December 2014

Reference to BIFR of sickness will halt proceedings before the DRT
In a jolt to banks looking at speedy recovery, the Supreme Court, in a recent judgment in the case of KSL & Industries Ltd., vs Arihant Threads Ltd., & Ors., held that in the event of an industrial company filing reference before the Board for Industrial and Financial Reconstruction (“BIFR”) under the Sick Industrial Companies (Special Provisions) Act, 1985 (“SICA”), then till the reference is pending or unless permitted by the BIFR, Banks cannot proceed with recovery proceedings including an Original Application before the DRT under the Recovery of Debts Due to Banks & Financial Institutions Act, 1993 (“RDDB Act”).

Arbitrator can award interest on interest
The Supreme Court in a recent judgment in the case of Hyder Consulting (UK) Ltd., vs Governor, State of Orissa, has held that it is within the powers of an arbitral tribunal to grant interest from the date of its award not only on the sum that is found principally due by a party but also on the interest that is payable on such principal sum from the date on which cause of action arose till the date on which the award is made.

November 2014

Review of the policy on Foreign Direct Investment (“FDI”) in construction sector
The Union Cabinet has given its approval for amending the existing FDI policy on the construction development sector in line with the budget announcement of the government. Under the extant FDI policy, 100% FDI in construction development sector was permitted under the automatic route subject to several restrictions.

September 2014

Relaxation of norms for issuance of securities against various remittances
Under the current Foreign Direct Investment (‘FDI”) Policy, an Indian company, under the automatic route, may issue shares/convertible debentures to a person resident outside India, being a provider of technology/technical know-how, against royalty or lump-sum technical know-how fee, against External Commercial Borrowings (“ECB”) (other than import dues deemed as ECB or trade credit as per RBI guidelines) and against import of capital goods by units in Special Economic Zones, subject to certain conditions like entry route, sectoral cap, pricing guidelines and compliance with the applicable tax laws.

Daughters as coparceners – Has the judiciary finally figured out the 2005 amendment to the Hindu Succession Act?
The question for consideration before the full bench of the Bombay High Court in Shri Badrinarayan Shankar Bhandari & Ors. Vs. Omprakash Shankar Bhandari was whether the amendment to Section 6 of the Hindu Succession Act 1956 (“HSA”) was prospective or retrospective in its operation.

August 2014

Approval of SEBI (Real Estate Investment Trusts) Regulations, 2014
SEBI, in its board meeting dated August 10, 2014 has approved the draft regulations called SEBI (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”) first released on 10th October, 2013. These regulations provide a framework for registration and regulation for setting up and listing of Real Estate Investment Trusts (“REITs”) in India.

No Credit Card Transactions to be completed without additional authentication/validation
Previously, RBI had issued directives making it mandatory for banks to put in place additional authentication / validation based on information not visible on the cards for all on-line card not present (CNP) transactions. It was further clarified that the mandate shall apply to all transactions using cards issued in India for payments on merchant sites where no outflow of foreign exchange is contemplated. Also, it was stated that the linkage to an overseas website/payment gateway cannot be the basis for permitting relaxations from implementing the mandate.

Approval of SEBI (Infrastructure Investment Trusts) Regulations, 2014
SEBI, in its board meeting dated August 10, 2014 has approved the draft regulations called SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“InvIT Regulations”) released on July 17, 2014 following the 2014-15 budget announcement made by Finance Minister advocating establishment of such trusts. This move will provide a framework for registration and regulation for setting up and listing of Infrastructure Investment Trusts (“InvITs”) in India.

Cheque bounce complaints to now be filed only where the drawer’s bank is located
Dashrath Rupsingh Rathod v. State of Maharashtra & Anr.: This landmark decision of the three-judge bench of the Supreme Court delivered on August 1, 2014 has overturned the position of law laid down by the Apex body in K. Bhaskaran v. Sankaran Vaidhyan Balan (1999) 7 SCC 510 (“Bhaskaran”) which held the field for fifteen years. The effect of this judgement is to now restrict cheque bouncing complaints only to jurisdictions where the drawer’s bank is located. Under the Bhaskaran regime, the complaint could be filed in any of the courts where any of the 5 ingredients of the offence under Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”) occurred that is, (a) drawing of a cheque, (b) presentation to the bank, (c) returning the cheque unpaid to the drawee bank, (d) giving notice to the drawer demanding payment and (e) finally failure to make payment within the stipulated period of 30 days from giving notice.

PENDENCY OF CRIMINAL PROCEEDINGS - NO BAR TO ARBITRATION
The Supreme Court in its recent judgment in Swiss Timing Limited v. Commonwealth Games 2010 Organising Committee., (2014) 6 SCC 677, has held that it is mandatory for courts to refer disputes to arbitration, if the agreement between parties provides for reference to arbitration. Mere registration of criminal case in relation to the agreement concerned on grounds such as fraud, corruption or collusion against members of both parties, is not an absolute bar to refer the disputes to arbitration. It has been held that to shut out the arbitration at the initial stage itself would destroy the very purpose for which the parties had entered into arbitration and that there is no inherent risk of prejudice to any of the parties in permitting the criminal proceedings to simultaneously proceed with the arbitration.

July 2014

Recent Supreme Court Judgment – A Shot in the Arm for Banks to take possession of Secured Assets Occupied by Tenants
A recent judgment of the Supreme Court in Harsh Govardhan Sondagar v. International Assets Reconstruction Company Ltd., (2014) 6 SCC 1, has provided a shot in the arm to the Banks towards facilitating speedy recovery of their dues by paving way for the Banks to secure quick vacant possession of the property even by evicting certain kinds of Tenants of the Borrower

FDI Reforms: Pricing for transfers/exits
We had discussed in our previous alert, how the government has relaxed pricing norms for issuance of shares, warrants and partly paid shares. RBI has now also issued a circular to all Category I Authorized Dealer Banks dated July 15, 2014 with respect to pricing for transfer of shares involving foreign investment

FDI REFORMS: RELAXED PRICING FOR WARRANTS AND PARTLY PAID SHARES
In an attempt to further liberalize the foreign investment regime in India, the Reserve Bank of India (“RBI”) has amended the Foreign Exchange Management (Transfer or issue of Security by a Person Resident Outside India) Regulations, 2000 by way of a notification published on July 8, 2014 read with notifications dated May 23, 2014 and July 14, 2014