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Legalities in Business Final Sem 1
Legalities in Business Final Sem 1
APOORV DANDONA
PROBLEM STATEMENT 1
Newgen Scaffoldings is a supplier of scaffoldings, formworks etc to its
customers. Newgen Scaffoldings supplied few scaffoldings for a period of 2
years to Highway Construction Limited. The machine was supposed to be
used at one of the construction sites of Highway Construction Limited.
Newgen Scaffoldings raises quarterly invoices for entire two period. Highway
Construction Limited did not pay any of the invoices and the total unpaid
money at the end of two years is INR 1 Crore.
Based on this answer the following questions
QUESTION 1
A) Discuss the applicable provisions of Insolvency and Bankruptcy Code,2016
According to the Insolvency and bankruptcy code 2016, under section 9, an operational
creditor (Newgen Scaffoldings) can itself initiate the insolvency resolution process.
DEFAULT- Highway construction limited failed to pay the invoices which summed up to
rupees 1cr at the end of 2 years.
3. Moratorium and public announcement - the moratorium will restrict the following
actions –
I The commencement of any legal actions against the corporate debtor i.e Newgen
Scaffoldings
II Assets’ Transfer
III the execution of a security interest
IV the repossession of property as an owner
NOTE- Within three days of appointment of the IRP , the IRP must make a public
announcement in form A . it must be published in –
• in one English and one regional language newspaper with wide circulation at the
registered
office and principal office location.
• on the website of corporate debtor
• on the website chosen by the Board for the matter
4. Analysis and verification of claims – THE IRP examines the claims put forward by the
various type of debtors be it financial, operational or any other creditor
6. Acceptance of resolution plan – the creditors must approve a resolution plan within
180 days of the start of CIRP. The resolution professional must ensure that the
resolution plan complies with the insolvency and bankruptcy code 2016 .
Sections 7 and 9 empower operational creditors to initiate the insolvency resolution process
for a company if the outstanding amount exceeds one lakh rupees. Given that Newgen
Scaffoldings is owed INR 1 crore, this surpasses the stipulated threshold by a substantial
margin.
Section 10 confers upon companies the authority to commence the insolvency resolution
process under specific circumstances. This option may become pertinent if Highway
Construction Limited is grappling with financial challenges and deems insolvency as a viable
solution.
B) Do you think that Newgen Scaffoldings is an operational debtor? if yes then list down
the steps that are required to be taken by Newgen scaffoldings before approaching
the NCLT.
ANSWER
Operational Creditors are those whose liability from the entity comes from a
transaction on operations. According to the information given to us, Newgen
Scaffoldings will be an operational creditor as they provided Highway Construction
limited with 1 crore worth of scaffolding. Accordingly there is an unpaid operational
debt worth 1cr as well.
If Highway Construction Limited discloses an email within the initial year, alleging concerns
with scaffolding and inactivity, it adds layers of complexity to Newgen Scaffolding's case at
the National Company Law Tribunal (NCLT). The following key aspects should be taken into
account:
1. Establish faultiness –
HCL needs robust evidence beyond the email, such as technical inspections or expert
assessments, to substantiate their claim.
NGS should counter with their own proof, such as delivery records and communication
regarding maintenance during the rental period.
2. Impact on Usage and Rental Duration –
HCL must demonstrate how the purported issues significantly impacted the use of
the scaffolding.
If NGS can prove that the equipment was available and functional throughout the
agreed rental period, HCL's claim may carry less weight.
3. Communication and Contractual Terms –
The tone of the email is crucial. Did HCL promptly notify NGS about the issues and seek
repairs?
Contract clauses pertaining to maintenance, fault reporting, and dispute resolution will
be taken into consideration.
4. NCLT's Final Verdict -
NCLT examines the presented evidence and arguments, possibly appointing experts for
evaluation.
Possible outcomes include upholding NGS's claim, adjusting the debt based on non-
usability, dismissing the claim, or recommending arbitration.
5. Potential Legal Entanglements –
If NGS's claim is dismissed, legal recourse might be contemplated based on
misrepresentation or breach of contract.
In conclusion, although the email introduces complications, the ultimate resolution of
the case hinges on the quality of evidence, contractual terms, and the NCLT's
interpretation.
PROBLEM STATEMENT 2
FinTech Loans Private Limited, a financial institution, provided a substantial loan to UDC
Limited for a large-scale infrastructure project. The loan term was five years with
quarterly repayments. UDC Limited failed to make the repayments from the third quarter
onward, accumulating a total unpaid amount of INR 5 Crores by the end of the loan term.
QUESTION 2
Discuss the relevant provisions of the Insolvency and Bankruptcy Code, 2016, that FinTech
Loans Private Limited can rely on to initiate the Corporate Insolvency Resolution Process
(CIRP) against UDC Limited What conditions need to be satisfied for the initiation of CIRP
in this scenario?
ANSWER 2.
In the described situation, FinTech Loans Private Limited, functioning as a financial
institution, may contemplate initiating the Corporate Insolvency Resolution Process (CIRP)
against UDC Limited in accordance with the provisions of the Insolvency and Bankruptcy
Code, 2016 (IBC). The following details the pertinent clauses and prerequisites upon which
FinTech Loans Private Limited can depend:
Financial Creditor and Default (Section 7):
As a financial creditor, FinTech Loans Private Limited has the authority to instigate the CIRP
by submitting an application under Section 7 of the IBC. The application should substantiate
UDC Limited's default in repayment, evident from the third quarter onward, resulting in a
cumulative outstanding amount of INR 5 Crores by the conclusion of the loan term.
Minimum Amount of Default:
Section 4 of the IBC establishes a minimum threshold for triggering the CIRP. The
outstanding sum of INR 5 Crores surpasses this threshold, rendering FinTech Loans Private
Limited eligible to proceed with the application.
Conditions for Initiating CIRP:
The default by UDC Limited must pertain to a debt owed to a financial creditor. The default
amount should equal or exceed the stipulated minimum threshold as per the IBC.
Additionally, the financial creditor is obliged to issue a demand notice to the corporate
debtor, affording a ten-day window for repayment.
Application to Adjudicating Authority:
FinTech Loans Private Limited is required to submit the application for the initiation of CIRP
to the National Company Law Tribunal (NCLT), serving as the adjudicating authority under
the IBC.
Appointment of Insolvency Professional:
Upon acceptance of the application by the NCLT, an insolvency professional will be
designated to oversee the affairs of UDC Limited throughout the resolution process.
Corporate Insolvency Resolution Process (CIRP) Timeline:
The CIRP adheres to a predefined timeline, necessitating the completion of the resolution
process within 180 days, extendable by an additional 90 days in extraordinary
circumstances.
Resolution Plan or Liquidation:
The primary aim of CIRP is to formulate a resolution plan. Should a feasible resolution
remain unattainable within the specified timeframe, the company might proceed towards
liquidation.
In conclusion, FinTech Loans Private Limited can draw upon Section 7 of the IBC, considering
UDC Limited's repayment default, and must fulfill the stipulated conditions in the Code for
the initiation of the Corporate Insolvency Resolution Process.
PROBLEM STATEMENT 3 (information)
The tussle between Google and Competition Commission of India (CCI) has been going on
for quite some time. It started with a complaint against google before CCI and CCI fined
Google a large sum for abuse of dominance. Google approached NCLAT which also upheld
the CCI’s decision. Google finally filed appeal before the Hon’ble Supreme Court of India 3
QUESTION 3
A) Research about the google case and write all the alligations made against google in
brief
ANSWER.
The Competition Commission of India (CCI) scrutinized Google for alleged unfair
practices within the Indian mobile operating system market, which is predominantly
dominated by Android. The primary allegations are as follows:
1. Forcing google play services:
Google is accused of compelling manufacturers not only to install the Android OS but
also the entire suite of Google Play Services (GPS), including the Play Store and
various Google applications. This alleged practice facilitated the prominence of
Google's apps while disadvantaging others, thereby restricting competition.
2. Favouring own apps in play store:
Accusations were levelled against Google for exhibiting preferential treatment to its
own apps in the Play Store. This purportedly created challenges for other apps to
gain visibility and downloads, potentially impeding the introduction of new ideas and
choices for users.
3. Limit on other payment methods
Google is alleged to have restricted developers from utilizing alternative payment
methods, such as UPI, for in-app purchases within the Play Store. Developers were
reportedly compelled to use Google's proprietary system, leading to increased
revenue for Google and impacting other payment platforms.
4. Possibly unfair agreements:
There are indications that the CCI is exploring potential agreements between Google
and smartphone manufacturers. Manufacturers may have been encouraged to
prioritize Google services like Search and Chrome, raising concerns about fairness.
In summary, the accusations imply that Google, with its significant presence in the
mobile operating system market, may be stifling competition and exhibiting bias
toward its own services. This alleged behavior could have adverse effects on both
developers and users by limiting choices and stifling innovation.
B) Discuss the legal provisions of Indian Competition Act, 2002 involved in the Google
Case.
ANSWER:
1. Section 4 ( RESTRICTION OF ANTI COMPETETIVE AGREEMENTS )
This segment prohibits agreements that could undermine fair competition in India.
The Competition Commission of India (CCI) investigated Google's actions, such as
mandating GPS apps and restricting payment options, which may provide Google
with an advantage and impede fair competition.
2. Abuse of dominant position
This provision prevents large companies from utilizing their influence unfairly. The
CCI is concerned that Google's significant role in the Android OS market and its
favouritism towards its own apps may violate these regulations.
3. Section 3 (Regulation of Agreements Limiting Competition)
This section addresses agreements between different companies that could restrict
competition. The CCI has the authority to scrutinize and prevent such deals if they
are deemed detrimental to competition. If proven, Google's agreements with phone
makers to promote its own services could potentially fall under this category.
4. Section 27 (Imposition of Penalties for Violations)
This provision empowers the CCI to penalize companies that violate the rules.
Google faced a substantial fine under this section.
5. Section 48 (Authority to Investigate Markets)
This section grants the CCI the authority to examine markets and gather information
for investigations. It is likely that this provision was utilized in the case involving
Google.
C) In your opinion, has Competition Commission of India correctly levied huge penalty
on Google or CCI erroneously deemed a normal business practise as anti-
competitive?
ANSWER:
Should the CCI's ruling be accepted, it has the potential to foster increased
openness and competition within the digital market in India. This would enable
developers to establish direct connections with users and generate revenue from
their applications, fostering the emergence of new and varied app experiences.
This outcome is advantageous for users as it broadens their choices and could even
lead to potential reductions in app prices.
The implications of this case extend beyond the borders of India; it could have a
substantial global impact. A decisive stance by the CCI might serve as a directive
to major tech companies worldwide, urging them to adopt greater transparency and
fairness in their dealings with smaller players and users. This shift could contribute
to creating a more equitable and competitive global digital landscape.
Should the CCI's decision curtail Google's dominance over the Android
ecosystem, it could empower Indian users. This empowerment might manifest in
an expanded array of options for app stores, payment methods, and default apps,
granting users more control over their digital experiences. Additionally, this could
potentially enhance data privacy and security measures.