRAWAL A -46297 17428 SIRC
19 SH. SURESH MENON F -7426 20866 NIRC 36 MS. PRITI BHANDARI A -13672 5932 NIRC
20 MS. SHWETA SINGHVI A -15159 7660 NIRC 37 MR. MANOJ KUMAR YADAV A -35674 13296 NIRC
21 SH. KAMLESHBHAI PUNAMCHAND PATEL A -10772 12205 WIRC 38 SH. NITIN PRAFULLA CHOUDHARI A -20837 13460 WIRC
22 MRS. RIMA DHAVAL SHIRODARIYA A -31009 13601 WIRC 39 MR. PRABHAKAR TIWARI A -32733 18602 SIRC
23 MRS. MONIKA GANDHI A -37372 13993 NIRC 40 MR. RETNAVILASAM GOPINATHAN NAIR JISHNU A -32820 18974 SIRC
24 SH. Y V SUBBARAO F -1871 15516 SIRC 41 MS. PRIYANKA AGGARWAL A -38180 20859 WIRC
25 MS. SHANU GYANCHAND JAIN A -42408 16743 WIRC
26 MS. SWATI JAGATI A -47034 17359 WIRC KNOW YOUR MEMBER (KYM)
27 MR. AJAY RAGHAVRAM GUPTA A -50503 18335 WIRC
28 MR. JATIN CHOPRA A -49958 18392 NIRC A User Manual for filling the Know Your Member
(KYM) proforma online is available at the below
29 MS. MEGHA GOEL A -56111 20984 NIRC
link:  https://www.icsi.in/student/Portals/0/Manual/
30 MS. NEHA GUPTA A -42016 17371 EIRC KYM_Usermanual.pdf
31 MS. PALLAVI PARAMESHWAR HEGDE A -48551 17957 SIRC

NOTICE ATTENTION!
The last date for payment of annual membership For latest admission of Associate and Fellow Members, Life
fee was 31-08-2018 and for renewal of certificate of Members of Company Secretaries Benevolent Fund (CSBF),
practice was 30-09-2018. The members who have not Licentiates and issuance of Certificate of Practice, kindly
paid their annual membership fee and/or certificate of refer to the link http://www.icsi.edu/Member.aspx
practice fee by the last date are required to restore their
membership and/or certificate of practice by paying the
requisite entrance and restoration fees alongwith the
applicable annual membership fee and annual certificate APPOINTMENT
of practice fee with GST@18% on the total fee payable.
Members are required to submit Form–BB for restoration
of membership and Form-D for restoration of certificate GINI SILK MILLS LIMITED
of practice duly filled and signed. For more clarification,
may please write at jitendra.kumar@icsi.edu(for
restoration of membership) and vidhya.ganesh@icsi.
edu (for restoration of certificate of practice).
APPOINTMENT OF
COMPANY SECRETARY
CONGRATULATIONS!!! LOCATION : MUMBAI

Gini Silk Mills Limited is seeking to hire the

services of a company secretary to comply
with the requirement of Companies Act
2013 and SEBI (Listing Obligation and
Disclosure Requirement) 2015.
The Institute of Company Secretaries of India (ICSI) and
the entire fraternity greets and Congratulates Shri Upender • Candidates having 2 years
Gupta on his being appointed as Principal Commissioner experience may apply.
of GST at Ministry of Finance, Department of Revenue, • Candidate Should have excellent
Central Board of Excise and Customs, New Delhi. Your
Rich background and Expertise of GST the Regulator would
communication and computer skills.
be proactive in issuing industry friendly Laws making the • Interested candidate please mail their
Indian trade and Industry grow from strength to strength. resume at chetan@ginitex.com.
We wish him successful and professionally fulfilling times
ahead!!!

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 MISCELLANEOUS
6
CORNER

n ETHICS & SUSTAINABILITY CORNER

n GST CORNER
n CG CORNER
n GLOBAL CONNECT
n EIRC GAZETTEE NOTIFICATION
n NIRC GAZETTEE NOTIFICATION
n SIRC GAZETTEE NOTIFICATION
n CERTIFIED CORPORATE COMPLIANCE ASSISTANT (3 MONTHS CERTIFIED COURSE)
n CERTIFIED MSME PROFESSIONAL (3 MONTHS CERTIFIED COURSE)

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ETHICS & SUSTAINABILITY CORNER

MIND YOUR MIND

Contributed by Brahma Kumaris, Om Shanti Retreat Centre, Gurugram

I
n this title “Mind Your Mind”, there are two ‘minds’; the first one is the verb and the second
one is the noun. The human soul has three faculties such as mind, intellect and sanskar.
Mind is the thinking faculty, intellect is the judging or decision making faculty; and sanskar
is the recording faculty of what we, the souls, think, speak and act. The noun ‘mind’ is the creator
of thoughts. The verb ‘mind’ here means to know and check the nature and quality of thoughts;
if bad and negative thoughts and change them into good and positive thoughts.

People say, “Mind your business”. But the topic says to mind your mind, and we have to discuss
how to mind our mind and know the benefits of doing this. bkashaorc@gmail.com

Mind
Mind is the thinking faculty. All sorts of thoughts, feelings and emotions arise in the mind.

Intellect is the judging or decision making faculty. It is the rational element in the soul that
considers, analyzes, organizes, facts, information, events, people, etc, and finally judges and
takes a decision.

Sanskar (impression) is the recording faculty of what we, the souls, think, speak and act in our
personal, social and professional life and behaviour. It is referred to as the sub-conscious, which
most often motivates and influences our actions.
Mind Proves One’s Existence
Rene Descartes, the French Philosopher, said, “Cogito Ergo Sum”, which means “I think,
therefore I am.” In other words, I exist because I think. Unless I think, I cannot exist. Thus, it
proves the existence of all human beings, who are thinking and rational beings. Human beings
are different from animals who act on the basis of their instincts only. Our thinking proves our
existence upon the earth when we, the souls, come and take the bodies to play our roles/parts
on the stage of the world.
People say, “Mind your
Individual Mind and Universal Mind business”. But the topic
There is a difference between individual human mind and God’s universal Super-mind. Every says to mind your mind,
individual soul has a mind of its own. The individual human mind is subject to time and space
continuum, and reaps the fruits one’s own thoughts, words action in the form of sorrows and
and we have to discuss
sufferings and peace and happiness, depending on the nature and quality of thoughts, words how to mind our mind
and actions. In the physical world of time and space, the individual human mind becomes and and know the benefits of
remains body-consciousness and becomes vicious being indulged in vices like anger, greed,
attachment, ego,lust, indolence and jealousy. doing this.
God’s universal Super-mind is not subject to time and space continuum even though He comes
to play His unique roles as the Creator, Director and Main Actor by controlling the forces and
effects of the world of time and space in this earthly elemental Nature. God, the Universal Mind, Mind is the thinking
is ever soul-conscious, who remains in the metaphysical Soul World beyond the physical world
of time and space, and is, therefore, called the Supreme Lord of Nature (Prakruti Pati).
faculty. All sorts of
thoughts, feelings and
Karma Philosophy is based on Positive Mind and Negative Mind emotions arise in
Karma philosophy is based on positive mind and negative mind. Thought is the seed, and the mind.
words and actions flow from the nature and quality of thoughts. That is why words and actions
are called the flowers and fruits of thoughts, the seeds. There is a saying, “As you think, so
become”. In other words, you are what the nature or qualities of your thoughts are. Thus, Karma
Philosophy (Karma Darshan) is based on the states of human mind such as positive mind and/
or negative mind. Good and positive thoughts evoke positive feelings and actions, whereas bad
and negative thoughts evoke bad and negative feelings and actions. Karma Philosophy (Karma
Darshan) is the psychological and/or spiritual equivalent of the third law of motion of Newtonian
Physics. The third law of motion of Sir Issac Newton states, “Every action has equal and opposite
reaction.” Good actions flow from good thoughts; whereas bad or negative actions flow from bad
or negative thoughts.
Mind is the Creator of Hell & Heaven
John Milton, the blind English poet, has rightly said, “Mind is in its own place; it can make a hell

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of heaven and heaven of hell.” Start thinking of heaven, you will get the feeling and experience
of heaven; in contrast, start thinking of hell, you will get the feeling and experience of hell.

William Shakespeare, the world famous poet and dramatist, has also rightly stated, “There is
nothing good or bad; thinking makes it so.” Think good and be good. Our thoughts create our
environment; our thoughts transmit the similar vibrations to others. Our thoughts can make our
destiny or mar our destiny.
All hopes and ambitions are based on mind/thoughts
An optimist is a positive thinker. He always sees the brighter sides of life. He sees the bright
lightning in the dark clouds. Every inconvenience is an opportunity for the optimist. For the
optimist, “Stone walls do not a prison make/ Nor iron bars a cage.” In contrast, the pessimist is
a negative thinker.
Karma philosophy is He always sees the darker sides of life. He perceives clouds as all dark as he fails to see
based on positive mind the bright lightning in the dark clouds. He is unable to make the best use of the opportunity.
and negative mind. This difference lies in their thought and outlook. Deepak Chopra says, “The winner does not do
different thing; he only thinks to do it differently.” All failures and successes are the works of the
Thought is the seed, mind .
and words and actions
flow from the nature and Mind is the wonder worker. All failures and successes are the works of the mind/thoughts. If you
think of success, you will get success; otherwise, if you think of failure, you will get failure. Every
quality of thoughts. successful person begins with two thoughts: (i) The future can be better than the present; (ii) I
have the power to make it so. So, believe in yourself and say to yourself: “I think I can; I can do
it; finally I did it.”

Winners are not people who fail; but people who never quit. Thomas Alva Edison has rightly said,
“I have not failed; I have only found 10,000 ways that won’t work.”
The Mind is Fickle
The Bhagavad Geeta puts a great emphasis on the control of mind. The mind is described
as fickle and unstable by nature. As an aspect of Nature, the human mind personifies the
phenomenal world, its impermanence and instability. The mind can be stabilized through yoga
practice. “A lamp in a windless place is the metaphor that can be used to describe a Yogi whose
mind is under control and who is united with his inner Self.” Rajayoga practice can control mind
Rajayoga practice can control the fickle and unstable mind. It is the mental, intellectual and
spiritual connection of the human soul with God, the Supreme Soul, the Almighty, Absolute and
Divine Super-mind.

It helps in quantum shift our mind or spirit/soul/consciousness from body-consciousness to soul-

consciousness or spiritual consciousness. Raja-yoga is the King of all Yogas as it has integrated
all in it all Yogas like Jnana Yoga, Bhakti Yoga, Karma Yoga and various disciplines like Science,
Psychology, Psychiatry, Psychotherapy, Education, Spirituality,

Values, etc. Rajayoga is the journey of the self through the self to the self and the Supreme Self.
The Bhagavad Geeta It helps to control and reduce the speed of thoughts; in attaining lasting peace and happiness; in
puts a great emphasis attaining liberation (Mukti) and Fruition (Jeevanmukti).
on the control of mind. Silent Mind is Powerful Mind
The mind is described as Silence is recognized as a great power. In fact it is from the power of silence that all the other
fickle and unstable spiritual powers emerge.
by nature. Few understand silence to be un-speaking with the lips. It is true but only at the physical level.
It is observed that people like to be surrounded with a variety of sounds and noises. Even when
a person is left in solitude all by himself, he would switch on a radio or television, or he would
search for somebody to talk to. Solitude and silence, for some becomes unbearable. Few also
believe that keeping silent makes one unsocial and difficult to connect to others. Silence is not
just the absence of sound nor a state of passivity. However, real silence is always accompanied
by happiness.

The whirlwind of unwanted thoughts in the mind is the reason why some believe silent to be
eerie. Thus they wrongly equate being in solitude as being lonely. When the multifarious sound
of mind becomes difficult to bear, we look out for ways to diminish it by engaging our self in
some activity or the other. A silent mind is a peaceful mind. Hence, peace of mind is sought after.
Immense power can be exercised by a silent mind.

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ETHICS & SUSTAINABILITY CORNER
When we are in a state
of silence, we can
transfer the experience
of the virtues of the soul
peace, purity, love, bliss
and happiness to those
coming in contact
with us.

Mind is the thinking faculty of the soul. Sound comes in the mind in the form of thoughts. The
silence of the mind is not the mere absence of sound, or a state of passivity. For the mind
to be silent it need not be absolutely void of all the thoughts. When a person thinks that he
does not want to think about anything, this also is a thought in itself. The silent mind is actually
devoid of the clamor of waste and negative thoughts. As the sound of the mind stops, that is,
as the expansion of thoughts is merged and transformed into their very essence, so the power
of silence is accumulated automatically. Power of silent mind is in essence the power of pure
thoughts. Positive thoughts in turn provide pure energy to the soul.

A silent mind is not passive but consciously active with the flow of positive thought. A silent mind
is free from greed, attachment, fear, ego and jealousy. It is brimming with love, peace, purity and
happiness. This results in a peaceful and powerful stage. A silent mind thus becomes a powerful
mind to take up elevated thoughts and is reflected through the peace and positivity in our personality.

Through the power of silent mind great actions can be achieved. Accuracy accompanies a silent
mind and right things begin to happen at the right time. For example when a person misplaces
his drawer keys and after searching frantically for hours cannot find them. Chances are he
would remember where he left the keys, if he actually pauses for a few minutes and let go of
the negative thoughts of tension and worry. While solving any complex or day to day situation,
solutions come easily with the power of silent mind. A silent mind is not
We generally overestimate the time it takes for a task to complete and also over spend the hours
passive but consciously
while finishing the same task. The speed of thoughts is the speed of time. If we start observing our active with the flow of
thoughts we would notice that even a minute is a very long period of time. Thus, we can infer that positive thought. A silent
we are able to control our thoughts through the power of a silent mind; we are also in a position mind is free from greed,
to control time. The silent mind allows us to be in the present moment or to exercise the power of
‘now’. Living in the now is possible only when our thoughts are related with the present moment attachment, fear, ego and
and the mind is not wandering in the past or future. Immense thought energy is conserved. This jealousy. It is brimming
stocked energy is channelized for creating a better future and for productive purposes.
with love, peace, purity
A silent mind can bring about great transformation in the self and in those around us. Steering and happiness.
any wrong into the right direction can be carried out with the power of a silent mind. A difficult
situation, a relationship turned sour, a mistake, or even our own nature can be cured through the
elevated thoughts.

The original nature of the self can be experienced and realized only in the stage of silence. One
may know factually that he is a being separate from the body, a point of light, the soul. However,
in order to realize the original soul conscious stage, one needs to practice the power of silence.
When we are in a state of silence, we can transfer the experience of the virtues of the soul peace,
purity, love, bliss and happiness to those coming in contact with us.

Hence, stabilize the self as the being of light, the soul, plug the connection with the power house,
the Supreme and switch on the elevated thoughts. This practice of meditation, a sure shot way
of accumulating the power of silent mind.

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 GST NEWS
1. GST collection drops to Rs. 94,726 crore in December
• GST collection dropped to Rs. 94,726 crore in December
2018, lower than Rs. 97,637 crore collected in the previous
month. The total number of GSTR-3B filed till 30th
December, 2018 is 72.44 lakh, the finance ministry said in a
statement.
• Of the Rs. 94,726 crore collected, Central GST collection is
Rs. 16,442 crore, State GST collection is Rs. 22,459 crore,
Integrated GST collection is Rs. 47,936 crore and Cess is
Rs. 7,888 crore.
• The GST collection stood at Rs. 1.03 trillion in April 2018,
Rs. 94,016 crore in May 2018, Rs. 95,610 crore in June
2018, Rs. 96,483 crore in July 2018, Rs. 93,960 crore in
August 2018, Rs. 94,442 crore in September 2018, Rs.
100,710 crore in October 2018 and Rs. 97,637 crore in
November 2018.
2. Govt. notifies new Annual Return forms; to be filed by
June 30
• The government has notified new Annual Return forms,
which are required to be filed by businesses registered
under the Goods and Services Tax regime by June 30,
2019.
• In the annual return forms, businesses have to provide
consolidated details of sales, purchases and input tax credit
(ITC) benefits accrued to them during the 2017-18 fiscal.
• The Central Board of Indirect Taxes and Customs (CBIC) on
December 31, 2018, notified form GSTR-9, GSTR-9A and
GSTR-9C.
• GSTR-9 is the annual return form for normal taxpayers,
GSTR-9A is for composition taxpayers, while GSTR-9C is a
reconciliation statement.
3. New GST rates: GST rated reduced on 23 goods and
services from January 1
• The GST Council on December 22 decided to cut tax rates
on 23 goods and services, including movie tickets, TV and
monitor screens and power banks and exempted frozen and
preserved vegetables from the levy.
• The Council had rationalised the 28 per cent slab and
restricted the highest slab to luxury, demerit, and sin goods,
besides cement, large screen TV, Air Conditioners and
dishwashers.
• The goods on which GST has been lowered to 18 per cent
from 28 per cent at present include pulleys, transmission
shafts and cranks, gear boxes, retreaded or used tyres,
power banks of lithium ion batteries, digital cameras, video
camera recorders and video game consoles.
• The GST Council has also decided to slash tax rate on parts
and accessories for the carriages for disabled persons from
28 per cent to 5 per cent. Also third party insurance premium
of goods carrying vehicles has been reduced from 18 per
cent to 12 per cent.
• The other items which will attract lower GST rate of 5 per
cent include marble rubble, natural cork, walking stick, fly
ash blocks.
• Music books and vegetables (uncooked or cooked by
steaming or boiling in water), frozen, branded and put in an
unit container and vegetables provisionally preserved but
unsuitable in that state for immediate consumption have
been exempted from GST.
• Services supplied by banks to basic savings bank deposit
account holders under the Jan Dhan Yojana will not attract
the GST.
• Air travel of pilgrims by non-scheduled/charter operations
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CHARTERED SECRETARY JANUARY 2019
GST CORNER
being facilitated by the government under bilateral
arrangements will attract a lower GST rate of 5 per cent.
• GST on movie tickets costing up to Rs 100 has been cut to
12 per cent, from 18 per cent. Also tickets over Rs 100 will
attract 18 per cent GST, against 28 per cent earlier.
• Monitors and TV screens up to 32 inches and power banks
will attract 18 per cent GST, as against 28 per cent earlier.
• The consumers will pay less for these items of common
consumption as the incidence of Goods and Services Tax
(GST) on them came down from January 1, 2019.
4. Single GST rate in the process, cutting tax on cement a
priority: Jaitley
• India is working towards a single national tax rate which
could be a mid-point between 12 and 18 per cent, Finance
Minister Arun Jaitley said, in an effort to simplify the tax
structure.
• The government set the range for the Goods and Service
Tax from 28 per cent to 5 per cent on most items when the
signature reform was introduced last year.
• “Multiple slabs were fixed transiently in order to ensure the
tax of no commodity goes up radically. This contained the
inflation impact,” Jaitley wrote in his blog.
• “A future road map could well be to work towards a single
standard rate instead of two standard rates of 12 per cent
and 18 per cent. It could be a rate at some mid-point
between the two.” He also said the country should look
towards having slabs of zero, five per cent and a standard
rate for luxury and sin goods (alcohol, drugs, cigarettes,
etc.).
• Stating that only cement and auto parts are items of common
use which remain in 28 per cent slab, Jaitley said the next
priority will be to transfer cement into a lower slab.
• All other building materials have already been transferred
from 28 per cent to 18 per cent and 12 per cent.
• The sun is setting on the 28 per cent slab, he added.
• Jaitley said of the 1,216 commodities which are used,
broadly 183 are taxed at zero rate, 308 at 5 per cent, 178 at
12 per cent and 517 at 18 per cent.
• The 28 per cent slab is now a dying slab, he said. Currently,
28 items, including luxury and sin goods, auto parts,
dishwashers, AC and cement remain in the highest slab of
28 per cent.
• With the goods and services tax (GST) transformation
completed, we are close to completing the first set of rates
of rationalisation i.e. phasing out the 28 per cent slab except
in luxury and sin goods, he said.
• Jaitley said the standard rate pre-GST rollout was 31 per
cent on a large number of commodities.
• The assessees had only two options either to pay a high rate
of tax or evade it, he said, adding tax evasion was prevalent
to a large extent. India comprised of multiple markets.
• Those who oppressed India with a 31 per cent indirect tax
and consistently belittled the GST must seriously introspect.
Irresponsible politics and irresponsible economics is only a
race to the bottom, Jaitley added.
5. Chidambaram attacks Govt. over ‘one GST rate’, asks why
goals are changing
• Former Finance Minister P Chidambaram raised questions
about what caused the change in the “declared goals” of the
Goods and Services Tax (GST) regime, why it was being
changed.
• “Until yesterday a single standard rate of GST was a
stupid idea. Since yesterday, it is the declared goal of the
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government!
• “Until yesterday capping GST at 18 per cent was
impracticable. Since yesterday, the Congress party’s
original demand of an 18 per cent cap is the declared goal
of the government!
• “Until yesterday, the Chief Economic Adviser’s RNR report
to fix the standard rate at 15 per cent was in the dustbin.
Yesterday it was retrieved and placed on the FM’s table and
was promptly accepted!” the senior Congress leader said in
a series of tweets.
6. GST Intelligence unit unearths Rs 2.2-billion fake tax-
invoices scam
• The Directorate General of GST Intelligence (DGGI) has
busted a racket of fraudulent companies engaged in raising
fake tax invoices worth Rs 2.2 billion to avail input-tax credit.
• According to the DGGI, searches were conducted at several
official as well as residential premises last Thursday in
Chennai and Coimbatore in Tamil Nadu and busted the
racket and arrested two persons.
• “Several incriminating documents, including copies of fake
invoices, issued on the letterheads of several firms that
existed merely on paper, were seized”, an official release by
Additional Director General K Balaji Majumdar said.
7. Rs 120 Bn GST evasion detected between Apr-Nov despite
e-way bill mechanism
• “We started anti-evasion measures from April onwards, and
from April-November we have detected Rs 120 billion of
GST evasion. This is huge compared to what happened in
central excise or service tax side. There is huge evasion.
There are smarter guys outside who knows how to pocket
the money,” Joseph said addressing an Assocham event.
• Joseph, who looks after investigation in the CBIC, said
almost Rs 80 billion worth GST evasion has been recovered
by the tax officials.
8. GST cut on movie tickets to boost revenue growth of
multiplex operators
• For a sector that was at the wrong end of multiple regulatory
and legal worries, the cut in the goods and services tax
(GST) on movie tickets is a welcome relief. The GST Council
cut tax rates to 12 per cent on tickets priced below Rs 100
from 18 per cent earlier and to 18 per cent for tickets priced
above that from 28 per cent.
9. No GST on flats with issue of completion certificate:
Finance Ministry
• It is brought to the notice of buyers of constructed property
that there is no GST on sale of complex/ building and
ready to move in flats where sale takes place after issue
of completion certificate by the competent authority ,” the
ministry said in a statement.
• However, Goods and Services Tax (GST) is applicable on
sale of under-construction property or ready to move in flats
where completion certificate is not issued at the time of sale.
• It further said affordable housing projects like Jawaharlal
Nehru National Urban Renewal Mission, Rajiv Awas Yojana,
Pradhan Mantri Awas Yojana or any other housing scheme
of state governments attracts 8 per cent GST, which can be
adjusted by the builders against its accumulated input tax
credit (ITC).
• “For such (affordable housing) projects, after offsetting ITC,
the builder or developer in most cases will not be required
to pay GST in cash as the builder would have enough ITC
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in his books of account to pay the output GST, the ministry
said.
• It said the cost of housing projects or complexes or flats,
other than those in affordable segment, would not have
gone up due to implementation of GST.
• “Builders are also required to pass on the benefits of lower
tax burden to the buyers of property by way of reduced
prices/ installments, where effective tax rate has been
down, it said.
10. GST Council likely to lower GST on under-construction
homes to 5%
• The GST Council is likely to consider lowering GST on
under-construction flats and houses to 5 per cent in its
meeting next month, an official said.
• Currently, the Goods and Services Tax (GST) is levied at 12
per cent on payments made for under-construction property
or ready-to-move-in flats where completion certificate has
not been issued at the time of sale.
• However, GST is not levied on buyers of real estate
properties for which completion certificate has been issued
at the time of sale.
• An official said that this 12 per cent GST rate ideally would
have been partially offset by way of taxes paid on inputs by
builders and hence the actual incidence of GST on under-
construction home buyers would have been around 5-6 per
cent. However, builders are not passing on the input tax
credit (ITC) benefit to consumers.
• Major construction material, capital goods and input services
used for construction of flats and houses attract 18 per cent
GST, while cement attracts 28 per cent tax.
• Prior to GST rollout, under-construction housing projects
attracted 4.5 per cent service tax and a value added tax
(VAT) of 1-5 per cent depending on the state. Also inputs
used in construction attracted 12.5 per cent excise duty in
addition to12.5-14.5per cent VAT. Besides, entry tax was
also levied on the inputs.
• After adjusting for credits on inputs used, the effective pre-
GST tax incidence on such housing property was 15-18 per
cent.
• The Finance Ministry has time and again asked real estate
dealers to pass on GST rate cut benefits to buyers, but to no
avail.
• Briefing reporters after the GST Council meeting on
December 22, Finance Minister Arun Jaitley had said that
builders can adjust some portion of the 12 per cent GST
against the taxes paid on inputs like cement which attract 28
per cent levy.
• “The potential homebuyers feel they are not getting
benefited under GST. Certain proposals have come before
the Council and the law and fitment committee will look into
the matter and the matter will come up in the next council
meeting. There was a total consensus that something needs
to be done,” Jaitley had said.
11. E-tailers into services not to collect TCS; online goods
players cry foul
• The Central Board of Indirect Taxes and Customs (CBIC),
in frequently asked questions (FAQ) for TCS, said a person
supplying services through an e-commerce platform was
exempted from obtaining compulsory registration provided
his aggregate turnover does not exceed Rs 2 million in a
financial year.
• “Since such suppliers are not liable for registration,
e-commerce operators are not required to collect TCS on
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JANUARY 2019 CHARTERED SECRETARY

supply of services being made by such suppliers through
their portal,” said CBIC.
• The decision has annoyed e-commerce players with product
vendors. A spokes person of ShopClues said there is no
level playing field. For e-commerce services, there is an
exemption, but for products being sold through e-commerce
sites, there is none and the supplier needs GST registration,
he said.
• “We urge the government to do away with this mandatory
registration requirement (for e-commerce platform selling
products) for the level-playing field with offline space as
well as with services e-commerce. Such measures also
discourage artisans, tiny businesses, small retailers, etc,
to sell through e-commerce platforms,” he said.
• Abhishek Jain, partner at EY, said this exemption should
be expanded to products as well. Since there is no
requirement for registration for those selling offline products,
e-commerce players are put at a disadvantageous position,
he said.
GST CORNER
articles of silver and platinum very soon,” Agrawal added.
• He also said that the upfront payment of IGST and import
duty in the form of bank guarantee had led to the huge
working capital blockage for various small and medium
jewellery exporters. In addition, it increased interest cost as
well as hassles of compliance to claim refund, consequently
impacting their business operations.
• After implementation of the GST and the levy of 3 per
cent IGST on gold, industry had requested for the
exemption on supply of gold by nominated agencies to
exporters. Thereafter, the government, in October 2017,
had exempted specified banks and public sector units
(nominated agencies) from payment of IGST on import of
gold, but the same had not benefitted jewellery exporters
as they still had to bear the upfront payment of IGST/GST
and the basic import duty to the tune of 10 per cent on
procurement of gold.
• GJEPC has also urged the government to consider relief on
inverted duty structure and blockage of input tax credit.

12. Jewellery exporters welcome govt. move to exempt gold
import from IGST
• Jewellery exporters have welcomed the government’s
decision to exempt 3 per cent of integrated goods and
services tax (IGST) on gold sourced from nominated
agencies, effective January 1.
• “We commend the government’s decision on 3 per cent
IGST exemption on gold sourced from nominated agencies,”
said Pramod Kumar Agrawal, chairman of Gem & Jewellery
Export Promotion Council. The GST Council felt the need to
exempt intra-state supply of gold by nominated agencies, in
public interest under the scheme for ‘export against supply
by nominated agency’.
• “We are also expecting a similar relief to the exporters of
13. Another round of GST rate cuts? Council to meet on
January 10
• The GST Council, set to meet on January 10, will decide
on bringing under-construction residential properties to
5 percent slab, raising the threshold limit for MSMEs and
bringing small service suppliers under the composition
scheme.
• There are heightened expectations that the Council could
decide another round of rate cuts including on products like
cement with the industry arguing that the product is a critical
construction material and needs to be taxed at a lower 18
percent from the current 28 percent.
• “The GST (Goods and Services Tax) Council will meet on
January 10 in New Delhi,” said a government official.

Secretariat Audit under SEBI LODR Regulations

C onsidering the significance of Secretarial Audit as a self regulatory regime, Securities and
Exchange Board of India has already provided for the mandatory secretarial audit for listed
and unlisted companies above a threshold. In the recent move, the Securities and Exchange
Board of India has mandated secretarial audit for all listed companies and “material unlisted”
subsidiaries of such companies. This has been done under the SEBI (Listing Obligations and
Disclosure Requirements) (Amendment) Regulations, 2018 with an objective of strengthening
group oversight and improving compliance at group level. In addition, SEBI has also recognised
the significant role played by a Company Secretary as a Governance Professional under the
SEBI Listing Regulations.

This recent expansion of Secretarial Audit conducted by the Company Secretary in Practice is
expected to pave the way for a more effective Corporate Governance Framework and enhanced
No. of Pgs. 114 compliance level in listed entities as well as their material unlisted entities in India.
Price: Rs. 200/- In this direction the Institute as part of its capacity building initiatives for members has brought
(excluding postage) out the publication titled, ‘Secretariat Audit under SEBI LODR Regulations’ for briefing the basics
and necessary compliances under Secretarial Audit.
First Edition: January, 2019
Hard copies of the Referencer may be obtained from all the cash counters of the Institute
located at its Regional and Chapter Offices. For obtaining the same by post, please write to
storeservices@icsi.edu

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 CORPORATE GOVERNANCE CORNER
CG CORNER
Developments – December, 2018
UK: BEIS publishes updated guidance for the Companies (Miscellaneous Reporting) Regulations 2018
T he Department for Business, Energy and Industrial
Strategy has published updated guidance concerning
the Companies (Miscellaneous Reporting) Regulations 2018.
The Regulations contain several new reporting obligations for
companies to include new content in their annual reports. A
summary of these obligations is as follows:
• Large companies are required to include a statement as part
of their strategic report describing how the directors have had
regard to the matters in section 172(1)(a) to (f) of the Companies
Act 2006. Section 172 (1) mentions about the duty of directors to
promote the success of the company
• Companies with more than 250 UK employees are required to
include a statement as part of their directors’ report summarising
how the directors have engaged with employees, how they have
had regard to employee interests and the effect of that regard,
including on the principal decisions taken by the company in the
financial year.
• Large companies are required to include a statement as part
of their directors’ report summarising how the directors have
had regard to the need to foster the company’s business
relationships with suppliers, customers and others, and the
effect of that regard, including on the principal decisions taken
by the company during the financial year.
• Very large private and public unlisted companies are required to
include a statement as part of their directors’ report stating which
corporate governance code, if any, has been applied and how.
APPOINTMENTS
SREE SATYANARAYANA SPINNING MILLS LTD.
(A 50000 Spindle Spinning Mill)
Tanuku-534215 , W.G.Dt., A.P
Requires
Company Secretary
The candidate should be a qualified
Company Secretary with minimum 5
years experience in a company preferably
having exposure also in Finance, and
Administration.
The appointment is on contract basis
for a period of two years which may be
extended for further period at mutually
agreed terms and conditions. Interested
candidates can email their CVs to:
sssmills.tanuku@gmail.com
138
• Quoted companies with more than 250 UK employees are
required to publish, as part of their directors’ remuneration report,
the ratio of their CEO’s total remuneration to the median (50th),
25th and 75th percentile full-time equivalent remuneration of
their UK employees.
• All quoted companies are required to illustrate, in the directors’
remuneration policy within their directors’ remuneration report,
the effect of future share price increases on executive pay
outcomes.
The new requirements apply to company reporting on financial
years starting on or after 1 January 2019. The first actual
reporting under the new regulations will therefore start in 2020.
The one exception is the requirement for companies to illustrate
the impact of share price increases on executive pay outcomes
which will apply to any new remuneration policies introduced
by companies on or after 1st January 2019. The Companies
(Miscellaneous Reporting) Regulations 2018 are available at:
http://www.legislation.gov.uk/uksi/2018/860/contents/made
For the purpose of understanding the impact of these Regulations
on the companies and stakeholders, the frequently asked questions
may be referred at:
https://assets.publishing.service.gov.uk/government/uploads/
system/uploads/attachment_data/file/755002/The_Companies__
Miscellaneous_Reporting__Regulations_2018_QA_-_Publication_
Version_2__1_.pdf
Certification from a Premier Institution established by Ministry of
Corporate Affairs, Government of India
Last date for registration: 10th February, 2019
(Limited Seats per Batch)
This Certificate Programme focuses upon the Corporate and Individual
Insolvency Process and introduces the concepts such as Insolvency and
Bankruptcy Regime in India, Authorities and Enforcement Mechanism
in IBC 2016, Corporate Insolvency Resolution Process (CIRP),
Liquidation Process, Insolvency Resolution & Bankruptcy for Individuals
& Partnership Firms and IBBI which would regulate a new genre of
Insolvency Professionals through Insolvency Professional Agencies.
• FOR WHOM: This certificate course would be useful to
professionals as CS, CA, CMA, Insolvency Professionals, Legal
Practitioners, creditors, academics and other related stakeholders
who are interested in pursuing this area in their professional life.
• Course delivery by way of Online Learning Management System
spread over 3 months (50+ Class Hours)
Contact:
Dr. Pyla Narayana Rao
Course Director, School of Corporate Law, IICA
Web: www.iica.in E-mail: pyla.nari@gmail.com
T: 0124-2640088/100 : Mob: 7042712183
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JANUARY 2019 CHARTERED SECRETARY
 Dear Professional Colleagues,

Subject: Registrations Open for Educational Course on

‘Valuation of Securities or Financial Assets’ at PUNE
We are pleased to inform you that the Classroom training of ICSI Registered Valuers Organisation
(ICSI RVO) Educational Course on ‘Valuation of Securities or Financial Assets’ has been
successfully completed at various cities.

In continuation of the above, ICSI RVO is planning to conduct Classroom training of its 50 hour
course for its next batch at PUNE:

Venue Dates
Pune Chapter of ICSI, The 50 hour course shall be
Shreyas Apartments Condominium, conducted as follows:
C.T.S. No 1654+1655, S. No. 50,
D.P. Road, Near to Badhai Sweets,   23rd January, 2019
Kothrud, Pune – 411038 to
Contact No. 020-25393229/25393227 31st January, 2019

Any individual willing to register for the Educational Course, which is a pre-requisite for appearing
in the IBBI examination, may fill-in the online application in the form available at the link below with
the requisite attachments:
http://www.icsirvo.in/Member/Login

After the successful submission of application, the payment link shall be sent to the candidates.

Enrolment Fee: Rs. 8,850 (Rs. 7,500 + GST @18%)

Educational Course Fee: Rs. 26,550 (Rs. 22,500 + GST @ 18%)

Educational course Fee (for members who have successfully completed the online Course on
Valuation conducted by ICSI): Rs.20,650/- (Rs.17,500 + GST @ 18%)

For more details, please visit the website www.icsirvo.in

Regards

CS Samir Raheja
CEO (Designate)

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CHARTERED SECRETARY JANUARY 2019 139
GLOBAL CONNECT

AN OVERVIEW OF THE DUBAI VISIT OF ICSI DELEGATION LED BY CS MAKARAND LELE,

PRESIDENT, ICSI VISITED ON JANUARY 5-7, 2019

I
nstitute while striving for academic and professional excellence of its key stakeholders, i.e., students and members, aims
to expand the opportunities for Governance Professionals in not just national territory but beyond as well. And for an
organisation setting best professional standards for the corporate and even for the promotion of national governance, it
becomes imperative that the Institute itself strives to meet the internationally set benchmarks.

ICSI delegation led by CS Makarand Lele, President, ICSI visited Dubai on January 5-7, 2019. During the visit delegation
met with followings:
1. H.E. Shri Navdeep Suri, Ambassador of India to UAE, Abu Dhabi
2. H.E. Shri Vipul, Consul General of India, Dubai
3. Mr. Vikrant Bhansali, Chief Representative - International Markets, Dubai International Financial Centre Authority (DIFC)
4. Dr. Lindsey McPherson, Director, Abu Dhabi Centre for Technical and Vocational Education and Training (ACTVET)
5. ICSI Member Meet

Meeting of ICSI delegation with H.E. Navdeep Suri, Meeting of ICSI delegation with H.E. Shri Vipul,
Ambassador of India to UAE, Abu Dhabi. Consul General of India, Dubai.

Meeting of ICSI delegation with Vikrant Bhansali, Meeting of ICSI delegation with Dr. Lindsey
Chief Representative - International Markets, Dubai McPherson, Director, Abu Dhabi Centre for Technical
International Financial Centre Authority (DIFC). and Vocational Education and Training (ACTVET).

CS Makarand Lele,
President, ICSI
addressing
the delegates at
ICSI President CS Makarand Lele with members at Dubai. Dubai.

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C C E R Gazettee Notification

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2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4]

IV 
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  
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 


[III]

THE INSTITUTE OF COMPANY SECRETARIES OF INDIA
NOTIFICATION
New Delhi, the 27th December, 2018
No. 3 of 2018.—Pursuant to Notification No. 1 of 2018 dated 10th September, 2018, the Election to
the 13th Council of the Institute of Company Secretaries of India was held in accordance with section 9(2)(a)
of the Company Secretaries Act, 1980 and the Company Secretaries (Election to the Council) Rules, 2006 on
14th and 15th December, 2018 at Delhi, Kolkata and Mumbai and on 14th December, 2018 at other places.
The following candidates have been declared elected to the Council (in the order elected) from the four
Regional Constituencies after the counting of votes held from 24th December, 2018 to 27th December,
2018:—
I Eastern India Regional Constituency
1. CS Khaitan Deepak Kumar (FCS-5615)
2. CS Murarka Siddhartha (FCS-7527)

II Northern India Regional Constituency

1. CS Pandey Ranjeet (FCS-5922)
2. CS Chawla Niraj Preet Singh (FCS-6987)
3. CS Gupta Manish (FCS-5123)
4. CS Chaudhary Vineet K. (FCS-5327)
5. CS Mehta Hitender Kumar (FCS-3946)

III Southern India Regional Constituency

1. CS Vummenthala Ahalada Rao (FCS 5019)
2. CS C. Ramasubramaniam (FCS-6125)
3. CS Rao Nagendra Dattathreya (FCS-5553)

IV Western India Regional Constituency

1. CS Garg Ashish (FCS 5181)
2. CS Deshpande Devendra Vasant (FCS 6099)
3. CS Balasubramanian Narasimhan (FCS 1303)
4. CS Soni Praveen (FCS 6495)
5. CS Patel Chetan Babaldas (FCS 5188)
Issued pursuant to Rule 36 of the Company Secretaries (Election to the Council) Rules, 2006.
ASHOK KUMAR DIXIT, Returning Officer & Officiating Secy.
[ADVT.-III/4/Exty./465/18]

Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064

ALOK Digitally signed

and Published by the Controller of Publications, Delhi-110054.
by ALOK KUMAR

KUMAR Date: 2018.12.28

17:33:30 +05'30'

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EIRC Gazettee Notification

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NIRC Gazettee Notification

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 NIRC Gazettee Notification
2 THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4]

THE INSTITUTE OF COMPANY SECRETARIES OF INDIA

NOTIFICATION
New Delhi, the 31st December, 2018
No. 6 of 2018.—Pursuant to Notification No.1 of 2018 dated 10th September, 2018 issued under the Company
Secretaries (Election to the Council) Rules, 2006 read with Section 23 of the Company Secretaries Act, 1980 and the
Company Secretaries Regulations, 1982, the elections for electing 12 members to the Northern India Regional Council
was held on 14th and 15th December, 2018 at Delhi and on 14th December, 2018 at other places. Following members
have been declared elected from Northern India Regional Constituency (in the order elected) after the counting of votes
held from 28th December, 2018 to 31st December, 2018:—
1. CS Pandey Suresh (FCS-7776)
2. CS Gupta Vimal Kumar (FCS-6582)
3. CS Harbola Himanshu (FCS-9357)
4. CS Shukla Vinay (FCS-4082)
5. CS Gupta Amit (FCS-5478)
6. CS Kohli Monika (Ms.) (FCS-5480)
7. CS Kumar Devender (FCS-9545)
8. CS Daga Susshil (FCS-9567)
9. CS Kalia Saurabh (FCS-7331)
10. CS Gupta Surya Kant (FCS-9250)
11. CS Gupta Bhupesh (FCS-4590)
12. CS Sarin Gurvinder Singh (FCS-4025)
Issued in accordance with Rule 36 of the Company Secretaries (Election to the Council) Rules, 2006.
ASHOK KUMAR DIXIT, Returning Officer & Officiating Secy.
[ADVT.-III/4/Exty./470/18]

Uploaded by Dte. of Printing at Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.
MANOJ Digitally signed by
MANOJ KUMAR
KUMAR VERMA
Date: 2018.12.31
VERMA 19:22:06 +05'30'

I
CHARTERED SECRETARY JANUARY 2019 155
SIRC Gazettee Notification

156 I
JANUARY 2019 CHARTERED SECRETARY
 SIRC Gazettee Notification

I
CHARTERED SECRETARY JANUARY 2019 157
 Suggestions/issues/queries are invited on the
new topics identified for
developing the Secretarial Standards/Guidance Notes

T he Secretarial Standards Board (SSB) of the Institute of Company Secretaries of India (ICSI) is
considering to bring out the Secretarial Standards/Guidance Notes on emerging topics of professional
and corporate interest.

In order to elicit all the prevailing issues and to start with the process, it is considered pertinent to obtain views of our
professional colleagues on the following topics identified for developing the Secretarial Standards/Guidance Notes:

(i) Preferential issue & Private Placement of Securities

(ii) Managerial Remuneration
(iii) Borrowing, Loans & Investments (including Registration, Modification and Satisfaction of Charges)
(iv) Corporate Social Responsibility
(v) Prevention of Insider Trading
(vi) Mergers, Acquisitions and Corporate Restructuring
(Including cross border mergers and reduction of capital)
(vii) Disqualification and Vacation of Directors (excluding resignations)
(viii) Indian and Global Best Practices on Governance

Accordingly, Members are requested to send their specific suggestions/issues/queries on the above
topics to the Secretariat of SSB at ssb@icsi.edu on or before 15th February, 2019, preferably under the
following heads:

• Grey areas in the law

• Contradictions between various provisions of the Act, Rules/Regulations and other applicable laws
• Multiple or diverse interpretations of law
• Best practices followed by the corporates
• Critical issues or special circumstances encountered by members
• Any other queries/doubts/issues on which the members feel that the guidance is necessary
• Any other information, members would like to bring to SSB to consider while drafting the Secretarial Standards/
Guidance Notes.

Members may also substantiate their suggestions with the judicial pronouncements, if any, which may
useful for the proposed Secretarial Standards/Guidance Notes.

Comments/suggestions received from the Members under the above stated categories will be considered by the SSB.

158 I
JANUARY 2019 CHARTERED SECRETARY
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