SFIO, 2003

Happy Independence Day!

Wish you a Happy Independence Day! While digging Companies Act, 2013, we came across few rules that were not spoken much into the market and thought of discussing it in this edition. We will be discussing in detail about Serious Fraud Investigation Office (SFIO) which is an organization that deals with Corporate Fraud.

As usual, our Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST will follow the article. Come lets see what SFIO says about.

Saranya Deivasigamani,
CEO

SFIO, 2003

We know that the Companies Act 2013, guarantees several rights to investors and also regulates the affairs of a company with a view to ensure efficient functioning of a company so that investors may receive their due returns of the capital invested by them and their rights and interests are adequately protected. We also know that the Investors are the real owners of a company but the power of management of the company is vested in the Board of Directors. Now, the Ministry of Corporate Affairs came forward will set up two committees to look at possible withdrawal of court cases related to investor protection pending for 10 years or more. There are chances to abuse of power like committing fraud, by few directors of the company. As we know that there is close nexus between corporate governance and ethics but conflicts between these two are also bound to occur. Corporate fraud, an inevitable incident occurring, in recent, is an aggravated form of corruption in corporate world. It is difficult to prevent and to catch such white collar crimes. Such incidents reduce the interest and trust in corporate investments and in turn reduce the confidence on the government. The Companies Act empowers the Central Government with the right to investigate the affairs of the company, especially in cases of an alleged fraud or even in the oppression of the minority shareholders. The Central Government is empowered to appoint inspectors to investigate either on its own if it is of the opinion that such investigation is required on the report of the Registrar or Inspector under section 208 or in public interest or on the request of the company on the basis of a special resolution or on the Direction of the court/tribunal or from such members of the company having requisite number of shares as specified in section 213 of the Companies Act, 2013. The Central Government has also set up the Serious Fraud Investigation Office (SFIO) in the ministry of corporate affairs, a specialized, multi-disciplinary organization to deal with serious cases of corporate fraud. This was also a major recommendation made by the Naresh Chandra Committee which was set up by the government on 21 August 2002 on corporate governance. Headquarters of this office is located in New Delhi, with field offices located in major cities throughout India. The SFIO is headed by a director not below the rank of a Joint Secretary to the Government of India having knowledge and experience in dealing with the matters relating to corporate affairs and also consist of experts from various disciplines. This will, certainly protect the investor’s interest and will also bring back the confidence of investors in Indian capital market. The Serious Fraud Investigation Office (SFIO) is a fraud investigating agency in India. It is under the jurisdiction of the Ministry of Corporate Affairs, Government of India. The SFIO is involved in major fraud probes and is the coordinating agency with the Income Tax and CBI. Asserting that the country’s capital market was in a healthy condition, the minister told the Lok Sabha that various agencies, including the Serious Fraud Investigation Office (SFIO), are working to curb the black money menace. The Serious Fraud Investigation Office (SFIO) is aiming to deploy an early warning system (EWS) by 2018 to facilitate advance detection of frauds by corporate entities.

Process of Investigation

An investigation into the affairs of a company can be initiated by the Central Government and entrusted to the Serious Fraud Investigation Office under the following circumstances:-

1. As per Section 212 (1) of the Companies Act, 2013, the Central Govt. may assign the investigation into the affairs of a company to the Serious Fraud Investigation Office –

a. On receipt of report of the Registrar or Inspector under section 208;

b. On intimation of a special resolution passed by a company requesting an investigation into its affairs;

c. In public interest;

d. On the request of any Department of Central Government or State Government.

On receipt of such order from the Government, Director, SFIO may designate such number of Inspectors as he may consider necessary for the purpose of such investigation.

2. As per sub-section (3) of section 212 of Companies Act, 2013, the investigation into the affairs of a company shall be conducted in the manner and by following the procedure specified in Chapter XIV of Companies Act, 2013. The SFIO shall submit its report to the Central Government within the period specified in the order.

3. As per sub-section (4) of section 212 of Companies Act, 2013, the Director SFIO shall cause the affairs of the company to be investigated by an investigating officer, who shall have the powers of the Inspector under section 217 of the Companies Act, 2013.

4. As per sub-section (5) of section 212 of Companies Act, 2013, it shall be the responsibility of the company, its officers and employees, who are or have been in the employment of the company to provide all information, explanation, documents and assistance to the investigating officer as he may require for conduct of business.

5. As per sub-section (11) of section 212 of Companies Act, 2013, the Serious Fraud Investigation shall submit an interim report, if so directed by the Central Government.

6. As per sub-section (12) of section 212 of Companies Act, 2013, on completion of investigation, the SFIO shall submit the Investigation Report to the Central Government.

The SFIO will only deal with investigation of corporate frauds characterized by:

Complexity and having inter- departmental and multi-disciplinary ramifications.
Substantial involvement of public interest in terms of monetary misappropriation or in terms of number of persons affected and
The possibility of investigations leading to or contributing towards a clear improvement in systems, law of procedure.

SFIO Experts

SFIO comprises experts from various relevant disciplines including law, banking, corporate affairs, taxation, capital market, information technology, forensic audit etc. Where an investigation is ordered by the Central Government in pursuance of clause (b) of sub-section (1) of section 210, or in pursuance of an order made by the Tribunal under section 213, the Central Government may before appointing an inspector under subsection (3) of section 210 or clause (b) of section 213, require the applicant to give such security not exceeding twenty-five thousand rupees as may be prescribed, as it may think fit, for payment of the costs and expenses of the investigation and such security shall be refunded to the applicant if the investigation results in prosecution.

The number of Prosecution Cases filed by SFIO in various designated Courts and Forums as on 15.03.2017 are as under:

S.No.	Details of Cases filed	Number of Cases
1	Cases filed before designated Court	1138
2	Cases filed before ICAI/ICSI or other forums	79
3	Cases filed before NCLT	20
	Total	1237

The number of Conviction, Acquittal and disposed off cases on technical ground cases as on 15.03.2017 are as under:

S.No.	Particulars	Number of Cases
1	Total number of successful Conviction (Criminal Court / ICAI/ICSI/NCLT)	92
2	Total number of acquittal cases (Criminal Court / ICAI/ICSI/NCLT)	45

Power of SFIO to arrest the accused

Director, Additional Director or Assistant Director of SFIO, if authorized by Central Government by general or special law, may arrest such person, who is found guilty of cases of fraud as mentioned above. Every person arrested shall, as soon as possible, be intimated the ground of arrest and within twenty-four hours, be taken to a Judicial Magistrate or a Metropolitan Magistrate, as the case may be, having jurisdiction; provided that the period of twenty-four hours shall be excluded the time necessary for the journey from the place of arrest to the Magistrate’s court. A person, who, is under the age of sixteen years or is a woman or is sick or infirm, may be released on bail, if the Special Court so directs.

Submission of Investigation Report by SFIO

Submission of Interim Investigation Report- The Central Government if so directs, the SFIO will submit an interim report to the Central Government within stipulated time. This report may contain the preliminary findings related with seriousness, wrongdoers of the fraud etc.

of final Investigation Report- SFIO shall submit the detail and final investigation report, on completion of the investigation to the Central Government. A copy of the investigation report may be obtained by any person concerned by making an application in this regard to the court. On receipt of the investigation report, the Central Government will, after examination of the report (and after taking such legal advice, as it may think fit), may direct the SFIO to initiate prosecution against the company and its officers or employees. The investigation report filed with the Special Court for framing of charges shall be deemed to be a report filed by a police officer under section 173 of the Code of Criminal Procedure, 1973. In case SFIO has been investigating any offence under this Act, any other investigating agency, State Government, police authority, income-tax authorities having any information or documents in respect of such offence shall provide all such information or documents available with it to the SFIO.

The SFIO will also share any information or documents available with it, with any investigating agency, State Government, police authority or income tax authorities, which may be relevant or useful for such investigating agency, State Government, police authority or income-tax authorities in respect of any offence or matter being investigated or examined by it under any other law.

Eligibility criteria to become a consultant at SFIO:

Educational qualification:

Consultant in the Field of Law (Advocates): Advocate with minimum 4 years’ experience at the bar in the relevant field.

To draft complaints, petitions, replies, rejoinders, affidavits and other legal documents to be filed before various Hon’ble courts.
To appear before benches of the Hon’ble Company Law Board and if required in the District and subordinate courts in various states throughout India.
To give expert opinion regarding filing of appeals in cases decided against SFIO.
To keep SFIO informed about all the developments of each hearing and timely make available copies of judgements.

Consultant in the field of Financial Analysis: The candidates should possess a Chartered Accountant (CA)/ Cost and Works Accountant (CWA)/Company Secretariat (CS) degree with minimum 3 years’ experience in the relevant field.

The consultants engaged in the field of Financial Analysis would be required to perform following functions:-

To critically analyses the data stored with SFIO of the companies.
To critically analyses the data available in MCA 21 database in relation to relevant provisions and pronouncements.
To critically analyses the corporate announcements made by the listed companies.
To study financial reports of the companies under investigation and make complex financial analysis.
To assist investigation teams in forensic audit, examination/scrutiny of board minutes, directors reports and other schedules and documents.
Any other relevant work assigned by the SFIO.

Consultant in other fields (Banking/ Law): The candidates should possess a post graduate degree in the relevant field or subject with minimum 5 years’ experience.

It is concluded that SFIO is performing well to find out the corporate frauds, during recent time which reflects the good corporate governance in our country and certainly protect the investor’s interest and will also bring back the confidence of investors in Indian capital market.

Legal Term

Praecipe

An original writ, one of the forms of legal process used to commence an action.

MCA Updates

Companies (Incorporation) Second Amendment rules, 2017.
Companies(Meetings of Board and its Powers) Second Amendment Rules 2017,

SEBI Updates

Securities and Exchange Board of India (International Financial Services Centres) Guidelines, 2015-Liquidity Enhancement Scheme.
Online Registration Mechanism for Custodian of Securities.
Disclosures by listed entities of defaults on payment of interest/ repayment of principal amount on loans from banks / financial institutions, debt securities, etc.
Online Filing System for Alternative Investment Funds
Online Filing System for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
Position Limits for Agricultural Commodity Derivatives .
Investments by FPIs in Corporate Debt .
Disclosure of divergence in the asset classification and provisioning by banks .

RBI Updates

No major Notifications.

Income Tax Updates

Clarifications on computation of book profit for the purposes of levy of Minimum Alternate Tax (MAT) under section 115JB of the Income-tax Act, 1961 for Indian Accounting Standards (Ind AS) compliant companies.
Section 9A (3) of the Income-tax Act, 1961 in respect of Fund Manager Regime -reg.
Clarifications on computation of book profit for the purposes of levy of Minimum Alternate Tax (MAT) under section 115JB of the Income-tax Act, 1961 for Indian Accounting Standards (Ind AS) compliant companies.

GST Updates

Related to Letter of Undertaking in place of a bond for export without payment of integrated tax .
Modes of verification under CGST Rules 2017 .

RERA, 2016

Crazy About Laws

Every business person and professional in India going crazy about migration and new registration of all Indirect Taxes to GST. Do not worry, we are not going to pick up any topic about GST which you hear from everywhere for this month’s article. Instead we will be adding GST Notifications section under NewBites. In this article, we will be discussing about the Real Estate Regulation & Development Act (RERA), 2016 where the property owners, promoters and real estate agents are going crazy since its inception. We are discussing in detail about the contribution of CA, CS, CMA in RERA Act. Along with the article, our Legal terms and News Bites related to notifications by MCA, SEBI, RBI, IT and GST follows.

Saranya Deivasigamani,
CEO

RERA, 2016

The Real Estate Regulation & Development Act (RERA), 2016 is a defining moment in the Indian real estate sector which was passed by parliament last year and the Union Ministry of Housing and Urban Poverty Alleviation had given time till May 1, 2017, to formulate and notify rules for the functioning of the regulator. To regulate the real estate sector, the government has come up with the idea of Real Estate Regulatory Authority (RERA) Bill which is expected to help buyers. Although RERA is a central law, its implementation will depend on state governments, as real estate is a state subject. Under RERA, each state will have to setup regulatory bodies as appellate tribunals to solve the disputes between buyer and builder within 120 days. RERA is supposed to protect the interest of the homebuyer and ensure timely delivery of projects. RERA seeks to bring clarity and fair practices that would protect the interests of buyers and also impose penalties on errant builders. It will bring in a systematic approach and enhance transparency, which will aid growth of the sector. To the buyers, it safeguards their interests: brings transparency, ensures accountability and timely completion of projects. From an industry perspective, it will increase credibility in the long term, leading to higher domestic and foreign investments.

Within 1 year of notification of act, appropriate Govt. to create RERA and HRAAT to dispose all cases and transfer to RERA max by 6 months. After the establishment of the Regulatory Authority, all applications, complaints or cases pending with the Regulatory Authority designated, shall stand transferred. Authority is to consist of a Chairperson and not less than two whole time members, appointed by the Government.

According to RERA, each state and Union territory will have its own regulator and set of rules to govern the functioning of the regulator. Under the Real Estate (Regulation and Development) Act all developers with ongoing projects must apply to the regulatory authority to register them, within a specified period. Once registered, they must upload project details on the RERA website and provide updates on construction progress as well as commencement, occupation and other certificates required before flats are handed over to buyers.

Promoter to maintain escrow account for each project separately with 70% of money from investors and buyers be deposited. The escrow money can only be used for the construction of the project and the cost borne towards the land. RERA requires builders to submit the original approved plans for their ongoing projects and the alterations that they made later. They also have to furnish details of revenue collected from allottees, how the funds were utilised, and the timeline for construction, completion, and delivery that will need to be certified by an Engineer/Architect/Practicing Chartered Accountant. The buyer has to make the required payments as per the agreement signed with the promoter. If there is a delay in payment, then the buyer will be liable to pay interest for the delayed period.

PURPOSE OF THE ACT

To establish the Real Estate Regulatory Authority for regulation and promotion of the real estate sector.
To ensure sale of plot, apartment or building, as the case may be, or sale of real estate project, in an efficient and transparent manner.
To protect the interest of consumers in the real estate sector and to establish an adjudicating mechanism for speedy dispute redressal.
To establish the Appellate Tribunal to hear appeals from the decisions, directions or orders of the Real Estate Regulatory Authority and the adjudicating officer and for matters connected therewith or incidental thereto.

SCOPE OF THE ACT

The Act applies to all apartments, plots and buildings whether residential or commercial. The Real Estate Project as defined in the Act, states that it shall include:

Development of buildings;
Development of buildings consisting of apartments;
Converting existing buildings or part thereof into apartments (e.g.:- converting a bungalow or hotel into apartment);
Development of land into plots or apartments for the purpose of selling all or some of the said apartments or plots or buildings.

Thus, it is pertinent to note that the Act is wide enough to cover within its scope development of land for buildings, apartments as well as plots. Further, the Act covers not only residential projects but also commercial projects.

ENCLOSURES WITH APPLICATION FOR REGISTRATION

All real estate projects are required to be registered by the Promoter with RERA. Undertaking Marketing/sale with respect to a real estate project will not be permissible for promoters till necessary registration has been obtained under RERA.

UNDER THE DRAFT RULES:

Pan card
Audited Balance Sheet of preceding Financial year
Income tax return of preceding 3 years
Number of open parking areas
Development Agreement/ Collaboration
Agreement/ Joint Development Agreement

Application will be rejected only after giving opportunity of hearing. The Registration, if granted, will be valid UNTIL THE PERIOD OF COMPLETION of the project as committed by the promoter to the Regulatory Authority. This period shall be extended by the RERA is delay is attributable.

PENALTIES

If a promoter fails to register the property, he has to pay up to 10% of the estimated cost of the project as a penalty.
Failure to register the property despite orders issued by RERA will attract imprisonment up to 3 years and or an additional fine of 10% of the estimated cost of the project.
If a promoter violates any other provision he has to pay up to 5% of the estimated cost of the project.
Real estate agents have to pay a fine of 10,000 for each day for the violation of provisions of the act.

EXEMPTIONS FROM REGISTRATION

Area of proposed land to be developed does not exceed 500 sq. mts. or no. of apartments does not exceed 8 inclusive of all phases.Where the promoter has received completion certificate for a real estate project prior to commencement of this Act.

In case of renovation or repair or re-development which does not involve marketing, advertising selling or new allotment of any apartment, plot or building, as the case may be.

RIGHT TO LEGAL REPRESENTATION

Before the RERA, Adjudicating Authority and Appellate Tribunal the Applicant or Appellant may either appear in person or authorize one or more Chartered Accountants or Company Secretaries or Cost Accountants or legal practitioners to present his or its case.

ROLE OF CHARTERED ACCOUNTANT

Amounts from the separate account maintained for deposit of amounts received from allottees shall be withdrawn by the promoter after it is certified by an engineer, an architect and chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project.

The promoter shall get his accounts audited within six months after the end of every financial year by a chartered accountant in practice, and shall produce a statement of accounts duly certified and signed by such CA. During the audit it shall be verified that the amounts collected for a particular project have been utilized for the project and the withdrawal has been in compliance with the proportion to the percentage of completion of the project.

Chartered Accountants can be appointed as legal representative before the Appellate Tribunal or the Regulatory Authority

Can be appointed as member of Central Advisory Council, Chairperson or member of RERA, Technical Member of Real Estate Appellate Tribunal

SECONDARY ROLE OF CHARTERED ACCOUNTANT

Application for Registration of real estate project

Application shall be made in prescribed form with the prescribed fee and shall include details of promoters, projects launched in past five years, approval letters/certificates to commence project, lay out plan, allotment letter, agreement for sale proforma, garage, and declaration to legal title etc.

Registration of real estate agents — No real estate agent shall be able to facilitate the sale or purchase in a real estate project registered without obtaining registration under new Act.

The registration shall be given by the Authority for the entire State/ Union Territory.

ROLE OF COMPANY SECRETARY AS A LEGAL REPRESENTATIVE CLAUSE 48 – Role of Company Secretary in Ensuring Environmental Compliances NOCs from Central and State Governments

Environment Impact Assessment (EIA) Notification S.O. 1533 (2006)- It is intended to ensure that all new projects are given EC after the suitability of a site and environment impact has been duly assessed.

Section 3 of the Environment (Protection) Act, 1986

Water (Prevention & control of pollution) Act, 1974 and Air (Prevention & control of Pollution) Act, 1981- All the covered industries in above act are required to obtain consent to establish for establishment of any new unit or before carrying out expansion/modernization of any existing unit. These units after establishment are required to obtain consent to operate before commencing commercial production.

Forest Conservation Act, 1980- Under the provisions of this Act, prior approval of the Central Government is essential for diversion of forest lands for the non-forestry purposes.

Central Coastal Zone Authority- The development or construction activities in different categories of CRZ area are regulated by the concerned authorities at the State/Union Territory level.

RERA is a huge step forward and lot of expectation will be there for the state RA to frame the rules according to the Act and not dilute them in builder’s favour.

Legal Term

Encroach

v. to build a structure which is in whole or in part across the property line of another’s real property.

MCA Updates

SPICE Forms, GNL-3, INC-22, 23AC has been amended.
PAN and TAN fee shall be revised from to INR 110 and INR 65 due to implementation of GST w.e.f 1st July 2017.
DIR-5 has been notified.
Ministry invites comments regarding notice on Companies (SDD) Rules, 2014 on layers of subsidiaries.

SEBI Updates

Regulations amended: SEBI (Stock Brokers and Sub-brokers); SEBI (Issue and Listing of Debt Securities); SEBI (Employees’ Service); SEBI (Debenture Trustees); and Securities Contract.

RBI Updates

FEMA regulations to remove the words “ Exchange Control copies of the shipping bills” from Regulation 6 sub-regulation (C).

Income Tax Updates

Details of Particulars of Associate & Parent Companies has been modified.
PAN Application has been modified.

GST Updates

Register/Update DSC;
Application for New Registration, Filing Clarification, Enrolment for GSTP, to opt for Composition scheme, New Registration (ISD).

Process of Winding Up

Every Life Has an End

Every new life starts with birth and ends with death. As like we know that every corporate entity starts with incorporation and ends with liquidation / winding up. The end is inevitable in the circle of life which may happen in any kind of situation. Though it is not a happy process, we have to learn about it as a Professional

How to liquidate a company is what we will be seeing in this edition along with our Legal terms and News Bites related to notifications by MCA, SEBI, RBI and IT Department follows the articles.

Saranya Deivasigamani,
CEO

Process of Windingup

We have already seen in our 17th Edition of ZappyNews in January, 2017 about the Insolvency and Bankruptcy Board of India has notified the Corporate Voluntary Liquidation Process Regulations, 2017 that came in effect from 1st April 2017. These regulations have removed the recently faced ambiguity in winding up and liquidation of corporate persons after the recent amendments in Companies Act, 2013 subsequent to section 255 of Insolvency and Bankruptcy Code being notified. In this edition, we will be seeing about the key features of the code and the procedure for liquidation of Companies.

The key features of the same are:

1. A corporate person with no default can initiate the voluntary liquidation process.

2. The winding up process shall commence on the date on which a special resolution is passed by the members/partners of the corporate person to liquidate the corporate person and appoint an Insolvency Professional (IP) to act as the liquidator. On the appointment of a liquidator, the corporate person shall cease to carry on its business.

3. For initiating voluntary liquidation, the majority of Directors and Designated Partners of the corporate person have to make a declaration to the effect that:

The corporate person has no debts or it will be able to pay its debts in full from the proceeds of the assets to be sold in the voluntary liquidation; and
The corporate person is not being liquidated to defraud any person.

4. Eligibility criteria for appointing an IP as a liquidator.

5. It specifies and provides for:

The manner and content of the public announcement of the appointment of a liquidator.
Invitation of claims from the stakeholders.
Receipt and verification of claims.
Various reports and registers to be made and preserved by the liquidator.
Realisation and distribution of the assets of the corporate person.

6. It also provides for the manner and procedure for dealing with extortionate credit transactions, unclaimed proceeds of liquidation/undistributed assets, detection of fraud, etc.

7. The liquidator is obliged to preserve a physical/electronic copy of the reports, registers and books of accounts for at least eight years after the dissolution of the corporate person, either with himself or with an information utility.

8. If the corporate person is unable to oblige point 3 above, the liquidator has to make an application to the National Company Law Tribunal (NCLT) to suspend the process of liquidation and pass any order as he/she deems fit.

9. On the completion of the liquidation process, the liquidator shall prepare and submit the final report to the NCLT and after the affairs of the corporate person are wound up, he/she will make an application to NCLT for dissolution of the corporate person.

Process of voluntary winding up

The Winding up of a Company can also be done voluntarily by the members of the Company, if:

The Company in general meeting passes a special resolution requiring the Company to be wound up voluntarily as a result of the expiry of its duration, if any, fixed by its Articles of Association or on the occurrence of any event in respect of which the Articles of Association provide that the company should be dissolved.

The Voluntary winding up process applies where the directors and shareholders decide to cease trading their solvent limited company.

Step – 1 convene a board meeting with two Directors or with a majority of Directors:

a. Pass a resolution for Voluntary Liquidation of the Company.

b. Prepare a declaration from majority of the directors of the company verified by an affidavit stating that—

i. They have made a full inquiry into the affairs of the company and have formed an opinion that either the company has no debt or that it will be able to pay its debts in full from the proceeds of assets to be sold in the voluntary liquidation; and

ii. The company is not being liquidated to defraud any person – section 59(3) (a) of The Insolvency Code, 2016.

c. File declaration in e-form GNL-2.

d. Attachment with Declaration:

i. Audited financial statements and record of business operations of the corporate person for the previous two years or for the period since its incorporation, whichever is later.

ii. A report of the valuation of the assets of the corporate person, if any, prepared by a registered valuer.

Step – 2 convene a general meeting: Within 4 weeks of passing of above said declaration, hold the meeting of Shareholders for the following purposes:

a. To Pass a Special Resolution for approving the proposal of Voluntary Liquidation of the Company.

b. Appoint an insolvency professional to act as the liquidator. Resolution should contain the terms and conditions of the appointment of the insolvency professional, including the remuneration due to him.

c. File resolution in e-form MGT-14.

Step – 3 approval of creditors, if company owes DEBT:

a. If the company owes any debt to any person, creditors representing two-thirds in value of the debt of the company shall approve of the resolution passed above by the shareholders within seven days of passing of such special resolution.

b. Approval can be done by Consent of 2/3 of creditors in writing in General Meeting.

c. Commencement of voluntary liquidation shall be deemed to be from the date of passing of the resolution.

Step – 4 public announcement by the liquidator:

The liquidator shall make a public announcement in Form A of Schedule I within 5 days from his/her appointment .

a. The public announcement shall-

i. Call upon stakeholders to submit their claims as on the liquidation commencement date (LCD); and

ii. Provide the last date for submission of claim, which shall be 30 days from the LCD.

b. The announcement shall be published-

i. In one English and one regional language newspaper with wide circulation at the location of the registered office and principal office, if any, of the corporate person and any other location where in the opinion of the liquidator, the corporate person conducts material business operations;

ii. On the website, if any, of the corporate person; and

iii. On the website, if any, designated by the Board for this purpose.

Step – 5 proceedings by liquidator:

The liquidator shall submit a Preliminary Report to the Company within 45 days from the LCD, detailing as given below. The liquidator shall preserve a physical as well as an electronic copy of the reports for eight years after the dissolution of the corporate person.

a. The capital structure of the Company

b. The estimates of its assets and liabilities as on the LCD based on the books of the Company

c. Whether he/she intends to make any further inquiry into any matter relating to the promotion, formation or failure of the Company or the conduct of the business thereof; and

d. The proposed plan of action for carrying out the liquidation, including the timeline within which he/she proposes to carry it out and the estimated liquidation costs.

e. Maintenance of Registers and Books of Account

f. The liquidator shall verify the claims submitted within thirty days from the last date for receipt of claims and may either admit or reject the claim, in whole or in part, as the case may be, as per section 40 of the Code.

g. A creditor may appeal to the adjudicating authority against the decision of the liquidator as per section 42 of the Code.

h. The liquidator shall prepare the list of stakeholders within forty-five days from the last date for receipt of claims.

i. The liquidator shall open a bank account in the name of the corporate person followed by the words ‘in voluntary liquidation’, in a scheduled bank, for the receipt of all moneys due to the corporate person.

j. The liquidator shall distribute the proceeds from realization within six months from the receipt of the amount to the stakeholders.

Step – 6 Completion of liquidator:

The liquidator shall endeavour to wind up the affairs of the corporate person within one year from the voluntary LCD. In the event of the voluntary liquidation continuing for more than one year, the liquidator shall.

Step – 7 preparation of final report:

Final Report: On completion of the liquidation process, the liquidator shall prepare the Final Report consisting of:

a. An audited account of the voluntary liquidation, showing the receipts and payments pertaining to liquidation since the LCD; and

b. A statement demonstrating the asset and debts.

c. Sale statement in respect of all assets.

Step – 8 Submission of final Report/Application with NCLT:

The liquidator shall send the Final Report by registered post at their registered address and by electronic. Where the affairs of the Company have been completely wound up, and its assets completely liquidated, the liquidator shall make an application to the NCLT in form NCLT-1 for the dissolution of such Company.

The order of the Tribunal shall be filed with the ROC within a period of 14 days of the receipt of the copy of order, or such other time as may be fixed by the Tribunal.

As now Registered Insolvency Professional will be required to act as a Liquidator in case of winding up proceedings. It is a great opportunity for the Company Secretaries. It will help to boost the profession to scale a new height.

Legal Term

Subpoena Duces Tecum

A legal paper requiring someone to produce documents or records for a trial.

MCA Updates

No important updates.

SEBI Updates

SEBI IFSC Guidelines 2015 has been modified.
Disclosure Requirement for Issuance and Listing of Green Debt Securities.

RBI Updates

Master Direction – Information Technology Framework for the NBFC Sector .
Introduction of Legal Entity Identifier for OTC derivatives markets

Income Tax Updates

Amendment of Income tax Rules to operationalise section 194-IB and introduction of single challan cum statement

GST Transition

Transition Era

All Companies dealing with Goods and Services and are eligible for VAT, CENVAT, ST, IEC, Customs and Excise are now registering for GSTIN to get migrated to GST’s Single Window Interface for Facilitating Trade. Converting the entire taxation system of a Company needs a major strategic decision to be taken by the Directors.

In this edition we are going to see in detail about the GST transition by each Company. As usual, the Legal terms and News Bites related to notifications by MCA, SEBI, RBI and IT Department follows the articles.

Saranya Deivasigamani,
CEO

Walkthrough on GST Migration

When any taxation law is substituted by new taxation system, every firm will create a separate provisions to deal with the migration issues called as transitional provisions. They will create transitional provisions with main object to provide a safe cushion to adapt the new legislation without any shock. There is a lot of discussion around Goods and Services Tax (GST) and the impact that it may have on small, medium and large businesses. GST is not a tax reform but a business reform which will impact all kind of taxable & exempted person, intermediaries, job-workers, first & second stage dealers, person assessed under composition scheme. The transitional provisions covered in Section 139 to Section 142 of the CGST Bill, 2017 give clarity relating to events that may not have been finished as on the appointed day like closing balance of CENVAT credit, goods in transit, material sent for job work, stock of exempted goods which have now become taxable, etc. However, at the same time, these provisions also leave certain areas of doubt that would throw up certain challenges. All officers appointed under the Central and State laws shall be deemed to have been appointed as GST officers under the provisions of GST Act. The Article below summarizes the transitional provisions relating to CENVAT credit and input tax credit as per the CGST Bill, 2017 and UTGST Bill, 2017 as approved by the Lok Sabha on 29 March 2017.

Transition can be split into 2 parts:

1. Systematic Transition

2. Regulatory Transition

Systematic Transition

Systemic Transition is about changes in System, process and business structure. Any existing businesses have to revisit their ongoing contracts, internal procedures and go back to their Board room to adapt to new product & marketing strategies which concurs new scheme of Taxation i.e. GST. A deep analysis needs to be undertaken to accommodate any anticipated changes on account of widening tax base, rationalization of tax rates, phasing out of tax exemptions, integrated credit structure and automated compliance system. This will necessitate redesign of Enterprise Resource Planning (ERP) system which is not only an Accounting system but one of efficient ways of managing business. Systemic transition is more of case-to-case process and has to be looked separately for different industry verticals.

Regulatory Transition

Regulatory Transition is governed by GST Law under Sections 139—142 of the CGST Act, 2017 which is detailed below.

Migration of Existing Taxpayers [Section 139]

The migration of existing taxpayers into GST is already undergoing with aggressive push from Government. Provisional IDs have already been issued to taxpayers from State VAT Authorities/ Excise Authorities/Service tax Authorities as the case may be. There would be one Provisional ID for one PAN based registration for each State. That is, if there are multiple locations in single state, only Single Provisional ID is being issued. On and from appointed day, any person registered under any of the existing law and having PAN shall be provided provisional registration subject to certain condition as prescribed. After submission of certain documents as may be prescribed, final registration shall be granted.

For Existing Taxpayer in relation to registration:

Every dealer registered under any earlier laws shall be issued a Registration Certificate (RC) on provisional basis.
Such provisional RC shall be valid for a period of 6 months from the date of issue.
Dealer will submit relevant information as prescribed to the relevant authority.
After furnishing of all information, RC shall be granted on final basis by Central/State Government.
RC may be cancelled if dealer fails to furnish the information within prescribed period.

Amount of CENVAT carried forward in earlier return:

A registered taxable person shall be entitled to take credit of CENVAT credit/VAT credit carried forward in return furnished under earlier laws.
Credit shall be allowed if amount was admissible as credit under the earlier laws or Act.

Unavailed CENVAT credit on capital goods not carried forward in earlier return:

A registered person shall be entitled to take credit of unavailed CENVAT credit on capital goods, not carried forward in earlier return filed under the earlier law or Act.

Credit of duties and taxes in respect of inputs held in stock:

A registered person, who was not liable to registration under earlier law or dealing in exempted goods, but liable to registration under GST laws shall entitled to take credit of eligible duties and taxes in respect of inputs held in stock.

Transition arrangement for input tax credit [Section -140]

Registered Person [RP] other than person opting to pay tax u/s 10, may take credit in electronic credit ledger of amount of CENVAT carry forward in the last return filed before appointed day. Under the following circumstances credit shall not be allowed.
Input credit is not allowed under this act.
He has not filed in last six months all returns proceeding the appointed day.
Where the credit relates to goods manufactured and cleared under exemption notification.

File GST TRAN-1 within sixty days of appointed day and will separately specify the value of claim u/s 3, 6, 6A, subsection 8 of section 8 of the Central Sales Tax Act,1956 during the financial year relating to the relevant return shall specify the detail of stock as on appointed day. Where RP having centralised registration under the existing law has obtained registration under this Act, can take credit in electronic credit ledger, credit of the amount of CENVAT carry forward in return furnished under the existing law.

Transition provision relating to Job work [Section 141]

Where any input received has removed as such or removed after partial processing to a job worker for further processing, repair, testing, reconditioning or any other purpose as per the existing law before appointed day and such input are returned after the appointed day, no tax shall be payable if such goods are received within six months from the appointed day. The said period may be extended for another two months on sufficient cause. If the input is not returned within the stipulated period above then the input shall be recovered with interest, fine and penalty
Where finished goods manufactured had been removed for testing or for any other purpose to any premises weather registered or not prior to appointed day, no tax shall be charged if the goods are returned within six months from the appointed day. The said period may be extended for another two months on sufficient cause. If the input is not returned within the stipulated period above then the input shall be recovered with interest, fine and penalty
No tax shall be payable in above cases, if such goods are declared by manufacturer and job worker as prescribed.
File declaration of stock in GST TRAN-1 detail of stock including capital goods specifying stock held as principal, agent or branch.

Miscellaneous Transition Provision [Section 142]

Where any goods on which duty has been paid is removed not earlier than six months before the appointed date , returned from the unregistered person within six months from the appointed day , the duty of refund shall be paid to registered person under the existing law. But if the goods are returned by registered person, return of goods shall be treated as supply of goods. Where any input goods sent for approval basis as per the existing law, not earlier than six months before appointed day and such input are returned after the appointed day, no tax shall be payable if such goods are received within six months from the appointed day. The said period may be extended for another two months on sufficient cause. If the input is not returned within the stipulated period above then the tax shall be paid by the person sending the goods back or by person to whom the goods was sent for approval. Where any supply of goods made under any law of State or Union Territory where TDS was supposed to be deducted and invoice for the same is also issued before the appointed date. NO TDS can be deducted under section 51 of the Act while making payment to supplier after the appointed date.

Submit application in GST TRAN- 1 mentioning the stock including capital goods within 60 day of appointed day.

Provisions relating to revision of return:

When any return, furnished under any earlier law, is revised and due to such revision any amount is found to be recoverable from the person, the same shall be recovered as arrear.
Amount so recovered shall not be admissible as input tax credit under this Act.

Provision relating to progressive or periodic supply:

No tax shall be payable for supply of goods or service made after the enactment of GST law if consideration for said supply has been received prior to the enactment of GST law.

Provisions relating to retention payments:

No tax shall be payable on supply of goods or services made before the enactment of GST law and part payment received after the enactment of law, provided full tax on such supply has already been paid under the earlier law.

Provisions relating to TDS:

Where supplier has made any sale of goods in respect of which tax was required to be deducted at source under earlier law and also issued the invoice before enactment of GST law.
No tax shall be deducted where payment to the supplier is made on or after the enactment of GST law.

Based on the above analysis the transitional provisions require re-consideration in order to be more rational and indifferent to various industries and taxpayers.

Legal Term

Quantum Meriut

In contract law, a quasi-contractual remedy that permits partial reasonable payment for an incomplete piece of work (services and/or materials), assessed proportionately, where no price is established when the request is made.

MCA Updates

Forms recently revised in MCA Portal—DIR 3C, RD-1, CHG-1, CHG-4, CHG-9, and STK-2.
Companies (Acceptance of Deposits) Amendment Rules, 2017 (315 KB) has been amended.

SEBI Updates

http://siportal.sebi.gov.in has been operationalized for the intermediaries to submit all the registration applications online.
Instant Access Facility and Use of e-wallet has been enhanced for investment in Mutual Funds

RBI Updates

Submission of Statutory returns (SLR-Form VIII) in XBRL platform.
Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002- Section 3 (1) (b) – Requirement of Net Owned Fund (NOF) for Asset Reconstruction Companies.

Income Tax Updates

Income-tax (9th Amendment) Rules, 2017 – Amendment of Income-tax Rules, 1962 – Prescribing form & manner of exercise of option by the domestic company for the purposes of section 115BA of the Income-tax Act, 1961-reg