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Section 194-O of the Income Tax Act: Deconstructing the Definitions

[Sridattha is a student at Symbiosis Law School, Pune.] The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the United States of America to become the second largest e-commerce market in the world by 2034. Considering the growing number of these e-commerce transactions, the Government of India recently introduced Section 194-O through the Finance Act 2020 under the Income-tax Act 1961 (Act). Section 194-O of the Act states that an e-commerce operator shall deduct tax at the time of credit to the e-commerce participant at the rate of 1% on the gross amount of the sale of goods or services or both. The provision was introduced in order to widen and

To Enforce or to Relinquish – The Predicament of Joint Charge Holders under IBC

[Harshil is a student at Symbiosis Law School.] In a recent decision of the National Company Law Appellate Tribunal (NCLAT) in Mr Srikanth Dwarakanath, Liquidator of Surana Power Limited v Bharat Heavy Electricals Limited, the tribunal applied provisions of Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act 2002 (SARFAESI Act) to resolve a deadlock within Section 52 of the Insolvency and Bankruptcy Code 2016 (IBC). Here, I shall argue that the commercial implications of this judgement can be far-reaching as the tribunal has not only missed out on considering pertinent legal provisions but also stretched certain sections beyond their scope. Concep

Srikanth Dwarkanath v Surana Power Limited: NCLAT’s Idea of Majoritarianism

[Keshav is a student at Gujarat National Law University.] The National Company Law Tribunal (NCLT) Chennai directed the liquidation of Surana Power Limited by an order dated 28 January 2019. The dispute arose over certain equipment and goods (Secured Assets) which were hypothecated to secured creditors amounting to 73.76% of the outstanding debt by a hypothecated deed dated 24 September 2010. Additionally, the respondent i.e. Bharat Heavy Electricals Limited (BHEL), by an arbitral award dated 24 January 2018, was granted lien over the secured assets on account of being an unpaid seller. The secured creditors amounting to 73.76% had relinquished their security interest in the secured assets t

Suspension of IBC: A Confounding Endeavour?

[Dharmi is a student at NMIMS School of Law, Mumbai.] On 5 June 2020, in the wake of the COVID-19 pandemic and the subsequent lockdown and with an aim of shielding businesses from being pushed into insolvency proceedings, the much-awaited ordinance suspending initiation of corporate insolvency resolution process (CIRP) was promulgated. The Insolvency and Bankruptcy Code (Amendment) Ordinance 2020 (Ordinance) inserted Section 10A to the Insolvency and Bankruptcy Code 2016 (Code) that prohibits financial creditors, operational creditors and corporate debtors (CD) from initiating a CIRP for a default arising on or after 25 March 2020 (specified date). The said suspension is to remain in effect

Changing Dynamics of Venture Capital Financing in COVID-19 Era

[Poojita is a student at National Law Institute University, Bhopal.] As we cross the half-year mark, the full-fledged ramifications of COVID-19 on the venture capital (VC) market have started to unravel. When the economy takes a downturn, there are usually a few consequences that follow like reduced cash flow, increased unemployment rates, lower incomes, and lost opportunities. Further, when a pandemic like this hits, with no foreseeable end in sight, it massively deteriorates the public and private capital markets. For many startups and other early-stage companies, this might come as a severe blow to raising capital for their sustenance. VC investment trends in 2020 Despite the economic and

Decriminalization of Dishonour of Cheque: Doing a Reality Test of MCA’s Proposal and Intentions

[Piyush and Sunil are students at Hidayatullah National Law University, Raipur.] The Ministry of Corporate Affairs (MCA) issued a notification dated 8 June 2020 (Notification) to invite suggestions on decriminalizing minor offences to make it civil offence for the purpose of improving ease of doing business and facilitating court processes. The deadline set by the MCA for providing suggestions was 23 June 2020. The Notification includes 19 statutes which according to the government prescribe criminal punishments for minor offences. The aim behind this measure is to: reduce the burden off the business and stimulate confidence among the investors; help in the economic growth post Covid-19; and

Decriminalisation of Cheque Bounce: A Step Towards Recovery?

[Anuj and Aanchal are students at National Law University, Odisha.] The economic distress caused due to the global pandemic has increased concerns regarding financial failures which are treated as criminal offences. Under the current law’s cases pertaining to cheques bounce, repayment of loans, and certain offences under Banking Regulation Act, RBI Act, Chit Funds Act, etc. attract criminal liability. Consequently, the Ministry of Finance, on 8 June 2020, proposed decriminalisation of minor economic offences, with the aim to boost economic revival process and ease of doing business in India. It has proposed to decriminalise 39 sections by amending 19 statutes and has invited comments from va

Supreme Court’s Ping Pong and the Need for a Conclusive Test to Determine the Arbitral Seat

[Anhad is a practising commercial lawyer based out of Chandigarh and Delhi, having graduated from National Law School of India University, Bangalore.] The Supreme Court’s recent back and forth over the venue versus seat debate is reflective of the wide interpretative scope not only of ambiguously worded arbitration agreements, but also of hitherto settled arbitration law principles. It is perhaps also reflective of one of the reasons why parties may prefer arbitration over approaching courts to resolve their disputes. Background Over the past year and a half, three 3-judge benches (all different judges) of the Apex Court were called upon to determine the arbitral seat in cases where arbitrat

Green Channel Approval for IBC-driven Acquisitions?

[Jai is a student at Maharashtra National Law University, Mumbai.] The time bound resolution of distressed corporate entities is perhaps the most important objective of the Insolvency and Bankruptcy Code 2016 (IBC). The corporate insolvency resolution process (CIRP) introduced by the IBC was supposed to lead the charge in achieving this end. Unfortunately, the average time taken for the 190 CIRPs that yielded resolution is 394 days. This far exceeds the statutory timeline of 330 days provided in the IBC. Keeping in mind the need to expedite this process, it is argued that extending the green channel approval process of the Competition Commission of India (CCI) to IBC-driven acquisitions coul

Clean Slate Approach under IBC: An Impetus to Insolvency Proceedings

[Divyani is a student at National Law University, Nagpur.] The Insolvency and Bankruptcy Code 2016 (IBC) is one of the most dynamic statutes to be enacted in recent times. Since its implementation, India’s ranking has meteorically risen under the insolvency head of the World Bank Group’s Ease of Doing Business Report. However, at the same time, a pall of uncertainty prevails for the resolution applicants under the IBC over the implementation of clean slate approach. The doctrine of clean slate stipulates that after the culmination of the corporate insolvency resolution process (CIRP), any pending claims qua the corporate debtor (CD) shall be extinguished, and the successful resolution applic

A Living Law – ‘Intangible’ Business Connection

[Mohit and Vibhore are students at Institute of Law, Nirma University.] As we move more towards the digitalized world having physical presence as a prerequisite for exercising a right to tax, the business income is bound to dilute in the source state. Under the current regime, Article 7 of the India-US Double Taxation Avoidance Agreement treaty provides that the source country can exercise its right to tax the business income of the non-resident entity only when such entity has a permanent establishment (PE) in the source jurisdiction. Under the Income Tax Act 1961 (IT Act), Section 9(1)(i) through a deeming fiction provides the right to tax income which may arise outside India if such incom

New Standard for Independence: NCLAT Rules Ex-employee of Financial Creditor Cannot Act As Interim R

[Aparajita is a student at NALSAR University of Law, Hyderabad.] On 22 May 2020, the National Company Law Appellate Tribunal (NCLAT), in the matter of State Bank of India v. M/s. Metenere Limited, upheld the order passed by National Company Law Tribunal, Delhi (NCLT), mandating substitution of the interim resolution professional proposed by State Bank of India, the financial creditor, in the corporate insolvency resolution process (CIRP) initiated for M/s. Metenere Limited, the corporate debtor. The NCLAT judgment effectively created a new requirement of independence for the interim resolution professional from the financial creditor. Brief facts of the case M/s. Metenere Limited opposed the

The Enigma Underlying Transitional Credit

[Sakshi is a student at National University of Study and Research in Law, Ranchi.] In the sphere of indirect taxation, certain basic taxes are levied on every manufacturer and service provider in respect of his business of manufacturing or providing services. As the manufacture of goods is a multi-step process, there might be incidents where double taxation seems to be inevitable, i.e., where a person is made to pay taxes more than once. However, to ensure a smooth flow of payment of taxes and at the same time avoid over-burdening the taxpayers, the Indian tax regime follows a system that allows such taxpayer to claim the credit for the taxes/duties already paid by him. In the pre-Goods and

Maintaining Competition: The Failing Firm Defense in Indian M&A Transactions

[Shivek is a student at Amity Law School, Delhi.] The disastrous impact of the COVID-19 on domestic businesses is widely documented. In order to stay afloat, many failing businesses may be forced to consider a merger or an acquisition by another entity. Such parties would require a clearance from the Competition Commission of India (CCI), if the proposed transaction meets the financial thresholds under Section 5 of the Competition Act 2002 (Act). In case the transaction raises anti-competitive issues, parties may employ the ‘failing firm’ defense in order to improve their chances of getting the transaction approved by the CCI. In this post, the author delves into the essential elements of a

COVID-19 and Cyclones Amphan and Nisarga: The Effect upon Contractual Obligations and Determining th

[Samriddha is a student at Amity Law School, Noida, while Bikram is an Advocate.] The existential instruments and risk structure that range the legitimate stimulus of contractual obligations in issues like employment, advancement, entertainment, education and others had not been expected or witnessed before the conjunction of massive invasions – COVID-19 and cyclones Amphan and Nisarga- as fated acts of the universe. The Black’s Law Dictionary defines force majeure as a “superior or insuperable force”. It, therefore, means an inevitable event caused by a superior strength. These events prevent parties to the contract from fulfilling their obligations. In this situation, both parties are disc

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