Author Archives: novojuris

Highlights of the Companies Amendment Act, 2019

The Ministry of Corporate Affairs has amended the Companies Act 2013 vide the Companies (Amendment) Act, 2019 (the “Amendment Act”) notified on 31 July 2019. The Amendment Act takes into account the amendments that were already notified in the Companies (Amendment) Ordinance, 2018, which came into force on 2 November, 2018.

The major changes under the Amendment Act are broadly aimed at:

  • to improve the existing prosecution system by imposition of stricter penalties, under various sections, on the companies as well as the officers in default. Although this will increase the monetary burden on the company but will gradually help to reduce non-compliances.
  • to re-categorize certain compoundable offences as civil defaults and remove the criminal liability attached to them. The amendment has re-categorized certain penal provisions, where defaults that were punishable with fine/ and imprisonment have been amended to penalty. Now, the offences can be easily adjudicated with the authorities without going into time-consuming application procedures.
  • to transfer some of the approval powers from NCLT to the Central government i.e. ROC to reduce the burden of tribunals.
  • to bring accountability to the CSR activities undertaken by the Companies not only in letter but in spirit too.
  • greater accountability with respect to filing documents related to creation, modification and satisfaction of charges; non-maintenance of registered office to trigger de-registration process; holding of directorships beyond permissible limits to trigger disqualification of such directors, have also been introduced in the Amendment Act. Reforms pertaining to declaration of commencement of business provision.

Key Highlights of the Amendment Act:

Sr. No.

Category Highlights on the amendments


Approval for Change in Financial Year

Any company or body corporate which is a holding company or a subsidiary or an associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, may change its financial year with the approval of Central Government.

Prior to amendment, Tribunal’s approval was required.

2. Requirement of obtaining approval for Commencement of Business

Companies incorporated after Amendment Act, shall commence its business or exercise any borrowing powers only after filing a declaration with respect to the receipt of paid up value of the shares from the subscribers to the memorandum and the verification of Registered office within 30 days from the date of incorporation in with the Registrar of Companies. The declaration shall be filed within 180 days from the date of Incorporation.

3. Physical verification of Registered Office of the Company

Pursuant to amendment in Section 12, the Registrar is empowered to do the physical verification of the Registered office of a Company if it has reasonable cause to believe that the company is not carrying on any business or operations also to remove the name of the Company from the register of companies.

4. Approval for conversion of Public Company to Private Limited Company

Erstwhile, the Tribunal had authority approve or reject any alteration in the Articles of the Company relating to conversion of a public company into a private company. Pursuant to this amendment, the Central Government is empowered.

5. Securities to be in Dematerialized Form

A new provision has been inserted to Section 29, whereby securities of certain class or classes of unlisted companies, the securities shall be held or transferred only in dematerialized form in the manner laid down in the Depositories Act, 1996 and the regulations made thereunder.

6. Registration of Charge (due date for filing is reduced)

Section 77 has been amended whereby the extended period of 270 days has been now restricted to 60 days for filing an application to register a charge.

7. Responsibility of Identifying beneficial owner

Sub-section 4A has been inserted whereby every company shall take necessary steps to identify an individual who is a significant beneficial owner in relation to the company and require him to comply with the provisions of section 90. The introduction of this section brings more clarity for casting duty on company to identify and report on Significant Beneficial Owner to the Registrar. Further, Central Government has been empowered to make rules for the section.

8. Consequence of non-filing of Annual Return

Penalty provisions on non-filing of the annual return within the prescribed timeline have been revised and a further penalty of INR 100 per day on continuing offence subject to a maximum of 5 Lakhs has been imposed.

9. Section 117 (Resolutions and Agreements to be Filed)

The word ‘fine’ has been substituted with the word ‘penalty’ in the penalty provision and an additional penalty on continuing offence of INR 500 per day subject to maximum of INR 5 Lakhs have been imposed.

10. Section 135 (Corporate Social Responsibility)

Clarification has been provided for calculation of profits in case of newly incorporated Company by inserting following words under sub-section 5 “or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years”. On the unspent amount, a provision has been added to transfer the unspent amount to a fund specified under schedule VII within six months from the expiry of financial year has been provided unless it relates to an ongoing project.

In relation to any amount being unspent which relates to an ongoing project shall be transferred to a separate account to be opened by the Company to be called as the Unspent Corporate Social Responsibility Account within a period of 30 days from the end of Financial Year and such amount shall be spent within the period of three financial years from the date of transfer and in case of failure such amount shall be transferred to a fund specified in Schedule VII within 30 days from the date of completion of third financial year.

In case of default, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to twenty-five lakh rupees and every officer of such company who is in default, shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees, or with both.”

11. Automatic Vacation in case of Disqualification of Director

A new clause (i) has been inserted under Section 164 as “he has not complied with the provisions of sub-section (1) of section 165” which is one of the grounds of disqualification of a director where, if he/ she breaches the limits of maximum directorship allowed thereunder.

It is to be noted that falling under any of the clauses of Section 164 leads to automatic vacation of office from all the existing companies.

12. Stock options to Independent Director

Provisions pertaining to the prohibition on entitlement of stock option by independent directors. However, this omission shall not have any impact as Section 149 (9) also provides similar prohibition.

Further, the minimum fine of 1 lakh rupees and maximum fine of 5 lakhs rupees have been replaced with a penalty of INR 1 lakh for the defaulting person and in addition where any default has been made by a company, the company shall be liable to a penalty of five lakh rupees.

13. Oppression & Mismanagement

There is an insertion of 3 new sub-sections to the Section, where for the purpose of class of companies as may be prescribed the matter shall only be made before principal bench of the Tribunal and if in the opinion of Central government there exists circumstances as mentioned under sub section 3 clause (a) (b) (c) and (d), the Central Government may initiate a case against such person and refer the same to the Tribunal with a request that the Tribunal may inquire into the case and record a decision as to whether or not such person is a fit and proper person to hold the office of a director or any other office connected with the conduct and management of the company.

14. Powers of Tribunal in case of Oppression & Mismanagement

A new sub-section (4A) has been inserted to cast responsibility on the tribunal to record its decision at the conclusion of hearing case in respect of sub-section (3) of section 241, specifically as to whether or not the respondent is a fit and proper person to hold the office of director or any other office connected with the conduct and management of any company.

15. Section 243 (Consequence of termination or modification of certain agreements)

New Sub-sections (1A) and (1B) to the section has been inserted whereby in case a person is declared as not a fit or proper person pursuant to section 242(4A) under the case of oppression and mis-management, shall not hold the office of a director or any other office connected with the conduct and management of the affairs of any company for a period of five years from the date of the said decision provided that the Central Government may, with the leave of the Tribunal, permit such person to hold any such office before the expiry of the said period of five years.

Further, according to Section 243(1B), any person on being removed as Director or any other office connected with the conduct and management of affairs of the company, shall not be entitled to, or be paid, any compensation for the loss or termination of office.

16. Petition for winding up by Registrar

There is an amendment in sub-section (3) which enables the Registrar to present a petition for winding up under section 271 with the only exception mentioned in clause of Section 271 which talks about the situation where if the company has, by special resolution, resolved that the company be wound up by the Tribunal the Registrar may not present such petition.

17. Compounding of offences

The amendment has increased the limit of offence for compounding before the Regional Director from 5 Lakh rupees to 25 Lakh rupees in 441(1)(b). Further, it has been clarified in sub-section (6), that any offence which is punishable under this Act with imprisonment only or with imprisonment and also with fine shall not be compoundable.

18. Penalty for repeated default

New Section 454A has been inserted which talks about the penalty of repeated default. In this section a company or an officer of a company or any other person shall be liable to the twice the amount of penalty, who had already been subjected to the penalty under the Act. However, the subsequent default has to be repeated within 3 years from the date of order imposing penalty for earlier default.


Product Liability vis-a -vis the Consumer Protection Act, 2019

In India, we do not have one specific statute which covers the legal framework for product liability claims.

Product Liability prior to the Consumer Protection Act, 2019

Prior to the Consumer Protection Act, 2019 (“New Act”) there was no specific product liability theory in India. In the absence of a statutory law, courts were guided by the principles of justice, equity and good conscience and more than often guided by the provisions of English Law. The often cited case of Donoghue v. Stevenson[i] lay down the position where one owes a duty of care to another, and if such duty of care is breached, there is negligence irrespective of whether any contractual relationship exists between the parties or not.

Before we proceed with understanding the concept of product liability as mentioned in the New Act, we make it evident that there were certain laws in India which protected the interests of the consumers against faulty products. Some of the laws which have protected the interest of the consumers against faulty products would include, among others:

  • The Consumer Protection Act, 1986;
  • The Indian Contracts Act 1872;
  • The Sale of Goods Act 1930;
  • The Drugs and Cosmetics Act, 1945; and
  • The Prevention of Food Adulteration Act, 1954.

Though these laws touched on product liability to some extent, none of them could lay a comprehensive legal framework. These statutes were not able to identify a particular individual or entity in the supply chain against whom a consumer could raise a complaint. Thus, it was the need of the hour to establish a detailed product liability doctrine which would safeguard the interest of the consumers.

Product liability under the Consumer Protection Act, 2019

To strengthen the safeguards guaranteed to a consumer, the President gave his assent to the Consumer Protection Act, 2019 on 9th August, 2019. The New Act, introduces the concept of product liability, seeks to revamp the process and settlement of consumer disputes, establishes a Central Consumer Protection Authority as a central authority and Consumer Protection Councils at the district, state and national level, introduces penalties, covers unfair trade practices, unfair contracts, broadens the definition of a “consumer”, among other changes.

The New Act defines product liability[ii] as “the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto.” The impact is that it is not only the manufacturer who will be liable to compensate a consumer but also the seller if it fulfils the conditions mentioned in the New Act[iii]. The New Act allows a person to raise a product liability action by means of filing a complaint before a District Commission or State Commission or National Commission[iv].

Manufacturer Liabilities

The New Act sets out the following scenarios in which a product manufacturer shall be liable:

  • the product contains a manufacturing defect, or
  • the product has a defective design, or
  • there is a deviation from the manufacturing specifications, or
  • the product does not conform to an express warranty given by the manufacturer (even when the manufacturer proves that it was not negligent or fraudulent in making the express warranty for the product), or
  • the product does not contain adequate instructions or any warning regarding improper or incorrect usage of correct usage to prevent harm.

Service Provider Liabilities

Similarly, a service provider shall be liable for:

  • providing services which were faulty, imperfect, deficient or inadequate, or
  • proving inadequate instructions and warning to prevent harm, or
  • providing services which do not conform to the warranty or the terms and conditions mentioned in the contract.

Seller Liabilities

The New Act even makes a product seller liable for a product liability claim if:

  • it has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of the product, or
  • it altered or modified the product and such alteration or modification was a substantial factor in causing the harm, or
  • it has made an express warranty which is independent of the warranty made by a manufacturer and such product failed to conform to such express warranty made by the product seller which caused the harm, or
  • the identity of the manufacturer is not known or if known the service of notice or process or warrant cannot be affected on the manufacturer or it the manufacturer is not subject to the law which is force in India, or
  • the product seller has failed to exercise reasonable case in assembling, inspecting or maintaining the product or it did not follow the warnings or instructions for the product provided by the manufacturer while selling such product and such failure was the proximate cause of the harm caused to such product.

Exceptions to a product liability action claim

The New Act envisages certain scenarios where a product liability action cannot be brought against the product seller. No liability will be fastened on the product seller if at the time of harm, the product was misused altered or modified.

Further, a product liability action will not be fastened on the product manufacturer if it fails to provide adequate warnings or instructions, if:

  • the product was purchased to be used at a workplace and the product manufacturer had provided warnings to such employer, or
  • the product was sold as a component to be used in another product and necessary instructions and warnings had been given by the manufacturer, and the harm was caused to the complainant from the use of the end product, or
  • the product was one which was legally meant to be used under the supervision of an expert or a class of experts and the product manufacturer had employed reasonable means to give warnings or instructions for usage to such expert or class of experts, or
  • the complainant was under the influence of alcohol or any prescription drug while using the product which was not prescribed a medical practitioner, or
  • such instructions or warnings are obvious or commonly known to a user or a consumer of such product or which the consumer should have known, taking into account the characteristics of such product.


As per the New Act if the central authority is satisfied on the basis of investigation that there is sufficient evidence to establish violation of consumer rights or unfair trade practices, it may pass an order which could include:

  • recalling of goods or withdrawal of the goods;
  • reimbursement of the price of the products or services so recalled to the purchaser; and
  • discontinuation of practices which may be unfair and prejudicial to the consumers interest.

In addition, if the central authority is satisfied after investigation that any advertisement is false or misleading or is in contravention to consumer rights, it might issue a direction to the manufacturer or endorser or advertiser or publisher to discontinue such advertisement or modify the same.

Therefore, we see that the New Act is being cautious to employ responsibilities even on the endorsers or publishers of an advertisement. In this regard, the central authority may impose a penalty on a manufacturer or an endorser which may extend to Rs. Ten lakhs (Rupees One million). A subsequent contravention may result in levying the penalty to the tune of Rs. Fifty lakhs (Rupees Five million).

Further, the central authority may also prohibit the endorser from making endorsements of any product or service which may extend to one year and on a subsequent contravention to the tune of three years.

Additional safeguards placed for e-commerce companies

The central authority with a view to protect the interest of the consumers from the e-commerce entities who make direct sales to the consumers will provide for measures in the future which will protect the consumer from unfair trade practices in e-commerce.


[i] [1932] UKHL 100

[ii] Section 2(34) of the Consumer Protection Act, 2019

[iii] Section 82 of the Consumer Protection Act, 2019

[iv] Section 2(35) of the Consumer Protection Act, 2019

Economic Downturn : Double impact for MSMEs

The news paper articles are talking about an impending economic downturn. The automobile industry is witnessing it already and so are many other sectors feeling the heat. A downturn means not only a reduction in revenues and squeezed profits, but also an issue on not receiving payments on time. Tax rates and rebates are certainly helpful.

Under Companies Act, if a company has not paid any Micro Small and Medium Enterprises (MSME) for more than 45 days, then the company has to inform the Registrar of Companies of the outstanding dues. This is one small step to address the giant issue of non-receipt of money.

There are several benefits that a MSME can avail and this post touches upon some of them.

Eligibility criteria for MSME

Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 mandates any MSME to file Udyog Adhaar Memorandum (UAM) in Form-I appended to the Gazette Notification No.S.O.2052(E) dated June 30, 2017. Also, Section 7 of the MSMED Act, provides the below classification of enterprises, which is proposed to be enhanced through a 2018 Bill, which is yet to be passed by parliament:

Type of Enterprise

(All figures in INR)

MSMED Act, 2006 2018 Bill
Manufacturing Services All enterprises
Investment in Plant and Machinery in INR Investment in Equipment in INR Annual Turnover in INR
Micro 25 lakh 10 lakh 5 crore
Small 25 lakh to 5 crore 10 lakh to 2 crore 5 to 75 crore
Medium 5 to 10 crore 2 to 5 crore 75 to 250 crore

 Benefits available to MSME

Section 15 of the MSMED Act, 2016 mandates maximum of 45 days for making payments by a buyer to the goods/service supplied by an MSME, failing which Section 16 imposes a compound interest at three times the notified bank rate. The MSME facilitation centre also acts as a conciliator/arbitrator to decide the cases within 90 days of a dispute. This is the most important factor and if this process can be made more robust, then one of the biggest pain points of MSMEs will get addressed.

Subject to certain conditions, below are few other benefits available to MSMEs:

  • Interest subvention/rebate by 2% on any new/incremental loans
  • Online Delayed Payment Monitoring portal
  • Exemption from 2% TDS on cash withdrawal above INR 1 Crore
  • No merchant discount rate (MDR) chargeable on accepting debit/credit cards transaction
  • Online bill discounting system by selling trade receivables (TreDS)
  • Legacy dispute resolution scheme for closure of pre-GST litigations
  • Each bank to provide up to 1 Crore finance for woman in Greenfield investment
  • Credit guarantee scheme to cover liability of collateral free credit
  • Capital subsidy of 15% for technology upgrading
  • Capital subsidy of 25% to promote energy conservation
  • 75% subsidy for acquiring product quality certification
  • 75% financial assistance for business incubation for innovative ideas
  • 25% financial assistance for air-fare, space rent for international trade fairs
  • 4% per annum interest on working capital for interest subsidy eligibility certificate holders
  • INR 25,000 financial support on domestic patent and 50% discount on trademark processing
  • 75% financial assistance for obtaining bar code registration

Link for a complete list of Schemes:

Compliances to be undertaken by a company towards MSME

Companies registered under the Companies Act, 2013 are also forewarned by the Ministry of Corporate Affairs (MCA) to settle payments due to MSMEs within 45 days of the deemed acceptance of the goods or services.  Further, MCA, vide Notification dated January 22, 2019, has mandated filing of a half yearly return in MSME Form I by April 30th and October 31st every year by specifying the reasons for delay and amount of all outstanding payment due to MSMEs. Non-compliance will lead to punishment with penalty up to INR 25,000 for the company and either imprisonment up to 6 (six) months or fine for each of the key managerial persons.  Hence the companies are required to enquire if the suppliers are registered as an MSME or have obtained an UAM, to be in compliance.

Cancellation of MSME or Udyog Adhaar Memorandum

The MSMED Act, 2006 is silent on the closure procedure and hence, a physical application need to be filed with the respective General Managers of District Industry Centres in respective Districts, to withdraw the registrar. It is recommended that MSME who do not fall within the eligibility criteria as they grow their businesses to cancel their registration. It helps in avoiding the  misuse of registration.

There are many benefits that MSMEs can avail, but the bureaucracy and the process has to be demystified substantially.

Income Tax clearance: M &A or secondary transactions

Obtaining a no objection certificate or prior permission under section 281 of Income Tax Act, 1961 (Section 281 Certificate) is a mandatory ‘conditions precedent’ in a merger, acquisition or a secondary transaction. A general disdain is the time it takes to obtain the permission. Without the permission, the transaction could risk being voided by the tax department.

This article analyses the significance of the Section 281 Certificate, when should it be procured and implications if not procured.

tax certificate

Breaking down Section 281

As per Section 281 of the Income Tax Act (“Act”), in the event an assessee creates a charge or parts with the possession (by way of sale, mortgage, gift, exchange or any other mode of transfer whatsoever) of, any of his assets in favour of any other person, during the pendency of any proceeding under the Act or after the completion thereof, but before the service of notice under Rule 2 of the Second Schedule of the Act, such charge or transfer shall be void as against any claim in respect of any tax or any other sum payable by the assessee as a result of the completion of the said proceeding or otherwise. As per the explanation to the section, ‘asset’ includes shares and securities as well.

The section has the following exceptions in which case, such charge or transfer is not void:

  • if it is made for adequate consideration and without notice of the pendency of such proceeding or, as the case may be, without notice of such tax or other sum payable by the assessee; or
  • if it is made with the previous permission of the assessing officer.

It may also be noted that this section applies to cases where the amount of tax or other sum payable or likely to be payable exceeds Rs.5000 and the assets charged or transferred exceed Rs.10,000 in value.

In a nutshell, section 281 of the IT Act requires an assessee to obtain the permission of the assessing officer before creating a charge on certain assets or transfer of certain assets in the event there are ongoing tax proceedings or pending claims/demands against such assessee. The main objective of section 281 is to safeguard the interests of the revenue against assessees who may fraudulently part with their assets to avoid payment of taxes.

Process for obtaining Section 281 Certificate

The Central Board of Direct Taxes through its Circular No. 4/2011 [F. NO. 402/69/2010-ITCC], dated 19-7-2011 (“Section 281 Circular”), has issued certain guidelines for obtaining the Section 281 Certificate. The format of the application (which also mentions the documents and other information to be provided) is also provided in the said Circular. The assessing officer may, at his discretion, ask for additional documents. The application is to be filed at least 30 (Thirty) days prior to the proposed transaction. The Section 281 Circular also contains the circumstances under which Section 281 Certificate could be granted by the assessing officer, the timelines within which the assessing officer has to grant/refuse the permission under section 281 and the validity of the certificate granted. It is interesting to note that the Circular provides for an approval timeline of 10-15 days.

It may also be noted that the assessing officer would require the approval from the Range Head for granting permission if the value of assets being transferred or on which charge is being created, or the amount of charge being created is Rupees Ten crores (Rupees Hundred Million) or more.

Analysis of Section 281

Going by the strict interpretation of section 281, the Certificate is required only when an assessee creates a charge or parts with possession of any asset, under the following circumstances:

  • If the transfer is made during the pendency of any proceeding under the Act, or
  • After the completion of any proceeding under the Act but before the service of notice under rule 2 of the Second Schedule of the Act.

It appears that strict interpretation seems narrow.

In most cases, in a M & A or in a secondary sale of securities, the purchaser insists on Section 281 Certificate to de-risk a possibility of a tax claim which in turn would impact the purchase consideration. As an extension to that, the purchaser also wants to apriori know of the possibility of tax claims, before releasing the purchase consideration. Hence, Section 281 Certificate is almost always a Conditions Precedent to the transaction. In cases where it takes a long time to obtain the Section 281 Certificate, the purchaser reluctantly moves it as a “conditions subsequent” but with a personal guarantee or specific indemnities from the seller/s to de-risk the possibility of the transaction being considered void by the tax authority.

Cabinet to consider relaxing FDI norms to attract Overseas Investment

Foreign Direct Investment (FDI) is major driver of growth and development of the economy of the country. With this intent, the Government of India has time and again come up with investor friendly reforms under FDI regulations to have more liberalized reforms across various sectors.

To boost up FDI, the Union Cabinet headed by Prime Minister Narendra Modi on 28 August 2019, has approved the proposal for reviewing of the FDI policy on various sectors. They have considered relaxing foreign direct investment (FDI) norms in several sectors, including coal mining, manufacturing, single-brand retail and digital media, to attract overseas players.

The key highlights of the proposed changes are as follows:

Coal Mining

The present FDI policy allows 100% FDI under automatic route for captive coal mining only. The captive coal mining deals with coal & lignite mining for captive consumption by power projects, iron & steel and cement units and other eligible activities. Along with the captive coal mining, 100% FDI under automatic route is also allowed for setting up coal processing plants like washeries. However, the companies are prohibited to sell washed coal or sized coal from its coal processing plants in the open market and supply the washed or sized coal to those parties who are supplying raw coal to coal processing plants for washing or sizing.

This proposal aims at allowing 100% FDI under automatic route for “Associated Processing Infrastructure”. Associated Processing Infrastructure includes coal washery, crushing, coal handling, and separation (magnetic and non-magnetic). This proposal has opened 100% FDI for selling coal subject to provisions of Coal Mines (Special Provisions) Act, 2015 and the Mines and Minerals (Development and Regulation) Act, 1957.

In crux

  • 100% FDI under automatic route is allowed for Associated Processing Infrastructure.
  • 100% FDI under automatic route is allowed for sale of coals.

Contract Manufacturing

Contract manufacturing in international markets is used in situations when one company arranges for another company in a different country to manufacture its products. This concept is not captured in Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017 and therefore there is no clear laws and rules regulating FDI in contract manufacturing in India. Therefore, the Government through this proposal has allowed to include contract manufacturing under the manufacturing sector and has allowed 100% FDI under automatic route. Manufacturing activities may be conducted either by the investee entity or through contract manufacturing in India under a legally tenable contract, whether on Principal to Principal or Principal to Agent basis.

In crux

  • Contract manufacturing included as an activity under the manufacturing sector.
  • 100% FDI under automatic route is allowed for contract manufacturing.

Single Brand Retail Trade (SBRT)

The present FDI policy provides that 30% of the value of goods has to be procured from India if SBRT entity has FDI more than 51% and the same can be met as an average during the first 5 years, and thereafter annually towards its India operations. As regards local sourcing requirement, the Government has decided to count procurements made from India by the SBRT entity for that single brand as local sourcing, irrespective of whether the goods procured are sold in India or exported. Also, the Government would relax the cap of 5 years by removing it. The approvals allow ‘sourcing of goods from India for global operations’ can be done directly by the entity undertaking SBRT or its group companies (resident or non-resident}, or indirectly by them through a third party under a legally tenable agreement.

The present policy limits the global sourcing by stating that only that part of the global sourcing shall be counted towards local sourcing requirement which is over and above the previous year’s value. The Government is trying to relax this restriction by considering sourcing from India for global operations shall be considered towards local sourcing requirement.

The present FDI policy states that if any SBRT wants to trade through e-commerce, they would be required to operate through brick and mortar stores before trading through e-commerce. The Government by approving this proposal is relaxing the said condition by allowing SBRT to operate through e-commerce subject to the opening of brick and mortar stores within 2 years of starting to trade online.

In crux

  • Goods procured are sold in India or exported to be considered as local sourcing.
  • The 5 years cap removed.
  • No incremental value for calculating local sourcing requirement.
  • SBRT can trade through e-commerce prior to having a brick and mortar store.

Digital Media

The present FDI policy is silent on the fast-growing digital media segment. In the print media sector, 26 percent FDI is allowed through government approval route. Similarly, 49 percent FDI is permitted in broadcasting content services through government approval route. With this proposal, it has been decided by the Government to permit 26% FDI under government route for uploading/ streaming of News & Current Affairs through Digital Media, on the lines of print media.

In crux

  • Introduction of the concept of digital media
  • 26% FDI under governmental route is allowed for uploading/ streaming of News & Current Affairs through Digital Media.

The proposed change reflects that the Government is keen on promoting FDI in various sectors. These amendments are meant to liberalize and simplify the FDI policy to provide ease of doing business in the country. These changes will lead to benefits of increased investments, employment and growth.


Extension of Order Permitting Telangana Shops & IT/ITES to remain open on all days of the year

Government of Telangana vide Government Order (G.O.) No.24 dated July 25, 2019[1], extended the permissions to all Shops and Establishments to keep open on all days of the year for a period of three (3) years till June 15, 2022 subject to fulfilment of the conditions in the extension G.O.

Further, vide G.O. No. 25 dated July 25, 2019[2], the Telangana Government also extended the exemption issued to all Information Technology (IT) and IT-enabled services (ITES) establishments in Telangana with regard to the below provisions for a period of five (5) years till May 29, 2023:

  1. Section 15: Prohibition on keeping open of establishments before/after the fixed hours
  2. Section 16: Daily work of eight (8) hours and weekly work of 48 hours
  3. Section 21: Prohibition on employment of young persons between the age of 14 to 18 years after 7 pm and before 6 am
  4. Section 23: Prohibition on employment of women after 8:30 pm and before 6 am
  5. Section 31: Mandatory five (5) holidays on Republic Day, May Day, Independence Day, Gandhi Jayanthi and Telangana formation day

Earlier the exemption was in effect for five (5) years from May 30, 2013 in the combined State of Andhra Pradesh, while this G.O. 25 is applicable only for the State of Telangana.



Creche rules notified in Karnataka for establishments with 50 or more employees

Karnataka State Government vide Gazette Notification No.LD 127 LET 2018 dated August 8 2019, notified the Karnataka Maternity Benefit (Amendment) Rules, 2019 (“Karnataka Creche Rules”), wherein new rules relating to crèche facilities is inserted in the Karnataka Maternity Benefit Rules, 1966.

Earlier, the Central Government vide Gazette Notification dated March 28, 2017 had amended the Maternity Benefit Act, 1961 (“Act”) by inserting a new Section 11A mandating every establishment with fifty or more employees to have the facility of crèche and also to intimate in writing and electronically to every woman at the time of her initial appointment regarding every benefit available under the Act.  Further, the Central Government vide Gazette Notification No.S.O. 1026(E) dated March 31 2017, & S.O. 1049 (E) dated April 3 2017, had notified that the crèche related provision will be effective from July 1, 2017.

Further, the Government of India vide its Circular dated November 17 2017, requested that the State Governments being the appropriate Government under the Act, may take immediate action to frame and notify rules for the crèche facilities. The Karnataka State Government had published the draft rules on July 21 2018, inviting comments from the public and the present Karnataka Creche Rules was notified effective from the date of publication in the Official Gazette.

The compliance under the Karnataka Creche Rules is shown in the below table:

Standards Compliance Requirements
Number of Creches
  • One crèche for use of children below 6 years of age for every thirty children
  • Creche facility to be provided to employees of all types of employment like permanent, temporary, regular, daily wage, contract labour etc.
  • To be situated within half a kilometre from the gate of the establishment
  • Easy access to the parents
  • To be away from excessively noisy process or dust/fumes/odours etc.
  • Construction of room height of at least 9 feet with heat resistant material and waterproof with fencing
  • 5 Square Feet floor area for each child in crèche
  • Shady open-air playground well maintained/safe/secure or ensure safety/security in case of use of public playgrounds or parks
  • Artificial lightning to be connected with emergency power back up
  • Kitchen or in its absence, employer to make available hygienic food/beverages
  • Dedicated water purifier & washbasins at 1 for every 15 children
  • Washroom adjoining crèche with a separate facility for drying of soiled clothes and change of dresses
  • Separate ‘Latrine’ for children at 1 for every 20 children and separate ‘Latrine’ for staff/mothers adjoining the bathroom
  • To be open 24/7 for employees working in shifts  with not more than eight hours a day per shift
  • Uniforms and clean clothes for staff as well as children
  • Water supply at the rate of 5 gallons per child per day
  • Supply of clean towels, oil and soap
  • Play and teaching materials, display of daily schedule/norms of child safety etc.
  • Medical check-up of children before admission and once in two months
  • Recording of Body-Mass Index once a month and other medical examination to be stored in the crèche
  • 250 ml of milk per child below the age of two years and adequate refreshments for child above two years
  • Cradles
  • Cots
  • Beds
  • Mattresses
  • Cotton Sheets
  • Utensils to feed
  • Furniture for child and parents
  • Rubber sheets
  • Blankets
  • Pillow
  • First Aid Kit/ Medicine Kit
  • Toys
  • One women ‘Teacher cum Warden’ who is Government recognized qualification  holder & training in childcare
  • One woman ‘Creche Attender’ who is qualified or trained in midwifery
  • One woman ‘Ayah’ for every 10/15 children

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