ISSN 0972-1983

VOL 50 | NO. : 08 | Pg. 1-164 | August 2020 | `100/- (Single Copy)

THE JOURNAL FOR GOVERNANCE PROFESSIONALS

Governance
Standard

Global
Governance

National
Governance

Charity
Governance

Panchayat
Governance
 The Council Contents
President
 Ashish Garg
ISSN 0972-1983

CHARTERED SECRETARY
Vice President
®
 Nagendra D. Rao

Members
(in alphabetical order)
[ Registered under Trade Marks Act, 1999 ]
 Dr. Ahalada Rao Vummenthala
 Anil Gupta (Govt. Nominee) Vol. : L n No. 8 n Pg 1-164 n August-2020
 Balasubramanian Narasimhan
 Chetan Babaldas Patel
From the President 04
 Deepak Kumar Khaitan
 Devendra Vasant Deshpande Articles 31
 Gyaneshwar Kumar Singh (Govt. Nominee)
 Hitender Mehta Legal World 109
 Dr. (Ms.) Madhu Vij (Govt. Nominee)
 Manish Gupta From the Government 119
 Manoj Pandey (Govt. Nominee)
 Niraj Preet Singh Chawla Startup India 148
 Praveen Soni
 Ramasubramaniam C. News from the Institute 149
Ethics in Profession 157
 Ranjeet Pandey
 S Santhanakrishnan (Govt. Nominee)

CG Corner 162
 Siddhartha Murarka
 Vineet K. Chaudhary
Secretary
 Asish Mohan
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 Hitender Mehta
to company secretaries are welcome. n Views expressed by contributors are their own
and the Institute does not accept any responsibility. n The Institute is not in any way
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CHARTERED SECRETARY | AUGUST 2020 3

FROM THE PRESIDENT

Z_Z eV-eV A_a dramo§ H$mo, Z_Z dmo Omoe \$µm¡bmXr

Z_Z dmo AZ{JZV Hw ~m©{Z`m±, dmo bmoJ CÝ_mXr
{dO` JmWm Ho$ ha {H$aXma H$mo, eV eV Z_Z {Xb go
Z_Z nmdZ {Va§Jo H$mo, Z_Z h¡ AnZr AmOµmXr

Dear Professional Colleague, care has been taken under the laws so as to ascertain and
assure the independence of the professional undertaking
W ith these reverberating words, I extend my heartfelt best
wishes to each one of you on the 74th Independence
Day of this magnanimous nation of which we all consider
the activity.

74 TH INDEPENDENCE DAY –
ourselves proud citizens. Freedom and independence, may
seem as mere words celebrated, discussed, deliberated
CELEBRATED THE ONLINE WAY
and talked about once every year; but pondering a little Hw N> Zem {Va§Jo H$r AmZ H$m h¡,
further and we find ourselves thanking our stars for being Hw N> Zem _mV¥^y{_ H$r emZ H$m h¡,
born in this land and praying for the safety of not just the h_ bham`o§Jo ha OJh `o {Va§Jm,
nation and its citizens but its independence as well. Zem `o {hÝXwñVm§ Ho$ gå_mZ H$m h¡!!

For us professionals, who consider ourselves to be the As the norm has been, the Indian flag was hoisted
caretakers of governance, enforcing compliance with law high across the Headquarters, Regional Councils and
in true letter and spirit; the Constitution of India is the Chapters of the Institute following the social distancing
ultimate supreme law. It is this supreme law which has norms evidencing the fact that the pandemic and the
woven the fabric of Rights and Duties of every single fears could not dampen our spirits of celebrating this
citizen and which reiterates the significance of freedom auspicious day.
and independence in the varied spheres of life.
If we can celebrate the ICSI Flagship Events online then
Taking a more microscopic corporate view against this why should a day of such huge national significance be
national thought, various audits in the Companies Act, any different…? With this thought reigning our minds
2013 and under a host of other laws encasing the India and hearts, the 74th Independence Day of the nation was
Inc. have been entrusted with Independent Professionals celebrated through an hour long Webinar session in the
hailing from any of the Professional Institutions. The esteemed presence of Shri Rajesh Verma, Secretary,
Secretarial Audit conducted by Company Secretaries in Ministry of Corporate Affairs. With Shri Manoj Pandey,
Practice is a handy example to emphasize this context. Due Joint Secretary, MCA joining in as well, the event was

4 AUGUST 2020 | CHARTERED SECRETARY

made all the more memorable with the launch of a host feel safe and both genders can work together in harmony.

FROM THE PRESIDENT

of Courses and publications.
All these initiatives have been with the determined aim to
The day seemed perfect to thank and extend our gratitude broaden the horizon of learning and assist in enhancing
to the Company Secretaries and MCA Officials who have practical insights and to assist our members in advancing
been working tirelessly as Corona Warriors amidst the their knowledge horizons with greater enthusiasm and
pandemic and lockdown at the CRC. Their contribution zeal.
in the Name Reservation process and Company
Incorporation process has not only been commended NATIONAL GOVERNANCE – MOVING
by the ICSI by way of Certificates of appreciation but TOWARDS NEW AGE RAM RAJYA
has also been lauded and highlighted by the Hon’ble
Ministers themselves. am_ amO ~¡Ro> Ì¡bmoH$m&
ha{fV ^E JE g~ gmoH$m&&
Spinning the wheel of knowledge – Publications and
Certificate Courses Alongside the landmark event in the Indian history of laying
of Foundation Stone of Ram Temple at Ayodhya, we the
The publications, both pertaining to the aspects of Governance Professionals find avenues of laying deeper
Companies Act, 2013 as well as the Insolvency and stones of good governance far and beyond the limits of
Bankruptcy Code, 2016 released on the occasion of the corporate world. While the governments at all levels
Independence Day have been designed to provide much have been undertaking initiatives and adapting measures,
needed guidance referencers and ready reckoners in the it is quite understood that the finesse in governance
respective areas. Given the need for the professionals to structures and functionaries cannot be achieved by their
attain a heightened sense of knowledge and skill so as efforts alone. However, the need of the hour is to make a
to serve the corporates in the better manner, publications collaborative and cohesive effort both at an institutional
of the likes of Referencer on Boards’ Report, Guide to level as well as an individualistic professional level so as
Board Evaluation, Referencer on E Form PAS 6 have to witness the nation reaching pinnacles of governance.
also been prepared and rolled out.
It is with this thought and intent that the focus of this
The ICSI IIP too has been on its toes and has brought issue of Chartered Secretary Journal has been kept as
forth the Insolvency and Bankruptcy Code, 2016, Futuristic Governance: From Grassroots to Global so as
Insolvency and Bankruptcy Code, 2016 (Rules and to share thoughts, ideas and opinions in taking the torch of
Regulations), Final Word on IBC, IBC Learning Curves, governance forward and alighting the way…
Limited Insolvency Examination: Preparation Guide all
for the benefit of the Insolvency Professionals and our CHAPTER INITIATIVES – TOGETHER
stakeholders’ ease. WE CAN, TOGETHER WE WILL
Apart from these, the first 25 Info Capsules have been Talking about the Chapters of ICSI pan India, I am reminded
clubbed together in the form of a Series to provide all of a story that I shared during one of the recent Webinars.
the information pertaining to various arenas of India Inc. While the entire story might be too elongated to be shared
between the covers of a single book and the Case Digest in here, the moral of the story was the guidance given by
Series 3 has also been released covering case snippets Lord Gautam Buddha to a group of wise men and women
pertaining to Company Law; Economic Legislations; staying in a village. Gautam Buddha after having stayed
Banking and Insurance; Tax Laws; Insolvency. with the group for a while and pleased by their wisdom,
culture and discipline had guided them to spread out and
Coming to further capacity building initiatives, while the share their wisdom with the world outside. Somehow, the
new Certificate Courses on Independent Directors has teaching or the learning of the story befits the manner in
been launched with the intent of promoting the concept which ICSI has tries to sow the seeds of good governance
of independent directors and providing opportunities in every nook and cranny of the nation and even beyond.
to professionals wiling to serve as independent
directors the Certificate Course of Commercial Contract Very recently, I had the honour of sharing my thoughts
Management intends to focus on providing a highly and celebratory moments of the Foundation Days of a
applied and focused approach, giving the professionals few Chapters through Webinar modes; and believe me
knowledge, understanding and practical skills necessary when I say that, each single event has left me ecstatic
for managing contracts effectively. After the successful and mesmerized. I am delighted to see the passion
completion of the first batch, the second batch of and the drive, not just in the Management Committees
Certificate Course on POSH (Prevention of Sexual or the Chairpersons, but each of their past and present
Harassment) has been announced in order to infuse the stakeholder. Be it organizing full-fledged celebrations to
professional competency within corporate workers so make the day memorable or launching their very own
that organisations imbibe a culture where women can newsletters, each of them swells my heart with pride. I am

CHARTERED SECRETARY | AUGUST 2020 5

 sure that with these collective efforts we shall be able to
FROM THE PRESIDENT
RELEASE OF THE REPORT ON BRR – THE
achieve our vision sooner than later. My best wishes to all FUTURE FOR COMPANY SECRETARIES
the Chapters in their future endeavours.
In 2018, the Ministry of Corporate Affairs had constituted
CREATING SYNERGIES THROUGH ICSI a ‘Committee for finalizing Business Responsibility
ACADEMIC CONNECT – MOU WITH IIM Reporting Format for Listed and Unlisted Companies’
based on the Framework of the updated NVGs and
JAMMU
updated as the National Guidelines for Responsible
Renowned Author, Stephen Covey said and I quote, Business Conduct (NGRBCs). The ICSI too was a
“Synergy is what happens when one plus one equals ten representative member on the Committee constituted
or a hundred or even a thousand! It’s the profound result under the Chairmanship of Mr. Gyaneshwar Singh, Joint
when two or more beings determine to go beyond their Secretary, MCA comprising members of professional
preconceived ideas to meet a great challenge”. bodies, SEBI and the IICA, etc.

ICSI creates professionals who are well equipped with all The Committee provided a non-financial reporting
the leadership qualities and IIM believes in developing framework for the companies recommending a
leaders and it is through collaborative efforts of both these new reporting framework called as the ‘Business
brigades that the true spirit of Corporate Governance will Responsibility and Sustainability Report (BRSR)’. It
be achieved in India Inc. gives me immense pleasure to share that the Report
has been formally released for the stakeholders by Shri
In view of the same, it seemed quite apt to build upon Rajesh Verma, Secretary, MCA.
the nexus of leaders from both worlds, one which would
benefit the entire Indian as well as global arena. Given With the upcoming paradigm shift in the business
the concept of synergy befitting as well as seemingly operations and importance of non-financial reporting
materializing in this scenario, the ICSI recently entered into increasing significantly, the dynamics of the role played
a synergistic relation by way of signing a Memorandum of by professionals shall be altered significantly in the times
Understanding with the IIM Jammu. The idea of signing ahead.
a single comprehensive MoU with the any University or
Academic Institution especially IIM Jammu is to partner I would request all the members to acquaint themselves
with them on various desirable fronts simultaneously. with the BRSR framework so as to be able to explore
and utilize the professional opportunities presented with
EXTENDING TIMEFRAME FOR the enhanced scope of non-financial disclosures in the
Annual Report while enforcing responsible business
COMPULSORY SWITCHOVER FROM conduct & sustainability across the length & breadth of
OLD TO NEW TRAINING STRUCTURE – India Inc.
GRATITUDE TO THE MINISTRY
Given the fact that India is home to more than half of the
While a large number of initiatives have been undertaken for total Company Secretaries population across the globe,
the members, the students have been in hindsight as well. it seems all the more fitting that not only does the Institute
of Company Secretaries of India becomes the frontrunner
Given the ongoing situation of COVID-19 in the country, the of good governance for the entire CS fraternity globally
requirements of the provisions of the Company Secretaries but also that the Company Secretaries in the Indian
(Amendment) Regulations, for students to commence their mainland expand their professional possibilities and
Practical training within a period of six months from the explore new opportunities.
date of commencement of the Amendment Regulations
and the difficulties facing students in search of practical For as the late writer Munshi Premchand says and I quote,
training before 3rd August, 2020 are well understood.
""gm¡^m½` CÝhr§ H$mo àmá hmoVm h¡, 
In view of the requests received from students to extend Omo AnZo H$V©ì` nW na A{dMb ahVo h¡§&''
the period of commencing their practical training, and the
proposal placed before the MCA for granting an additional Happy reading !!!
time period of six months to students to begin their
training under previous training structure, we extend our
deep gratitude towards the Ministry for kindly acceding
to our request and extending the period of compulsory Yours Sincerely
switchover of training as prescribed under the Amendment
Regulations for another period of six months (i.e., upto 2nd
February, 2021). CS Ashish Garg
President, ICSI

6 AUGUST 2020 | CHARTERED SECRETARY

 INITIATIVES UNDERTAKEN DURING THE

RECENT INITIATIVES TAKEN BY ICSI

MONTH OF JULY, 2020
INITIATIVES FOR MEMBERS them electronically available on real-time basis, the Institute
of Company Secretaries of India had connected itself with the
WEBINARS CONDUCTED DURING JULY, DigiLocker platform of the Government of India. The initiative
was launched on 5th October, 2019 in the presence of the
2020 Hon’ble President of India. In addition to their identity cards
Webinars were conducted during the month of July, and Associate certificates, members can also now access
2020 on varied topics of professional interest for the and download their Fellow certificates and Certificates of
holistic development of our members, students and other Practice from the Digilocker anytime, anywhere.
stakeholders:
MEETING OF THE EXPERT GROUP FOR ICSI
 Life Skills for Success
NATIONAL AWARDS FOR EXCELLENCE IN
 International Webinar on Digitalising Corporate
Governance in a COVID-19 Age by CSIA
CORPORTAE GOVERNANCE, 2020
 International Webinar on Empowerment of the Company Considering the upcoming 20th ICSI National Awards
Secretary: International View for Excellence Awards, 2020, an Expert Group was
constituted under the Chairmanship of CS K Sethuraman,
TASK FORCE ON BANKING AND Group Company Secretary and Chief Compliance Officer,
Reliance Industries Limited, to finalize the questionnaires
FINANCE and evaluation methodology for the Awards. The meetings
The first meeting of the Task Force on Banking and Finance of the Expert Group were held on 27th July, 2020 and 2nd
was held on Tuesday, July 14, 2020 under Chairmanship of August, 2020 to finalize the questionnaire and evaluation
Shri D K Mittal, Former Secretary, Department of Financial methodology.
Services, Ministry of Finance to deliberate upon the views
to be submitted by the Institute to Reserve Bank of India on MEETING OF THE EXPERT GROUP FOR
the ‘Discussion paper on Governance in Commercial Banks ICSI CSR EXCELLENCE AWARDS, 2020
in India’.
Considering the upcoming 5th ICSI CSR Excellence Awards,
REPRESENTATIONS SUBMITTED DURING an Expert Group was constituted under the chairmanship
of CS J. Sridhar, Company Secretary and Compliance
JULY, 2020 Officer, Bajaj Auto Ltd. & Past President ICSI, to finalize the
During the month of July, 2020, the following suggestions, questionnaire, evaluation methodology and field assessment
views and representations were submitted to various parameters for the Awards. The meeting of the Expert Group
Regulatory Authorities: was held on 1st August, 2020 to finalize the questionnaire and
evaluation methodology.
 Views and suggestions of ICSI on the RBI Discussion
Paper on Governance  in Commercial Banks in India ANNOUNCEMENT OF ENHANCED
submitted to Reserve Bank of India on July 15, 2020. BENEFITS UNDER COMPANY SECRETARY
 Views and suggestions of ICSI on the Draft Pension BENEVOLENT FUND
Fund (Foreign Investment) Rules, 2020 submitted to
Department of Financial Services, Ministry of Finance on The Company Secretaries Benevolent Fund (CSBF) provides
July 18, 2020. safety net to the Company Secretaries who are members
of the Fund and their families in the times of distress. The
 Representation given to SEBI on July 29, 2020 in benefits accorded to the members have been enhanced as
connection with issuing clarification regarding the use of follows:
digital signatures w.r.t. authentication/certification of any
filing/submission made to stock exchanges under the  Annual income limit for deserving cases raised from Rs. 5
SEBI (Listing Obligations and Disclosure Requirements) lakh to Rs. 7.5 lakh.
Regulations, 2015 due to the COVID–19 pandemic.  Medical reimbursement limit for members raised
 Views and suggestions of ICSI on report of the SEBI from Rs. 60,000 to Rs. 75,000.
Social Stock Exchange Working Group sent to SEBI on  Education allowance for children raised from Rs. 40,000
31st July, 2020. to Rs. 50,000.
 Financial assistance to dependents in case of death
DOCUMENTS DOWNLOADABLE FROM under non-member category raised from  Rs.  50,000
THE DIGILOCKER PLATFORM to Rs. 75,000.
In the wake of digitization and in an attempt to issue  Medical reimbursement under non-member category
documents to all the members in a standard format and make raised from Rs. 30,000 to Rs. 50,000.

CHARTERED SECRETARY | AUGUST 2020 7

RECENT INITIATIVES TAKEN BY ICSI
ICSI ONLINE CRASH COURSES ICSI PARTICIPATED IN VIRTUAL
ICSI has been conducting various Crash Courses for EDUCATION EXPO ORGANIZED BY
members comprising 5 days of learning through web-based HINDUSTAN TIMES
lectures and subsequent assessment in online mode. The
ICSI has so far introduced various crash courses having ICSI has recently participated in virtual Education Expo
impact on the profession of Company Secretaries including organised by Hindustan times from 22nd June to 31st July, 2020.
Compliance of Securities Laws, Arbitration, IT tools for The main objective of participation was to create awareness
professionals, IPR, IBC and NCLT. In the month of July, 2020, amongst the students about the Institute and to sensitise
the Institute conducted two new crash courses on students regarding the recent changes like introduction of
CSEET Test etc. ICSI also participated earlier in one more
1) Corporate Meetings and virtual Education Expo being organised by Times of India.

2) Audits, Reports and Certifications FAQS ON MERGING OF JUNE 2020

to allow the members get a quick and relevant knowledge SESSION WITH TO DECEMBER 2020 CS
with regard to their roles in corporate meetings and as EXAMINATIONS
a company auditor, which also covered the impacts
of COVID-19. As June 2020 examination has been merged with December
2020 examination, many students are coming up with lot
INITIATIVES FOR STUDENTS of queries to the Institute pertaining to the examination. To
ease out the difficulties faced by such students, Institute has
STUDENT MONTH prepared a detailed FAQ comprising detailed information
regarding the December 2020 examination. Students can
July being the Student Month was filled with activities aimed at visit the website of the Institute for the FAQs.
not just connecting with the future professionals or generate
a feeling of oneness amongst them with the Institute but to RELAXATION FOR COMPLYING WITH THE
share dedicated moments with them. From Quiz contests
and Launch of special initiatives for students like online Mock REQUIREMENT OF PRE-EXAMINATION TEST
tests, Crash Courses, Revision classes to Special classes for AND ONE DAY ORIENTATION PROGRAMME
non-commerce students; from Classes of specific subjects to
online Soft skills development Programmes, from ‘Samadhan
FOR DECEMBER 2020 SESSION
Diwas’- Zero Grievance Day to Celebration of online Career In view of the difficulties faced by the students on account
Awareness Week, from World Nature Conservation Day to of the unprecedented crisis due to Corona Virus outbreak
Kargil Vijay Diwas the month had it all. Due to widespread in the country, institute has decided to temporarily relax the
Corona virus pandemic, all activities were organized through requisite of Pre-examination test and One Day Orientation
electronic mode. Programme as per details given below:

COMMENCEMENT OF ONLINE CLASSES (i) Students are temporarily allowed to enroll themselves
for Company Secretaries Examinations, December 2020
FOR DECEMBER 2020 SESSION OF Session, without complying the abovesaid two requisites.
EXAMINATION Such students are required to comply with the said
requisites on or before 20th November 2020.
During the Student month, many Regional/Chapter offices
commenced online classes uniformly on 8th July 2020 for the (ii) Students enrolled for Company Secretaries Examinations,
students appearing in December 2020 examination. Many June 2020 Session (now merged with Company
students are attending these classes and appreciating the Secretaries Examinations, December 2020 Session), are
initiative of online classes by the Institute. also allowed to complete the said two requisites on or
before 20th November 2020, if not complied earlier.
REVISION/SPECIAL CLASSES, MOCK (iii) In case students are unable to comply with the requisites of
TESTS CONDUCTED BY REGIONAL AND Pre-Examination Test and One Day Orientation Programme
on or before 20th November 2020, their examination
CHAPTER OFFICES enrollment requests shall be rejected and that 50% of the
Many Regional/Chapter offices also conducted online Examination Fee remitted by them shall be refunded.
revision classes/special classes/mocks tests for the students
of the Institute to facilitate them for preparing for the main CSEET TO BE CONDUCTED ON 29TH
examination. Such initiatives are very helpful for the students. AUGUST, 2020 THROUGH REMOTE
SAMADHAN DIVAS CELEBRATED ON PROCTORED MODE
19TH JULY AS ZERO GRIEVANCE DAY Taking cognizance of the ongoing situations, the ICSI has
decided to conduct the first CSEET on Saturday, 29th August,
The Institute also celebrated Samadhan Divas on 19th July, 2020 through Remote Proctored Mode instead of conducting
2020 as part of Student Month which is also known as zero the same from Test Centres. All eligible candidates would be
Grievance day. It was ensured by all offices of the Institute to allowed to appear for the test through laptop/desktop from
clear all grievances of the students on 19th July 2020. home/any such other convenient place.

8 AUGUST 2020 | CHARTERED SECRETARY

 RECENT INITIATIVES TAKEN BY ICSI
CARRY FORWARD OF CSEET FEES ICSI ACADEMIC COLLABORATIONS
PAID FOR AUGUST, 2020 SESSION TO WITH UNIVERSITIES AND ACADEMIC
NOVEMBER, 2020 SESSION INSTITUTIONS
In view of the requests received from students on account of The Institute has recently come up with a consolidated
lack of internet connectivity and other technical issues, and to Academic Collaboration proposal bringing multiple schemes
facilitate such candidates in the present times, the Institute has of ICSI such as signature Award, Study Centre scheme,
decided to grant benefit of carrying forward the credit of CSEET Ph.D. recognition, Faculty emplacement, Library scheme
fees paid by the candidates for the August, 2020 session to etc. under one umbrella. The main purpose behind this is
November, 2020 session. Candidates willing to do so can avail to sign a single Memorandum of Understanding (MoU) with
the benefit by submitting a declaration in this regard. the University or Academic Institution interested and partner
with them on various fronts simultaneously. The proposal had
ORGANIZED 2ND BATCH OF 15 DAYS been sent to 851 universities in India. Further the members of
E-ACADEMIC PROGRAMME INCLUDING ICSI have been requested to coordinate with the Universities
known to them for initiating the process of MoU to be signed.
08 DAYS E-EDP (3 DAYS E-GOVERNANCE This initiative has been undertaken to build synergistic
AND 05 DAYS SKILL DEVELOPMENT relations with these Academic Institutions for the benefit of
our members and students.
PROGRAMME)
Given the ongoing situations, all the short term trainings STUDENT COMPANY SECRETARY AND
organized by the ROs and Chapters in classroom mode were
discontinued. In view of the same and in order to provide the CS FOUNDATION E-BULLETIN
best possible services to the students during the period of The Student Company Secretary e-journal for Executive/
lockdown, the Institute had organized 1st Batch of 15 days Professional programme students of ICSI and CS Foundation
e Academic Programme including 08 days e-EDP (3 Days course e-journal for Foundation programme students of ICSI
e- Governance and 05 days Skill Development Programme) have been released for the month of June, 2020. The journal
from 17th April, 2020 to 19th May, 2020. Further, the 2nd batch is available on the Academic corner of the Institute’s website
of 15 days e- Academic Programme was organized by the at the link: [Link]
Institute started from 25th June, 2020 to 31st July, 2020.

05 DAYS ONLINE PROFESSIONAL SKILL CSEET E-BULLETIN

DEVELOPMENT TRAINING (PSDT) FOR The June issue of the CSEET e-bulletin covering the latest
CS TRAINEES AND ASPIRANTS update on the subject on the CSEET is also placed on the
ICSI Website. The same is available on the Academic corner
In order to build confidence among our trainees by enhancing of the Institute’s website at the link: [Link]
their skill set, and also to develop their functional competency journals/
in core and emerging areas, the Institute had conducted first
batch of 05 days online PSDT for the CS trainees from 2nd ICSI INITIATIVES TOWARDS GST
June to 6th June 2020. The objective of such training was the
capacity building of CS trainees, enhancing their soft skills, IT Initiated from April, 2017, 36 issues of the GST Newsletter
Skills and drafting skills etc. A total of 710 students successfully have been published in so far, with July, 2020 issue being
participated in the programme in the first batch. The Institute the latest.
has organized the second batch of PSDT from 11th July to 15th
July, 2020 in which 248 students had participated. IT INITIATIVES
EXTENSION IN THE PERIOD OF  Development of online platform for smooth and speedy
processing of member verification form, receipt of
COMPULSORY SWITCHOVER FROM OLD endorsement fee.
TO NEW TRAINING STRUCTURE  Development of new enrolment system in Student
As per the recommendations of the Council and subsequent portal to give services to student enrolled for June 2020
approval of the Ministry of Corporate affairs, temporary examinations pertaining to merging with December,
relaxations have been granted under Regulation 46BA and 2020 session. Approximately 74,000 students are getting
46BB of the Company Secretaries (Amendment) Regulations, benefited to utilize these services.
2020. Now the period of compulsory switchover of training
 Development of Complinity compliance registration portal
as prescribed under Regulation 46BA of the Amendment
Regulations has been extended for another period of six  Development of New process for ACS to FCS conversion
months i.e., upto 2nd February, 2021. under UDIN and updation of old data
Also, since students cannot start their practical training of  Data mining exercise of professional address mismatch
21 months without completion of 1 months EDP, in view of between ECSIN and Membership.
the ongoing situations they shall be allowed to complete 15  Installation and configuration of SSL certificate on student
days EDP in online mode and the remaining 15 days of EDP portal
in classroom mode within 6 months of starting their long term
training.  CSBF Dependent Updation in Membership Portal CS

CHARTERED SECRETARY | AUGUST 2020 9

 Launch Ceremony of Transparent Taxation - Honouring
the Honest Platform of CBDT in the presence of Hon’ble
Prime Minister, Shri Narendra Modi on 13th August, 2020

10 AUGUST 2020 | CHARTERED SECRETARY

 74TH INDEPENDENCE DAY
(AUGUST 15, 2020)
PAN INDIA CELEBRATIONS

CHARTERED SECRETARY | AUGUST 2020 11

 74TH INDEPENDENCE DAY
(AUGUST 15, 2020)
PAN INDIA CELEBRATIONS

12 AUGUST 2020 | CHARTERED SECRETARY

 Glimpses of ICSI Webinars

WEBINAR ON
“74TH INDEPENDENCE DAY – 2020”
ON 15TH AUGUST, 2020
Addressed by:
Shri Rajesh Verma, Secretary, Ministry of Corporate Affairs, Government of India
Shri Manoj Pandey, Joint Secretary, Ministry of Corporate Affairs, Government of India

Release of Flyer on World Senior Citizen's Day

CHARTERED SECRETARY | AUGUST 2020 13

 Glimpses of ICSI Webinars

WEBINAR ON
“74TH INDEPENDENCE DAY – 2020”
ON 15TH AUGUST, 2020

Release of ICSI Progress Report

Release of Compliance Software for PCS

14 AUGUST 2020 | CHARTERED SECRETARY

 Glimpses of ICSI Webinars

WEBINAR ON
“74TH INDEPENDENCE DAY – 2020”
ON 15TH AUGUST, 2020

Release of ICSI Publications

CHARTERED SECRETARY | AUGUST 2020 15

 Glimpses of ICSI Webinars

WEBINAR ON
RELEASE OF REPORT OF THE ‘‘COMMITTEE ON BUSINESS
RESPONSIBILITY REPORTING (BRR)’’ BY THE MINISTRY OF
CORPORATE AFFAIRS ON 11TH AUGUST, 2020

Addressed by:
Shri Rajesh Verma, Secretary, Ministry of Corporate Affairs
Shri Gyaneshwar Kumar Singh, Joint Secretary, Ministry of Corporate Affairs

WEBINAR ON
ICSI HYDERABAD CHAPTER 46TH FOUNDATION DAY - WEBINAR
ON “CORPORATE SUSTAINABILITY & GROWTH–BREAKING
BARRIERS” HELD ON 10TH AUGUST, 2020

SPEAKERS

Shri T Harish Rao CS Ashish Garg CS Nagendra D Rao

Hon’ble Minister of Finance, Telangana President, ICSI Vice President, ICSI

16 AUGUST 2020 | CHARTERED SECRETARY

 Glimpses of ICSI Webinars

WEBINAR ON
“CELEBRATION OF 19TH FOUNDATION DAY” OF
RAJKOT CHAPTER OF WIRC OF ICSI ON 17TH AUGUST, 2020

WEBINAR ON
“BENAMI TRANSACTION” BY GHAZIABAD CHAPTER
OF NIRC OF ICSI HELD ON 17TH AUGUST, 2020

CHARTERED SECRETARY | AUGUST 2020 17

 Glimpses of ICSI Webinars

WEBINAR ON
AWARD CEREMONY FOR “COURSE COMPLETION
CERTIFICATE” HELD ON 13TH AUGUST, 2020

WEBINAR ON
“3 YEARS OF GST JOURNEY SO FAR AND THE WAY FORWARD”
BY AJMER CHAPTER OF ICSI HELD ON 13TH AUGUST, 2020

WEBINAR ON
“ANALYSIS OF CRITICAL AMENDMENT UNDER COMPANIES
ACT,2013” BY BHILWARA CHAPTER OF NIRC OF ICSI HELD
ON 11TH AUGUST, 2020

18 AUGUST 2020 | CHARTERED SECRETARY

 Glimpses of ICSI Webinars

WEBINAR ON
CORPORATE GOVERNANCE AND LEADERSHIP: CREATING
SYNERGISTIC NEXUS & MOU SIGNING CEREMONY BETWEEN ICSI
& IIM JAMMU HELD ON 11TH AUGUST, 2020

SPEAKERS

CHARTERED SECRETARY | AUGUST 2020 19

 Glimpses of ICSI Webinars

WEBINAR ON
“OPPORTUNITIES FOR COMPANY SECRETARIES IN
EMPLOYMENT” BY GORAKHPUR CHAPTER OF NIRC OF
ICSI HELD ON 8TH AUGUST, 2020

Addressed by:
CS Dev Bajpai, Executive Director,Hindustan Unilever Ltd,
Shri Shiv Pratap Shukla, Hon’ble MP, Rajyasabha, Ex. Minister of State Finance

WEBINAR ON
47TH FOUNDATION DAY CELEBRATIONS OF ICSI
AHMEDABAD CHAPTER ON 4TH AUGUST, 2020

20 AUGUST 2020 | CHARTERED SECRETARY

 Glimpses of ICSI Webinars

WEBINAR ON
“COMPANIES ACT, 2013" BY BENGALURU CHAPTER
OF ICSI HELD ON 23RD JULY 2020

WEBINAR ON
FIRST FOUNDATION DAY OF PATIALA CHAPTER OF NIRC OF
ICSI ON TOPIC “IT LAWS, CYBER COMPLIANCE AND CYBER
SECURITY” HELD ON 22ND JULY, 2020

CHARTERED SECRETARY | AUGUST 2020 21

 Glimpses of ICSI Webinars

WEBINAR ON
“OPPORTUNITIES FOR CS IN CAPITAL MARKET” BY
BAREILLY CHAPTER OF ICSI HELD ON 17TH JULY, 2020

WEBINAR ON
“SECRETARIAL AUDIT” BY GUWAHATI CHAPTER
OF EIRC OF ICSI HELD ON 16TH JULY, 2020

22 AUGUST 2020 | CHARTERED SECRETARY

 Glimpses of ICSI Webinars

GLOBAL CONNECT
WEBINAR ON
"DIGITALISING CORPORATE GOVERNANCE IN A COVID-19
AGE" HOSTED BY CORPORATE SECRETARIES INTERNATIONAL
ASSOCIATION (CSIA) HELD ON 23RD JULY, 2020

SPEAKERS

Mr. Ranjeet Pandey Mr. Ashish Garg Mr. Benjamin Quinlan Mr. Alan Evan
Vice President, CSIA President, ICSI CEO, Quinlan & Associates, Exco Member, CSIA
Chairman, (FTAHK)

WEBINAR ON
“EMPOWERMENT OF THE COMPANY SECRETARY PROFESSION”
INTERNATIONAL VIEW HELD ON 24TH JULY, 2020

CS Ashish Garg CS Ranjeet Pandey Vice CS Nitin V Kotak

President, ICSI President, CSIA and Immediate Strategic Finance & Business
Past President of ICSI Consultant

CA Kunal Singhania CS LakshmiKant Garg CS Renuka Raman, Vice

Vice President, External Reporting Chairman, ICSI Overseas Chairperson, ICSI Overseas
American Express, New York City Centre, USA Centre, USA

CHARTERED SECRETARY | AUGUST 2020 23

GLOBAL CONNECT

Dear Professional Colleague,

The Institute in alignment with its vision “To be global leader in promoting good
Corporate Governance” is continuously working towards strengthening the profession of
Company Secretaries and advancement of global footprint of the Institute.

To achieve this goal, the Institute has decided to bring out an exclusive e-newsletter
“ICSI Global Connect” for its overseas members and students. The e-newsletter shall
cover all the latest international developments related to the profession, regulatory
changes, upcoming opportunities, events etc.

Highlights:

i. Regulatory changes from different jurisdiction across the globe

ii. Articles of professional interest written by members/professionals
iii. Opportunities for Company Secretaries globally
iv. Knowledge updates
v. Information/knowledge on Doing Business Globally or relocation of business
vi. Important regulatory changes in India affecting foreign investors

You are requested to share articles, write-ups, opportunities etc. at overseas@[Link] by

31st August, 2020.

Look forward to your kind cooperation.

Thanking You,

(CS Ashish Garg) (CS Ranjeet Pandey)

President Chairman
International Affairs Committee

24 AUGUST 2020 | CHARTERED SECRETARY

 Call for Articles

Call for Articles for publication in Chartered Secretary

– September, 2020
Corporates cannot achieve the highest levels of corporate governance overnight. Rather it is a gradual and an
ongoing process whereby the company becomes ethically compliant by adhering to the laws of the land and
diligently applying the various corporate governance practices provided under those laws. Introduced under the
Companies Act, 2013 so as to bring about an independent check in the working of the company by Company
Secretaries in Practice, Secretarial Audit helps to detect the instances of noncompliance and facilitates taking
corrective measures.
Acting as a measure of checks and balance to ensure adherence of good corporate practices by the company,
it helps to accomplish the organisation’s objectives by bringing about a systematic, disciplined approach to
evaluate and improve effectiveness of risk management, control and governance processes.
Apart from the Companies Act, the mandate of secretarial audit for bigger companies and submission of annual
Secretarial Compliance Report to stock exchanges have reposed enormous faith on the Company Secretaries.
Keeping the above and more in sight, the September, 2020 issue of Chartered Secretary will be devoted to the
theme “Expanding boundaries of Secretarial Audit”.
ICSI is inviting articles from scholarly authors on the above broad theme and the articles can cover various
areas viz.;
 Evolution of Secretarial Audit
 Two Decades Journey of Secretarial Audit from recommendatory to mandatory
 Secretarial Audit and Compliance Management
 Secretarial Audit as emerging factor in governance
 Secretarial Audit and CS Auditing Standards
 Secretarial Auditor- A Company Secretaries Identity and many more...
The article should have 2500 words minimum and should accompany with an abstract of 200 words. The article
may be sent to [Link]@[Link] latest by Tuesday, 25th August 2020.
We look forward to your co-operation in making the initiative of the institute a success.

CHARTERED SECRETARY | AUGUST 2020 25

AT A GLANCE
Charity governance – An ever 46
Articles P - 31 -evolving landscape!
Hemal Zobalia, Pankaj Bagri and Naman Shah
Strengthening National Governance:
I
32 n India, charitable organizations are usually formed as
The new age Governance Mantra public charitable trusts, charitable societies or not-for-
profit companies (known as ‘Section 8 Company’). Further,
Ashish Garg and [Link] Agrawal
the governance is stipulated under various legislations,

G overnance as a concept, as a practice and as a culture

cannot be bounded. To be put conclusively, it shall be
highly imprudent to restrict governance to the corporates
independent codes of governance issued by professional
bodies such as ICSI and respective bye-laws of the charitable
organizations. The not-for-profit sector in India is governed
of the country and believe that the other segments of the by Companies Act, Income-tax Act, Foreign Contribution
society can survive without its presence. The journey of Regulation Act, Registration of Societies Act and Indian Trust
attaining the highest standards of National Governance is Act. However, societies and trusts are also governed by various
one which entails and requires multifarious steps and actions state legislations in India, like Maharashtra Public Trust Act.
at multiple levels. Given the clarion call of the Hon’ble Prime Further, various changes are recently prescribed in Finance
Minister of India to make the nation self-reliant or to create Act, 2020 (such as issuance of a Unique Registration Number
an ‘Aatmanirbhar Bharat’, the need for strengthening all or URN) and various are in the draft stage (such as Draft CSR
the existing governance functionaries, mechanisms and Amendment Rules, 2020 and the Companies Amendment Bill,
2020). The article discusses various governance aspects laid
systems has been felt now more than ever. The need of the
down in aforesaid laws and the rules in making. The need of
hour is to accord enhanced significance to this very term
the hour is a genuine effort by all the stakeholders to ensure
to include those sections of society and economy whose governance at highest standards.
growth is intertwined to national growth to ensure holistic
development. Panchayati Raj in India; From 51
Governance for Gram Swaraj - 37 Grassroots to Global Standards of
Lessons from India Governance
M. K. Raghavan and Dr. P. P. Balan Dr. Manish Sitlani

P anchayati Raj in India is the greatest experiment in

democracy ever undertaken anywhere in the world or T he Indian system of Local self-governance is being popularly
termed as Panchayati Raj System across the country. Though
this system has its roots in ancient Indian tradition and Mahatma
at any time in history. Gandhiji’s desire was that the village
institution should be reconstructed according to the changed Gandhi also advocated the philosophy of Gram Swaraj, this
circumstances and requirements. The 73rd Constitution system of local self-governance first gained statutory recognition
Amendment Act passed in 1992 paved the way for the in 1992 through the 73rd constitutional amendment. Given the
formalization of the Panchayati Raj system. Even though constitutional validity in 1992, the basic objective of providing
the State Governments and Union Territories have enacted better governance to the rural masses through their enhanced
participation in governance process was somewhere lost.
legislation to give it operational dimensions, the growth of self-
With an idea to strengthen governance process at Panchayati
governing bodies as the third tier of government in the country
Raj Institutions across the country, Ministry of Panchayati
has been rather uneven and slow. Kerala has shown the way Raj initiated an e-Panchayat Mission Mode Project. As a part
and is regarded as a role model. There are a lot of constraints of this initiative, Ministry of Panchayati Raj has developed a
such as centralized motives, bureaucratic interventions and Panchayat Enterprise Suite (PES) that is a combination of 11
the like that hinder the movement towards Gram Swaraj. But applications creating a platform for e-governance in Panchayati
there are rays of hope as the ideals of Mahatma Gandhi lives Raj Institutions. This e-governance model is a clear reflection of
in the heart of the people of India. strategic vision behind it, and creates a very strong foundation
for global good governance practices for local self-governance
National governance through 42 in India. The Panchayats being the basic unit of administrative
sustainable leadership machinery, this Mission Mode Project would go a long way in
improving local self-governance in India through the Panchayati
Dr. Jacob Thomas Raj Institutions.

C reating an enabling environment for local level leaders to

excel in the 250,000 panchayats and 3,700 urban local
bodies is the role of national governance. This is where
The Governance Question Mark
Shivangi Praful Rajpopat
57

G
the PESTELD framework comes in. National Governance overnance is imperative in all walks of life especially in social
through sustainable leadership is the dexterous balancing structures. As company secretaries, corporate governance
of all the seven dimensions of PESTELD namely Political, is our foremost and singular priority. While routinely corporate
Economic, Social, Technological, Environmental, Legal failures are reported with plenty of faces and figures, at the
and Demographics. Sustainable leadership is the process root cause of all corporate failures is the absence of the will
of the greatest of all reflections occurring in the heads of all to adhere to the sound and ethical governance principles. The
leaders at the helm of affairs of the nation and the product is article evaluates many corporate governance failures and
excellence in national governance, measured on the global several unanswered governance questions, aiming to discover
ranking indices. the true spirit of effective governance.

26 AUGUST 2020 | CHARTERED SECRETARY

 AT A GLANCE
Anarchy versus Governance in 61 operational needs -- for resources, talent, systems, processes
– are the same as any others’. NGOs’ efforts to streamline
Corporate Domain and formalize processes have shown progress over time, but
Henry Richard internal processes often remain below optimum, with many

G ood Governance is about achieving the desired results still not using technology to its fullest potential. Experience
and achieving them in the right way. There cannot be thus far has revealed a need to build more trust between the
universal template for Good Governance as it depends on NGO sector and donors. When looking for a suitable NGO
cultural norms and values of the organisation and each partner, it is important to conduct a holistic assessment that
organisation must tailor its own definition of Good Governance. considers credibility, capability, on-ground impact, as well as
Good Governance is an ideal which is almost impossible the fit between the specific donor and partner, rather than
to achieve in its totality. In reality one can conspicuously relying on a standard set of metrics. Better communication and
notice Bad Governance in all spheres of society. Corporate mutual understanding of each other’s strength and constraints
frauds reflect Bad Corporate Governance. Good Corporate will lead to more fruitful efforts towards India’s national
Governance will always remain in theory and appropriate development.
for class room discussions in universities and management
institutes unless the leadership and key management positions Grass root role and responsibilities 78
in Organizations including Companies and Governments of Grama Sabha in Futuristic governance
are occupied by qualified, competent and enlightened
individuals who are committed to honesty, integrity, truth and
in India
righteousness Dr. S. Rajamohan and A. Sathish

Governance from Grassroot Level to

Global Level - An Indian Perspective
68 A vibrant Grama Sabha is important for the effective
functioning of Village Panchayats in transparency
administration and paving the way for public participation
Dr.V. Balachandran and Dr. Sudheendra Putty in the planning and implementation of schemes at local
level. The Grama Sabha provides an opportunity for

T he essence of democracy lies in the fact that the

governance shall be representative of the majority of
governed population. India is a country of huge rural masses
each and every villager to participate in decision making
at the village level. It enables a political platform to the
people in the villages to assemble and discuss their
and majority of its population still resides in non-urban areas. common problems and consequently understand the basic
Through its journey from non-constitutional “Panch-Pradhaan” requirements of the community, hence it is called as soul
system in ancient rural India, to landmark 73rd constitutional of self-government. The Grama Sabha can be the first
amendment, to the current phase of e-governance, local modern political institution where the actual democracy is
self-governance has witnessed considerable ups and beginning.
downs. With this backdrop, and with an idea to strengthen
governance process at PRIs across the country, Ministry
of Panchayati Raj initiated a e-Panchayat Mission Mode Banking Regulation (Amendment) 82
Project. The e-governance model designed for Panchayati Ordinance, 2020 - reforming governance
Raj Institutions in India is a clear reflection of strategic vision norms for co-operative banks
behind, and creates a very strong foundation for global good
governance practices for local self-governance in India. Abdullah Fakih
This is a one of its kind nationwide IT initiative introduced by
Ministry of Panchayati Raj that endeavours to ensure people’s
participation in programme decision making, implementation
C o-operative banks have played a key role in the economy
to channelize the savings of small depositors. However,
they are often plagued by issues of mismanagement and
and delivery lack of access to viable sources of capital. Given the recent
misgivings in the co-operative banking sector, apprehensions
NGO Governance and Why it matters 73 were raised by many quarters on their ability to keep investors’
money safe. At the heart of the issue lies the dual regulation
Ragini Menon and Anushree Parekh
policy applicable to co-operative banks in India with the RBI

O ver the past decade, charitable giving in India has grown

significantly. Foundations, high net-worth individuals, CSR,
and individual citizens collectively contribute around INR
having oversight over the banking function, and the state
registrars having oversight on operations and management.
In cases of mismanagement, this dual regulation policy ties-
70,000 Cr. What each of these groups has in common is that a up the hands of RBI, RBI's hands are tied as it is unable to
large part of their philanthropic capital is channelized towards seize control of the co-operative’s management to protect
charitable purposes through non-governmental organizations the interests of depositors. To remedy this situation, the
(NGOs). Given their central role in national development, Banking Regulation (Amendment) Ordinance, 2020 has been
understanding NGOs’ governance, management, and promulgated to extend RBI’s regulatory oversight over co-
operational structures is critical. Most NGOs in India are operative banks without diluting the powers of the state co-
relatively small, with 61% of organizations reporting an operative registrars. The Ordinance also enables co-operative
annual budget of less than INR 1 Cr. NGOs are distinct from banks to raise funds from their local area of operations. This
other types of organization in that they are mission-led and article takes a closer look at the amendments set-out in t
driven by impact, but what is underacknowledged is that their he Ordinance.

CHARTERED SECRETARY | AUGUST 2020 27

AT A GLANCE
A revisit to functioning of Competition 86 services excludes person obtaining goods and services for
commercial purpose. ‘Commercial purpose’ and ‘livelihood’
Commission of India during the pandemic being a question of fact, has not been defined in the Act but it
outbreak: some reflections may be inferred that commercial purpose may be considered
Dr. Susmitha P. Mallaya when goods have been purchased with an intent to resell or
for any other large-scale profit-making activity.
C ompetition Law is one of the outcomes of the liberalized
economic policies adopted by India which paved way for
the entry of many foreign entities in our country and venture
Force Majeure, et al –Is it a Cogent 101
into business activities in almost all sectors. In the wake of Line of Defence?
the COVID-19 pandemic, some countries have temporarily Vipul Ganda
exempted the scrutiny of anti-trust authorities pertaining to
collaborations of market players involving the procurement
and provision of essential products and services in order to B roadly, the doctrine of ‘force majeure’ is applied to a situation
where it becomes impossible for a party to undertake its
promises or contractual obligations in the wake of prohibitive
help businesses to sustain themselves. In India, Section 3 of
the Competition Act, 2002 deals with the aspect pertaining circumstances. The COVID-19 pandemic has triggered many
to anti-competitive agreement and its effect. Initially, the discussions in the context of Force Majeure. The provisions
CCI was not accepting any filing or submissions due to the pertaining to frustration of contract are contained in sections
complete lockdown announced by the Government of India. 32 and 56 of the Indian Contract Act, 1872, albeit with distinct
Later on, CCI updated its functioning by issuing several perspectives, which has evolved over a period of time in
circulars and notices. It can be expected that CCI will keep the context of the doctrine of force majeure. Courts in India
an eye to monitor any unusual business practices that is have applied a very high standard in relation to frustration of
detrimental to consumers. In case there is any gross violation contract on account of occurrence of a force majeure event.
of the law by the firms by indulging in cartel arrangement, This article discusses the doctrine of force majeure in light of
they can be penalised heavily by the CCI without considering judicial pronouncements, where the doctrine has been tested
the leniency application that may be filed under section 46 of and applied to determine whether there are valid grounds to
the Competition Act, 2002. declare frustration of a contract, and thus, void, on account
of ‘Force Majeure’.
Audit - Mechanism for enhancing 90 Analysis of some Court rulings against 105
Corporate Governance
Enforcement of Restrictive Negative
Dr. S. Chandrasekaran
Covenants against employees and
A udit is an independent, objective assurance intended to
add value and improve an organization’s operations.
Without a mechanism of effective statutory audit, the due
performing artists
Delep Goswami and Anirrud Goswami

R
diligence exercise for the prospective investors or joint venture estrictive covenants in employment/artist-performance
partners would have to be much more exhaustive. The article agreements are not enforceable and this article analysis
analyses three types of audits namely Statutory Financial some of the recent judicial decisions on the various aspects
Audit, Internal Audit and Secretarial Audit. As regards Internal relating to such negative covenants. The provisions of Section
Audit and Secretarial Audit, certain thresholds are prescribed 27 of the Indian Contract Act specifying that “agreement
for unlisted companies. The term Financial Institutions (FI) is
in restraint of trade is void” is also analysed. The article
one of the criteria for the purpose of statutory audit, whereas,
concludes that in relation to contracts of personal service,
the term Public Financial Institutions (PFI) is one of the
the Court does not seek to compel persons against their will
criteria for the other two audits, namely, internal audit and
to perform such contract since contracts of personal service
secretarial audit. The author has also suggested extending
the principle of Secretarial Audit of Material Subsidiary to require special knowledge, ability, skill or expertise, etc.
unlisted companies by making necessary amendments to the and are dependent on the personal will and volition of the
governing framework under Section 204 of the Companies employee or artist/performer.
Act, 2013 read with the rules made thereunder and added
that similar considerations may apply to Internal Audit under
Section 138 of the Companies Act, 2013.
Legal World P-109
n LMJ [Link] : Section 529(1) (c) of the Companies Act
Consumer Supremacy: Myth or Reality? 95 speaks about the respective rights of the secured creditors
M.G. Subramaniam and Suraj Subraman which would mean the respective rights of secured creditors
vis-`-vis unsecured creditors. It does not envisage respective
C onsumer supremacy may not be a reality but today’s
consumer is well informed and equipped with a powerful
tool called social media. Dissatisfied consumers can post
rights amongst the secured creditors.[SC]
n LW [Link] : The entitlement of respondent No.1 is under
their bitter experiences regarding a product or service a cloud of pending civil dispute. We deem it appropriate to
through social media which is a great platform to reach direct the dropping of the proceedings filed before the NCLT
out to millions with the click of a button. This was unheard regarding oppression and mismanagement under sections
of during the 80’s and 90’s. In the absence of internet and 241 and 242 of the Act.[SC]
digital era, consumers back then, had to resort to formal
written complaints to the concerned company or voice n LW [Link] : In other words the issue of maintainability
their displeasure by approaching consumer courts. Today’s of the Petition is still open and it will be decided finally after
consumer can file online complaints be it a damaged product, hearing the parties on merits. Therefore, we do not find any
or deficient service. Definition of consumer for goods and fault in the impugned order.[NCLAT]

28 AUGUST 2020 | CHARTERED SECRETARY

 AT A GLANCE
n LW [Link] : No permanent establishment has been set n Reporting to Stock Exchanges regarding violations under
up within the meaning of Article 5(1) of the DTAA, as the Securities and Exchange Board of India (Prohibition of
Mumbai Project Office cannot be said to be a fixed place of Insider Trading) Regulations, 2015 relating to the Code
business through which the core business of the Assessee of Conduct (CoC).
was wholly or partly carried on. [SC]
n Allowing Offer for Sale (OFS) and Rights Entitlements
n LW [Link] : The SLSC was rightly directed to issue the (RE) transactions during trading window closure period.
new Entitlement Certificate for subsidy to the limit of 50% of
total tax to the said Kotputli Unit of the appellant company; n Securities And Exchange Board Of India (Settlement
and the company was rightly directed to refund the amount of Proceedings) (Amendment) Regulations, 2020
subsidy availed in excess of 50% of payable and deposited n Transaction in Corporate Bonds/Commercial Papers
tax. [SC] through RFQ platform and enhancing transparency
pertaining to debt schemes
n LW [Link] : It is clarified that the Arbitral Tribunal shall
not be bound by the time line prescribed vide Order dated n Review of Stress Testing Methodology for Positions
September 25, 2019, if the proceedings are in the nature of with Early Pay-in
an international commercial arbitration. [Del] n Framework to Enable Verification of Upfront Collection
n LW [Link] : As Swingy has no role to play in the pricing of Margins from Clients in Cash and Derivatives
of the products offered by the Partners on the platform, no segments
prima facie case of contravention of the provisions of Section n Eligibility Criteria for Selection of Underlying Commodity
4 of the Act is made out. [CCI] Futures for Options on Commodity Futures
n LW [Link] : Based on the information provided by n Securities and Exchange Board of India (Prohibition of
the Informant and otherwise available in public domain, the Insider Trading) (Amendment) Regulations, 2020
prescription of eligibility criteria in the present matter, does n Manner and mechanism of providing exit option to
not appear to be unfair/discriminatory. [CCI] dissenting unit holders pursuant to Regulation 22(6A)
and Regulation 22(8) of SEBI Real Estate Investment
From The Government P-119 Trusts Regulations, 2014 (“SEBI (REIT) Regulations”)
n Manner and mechanism of providing exit option to
n Companies (Indian Accounting Standards) Amendment dissenting unit holders pursuant to Regulation 22(5C)
Rules, 2020 and Regulation 22(7) of SEBI Infrastructure Investment
Trusts Regulations, 2014 (“SEBI (InvIT) Regulations”)
n Notification of Special Courts in state of Assam under
section 435(2)(b) n Relaxation from compliance with provisions of the SEBI
(Issue and Listing of Debt Securities) Regulations,
n Extension of the last date of filing of Form NFRA-2 2008 (“ILDS Regulation”), SEBI (Non-Convertible
n Collection and Reporting of Margins by Trading Member Redeemable Preference Shares) Regulations, 2013
(TM) / Clearing Member (CM) in Cash Segment (“NCRPS Regulations”) and SEBI Circulars relating to
Listing of Commercial Papers.
n Use of digital signature certifications for authentication
/ certification of filings / submissions made to Stock n Guidelines for Issue and Listing of Structured Products/
Exchanges Market Linked Debentures-Amendments
n Clarification on applicability of regulation 40(1) of SEBI n Master Circular for Commodity Derivatives Market
(Listing Obligations and Disclosure Requirements) n Securities and Exchange Board of India (International
Regulations, 2015 to open offers, buybacks and Financial Services Centres) Guidelines, 2015 -
delisting of securities of listed entities Amendments
n Implementation of SEBI circular on ‘Margin obligations n Relaxation from compliance with certain provisions of
to be given by way of Pledge / Re-pledge in the the SEBI (Issue and Listing of Municipal Debt Securities)
Depository System’ Regulations, 2015 (ILDM Regulations) and certain SEBI
n Relaxation in timelines for compliance with regulatory Circulars due to the COVID -19 virus pandemic
requirements n Securities and Exchange Board of India (Investment
n Relaxation in timelines for compliance with regulatory Advisers) (Amendment) Regulations, 2020
requirements
n Extension of time for submission of financial results for
Other Highlights P-148
the quarter/half year/ financial year ended 30th June 2020
v STARTUP INDIA
n Relaxations relating to procedural matters – Takeovers
v NEWS FROM THE INSTITUTE
and Buy-back
v MISCELLANEOUS CORNER
n Recording of all types of Encumbrances in Depository
system v GST CORNER
n Relaxations relating to procedural matters – Issues and v ETHICS IN PROFESSION
Listing v CG CORNER

CHARTERED SECRETARY | AUGUST 2020 29

 Articles in Chartered Secretary
Guidelines for Authors
1. Articles on subjects of interest to the profession of company secretaries are published in the Journal.
2. The article must be original contribution of the author.
3. The article must be an exclusive contribution for the Journal.
4. The article must not have been published elsewhere, and must not have been or must not be sent
elsewhere for publication, in the same or substantially the same form.
5. The article should ordinarily have 2500 to 4000 words. A longer article may be considered if the subject so
warrants.
6. The article must carry the name(s) of the author(s) on the title page only and nowhere else.
7. The articles go through blind review and are assessed on the parameters such as (a) relevance and
usefulness of the article (from the point of view of company secretaries), (b) organization of the article
(structuring, sequencing, construction, flow, etc.), (c) depth of the discussion, (d) persuasive strength
of the article (idea/ argument/articulation), (e) does the article say something new and is it thought
provoking, and (f) adequacy of reference, source acknowledgement and bibliography, etc.
8. The copyright of the articles, if published in the Journal, shall vest with the Institute.
9. The Institute/the Editor of the Journal has the sole discretion to accept/reject an article for publication in
the Journal or to publish it with modification and editing, as it considers appropriate.
10. The article shall be accompanied by a summary in 150 words and mailed to [Link]@[Link]
11. The article shall be accompanied by a ‘Declaration-cum-Undertaking’ from the author(s) as under:

Declaration-cum-Undertaking
1. I, Shri/Ms./Dr./Professor........................... declare that I have read and understood the Guidelines for Authors.
2. I affirm that:
a. the article titled”............” is my original contribution and no portion of it has been adopted from any
other source;
b. this article is an exclusive contribution for Chartered Secretary and has not been/nor would be sent
elsewhere for publication; and
c. the copyright in respect of this article, if published in Chartered Secretary, shall vest with the Institute.
d. the views expressed in this article are not necessarily those of the Institute or the Editor of the
Journal.
3. I undertake that I:
a. comply with the guidelines for authors,
b. shall abide by the decision of the Institute, i.e., whether this article will be published and/or will be
published with modification/editing.
c. shall be liable for any breach of this ‘Declaration-cum-Undertaking’.
Signature

40 30 OCTOBER AUGUST I
2019 CHARTERED SECRETARY
2020 | CHARTERED SECRETARY
 ARTICLES
1
n STRENGTHENING NATIONAL GOVERNANCE: THE NEW AGE GOVERNANCE MANTRA
n GOVERNANCE FOR GRAM SWARAJ - LESSONS FROM INDIA
n NATIONAL GOVERNANCE THROUGH SUSTAINABLE LEADERSHIP
n CHARITY GOVERNANCE – AN EVER-EVOLVING LANDSCAPE!
n PANCHAYATI RAJ IN INDIA; FROM GRASSROOTS TO GLOBAL STANDARDS OF GOVERNANCE
n THE GOVERNANCE QUESTION MARK
n ANARCHY VERSUS GOVERNANCE IN CORPORATE DOMAIN
n GOVERNANCE FROM GRASSROOT LEVEL TO GLOBAL LEVEL - AN INDIAN PERSPECTIVE
n NGO GOVERNANCE AND WHY IT MATTERS
n GRASSROOT ROLE AND RESPONSIBILITIES OF GRAMA SABHA IN FUTURISTIC GOVERNANCE IN INDIA
n BANKING REGULATION (AMENDMENT) ORDINANCE, 2020 - REFORMING GOVERNANCE NORMS FOR CO-
OPERATIVE BANKS
n A REVISIT TO FUNCTIONING OF COMPETITION COMMISSION OF INDIA DURING THE PANDEMIC OUTBREAK:
SOME REFLECTIONS
n AUDIT - MECHANISM FOR ENHANCING CORPORATE GOVERNANCE
n CONSUMER SUPREMACY: MYTH OR REALITY?
n FORCE MAJEURE, ET AL –IS IT A COGENT LINE OF DEFENCE?
n ANALYSIS OF SOME COURT RULINGS AGAINST ENFORCEMENT OF RESTRICTIVE NEGATIVE COVENANTS
AGAINST EMPLOYEES AND PERFORMING ARTISTS

CHARTERED SECRETARY | AUGUST 2020 31

 Strengthening National Governance:
ARTICLE

The New Age Governance Mantra

While Governance as a thought and concept has been a part of each and every human civilization, yet good
governance has been the ultimate goal of each of them. Of late though the focus on corporate governance has
been immense yet it is a given fact that for any nation to achieve pinnacles of economic development and
success, the structure of governance is required to be strengthened at all levels and in all aspects. While
National Governance is a coalition of two words, its true sense is vast and multifaceted. This article is an
attempt to understand and analyze some of the significant facets which can act as perfect role players in
providing much needed strength and stimulus to the overall governance structure in the Indian scenario. The
future of Governance lies in taking a vertically and horizontally expansive approach and taking Governance
from Grassroots to Global.

that civilizations from thousands of years ago have been

studied and ranked on the basis of the manner in which they
were governed. The kings and rulers from Ancient to Medieval
times, too, have been found to be studied and analysed for
their Governance Structures, their governing mechanism and
the entailing strengths and flaws.

While earlier forms of businesses were singularly manned

or were undertaken through partnerships amongst groups
of few; the corporate form brought with it, the dawn of a new
Ashish Garg, FCS era, defining the roles of ownership and management. It was
President in this separation of their roles that the seeds of Corporate
Governance were sowed. Where on one hand, separate set
The ICSI
of laws were prepared to guide basically every aspect of
New Delhi corporate nature and functioning, the roles and responsibilities
president@[Link] of functionaries were thoroughly detailed and delegated on the
other. It was during this process of delegation that the Board
with its Directors came to the fore as the final authority not only
in decision making but in being the trustees of ensuring good
governance therein.

It is with the expansion of the entities, that the need was felt
to redefine these roles of ownership and management, and
in the process, the designation of a Company Secretary
also was highlighted immensely. Since then, both, Company
Secretaries or Governance Professionals as well as the
professional institutions have been on their toes to strengthen
the governance structures in the corporates.
Dr. Shyam Agrawal, FCS Governance – From Corporate to National
Past President
The ICSI H$mo {h ^ma… g_W©mZm§ {H$§ Xya§ ì`dgm{`Zm_² &
New Delhi H$mo {dXoe… gw{dÚmZm§ H$… na… {à`dm{XZm_² &&
info@[Link]
(What is too heavy for the strong and what place is too distant
for those who put forth effort? What country is foreign to a
man of true learning? Who can be inimical to one who speaks
INTRODUCTION pleasingly?)

Decoding Governance through History Taking cue from the above shloka of Chanakya Niti, if no
country is foreign to a man of true learning, how can any arena
The basic idea of governance rests with the process of of activity be far-fetched for an institution whose intent is to
governing a state or organization or any other entity; imbibe good governance in the heart and soul of the nation?
irrespective of their size, structure or composition. While
the word finds its historical background in the Old French The Institute of Company Secretaries of India (ICSI) with its
vocabulary, the thought and concept are evidenced in each vision, mission and motto has through its members and of
and every human civilization. Rather, it is fascinating to note, its own accord been pursuing initiatives aimed at taking the

32 AUGUST 2020 | CHARTERED SECRETARY

 Strengthening National Governance: The New Age Governance Mantra

ARTICLE
governance culture in the India Inc. to newer heights. However, structures in the sub-sets or the components of the national
while Corporate Governance pertains specifically to the governance system are strengthened, a truly world class
corporate entities established, reckoning the needs of the 21st national governance system cannot emerge.
century have dawned the realisation that governance, its scope
and the process of strengthening the existing mechanisms Panchayat Governance
and structures cannot be limited only to the confines of the One of the oldest system of local government, Panchayati
India Inc., just as Governance itself has never been limited to Raj as a political system finds its roots not only in the Indian
corporates mainly. mainland but quite a few South Asian Nations as well. As far as
the Indian scenario is concerned, the concept, its schema and
NEED TO PURSUE NATIONAL mechanism was duly incorporated in the supreme legislation
GOVERNANCE of the country, i.e., the Constitution via the 73rd Amendment
Act in 1992, also known as the Panchayati Raj Act which was
Good governance is possible only with a combination of both enforced on 24th April, 1993.
top-down and bottom-up approach. This holds true and is an
absolute must for good national governance and even further
for governance to travel from the grassroots to global level.
This pre-supposes the existence of a strong governance
mechanism through the entire hierarchy and across all the
components, given India’s federal structure.

The journey of attaining the highest standards of National

Governance is one which entails and requisites multifarious
steps and actions at multiple levels. While the macro concept
maybe of National Governance, but when bifurcated, aspects
brought to the fore are of the likes of

• Panchayat Governance,
• Charity Governance, As per the Constitution of India, Village Panchayats are
• Sports Governance, local units of self-government, working towards economic
development and ensuring social justice in their area. By virtue
• Technology Governance, etc. of this mandate, the Panchayati Raj Institutions (PRIs) in the
States have grown over the years and played a significant
Need for discussing National Governance role in achieving economic development and securing social
In the Indian society, the governing bodies and functionaries justice for all.
exist not only at the national apex level but also at the state
level, district level and then down to the level of panchayats A strong believer of strengthening local self-government
(villages). If the overall national system of governance has systems, Mahatma Gandhi was of the opinion that every
to be effective, efficient and sustainable, it must respect its village must be fully and completely empowered to deal with
constitution, the rule of law, free press; and at the same time, local issues. To quote the Father of the Nation, “when the
should be responsive as well as proactive for the security, Panchayati Raj is established, public opinion will do what
growth, well-being and development of its citizens at all levels of violence can never do”.
government. One of the important functions of Governance at
all the levels is not only ensuring the promotion and protection It goes without saying that the effective participation, discussion
of human rights, but also in ensuring both transparency and and decision making at Panchayat meetings is a key facilitator
accountability in the government functioning. of good governance. But a Panchayat can be effective only if it
is aware of people’s needs, functions in a democratic manner,
Apart from emphasizing on the governance at the grassroots, it undertakes participatory and inclusive planning, executes
is significant that present and future of governance is analysed schemes and projects effectively and is accountable to the
across the various segments and components which together people. In contrast, if the functioning of the Panchayat itself
make for the concept of National Governance as enlisted is unplanned, if decisions are not taken democratically, the
above. The need to bifurcate and deliberate upon these Panchayat will not be able to perform its role in the manner as
components in the Indian context arises because of a major is expected of it. Since, the most important decisions are taken
challenge compared to other countries which is the existence at the Panchayat Meetings, it is important that these be very
of a multi-cultural and multi-lingual society. well conducted.
It is with this thought that an attempt has been made to Given the scope for improvement, growth and development
understand the Governance equation in various components. in this area, a need had been felt to facilitate Governance
with a citizen-centric approach. With an intent to activate
NATIONAL GOVERNANCE – A MULTI- governance and development at the grassroot level and after
in-depth research and analysis, the ICSI had brought out a
THREAD SPUN UMBRELLA publication titled ‘Model Governance Code for meetings of
Recalling the slogan of our Hon’ble Prime Minister, “Minimum Gram Panchayats’ in the year 2017. The Code is a step ahead
Government, Maximum Governance”, it can very well in embedding the culture of good governance at the very initial
be understood that unless the governance systems and stage of governance functionaries.

CHARTERED SECRETARY | AUGUST 2020 33

 Strengthening National Governance: The New Age Governance Mantra
ARTICLE
While the ultimate goal of this Governance Code is to by NGOs who receive government grants because, “after all it
facilitate good governance through standardisation of is the tax payers’ money”. Noting that less than 10% of 35 lakh
secretarial practices, its introduction shall serve multiple NGOs file their audited accounts regularly, the government
purposes, including but not limited to facilitation of uniform had framed guidelines requiring NGOs and other voluntary
and standardised practices in conducting and convening the organisations to register with Niti Aayog for accreditation to
meetings, imbibing professionalism, streamlining systems and receive public funds.1
procedures, reduction in disputes, and detection of instances
of manipulation. More importantly, what is needed is not just a law to regulate
NGOs, but a comprehensive reform of the entire NGO
With technology expanding its base, extending the benefits of charity sector. This reform should include a new institutional
Information Technology and digital revolution to Rural India is mechanism to implement the law and reform already existent
the best way to create an environment wherein the knowledge institutions.
and resource gap at the level of the PRIs can be bridged
through structured programmes and other initiatives. Given the The  allegations  against many  charitable entities have been
fact that right process leads to right decisions, well informed eye openers, not only for the regulatory bodies or the public
stakeholders participating in the decision-making processes in at large, but  also  for professional institutions such as the
a transparent manner is a pre-requisite both for goal-oriented ICSI. Good Governance and a strong code of ethics has been
decisions as well as good governance in the context of PRIs.
the purpose, vision, mission and motto of the ICSI in India, while
All these and more along with an equally hands-on approach also aiming to be a torchbearer of the same internationally as
of the Professionals shall go a long way in strengthening the well.
governance structure at grassroots level or the ‘Panchayat
Governance’. Taking a leaf out of Corporate Governance, charitable entities
must also be mandated  to make full disclosures and
Charity Governance maintain transparency via online filing system and complete
Charity, alms, philanthropy have played their role in bridging digitisation.  And to implement this thought in its sheer
the gap between the disparities that have existed in the society exactness, the Model Code of Governance on Charitable
since ages. What began as a moral and ethical responsibility Entities had been rolled out by the ICSI in the year 2017.
found its future in the formation of dedicated organizations The Code laden with principles, all of which point towards
and institutions; entities which solely and wholeheartedly the ultimate goal of good governance, is intended at igniting
dedicated themselves to the social cause for which they had the much needed spark keeping in sight the ultimate goal
been established. of empowering national governance. Each principle of the
Code, touches upon a different arena of activity of these entities
In a large and rapidly developing country like India, charitable
entities  are significant drivers of national growth and while the code in totality aims to provide the governance
development. As they stand today in their varied formats, mechanism of the charitable entities of the nation, a  much
governed by different set of legislations,  they also  act as needed turnaround. This will hopefully fill a long overdue gap
ancillary bodies for the modern day corporates to dispense in their governance  to ensure that they remain true to their
with their social responsibilities.  However,  governance has purpose and play a positive role in scripting India’s double
always been a grey area due to lax monitoring in the Charitable digit growth story. The code, though voluntary in nature,  but
and the ‘not for profit’ sector undermining their positive when adhered  to in spirit  shall prove to be the perfect
purpose and  hampering the process of  socio-economic  roadmap for the Charitable Entities to reach the pinnacle of
development. good governance.
India has one of the largest NGO sectors in the world. The thought is to illuminate the path for  ‘Charitable  Entities’
The country has thrice the number of registered NGOs as as they endeavour  to achieve  good governance and assist
compared to registered corporates. NGOs are supposed to be corporates, public and the government in achieving the social
the backbone of India’s vibrant civil society. goals and responsibilities. 
The Supreme Court in one of the matters asked the Centre to Sports Governance
explore the possibility of a new law to regulate fund utilisation
Regarded as one of the largest industries globally in terms of
While the ultimate goal of this employment and revenue, the business of Sports is a multi-
Governance Code is to facilitate good billion dollar global industry propelled by enormous consumer
demand. The industry ranges from segments such as tourism,
governance through standardisation of sporting goods, sporting garments, to available opportunities
secretarial practices, its introduction in sporting management and sponsorship. It is seen across
shall serve multiple purposes, including the globe that sports as a full-fledged industry can and may
but not limited to facilitation of contribute about 1 to 5 percent of the country’s GDP.2
uniform and standardise practices in Given the growing might of the Indian economy and the
conducting and convening the meetings; country’s young demographics, India is fast emerging
imbibing professionalism; streamlining as a preferred venue for major sporting events such as
Commonwealth Games, Asian Games and World Cups of
systems and procedures; reduction in Hockey and Cricket. However, barring a few popular sports
disputes; and detection of instances of 1
[Link]
manipulation. 2
[Link]

34 AUGUST 2020 | CHARTERED SECRETARY

 Strengthening National Governance: The New Age Governance Mantra

ARTICLE
amongst them the biggest concern regarding the existing
bodies has been the absence of a system of checks and
balances, on the pretext of autonomy.
The need of the hour is to bring in a healthy level of control;
and yet at the same time, give sufficient autonomy to each
arm, each federation, each regulatory authority to formulate
and execute its own decisions. This could be done by clearly
outlining the rights and duties so as to cover up for the
challenge posed by these issues, thereby rendering the entire
system transparency. This will ensure the true democratization
of institutions doing away with nepotism and favouritism.

The above control can also be sought by way of an independent

regulator along the lines of Securities and Exchange Board of
India (SEBI), entrusted with the task of not only overseeing
the activities of governing bodies but also the national sports
federation and the state level sports federations. All this and
like cricket and shooting, not much popularity has been more can go a long way in strengthening the foundation for this
gained by other sports. Even a large amount of public and arena in the times to follow.
private investment in sports has not been able to accord any
substantial improvement. The reasons for the same can be The size and complexity of India’s sport
attributed to existing model of sports governance or rather the sector gives rise to four governance
lack of the same in the Indian scenario.3
challenges relating to lack of demarcation
The Indian Government has reiterated its commitment of roles and responsibilities, lack
towards promotion of sports and has laid emphasis on making
positive sports outcomes a strategic priority. According of professional approach, lack of
to this thought, as has been discernible in the initiatives differentiability between governance
like Fit India Movement, greater sports participation is and management; and lack of adequate
critical to the future health and productivity of India’s large accountability and transparency. And
population. This is driving demand for better sports systems,
facilities and inputs. even amongst them the biggest concern
regarding the existing bodies has been
With initiatives such as  Indian Premier League (Cricket),
Hockey India League, Indian Badminton League, Pro- the absence of a system of checks and
kabbadi, Indian Super League (Football) coming across as balances, on the pretext of autonomy.
economy drivers and even further with the professionalization
of Heritage sports events, the need is being felt to have a Technology Governance
dedicated Code which is not singularly applicable to a single The concept of Technology Governance is relatively new
sport or event, but caters to all aspects and is applicable and yet all the more validated in the ongoing scenarios of
universally across the entire Sports Industry. The idea is to complete dependency on Information and Correspondence
address the long pending issues of conflict of interest and Technology (ICT). The pandemic induced lockdown has
misuse of autonomy. witnessed a paradigm shift in the manner and functioning of
If the existing Indian sports system is to be understood from organisations globally. While paperless working environment
a governance point of view, the same is predominantly a was being promoted for long on account of the impact on the
federated model. Each sport is governed by different and natural environment, the same has become the new normal
autonomous sport governing bodies for each geographic area. of the present times, for reasons different altogether. Given
National governing bodies such as the BCCI or Hockey India or the dependency on the Internet and the Technology, it is
the All India Tennis Association are responsible for governing imperative that steps are in line to tie-up loose ends leaving
the sport on behalf of their member state sport associations. no scope for fiascos.
While the federated structure is common within many
successful sporting nations, India’s 28 states and 8 territories With corporate functioning globally shifting towards ICT,
far exceed countries such as Canada (13) or Australia (8) privacy and confidentiality are some of the major concerns
making it difficult and complicated for the national body to meet seeking to be addressed. However, Technology or Internet
the interests of each member states.4 governance should not be confused with  e-governance,
which refers to governments’ use of technology to carry out
The size and complexity of India’s sport sector gives rise to their governing duties.
four governance challenges relating to lack of demarcation of
roles and responsibilities, lack of professional approach, lack Considering the fact that no single person, company,
of differentiability between governance and management; and organization or government runs the Internet, rather it is
lack of adequate accountability and transparency. And even a  globally distributed network  comprising many voluntarily
interconnected autonomous networks. It operates without
3
[Link] a central governing body with each constituent network
[Link]
setting and enforcing its own policies. Its governance
4

governance-in-india/#:~:text=The%20Indian%20sport%20system%20is,bodies%20for%20
each%20geographic%20area. is conducted by a decentralized and international  multi

CHARTERED SECRETARY | AUGUST 2020 35

 Strengthening National Governance: The New Age Governance Mantra
ARTICLE
Digital Governance or e-Governance in India has steadily
evolved from computerization of Government Departments
to initiatives that encapsulate the finer points of Governance,
such as citizen centricity, service orientation and transparency.
The National e-Governance Plan (NeGP), takes a holistic view
of e-Governance initiatives across the country, integrating
them into a collective vision, a shared cause. Around this idea,
a massive countrywide infrastructure reaching down to the
remotest of villages is evolving, and large-scale digitization of
records is taking place to enable easy, reliable access over
the internet. The ultimate objective is to bring public services
closer home to citizens, as articulated in the Vision Statement
of NeGP.6

stakeholder network of interconnected autonomous groups One of the 31 Mission Mode Projects of the  National
drawing from civil society, the private sector, governments, e-Governance Plan; MCA21, the e-governance initiative from
the academic and research communities and national the Ministry of Corporate Affairs, Government of India is one of
and international organizations. They work cooperatively the biggest examples of Digital Governance.
from their respective roles to create shared policies and
standards that maintain the Internet’s global interoperability ROLE OF PROFESSIONALS AND
for the public good.5 PROFESSIONAL INSTITUTIONS – THE
However, even with the expansive nature of this arena, ROAD AHEAD
the role and impact at a nationally territorial level Given the clarion call of the Hon’ble Prime Minister of India
cannot be ignored. While India may have say in one of to make the nation self-reliant or to create an ‘Aatmanirbhar
the Global Governance entities, the same may seem Bharat’, the need for strengthening all the existing governance
insufficient in-house. The number of cyber-crimes functionaries, mechanisms and systems has been felt now
unreported usually have exceeded those reported and more than ever. All this and more have brought along the
both indeed clearly come across as a threat to good realisation that it is for this strengthening that not only the
governance. institutions but Governance Professionals have to step up
their roles and realise that greater responsibilities await their
Rather, at a macro level, these crimes can be believed
consideration and response.
to be hindrances in the path of nation’s growth and
development. All these and more obligate the need It is here that the role of Company Secretaries along with other
for a dedicated Technological governance structure professionals as well as professional Institutions become very
which not only provides stability to the governance and important as India moves to the next level, wherein there would
functioning of the internet but also smoothens the path be integration of all the components of governance including
of economic development by building greater trust and the various aspects of corporate governance.
transparency.
ñdY_©_{n Mmdoú` Z {dH${ånVw_h©{g &
DIGITAL GOVERNANCE – FUTURISTIC Yå`©m{Õ `wÕmÀN—>o`mo@Ý`Ëj{Ì`ñ` Z {dÚVo &&
SOLUTION TO PRESENT CHALLENGE (Besides, considering your duty as a warrior, you should not
More often than not, the concept of Digital Governance waver. Indeed, for a warrior, there is no better engagement
has been considered to be synonymous with Technology than fighting for upholding of righteousness.)
Governance or Internet Governance. While Technology and
Internet are the areas requisitioning strengthening measures in It is with this thought in sight and our ever expanding
the area of Governance; Digital Governance is the readymade base of professional duties and responsibilities, that the
reply or the sure shot answer to the challenges posed in the ICSI had prepared and released the Corporate Anti-
area of Governance on account of lack of transparency and bribery Code in 2017 to curb and control the supply
side corruption in the Indian corporate sector which
clear accountability.
was well appreciated by the Hon’ble Prime Minister,
Digital governance is an upcoming trend in the Indian Shri Narendra Modi.
constitutional assemblies as well. Digital governance is a clear Governance as a concept, as a practice and as a culture
cut procedure wherein accountability is established for digital cannot be bounded.  To be put conclusively, it shall be
strategy, implementation, and policy formulation. Certain highly imprudent to restrict governance to the corporates
standards or protocols are clearly stated in the strategy plan of the country and believe that the other segments of the
itself. When a government digital service methodology is society can survive without its presence. The  need of the
properly implemented, it helps streamline digital development hour is to accord enhanced significance to this very term  to
and takes out confusion and chaos in the day to day include those sections of society and economy whose
administration of the government where people are primarily growth is intertwined to national growth to ensure holistic
involved.  development.  CS

5 6
[Link] [Link]

36 AUGUST 2020 | CHARTERED SECRETARY

Governance for Gram Swaraj - Lessons from

ARTICLE
India
Ideas pertaining to Village Republics have been part of Indian ethos for a long period. Influenced by Gandhian
concepts of Gram Swaraj, it has achieved some measures of success after passing of the 73rd Constitutional
Amendment Act through the system of Panchayati Raj institutions. In the Federal structure, the empowerment
of local government is largely vested with the states and the union has an advisory role to play in terms of
providing a proper framework for uniformity. Some of the states have gone ahead with Gandhiji’s concept by
devolving 3Fs i.e. finance, functions and functionaries at the grass roots level. This article highlights the
overall activities carried out for strengthening the system in the country which has become a role model for
the East, South East Asian and African countries to emulate.

of persons elected (36 lakhs in Panchayats and Nagarpalikas)

and in terms of the empowerment at the grassroots of women
is higher than the entire population of Norway.

VISION OF MAHATMA GANDHI

Mahatma Gandhi advocated Panchayati Raj by way of a
decentralised form of Government where each village is
responsible for its own affairs as the foundation of India’s
political system. He said, “My idea of village swaraj is that it is
[Link]* a complete republic independent of its neighbours for its own
Member of Parliament-Lok Sabha vital wants, and yet interdependent for many others in which
Kozhikode Constituency dependence is necessary. Thus, the first concern of every
Kerala village will be to grow its own food crops and cotton for its
cloth”. He further added “any village can become a republic
calicutmp@[Link]
today without much interference. The individual is the architect
of his own government. The law on non-violence rules him and
his government. He and his village are able to defy the might
of the world. For the law governing every villager is that he will
suffer death in the defence of his and village honour”.

Gandhiji’s views on panchayats aptly indicates that he

wanted India to build on its growth post-independence from
the bottom. This has to be seen from the fact that the village
communities even in those days were more or less self-
sufficient and self-governing. It was also his desire that the
village institution should be reconstructed according to the
changed circumstances and requirements.
Dr. P. P. Balan*#
Senior Consultant AFTERMATHS OF 73RD CONSTITUTIONAL
Ministry of Panchayati Raj AMENDMENT ACT
Government of India It is in this background that a look into the various aspects of
New Delhi 73rd Constitutional Amendment Act of 1992 (Act) is required.
balanpp25@[Link] It is noticed that they contain provisions for devolution of 3Fs
ie. Funds, functions and functionaries to the panchayats for
the preparation of plans for economic development and social
justice in relation to the 29 subjects listed in the 11th Schedule
INTRODUCTION of the Constitution. The Constitutional Amendment was a
new era of local governance to realise the sublime version of
P anchayati Raj in India is the greatest experiment in
democracy ever undertaken anywhere in the world or at
any time in history. In terms of the size of the electorate, the
Gandhi’s Gram Swaraj.

The Act provides for a uniform three tier structure of

number of grassroot institutions (about 2.4 lakhs), the number Panchayati Raj system in the country. Election for a five-year
*
The views expressed are the personal views of the authors
term, convening Gram Sabha or people assembly, reserving
#
Former Director, Kerala Institute of Local Administration, Government of Kerala seats for women, SC’s and ST’s, constitution of State Finance

CHARTERED SECRETARY | AUGUST 2020 37

 Governance for Gram Swaraj - Lessons from India
ARTICLE
Commission and Election Commission as also constitution of Even though the state governments and
District Planning Committees are the mandatory provisions of UT’s have enacted legislation to give it
the Act to be carried out by the states. All the states and Union
Territories (UT’s) had passed their legislation in conformity with operational dimensions, the growth of
the Act within the prescribed time of one year starting from April self-governing bodies, as the third tier
24th 1993. This is the milestone in the history of Panchayati Raj of government in the states has been
in the country because it established a uniform pattern of local rather uneven and slow. Some states have
democracy across the country. It was expected that timely
elections to the panchayat would give sustainability to the gone far ahead in the implementation of
system; representation to the vulnerable groups and women the subject enlisted in the 11th schedule
would give representative character to their bodies. Further while some are still lagging behind. By
it was anticipated that State Finance Commissions would conducting regular elections, the local
devolve financial resources to them and District Planning
Committees would consolidate the plan of the district. It was bodies have been given permanency
expected that these provisions would surely give a new phase as entities of self-government with
of life to the Panchayati Raj system in the country. But it has specific role in planning for economic
not specified the powers and functions of Gram Sabha and development and social justice.
this has been entirely left to the discretion of States /UT’s as
devolution part of Panchayati Raj is a state subject.

Even though the state governments and UT’s have enacted LIMITATIONS AND CONSTRAINTS
legislation to give it operational simensions, the growth of The democratic decentralization process is essentially meant
self-governing bodies, as the third tier of government in the to ensure the collective mind for policy formulation, decision
country has been rather uneven and slow. Some states have making and effective implementation. It is an institutional
gone far ahead in the implementation of the subject enlisted mechanism to serve common good on a sustained basis.
in the 11th schedule while some are still lagging behind. By The expectation is that all this will ensure harmony, peace
conducting regular elections, the local bodies have been given and development at large. Paradoxically, the process in
permanency as entities of self-government with specific role actual, quite often tends to be decisive. To begin with this may
in planning for economic development and social justice. In happen at the stage of election itself when representative
totality, the intention of this amendment is to assign a position of the people is to be chosen. The stage of decision making
of command to the citizens in the democratic framework of the by the elected representative may also witness a series of
country. differences in opinion with more heat than light. Decision may
be seen as favouring some at the cost of others. Finally, at
Local self-government institutions in India have developed the stage of implementation, the element of inequality may
strength although they are characterized by several constraints again be coming on the surface where some are cared and
as well. They have acquired substantial legitimacy, one – they others are ignored. This kind of segmentation may run along
are recognized as an instrument of the government and two with communal, caste or class lines. Violence could be another
– they have created participatory structure of grass roots off shoot of this. Inequitable development might be another
democracy for the people. Across the country, we see more outcome. Though village system is a venue of inter-dependent
and more Panchayats moving away from the stereotype living, high level of mutual co-operation and general harmony
of being passive recipients of power devolved from above. to a great extent, the tendencies described above have not
Panchayats have also begun to challenge the fetters, real been absent. Therefore, it is high time to assess as to:
or imaginary, which prevents them from realising their full
potential. Those who thus succeeded have grabbed with both a) What extent satisfactory introduction of Panchayati
hands the opportunity to make a difference. In this context, it is Raj System has mellowed down or contributed to
important to note that they have become ‘government’ where communalism? and
they have worked like a government
b) What degree any violence has been quelled or promoted
and socio-economic inequalities have been reduced or
enhanced?

KERALA – ROLE MODEL IN PANCHAYATI

RAJ
Though Kerala had a reasonable and effective Village
Panchayat System for a long time and it had pioneered the
concept of District Council, it was never recognised for its local
governments either in the rural or urban areas until after the
73rd Constitutional amendment. Starting from October 2, 1995,
in a short space of less than two years, it adopted a big bang
approach to decentralization, the high watermark of which
was the launch of People’s plan on August 17,1996. Since
then Kerala has been the undisputed leader in strengthening
its local governments - both urban and rural. In rural areas,

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the Ministry of Panchayati Raj has ranked it as No.1 based on Kerala adopted a massive campaign during the IX plan (1997-
the Devolution Index independently assessed by Tata Institute 2002) known as “People’s campaign for IX plan”. At the outset,
of Social Sciences (TISS) in 2016. The table given below the government took the bold decisions of devolving 30%
indicates that Kerala is not only in the first position but is also of state plan fund to the local bodies. This was followed by
considerably ahead of rest of India the creation of proper environment for planning. Side by side
various capacity building activities have also been initiated.
Table-1 Gram Sabha became the fulcrum of all activities. Deliberate
attempts were made to ensure this participation of numerous
Devolution Index mass organizations, elected representatives and officials in
the capacity building programs initiated by Kerala Institute of
Rank State Index Local Administration (KILA).
1 Kerala 0.72
The entry point to decentralization in Kerala is participatory
2 Maharashtra 0.54 planning. Kerala has succeeded in providing a practical
3 Karnataka 0.50 methodology for participatory planning which attempts to
balance the need for participation with requirements of rational
4 Tamil Nadu 0.47 planning. Important stages of this methodology are outlined
5 Gujarat 0.45 below: -
6 Sikkim 0.41
i) Need Identification
7 West Bengal 0.40
8 Telangana 0.38 The identified needs of the community are narrowed
down in the meeting of Gram Sabha which is the elected
9 Haryana 0.38 constituency of Gram Panchayat. The decisions are
10 Madhya Pradesh 0.35 entered in the minutes and forwarded to the panchayat.
Gram Sabha has the power to prioritize the development
11 Rajasthan 0.34 needs of the locality, which is chaired by the elected
12 Andhra Pradesh 0.33 member and has an official as its coordinator.
13 Bihar 0.31
14 Tripura 0.30 Kerala followed the path of ‘Big Bang’
15 Jharkhand 0.30 approach by devolving power, finance
16 Uttarakhand 0.29 and functionaries at one go without
17 Uttar Pradesh 0.28 considering the capacities at the local
18 Himachal Pradesh 0.27 level. But to overcome this weakness,
19 Chattisgarh 0.27
Kerala adopted a massive campaign
during the IX plan (1997-2002) known
20 Odisha 0.25
as “People’s campaign for IX plan”. At
21 Assam 0.21 the outset, the government took the
22 Jammu and Kashmir 0.19 bold decisions of devolving 30% of
23 Punjab 0.15 state plan fund to the local bodies. This
24 Manipur 0.12 was followed by the creation of proper
25 Arunachal Pradesh 0.06 environment for planning. Side by side
26 Goa 0.04
various capacity building activities have
also been initiated.
Source: Devolution Index independently assessed by Tata Institute of Social
Sciences (TISS) in 2016
ii) Situation Analysis and Strategy Setting
The state governments are supposed to transfer the function,
functionaries and finance pertaining to the 29 subjects. But that Based on the demands emanating from the Gram Sabha
has happened very slowly in many of the states. But states like and based on the developmental data, both primary and
Kerala, Karnataka and Sikkim have gone ahead. Moreover, the secondary exhaustive development reports would be
state of Kerala has earned the credit of becoming the pioneer prepared and printed. This report describes the status in
state in decentralized planning. So, it is relevant to go into each sector of development with reference to available
the details of decentralized planning process that has been data analysis which highlight the problems and point out
institutionalized in Kerala, which has become a role model in the directions for further developments.
this regard.
iii) Development Seminar
Kerala followed the path of ‘Big Bang’ approach by devolving
power, finance and functionaries at one go without considering On the basis of the feedback from the Gram Sabha and
the capacities at the local level. But to overcome this weakness, the development reports, a one-day seminar held at the

CHARTERED SECRETARY | AUGUST 2020 39

 Governance for Gram Swaraj - Lessons from India
ARTICLE

Panchayat level would discuss the details with experts,  The Gram Panchayats have grown to a certain extent of
officials and activists for further additions and finalize offering self- rule for the village.
the report, which would be submitted to the Panchayat
committee for approval. The Panchayat committee will  Volunteerism has increased in all the rural development
decide on the projects to be undertaken for a particular programs.
year considering the economic and technical viability.
 Panchayats have full control over water supply, primary
iv) Formulation of Projects education, care of the sick, public roads, sanitation, public
Considering the approved development needs and the lighting and legal protection.
ideas thrown up from the three stages of discussions,
 The increased resource mobilisation helps the Panchayats
working groups constituted at the Panchayat level will
translate the suggestions into projects. There are eight to undertake activities beyond their assigned duties.
to ten working groups dealing with different sectors to
 Through multipurpose co-operative and entrepreneurship
prepare projects. Panchayat committee approves the plan
document and submits to the District Planning Committee programs of ‘Kudumbasree’, Panchayats are able to
(DPC) for final approval. enhance the livelihood and develop successful production
programs.
v) Plan Approval
 Panchayats are undertaking activities by using the
The plan approval will be done by the DPC, chaired by resources available at the local level without the
the District Panchayat President. It is with the support environmental degradation.
of technical advisory committees; plan vetting is done.
DPC has no power to change the project proposed by  Many of the disputes are settled at the local level through
the Panchayat. It can only ensure that the government conciliation.
guidelines are followed. The Administrative sanction is
given by the Panchayat once plan document is approved.  It has led to economic and social empowerment of women,
SC’s and ST’s.
For plan implementation, the processes of convening
meetings of Gram Sabha, constituting beneficiary  Peace and Non-violence are promoted through Gram
committees and monitoring committees must be followed Sabhas.
scrupulously. The concept of social audit has been
introduced for ensuring transparency and accountability
in implementation. CENTRAL GOVERNMENT INITIATIVES
i) Gram Panchayat Development Plan (GPDP)
LESSONS FROM KERALA IN A
Drawing lessons from Kerala experience on
GANDHIAN PERSPECTIVE decentralization and participatory planning, the Ministry
 Decentralization offers tremendous opportunities of basic of Panchayati Raj has initiated the preparation of Gram
governance reforms with a bottom-up approach. Panchayat Development Plan (GPDP) in accordance

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 Governance for Gram Swaraj - Lessons from India

ARTICLE
with Article 243G of the Indian Constitution. Mahatma one crore households out of poverty to make 50,000
Gandhi National Rural Employment Guarantee Scheme Gram Panchayats poverty free. Accordingly, convergent
(MGNREGS) has provided a significant breakthrough by action with Mission Antyodaya has been integrated into
statutorily empowering Panchayats to prepare plans of this scheme.
their own at an All-India level through a participating mode.
The fourteenth Finance Commission Grant awarded to CONCLUSION
the Gram Panchayats comes to Rs. 20,000 Crores which
is equivalent to grant utilized by the Panchayats under Mahatma Gandhi believed in the reconstruction of village
MGNREGS. Further, State Finance Grant, own resources, economy based on Gram Swaraj as an important pillar of
centrally and state sponsored scheme are all reaching to economic development in India. He advocated for that model
the panchayat account. Convergence of schemes under to be employment oriented rather than production oriented.
MP Local Area Development (MPLAD) and MLA Local He was convinced of the development of agriculture as a
Area Development (MLALAD) are also taking place. means of enlarging employment and emphasized on the small
The GPDP is prepared with the resources available industries rather than large ones. Considering Gandhi’s notion
from the above sources which has been visualized as a of development, the Panchayati Raj system in India has gone
comprehensive plan through the convergence schemes ahead with the ideals of Mahatma Gandhi. Most of the schemes
and resources. and programmes initiated by the centre and the states have given
a central role to the panchayats. The methodology adopted for
ii) Sansad Adarsh Gram Yojana (SAGY) implementation is largely participatory in nature. Still, we are
half way through the efforts. There are a lot of constraints such
Higher level intervention through the convergence as centralized motives, bureaucratic intervention and the like
of schemes identifying 3 Gram Panchayats in the that hinder the movement towards Gram Swaraj. But there are
Parliamentary constituency has caught the attention from rays of hope as the ideals of Mahatma Gandhi lives in the heart
far and wide. With the Gandhian concept of ideal village of the people of India. CS

or Adarsh gram, all the MPs in India have initiated this

costless programme. Pooling of various resources at REFERENCES:
the Panchayat level can bring substantial achievements
avoiding overlapping of schemes and wastage of money. 1. Gandhi M.K Village Swaraj, Navajeevan Publishing
Through policy advocacy, the MPs, as law makers are house, Ahmedabad 1962.
able to pay attention to strengthen the decentralization in
the country. 2. Mahipal, Panchayati Raj in India, Publication Division,
Ministry of Information and Broadcasting, Government of
India, 2016.
For plan implementation, the processes
of convening meetings of Gram Sabha, 3. Aiyar Mani Shankar, Panchayati Raj in India: The greatest
constituting beneficiary committees and experiment ever,The State of Panchayats A mid-term
monitoring committees must be followed review and appraisal,Ministry of Panchayati Raj, New
Delhi, 22nd November 2006
scrupulously. The concept of social
audit has been introduced for ensuring 4. Misra. C. R, Gandhian Economic Model as an Alternative,
transparency and accountability in Gandhi Gram Swaraj Decentralization Context and
Content (ed:) KILA 2015
implementation.
5. Ministry of Rural Development, MGNREGS Sameeksha
iii) Rashtriya Gram Swaraj Abhiyan (RGSA) orient black swan, 2012.
The Finance Minister, in his budget speech for 2016-17, 6. Vijayanand S.M, Social accountability and participatory
announced the launch of new restructured scheme of planning, Decentralized governance and poverty
Rashtriya Gram Swaraj Abhiyan (RGSA), for developing reduction (ed:) KILA 2005.
and strengthening the capacities of Panchayati Raj
Institutions (PRIs) for rural local governance to become 7. Venniyur Agit, Gram Swaraj and Panchayati Raj,
more responsive towards local development needs, Gandhian Perspective, KILA 2005.
preparing the participatory plans that leverage technology,
efficient and optimum utilization of available resources for 8. Vyas H M, Village Swaraj, M K Gandhi Navajeevan Trust,
realizing sustainable solutions to local problems linked 1962.
to Sustainable Development Goals (SDGs). The key 9. Wade, Village republics: Economic condition for collective
principles of SDGs, i.e. leaving no one behind, reaching action in South India, Hyderabad, Orient Longman ,1962.
the farthest first and universal coverage, along with
gender equality will be embedded in the design of all 10. [Link]
capacity building interventions including trainings, training
modules and materials. 11. [Link]
12. [Link]
iv) Mission Antyodaya
13. [Link]
In the Budget Speech for 2017-18, the Finance Minister
announced to undertake a Mission Antyodaya to bring 14. [Link]

CHARTERED SECRETARY | AUGUST 2020 41

 National Governance through sustainable
ARTICLE

leadership
A “7 P Model” is introduced as a framework for National Governance. Every nation has these “Ps” in varying
degrees. For example, Population or People as the first “P” forms the foundation of every nation, which may
be too many, too few, composed of old-aged people, less educated class etc. Then comes the second P of
-Poverty which is concerned with relative deprivation. There are rich and poor people in every nation. A
sustainable leader employs PESTELD framework as the essential dimensions of every challenge or decision
dilemma and the resultant solutions may be sustainable. Though India’s standing in the world rankings has
substantially improved with respect to “Ease of Doing Business”, it is way behind in many other parameters.
The article analyses the state of affairs and how sustainable leadership in the real sense can help in making
meaningful headway.

higher level of well-being to the residents. This governance

model is five years old now. There are similar models in
other states such as Hiware-Bazar village of Maharashtra,
Punsari village of Gujarat, Bellandur panchayat in Karnataka
in 2006, and Piplantri village in Rajasthan. Why no other
states are replicating these models in the panchayats of other
states will illustrate the importance of national governance
through sustainable Leadership. Governance requires first
and foremost, leadership skill. There are several panchayats
where there are elected members having high level of
leadership skills. However, they are not able to make another
Dr. Jacob Thomas*# Kizhakkambalam 20/20 model or Bellandur panchayat of 2006.
Chairman
Agrilex MSCS Ltd Leadership skills alone is not sufficient at panchayat level
Kochi to excel. An environment to excel is required, which the
drjacobt@[Link] leadership at the panchayat level may not be able to create.
Creating an enabling environment for local level leaders to
excel in the 250,000 panchayats and 3,700 urban local bodies
is the role of national governance. This enabling environment
BACKGROUND can be understood through the PESTEL framework, used in

A lexander Hamilton and his colleagues in The Federalist strategic management for external analysis.
Papers published in 1788, called upon the voters to
decide: “whether societies of men are really capable or not, of PESTELD FRAMEWORK
establishing good government from reflection and choice, or
whether they are forever destined to depend, for their political The various components of PESTELD framework are: -
constitutions, on accident and force”
 P – Political
Is the national leader of New Zealand better than that of
 E – Economic
South Korea or Ireland or Finland? During the COVID-19
time, leaders of national governments across the globe are  S – Social
being compared, for the decisions and non-decisions that are
impacting the wellbeing of the citizens. COVID-19 brought to  T – Technological
focus the purpose of national governance as well-being/quality  E – Environmental
of life with its four dimensions- material wellbeing, health and
safety well-being, community well-being and emotional well-  L – Legal
being. Media admire several woman national leaders as better
 D- Demographics
performers, primarily measuring them on these four dimensions
of quality of life of citizens. National Governance, led on these Political dimension
four dimensions can be understood as sustainable Leadership.
The first dimension in the PESTELD analysis, Political, is
In Kerala State there is a Panchayat, Kizhakkambalam, where the arena of politicians who are citizens having skills to work
an initiative in panchayat governance by 20/20 is bringing with people, influence public opinion, craft policies for larger
good of people and act as people’s representatives and
*The author is the former Director of Vigilance and Anti-Corruption Bureau and former spokespersons. They are the executives of governance from
Director General of Institute of Management in Government (IMG), State of Kerala. He is
also a recipient of President's Police Medal in the year 2016.
the President, Vice President, Prime Minister, Chief Ministers,
# The views expressed are personal views of the author
hundreds of Ministers, Mayors, down to the Panchayat

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 National Governance through sustainable leadership

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Presidents, who formulate policies, programs, budgets and ensure that the national institutions assure access, equally
implement them for the benefit of people. They are assisted to all segments of society and there is a sense of significant
by all the Civil service officers at the national, state and foreign inclusiveness, so that the nation sustains.
missions plus the defense forces in planning, organizing,
executing, and monitoring the policies that are converted to Technological Dimension
programs/schemes/projects.
Technological advancement has contributed single handedly
Sustainable leadership is the art of towards the overall development of mankind. World powers
influencing decisions of strategic are maintaining their superiority thanks to innovations
and technology. Even the green revolution that gave food
significance, affecting the quality of life sufficiency to India is a technological initiative at the national
and prosperity of present and future level. In the areas of Nuclear Technology, Space Technology,
generations.” Pharmaceutical technology, and information Technology, India
has great capabilities that is built as per national policy. For
Political leadership at national level has the overriding sustainable growth of the country, being at the forefront of
responsibility of implementing the provisions in the Constitution technology is an essential prerequisite. India has built up huge
in order to secure to all its citizens: research and technology capacity in its universities, IITs, NITs,
IIMs, National Research Organizations and even jugaad (frugal
JUSTICE, social, economic and political; innovation) is promoted by the National Innovation Council.
India has technological advancements as per recorded history
LIBERTY of thought, expression, belief, faith and worship;
and well-developed libraries in Nalanda, Takshashila and
EQUALITY of status and of opportunity; and to promote other centers of learning, which were destroyed by foreign
invaders. So integrating the traditional wisdom evolved in a
FRATERNITY assuring the dignity of the individual and the particular ecosystem, with the modern knowledge is also part
unity and integrity of the Nation. of sustainable leadership.
The biggest challenge of national Governance is to address
the fact of a small farmer/farm worker who has to work 941 National Governance for sustainable technology development
years to earn the same annual income of a senior executive has its foundations in education policy, training policy,
of a big company in India. This inequality has a few underlying research policy, science policy, and innovation policy. National
governance is to create enabling environment to bridge the
root-causes. Sustainable leadership in national governance
knowledge gaps and technology gaps for the nation to be a
is assuring social, economic, political justice and equality
technology powerhouse.
of opportunity for all citizens. Continuing inequality is one
of the causes of corruption, conflicts, extremism, crimes,
Environmental Dimension
environmental damages, protests and negativity in attitudes
among people. Therefore, securing equality for all citizens
Ecological/environmental dimension in national governance is
is the first priority of national Governance at the political a big challenge in this trying time of global warming/climate
leadership level, for the nation to be sustainable. If not, the change. India has the traditional teaching in its Vedas about
very same foundations of the nation will be at risk. the connection to nature. From the governance perspective the
words of Lord Buddha are very explicit: “to consume less and
Economic dimension to live in harmony with nature, understanding the natural laws,
and use nature wisely”. The directive principles of State policy
Economic dimension of national governance, in the PESTELD espouse practices in sustainable leadership while addressing
analysis, includes the fiscal and monetary aspects. Although several issues such as education, environment, cooperatives,
the production functions occur mostly in the private sector, biodiversity, etc. The leaders influence will certainly render a
Government policies make or mar the businesses. Just as positive impact at the intersection of economic, environmental
during the COVID-19 pandemic, the Indian Government and social contexts as recognizing the intricate systems,
announced several stimulus packages to sustain the interwoven with human values.
economy, the allocations to different economic sectors in
the national budget gives direction to the entire economic
activity. Sustainable leadership on the economic dimension Thus, the power in a governance system
is balancing the political interests of national leaders with the is anchored in universal virtues, values,
economic justice and equality of opportunity interests of all vision and purpose and leaders continue to
citizens.
influence on matters that are significant for
Social Dimension current as well as future generations.
Social dimension of the national governance, in the PESTELD Legal Dimension
analysis, finds expressions in protective discrimination to
socially disadvantaged groups and classes, social security Legal aspects of national governance of the country is vested
measures for ensuring support to marginalized groups, with Parliament, Executive and Judiciary. The Parliament
preserving the cultural values and social justice initiatives. enacts the law to give effect to the constitution, the Executive
The reach of the social and political justice and social security assures Rule of Law in all transactions and the judiciary
programs to the needy is still a matter impacting the health adjudicates the disputes by interpreting the law. Even now
of the democracy. It is the duty of the national leadership to 50% of the population may not have access to clear Rule

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 National Governance through sustainable leadership
ARTICLE

of Law from the systems free from corruption, and access BALANCING OF THE SEVEN
to speedy decisions on a petition to a court. If a petition is
given to a court of Law for a decision on granting voluntary DIMENSIONS
retirement, no decision may come even after retirement. Going National Governance through sustainable leadership is the
in appeals to the level of Apex court is still unthinkable to more dexterous balancing of all the seven dimensions detailed
than 50% of the population due to the cost and access factor. above. The competencies of leadership in national governance
The citizen-level knowledge/understanding of all provisions of in understanding well these seven dimensions and then
the Constitution and most laws affecting a citizen is also a big not neglecting any of them, determine whether it is ordinary
challenge for national governance, to secure real freedom to leadership or sustainable leadership.
all citizens.
Conceiving and articulating a vision that is the shared dream
of most citizens is the next competency, after the balancing-
National Governance for sustainable integrating competency of the PESTELD dimensions. The
technology development has its world leaders of the yesteryears from Alexander of Macedonia
to Ashoka, to Nelson Mandela about whom we still talk about,
foundations in education policy, training were referring to a dream that they articulated. The sustainable
policy, research policy, science policy, and leader engaged in national governance needs to understand
innovation policy. National governance is the present situation, where India stands among the comity
to create enabling environment to bridge of nations measured/ranked on several indices. India is 133rd
on Happiness index,78th in Corruption perception Index, 41st
the knowledge gaps and technology in Democracy index, 147th in Inequality index, 63rd on Ease
gaps for the nation to be a technology of doing business, 130 on Human development index, 177
powerhouse. on Environmental performance index, and 52nd on Innovation
Index. National governance then needs to have the clear and
specific vision of reaching the top 10 on the various indices
DIMENSION OF DEMOGRAPHICS in the next 5 or 10 years, through leadership decisions, if the
Demographics, the letter “D” in the word PESTELD is an country’s governance systems should carry any weightage in
important parameter. Here there is reliance on accurate the global map.
statistical data about citizens, while making national policies
and programs. A government program or decision should POPULATION EXPLOSION AND THE
not exclude an age group, income group, and consider the RESULTANT PROBLEMS
effects of the decision on rural/urban population, men/women,
educational attainments of the target groups, etc. If one were to take stock of the achievements of national
governance during the last 70 years, the four goals of the

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 National Governance through sustainable leadership

ARTICLE
constitution: justice, equality, liberty and fraternity continues to a poor-quality next generation. High proportion of relatively
be at quite a distance. Nation building is a challenge in India deprived population who are not invested with the best
with these four fundamental goals, in the democratic traditions, education, healthcare, and offer of career choices, tend to
unlike the leadership system in Russia, China, N. Korea, Iran have a feeling of powerlessness. With several schemes to
or Saudi Arabia. The rising population is eating away the reduce poverty, the bureaucrats or political leaders who decide
economic gains and widening the disparity. A strong leadership on the beneficiaries, funds and place of implementation gains
decision to check the population growth, considering the more power and eventually a master servant relationship
carrying capacity of the ecosystem is the most urgent need evolves around the political executive-bureaucracy-citizen
of national governance. Even though the ecological footprint interface. Judiciary having low accountability to citizen (we
of USA is very high, the resources available per capita there the people….) is another area of powerlessness of citizen with
would allow a higher quality of life to all its citizens. India low legal literacy. Involvement of citizen in decision making on
with lower resources of per capita land, water, and teacher matters of governance is low, despite, 11th and 12th schedule of
availability, can carry only a lesser population of higher the Constitution, resulting in a low-role-democracy.
well-being than USA. The environmental degradation by
encroaching into vulnerable ecosystems, wastes, migration, MAMMOTH TASK BEFORE NATIONAL
poverty, unemployment and unhappiness are all the result of
the population explosion much beyond the carrying capacity. LEADERSHIP TO TAKE INDIA TO
GOVERNING HEIGHTS
While the national governance takes firm steps to bring the
Pollution of environment, pollution of mind with dogmas,
population to below the carrying capacity levels, and secure
pollution of governance systems with corrupt practices and
to all citizens a comparable standard of living of the top 10
pollution of education system with alien wisdom suppressing
countries on happiness/wellbeing index, the nation needs
native wisdom are challenges affecting the physical and
to understand its major challenges, and strengths evolved
mental health of citizens.
through its long history and accentuate each one of the
strengths.
“Mandalisation of politics and society” since 1979 led to
continued fracturing of the Indian society thereby increasing
A seven-P model of national governance framework is given
social distance among sub-cultures. Being plural though
below with population challenge forming the base:
can be an asset; it is a big load on national governance, as
relative disadvantages may be continued in order to get the
Fig 1: - Major challenges of governance in India:7P Model.
reservation benefits perpetually. Pluralism by way of food,
languages, beliefs, race and orientation is a big challenge in
India compared to many other nations of similar size.
7. Planning Often called the implementation gap, the gaps existing between
6. Policy- the policy, programmes and people, whereby the benefits of
Program-People well-intentioned programmes are squandered make it appear
that governance is not effective. Planning from top continues
5. Pollution (contaminant) to be a big problem irrespective of the government formed,
whether by a strong national party or a coalition of political
4. Pluralism (fractured) parties. The elite persons doing the planning functions are far
away from the real aspirations of a fisherman in a coastal village
3. Powerlessness (dependent) in Kerala, or a farmer in the rain-shadow area of Tamil Nadu
or a farm worker of Bihar working in a Karnataka plantation
(migrant worker) or a taxi driver at Bapatla in Andhra Pradesh.
2. Poverty (vulnerable to promises)

1. Population (beyond carrying capacity) LET US WRAP-UP

There are many issues about which a national leader should
Source: Conceptualised by the author
be aware of and have the inclination to address. As many
issues are symptoms of a few underlying root causes, this 7
It is said that India adds half of Australia every year. The
P model of analysis of governance challenges throws light on
population growth is far too disproportionate vis a vis the
the sustainable solutions, that the national leadership should
capacity of the nation, which is unable to meaningfully educate/
focus on. The words of Thomas Jefferson are relevant here: “I
employ this addition, consequent to which the quality of the
predict future happiness for Americans, if they can prevent the
people asset tends to be poor. While India’s illiterates are more
Government from wasting the labours of the people under the
than the population of USA, this illiteracy affects the quality of
pretence of taking care of them.”
democracy and government. Not only that the high density of
population a burden on civic amenities (roads, railway, water,
In Federalist Paper 51, James Madison argues for checks
sewage, parks), but while the resources are depleted, they
and balances while justifying a national government as
are also not sufficient to meet the needs of new members and
“the greatest of all reflections on human nature”. Therefore,
improving the position with respect to the existing members.
sustainable leadership is the process of the greatest of all
The number of poor people in India is more than the population reflections occurring in the heads of all leaders at the helm of
of Russia, and they are vulnerable to promises and abuses. affairs of the nation and the product is excellence in national
Poverty leads to migrant labour, slums, health hazards and governance, measured on the global ranking indices. CS

CHARTERED SECRETARY | AUGUST 2020 45

 Charity governance – An ever-evolving
ARTICLE

landscape!
India being one of the few countries around the globe to mandate corporates to undertake Corporate Social
Responsibility (CSR) and include it as part of the Indian corporate law legislation, charity governance has
evolved rapidly in recent years. The pace of reforms and improvements in this sector has been picking up
lately. Currently, a couple of reforms and changes are in a draft stage and it remains to be seen how they impact
the ever-changing sector. In this regard, key among the expected regulatory changes are Draft CSR Amendment
Rules, 2020 issued by Ministry of Corporate Affairs (‘MCA’) inviting public comments and the Companies
Amendment Bill, 2020 prescribing certain changes in the CSR legislation. Apart from the above, the Finance
Act, 2020 has also stipulated amendments which are expected to digitize the process of claiming deduction
and recording of donations and detailed rules are expected to be released soon. The move is likely to reduce
malpractices in claiming deductions to a great extent.

Hemal Zobalia Pankaj Bagri Naman Shah

Partner–Global Business Tax Partner–Global Business Tax Senior Manager - Global Business Tax
Deloitte Haskins & Sells LLP Deloitte Haskins & Sells LLP Deloitte Haskins & Sells LLP
Mumbai Mumbai Mumbai
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INTRODUCTION globe to mandate corporates to undertake Corporate Social

Responsibility (‘CSR’) and include it as part of the Indian
S ince the olden days, charity has been established as one
of the fundamental values of human society. In the wake
of a pandemic, global anxiety, misery and unemployment, the
corporate law legislation. With growing international ties, India
has also seen an increasing presence as well as funding from
International Donor Organizations desirous of undertaking
need of charitable temperament has become more significant social activities in India.
than ever.
Over the years, charity has evolved from an individual level of Accordingly, need for adoption of charity governance in India
‘help thy neighbour’ to specialized macro organizations that by all stakeholders like donors, charitable organizations,
aim to service the global community. However, with substantial corporates, governments, and activists, is ever increasing.
funding and corporatization of charitable sector, various issues
and controversies have started to emerge leading to conflicting In India, charitable organizations are usually formed as
situations, raising a lot of issues around its governance. With public charitable trusts, charitable societies or not-for-profit
this, new, innovative and unconventional concepts of charity companies (commonly known as ‘Section 8 Company’).
have also emerged viz., social impact funding, incubation, etc. Further, the governance is stipulated under various legislations,
independent codes of governance issued by professional
To protect public interest, ensure transparency and help bodies and respective bye-laws of the charitable organizations.
organizations, the need for charity governance was felt by the
various stakeholders as well as governments. The code of governance issued by Institute of Company
Secretaries of India (‘ICSI’) in 2017 deals with various
aspects pertaining to charity governance such has charitable
THE INDIAN CONTEXT institutions having a clear visions and objective, formation
In the Indian context, charity governance has evolved rapidly of an effective governing body, and measures to ensure
in recent years. India being one of the few countries around the adequate disclosure, transparency, etc. Further, the code also

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suggests an accreditation process for charitable institutions i.e. The CSR regulations have laid down various governance
certification by independent professionals, to boost confidence related rules to ensure that corporates effectively discharge
among various stakeholders of such institutions. their duty of nation-building and, as such, do not misuse the
law to their advantage. Requirements to have a separate
Apart from the code of governance as mentioned above, CSR committee, CSR policy laying down the CSR vision and
various legislations prescribe governance aspects in India mission, etc., the CSR provisions and CSR Rules framed
from the standpoint of charitable institutions. The not-for- thereunder from time to time, have ensured that corporates
profit sector in India is broadly governed by following main follow an efficient, transparent, independent and consistent
legislations: approach in discharging their CSR obligations. Some of the
interesting self-governance related rules laid down under the
1. The Companies Act, 2013 exercises two - fold CSR provisions are worth noting here:
governance – one in the form of governing Section 8
companies and secondly on corporates giving donations  Project mode requirement : One of the expectations
and contributions to charitable institutions to discharge from the corporates is that they should be actively
their CSR obligations. involved in undertaking CSR projects and should not be
seen as merely cutting out cheques towards philanthropy.
2. The Registration of Societies Act, 1960 and the Indian In other words, corporates are expected to undertake
Trust Act, 1882 are central legislations for governance of CSR projects under the ‘Project mode’ requirement with a
societies and private trusts. However, societies and trusts defined strategy and measuring mechanisms. This in turn
are also governed by various state legislations in India, lays emphasis on impact spending in line with the CSR
like Maharashtra Public Trust Act, 1950 for charitable policy.
trusts and societies registered in the state of Maharashtra.

3. The Indian Income-tax Act, 1961 grants charitable While some large industry houses
organizations exemption from paying income-tax. To
obtain and retain the income-tax exemption, the Indian
voluntarily adopted principles of
Income-tax Act regulates the sector through its own Corporate Social Responsibility, in
governance related provisions, to avoid misuse of income- 2014, when the concept of CSR was
tax exemption. introduced and enacted, many viewed it
4. Foreign Contribution Regulation Act, 2010 is a as ‘mandatory charity’ and was met with
legislation which falls within the administration and considerable resistance for a legislation
purview of the Ministry of Home Affairs in India and is, in encouraging charity! However, since then,
essence, a security law to ensure that foreign donations companies have adopted the legislation in
received in India are utilized for their intended purpose
and not misappropriated / used against the national spirit and is instrumental in significantly
interest, in the guise of charity and donations. streamlining the sector.
Some of the critical governance parameters laid down under  Disclosure and transparency in CSR Policy : CSR
the above legislations are discussed in ensuing paragraphs: Rules state that CSR policy of a company should lay down
various social themes, including CSR projects, which a
CHARITY AND THE GOVERNENCE company plans to undertake, areas, specify modalities
of execution of such project, implementation schedules
UNDER CORPORATE LAW and monitoring process of such projects. This has greatly
The increased emphasis on governance in the not-for-profit increased transparency in activities undertaken by the
sector in the last decade or so is largely due to the changes corporates as well as independent institutions receiving
in the corporate law. It has gained significant recognition and donations/contributions from corporates as part of their
prominence as India became one of the few nations across the CSR expenditure. Further, the companies are also
globe to have enacted the provisions of CSR in its corporate required to upload the CSR policy on their official website.
legislation, which mandates all the corporates (beyond a
particular threshold) to contribute 2% of their net-profit towards  Administrative expense capped at 5% : In order
charitable and social objects. to ensure that funds are actually spent on grass-root
charitable activity, the legislation puts a cap of 5% of
The corporate law also governs charitable institutions formed overall CSR expenditure on administrative overheads and
as companies under Section 8 of the Companies Act, 2013. capacity building. This also ensures that corporates do
not disclose volunteering hours of the employees or other
Corporate Social Responsibility infrastructure related capacity building cost beyond 5% of
the total spend requirement and, indeed, actually spend
While some large industry houses voluntarily adopted money towards social projects.
principles of Corporate Social Responsibility, in 2014, when
the concept of CSR was introduced and enacted, many Section 8 Companies
viewed it as ‘mandatory charity’ and was met with considerable
resistance for a legislation encouraging charity! However, Apart from CSR legislation, the corporate law also governs
since then, companies have adopted the legislation in spirit Section 8 companies that are not-for-profit entities having
and is instrumental in significantly streamlining the sector. charitable objects under the corporate law in India. It can be

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 Charity governance – An ever-evolving landscape!
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From a governance perspective, Indian Trusts Act, 1882 lays
down general principles of rights and duties of settlors, trustees
and beneficiaries but does not contain a comprehensive code
or office for implementing and monitoring the governance for
charitable trusts. However, most state legislations contain
such provisions.

For example, in case of the Maharashtra Public Trust Act,

1950, considerable control and governance is ensured by way
of below key governance provisions:

 Powers to Charity Commissioner to make adequate

inquiries before granting registration;

said to be a more regulated and structured form of charitable  Approval of Charity Commissioner in alteration of the
institution as compared to others. In this regard, various checks objects of the trust;
and balances are evaluated by the Central Government
through powers delegated to Registrar of Companies while  Trustees of prescribed trusts (where annual income
granting the license and registration as stipulated under exceeds prescribed financial threshold) are required
Section 8 Company of the Companies Act, 2013 read with the to submit a budget showing probable receipts and
Companies (Incorporation) Rules, 2014. disbursements in the following year to the Charity
Commissioner;
From a governance perspective, Section 8 companies are
required to comply with a number of provisions and some of  The legislation contains adequate provisions for
the key regulations are as below: maintenance of books of accounts and auditing;

 Section 8 companies are barred from issuance of any  Further, adequate monitoring powers are granted to
dividends to its members. Hence, amount donated cannot Charity Commissioner for inspection and supervision,
be repatriated back. In other words, the funds once seeking explanations, issuing directions for proper
donated to a Section 8 company are required to be used administration of trusts, suspension and removal of
for stated charitable purposes alone; trustees, etc.

 It cannot alter the provisions of its memorandum or articles

except with the prior approval of the Central Government;
SOCIETY
A society is commonly known as an association of persons
 The Central Government may revoke the license of (seven or more persons) united together by mutual consent
such company if the company contravenes any of the to achieve a common purpose. With its genesis in the British
requirements of Section 8 of the Companies Act, 2013 or era to monitor anti-British movements, the law continues to be
the affairs are conducted in a fraudulent manner or in a applicable even today (albeit in a much friendly manner) to
manner prejudicial to public interest; monitor similar associations of arts, culture and charity. Similar
to trusts, there exists a central legislation as well as state
 The Central Government also has a power to order the level legislations with modifications. However, all societies
company to be wound-up or amalgamated with another in India have to be registered under the central legislation
Section 8 company in the interest of public,; of The Societies Registration Act, 1860 and many states
have prescribed several variations to the legislation. The
 Similar to other companies, Section 8 companies are main instrument which brings a society into existence is the
required to furnish financial statements and annual returns memorandum of association.
to Registrar of Companies every year.
From a governance perspective, the Societies Registration
Act, 1860 does contain certain provisions like filing of a list
TRUSTS of managing body, adequate documentation at the time of
Another popular form of organization and arguably one of the registration, etc. However, a monitoring and implementing office
oldest forms is a ‘trust’. As per the Indian Trusts Act, 1882, a / body is not prescribed. On the other hand, some states like
trust is an obligation annexed to the ownership of property and Maharashtra have entrusted the governance and monitoring
arising out of confidence reposed in and accepted by the owner. of charitable societies also to the Charity Commissioner under
The statues in the Indian legal framework concerning trusts the Maharashtra Public Trust Act, 1950.
are Indian Trusts Act, 1882 and other state level legislations
relating to trusts. For example, trusts situated in Maharashtra
are governed by the Maharashtra Public Trusts Act, 1950. THE INCOME TAX ACT, 1961
The Indian taxation regime provides for 100% income-tax
In general, public trusts have to obtain registration under the exemption on income earned by charitable institutions provided
relevant State Act, if any, by making an application to a Deputy the same is applied towards prescribed charitable objects of
or Assistant Charity Commissioner or any other official as per the charitable organization. However, this is subject to certain
the State legislation along with particulars as prescribed under conditions pertaining to registration, monitoring, investments
the relevant State Act. and governance. Hence, the Indian Income-tax Act,

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1961 (‘IT Act’) requires fulfilment of certain specific conditions misappropriated. In fact, as per the recently passed Finance
by all forms of charitable institutions seeking to avail the Act, 2020, increased governance and compliance requirements
income-tax exemption. are prescribed to ensure transparency and genuineness.
At the outset, the charitable institutions, in order to claim the Increased governance for charitable organizations -
aforesaid exemption are required to obtain registration under Recent Finance Act, 2020
the IT Act (section 12AA of the IT Act). Briefly speaking, the
procedure is as below: As mentioned, the Finance Act, 2020 has introduced new
governance and compliance measures for charitable
 The charitable institution is required make an application institutions which are briefly discussed below:
in prescribed form along with documents such as trust
deed / other instrument evidencing creation of a charitable  The budget speech stated introduction of a system of
institution, a brief note on the activities of such institution, issuance of a Unique Registration Number (‘URN’) to
etc. to the jurisdictional Principal Commissioner / all charitable institutions. Hence, it indicates the tax
Commissioner of Income Tax (Exemptions). department is desirous to maintain or record a central
repository of charitable institutions claiming tax exemption.
 On receipt of such application, the tax officer is empowered
to call for documents or information to satisfy himself  As against registration which was granted for perpetuity
about the genuineness of the activities. In certain cases, (until revoked or cancelled by tax authority), the registration
field visits are also conducted by tax officers to validate is now granted for a limited period of 5 years at a time.
the genuineness; Such periodic renewal of registration is expected to lead
 After being satisfied about the objects and the genuineness to a non-adversarial regime, and timely revisiting of facts
of the charitable institution, the tax officer passes an order and compliances for continuation of registration;
granting registration or rejecting the same, as he may
deem fit, based on his evaluation of the application and  The concept of ‘provisional registration’ is proposed
reasons recorded for his action. for new charitable institutions, which are not already
registered and have not started any activities. Such
Once the above registration is granted, the total income earned provisional registration would be valid for 3 years.
in a financial year by such charitable institution is required to Subsequently, such provisionally registered charitable
be ‘applied’ or ‘utilized’ for charitable purposes to the extent institutions are required to apply for 5 years’ registration
of 85% in the same year. However, adequate provisions exist within 6 months of commencement of activities or at least
for accumulating the income for ongoing / larger projects for a 6 months prior to expiry of 3 years;
period of 5 years (subject to certification by an auditor).
 Filing of periodic returns of donation and issue of certificate
Similarly, another application is also required to be made of donation to donors by the charitable institution is
for availing certificate u/s 80G of the IT Act, such that 50% inserted. While the specifics of the said reporting are
deduction is available to the donor while computing its tax
yet to be prescribed, it is expected to be an automated
liability.
process where the donors shall receive deduction of 50%
From a governance perspective, key conditions for claiming as per return filed by the charitable institutions.
exemption are as below:
The above new procedures are currently kept on hold amidst
 Charitable activities are in line with the object and are the COVID-19 scenario as the detailed process and guidelines
carried out in India; are awaited.

 The funds which are accumulated for ongoing / larger Hence, while regulatory legislations may be referred by some
projects are to be invested in specified / prescribed as lacking rigour, the IT Act ensures that adequate measures
investments which are essentially risk free/ low risk are in place to encourage governance and transparency while
securities; being largely non-adversarial to genuine trusts.
 Further, adequate checks are prescribed in the income-
tax legislation for transactions with related parties to FOREIGN CONTRIBUTION AND
ensure that property of the charitable institutions is not REGULATION ACT, 2010 (‘FCRA ACT’)
unduly or wrongfully used for the benefit of such persons;
The FCRA Act was enacted to ensure that ‘contributions’
 The tax officers are empowered to cancel registrations or ‘donations’ received from outside India are utilised for
based on various grounds like, activities not being genuine their intended purpose and not misappropriated in the guise
/ as per objects, audit of accounts not being conducted of charity and donations. The legislation falls within the
as prescribed, investment of funds in non-specified administration and purview of the Ministry of Home Affairs
investments, etc. (‘MHA’) in India.

Hence, significant governance and monitoring mechanisms As per the FCRA Act, no contribution from a ‘foreign source’
are imbibed under the IT Act to ensure that income-tax can be accepted without obtaining prior permission or
exemption is claimed by institutions genuinely undertaking registration under the said Act. Charitable institutions face
charitable activities and funds received as donations are not a robust scrutiny process from MHA, including field visits by

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 Charity governance – An ever-evolving landscape!
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The budget speech stated introduction changes in the CSR legislation. Some of the proposed changes
of a system of issuance of a Unique worth noting are as below:
Registration Number (‘URN’) to all  Set-off of excess CSR spend in succeeding years : If
charitable institutions. Hence, it indicates a company spends an amount in excess of the required
the tax department is desirous to maintain quantum of CSR, such company may set off such excess
or record a central repository of charitable amount against succeeding years.
institutions claiming tax exemption.
 Activities through trust / society not eligible? One of
the controversial interpretations emerging out of the draft
officials to prove the genuineness of activities conducted and rules is that CSR activities of a company being undertaken
use of funds from outside India. through registered trust or registered society is not covered
under the Draft Rules. While some experts speculate it to
From a governance perspective, the key registration and be an error, others believe it is a deliberate omission as the
governance aspects are as under: governance of trusts and societies are outside the purview
of MCA. If implemented as it is, numerous organizations
 The charitable institutions receiving foreign contribution will have to shift their structure to a Section 8 company if
are required to obtain either prior permission or five year they intend to receive donations from corporates as part
registration under FCRA. However, for obtaining a five of discharging their CSR obligations.
year registration, the institution must have a track record
of at least three years in its chosen field (spending of at  Impact assessment : In a welcome move, the draft rules
least INR 1 million in past three years); state that a company having obligation of CSR spending
beyond prescribed financial thresholds is required to
 In case of non-satisfaction of the said criteria, institutions
undertake an impact assessment for their CSR projects.
are required to follow the prior permission route. In this
regard, prior permission is granted for receipt of a specific  Higher onus on management for proper utilization : A
amount from a specific donor for carrying out specific greater onus is placed on management to ensure proper
activities/projects as against a blanket registration of 5 utilization of CSR funds.
years;

 Charitable institutions are not permitted to invest the

Apart from the above, impact of return of donation filed by
funds in speculative areas and no donation to political institutions introduced by the Finance Act, 2020 (discussed
parties is allowed by such charitable institutions. above) is expected to digitize the process of claiming
deduction and recording of donations. The move is likely to
Once the prior permission or registration is obtained, below reduce malpractices in claiming deductions to a great extent.
key governance criteria are prescribed under FCRA: The detailed rules are expected to be released soon.

 A quarterly intimation is required to be filed listing details NEED OF THE HOUR

of donation or contribution received;
India has always prided itself in its charitable spirit and the
 A comprehensive annual return is required to be filed values of giving to others. In today’s India, the values still
detailing the donation received and the manner in which hold and are carried out on a much larger scale. Hence,
the same was utilised. there is a need to bring about a comprehensive change
in the governance structure of charity in India to not only
When it comes to FCRA legislation, it is distinctive as the ensure monitoring, transparency but also to assist charitable
temperament of the legislation leans more towards national institutions. While many believe the ‘governing body’ is at
security rather than governance. However, the roving and odds with those governed, if undertaken rightly, it can be
exhaustive inquiries lead to considerable delays for genuine instrumental in helping and creating an atmosphere of ease
institutions in receiving funds. Hence, while the inquiry and and accountability.
checks are significant, parity between national interests on
one hand and charity-friendly governance on the other hand It is not only the responsibility of the government but also the
is the need of the hour. responsibility of charitable institutions themselves to ensure
that they adhere to higher standards of ethics and charity
governance. The release of ‘Code of Charity Governance’ is a
IN THE MAKING welcome move by ICSI for organisations desirous of achieving
The field of Charity Governance is an evolving field and the better governance and public confidence.
pace of reforms and improvements has been picking up lately.
Currently, a couple of reforms and changes are in a draft stage The need of the hour is a genuine effort by all the stakeholders
and it remains to be seen how they impact the ever-changing to ensure that the charity is done in the right spirit and correctly,
sector. In this regard, key among the expected regulatory governance is ensured and transparency is aspired so that
changes are Draft CSR Amendment Rules, 2020 issued by today’s India reflects our age-old values of giving to others not
Ministry of Corporate Affairs (‘MCA’) inviting public comments just as a short-term measure, but truly with focus on achieving
and the Companies Amendment Bill, 2020 prescribing certain long term financial inclusion. CS

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Panchayati Raj in India; From Grassroots to

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Global Standards of Governance
The system of Panchayati Raj has been in existence ever since India’s pre-independence days. Almost 70% of
the population of India live in the rural areas and the governance system in these panchayats (villages) is an
important component in the national governance. After nearly four and a half decades since inderpedence, the
73rd Constitution Amendment paved the way for the States to formally adopt the Panchayati Raj System. This
article is an attempt to explain the conceptual framework of the e-governance systems which can be used by
the Panchayats to achieve excellence in governance.

its roots in ancient India, the term “Panchayati Raj” has a

recent origin in Indian Modern History. This term was coined
during British administration in India (Gandhi Siga, 2014).
The term “Panchayat” is extension of Hindi word “Paanch”
meaning five, and the term “Raj” implies governance. Thus
the term “Panchayati Raj” literally means governance by
five people who are representative of, and accepted by the
others. Technically, it does not stand true in today’s time, as
“Panchayati Raj” system is not restricted to governance by five
people only, though it was technically also true in ancient rural
India, where five identified wise individuals (panch-pradhaan)
Dr. Manish Sitlani, ACS were accepted by the rest of the villagers to be the part of all
Head, School of Law the decision-making powers concerning the related territory.
Devi Ahilya University Though this system has its roots in ancient Indian Tradition
Indore and Mahatma Gandhi also advocated the philosophy of Gram
[Link]@[Link] Swaraj (i.e. Independent Governance of Villages), this system
of local self-governance was first constitutionalized in 1992
through 73rd constitutional amendment. This amendment was
an outcome of recommendations made by a large number
“India will progress only, when the people living in villages of committees and working groups constituted during 1957
become politically conscious. The progress of our country is to 1989 to look into the aspects of community development
bound up with the progress in our village. If our villages make and local self-governance in India with a more decentralized
progress, India will become a strong nation and nobody will be administrative approach. In current scenario, Panchayati Raj
able to stop its onward march.” Pt. Jawahar Lal Nehru System has been accepted in India as a system of governance
at grass roots level with village or gram being the basic unit of
governance. This system of governance broadly operates at
I. LOCAL SELF-GOVERNANCE IN INDIA- three levels including Village Level (Gram Panchayat), Block
BACKGROUND Level (Panchayat Samiti), and District Level (Zila Parishad).

T he essence of democracy lies in the fact that the governance Presently, this system of local self-governance has been
shall be representative of the majority of governed implemented in almost all the states of India, and all the union
population. Indian democracy is a reflection of philosophy territories excluding Delhi.
advocating governance of the people, for the people and
by the people. India is a country of huge rural masses and It was with the idea of making the participation of rural
majority of its population still resides in non-urban areas. This masses in governance process meaningful and effective, that
section of Indian society is the largest stakeholder, as well as Panchayati Raj Institutions (PRIs) were established. The core
contributor, of this largest unique democracy, comprising of a objectives behind establishment of this institutional framework
series of castes, beliefs and religions. Involvement of people at were:
the grass-roots level is the most important means of bringing 1. It should contribute to meaningful participation by the
about socio-economic development (Gandhi Siga, 2014). So, people in local development.
it is imperative to incorporate this important component of
Indian society in the governance architecture. 2. It should reduce inter-group economic and social
disparities and contribute to alleviate unemployment and
At the lower end of this democracy lies the Panchayati Raj
poverty.
system, comprising of a three–tier machinery including the
gram/ward (basic unit of Indian governance system), the block, 3. It should not affect adversely centre-state relations,
and the district. The Indian system of Local self-governance preservation of which forms the basis of our federal polity.
is being popularly termed as Panchayati Raj System across
the country. Though the system of local self-governance has 4. It should promote bottom-up planning.

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 Panchayati Raj in India; From Grassroots to Global Standards of Governance

PRIs. Following this, L.M. Singhvi Committee was constituted,

ARTICLE
II. PANCHAYATI RAJ INSTITUTIONS;
that recommended reorganization of villages and availability
THE WHIPPING BOY OF INDIAN of more financial resources for PRIs. The outcome of all such
GOVERNANCE recommendations was reflected in a boost for process of
As aforesaid, Panchayati Raj System, or what is technically democratic decentralization. Consequently, PRIs received a
constitutional validity with 73rd Constitutional Amendment Act
termed as local self-governance, has its roots in ancient
passed in 1992 and enforced since 24th April 1993.
rural India. Through its journey from non-constitutional
“Panch-Pradhaan” system in ancient rural India, to landmark
73rd constitutional amendment, to the current phase
of e-governance, local self-governance has witnessed
considerable ups and downs. Passing through the British Way back before 1993, the three-tier
rule in India, the panchayat system gained considerable machinery of Panchayati Raj Institutions
importance in the sphere of National Governance. On the (PRIs) was established with the basic
contrary, after India sought independence, the playground
for panchayat functionaries narrowed down considerably for objective of establishment of grass-roots
the want of political intent of Central and State Governments. democracy and ensuring greater people’s
Swinging between survival and sinking, panchayati raj system participations in political system of the
witnessed a drowning phase all across the nation, till the time country, in order to foster socio-economic
when this system was extended constitutional validity through
73rd constitutional amendment toward the end of the century. transformation in rural India. This
was popularly termed as ‘democratic-
Way back before 1993, the three-tier machinery of Panchayati decentralization’. The system also aimed
Raj Institutions (PRIs) was established with the basic objective
of establishment of grass-roots democracy and ensuring greater at strengthening local level governing
people’s participations in political system of the country, in order institutions in planning, executing and
to foster socio-economic transformation in rural India. This was monitoring the development initiatives of
popularly termed as ‘democratic-decentralization’. The system
also aimed at strengthening local level governing institutions in
the local community through involvement
planning, executing and monitoring the development initiatives of local masses.
of the local community through involvement of local masses. It
was initially the Balwant Rai Mehta committee that suggested
‘democratic decentralization scheme’ for ensuring participation Despite given constitutional validity in 1992, PRIs have not been
of rural masses in mainstream political administration of the able to deliver the desired outcomes. Though administratively
country, though the committee was basically set-up to look into and politically the face of governance in India changed from a
the working of Community Development Program and National ‘two-tier’ structure to a ‘three-tier’ structure, nothing changed
Extension Service, and make suitable recommendation for much as far as participation of rural masses in governance
reorganizing these activities. Though some of the states process is concerned. The third tier in the administrative
including Andhra Pradesh and Rajasthan initiated the process machinery, i.e. PRIs, ended-up being the agency of the other
of ‘Democratic Decentralization’ in their respective jurisdictions, two tiers, and implementing their plans and projects without
our then prime minister Pt. Jawaharlal Nehru considered this any contribution in planning and monitoring process. The basic
as a revolutionary and historical step towards democratic objective of providing better governance to the rural masses
decentralization nationally, and this initial period of panchayati through their enhanced participation in governance process
raj system was termed as golden period by George Mathew was somewhere lost.
(see Gandhi Siga, 2014), but this system started losing its
glory very soon somewhere in mid-seventies, and the same III. e-PANCHAYAT MISSION MODE
continued somewhere towards the end of eighties.
PROJECT; THE TURNING POINT
It was then in 1977, that Ashok Mehta Committee was With this backdrop, and with an idea to strengthen governance
established to look into the below- expectation performance of process at PRIs across the country, Ministry of Panchayati Raj
panchayati raj in India and making suitable recommendations initiated an e-Panchayat Mission Mode Project (e-Panchayat
for strengthening the same. This committee, as against MMP). The core objective behind initiating this project is
the recommendations of Balwant Rai Mehta Committee, to make PRIs adaptable to e-governance and help these
recommended a “Two-Tier Model”, and constitutional institutions to build related capabilities. As a part of this
protection of Panchayati Raj system. Though the initiative, Ministry of Panchayati Raj (MoPR) has developed
recommendations of the committee could not be implemented a Panchayat Enterprise Suite (PES) that is a combination of
due to certain reasons not worth mentioning here, but these 11 applications creating a platform for e-governance in PRIs.
recommendations brought a philosophical change in the These applications include Local Government Directory
attitude of the succeeding governments that started working (LGD), Area Profiler, Plan Plus, PriySoft, ActionSoft, National
towards strengthening the participation of rural masses in Asset Directory (NAD), ServicePlus, Social Audit, Training
political administration. As a result, G.K. Rao Committee was Management, and National Panchayat Portal. Panchayat
set-up in 1985 to look into issues relating to rural development Enterprise Suite is first enterprise suite for government entities
of the country. The recommendations of the committee that attempt to address the core common governance function
included; making district as the focal unit for planning and of panchayats under e-panchayat mission mode project of
executing development, and conduct of regular elections in ministry of panchayati raj.

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 Panchayati Raj in India; From Grassroots to Global Standards of Governance

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Source: [Link]
g) ServicePlus: It is a dynamic metadata-based service
A brief description of these applications is reproduced delivery portal, developed in order to help in providing
hereinafter: electronic delivery of all services in all States. The
functionality of the erstwhile Grievance Redressal
a) Local Government Directory (LGD): This application Application has also been subsumed into this Application.
aims at capturing all the important details of local
governments and assigns unique codes to these h) Audit Online: This application facilitates the conduct
governmental functionaries. Further, the application of online and/or offline audit of governmental bodies
also maps panchayats with assembly and parliamentary including Panchayats, Urban Local Bodies, Rural Local
constituencies. Bodies, etc.

b) Area Profiler: The basic purpose behind generating i) Training Management: This application aims at
this application is to capture geographic, demographic, facilitating the varied training needs of governmental
infrastructural, socio-economic and natural resources organizations including Rural Local Bodies.
profile of a village/panchayat. This application also
acts as a universal database for planning of all sectoral j) National Panchayat Portal (NPP): This dynamic
programmes, and it also provide the details of elected application has been generated to help each of the
representatives, etc. panchayats to share its information in public domain.

c) PlanPlus: This application aims at helping the k) Social Audit: This application is aimed at facilitating the
governmental bodies including Panchayats, Urban Local social audit process at Zila Parishad/Block Parishad/
Bodies and related line departments in planning their Gram Panchayat, and also entertains requests for reports
activities and preparing the Action Plans. of social audit.

d) PRIYSoft: This application facilitates the capturing of IV. OBJECTIVES OF e-PANCHAYAT

receipts and expenditure details of various PRIs on the
basis of voucher entries and automatically generates 8 MISSION MODE PROJECT
reports including Cash Books, Registers, etc. for PRIs. The key objectives of e-Panchayat Mission Mode Project are
to use ICT for:
e) ActionSoft: This application aims at monitoring physical
and financial progress under various projects/programs  Automation of internal workflow processes of Panchayats
undertaken in the light of Annual Action Plan.
 Improving delivery of services to citizens
f) National Asset Directory (NAD): This application aims at
capturing the details of assets created and /or maintained  Capacity building of Panchayat Representatives and
by PRIs, thereby helps in avoiding duplication of work. Officials

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 Panchayati Raj in India; From Grassroots to Global Standards of Governance
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 Social Audit VI. e-GOVERNANCE IN PANCHAYATI
 Transparency, Accountability, Efficiency and RTI RAJ INSTITUTIONS; THE GLOBAL
compliance of Panchayats PERSPECTIVE OF GOOD GOVERNANCE
 Improving Governance of local self-government
IN LOCAL SELF-GOVERNANCE OF INDIA
It was Mahatma Gandhi who envisioned an official governance
system in India with villages being extended an autonomy and
V. GLOBAL STANDARDS OF accountability for local development. Though India initially
GOVERNANCE rested upon highly centralized system of governance, but in
The concept of governance will always come in picture the course of brainstorming done by administrative authorities
wherever there are “those being governed” on one hand, and and in the light of recommendations made by a large number
“those governing” on the other hand. The context may be of committees and working groups, it has been realized that
different on the basis of the relationships between these two. until and unless administrative functions relating to rural
Simply speaking “governance” means the process of decision- India are delegated to PRIs along with related autonomy and
making and the process by which decisions are implemented accountability, the fruits of national development cannot ripen.
(or refused to be implemented). This formed the basis of Panchayati Raj System as envisaged
in the Constitution Amendment Act of 1992.
Since governance is a decision-making process and the
taken/not-taken decisions basically affect “those being As discussed above, even as the constitutional validity
governed”, the quality of decisions taken is largely affected extended to Panchayati Raj System could not bring the things
by the consideration/avoidance of those factors which may on place with desired pace, the Government of India (GoI)
be considered as the foundation pillars of good governance brought in National e-Governance Plan (NeGP) in the year
practices. Over a period of time, the concept of good 2006, with the aim to ensure the participation of masses in
governance has emerged through certain practices and their governance process, so that the governance landscape in India
experiences by a large number of institutions of national can be transformed as desired. NeGP has been introduced
and international repute and prominence. United Nations with the vision to “Make all Government services accessible
Economic and Social Commission for Asia and the Pacific to the common man, in his locality, through common service
(UNESCAP) suggested 8 parameters of good governance delivery outlets and ensure efficiency, transparency & reliability
including Participation, Consensus-orientation, Accountability, of such services at affordable costs to realise the basic needs
Transparency, Responsiveness, Effectiveness and Efficiency, of the common man.” e- Panchayat is one of the Mission Mode
Equity and Inclusiveness, and Rule of Law. It was observed Projects (MMPs) under national e-governance plan, currently
by UNESCAP that “Good Governance assures that corruption being implemented with a vision to empower and transform
is minimized, the views of minorities are taken into account rural India.
and that the voices of the most vulnerable in society are heard
in decision-making. It is also responsive to the present and The e-governance model designed for Panchayati Raj
future needs of society”. As noted in Sixth Report of Second Institutions in India is a clear reflection of strategic vision behind,
Administrative Reforms Commission, Govt. Of India (October, and creates a very strong foundation for global good governance
2007), one more dimension of good governance, “Strategic practices for local self-governance in India. The Local
Vision” has been added. The same has been depicted below. Government Directory (LGD) feature of Panchayat Enterprise
Suite (PES) is designed to keep in online mode all information
relating to local governments and revenue entities, with the key
Effectiveness and objective of maintaining up-to-date list of revenue entities at
Participation Responsiveness local level and local governmental bodies, and simultaneously
Efficiency
reporting their hierarchy and inter-relationship, thereby
Consensus ensuring participation, responsiveness and transparency in
Rule of Law Accountability the operations and making the functionaries accountable. The
Orientation
National Panchayat Portal, another feature of PES, offers a
Transparency Equity Strategic Vision dynamic web platform to all the panchayats across the country.
This portal, through its features like simple and user-friendly
interfaces and strong authentication mechanism, ensures
Source: conceptualised by the author equity to and participation by key stakeholders, and features
like easy organization and management of contents ensures
efficiency and effectiveness in the working of the system. Yet
another application of PES, Plan Plus has been designed to
The concept of governance will always facilitate decentralized planning process in local language,
thereby ensuring participation of rural citizens in planning and
come in picture wherever there are “those development process, making a way towards not only equity
being governed” on one hand, and “those based and consensus-oriented working, but also creating a
governing” on the other hand. The context room for strategic contribution by its key stakeholders. This
application also facilitates convergence of the flow of funds from
may be different on the basis of the different authorities including centre and states, thereby bring
relationships between these two. in transparency in the functioning and make the functionaries
accountable. The PriySoft application of PES captures all
inflow and expenditure of Panchayati Raj Institutions (PRIs)

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and facilitates automated generation of reports and registers so sound that it not only facilitates online and Offline audit of
by various stakeholders, thereby ensuring transparency and Accounts, but also encompasses feature of maintaining past
accountability with respect to working at the level of PRIs. audit records of the audited entity along with the details of
The ActionSoft application of PES is a multi-lingual android- team that undertook the said audit, there by ensures better
based application that operates in collaboration with PlanPlus transparency and accountability in functioning of PRIs in India.
and PriySoft applications. This brings in an integration and
coordination in the functioning of PRIs. Through its features VII. CONCLUSION
like capturing geographical coordinates of each asset and
facilitating decentralized reporting of activity execution, Panchayati Raj Institutions (PRIs) are such an important political
ActionSoft promotes transparency and accountability in innovation of India, for the establishment of democracy at the
the working of PRIs. Not only this, through its feature of grassroots and to ensure the greater participation of people in
milestone based progress reporting that captures stage wise the political system of the country. PRIs, the grass–root units of
progress of on-going activities, it ensures participation and local self-government have been considered as an instrument
responsiveness by the authorities, and their accountability. of socio-economic transformation in rural India (Gandhi Siga,
The Area Profiler application facilitates the PRIs to manage 2014). This system is a true reflection of decentralization of
their socio-economic and demographic information and details governance power by ensuring involving people at the lower
of infrastructure and amenities and functionaries. The collected end in governance process.
information acts as a centralized database, thereby ensures
equity to stakeholders and efficiency and effectiveness of the The e-Panchayat project holds great promise for the rural
functioning and processing by PRIs. The ServicePlus software masses as it aims to transform the PRIs into symbols of
application has been designed with the core objective of modernity, transparency and efficiency. This is a one of its kind
“Making all Government services accessible to the common nationwide IT initiative introduced by Ministry of Panchayati Raj
man in his locality, through common service delivery outlets, that endeavours to ensure people’s participation in programme
and ensure efficiency, transparency, and reliability of such decision making, implementation and [Link] e-panchayat
services at affordable costs to realize the basic needs of the Mission Mode Project of Government of India is focussed
common man.” The basket of ServicePlus is large enough to towards automating the functioning of more than 2,50,000
incorporate bundle of services including Regulatory Services, Panchayats across the country. The panchayat enterprise
Statutory Services, Developmental Services, and Consumer suite has been so designed to incorporate the automation of
Utility Services. This enforces the principles of Equity, all the key dimensions of working of PRIs, thereby is destined
Transparency, Responsiveness and Accountability in the to bring the local-self-governance in India to the level of global
functioning of PRIs. The Training Management application of good governance practices. The Panchayats being the basic
PES addresses to all the training needs of local government unit for planning and implementation of a large number of
bodies, thereby ensure greater participation of stakeholders schemes and services, this Mission Mode Project would also
and efficiency and effectiveness in the working of these local go a long way in improving local self-governance in India
bodies. Yet another application of PES, AuditOnline, facilitates through the PRIs.
financial audit of accounts of all the PRIs including Gram
Panchayat, Block Parishad and Zila Parishad, Urban Local “When the Panchayat Raj is established, public opinion
Bodies and associated Line Departments. This application is will do what violence can never do.” — Mahatma Gandhi CS

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 Panchayati Raj in India; From Grassroots to Global Standards of Governance
ARTICLE
REFERENCES: 17. Rashme, S. (2004), The challenge is to make panchayati
raj institutions vehicles for both governance and delivery.
Books and Publications
18. Shalini, R. (2002), Rural Development through Democratic
1. Bhattacharya, A. (2009), Local Self-Government and Decentralization, Deep & Deep Publication- New Delhi.
Parliamentary Democracy in India.
19. Second Administrative Reforms Commission, Government
2. Behera, M.C. (2005), Globlisation and Rural Development: of India (2007), Local Governance- An Inspiring Journey
Understanding New Development Paradigm. into the Future, Sixth Report, October 2007.
3. Baric, C. Bishnu and Shahoo C. Umesh (2008), 20. Sharma, S. (1997), Grass Root Politics and Panchayati
Panchayati Raj Institutions and Rural Development, Raj, Deep & Deep Publication, New Delhi.
Rawat Publication, Jaipur.
21. Swain, P.C, (2008), Panchayati Raj: The grassroots
4. Der Fakultät für Sozialwissenschaften und dynamics in Arunachal Pradesh, A.P.H. Publishing
Philosophie,(1997) Participatory Development and Local Corporation, New Delhi, 2008.
Self-Government Reforms in Rural India; Case Studies in
Rajasthan, Ph. D. Dissertation, April 1997. 22. United Nations Economic and Social Commission for Asia
and the Pacific, what is good Governance?
5. Gandhi, S. (2014), Evolution of Panchayati Raj in India
with special reference to Arunachal Pradesh, International 23. “Local Governance; An Inspiring Journey into the
Journal of Humanities and Social Science Studies (ISSN Future”, Sixth Report, Second Administrative Reforms
2349-6711) , Vol. I, Issue III (Nov. 2014), Pp. 225-240. Commission, Govt. of India (October, 2007)
6. George, M. S. (2007). An Introduction to Local Self Websites
Government in Kerala. Thiruvananthapuram: Swiss
Agency for Development and Cooperation. 1. [Link]/sites/default/files/[Link]

7. Gupta, N. (2018), Globalization and Challenges of 2. [Link]

Panchayati Raj Institutions, International Journal of
Academic Research and Development (ISSN 2455- 3. [Link]/
4197), Vol. 3, Issue 2 (March 2018), Pp. 957-960.
4. [Link]/
8. Joshi, R.P and Narwani, G.S, (2002), Panchayati Raj
in India, Emerging Trends across the States, Rawat 5. [Link]/
Publications, New Delhi-2002.
6. [Link]/
9. Kumar P. [Link] (2013), ICT in Local Self Governance: A
Study of Rural India, International Journal of Computer 7. [Link]/
Applications (0975 – 8887) Volume 83 – No 6, December
2013. 8. [Link]./

10. Majumdar, A.K. and Singh, B. (editors.) (1996), 9. [Link]/

Panchayat Politics and Community Development, Radha
10. [Link]/
Publications, New Delhi.
11. [Link]/
11. Mathew, G. (1994), Panchayati Raj From Legislation to
Movement, Concept-Publishing Company, New Delhi. 12. [Link]/
12. Ministry of Panchayati Raj, Government of India (2010), 13. [Link]
Establishing a Centre of Excellence for Local Governance-
Detailed Project Report, (Nov. 2010) 14. [Link]

13. Mondal, P., Defects Found in Panchayati Raj System in 15. [Link]
India
16. [Link]/important-institutions/drishti-specials-
14. Nath, V. (2010), Rural Developmemt and Planning in important-institutions-national-institutions/panchayati-
India. raj-institution-pri#:~:text=The%20interference%20of%20
area%20MPs,lies%20the%20failure%20of%20PRIs.
15. Rajgopalan, S. (2018), Evaluating the Panchayati Raj
Institutions at 25. 17. [Link]/Opinion/SvD5HQO5xTajYrqFj2zy9L/
[Link]
16. Rajshekhar, D. Local Self Government in India: An
Overview 18. [Link]

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The Governance Question Mark

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A new project in the state, another round of smart city projects and bids won, a new PE who would bring
in mega investments in the company, being on a panel discussion on reviving the economic growth, being
inducted as a Board member on one of the top 100 companies by market capitalisation, displaying sterling
performance with quarterly results or having an index impacting collaboration – these are our “ideal Dalal
Street” news, aren’t they? In a corporate world which is flushed with the star CEOs / CXOs taking the
world by storm, these create a flurry of excitement and emotion in the corporate community, aptly
represented on the greens or the red lines of the indices. But do we note the emotion in each of those
headlines – the emotion exemplifies the adrenalin rush of being relevant and being successful. Behind
each such news, is a race, is a burden of expectations, is the weight of leaving legacies. And to make this
news sound even more relevant, even more highly placed and even more ethical in pursuit, we indulge in
jargons that turn these stressful expectations into meaningful outcomes and tag it to the lofty ideal of
‘Governance’. This Article seeks to explore what real governance could mean, and whether, if at all, in the
pause inflicted by nature that we are all amidst, namely COVID-19, could we look at the ‘Governance’ ideal
with ‘Sustainable’ lenses.

and continues since time immemorial, is still far beyond our

realm of understanding.
What then, may we ask, is the role of the man who walks this
earth and is the most intelligent and evolved specie inhabiting
the planet? Is there any real objective with which we exist?
Or since we exist, we chose to view our own objectives with
binoculars that enlarge our egos, whilst being completely aware
that our objectives are far too miniscule and inconsequential
for this universe and its energies. Avay Shukla in his write up,
“Sermons in Stones, Lessons from Pathogens”, puts across
Shivangi Praful Rajpopat, ACS this thought of selfish human pursuit succinctly, “It took a
General Manger & Company Secretary microscopic, invisible virus to expose the wasteful, predatory
CLP Wind Farms (India) Pvt. Ltd. and unsustainable life style we have evolved - exposing the
Mumbai arrogance of a species which has been around for just about
[Link]@[Link] 80,000 years, but has already undone most of what nature and
a systematic evolution process had achieved in the millions of
years which preceded it. Man is the only living thing which has
the power to alter its external environment, and we have been

T he great American poet Henry Wadsworth Longfellow wrote at it, with a vengeance, ever since the Industrial Revolution -
“The lives of the great men all remind us, we can make our ravaging our forests, our oceans and rivers, pushing species
lives sublime, and, departing, leave behind us, footprints on the into extinction, poisoning the air, even cluttering space with
sands of time.” Centuries and ages have passed since human more than 5000 objects. All this in the never-ending pursuit
race has engaged in its quest for achieving higher planes of of pleasure, convenience, gluttony and greed. Homo sapiens
mortal existence, incessantly driving itself to do better and have been behaving as if there was no tomorrow. But the
search for new ways for making a meaningful contribution Corona virus has now shown us that ugly tomorrow - one
to humanity. Essentially, therefore, each of us in this lifetime, which will be the last if we do not change our lifestyles and
is looking to do something worth our salt, so that we could frenzy of consumption. Those who die of the virus may well
believe that we would live through our contributions much turn out to be the lucky ones.”
beyond the realm of where our physical presence is or even
when it would cease to matter. However, in this admirable and In just the last 6 months, the entire world economy has lost
outstanding desire to leave a mark, which may also be likened much of what it created in last ten years, and estimates say
to being noble and novel, we have indeed forgotten, that we that we will be struggling for well over another few years, before
live in a planet which has since time immemorial sustained we return to the pre-Pandemic world, lifestyle and economic
and continues to harbour, forms of life far and beyond what we growth. While this means that many of us may not be able to
have been able to study or understand. Every story around the indulge in the copious over-consumption we are used to since
evolution of mankind or life on this planet is a ‘theory’ which the turn of the century, it also means that all the social cost
is developed, then propounded or thereafter extrapolated to that we have inflicted on nature and its resources over the last
understand the perspective of that researcher who created it decade to meet all those GDP targets, have been lost forever,
or the student who deep-dives into it; however, the ways of the to no avail. The moot question that, therefore, arises from this
Universe and the way its energies nurtures nature, fosters life, discussion is whether the earth has enough of what it needs

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 The Governance Question Mark
ARTICLE
now and whether it is really necessary to hold the growth flag criminal penalties for non-compliance. The SOX compliance
in hand and continue in this never – ending relay, exhausting require that all applicable companies must establish a financial
our mental and physical energies, as also precious social accounting framework that can generate financial reports that
and natural resources. To satiate the desire to win this race, are readily verifiable with traceable source data. This source
against no other species but our fellow human beings, we are data must remain intact and cannot undergo undocumented
building structures around it which are built on lofty ideals and revisions. In addition, any revisions to financial or accounting
high values, but sadly which cannot hold their ground to the software must be fully documented as to what was changed,
very race that gave birth to them. why, by whom and when. Additionally, the Financial Accounting
Standards Board of the United States substantially raised
GOVERNANCE OR JUST NOTHING BUT its levels of ethical conduct. Moreover, company boards of
directors became more independent, monitoring the audit
THE NAME OF IT? companies, and quickly replacing poor managers. These
The birth of modern-day corporate governance norms and its new measures were important mechanisms to spot and close
requirement is often linked to the Enron scandal of 2002. It loopholes that companies have used to avoid accountability.
involved the most known names of the time; most importantly, Nonetheless, the Enron scandal was not the last one obviously,
the Enron Corporation, referred to as the Wall Street darling and and since then, the failures of WorldCom, Lehman Brothers,
Arthur Anderson, one of the five largest accounting firms in the and Washington Mutual have far surpassed it.
United States at the time, with a reputation for high standards At this point, we must also examine, the Indian simile of the
and quality risk management. To this day, it is a puzzle, how Enron scandal, the Satyam scandal of 2009. Without going
such a powerful business, one of the largest companies in the into the details of the fraud, it’s a given that the company
United States, disintegrated almost overnight. Also difficult to misrepresented its accounts to the stock exchanges, to its own
fathom is how its leadership managed to fool regulators for Board of Directors, investors and all stakeholders. A complex
so long with fake holdings and off-the-books accounting. In web of 356 investment companies was used to allegedly divert
Enron’s case, the company would build an asset, such as a funds from Satyam. These companies had several transactions
power plant, and immediately claim the projected profit on its in the form of inter-corporate investments, advances and loans
books, even though the company had not made one dime from within and among them. Even bank fixed deposit receipts were
the asset. If the revenue from the power plant was less than allegedly fudged to boost cash in hand.
the projected amount, instead of taking the loss, the company
would then transfer the asset to an off-the-books corporation In both the aforesaid cases and in several that followed,
where the loss would go unreported. This type of accounting the promoters could be the primary perpetrators of the
jugglery enabled Enron to write off unprofitable activities misgovernance and mismanagement, however, it is almost
impossible to misrepresent such facts without the connivance
without hurting its bottom line. Arthur Anderson also certified
of the independent auditors and some executive board
these books for years, turning obviously a blind eye to the
members. Independent directors, it is said, where they were
dressing up of the books of the listed entity. At Enron’s peak,
appointed, were kept in the dark about the actual books of
its shares were worth $90.75; just prior to declaring bankruptcy
accounts. Obviously therefore, the liability was not restricted
on December 2, 2001, they were trading at $0.26. The Enron to the Promoters alone.
scandal drew attention to accounting and corporate fraud as its
shareholders lost $74 billion in the four years leading up to its In the first case of Enron, the Powers Committee which was
bankruptcy, and its employees lost billions in pension benefits1. appointed by Enron’s board to look into the firm’s accounting
in October 2001, came to the assessment that “The evidence
In just the last 6 months, the entire world available to us suggests that Andersen did not fulfill its
professional responsibilities in connection with its audits of
economy has lost much of what it created Enron’s financial statements, or its obligation to bring to the
in last ten years, and estimates say that attention of Enron’s Board (or the Audit and Compliance
we will be struggling for well over another Committee) concerns about Enron’s internal contracts over
few years, before we return to the pre- the related-party transactions”2. On June 15, 2002, Arthur
Andersen was convicted of obstruction of justice for shredding
Pandemic world, lifestyle and economic documents related to its audit of Enron and although the
growth. While this means that many of us Supreme Court reversed the firm’s conviction, the impact of
may not be able to indulge in the copious the scandal combined with the findings of criminal complicity
ultimately destroyed the firm. In the second case of Satyam,
over-consumption we are used to since the Indian arm of Price Waterhouse Coopers (“PwC”) was
the turn of the century, it also means that fined $ 6 million by the SEC for not following the code of
all the social cost that we have inflicted conduct and auditing standards in the performance of its duties
on nature and its resources over the last related to the auditing of the accounts of Satyam Computer
Services. In 2018, the Securities and Exchange Board of
decade to meet all those GDP targets, India (“SEBI”) barred PwC from auditing any listed company
have been lost forever, to no avail. in India for 2 years, saying that the firm was complicit with the
main perpetrators of the Satyam fraud and did not comply with
The Enron disaster led to the birth of Sarbanes-Oxley Act of auditing standards.
2002 (“SOX”) which established new accountability standards
for corporate boards and auditors, established a Public It is important to note that Clause 49 for Corporate Governance
Company Accounting Oversight Board under the Security had been introduced in the Listing Agreement much before
and Exchange Commission (“SEC”), and specified civil and 2
Cornford, Andrew (June 2004). "Internationally Agreed Principles for Corporate Governance
1
Enron Scandal: The Fall of a Wall Street Darling by Troy Segal and the Enron Case"

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Satyam. Therefore, the Satyam scandal, though the first one investigation for these and other alleged shady transactions.
that assumed significant proportion, was not devoid of the These are the same companies, whose equity has traded at
governance system as it existed then. In 1995, a task force market capitalisations of millions of rupees, which have done
set up by Confederation of the Indian Industry (“CII”) under mega debt listings, qualified institutional placements and
Rahul Bajaj which was instrumental in release of a voluntary mega IPOs/FPOs. Another part of the promoter family of the
code called “Desirable Corporate Governance” in 1998. SEBI same housing finance company is now responsible for stay on
also established few committees, among which are, (i) the operations of a leading co-operative bank, where depositors
Kumarmangalam Birla Committee (2000) that introduced the have died due to the shock of inability to retrieve their lifelong
concept of Independent Directors, separated the mandatory savings when they most need it. In another shocking yet sad
and non-mandatory requirements, (ii) the Naresh Chandra news, a promoter of a large listed company which owned a
Committee (2002) which focused on the role of Statutory chain of Coffee outlets committed suicide in an apparent
Auditors, their relation with Management, procedure for failure arising from financial setbacks and non-foreseeable
appointment of the Auditors, methodology for determination revival from the crisis. A leading private airline too is fraught
of audit scope and audit fees, amongst others, and (iii) the with internal bickering between the two promoter groups which
Narayana Murthy Committee (2002) which charted out has all the signs to ballooning into yet into another saga of
the responsibilities of audit committee, quality of financial “misgovernance”. In yet another failure, an airline with a fleet of
disclosure, and also requiring boards to assess and disclose 20,000 employees was grounded after the promoter refused to
business risks in the company’s annual reports. This kept resolve the financial crisis of the company despite the lenders
evolving with time. However, clause 49 passed through patiently waiting for years to support an amicable resolution by
a challenge of form over content, since SEBI struggled in a possible stake sale. And while the world was reminiscing the
enforcing it as part of a mere contractual obligation under an 10 years of Lehmann crisis, one of India’s leading infrastructure
Agreement. With introduction of the Companies Act, 2013 companies defaulted on payments to its lenders, including the
and in 2015, with the introduction of Listing Regulations
entire spectrum of bank loans, interest on loans, term deposits,
introduced under the framework of the SEBI Act, giving it
short-term deposits and the Commercial Papers redemption
the much required ‘teeth and muscle’, the rules governing
obligations.
the listed companies were made more stringent. The mother
legislation itself has a separate chapter on Governance And listed here are only some of the Indian corporate
and includes provisions pertaining to the composition of the
governance failures of 2019, its Nissan in Japan, its
Board, requirement for appointment of Woman Director and
Volkswagen in Germany and Carillion in the UK, besides the
Independent Directors, Directors Training and Evaluation,
US failures listed before. So, the root of corporate governance
Audit Committee / Nomination and Remuneration Committee,
failures is obviously not in the legislation or the absence of it
strict approval process and disclosures of Related Party
Transactions, setting up of Vigil Mechanism and strengthening or too much of it. Legislature can only be the facilitator to the
the Whistle Blower Policy requirements as also the setting up governance process-not the prime mover. The root cause of
of Serious Fraud Investigation Office, among others. SEBI has the governance failure is in the conduct of man and the avarice
supplemented this effort with stringent amendments to the for amassing wealth stealthily, at the cost of the unsuspecting
Insider Trading Code and a robust Takeover Code. The latest investors who really do not have any safety net, at the end of
entrant in the governance landscape is also the Insolvency & the day. The conduct of those really and truly responsible for it.
Bankruptcy Code forcing companies to pay up on time, else
the Promoters would make way for the Financial Creditors, and HOW TO IDENTIFY A GOVERNANCE
protection of legitimate interests of the Operational Creditors to
a certain extent. More recently, on the governance front, the
MISMATCH?
Uday Kotak Committee of 2017, also delved into the need to Although it is easier said than done, there are some very
do away with the informal matrix reporting structure so that common traits that are found in every corporate aberration/
Board can assume complete responsibility for the business misadventure. One must examine the financial statements,
and overall affairs of the Company, as also the proposed not just at consolidated level but also at standalone level very
introduction of a ‘Group Governance Policy’ to strengthen closely. Too much dividend with very high promoter holding
the governance policies and monitor governance of unlisted (as in the case of Carillion), operational cashflows allegedly
subsidiary companies through Group Governance Committee diverted to group companies (as in the case of Yes Bank
or Group Governance unit (although this recommendation and IL&FS), revenue recognition policies (as in the case of
remains to find its place in the Regulations yet). Enron), increased reliance on refinancing the borrowings than
to allocate cash flows to repay the obligations (allegedly as in
But then, has this helped resolve all the issues that led to the case of IL&FS once again), shoddy disclosures of related
the misgovernance, is the governance conundrum put in its
party transactions and a web of shell companies with diamond
place, is there any way, we can conclude that we have had
structures – all of these are pointers, red flags, caution marks
relief from misadventures of governance gate-crashers. The
answer seems to be no. To elucidate the point, just look at – to internal auditors who are at first level of doing internal
some of the major corporate mis-governance news of 2019. In process diligence, to statutory auditors who are independent
a leading private sector bank, the promoter and ex-managing to do transactional diligence, to independent directors who
director has been accused of passing off loans from the banks are the first to have access to all unpublished price sensitive
to around 70 privately owned and managed shell companies. information, to huge institutional investors who collect small
In a linked case, the same promoter of the Bank is alleged to savings of millions of people with a fiduciary duty to employ the
have received kickbacks from the promoter-managing director pool profitably and lastly, to small retail investors capable of
of another leading housing finance company for accepting reading financial statements, who invest to satiate their desire
lower collaterals against huge facilities. Incidentally, both of participating in nation building and entrust their hard earned
these persons are now facing the Enforcement Directorate small savings to the promoters.

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 The Governance Question Mark
ARTICLE
IS THERE A REMEDY? of one’s misdoings to someone who didn’t spot it or maybe
report it? An alternative to this could be the requirement to
The answer obviously is not in the legislation or the rule book, provide audited financial results for every half year. An audit
or with more Committees, or with any set of regulators. The travels much beyond the scope of a limited review and also
answer only lies with the regulated. But the question really is, enlarges the responsibilities of the auditors.
are we ready for it?
There are so many questions but is there an answer? The way
Many research papers seek that the Non-Executive and the corporate governance ethos has evolved over the years is
Independent Directors be empowered to be more effective. more about being reactive (knee-jerk if one may say so) than
They suggest that effectively, corporate governance is the proactive and since it is a social science, we conclude that it
handy work of those involved in day-to-day management, must be imperfect in its form and structure, and hence, evolve
and therefore, those who aren’t involved at a transactional as we do. The study of many a governance structure leads
level, but are entitled to ask difficult questions, and who to the same answer for all failures, be it in the corporates,
can balance between supporting as well as challenging the across industries and sectors, or in any other social structure,
management at the same time, could foster good governance. government machinery, judicial fora’s, etc. The answer is in the
But is that really possible? For we all know a fact, promoters / conduct of certain people in certain situations and the wisdom
management teams fetch candidatures of the Non-Executive they exercise in those.
or the Independent Directors. Often, it is the family friend of the
promoter or the B-school buddy of the CEO who passes muster CONCLUSION
and masquerades as an Independent Director. The silent It is high time to reflect, therefore, on Governance as we
understanding of co-existence leads to denial of any space for understand it today and introspect about what it really
tough discussions and though there is merit in transparency, should be.
difficult questions are often avoided for the sake of maintaining
the decorum of the board room environment and for being The Regulators need to think over its role. The lofty ideal of the
politically correct. When it comes to scandals and discovery securities market regulator is “investor protection” which may
of mismanagement, these Independent Directors have often well be elusive and as slippery as the proverbial eel, but the
claimed being kept in the dark. The question to them is, did misgovernance is causing tremendous loss of investor wealth.
they seek light? And well if they did, and the darkness did Each corporate failure exposure and reporting has cost the
not dissipate, did they move out of that darkness before it Stock Exchange millions in market capitalisation, causing an
completely engulfed their conscience? erosion of investor faith too.
Another question is about the Risk Management Committees? The promoters and the managers need to think of their role
Its fine to say it will be applicable to top 100 or top 500 listed too, being in charge in a fiduciary capacity of the company’s
companies. But the Listing Regulations, as they stand today, actions and acting on its behalf, they must think of posterity, of
do not prescribe 2 fundamental things it ought to have, if it the hundreds of people who work for them and the thousands
wanted to achieve the primary intent of constitution of the who invest in them. While enhancing shareholder wealth is the
said Committee. Firstly, the Independent Directors are not target, it needs to be sustainable and be seen through the lens
mandated to be a part of the Committee and secondly, does of long-term existence, which is what companies were formed
it talk about the periodicity of the Meetings. Of what value is in the first place for, rather than aim at short term wins and
such a committee if it is expected to meet only “at least once” prospects of making quick gains with a view to be more visible
to satisfy the requirements of the Regulations? So, are the than sustainable. We need to be ergonomically equipped to
Listing Regulations really achieving anything by mandating
meet few sharp upturns and downturns in the short and medium
Committee constitution? What is the Committee’s mandate?
term to meet the long-term economic stability and sustainable
The Regulations only say form a Committee, question is,
organisations which we serve. There are manifold examples in
is it merely enough to form a Committee? Or is it in reality
corporate India too, which have outlasted the British empire,
supposed to be a guide to the Management to be more aware
the pre-liberalisation era and even flourished in the post-
and prepared to face the uncertainties and headwinds facing
liberalisation world we live in. They have mitigated a century
their businesses? Thus, Regulation for the sake of it, is no
and even more, with sustainable ideals of faith, fiduciary duty
Regulation at all.
and ‘doing the right thing’. On the Dalal Street, their valuations
Another major reason for governance failure, especially in may be at par with some start-ups or some IT companies
Indian context and which possibly is at its root cause, is the which are cynosure of investors eyes, but they still command a
need to disclosure quarterly results. Is there is any merit in premium for their sustainable governance practices.
disclosing financial results after getting a limited review done
on a quarterly basis? With transactions that run into millions Governance questions put forth in this article are only a tip
of crores, limited number of audit partners engaging in of the iceberg. More fundamentally, these questions are far
multiple entities, stretched corporate and audit teams to meet greater, far deeper, and much more complex. That is because,
deadlines after deadlines, and a Management that wants to governance is a psychological thing, and works in the
beat the street expectations, its only human that errors creep in innermost quarters of a complex human brain. In fact, the word
even if unintended and also very much possible that intended Governance does not have any good or bad standards, there
misadventures miss the auditors’ scrutiny. Can this just be is no such thing as bad Governance, its only misgovernance.
not done away with? Is the investor asking for this? Is this Governance, in whichever form and at whichever platform, is
the regulators need? Does it end in achieving transparency if a matter of conduct, a matter of faith, and most importantly, a
that is what is intended? Or does it simply end up promoters matter of choice. For instance, when one must decide what is
and managers giving in to a very human tendency, that is the next best thing to do, Governance makes it simpler and
mentioned at the outset of this article, “the need to view our asks, what is the next right thing to do. To choose between two
own objectives with binoculars that enlarge our egos”. The things, one says choose lesser of the two evils. Governance
collateral damage of each corporate failure is the audit partner. is about not classifying one as a lesser evil than the other.
But then, is it reasonable and fair, that we transfer the liability Governance is about “not choosing evil”, period. CS

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Anarchy versus Governance in Corporate

ARTICLE
Domain
Anarchy is the opposite of governance, though governance in itself may be bad or good. In an autocratic
government, the dictator determines the policies and programmes taking into consideration his own welfare
and that of his team, disregarding others. Therefore, good governance may not be appropriate and relevant
in such a scenario. Good Governance, in the true sense of its term, is always associated with a developed
or developing democracy. In this article, an attempt is made to highlight the principles of good governance
and their application to Corporate Governance practiced in developed and developing democracies of the
world. The author also highlights the salient features of Corporate Governance in these countries. Though,
the provisions of Corporate Governance are similar in these countries, the underlying principles are
different. In countries like United Kingdom and European Union, Corporate Governance operates on the
“Principle of Comply or Explain”, in South Africa, it operates on the” Principle of Apply and Explain”, while
in United States of America and India it is” Rule Based” and non-compliance attracts stringent punishments.

international organizations such as Organization for Economic

Co-operation & Development (OECD), Asian Development
Bank (ADB), World Bank, Council of Europe (COE) and United
Nations Development Programme (UNDP) in their several
reports have enumerated the important Principles of Good
Governance and the key players in such Governance. Some
of these are briefly discussed in the following paragraphs.

Firstly, good governance is Participatory. In any organization

there are many stakeholders. People in charge of the
organization should ensure that all stakeholders are
adequately involved in the formulation of the policies, goals
Henry Richard*, FCS and important decisions so that each stakeholder develops a
Former Regional Director sense of belonging to the organization.
Ministry of Corporate Affairs
Hyderabad Secondly, good governance is Transparent. There should be
[Link]@[Link] free flow of information to all stakeholders. The processes
involved in decision making and the relevant information should
be directly and easily available to all those who are affected by
the decisions of the organization. The decision making should

G overnance in its noun form is derived from the Latin be as per law, rules and regulations and be predictable.
word gubernare, which means the process of decision
making and the process of implementation. The Greek verb Thirdly, good governance should be Responsive. All the
Kubernaein equivalent of Govern means “to steer”. Collins stakeholders should be able to get timely response to their
dictionary states that Governance means the way in which a needs and the organization should have a set time-frame to
Company or Organization is managed. Generally, Governance respond to the stakeholders. There should be well-defined
is understood as Government as portrayed by William Tyndale processes and procedures to serve the best interest of the
in the words “governance of the realm” which implies authority stakeholders within a set time-frame.
and rule of law. All governing is an act of leadership of moving Fourthly, good governance should have Equity and
an organization towards a preferred direction and making sure Inclusiveness. All the stakeholders should be given equal
that the day to day management is lined up in synchronisation opportunity to maintain, enhance and improve their well-being
with the organization goals. Corporate Governance cannot be without any discrimination. The governance should fairly
seen in isolation as it is a very significant part and Key Player include the concerns and interest of every stakeholder and
in the overall governance of a Society and the State. their needs must be addressed.
GOOD GOVERNANCE Fifthly, good governance should be consensus oriented. Various
Good Governance is about achieving the desired results and stakeholders should have the opportunity to be consulted in the
achieving them in the right way. There cannot be universal governance process. The policies and programmes formulated
template for Good Governance as it depends on cultural norms by the organization should have consultation of the concerned
and values of the organisation, therefore each organisation stakeholders who will be affected by such decisions and such
must tailor its own definition of Good Governance. The decisions should be with the consensus of all involved. This
will also ensure the successful implementation of the several
*The views expressed are the personal views of the author policies and programmes.

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 Anarchy versus Governance in Corporate Domain

Last but not the least is the Rule of Law. Organizations must
ARTICLE
Sixthly, good governance should be Effective and Efficient.
Every organization operates on limited resources both in operate within the framework of the Rules, Regulations and
terms of finance and other physical resources. Therefore, it the Laws applicable to them. Compliance Management is a
is necessary that such scarce resources are effectively and significant part of good governance.
efficiently utilised to achieve the organization goals and in the
best interest of all the stakeholders who are directly affected by KEY PLAYERS IN GOOD GOVERNANCE
the decisions of the organization.
OECD, ADB and UNDP have identified in their several reports,
Seventhly, good governance should have Accountability. Four Key Players in good governance. First and Foremost is
Every individual who is involved in decision making in the the State. Governments play a key role in establishing good
organization should be held accountable for their decisions. governance. The State should formulate appropriate Laws,
In the case of collective decisions, all those involved in the Rules and Regulations to be observed by various segments
decisions should take collective responsibility. A well-defined of society including business entities. There should be a
procedure fixing responsibility on important personnel in the proper mechanism for implementation. The State should
organization for their role would be beneficial to all stakeholders also create proper infrastructure for effective governance.
in the organization. The Second Key Player is the Civil Society. This comprises
CSO (Civil Society Organizations), NGO (Non-Government
Eighthly, there should be Ethical Conduct in governance. Organizations) including Educational Institutions, Universities
Though many organizations operate with the object of profit and the like. These organizations supplement the role of the
maximization, ethics should not be sacrificed in the process. State. They fill the gaps where the State cannot reach. The
Organizations should strive to achieve their goals within the Third Key Player is the Business Entities including Companies/
framework of ethics. Generally, it is found that ethical behaviour Corporations. They provide employment and create income for
of the organization helps it to achieve its goals effectively in the the members of the society. These organizations need to be
long run. governed well so as to ensure optimum benefit and welfare to
the constituents of the society. The Fourth Key Player is the
Ninthly, the individuals working in the organization should be Media. This comprises, Television Channels, Radio Stations,
Competent with desired Capacity. Inefficient people working Magazines, Newspapers and the like. These institutions can
in an organization would be detrimental to the overall effective contribute immensely towards improvisation of governance
functioning of the organization which will ultimately adversely by channelizing proper information to all the stakeholders and
impact the interest of all the stakeholders. redressing their problems.

Tenthly, good governance requires Innovation and Willingness Good Governance is an ideal which is almost impossible to
to Change. Organizations should be dynamic, continually achieve in its totality. In reality one can conspicuously notice
innovate and gladly willing to change to keep in line with the Bad Governance in all spheres of society. In an autocratic
changing environment. Many a times, it is seen that lack of model of governance where a dictator governs, the interests,
change and adaptability kills the organization. individual rights and well-being of its constituents are ignored.
It is widely reported through media that a dictator in one Nation
Eleventhly, good governance is Sustainable with Long Term has ordered that any citizen infected with Corona (COVID-19)
Orientation. Organizations should have foresight and have virus must be shot dead. Even, the so-called Democratic
sustainable long-term goals. Some programmes may be Governments are steeped in corruption and nepotism, where
beneficial in the short run but not sustainable. Proper vision is the individual well-being is dis-regarded. Bad Governance is a
Sine quo Non for successful organizations. rule than an exception.

Twelfthly, good governance involves Sound Financial CORPORATE FRAUDS

Management. Organizations need to manage their finances
efficiently as it is a scarce resource and not easily available. Corporate frauds reflect Bad Corporate Governance. Ever
Moreover, those who provided the finance expect a reasonable since corporate form of organization was introduced, corporate
return on their investment. frauds also evolved along with it. Such frauds occurred and are
occurring in every Nation across the Globe since inception of
the Company/Corporate form of organization. An illustrative list
Good governance should have of a few such frauds which occurred in several Nations over
Accountability. Every individual who centuries is given below. These are not exhaustive.
is involved in decision making in the Medici Bank (1494), largest bank in Italy collapsed due to
organization should be held accountable financial mis-management (being highly leveraged) and
for their decisions. In the case of diversion of funds. Mississippi Company (1720), a French
collective decisions, all those involved finance and trading company created a Ponzi scheme and
manipulated its share prices and finally became a bubble and
in the decisions should take collective collapsed. Dutch East India Company (1799), a multinational
responsibility. A well-defined procedure company from Netherland operated in more than 10 Asian
fixing responsibility on important Countries suffered bankruptcy in 1799 due to internal corruption
and mis-management including declaration of dividend without
personnel in the organization for their role profits. Overend Gurney & Company (1860), a London based
would be beneficial to all stakeholders in Discount House collapsed due to financial mis-management
the organization. as it indulged in indiscrete lending without proper risk

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 Anarchy versus Governance in Corporate Domain

ARTICLE
assessment. Friendrich Krupp AG (1873), a German Company
which was charged for aiding Nazis military in its aggression
against neighbouring Nations and for engaging huge number
of slave labourers violating human rights leading to dissolution
of the company. Danatbank (1931), a German Bank failed
due to market mis-management and loss of confidence of
the Public. Allied Crude Vegetable Oil Refining Corporation
(1963), an American Company indulged in mortgage fraud and
availed funds by showing water as oil which caused losses
to several American Banks to the extent of $1.5 billion. Polly
Peck (1990), a British textile company collapsed after the
Key management people stole money from the company to
the extent of 150-million-pound sterling. BCCI (1991), a bank
based in Britain sarcastically referred to as “Bank of Crooks
and Criminals” involved in money laundering, phony loans,
concealed deposits, hid huge losses and covered up shady
customers. Barings Bank (1991), a British Merchant Banker
collapsed due to speculative, unauthorized, and fraudulent
trades in Derivatives and Futures carried on by Nick Leeson
a Senior Employee of the Company. Harshad Mehta Scam
(1992), a stock broker availed huge funds from banks by
producing false Bankers Receipts and manipulated share
prices in stock market. Ketan Parekh Scam (1999), a stock
broker borrowed funds from Banks using false Pay Orders
and manipulated share prices in stock market through circular
trading. WorldCom (2001) an American Telecom company
indulged in fraudulent accounting to inflate profits by wrongly
accounting expenditure to the extent of about $4 billion.
Enron (2001) indulged in accounting fraud and concealment
of losses. Satyam Computer services (2008), an Indian
software company manipulated account by showing cash
deposits which did not exist and inflating sales and profits. is a system by which Companies are directed and controlled”.
Bernard Madoff Investment Securities LLC (2009) cheated Corporate Governance encompasses the internal and external
large number of investors through a Ponzi Scheme who did factors that affect the interests of a Company’s stakeholders
not get their money back and China Medical Technologies including the shareholders, customers, suppliers, Government
(2012) cheated investors to the tune of $3400 million through Regulators, management, environment and society at large.
securities and wire fraud. The above list of frauds is only a few Sound Corporate Governance is to contribute to improved
out of many. corporate performance and accountability in creating long-
term sustainable values.
Price Waterhouse Cooper’s Global Survey 2020 on Corporate
Frauds covering about 99 territories across the Globe for the In an Autocratic Government Model, Good Corporate
period of twenty-four months in the years 2019-20 reveal that Governance, in its true sense, may not be relevant and
nearly 50% of the companies surveyed were affected by one appropriate as the interests, rights, welfare and concerns of all
or the other form of fraud. The Corporate Frauds primarily fell stakeholders, other than the Dictator and his team, would not
in three categories, namely - customer frauds, cybercrimes be addressed or considered. Therefore, Good Governance in
and asset mis-appropriation. The quantum of frauds is found such a setup is like trying to fix a square peg in a round hole.
to be about $ 42 billion. Therefore, this would exclude countries in half the Globe from
any meaningful study from Good Governance perspective.
CORPORATE GOVERNANCE However, Corporate Governance would be relevant and
appropriate in a Democratic Government Model and in this
Corporate Frauds occurring across the Globe in several perspective, an attempt is made in this article to discuss
territories have drawn the attention of the respective Corporate Government practices in the leading Democracies
Governments to deliberate upon ways and means to prevent of the world.
and detect such frauds at the earliest. These countries
affected by Corporate Frauds already have a well-developed
criminal justice system to punish such fraudsters and recover UNITED KINGDOM (UK)
the loss suffered by the stakeholders to the maximum UK comprises four countries, namely, England, Scotland,
extent possible. But these countries lacked a fine-tuned Wales and Northern Island and is the Head of the
fraud prevention and early detection Code. This aspect is Commonwealth of fifty-four member Nations including
generally referred as Corporate Governance. Organization India who were once Ruled by Britain before declaring
for Economic Co-operation and Development (OECD) independence. The English Company Law itself contains
defines Corporate Governance (CG) as “…involving a set of several provisions to ensure Good Corporate Governance
relationships between a company’s management, its Board, such as Shareholder Participation through collective decision
its shareholders and other stakeholders.” Cadbury Committee making, Transparency and openness through a well-defined
(United Kingdom) simply states that “Corporate Governance disclosure of relevant information in the Financial Statements

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 Anarchy versus Governance in Corporate Domain
ARTICLE
and Board Reports, Responsibility and Accountability of Board Governance is feasible only in a democratic and voluntary
Member by enlisting the duties of directors and the like. All environment. The Code has 18 principles and 41 provisions.
Members of Commonwealth of Nations have Company Law These cover several aspects of Good Corporate Governance
modelled on the English Companies Act and therefore have such as Board Leadership that steers the company towards
similar provisions enabling Good Corporate Governance. its goal in alignment with the culture of maximisation of the
welfare of all stakeholders including the society and country’s
Several massive corporate frauds, mostly financial and wrong prosperity, ideal division of responsibilities between Executive
reporting frauds, which surfaced during late eighties in UK such and Non-Executive Directors, Independent Directors including
as Polly Peck, BCCI, Maxwell and the like have demonstrated separation of role between the Chair and Managing Director/
the need for more effective Corporate Governance in UK, CEO, Composition, Succession Plan & Evaluation of Board
This led to the formation of Financial Reporting Council at least annually, the Board should have ethnic, gender and
(FRC), based on the recommendations of certain committees, social balance including diversity of skills, effective internal
as the Apex Authority to regulate accounting, reporting, controls, Risk Management and external audit with rigorous
Professionals, Auditors, Accountants, Actuaries and other monitoring by the Audit Committee and a rational & equitable
Key professionals concerned with Corporate Sector. FRC remuneration policy covering directors remuneration including
along with Stock Exchanges and other Regulators constituted senior level management where the remuneration can be fairly
an Expert Committee under the Chairmanship of Sir Adrian linked to performance (FRC Report 2018).
Cadbury in 1991, to study and make recommendations relating
to Financial Reporting and Accountability relating to Corporate The UK Stewardship Code focuses on Investors including
Governance. This Committee is popularly known as Cadbury their responsibility to engage constructively with the company
Committee on Corporate Governance. The recommendations and discuss any deviations from the Code. FRC has also
of the Committee comprised four important aspects, namely, published The Guidance on Board Effectiveness, explaining
the role of the Board of Directors, its composition & duties, the right way to apply the Code, The Guidance on Audit
role of Non-Executive directors, Directors remuneration and Committee, The Guidance on Risk Management, Internal
Financial Reporting & Financial Controls, both internal and Control and Related Financial and Business Reporting.
external.
UNITED STATES OF AMERICA (USA)
Corporate Governance in UK is based on Anglo-Saxon
Unlike UK, USA does not have a well-defined Corporate
Model whose primary concern is to address the Agency
Governance Code. USA, being a Federal Structure comprising
Issues (Jenson & Meckling-1976). This complexity required a nearly 50 States, have separate corporate laws for each
consistently evolving Corporate Governance Model. While the state, Delaware being the state with many large companies
Corporate Governance Code based on Cadbury Committee incorporated under the state company law. Company Law in
Report was in force, UK faced several issues regarding these states have certain provisions directed towards Good
Directors remuneration. This led to the appointment of Corporate Governance such as fiduciary duties of directors
Greenbury Committee (1995) under the chairmanship of Sir and auditors, regulating relationships between shareholders,
Richard Greenbury to examine this issue. He made certain officers, the Board and external auditors and the Charter of
recommendations regarding determination of remuneration the company determines the duties, responsibilities and role of
linked to performance and conferring rights on shareholders. different constituents of the company. Shareholders have the
Subsequently, Hampel Committee (1998) was constituted to remedy to initiate civil suits against directors, auditors et al and
review the Corporate Governance Code in UK and suggest claim damages for breach of duty or breach of contract.
changes keeping in view the changing scenario. This
Committee suggested merger of all the recommendations The Wall Street Crash of 1929 awakened the leaders of
made by Cadbury Committee, Greenbury Committee and USA to the reality of the weakness in corporate regulation.
Hampel Committee and accordingly the Combined Code President Sir Franklin Roosevelt emphasised that the investor
of Corporate Governance came into force with focus on confidence in the stock market must be restored to facilitate
the role of Institutional Investors in the governance of capital formation to fuel the growth of the USA economy. In
companies, composition of the Board, Directors’ remuneration, this manner, the Federal Government stepped in to create
accountability and audit, internal controls and periodic review and establish Good Corporate Governance practices in USA.
of the same. The Combined Code was regularly reviewed This led to the enactment of the Securities Act 1933, a Federal
and changes were made keeping in line with the changes Legislation that applied uniformly to all the states in respect
in the corporate world based on the recommendations of of securities offered by the Companies to the public. The Act
Turnbull Report (1999), Myners Report (2001), Tyson Report regulated the offer of securities with adequate disclosure
(2003), Smith Report (2008), Turner Report (2009), Walker of information which are relevant to the investor to take
Report (2010), so on and so forth. FRC has been continually an informed decision. This was followed by the Securities
revising and updating the UK Corporate Governance Code in Exchange Act 1934 which established the Securities
consultation with the London Stock Exchange. Exchange Commission (SEC) to govern trading of securities
in the secondary market. SEC was empowered primarily to
UK Corporate Governance Code 2018 (The Code) came ensure that the companies disclose meaningful financial and
into force with effect from 1st January 2019 and primarily other information to the public, monitor the key players in the
applies to premium Listed Companies, mostly FTSE 350 securities trade such as the stock exchanges, security brokers,
companies. The Code operates, on the basis of the most & dealers, investment advisors, mutual funds and others.
lauded principle of Comply or Explain unlike many other SEC is also the enforcement authority for violation of security
countries where Corporate Governance is Rule based. FRC laws such as insider trading, accounting fraud, giving false or
has argued that effective and successful Good Corporate misleading information to the investors and public. SEC works

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ARTICLE
Several high-profile corporate frauds surfaced in the early
Unlike UK, USA does not have a twenties such as Enron, WorldCom, Tyco, Health growth and
well-defined Corporate Governance the like which proved the inadequacy of Corporate Governance
Code. USA, being a Federal Structure Regulations in USA. This led to the enactment of Accounting
Reforms and Investor Protection Act 2002, popularly known
comprising nearly 50 States, have as Sarbanes-Oxley Act 2002 (SOX) because the legislation
separate corporate laws for each state, was spearheaded by Sir Sarbanes and Oxley, the Senators
Delaware being the state with many large in the American congress. Following are the important areas
covered in SOX:
companies incorporated under the state
company law. Company Law in these TITLE-I (9 sections) dealing with establishment of independent
Public Company Accounting Oversight Board (PCAOB) vested
states have certain provisions directed with powers to oversee audit firms including their registration,
towards Good Corporate Governance laying down policies, procedures and process for compliance
such as fiduciary duties of directors audits, inspection, regulate audit firms and enforcing compliance.
and auditors, regulating relationships TITLE-II (9 sections) deals with audit independence, mitigate
between shareholders, officers, the Board conflict of interest, new auditor appointment procedure, rotation
and external auditors and the Charter of audit partners, audit reporting requirements, separation and
prohibition of rendering non-audit services (Consulting) to the
of the company determines the duties, same client.
responsibilities and role of different
constituents of the company. TITLE-III (8 sections) provides that Senior executives take
individual responsibility for accuracy and completeness of
corporate financial reports, role of Audit Committee and inter-
action with external auditor, Section 302 provides that the CEO
in co-ordination with Federal Department, US Department of
and CFO approve and certify the integrity of the company
Justice and State Regulatory Authorities. SEC has specific
financial reports quarterly and civil liability including forfeiture
responsibilities to interpret Federal security laws, issue new
of benefits to Senior Executives.
rules and amend existing laws keeping in line with changing
times, oversee the inspection of security firms, investment TITLE-IV (9 sections) provides for enhanced reporting
advisors, audit & accounting firms and rating agencies and co- requirements for financial transactions including off-Balance
ordinate with state and other authorities. Sheet transactions, disclosure of stock transactions of
corporate officers, internal controls for assuring accuracy
The stock exchanges in USA play a key role in achieving of financial reports and disclosures and mandates audit of
good corporate governance. NYSE Euronext with the listing such internal controls and report thereon, timely reporting of
of over 4000 large companies is the biggest exchange in USA material changes in financial condition to SEC and enhanced
and the world. Corporate Governance Listing Standard set in review by SEC.
section 303A, approved by SEC, stipulates the requirements
of companies to disclose important information in their TITLE-V (One section) deals with measures to restore the
security documents. NASDAQ, another large electronic stock dependability and trustworthiness of the reports of Security
exchange, having listing of more than 3000 companies have Analysts. It defines the Codes of Conduct for Security Analysts
rules to be followed by companies to prevent fraudulent and and requires disclosure of knowable conflict of interest.
manipulative actions, promote just and equitable trade and
provide means to take disciplinary action against violating TITLE-VI (4 sections) deals with measures designed to help
companies. restore investor confidence by enforcing disciplinary actions
against key players in the security markets. SEC vested with
Gate Keepers, namely the Auditors, Security Analyst, Merchant authority to censure or bar security professionals from practice
Bankers/Bankers and Credit Rating Agencies play an important and defined conditions under which a person can be barred
role in Corporate Governance. The Security Laws provide from practising as Security Analysts, broker, advisor or dealers.
stringent punishment for mis-deeds of such Gate keepers.
Citigroup paid $400 million to settle government charges for TITLE-VII (5 sections) provides that the Comptroller General
fraudulent research reporting. Similarly, Merrill Lynch paid and SEC to study and report their findings on Consolidation
$200 million for fraudulent research reporting. New legislation of Public Accounting Firms, the role of Credit Rating Agencies
restored the Chinese Wall between Investment Bankers and in the operation of security markets, security violations and
Security Analysts and separated audit function from providing enforcement actions. Investment Bankers to be studied for
consultation services by Audit Firms to the same client. their role in corporate frauds.
TITLE-VIII (7 sections) interlinked with Corporate and Criminal
Foreign Corrupt Practices Act 1977 is another milestone in Accountability Act 2002. Provides for criminal penalties for
paving the way for Good Corporate Governance in USA. This manipulation, destruction and alteration of financial records
Act provides stringent punishment to companies in USA and or interference with investigation while giving protection to
their officials who pay bribes to foreign regulators, politicians, Whistle Blowers.
officials, authorities and the like to get any favours. The
American companies must also maintain proper separate TITLE-IX (6 sections) deals with white collar crimes and
accounts to reflect any foreign payments with details of penalties. This chapter is interlinked with White Collar Crime
purpose. Penalty Enforcement Act 2002. Increases criminal penalties

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 Anarchy versus Governance in Corporate Domain
ARTICLE

associated with white collar crimes and conspiracies and as the four pillars. First is the Modernization of the Board of
specifically adds failure to certify the corporate financial Directors of companies including balancing of the Board
reports as a criminal offence. Section 903 provides for up to with Executive, Non-Executive and Independent directors to
20 years imprisonment for mail and wire frauds and for wrong ensure mitigation of conflict of interest so that no individual
certification of documents. group dominates decision making, separation of the role of
The Chair and CEO, Directors Remuneration and collective
TITLE-X (section 1001) provides for certifying and signing Tax responsibility of the Board to determine Remuneration Policy
returns and reports by Chief Executive Officer. and disclosure of remuneration and policy details in the
Annual Reports given to Shareholders. Second deals with
TITLE-XI (7 sections) linked with Corporate Fraud Enhanced Corporate Governance Disclosures. All Listed
Accountability Act 2002. This chapter identifies corporate frauds companies in EU are required to include a comprehensive
and record tampering as criminal offences and strengthens Corporate Governance Statement including governance
specific penalties. Empowers SEC to freeze transactions or structure and procedures. Third deals with strengthening
payments that has been declared as “large” or “unusual”. of shareholders rights uniformly in EU including rights to
ask questions, tabling resolutions, voting in absentia and
Thus, the corporate governance in USA is Rule Based unlike participation in decision making at General Meetings. Fourth
UK where the corporate governance code is based on the lays down rules and procedures for co-ordination of Corporate
principle of Comply or Explain. Governance initiatives in Member States. National Corporate
Governance code for monitoring, disclosure, compliance and
EUROPEAN UNION (EU) enforcement.
European Union refers to 47 members constituting the Council
of Europe spread across 18 Eurozone comprising 28 Member Action Plan 2012 laid emphasis on long term growth of
States, Germany being the largest economy. EU is an evolving highly competitive and sustainable companies in EU with
body, some joining and others leaving like Brexit. Article 17 of focus on Board diversity, risk management, quality of
the Treaty of EU specified the responsibilities of the European Corporate Governance reporting, executive remuneration,
Commission which included the formulation of regulations shareholder engagement through effective regulation of
relating to Corporate Governance applicable to member Proxy Voting Advisors, responsible role for Institutional
countries. Corporate Governance in EU is two-fold The first Investors with disclosure of their voting pattern, better control
is the Legislation pertaining to incorporated companies. Each of Related Party Transactions and managerial remuneration
member country of EU has its own company law governing the through shareholder approval on the principle of “Say on
companies incorporated in their countries. The second is the Pay” , employee share ownership, quality disclosure in
Soft Law, which is in the form of EU Corporate Governance Annual Reports touching on remuneration policy, directors
Code (EU Code) developed on the model of UK Corporate remuneration showing maximum pay vis-à-vis average pay
Governance Code operating on the principle of Comply or of employees, Non-Financial Disclosures on policies, risks,
Explain. outcome report on environment, report on human rights,
anti-corruption & bribery issues and social employee related
EU Code evolved through two Action Plans, the first issues.
announced in 2003 and the second in 2012. The first action
plan is based on the recommendations of the Company Law Thus, EU Corporate Governance Code is similar to that
Expert Committee headed by Jaap Winter which are construed prevailing in UK.

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 Anarchy versus Governance in Corporate Domain

ARTICLE
SOUTH AFRICA (SA) Committee, Protection of Shareholders rights including
appointment of Small Shareholder Director, Corporate Social
Corporate Governance in SA derive its source from four Kings Responsibility, risk management, transparent reporting in
Reports. King Report I coincided with the first democratic the Financial Statements including Board’s Responsibility
election of Mr Nelson Mandela. King Reports I, II, III and IV Statement and Corporate Governance Report, rotation of
cumulatively laid the foundation for Corporate Governance auditors every five years, separation of audit function and
Code. SA has a well-designed Company Law based on prohibition of non-audit services, Directors performance
English Companies Act with adequate provisions to establish evaluation including enumeration of duties of directors, full
Good Corporate Governance. King IV Report enumerated 17 disclosure of Related Party Transactions including shareholder
Principles which formed the bedrock for the present Corporate and Audit Committee approvals, Statutory regulation of
Governance Code. These Principles place responsibility on the managerial remuneration including shareholder approval and
Governing Board (GB) of the company to follow the principles disclosure in Financial Statement and the like. The best of the
which inter-alia provide for effective, ethical leadership and provisions in UK corporate Code and US Regulations discussed
establish ethical culture in the organization. Company to be in the preceding paragraphs are suitably incorporated in the
a responsible corporate citizen and establish value creation enactments and regulations mentioned above.
process through sustainable development. GB reports
should enable all stakeholders to make informed assessment CONCLUSION
of the company in short, medium and long term. GB is the
custodian of Corporate Governance in the company. GB to be Good Corporate Governance will always remain in theory and
balanced with diversified skills including Non-Executive and suitable only for class room/seminar discussions in Universities
Independent directors with effective participation. GB to have and Management Institutes, unless the leadership and key
effective delegation with independent judgment. Evaluation of management positions in Organizations including Companies
performance of GB including individual directors. Management and Governments are occupied by qualified, competent and
level delegation with role clarity. Risk management aligned with enlightened individuals who are committed to honesty, integrity,
strategic objectives. Effective use of technology in information truth and righteousness. It is the responsibility of the important
dissemination to all stakeholders. Comply with all applicable stakeholders like shareholders, Institutional Investors and
laws as a good corporate citizen. Develop well defined Governments to search and identify such individuals and place
remuneration policy with transparent reporting. Assurance them in leadership and important key management positions
services backed by good internal controls with integrity of in Companies, Governments and other Organizations. The
information. Stakeholder inclusive approach with proper threat of punishment for violations, breach of duty and breach
balance keeping in view the good of society and responsible of trust by corporate leaders and persons in key positions may
behaviour of Institutional Investors towards the companies in not by itself achieve the goal of establishing Good Corporate
which they have invested. Governance unless a culture of Good Governance is instilled
in the Organizations and Government by noble individuals
SA Corporate Governance Code operates on the principle referred above who are committed to high values. CS

of Apply and Explain unlike UK code principle of Comply or

Explain. SA Code is not shareholder centric but stakeholder REFERENCES:
oriented and includes all including environment and society. 1. Reports of ADB, OECD and World Bank on
Corporate Governance (2005, and subsequent years)
[Link]/oecddirect, [Link]/governance,
INDIA 2. [Link]
Corporate sector in India is well developed and recognized 3. Organization Theory- Stokes, Peters and Pierra-1998
Globally as nearly 12 large companies of India feature in 4. The Concept of Governance-Ledivina V Carino
Forbes List of 2000 world’s best firms. Corporate Governance 5. [Link]/governance
in India is primarily Rule Based, drawing substantially from
6. [Link]/governance
the Companies Act 2013 and SEBI Regulations such as SEBI
(Listing Obligations and Disclosure Requirements) Regulation 7. Sir Adrian Cadbury Committee Report, UK
([Link])
2015, SEBI (Prohibition of Insider Trading) Regulations 2015
and the like. These are administered by the Ministry of Corporate 8. Green bury Committee Report, UK, 1995
Affairs and the Security Exchange Board of India respectively. 9. Hampel Report, UK, 1998
The content of Corporate Governance Regulations in India is 10. Financial Reporting Council Reports UK
drawn from both the UK Governance Code and USA Regulations 11. Securities Act 1933, USA
vide supra and carefully incorporated in the Companies Act 12. Securities Exchange Act 1934, USA
2013, SEBI Regulations and the Listing agreements based on 13. [Link]
the recommendations from several expert committees such as 14. Sarbanes-Oxley Act 2002, USA,
Kumar Mangalam Birla Committee (2000), Naresh Chandra [Link]/sarbanesoxleyact
Committee (2002), Narayana Murthy Committee (2003) and
15. Foreign Corrupt Practices Act 1977
Kotak Committee (2017) The recommendations of these
16. Jaap Winter Report 2003, EU
committees incorporated in the said Regulations cover several
aspects of governance including constitution of balanced Board 17. [Link]
with Independent Directors and Women Directors, separation 18. [Link]
of The Chair from MD/CEO, 50% of the Board should comprise 19. Report Of the Institute of Directors, South Africa
Independent Directors if the Board has Executive Chairman, 20. [Link]
Board Committees such as Audit Committee, Nomination 21. [Link]
& Remuneration Committee, Stakeholder Relationship 22. [Link] Council of Europe Reports

CHARTERED SECRETARY | AUGUST 2020 67

 Governance from Grassroot Level to Global
ARTICLE

Level - An Indian Perspective

Any mention of governance from grassroots to global would be incomplete without the mention of the
Panchayati Raj Institutions, which were reformed by the 73rd Constitution Amendment in 1992, thus creating
a scope to attain development with social justice. It is emphasised that futuristic governance models must
focus on ethical aspects. The authors refer to their relevance from Arthashastra and Bhagavad Gita, from
which there is a lot to be learnt towards strengthening the governance framework.

to the investors. To avert such unpleasant and unfortunate

denouements, proper governance becomes indispensable.

Governance implies a process of decision making through

which the conduct of various activities of an organization are
monitored and controlled2. However, the decisions already
taken may or may not be implemented depending upon the
then prevailing circumstances. The World Bank, in its 1992
report titled ‘Governance and Development’, defined good
governance as ‘the manner in which power is exercised in the
Dr. V. Balachandran, FCS management of a country’s economic and social resources
Dean, School of Business Studies for development.’3
Central University of Kerala In other words, governance is a manner or means through
Periye which it encompasses process, people and prevailing
drvbchand@[Link] environment to ensure that the work is performed efficiently
with the purpose of delivering goods and services that are
fruitful to the society. Good governance is expected to result
in greater satisfaction to all the stakeholders.

PRINCIPLES OF GOVERNANCE
The United Nations (UN) has spelt out eight principles of
governance. They are:

• Participatory,
• Consensus oriented,
• Accountable,
Dr. Sudheendhra Putty, FCS
Company Secretary • Transparent,
Cyient Limited • Responsive, Effective and Efficient,
Hyderabad
• Equitable,
[Link]@[Link]
• Inclusive and
• Follow the rule of law 4
INTRODUCTION
There is an imperative need on the part of stakeholders from
The term ‘governance ‘is derived from the Latin verb
the grassroot levels particularly in the present COVID-19
‘gubernare’ or more originally from the Greek word
scenario to understand their role and responsibilities to work
‘kubernaein’ which implies to steer or control1. Governance
effectively and efficiently and follow the directions issued by
is the process of decision-making and the process by which
the Governments to contribute their mite for the development
decisions are implemented (or not implemented). It is the
of their organisations as well as nation’s development.
manner of governing an organisation, an entity or State. In
this present competitive environment, every organisation is
required to function effectively and efficiently. It has been 2 Lynn, Laurence E. Jr., Carolyn Henrich, and Carolyn J. Hill. 2001. Improving Governance:
A New Logic for Empirical Research. Washington, DC: Georgetown University Press;
observed by the world that the so-called reputed or good Frederickson, H. G. (2005). Whatever happened to public administration? Governance,
companies have collapsed and suffered an unprecedented governance everywhere. The Oxford handbook of public management, 282-304

setback leading to liquidation and imposing huge losses 3 World bank(1992) retrieved from [Link]
documents-reports/documentdetail/604951468739447676/governance-and-development

1 Tamayao M J.(2014), “What is Governance”, retrieved from [Link] 4 Gisselquist, R. M. (2012). Good governance as a concept, and why this matters for
com/2014/08/21/what-is-governance/ development policy (No. 2012/30). WIDER Working Paper.

68 AUGUST 2020 | CHARTERED SECRETARY

 Governance from Grassroot Level to Global Level - An Indian Perspective

ARTICLE
There is an imperative need on the part level movements are related with bottom-up, rather than
of stakeholders from the grassroot levels top-down decision making, and are sometimes considered
more natural or spontaneous than more traditional power
particularly in the present COVID-19 structures. Grassroots level movements utilize numerous
scenario to understand their role and strategies from fundraising and registering voters, to simply
responsibilities to work effectively and encouraging political conversation. These governance level
efficiently and follow the directions movements have greatly empowered the foundations of the
society at the grassroot level.
issued by the Governments to contribute
their mite for the development of From a national perspective, no doubt, in the past, the
their organisation as well as nation’s growth in India has been extraordinary in various sectors.
Economic expansion has benefited capital-intensive and
development. skill-intensive production and has therefore not eliminated
structural unemployment and brought much benefit to the
At this juncture, it is apt to recall the quote on good agricultural sector. With its pragmatic approach, and its
governance by the former UN Secretary General, Kofi Annan. acknowledged status as an emerging power, India today,
In his own words, ‘good governance is respect for human is a respected participant in many multilateral forums. At
rights as the rule of law; it strengthens democracy, promoting the same time, its emphasis on strategic autonomy and its
transparency and capacity in public administration.’ He added occasional insistence on its own uniqueness have earned it
that governance is perhaps the single most important factor the reputation of a country that finds it difficult to compromise
in eradicating poverty and promoting development (United on global issues. The Indian government has entered into
Nations, 1998). various global interchanges such as multilateral agreements,
strategic partnership with powerful nations, and has a strong
GOVERNANCE FROM GRASSROOT presence in G20 and BRICS. India’s socio-cultural structures
have proved resilient and adaptive across many centuries and
LEVEL TO GLOBAL LEVEL that its social and political institutions provide a sound basis
With regard to governance from grassroot level to global for an enhanced global role. The Government of India, under
level, it is worth mentioning about the 73rd Amendment to the the stewardship of Prime Minister, Narendra Modi, has built
Constitution of India (1992). It is clearly prescribed that the up an excellent reputation in the international political arena
Panchayats should be institutions of self-government through and its civilizational message has generally been positively
which powers are devolved to the people so as to ensure received5. Above all, the nation’s strengths include, skilled
their participation in the process of planning for economic human resources, English speaking population, structured
development and social justice, and implementation of education system, powerful military and defence system
schemes and programmes for the avowed purposes. To and being the youngest nation in the world with a high youth
strengthen and enhance the efficiency of local governance, population.
Panchayat Raj Institutions (PRIs) were structured
and designed as a three tier system. The base of this NEED TO FOCUS ON PROBITY IN
pyramidal structure is the Grama Sabha (village assembly),
encompassing all citizens eligible to vote, and so forms the
GOVERNANCE
foundation of grassroots democracy. Whatever the case, However, some of the bottlenecks that retard the growth
the grassroots level institutions are vital instruments in the and development of a nation/Institution/ organisation include
process of development to lower levels and these processes nepotism, favouritism, prejudices, fraudulent practices,
are quicker since common people identify themselves as corruption, prevalence of unethical practices and egoistic
active partners. There are so many facets to the issue of attitudes. It is a necessity for all the stakeholders from the
grassroots governance and development in India and it is grassroot level to global level to focus on developing probity
very important because more than 65 per cent of India’s in governance which will make governance more ethical.
population comes from rural areas and its fortune and future Probity is a rudimentary requirement for the successful
are determined by these PRIs. operation of governance in organisations and also for socio-
economic growth of a nation. The term probity means a
Grassroots democracy is the political process which is quality of having strong moral principles. It includes integrity,
driven by groups of ordinary citizens, as opposed to larger uprightness and honesty and it mandates strict adherence to
organizations. The initative of the government to promote a code of ethics6. It is only with such a strong sense of probity
the creation of effective units of local self- government with that futuristic governance models having global relevance
the aim of nurturing democratic participation by involving can be established with a combination of bottom-up and top-
villagers in the development of their communities to reduce down approach.
the costs of administration is definitely a milestone in Indian
Governance. The 73rd amendment to our Constitution (1992) GOVERNANCE IN ARTHASHASTRA
has created a scope to attain development with social justice,
which is the mandate of the new Panchayati Raj system. It is a well-known fact that Kautilya or Chanakya, (370-- 283
This system is the foundation for the “Social Justice” and BC) a teacher in Taxila, was insulted by the Nanda king.
“Empowerment” of weaker sections of the society on which Kautilya then vowed to destabilise the dynasty and left Taxila.
the development initiatives have to be built for achieving He later coronated Chandra Gupta Maurya as the king. In his
overall welfare of the society. This was based on the belief
that liberal democratization was in itself sufficient condition for 5 Case in point – 21 June being declared International Yoga Day
6 [Link] papers/subject/probity%20in%20
meeting rural India’s welfare needs (Tiwari 2010). Grassroots governance

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 Governance from Grassroot Level to Global Level - An Indian Perspective
ARTICLE
magnum opus, Arthashastra (wealth of knowledge/ knowledge From a national perspective, no doubt,
of wealth), he has exquisitely described governance principles in the past, the growth in India has
as including:
been extraordinary in various sectors.
 Judicial fairness, Economic expansion has benefited
 Code of conduct for the king, capital-intensive and skill-intensive
 Administering justice, production and has therefore not
eliminated structural unemployment or
 Concept of punishment,
brought much benefit to the agricultural
 Strict code of conduct for administrators and businessmen, sector. With its pragmatic approach, and
 Measures against misappropriation of State Fund, its acknowledged status as an emerging
 Identification and prevention of corrupt practices, power, India today, is a respected
 Prescription of rules to prevent misuse of power7 participant in many multilateral forums.
All these were intended to ensure that weaker and vulnerable  Protect agriculture in all its aspects
sections of society should not suffer and everyone must  Create job-opportunities for the people
discharge his duties properly. Further, he formulated seven
criteria for a successful businesses which are relevant to this Each of the above points taken by itself and in aggregate are
day. They are: swami (leader), amatya (manager), janapada like the bluebook for governance and worthy of emulation for
(market), kosha (finance), danda (team), mitra (friend/ all time - Yet another reflection of India’s glorious contribution
consultant) and durg (head office). across the board.

GOVERNANCE IN BHAGAVAD GITA

Bhagavad Gita is a complete code of strategy and
governance, valid even for all futuristic governance
mechanism. In the battlefield, Lord Krishna, explained step by
step, the significance of governance for the entire universe.
Lord Krishna himself has advocated the varied aspects of
governance and spelt out its principles such as responsibility
(duty consciousness), accountability, fairness, performing
duty effectively and efficiently, duty without any attachment,
equanimity, proper planning and working with confidence and
zeal.

It is a truism to state that the Bhagavad Gita is the epitome of all

scriptures encapsulate as it does the essence of all scriptures.
According to Acharya Madhwa, the Bhagavad Gita is the
quintessence of the Pancharaatra Agama:9

Vedaarthapoorvakam jneyam Pancharaatram yato’khilam

Tatsamksepascha Geeteyam tasmaannaasyaah samam
kvachit
According to the Arthashastra of Chanakya, although the
State as a whole should be given supreme importance vis-à- The Pancharatras and other scriptures must be interpreted
vis the subjects, it was obligatory on its part to8: in sync with the Vedas (or should never be interpreted
against the grain of the Vedas). If the Pancharatras are
 Treat the subjects as children and devise welfare schemes ever construed in a manner thatmilitates against the Vedas,
for them then such construction is erroneous. The summary of the
Pancharatras is comprised in the Bhagavad Gita. Hence,
 Help them in periods of crises like war and natural there is nothing that equals the Bhagavad Gita and the
calamities like famine, floods and earthquakes Pancharatras.
 Moderate the prices of commodities so that people are not
exploited Bhagavad Gita advocates the cardinal principles of right to
work in any organization. It offers a framework for stimulating
 Control the quality of goods high levels of motivation10. Sri Krishna’s first lesson to the
 Help trade and commerce by providing means of transport, people at the helm of affairs is to focus and train their minds
communication, security, tax-concessions in foreign trade and mindset to the notion of time. This is essential from a long
and so on
9 Brahmavaivartapurana quoted by Acharya Madhwa in Gitatatparya Nirnaya
7 Ali, S. S. “Kautilya and the concept of good governance.” The Indian Journal of Political 10 Satpathy, B., Muniapan, B., & Dass, M. (2013). UNESCAP’s characteristics of good
Science (2006): 375-380 governance from the philosophy of Bhagavad-Gita and its contemporary relevance in the
8 An Introduction to Hindu Culture – Ancient & Medieval, Swami Harshananda, Advaita Indian context. International Journal of Indian Culture and Business Management, 7(2), 192-
Ashram 212

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 Governance from Grassroot Level to Global Level - An Indian Perspective

ARTICLE
term perspective. He enumerates four aspects pertaining to Regarding discharging one’s duty, in the next sloka 22),
work and efficiency11. They are: [chapter 2 –sloka 47] Lord Krishna says,
karmany evadhikaras te na me parthasti kartavyam
ma phalesu kadachana trisu lokesu kincana
ma karma-phala-hetur bhur nanavaptam avaptavyam
ma te sango ‘stv akarmani varta eva cha karmani
(1) The doer has the right to work (karmanyeva adhikar)
It means that there is nothing in all the three worlds for
(2) The doer has no control on outcomes or fruits of actions Him to do, nor is there anything worth attaining unattained
(ma paleshu kadhachana) by Him, yet He is constantly engaged and continues to
(3) The doer has no control over root causes of fruits of action work. . It is therefore clear that everyone shall discharge
(ma karmapala hethurboo) one’s duty that is paramount and that He does so too. This
duty consciousness is a must for every one working from
(4) There is no choice to revel in inaction (ma te sango'stv
grassroot level to global level in order to ensure substantial
akarmani)
increase in productivity at all fronts towards attaining
The interesting aspect in the above sloka is that a person societal welfare at global level.
may think that why he should do the work and may conclude
that it is better not to do any more work hereafter. It may lead Further, He urges the authorities to learn to tolerate the
to a sense of inaction. The right interpretation of this verse ups and downs that characterises the world of duality. The
would be ‘prohibition of desire for gain does not mean total real purport as can be translated in today’s business milieu
absence of gains. Greater fruits like knowledge, devotion and is that important policy decisions are to be taken after
grace of God accrue. Only desires for such gains which bind examining all the aspects of a subject thoroughly without
the beneficiary to the wheel of birth and death are prohibited. any passion or interest, i.e., dispassionately. The following
Material gains also accrue if this policy is followed universally sloka is pertinent to note: [Chapter 2, sloka14]
and sincerely.’ 12
matra-sparsas tu kaunteya
Further, Lord Krishna Himself has ruled out the option of sitosna-sukha-duhkha-dah
inaction. In Chapter 3, sloka 5, He clearly spells out why the agamapayino ‘nityas
so called state of inaction does not exist in reality. tams titikshava bharata
na hi kascit ksanam api Again, He proclaims the necessity to develop a sense
jatu tisthaty akarma-krt of equanimity and defined the term ‘yoga’ which means
karyate hy avasah karma evenness of temper. This is evident from the following
sarvah prakrti-jair gunaih sloka 48 in chapter 2. Accordingly, He directs Arjuna
to perform his duties as established in yoga, thereby
It means that nobody would ever remain, even for a moment, renouncing attachment, and even-tempered in success
without doing anything. The embodied soul has no chance
and failure.
to keep quiet. He is always regulated by the Almighty. The
Almighty forces him through the elements – sattva, rajas and yoga-sthah kuru karmani
tamo gunas to do some work always13. sangam tyaktva dhananjaya
siddhy-asiddhyoh samo bhutva
karmanaiva hi samsiddhim
samatvam yoga ucyate
asthita janakadayah
loka-sangraham evapi Later, in Chapter 14 - (slokas 24- 25) He has
sampasyan kartum arhasi [chapter 3 – sloka 20] mandated the key attributes pertaining to the world of
duality that an organization shall possess to become
Lord Krishna depicts in the above sloka that it is through
successful in his/her work place. This will result in
action alone (of course without attachment) that King Janaka
enhanced quality of leadership and in turn quality of
and wise men attained greatness/perfection/ excellence. It is
a paramount accountability on the part of the governing body governance.
to maintain the world in an order meaning to ensure welfare It calls for deep contemplation and conviction and no doubt,
of the society.
they may generate new behavioural patterns consistent
with the ideas. It is observed that in various organizations
Again, in the same Chapter (sloka 21) Lord Krishna proclaims
that people become great because of their rare qualities and on account of nepotism, favouritism, bias, prejudices,
virtuous deeds. Ordinary mortals follow whatever a great (or unethical mind-set of a few authorities at various levels,
highly placed or a knowledgeable person) does. not only the image of individuals but also the reputation of
the organisation suffered seriously and the setbacks left
11 Mahadevan, B. (2008). “Management Lessons from the Bhagavad Gita”, Vedanta Kesari, untold hardships to stakeholders. Lord Krishna says that
December 2008, pp 558-561. developing a good sense of neutrality is an important pre-
12 The Bhagavadgita, English translation according to the Bhasya of Sri Madhvacharya and
Gitavivrti of Sri Raghavendra Swamiji, CH. Srinivasa Murthy; Aitareya Shodha Prakashana
requisite to be adopted for men at all levels to discharge
Peetham and Poornaprajna Samshodhana Mandiram work effectively. This, then, can be the firmament for good
13 Gitavivrti of Sri Raghavendra Swamiji governance.

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 Governance from Grassroot Level to Global Level - An Indian Perspective
ARTICLE

LESSONS ABOUT GOVERNANCE FROM attain and achieve the quality of governance at every level,
i.e. from the grassroot level to global level, Indian society is in
THE BHAGAVAD GITA the process of reforming itself, but economically and socially
Following are a few lessons pertaining to governance from there are still many problems to be addressed. Substantial
Bhagavad Gita. If followed by people from grassroot level, the reforms were carried out during the past two decades
people throughout the globe will attain peace and prosperity. but further structural reforms are required to bring about a
genuine reduction in poverty and a significant lessening of
1. Dharma -- righteousness in activities social inequalities. India’s socio-cultural structures have
2. Kausalam -- optimising one’s competence and capability proved resilient and adaptive across many centuries and that
3. Detachment - Discharging one’s duty without attachment its social and political institutions provide a sound basis for an
enhanced global role. The Indian government has built up an
4. Effective performance - Performing one’s duty effectively
excellent reputation in the international political arena and its
and efficiently
civilizational message has generally been positively received.
5. Emulating exemplary men - Follow the path of great This is achieved through a systematic and structured efforts
men who have displayed extraordinary brilliance and in governance from grassroot level to global level which
excellence further requires refinements.
6. Jignasa - Thirst to acquire knowledge
It may be appropriate to paraphrase the words of Pandit
7. Loka sangraha -- work for societal welfare and wellbeing
Deen Dayal Upadhyaya, the great thinker, philosopher and
8. Stithadhee - Developing stable mind and focussed economist of India: “One ought to be conscious of means
mindset in every effort. and ends. The decision on cost benefit analysis could be
9. Stithaprajna – Unperturbed mind, detachment in work myopic, because it refuses to know that the long-term effects
and maintenance of equanimity endanger humanity; one should not be a victim of short term
10. Nishkama karma - Work with confidence and without fear solutions however attractive they may be. The human values
and work without expectation of any return should be the touchstone of economic theories. Economic
and non-economic variables ought to be the synthetic test of
CONCLUSION a theory and decisions of the policy makers….. The truest test
of any policy is the extent of benefit received by the last man
It is evident from the foregoing discussion that embracing
standing in the last line of the social strata. That is integral
principle of karma yoga as an alternative paradigm will definitely
humanism.” That indeed is the true test of governance.
enhance the quality of governance in every organization. To
CS

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NGO Governance and Why it matters

ARTICLE
Philanthropic giving is on the rise in India. Foundations, high net-worth individuals (HNIs) and other
individual citizens collectively contribute around INR 70,000 Crore including profit-making companies
through Corporate Social Responsibility (CSR). What each of these groups has in common is that a large
part of their philanthropic capital is channelized towards charitable purposes through non-governmental
organizations (NGOs). While exact estimates of the size of the NGO sector have varied from 3+ million to
1-2 lakhs, by any estimate, the body of NGOs and people they employ is significant. Given the criticality
of NGOs in India’s development, financial inclusion, their governance, leadership, and management
deserve to be studied and strengthened. This article lays out some of the unique features and challenges
that NGOs face, as well as suggestions on how to better assess and work with NGOs in pursuit of
common development goals.

1. WHO DONATES AND HOW MUCH IN

INDIA?
According to the India Philanthropy report, 2019, overall private
funding for the social sector grew by 15% p.a. from INR 40,000
crore in 2014 to INR 70,000 crore in 20181. Philanthropic
funding from individuals saw the highest growth at 21% p.a.
and constituted about 63% of private funding in 2018, 16%
was contributed by CSR and 19% by foreign sources2. Within
the individual philanthropic category, contributions from ultra-
high net worth individuals donating more than INR 10 Cr
Ragini Menon* accounted for 55% while the remaining 45% was from other
Consultant smaller individual givers.
Samhita Social Ventures
Mumbai
2. THE RELEVANCE OF NGOS
ragini.m@[Link] What each of these groups has in common is that a large part
of their philanthropic capital is channelized towards charitable
purposes through non-governmental organizations (NGOs),
which act as important connections between underprivileged
and disadvantaged people and communities and those looking
to support them.
On average, 40% of CSR funding was spent through NGOs,
increasing year on year since 20133. The High-Level Committee
on CSR, constituted by the MCA in 2018, remarked that these
implementing agencies have become the most appropriate
way to execute projects, given their presence in the target
areas, local connect and knowledge, besides experience in
executing social projects, which a company typically lacks4.

Anushree Parekh* Similarly, NGOs’ role in battling the current COVID-19

Advisor pandemic cannot be overstated – from providing ration
Samhita Social Ventures and meals to those in need and migrants to helping district
administration set up quarantine centres to mobilizing women
Mumbai
to manufacture masks and working with communities to
anushree@[Link] protect their livelihoods and incomes, they have proven
themselves significantly. As articulated by Amitabh Kant, CEO
of NITI Aayog, “there is nobody better placed than the NGOs,
BACKGROUND to understand the pulse at the grassroots and engage closely
with communities, especially in rural India.”
O ver the past decade, charitable giving in India has grown
significantly. The country’s long-standing philanthropic
tradition, the rise of an affluent middle class, regulations such as
In addition to providing last-mile services to the under-
privileged and disadvantaged, NGOs also play the important
mandatory CSR under the Companies Act, 2013, innovations role of acting as the third pillar, a balance between the
such as the social stock exchange, and a healthy non- government, the corporate sector, and the people.
governmental organization (NGO) sector, have made the Indian
philanthropic ecosystem one of the most mature in the world. [Link]
1

2
[Link]
3
[Link]
* The views expressed are the personal views of the authors 4
Ibid

CHARTERED SECRETARY | AUGUST 2020 73

 NGO Governance and Why it matters
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Given their critical role and the degree of dependence on them tax-exempted organizations listed on the Income Tax (IT)
and their ability to implement effective programmes that lead to Department’s website, which totals at almost 2,20,000
positive impact on the ground, understanding their governance, organizations8. NITI Aayog’s Darpan portal has 94,000
management and operational structures is absolutely central organizations registered as NGOs9.
to the larger objective of nation-building.
c. What does an average NGO look like?
3. UNDERSTANDING INDIA’S NGO If finding reliable data on the number of NGOs is difficult,
SECTOR more representative and detailed information on their
a. What is an NGO? nature, size, and characteristics is almost impossible,
beyond individual sample surveys carried out by various
NGOs are non-profit organizations working on projects organizations.
and activities for social and charitable causes5 to promote
social welfare and/or environmental sustainability. The infographic summarizes some of the key parameters
of an average NGO in India. The data is based on
In terms of their legal status, NGO’s can be registered an extensive survey undertaken by Samhita Social
as any one of these three types of organizations – public Ventures in 2018 with a sample of 220 NGOs as part of a
charitable trusts, societies, and Section 8 companies consultation on CSR rules for the High-Level Committee
– each of these is governed by distinct regulations 2018.
and entities. Additionally, the Income Tax Department
manages tax exemption, and the Ministry of Home Affairs Most NGOs in India are relatively small, with 61% of
regulates the flow of foreign funding to the NGOs. The organizations reporting an annual budget of less than
overall perception of the regulatory landscape for NGOs INR 1 Cr. Only 13% had an annual budget of more than
in India is that of being complex and confusing, with 50% INR 10 Cr, and the remaining 26% fell somewhere in the
NGOs reporting difficulties in understanding them6. middle. The sample may be a little skewed towards NGOs
dependent on institutional funding, as another survey
b. How many NGOs are there? indicated a higher dependence on individual donations
and a lower proportion of CSR funding10. Both the surveys
By any estimate, the body of NGOs in India is significant. show that 1 in 2 NGOs have been able to raise CSR funds.
The highest approximation, made by the Ministry of It is important to note the severe effects of Covid-19 on
Statistics and Programme Implementation, is pegged at funding of NGOs, with estimates suggesting that CSR
3.17 million in 20117. However, this number is inflated funding can fall by as much as 50% and donations from
due to the inclusion of hospitals, schools, and religious individuals are also likely to decrease as many have
institutions in the scope and could also include inactive already contributed significantly for COVID-19 relief and
organizations. Other measures include the number of the PM Cares11.

4. HOW ARE NGOS RUN AND necessity for resources, talent, systems, processes, etc. It is
therefore important to conceive of a version of management
MANAGED? that can preserve rigour while being cognizant of principles like
NGOs are mission-led organizations that are passionate about “collaboration, equity, and participation”12.
driving positive impact and change in people’s lives. At the 8
[Link] Accessed
same time, they are like any other organization, in terms of the July 15 2020.
9
[Link] Accessed July 15 2020.
5
[Link]
10
Doing Good Index 2020
6
Doing Good Index, 2020
11
[Link]
7
[Link] state-of-its-social-sector-government-must-come-to-its-aid/
Instiututions_30may12.pdf
12
[Link]

74 AUGUST 2020 | CHARTERED SECRETARY

 NGO Governance and Why it matters

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a. Board of directors/ trustees A 2017 survey of 250+ leaders from NGOs in India
found that while almost all respondents believed in
Almost all NGOs in India have a Board of Directors or
the importance of leadership, more than half “do not
Trustees, who act as overall stewards or guardians
believe they are capable of recruiting, developing, and
for the NGO and legally liable for its actions13. While
transitioning leaders”, and “have not received any funding
the law permits a ‘reasonable’ remuneration for the
to develop leaders in the past two years”15. Forty percent
board members, expert opinion suggests that there is
respondents reported that they struggled in attracting
ambiguity in terms of what is reasonable and it may lead
senior leaders due to limited organizational resources, low
to conflicts of interest14. In most established NGOs, the
compensation, and lack of a suitable talent pool16. Another
trustees oversee the strategic, legal, ethical and financial
survey showed that almost 70% of NGOs reported
governance of the NGO, with day to day management left
difficulties in recruiting skilled staff. Indian funders and
to the leadership and execution teams. Successful NGOs
NGOs have traditionally focused on developing projects
have shown a high degree of involvement of the Board,
and programs, not organizations and people17. While a few
especially in terms of adding credibility to the NGO,
individual and CSR funders have now realized and started
championing its work, bringing visibility and opening up
supporting leadership development that is customized for
networks of potential funders.
the needs of the social sector, a majority of the donors
b. Leadership and even NGOs themselves remain quite unaware of this
imperative.
Like with any organization, leadership is critical within
NGOs. While NGOs may be started by passionate
individuals, good Samaritans or community members c. Execution team, systems, and processes
who are seeking to make a change, these charismatic
leaders most often need support from competent leaders An NGO typically divides its operations into a few key
to build and run the NGO. These leaders face unique and verticals: fundraising, project design, and implementation,
daunting challenges in terms of dealing with the messy monitoring & evaluation, and communications, along with
and complex nature of creating social impact, combined support functions covering HR and Finance. Depending
with balancing the priorities of funders, governments and on the nature of the organization’s mission, some will need
beneficiaries, low resources and funding, lack of suitably technical teams, such as staff with medical training and
talented staff and complicated compliance regime. Given expertise for delivering healthcare services and support,
this imperative and the size of the NGO sector, one would or a team dedicated to research and campaigning for
have thought that leadership development for NGOs advocacy. While data around the exact processes is
would be a well-established practice. On the contrary, it difficult to find, a Samhita survey of 150+ NGOs conducted
remains an unappreciated and under developed aspect in in 2016 yielded some insight.
NGO management in India.

15
[Link]
NGOs/[Link]
13
Doing Good Index 2020
16
ibid
14
[Link]
17
[Link]

CHARTERED SECRETARY | AUGUST 2020 75

 NGO Governance and Why it matters
ARTICLE
NGOs’ efforts to streamline and formalize processes are
evident in the high degree of documentation. However,
less than half of the NGOs reported being able to
maintain dedicated in-house teams for key functions such
as fundraising and monitoring & evaluation. It is worth
noting that NGO processes have strengthened since the
introduction of the CSR Act and there has been up upward
trend in process-oriented operations, so it can be expected
that these numbers will have increased since the time of
this survey. While many NGOs reported using technology,
most were only doing so for basic administrative tasks
and social media, and just under half had integrated
technology into their programme implementation and
monitoring & evaluation processes.

5. HOW TO ASSESS AN NGO?

With all of this in mind, how does one go about assessing
the credibility and capability of an NGO? Material factors like
responsible governance, financial sustainability, and legal
compliance are of course important, but there are many other
factors that CSR and all other philanthropic givers should
consider in the search for an NGO partner.

There exist a few global frameworks such as McKinsey’s There is no standard set of measures to measure an NGO’s
Organization Capacity Assessment Tool, Managing Accounting capacity. No single metric can paint a holistic picture of the
for NGO (MANGO) that assesses financial accountability, and extent of an organization’s integration with a particular
The Malcolm Baldrige Criteria for Performance Excellence community, the depth of its expertise in a particular cause
for Non-Profit ventures. Similarly, portals such as Guidestar, area, or the degree of social impact created, all of which are of
Darpan, Credibility Alliance, etc. offer certifications to Indian critical importance when it comes to implementation.
NGOs.
6. IN CONCLUSION – BUILDING TRUST
Overall, three aspects of an NGO – its credibility, capability, and
impact on the ground - are common across most frameworks, IN THE NGO SECTOR
though a fourth parameter of ‘fit’ is also equally important to be Despite the contributions of the NGO sector to development,
considered: and the key role they play in implementing the philanthropic
community’s efforts to address gaps in government service
 Credibility – this typically includes parameters of legal, delivery, these organizations are subject to immense mistrust18.
tax and other regulatory compliances and certification and It is therefore worth debunking a few myths that characterize
the pedigree, qualification, and experience of the NGO’s their work and reputation.
board/trustees and founders and senior leadership.
a. Perception - NGOs evade regulations and store
 Capability – this is a measure of the NGO’s ability to unauthorized funds
deliver its mission and its maturity. It generally covers
the strength of various systems and processes such as There are a number of regulations in place to ensure that
strategy and planning, talent management, financial NGOs are not able to misuse or store the funds they receive.
management, community relationships, learning and Violations of these rules can lead to swift punitive action.
growth etc. For example, NGOs are required to maintain separate
books for any commercial activities they undertake, and
 Impact on the ground – one of the most critical factors any profits must be applied towards the achievement of
in assessing an NGO’s performance is the question charitable objectives. If an organization brings business
of its impact on the ground, which has been a topic of income that is larger than 20% of its grant income, it can
discussion across multiple disciplines and stakeholders. lose its tax exemption status. An organization can also
There are a variety of tools and methods to assess social have its registration cancelled if it carries out any activity
impact, from the most rudimentary (simple before and that is not explicitly listed in its founding documents19.
after surveys) to the most sophisticated (randomized
controlled trials). Generally, the presence and quality of Foreign funding has become a particular point of scrutiny
an NGO’s monitoring, evaluation and learning team and for the NGO sector. FCRA applications are complex and
processes and third-party impact assessments can act as can take three months to upwards of a year to process.
proxies for an NGO’s impact. Once held, there are stringent reporting requirements
to maintain FCRA status. Inability to keep up with these
 Fit – a giving decision is a partnership between the donor requirements will lead to the forfeiture of the licence.
and the donee. As with all partnerships, it is essential to
assess the alignment of the two parties to each other’s [Link]
18

[Link]
values and objectives. 19
[Link]

76 AUGUST 2020 | CHARTERED SECRETARY

 NGO Governance and Why it matters

ARTICLE
Since 2014, more than 14,800 FCRA licenses have been managerial skills24. The sector is also seeing young
cancelled20. talent, which is not only highly motivated but also highly
educated, many from world-renowned universities and
Additionally, CSR funders under Section 135 demand combines the head and the heart25. Recent years have
a grueling level of reporting and transparency from also seen a growth of robust graduate and post-graduate
NGOs – right from monthly budget utilization to progress programs customized for the need of the social sector.
reports on-ground activities to third party audits and All these elements, complemented by the push for higher
impact assessments. The working committee on the transparency, are slowly but surely leading to a paradigm
proposed Social Stock Exchange in India has made shift in the way NGOs are managed.
further recommendations to consolidate, standardize
and strengthen financial and social impact reporting c. Perception - high overhead costs make an NGO
mechanisms for NGOs21. inefficient

Even NGO leaders may be subject to scrutiny at a In the business world, it is expected that investments
personal level through the Lokpal and Lokyuktas Act22, in training, research, and organizational development
wherein trustees or officers of charitable organizations are necessary for long-term and larger-scale success26.
that operate with large contributions from government and The same rationale holds true for NGOs; they too have
philanthropic funds are required to declare their assets to to survive and sustain beyond the short-term projects
the Ministry of Home Affairs23. While the final conditions in order to serve their purpose. Donors often think that
and enforcement of this Act are yet to be finalized, there their money spent on an NGO’s overheads is wasted as
is a clear indication that the government has a zero- it does not reach the end beneficiary. However, in order
tolerance approach to corruption in the sector. to deploy a donor’s money in the most impactful way,
an NGO needs to invest in its people, infrastructure,
In the business world, it is expected that technology, especially with the move towards a more
investments in training, research, and professional way of working explained above. It is also
useful to clarify that the 5% cap on companies for their
organizational development are necessary CSR-related administrative costs imposed by Section
for long-term and larger-scale success26. 135 of Companies Act 2013 does not apply to NGOs. In
The same rationale holds true for NGOs; practice, most NGOs would require at least around 15-
they too have to survive and sustain 20% as overhead costs.
beyond the short-term projects in order to That is not to say that all types of superfluous expenses
serve their purpose. can be permitted or that NGOs cannot become smarter
and more efficient in spending. There has to be a sense
b. Perception – NGOs are unprofessional of financial propriety in the spending of NGO’s funds
vis-à-vis its mission and vision. However, judging this
India is seeing a new shift in the ways NGOs are aspect is highly subjective. As aptly explained by a few
managed. Many NGOs are adopting a more structured experts, would we prefer to fly on an airline that had the
way of functioning, mimicking corporate-like discipline lowest maintenance cost? Or go to the hospital with the
and systems, greatly aided by the CSR expectations. oldest, depreciated equipment27? Partnering with NGOs
To add to the momentum, experienced professionals requires one to take a balanced perspective, considering
from the corporate sector are crossing over to the social and responding to all these aspects, to create win-win
sector, bringing with them a set of problem-solving and solutions. CS

20
[Link] 24
[Link]
ngos-cancelled-in-2019-for-violation-of-laws/articleshow/[Link] 25
[Link]
21
Working group report on social stock exchange, [Link] creating-remarkable-change-in-india/articleshow/[Link]?from=mdr
statistics/reports/jun-2020/report-of-the-working-group-on-social-stock-exchange_46751.html 26
[Link]
22
[Link] financial-performance/#7483e03b72cf
23
[Link] 27
[Link]

CHARTERED SECRETARY | AUGUST 2020 77

 Grassroot role and responsibilities of Grama
ARTICLE

Sabha in Futuristic governance in India

India has a fairly long tradition of rural self-governance. For centuries, local panchayats have been looking
after the basic social, political and economic requirements of the people in India. During the freedom struggles,
Mahatma Gandhi had highlighted the Gram Swaraj or village self-governance. As per his wishes the Panchayat
Raj System was formalized in 1992 which revealed the Grama Sabha. The Grama Sabha has been defined as
a statutory unit as per the 73rd constitution amendment Act, 1992. The major aim of the Grama Sabha is to
have decentralized planning and execution with people participation at the grassroot level. The vital aspect of
decentralized administration is to supervise the operational efficiency of the Grama Panchayat. The maximum
numbers of study and observations revealed that most of the state governments are not serious towards the
formation of Grama Sabha committees. The present study aims to discuss the prime role and responsibilities
of Grama Sabha in order to explore its significance and importance for the futuristic governance.

Panchayats by promoting transparency and accountability

in administration, enhancing public participation in the
planning and implementation of schemes and in the choice of
beneficiaries, and paving the way for social audit.
The Government has ordered the conduct of at least four
Grama Sabha meetings a year. For instance, the State of Tamil
Nadu has prescribed the date for conducting Grama Sabha
meetings such as 26th January, 1st May, 15th August and 2nd
October. In order to streamline the procedure for the conduct
of Grama Sabha, this Government brought out suitable
Dr. S. Rajamohan amendments to the Tamil Nadu Grama Sabha (Quorum and
Senior Professor and Director Procedure for convening and conducting of meetings) Rules,
Alagappa Institute of Management 1998 and specified that the Grama Sabha shall meet in each
Alagappa University of the Village Panchayat wards by rotation.
Karaikudi
rajamohans@[Link] As regards quorum, since a quorum of 10 percent of the
voters was unattainable and unwieldy for the larger Village
Panchayats, a reduced quorum supported the population of
Village Panchayats has been prescribed as shown in Table 1.

Table -1

Revised Quorum for Grama Sabhas

Sl. Population of a Village Quorum for the

No. Panchayat meeting
1. Upto 500 50
2. 501 to 3000 100
A. Sathish 3. 3001 to 10000 200
Research Scholar
Alagappa Institute of Management 4. Above 10000 300
Alagappa University
Source: Rural Development and Panchayat Raj Department.
Karaikudi
astsphd@[Link] It has also been specified that out of the quorum, at least
one out of three persons shall be women and the number
of SC / ST participants shall bear the same proportion to the
quorum that the population of SCs / STs bears to the entire
1. INTRODUCTION population of the Village Panchayat. Recording of Grama

T he Grama Sabha is that the grassroot level democratic

institution in each Village Panchayat. A vibrant Grama
Sabha is important for the effective functioning of Village
Sabha attendance and proceedings through proper registers
and keeping photographic records are made mandatory for the
conduct of meetings of Grama Sabhas.

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It has been decided to make the Grama Sabha a forum for the Vice-Chairperson is elected indirectly by the members of
conduct of Social Audit of all schemes for the welfare of the the Panchyat Council. The Union Council Members are
people. Every meeting of the Grama Sabha shall be presided elected directly by the people. For population of every
over by the President of the village panchayat or in his absence 5,000, one Union Council Member will be elected by the
the vice-president or in the absence of both of them by the people. Members of Parliament and Legislative Assembly
convenor of Grama Sabhas. The village panchayat shall place elected from that area are ex-officio members of the
before the Grama Sabha a report relating to the developmental Panchayat Union Council.
programmes relating to the constituency during the previous
year and these that are proposed to by undertaken during the iii) Zila Parishad (District Level)
current year, as also the expenditure incurred along with the
annual statement of accounts and the administration report of The District Panchyat is constituted with directly elected
the preceding year. If in any circumstances, any decision of the members - one member for a population of every 50,000.
Grama Sabha could not be implemented, the president shall The Chairperson and Vice-Chairperson are elected from
report the reasons therefor before the Grama Sabha. The village amongst the Council Members. Members of Parliament
panchayats, the block panchayats and the district panchayats and State Legislative Assembly of that area are ex-office
shall give due consideration to the recommendations and members of the District Panchayat Council.
suggestions, if any, of the Grama Sabha.
3. ROLE AND RESPONSIBILITIES OF
2. CLASSIFICATION AND STRUCTURE OF GRAMA SABHA
PANCHAYAT RAJ There are four types of responsibilities assigned to the Gram
The Balwant Rai Mehta Committee, headed by MP Balwant Sabha in the state Acts as follows.
Rai Mehta, was a committee appointed by the Government of
India in January 1957 to examine the work of the Community 1. Review of development programmes
Development Programme (1952) and the National Extension
Service (1953), to suggest measures to improve their work. 2. Control through considering the annual accounts, audits,
The committee’s recommendation was implemented by budget, report of vigilance committees and seeking
National Development Council (NDC) in January 1958 and this clarifications from the president
set the stage for the launching of Panchayati Raj Institutions 3. Assistance in the implementation of development
throughout the country. The committee recommended the programmes and schemes
establishment of the scheme of ‘democratic decentralization’,
which finally came to be known as Panchayati Raj. This led to 4. Participation in implementation of development
the establishment of a three-tier Panchayati Raj system such programmes and schemes
as Gram Panchayat at the village level, Panchayat Samiti at
the block level, and Zila Parishad at the district level
The village panchayat shall place before
Figure 1. the Grama Sabha a report relating to
the developmental programmes relating
Classification of Panchayat Raj to the constituency during the previous
year and these that are proposed to by
undertaken during the current year, as
also the expenditure incurred along
with the annual statement of accounts
and the administration report of the
preceding year. If in any circumstances,
any decision of the Grama Sabha could
not be implemented, the president shall
i) Grama Panchayat or Grama Sabha (Village Level)
report the reasons therefor before the
A Village Panchayat or Gram Panchayat is constituted Grama Sabha. The village panchayats,
for a minimum population of five hundred. The Village the block panchayats and the district
Panchayat has got members ranging from a minimum panchayats shall give due consideration to
of five to maximum of fifteen. In the Village Panchayat the recommendations and suggestions, if
the Ward Members and the President are to be elected
directly by the voters. The Vice-President of the Village any, of the Grama Sabha.
Panchayat is elected indirectly from among the elected
Ward Members of the Village Panchayat Apart from the above four categories some more responsibilities
are also assigned to the Gram Sabha under the residual clause
ii) Mandal Parishad or Panchayat samiti (Block Level) as given below
1. Annual statement of account and audit report
For each development block a Panchayat Union is
2. Previous year’s administrative report
formed. Each Panchayat Union has a Chairperson and a

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 Grassroot role and responsibilities of Grama Sabha in Futuristic governance in India
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3. The year’s programme of work (the report of development
programme for previous year and the current year)

4. Proposals for fresh taxation

5. Selection of schemes and beneficiaries

6. Promotion of unity and harmony among all the villages

7. Mobilizing voluntary labour the community welfare

programmes

8. Discussing about the street lights, street or community

water taps, public wells, public sanitation units, irrigation
facilities and such other public utility schemes

9. Identification of beneficiaries for development schemes

10. Programmes for adult education and family welfare within

the village

11. Knowing the follow up action taken on the decisions

of the Grama Sabha and the detailed reasons for not
implementing any of the decisions

12. Discussing the activities of parent-teacher associations of

the schools within the area of the Grama Sabha

13. Seeking clarifications from the president and ward

member and other office bearers of Grama Sabha about
any particular activity, scheme, income and expenditure  Education

14. Verifying the eligibility of persons getting various kinds The level of education is extremely low in rural areas
of welfare assistance from the Government such as which require to be strengthened through transformations
pensions and subsidies in education policies especially keeping rural areas
focused.
15. Proposal of any changes made in activities
 Right to Information
16. Minutes of the earlier meeting
Right to Information Act 2005 (RTI Act) enacted by the
17. Proposal of the panchayat budget govt has proved to be very successful weapon in bringing
transparency and accountability within the functioning of
18. Drafting the principles for the schemes and their priority the general public bodies but it is not being utilized to its
for economic development of the village fullest at the village level due to low level of awareness
about this Act amongst the village people. If the Gram
19. Ensure proper utilization and disbursement of funds or Pradhan is indifferent to the village people and functioning
as per his own requirements and not able to give any
assets to the beneficiaries
details of the expenditure made within the development
process then they can use the provisions of the RTI Act,
20. Mobilize people for community welfare programmes
which can help them to understand about all the details
of the work done. But what is required to be done is to
4. WAYS TO EMPOWER THE GRAMA spread awareness, knowledge, benefits and therefore the
SABHA FOR THE FUTURISTIC process of using this act among the people.

GOVERNANCE  Regular Meetings of the Gram Sabha

 Creating Awareness In most of the agricultural areas that the Gram Sabha or
Ward Sabha meetings do not happen regularly due to
Awareness should be created at village level about the the shortage of data among the villagers or indifferent
rights and responsibilities of the Gram Sabha members attitude of the Panchayat members. It is advised that
where they are empowered through Constitutional these meetings should be held regularly at least once in a
Amendments but not making proper use of their powers. quarter and the minutes of these meetings should be sent
The villagers need to be informed to use their Constitutional to BDPO (Block Development and Panchayat Officer) duly
rights. signed by a number of the senior Gram Sabha members.

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It should also be ensured that these meetings happen in a panchayat seats are being reserved for women candidate.
cordial atmosphere and fruitful manner. But in practice, the elected women representatives only
become a signatory authority and the work is being done
 Supervision by Senior Villagers by their husband or male members of the family. Most
of the women representatives are not even aware of the
The supervision of the event works should be administered activities and work being administered in their village. The
in the village level either by senior Gram Sabha members women representatives should be allowed to conduct
or any specific individual designated by the government Gram Sabha meetings and execute other development
itself. work so that more and more female members are
motivated to attend.
 Training of Panchayat Members
 Role of Media
In most of the villages, the Panchayat members are either
un-educated or under educated and they are not ready Media is the fourth pillar of the democracy but in the
to function in an effective way as desired and additionally current scenario, media is not focusing on the problems
the personal greed, internal politics and infighting at pertaining to the rural areas. Media should take the
village level play a crucial part in selecting and electing initiative to reach to the rural areas and create the
the Panchayat members. So, the required thing is that the awareness by their programmes focusing on the issues
elected members should be trained and educated either at concerning the villages.
district or block level about their roles and responsibilities
towards their Gram Sabha and will be motivated to boost
themselves above the internal politics being practiced at 5. CONCLUSION
village level. India is predominantly a land of villages. Around 72 per cent
of population are in the villages since Indian economy is an
 Increasing Participation of People agrarian economy. There are more than six lakh villages
in India. Therefore Mahatma Gandhi said that the real India
Participation of the people should be increased in lives in villages. As a matter of fact, the Indian villages are still
planning, budgeting and auditing of all empowerment confronted with various issues and challenges that range from
work to be administered at village level, and this may lack of education to improper sanitation. Hence, Grama Sabha
create a sense of responsibility for both Panchayat as needs basic legal knowledge to educate the local people on
also the Gram Sabha. In the concept of Panchayati Raj Panchayati Raj administration in general and Gram Sabha
institutions, strengthening the people’s participation in in particular. Grama Sabha becomes alive to the legal issues
the Gram Sabha may be a critical constraint for making and develop legal knowledge with the development initiatives.
Panchayats accountable to the people. In recent times efforts are made to create legal awareness
among the rural people, the Tamil Nadu government and the
 Capacity Building of Villagers regional political parties of the state along with NGOs have
launched a novel method of spreading legal knowledge to the
Due to various socio-cultural reasons as also, the mindset village habitants including SC and STs of the Scheduled Tribes
of being ruled and inability to ask questions on the part of Act, 2006. which empowers Grama Sabha on RTI Act, which
the villagers, the Gram Sabha meetings are dominated by is a bold step towards creating transparency in the system of
some influential or powerful group of people. It is here that governance through Grama Sabha. CS

the president plays an important role to give a meaningful

level of representation to the people in Gram Sabha.
Capacity building of the villagers must be done through REFERENCES:
education, awareness, training, increased participation 1. Nataraju.G. and Meenakshi K. (2018), Grama Sabha –
in development works and so on. They are motivated A Milestone for Sustainable Development in Rural Areas,
to attend these meetings and may raise themselves to Global Journal for Research Analysis, 7 (7), pp. 1-2.
ask questions from the Panchayat in those meetings. It
can be done by regular visits and attending Gram Sabha 2. Bavinck, M., and Vivekanandan, V. (2017). Qualities of
meetings by BDPOs too. self-governance and wellbeing in the fishing communities
of northern Tamil Nadu, India-the role of Pattinavarur
 Displaying Information of Notice Board panchayats. Maritime Studies, 16 (1), pp. 1- 16

Gram Sabha should inform the Panchayat to show all 3. Karpagavalli, V., and Mohanasoundari, R. (2015).
the information on Panchayat notice board from time Effectiveness of e-governance services at panchayat
to time about the works being administered or planned level in Tamil Nadu. International Journal of Marketing and
in near future, in order that the members who did not Technology, 5(3), pp. 81-90.
attend the Gram Sabha meetings can have access to that
information. 4. Mathur, M. V. (1966). Panchayati raj in Rajasthan: a case
study in Jaipur District. Impex India.
 Women Empowerment
5. [Link]
Government has taken various steps for the women
empowerment in many rural villages and some of the 6. [Link]

CHARTERED SECRETARY | AUGUST 2020 81

 Banking Regulation (Amendment) Ordinance,
ARTICLE

2020 - reforming governance norms for

co-operative banks
Of late there has been an observable decline in public confidence in the co-operative banking sector in India
due to the failure of some well-known names in this space. Several depositors are left in the lurch when a bank
fails leaving their hard-earned money at peril. The public outcry has brought about legislative change in the
way these banks are governed with enhanced regulatory oversight over co-operative banks by the Reserve
Bank of India with the promulgation of the Banking Regulation (Amendment) Ordinance, 2020. These
measures are a step towards protecting the interests of depositors and strengthening the governance norms in
co-operative banks.

Taking cognizance of the urgency of the need to address these

issues, the President has, on 26 June 2020, promulgated
the Banking Regulation (Amendment) Ordinance, 2020 (the
Ordinance) to amend the BR Act to protect the interests of
depositors and strengthen co-operative banks by improving
governance and oversight by extending powers already
available with RBI in respect of other banks to co-operative
banks as well for sound banking regulation, and by promoting
professionalism and enabling their access to capital.

In this article, the author has examined the legal changes

Abdullah Fakih, FCS brought about by the Ordinance in governance of the banking
Mumbai sector with specific reference to co-operative banks.
abdullahfakih@[Link]
HIGHLIGHTS OF THE ORDINANCE
Carve-outs from applicability of the BR Act

The Ordinance has amended the BR Act to provide that it

would not apply to:
BACKGROUND

C o-operative banks have played an important role in the

Indian economy, particularly in the rural areas and the
hinterlands due to their wider network and localized nature
(i) A primary agricultural credit society; or

(ii) A co-operative society whose primary object and

of operations. These banks are often the preferred savings principal business is long term financing for agricultural
vehicles for small depositors due to their local connect and the development.
lure of higher interest rates. So far, co-operative banks have
had to contend with a dual set of regulators viz., the Reserve To avail this carve-out from the BR Act, the aforesaid societies
Bank of India (RBI) regulating the banking functions under the must not use the words ‘bank’, ‘banker’ or ‘banking’ in their
Banking Regulation Act, 1949 (the BR Act) and the respective name and should not act as a drawee of cheques. The existing
state registrar of co-operatives regulating their management exemption for co-operative land mortgage banks under the BR
and governance under the respective state co-operative law or Act has been withdrawn by the Ordinance.
the multi-state co-operative law. This issue of dual regulation
has been a challenge in separating the management from the RBI’s POWER TO MAKE A SCHEME FOR
operation of co-operatives and has often been cited as the
reason behind mismanagement in some co-operative banks. RECONSTRUCTION OR AMALGAMATION
With a view to bring co-operative banks on par with the OF BANKING COMPANIES
developments in the banking sector through better management Under the BR Act, the RBI is empowered to apply to the
and proper regulation and to ensure co-operative banks are Central Government for an order of moratorium in respect of a
better managed to protect the interests of depositors, the banking company. During such moratorium, legal proceedings
Banking Regulation (Amendment) Bill, 2020 (the Bill) was and actions cannot be initiated or continued against the
introduced in the Lok Sabha in February 2020. However, the banking company for a period of up to six months. The banking
Bill could not see the light of day with the outbreak of Covid-19. company in respect of which such order of moratorium is made,

82 AUGUST 2020 | CHARTERED SECRETARY

 Banking Regulation (Amendment) Ordinance, 2020 - reforming governance norms for co-operative banks

ARTICLE
is also prohibited from making any payments to depositors or  Reduction of interest or rights which the members;
discharging liabilities or obligations to other creditors during depositors and other creditors have in or against
this period. The Ordinance has added to this list of restrictions the banking company before its reconstruction or
that during the moratorium, the banking company will also be amalgamation to such extent as the RBI considers
prohibited from granting any loans or making investments in necessary.
any credit instruments.
 Payment in cash or otherwise to depositors and other
Further, during such moratorium, RBI may prepare a scheme creditors.
for reconstruction or amalgamation of the banking company,
 Allotment to the members of the banking company for
if it is satisfied that such an order is needed to secure proper
management of the banking company, or is in the general shares held by them therein before its reconstruction or
public interest or in the interest of depositors or in the interest amalgamation whether their interest in such shares has
of the banking system of the country as a whole. been reduced or not; of shares in the banking company on
its reconstruction or; as the case may be; in the transferee
The scheme as envisaged may inter-alia contain the following bank.
provisions pertaining to the banking company:  Continuance of services of all the employees in the
banking company itself on its reconstruction or; as the
 Its constitution; name and registered office; capital; case maybe; in the transferee bank on the same terms
assets; powers; rights; interests etc. and conditions of service.
 In the case of amalgamation of the banking company; the  Such other measures which may be incidental or
transfer to the transferee bank of its business; properties; consequential to secure that the reconstruction or
assets and liabilities. amalgamation will be fully and effectively carried out; and

 Change in its Board of Directors. The Ordinance has gone a step further by also allowing the
RBI to initiate a scheme of reconstruction etc. in respect of
 Continuation by or against the banking company on its a banking company without imposing a moratorium. This
reconstruction or; as the case may be; the transferee will ensure that withdrawals by depositors and day-to-day
bank; of any actions or proceedings pending against the operations of the banking company are not disrupted while
banking company immediately before the date of the such a scheme is formulated by RBI, to ensure that small
order of moratorium. depositors are not unnecessarily inconvenienced.

CHARTERED SECRETARY | AUGUST 2020 83

 Banking Regulation (Amendment) Ordinance, 2020 - reforming governance norms for co-operative banks
ARTICLE
ISSUANCE OF SHARES AND SECURITIES of the BR Act to co-operative banks. These provisions mainly
deal with control over management as well as suspension of
BY CO-OPERATIVE BANKS business and winding-up of banking companies.
The Ordinance enables co-operative banks to issue equity
shares, preference shares, or special shares at face value or The applicability of these provisions to co-operative banks will
at a premium to its members or to any other person residing enable the RBI to take the following measures in respect of
within its area of operation. Further, co-operative banks have co-operative banks:-
also been enabled to issue unsecured debentures or bonds
or similar securities with maturity of ten or more years to  To remove managerial and other persons from office if it
such persons. These securities can be issued either through is satisfied that it is in the public interest to do so or for
a public issue or on private placement basis. Such issuance preventing the affairs of the bank from being conducted
will be subject to the prior approval of the RBI, and any other in a manner detrimental to the interests of the depositors
conditions as may be specified by RBI. or for securing the proper management of the bank, and
appointing other suitable persons in their position.
Enabling co-operative banks to raise equity / debt capital
through issuance of securities serves as an additional funding  To appoint additional directors on the Board of the bank if
avenue for them by improving their accessibility to capital. This it is of the opinion that it is in the interest of banking policy
will also help in safeguarding the interests of depositors. In or in the public interest or in the interest of the bank or its
adverse business situations, the shareholders would absorb depositors.
the first losses before the depositors take a hit. This is similar
to the practice of requiring commercial banks to maintain  To make a report to the jurisdictional High Court on the
stipulated levels of Tier 1 and Tier 2 capital in line with global application for winding-up of the Bank.
practices.
 To sanction a scheme of amalgamation of the bank with
The Ordinance goes on to state that no person will be entitled another bank, as duly approved by the shareholders of
to demand payment towards surrender of shares issued to him the respective banks.
by a co-operative bank. Co-operative banks have also been
prohibited from withdrawing or reducing their share capital,  To apply to the Central Government for an order of
except as specified by the RBI. moratorium in respect of the bank. The restrictions which
will be placed on the bank during such moratorium will be
SUPERSESSION OF BOARD OF as stated before.
DIRECTORS OF CO-OPERATIVE BANKS  To initiate a scheme of reconstruction etc. in respect of the
The BR Act enables the RBI to supersede the Board of Directors bank without imposing a moratorium.
of a multi-state co-operative bank for up to five years in cases
where public interest is involved or for preventing the affairs
of a multi-State co-operative bank from being conducted in a
manner detrimental to its interests or those of its depositors
or for securing the proper management of the multi-State
co-operative bank. The Ordinance has now included all co-
operative banks (as against earlier coverage of multi-state
co-operatives only) within the purview of this provision of the
BR Act. In case of a co-operative bank registered with the
Registrar of Co-operative Societies of a state, the RBI will be
able to supersede the Board of Directors only after consultation
with the concerned state government, and within such period
as specified by it.

The Ordinance has gone a step further

by also allowing the RBI to initiate a
scheme of reconstruction etc. in respect of
a banking company without imposing a
moratorium.

EXTENDING RBI’s CONTROL OVER

MANAGEMENT OF CO-OPERATIVE
BANKS
Perhaps the most significant amendment brought about by the
Ordinance has been in the form of extending the applicability of
Part IIA (comprising of sections 36AA, 36AB and 36AC), Part
III and Part IIIA (comprising of sections 36B to section 45X)

84 AUGUST 2020 | CHARTERED SECRETARY

 Banking Regulation (Amendment) Ordinance, 2020 - reforming governance norms for co-operative banks

ARTICLE
POWER TO EXEMPT CO-OPERATIVE the Central Government, and different dates may be appointed
for state co-operative banks, central co-operative banks and
BANKS FROM CERTAIN PROVISIONS OF
primary co-operative banks. The Bill is also expected to be
THE BR ACT passed by the legislature once normalcy resumes to give
The Ordinance empowers the RBI to exempt a co-operative permanent effect to the changes in the BR Act brought about
bank or a class of co-operative banks from certain provisions by the Ordinance.
of the BR Act through a notification. These provisions relate
to restrictions on certain forms of employment, qualifications IMPACT OF THE ORDINANCE
of the Board of Directors and appointment of a chairman of
The Ordinance extends the RBI’s oversight to all co-operative
a banking company. The time period and conditions for such
banks apart from those pertaining to agriculture or related
exemption will be specified by the RBI.
activities. The Ordinance is expected to bring 1,482 urban co-
operative banks and 58 multi-state co-operative banks under
OMISSION OF CERTAIN PROVISIONS OF the supervision of RBI. However, it does not completely do
THE BR ACT away with the duopoly of regulators for co-operative banks,
i.e. the state of registrar of co-operatives will continue to wield
The Ordinance omits certain provisions from the BR Act which their powers but possibly with more granular oversight by RBI.
were restrictive in nature as regards co-operative banks. Some As far as safety of depositors is concerned, the insurance
of the key provisions which have now been omitted are listed coverage of up to INR 5 lacs for co-operative banks under
below: the deposit guarantee scheme of the Deposit Insurance and
Credit Guarantee Corporation (DICGC) for both the principal
 The BR Act restricts co-operative banks from making loans
and interest amounts, continues to hold good. While the
or advances on the security of its own shares. Further,
Ordinance has enabled additional capital raising opportunities
it prohibits the grant of unsecured loans or advances to
for co-operative banks, this will require prior approval of the
its directors, and to private companies or firms where
RBI, which would hinge upon the ability of co-operative banks
the co-operative bank’s directors or chairman are an
to demonstrate a good track record of performance as well as
interested party. The BR Act also specifies conditions
kosher standards of corporate governance. The RBI on its part
when unsecured loans or advances may be granted and
will need to do some groundwork to ramp-up its supervisory
specifies the manner in which the loans may be reported
capacity since it would have additional responsibilities of
to RBI. The Ordinance omits this provision from the BR
overseeing the management of co-operative banks in these
Act.
challenging times. Given that many of the co-operative banks
 The BR Act provides that co-operative banks cannot open tend to have political affiliations these days, it would be
a new place of business or change their location outside interesting to see how this plays out. Some of the smaller co-
the city, town or village in which they are currently located, operative banks with weaker balance sheets could eventually
without permission from the RBI. The Ordinance omits end-up wanting to consolidate themselves with the stronger
this provision. players, and some M&A activity in this space could be on the
cards.
 The Ordinance also omits a provision requiring scheduled
co-operative banks to maintain assets in India with a CONCLUSION
value not exceeding 40% of their total demand and time
The Ordinance brings about a change in the dual regulation
liabilities within India.
policy hitherto applicable to co-operative banks in India. While
The RBI on its part will need to do some the Ordinance does not affect the existing powers of the State
Registrars of Co-operative Societies under the respective
groundwork to ramp-up its supervisory state co-operative laws, it definitely gives more teeth to the RBI
capacity since it would have additional to take control over the management of co-operative banks
responsibilities of overseeing the in cases of suspected mismanagement before it becomes too
management of co-operative banks in late to steady the ship.
these challenging times.
This should benefit millions of small depositors in the country
to assure them that their hard-earned money will be safe under
DATE OF THE ORDINANCE TAKING
the watchful eyes of RBI and is another step towards futuristic
EFFECT governance in the economy. CS

The provisions of the Ordinance relating to carve-outs from

applicability of the BR Act and enabling the RBI to make a REFERENCES:
scheme for reconstruction or amalgamation of banking 1. Banking Regulation (Amendment) Ordinance, 2020 as
companies without imposing moratorium are effective from published in the Gazette of India on 26 June 2020
the date of publication of the Ordinance in the official gazette,
i.e. with effect from 26 June 2020. All the other amendments 2. PRS Legislative Research – Summary of the Banking
brought about by the Ordinance will be notified subsequently by Regulation (Amendment) Ordinance, 2020

CHARTERED SECRETARY | AUGUST 2020 85

 A revisit to functioning of Competition
ARTICLE

Commission of India during the pandemic

outbreak: some reflections
The competition and anti-trust regimes all over the world have responded differently to the challenges posed
by COVID-19 pandemic. As a limited measure, some countries in the European Union have permitted
formation of cartels to ensure supply of essential goods and services. Proactive measures taken by anti-trust
regulators in Turkey, China, Russia and Brazil have been touched upon in this Article. With respect to India,
the article analyses the provisions of the Competition Act, 2002 with specific reference to Anti-Competitive
agreements, abuse of dominance. The article analyses how the Competition Commission of India (CCI) has
during the pandemic approved certain combinations pursuant to the merger control regulations. The article
highlights the importance of collaboration with RBI, SEBI and MCA by the CCI to control any abusive
practices in the market.

technological measures to restart its functioning and approved

many of the pending proposed acquisition matters filed before
it. These mergers of the corporates can be expected to bring
a big boom in the corporate sector of our country and help to
revive the economy which is currently facing a slowdown. Apart
from this, the expectation from CCI becomes more pivotal in the
wake of certain policy measures adopted by the Government
in some sectors especially pharmaceutical, banking, software
development, education etc. in favour of market economy
when the whole world is grappling to protect its citizens from
Dr. Susmitha P. Mallaya coronavirus. These policies are though, implemented as a
short-term measure and the immediate effect seems in favour
Assistant Professor of market economy rather than protecting the interests of
Faculty of Law socially and economically backward citizens of the country.
University of Delhi Though, there is no doubt that these efforts are admirable and
Delhi arguably necessary at this juncture to revive the economy of
spmallaya@[Link] a developing nation, it is also necessary to uphold the socio-
economic rights of its citizens. Therefore, in this situation
when there will be more start-up companies that would start
functioning with lesser government controls, the role of CCI
C ompetition Law is one of the outcomes of the liberalized
economic policies adopted by India which paved way for
the entry of many foreign entities in our country and venture
will become crucial to accomplish the spirit and objective of
Competition Law to sustain and encourage competition in
the market as well as to protect the interests of consumers
into business activities in almost all sectors. As observed by including Business / Commercial / Industrial consumers and
R.H. Bork in The Antitrust Paradox, “consumer welfare is thus contribute its share towards nation building.
greatest when society’s economic resources are allocated
so that consumers are able to satisfy their wants as fully as ANTI-COMPETITIVE AGREEMENTS AND
technological constraints permit”. The recent outbreak of
Covid-19 pandemic world over including India in 2020 has ITS IMPACT
posed several challenges and concerns in the administration At this point when there is lesser market control in the wake
of legislative measures adopted by the countries due to the of pandemic, it is sine qua non that any co-operation between
impact of globalization. Economic development world over, entities must remain in terms with the provisions of the
came to a standstill due to the pandemic outbreak and India Competition Act, 2002. In the wake of the COVID-19 pandemic,
is not an exception to this crisis. As a market regulator, some countries have temporarily exempted the scrutiny of
Competition Commission of India (CCI) is expected to balance anti-trust authorities pertaining to collaborations of market
the interest of all stakeholders and the present scenario players involving the procurement and provision of essential
makes their task more challenging. In the wake of several products and services in order to help businesses to sustain
changes in the market forces on the one hand and to ensure themselves. These measures are nonetheless, initiated on
that competition values and principles are followed by them the principle that such collaborations lead to efficiencies and
which is crucial for the development of economy in general ultimately benefit the consumers in the market. For instance,
and consumers in particular, CCI has a critical role to play. in United States they permitted the collaboration between
The efforts taken by CCI to overcome the initial phase of competitors in respect of research & development, sharing
pandemic lockdown in highly commendable. They adopted the technical know-how, joint purchase agreements among

86 AUGUST 2020 | CHARTERED SECRETARY

 A revisit to functioning of Competition Commission of India during the pandemic outbreak: some reflections

ARTICLE
healthcare providers etc. European Union recognizes crisis Considering the pandemic situation
cartels which involve industry players cooperating to find a prevailing world over and there being
solution to their common challenge arising out of a crisis which
will benefit the consumers. However, such cartels are neither good chances of consolidation of research
found in India nor the question of recognition arose before activities and technologies across
the CCI. Hence, now considering the market in general, and competitors pertaining to pharmaceutical
health sector in specific which are facing problems especially and health care, consumer and essential
with regard to distribution of health care products, there is a
need to exempt them from the scrutiny of anti-trust regulators goods, these sectors become profit
during COVID-19 if there is any co-operation among market making in order to meet the pandemic
players in the health sector. induced demands which may pave way for
In India, Section 3 of the Competition Act, 2002 deals with the adopting anti-competitive practices like
aspect pertaining to anti-competitive agreement and its effect. cartels.
It explicitly prohibits horizontal agreements which result in price
fixing; allocation of customers or territories or markets; limiting
of technological innovation or production or supply; and bid It is interesting to note that in Turkey, as reported in their website
rigging. These forms of arrangements are presumed to be on May 11, 2020, the concerned authority initiated its first case
anti-competitive, unless proven otherwise. Thus, agreements of investigation against 29 undertakings for involving in anti-
amongst competitors to competitive practices at the time of pandemic as reported. It
is likely that they may investigate the aspects relating to abuse
(a) directly or indirectly determine purchase or sales prices; of its position by imposing excessive prices on the products
sold. Earlier, the authority gave warning to the sectors that it
(b) limit or control production, supply, markets, technical is “closely following the price increases” which it referred to
development, investment, or provision of services; as “opportunistic” during the pandemic and may also impose
(c) share markets, source of production, or provision of heavy fines if found guilty. To quote the same,
services by way of allocation of geographical area of
market, type of goods or services, number of customers “It is observed that in our food market, especially in the
in the market, or any other similar way; or market for fresh vegetables and fruits, there are extreme price
increases in an opportunistic manner nowadays, while we are
(d) bid rigs, facing with global COVID-19 outbreak.
are presumed to be anti-competitive.
Being granted the power to protect consumer welfare
However, the Act does not recognize all forms of agreements and prevent actions and practices distorting effective
or joint actions between competitors as anti-competitive. It competition conditions, the Competition Authority closely
recognizes only those anti-competitive agreements which follows the price increases in question and all actors that
will have an adverse effect on the competition and formation contribute to those.
of cartels are one of the most recognized practices of anti-
competitive agreement. In this framework, the most serious administrative fines
laid down by the Competition Act will be imposed to people
Considering the pandemic situation prevailing world over and institutions (all actors such as producers, mediators,
and there being good chances of consolidation of research transporters, final sellers) which are engaged in anti-competitive
activities and technologies across competitors pertaining to practices in the food market, especially in the market for fresh
pharmaceutical and health care, consumer and essential vegetables and fruits. Announced to the public.”
goods, these sectors become profit making in order to meet the
pandemic induced demands which may pave way for adopting The approach of Turkish Competition Authority reflects its
anti-competitive practices like cartels. In India, cartels are not determination to deal rigorously against the market practices
recognized as criminal offence like EU. Hence, chances of which are against the basic spirit of competition law during
formation of cartels in these sectors are higher as compared the pandemic by closely monitoring the market behavior. In
to other sectors. China, Brazil and Russia, they began probing into reports
of excessive pricing. For instance, Brazil’s Administrative
ANALYSIS OF ABUSE OF DOMINANCE Council for Economic Defence launched a preliminary probe
Section 4 of the Competition Act 2002 prohibits any into the conduct of manufacturers and retailers of medical /
exploitative or exclusionary practices carried out by an pharmaceutical products with reference to the complaints
enterprise in a ‘dominant’ position which includes imposition against suppliers of face masks and hand gel charging
of “unfair” purchase or sales prices (including excessive disproportionately higher prices.
prices) or “unfair” conditions on the purchase or sale of goods
or services. For instance, CCI in Umar Javeed v. Google This shows that CCI in India is also expected to closely
LLC (2019) imposed a penalty for abusing its dominant monitor exploitative practices by dominant firms with market
position in the market for “online general web search and power especially in the health care sector and technology
web search advertising services” in India. Similarly, CCI in sector involving excessive demand and supply shortfalls of
Shamsher Kataria v. Honda Siel (2014) has imposed penalties essential goods or services. In case of any abusive conduct, it
for excessive pricing in the automobile auto-parts sector, is likely to be viewed as an aggravating factor in the light of the
transportation services market and patented technology in the Government’s efforts to cap/control the retail prices of essential
telecommunication sector. products such as hand sanitizers and surgical masks.

CHARTERED SECRETARY | AUGUST 2020 87

 A revisit to functioning of Competition Commission of India during the pandemic outbreak: some reflections
ARTICLE
PRACTICES ADOPTED BY CCI will range from friendly cooperation among the competing
companies to collaborative services starting from production
DURING PANDEMIC COVID-19: A to distribution which may be against the provisions of the
RECAPITULATION Competition Law. The possibilities of companies taking
The CCI was not accepting any filing or submissions earlier advantage of this pandemic situation to create cartelization
due to the complete lockdown announced by the Government by way of price fixing, limiting or controlling the supply of
of India. Later on, CCI updated its functioning by issuing products cannot be ignored since we can witness spike in
several circulars and notices. It is to be noted that there was the supply and demand of many essential products and
not any temporary suspension of substantive provisions services especially relating to health sector in our country as
of Competition Act, 2002. With regard to merger control well as internationally. Sometimes, dominant position of the
regulations, CCI’s approval continued to be mandatory. As enterprises will provoke them to over-charge with respect to
per earlier notification, CCI allowed only electronic filing of the supply of the goods or services as well as by refusing
combination application under the Green Channel (under to deal with any person in respect of the supply of essential
Regulation 5A of the Combination Regulations). Later, commodities. However, these practices are prohibited under
they allowed the electronic filing of all combination notices the Competition Act and may not be justified even during the
as per the notification dated April 13, 2020. For instance, pandemic times.
they approved, through video conferencing the formation
of joint venture between Adani Green Energy Limited and Many countries through their respective authorities have
Total S.S., in solar power generation business in India. It initiated strict measures to deal with the situation of
also approved the combination pertaining to the acquisition charging higher prices for essential commodities and issued
of 100% of the total issued and paid up share capital of strict warning to the retailers against price excavating. For
Emami Cement Limited (“ECL”), on a fully diluted basis by instance, EU Competition Commission “taking indication
Nuvoco Vistas Corporation Limited (“NVCL”). It also allowed from the earlier case of Itl has temporarily allowed suppliers
the filing of information with regard to anti-competitive to coordinate distribution of the essential products to cope
agreement and abuse of dominance electronically as up with the COVID-19 outbreak without apprehensions
well as allowed all pre-filing consultations through video of breaching cartel rules with strict warning not to misuse
conference as per the notification dated April 19, 2020. Apart the liberty”. In India, however, the approach is different. It
from this, CCI, as part of advisory measure, notified certain seems there is a lack of co-ordination between Government
advisory to businesses in time of Covid-19. It provided that and the market regulator, Government is initiating its own
in case any joint ventures initiate any concerted actions measures to curb the increase in the prices of essential
to increase efficiency in production, supply, distribution, commodities by invoking it legislative provision. However,
storage, acquisition or control of goods or provision of Government of India has not initiated any measures through
services related to critical healthcare products and other anti-trust regulator in India to control the market abuses or
essential commodities/ services in view of the significant to encourage the collaboration of competing companies
changes in supply and demand patterns arising out of this to meet the demand of essential commodities especially
extraordinary situation, the presumption under section 3(3)
health care sector which is very crucial now, any positive
will not be applicable. Section 3(3) of the Act presumes
approach to encourage the competing firms to collaborate
certain concerted actions between competitors to cause
for research and develop vaccines for Covid-19 will be
an appreciable adverse effect on competition. However, it
beneficial for the society. This can be done by suspending
also stated that only such conduct of businesses which is
the provisions under the Competition Act, temporarily
necessary and proportionate to address concerns arising
similar, to the temporary suspension of application of
from COVID-19 will be considered and cautioned not to take
certain provisions under Insolvency and Bankruptcy Code
advantage of COVID-19 to contravene any of the provisions
of the Act. Hence, in India only advisory is provided without in India so that companies are not dragged into tribunals
any temporary suspension of any of the provisions of the at a time they are trying to get back on their feet due to
Competition Act, 2002. economic slowdown.

EFFECTS OF COLLABORATION BETWEEN POWER OF CENTRAL GOVERNMENT

COMPETITORS UNDER COMPETITION ACT
There are apprehensions going on among the nations The Competition Act, 2002, section 54 provides that the
whether there will be reversal to the concept of globalization Central Government, may by notification exempt any class of
as well as global relations among countries. This trend enterprises from the applicability of the Competition Act, if it
can be witnessed when there is call for making and using considers it necessary in the interest of security of the State
national products instead of global products. Nonetheless, it or public interest. It can also withdraw the exemption which
can be expected that for the near future there will be certain is granted, if any complaint involving price-fixing, capacity
changes in global economy due to the challenges posed limitation, or market or customer allocation is brought to its
by this pandemic followed by disturbance of businesses of notice. For instance, the Central Government renewed the
companies globally. This scenario will trigger companies exemption available to banks placed under moratorium
around the globe to look for whatever solutions they can from the purview of the CCI merger regulation powers.
find to deal with the crisis. The solution to this problem This power of the Government is crucial in the prevailing

88 AUGUST 2020 | CHARTERED SECRETARY

 A revisit to functioning of Competition Commission of India during the pandemic outbreak: some reflections

ARTICLE
The possibilities of companies taking demand and supply situation as claimed. For instance,
advantage of this pandemic situation sanitizers and face mask are removed from the essential
commodity list recently.
to create cartelization by way of price
fixing, limiting or controlling the supply of It is also suggested that in tune with other jurisdictions,
products cannot be ignored since we can CCI needs to play a proactive role by warning against any
practices by the firms which will have an adverse effect on
witness spike in the supply and demand the competition in India. They can collaborate with other
of many essential products and services statutory regulators like SEBI, TRAI, RBI etc. to control
especially relating to health sector in any abusive practices adopted by market players in India.
our country as well as internationally. In this regard pending any new information alleging anti-
Sometimes, dominant position of the competitive agreements during this pandemic period,
CCI is utilizing this time period to examine and decide
enterprises will provoke them to over- the combination applications before it. It has approved
charge with respect to the supply of the many such pending proposed acquisition of 49% of the
goods or services as well as by refusing total equity share capital of Odisha Power Generation
to deal with any person in respect of the Corporation Limited (OPGC) by Adani Power Limited (APL)
supply of essential commodities. on 30th July, 2020 as well as other combination applications
like acquisition of Krishnapatnam Port Company Limited
circumstances particularly in the light of relaxations adopted by Adani Ports and Special Economic Zone Limited,
by other jurisdictions. It can consider exempting certain Aceso Company Pte. Ltd. (Aceso) in HealthCare Global,
forms of co-operation in key sectors from the purview of anti- Escorts Limited (Escorts) by Kubota Corporation (Kubota).
competitive agreements and merger control regulation under This action on the part of CCI to approve the business
the Competition Act. plan can be expected to bring a positive impact on the
concerned sectors thereby improving the economy of
India.
CONCLUSION AND SUGGESTIONS
CS

The pandemic situation affected many business enterprises REFERENCES:

resulting in the economic slowdown in the country. Post
pandemic situation may intrigue many firms to indulge 1. Press Release No. 17/2020-21 dated July10, 2020: CCI
in anti-competitive practices in order to make profit and approves the acquisition (i) in Escorts Limited (Escorts)
recover the loss occurred if any during this period. This by Kubota Corporation (Kubota) and (ii) in Kubota
can be made by increasing the prices of the commodities Agricultural Machinery India Private Ltd (KAI) by Escorts.
or services. There are increase in the rate of food grains 2. Press Release No. 18/2020-21 dated July15, 2020: CCI
and related goods in the market. However, there is lack of approves acquisition by Aceso Company Pte. Ltd. (Aceso)
proper market research to accuse them. It is suggested in Health Care Global Enterprises Limited (HCG), under
for conducting a research survey to find out if there is any Section 31(1) of the Competition Act, 2002.
anti-competitive practice prevailing in essential sectors.
3. Press Release No. 20/2020-21 dated July 30, 2020: CCI
Based on the result of the survey, they should penalize
approves proposed acquisition of 49% of the total equity
the entity engaged in such practices against the spirit of
share capital of Odisha Power Generation Corporation
Competition Law by providing an opportunity to justify the Limited (OPGC) by Adani Power Limited (APL).
increase in the prices for their products in the market. It
can be expected that CCI will keep an eye on to monitor 4. Eugene Buttigieg, Competition Law: Safeguarding the
any unusual business practices that is detrimental to Consumer Interest, (Kluwer Law International, 2009).
consumers. In case there is any gross violation of the law 5. [Link]
by the firms by indulging in cartel arrangement, they can newdocument/[Link]
be penalised heavily by the CCI without considering the
leniency application that may be filed under section 46 of the 6. [Link]
newdocument/[Link]
Competition Act, 2002.
7. [Link]
However, with regard to the commercial consumers, the com/2020/05/11/turkish-competition-watchdog-initiates-
protective shield of Maximum Retail Price is not there. its-first-pandemic-related-investigation/?doing_wp_cron
It is therefore necessary for the CCI to be more stringent =1589903035.8824250698089599609375
and monitor the activities very closely and strict warning
8. [Link]
be issued to avoid an irresponsible and ill-informed action
and-competition-law-companies-must-not-quarantine-
during this crisis and take immediate action against the competition-law-compliance/
erring firms. Investigation wing of CCI needs to be more
vigilant and check the possible exorbitant price increases 9. [Link]
and stockpiling especially with regard to the essential goods avaantika-kakkar/
and services. This becomes more inevitable in the wake of 10. [Link]
discontinuance of many of the items from the list of essential of-consumer-affairs-withdraws-masks-hand-sanitisers-
commodities by the Government after reviving the market from-essential-commodities-act/

CHARTERED SECRETARY | AUGUST 2020 89

 Audit - Mechanism for enhancing Corporate
ARTICLE

Governance
Audit mechanism is an essential component of Corporate Governance. Under the Companies Act, 2013,
there are provisions relating to applicability for different types of statutory audits namely Audit of Financial
Statements by a Chartered Accountant for every company and on the basis of triggers on reaching certain
thresholds for Audit of Cost Accounts by a Cost Accountant, Secretarial Audit by a Practising Company
Secretary and Internal Audit. This article analyses the applicability of the provisions for these audits in
terms of the level of thresholds which trigger them as also offers certain suggestions for strengthening the
mechanism for Secretarial Audit and Internal Audit.

Dr. S. Chandrasekaran,FCS
Senior Partner
Chandrasekaran Associates Company Secretaries
New Delhi
sankara@[Link]

AUDIT & ITS IMPORTANCE Companies Act, 1956, there was no concept of internal audit

I t is an undisputable fact that the business world is changing or secretarial audit as mandatory requirement arising from a
rapidly due to Vulnerability, Uncertainty, Complexity and provision of the statute. In such a situation, audits of books of
Ambiguity which has brought about significant changes in account and balance sheet and profit and loss account referred
the way the business world has begun to think, work and to in sub-section (2) of s. 227 of the 1956 Act (corresponding
act. Audit is an independent, objective assurance intended to s. 143(2) of the 2013 Act) was referred to as the statutory
to add value and improve an organization’s operations. audit, though no such expression has been used in the statute
It helps to accomplish the organization’s objectives by as such. Neither in the statement of objects and reasons nor
bringing a systematic, disciplined approach to evaluate as part of notes on clauses there is anything stated about the
and improve the effectiveness of the framework of statutory need for introducing rotation of auditors and fixing a maximum
compliances, risk management, control and governance of two consecutive terms of 5 years each as well as the
processes which can be effectively leveraged to build a reasons for introducing a provision for internal and secretarial
credible organization, which assures a reasonable level of audits. However, one can understand that all these measures
compliances. have been introduced with a prime objective of improving the
governance mechanism forming part of an effective national
From a due diligence perspective, audit provides a minimum governance framework. While audit of books and financial
level of assurance. Without a mechanism of effective statutory statements are mandatory for all companies registered under
audit, the due diligence exercise for the prospective investors or the provisions of Companies Act (1956 as well as 2013), it is
joint venture partners would have to be much more exhaustive. not so for internal audits and secretarial audits. Further, it is
Moreover, Financial Institutions, Banks, Creditors and other only for a class of companies that rotation of auditors, internal
lenders can assess the law-abiding nature of company’s audits and secretarial audits have been made applicable. Cost
management. The provisions of the Companies Act, 2013 audits under s. 148 of the Companies Act, 2013 fall altogether
and rules made thereunder provide various criteria on the under a different domain based on a criteria not comparable
basis of which appointment of different auditors i.e. Statutory, with the criteria fixed for rotation of auditors, internal audits and
Secretarial & Internal is made in a Company. Under the secretarial audits.

90 AUGUST 2020 | CHARTERED SECRETARY

 Audit - Mechanism for enhancing Corporate Governance

ARTICLE
MAJOR CRITERIA - OUTSTANDING From a due diligence perspective, audit
LOANS OR BORROWINGS FROM BANKS provides a minimum level of assurance.
OR PUBLIC FINANCIAL INSTITUTIONS/ Without a mechanism of effective
PUBLIC BORROWINGS FROM FINANCIAL statutory audit, the due diligence exercise
INSTITUTIONS AND ACCEPTANCE OF for the prospective investors or joint
venture partners would have to be much
PUBLIC DEPOSITS
more exhaustive. Moreover, Financial
Out of different criteria, one major criterion is “outstanding Institutions, Banks, Creditors and other
loans or borrowings from banks or public financial institutions/
public borrowings from financial institutions and acceptance lenders can assess the law-abiding
of public deposits”, on the basis of which the companies are nature of company’s management. The
required to appoint Internal/Statutory/Secretarial Auditor. In provisions of the Companies Act, 2013
the banks, financial institutions & public financial institutions, and rules made thereunder provide
“interest of public at large” is involved by way of their
savings, investments etc. Hence, the main objective of audit
various criteria on the basis of which
of these companies is to preserve the interest of investors appointment of different auditors i.e.
and other stakeholders of the lending institution and further Statutory, Secretarial & Internal is made in
to ensure that the Company fulfils its obligation towards a Company.
lending institution.

TYPES OF AUDIT
Internal Audit Statutory Audit Secretarial Audit
As per 138 of the Companies Act, 2013 As per 139 of the Companies Act, 2013 As per 204 of the Companies Act,
& Rule 13 of the Companies (Accounts) & Rule 5 of the Companies (Audit and 2013 & Rule 9 of the Companies
Rules, 2014, below class of companies Auditors) Rules, 2014, below class (Appointment and Remuneration
are mandatorily required to appoint of companies shall not appoint or re- of Managerial Personnel) Rules,
internal auditor: appoint an individual as auditor for 2014, below class of companies
more than one term of five consecutive are mandatorily required to appoint
years; and an audit firm as auditor for secretarial auditor:
(a) Every Listed Company; more than two terms of five consecutive
(b) Every unlisted public company having- years:
(a) Every Listed Company;
(i) paid up share capital of fifty crore
rupees or more during the preceding (a) Listed Companies; (b) Every Public Company having-
financial year; or
(b) all unlisted public companies (i) Paid-Up share capital of fifty
(ii) turnover of two hundred crore having paid up share capital of crore rupees or more; or
rupees or more during the preceding rupees ten crore or more;
financial year; or (ii) turnover of two hundred fifty
(c) all private limited companies crore rupees or more;
(iii) outstanding loans or borrowings from having paid up share capital of
banks or public financial institutions (c) Every company having outstanding
rupees fifty crore or more; loans or borrowings from banks
exceeding one hundred crore rupees
or more at any point of time during (d) all companies having paid up or public financial institutions of one
the preceding financial year; or share capital of below threshold hundred crore rupees or more.
limit mentioned in (b) and (c) above,
(iv) outstanding deposits of twenty-five but having public borrowings from
crore rupees or more at any point of financial institutions, banks or public
time during the preceding financial deposits of rupees fifty crores or
year; and more.
(c) every private company having-
(i) turnover of two hundred crore rupees
or more during the preceding
financial year; or
(ii) outstanding loans or borrowings from
banks or public financial institutions
exceeding one hundred crore rupees
or more at any point of time during
the preceding financial year.

CHARTERED SECRETARY | AUGUST 2020 91

 Audit - Mechanism for enhancing Corporate Governance
ARTICLE
Definition of “FINANCIAL INSTITUTIONS” and “PUBLIC FINANCIAL INSTITUTIONS”:

Source Financial Institutions (“FI”) Public Financial Institutions

(”PFI”)
The Companies As per Section 2(39) of the Companies Act, 2013, “financial institution” As per Section 2(72) of the
Act, 2013 includes a scheduled bank, and any other financial institution defined Companies Act, 2013, “public
or notified under the Reserve Bank of India Act, 1934 (2 of 1934). financial institution” means-

(i) the Life Insurance

Corporation of India,
established under section
3 of the Life Insurance
Corporation Act, 1956 (31
of 1956);

(ii) the Infrastructure Develo-

pment Finance Company
Limited, referred to in
clause (vi) of sub-section
(1) of section 4A of the
Companies Act, 1956 (1 of
1956) so repealed under
section 465 of this Act;

(iii) specified company referred

to in the Unit Trust of India
(Transfer of Undertaking
and Repeal) Act, 2002 (58
of 2002);

(iv) institutions notified by the

Central Government
under sub-section (2)
of section 4A of the
Companies Act, 1956 (1 of
1956) so repealed under
section 465 of this Act;

(v) such other institution as

may be notified by the
Central Government in
consultation with the
Reserve Bank of India.

Provided that no institution shall

be so notified unless—

(A) it has been established or

constituted by or under any
Central or State Act other
than this Act or the previous
company law; or

(B) not less than fifty-one

per cent of the paid-up share
capital is held or controlled
by the Central Government
or by any State Government
or Governments or partly
by the Central Government
and partly by one or more
State Governments;

92 AUGUST 2020 | CHARTERED SECRETARY

 Audit - Mechanism for enhancing Corporate Governance

ARTICLE
The Reserve Bank Section 45I(c) of Chapter IIIB (provisions relating to non-banking Reserve Bank of India Act, 1934
of India Act, 1934 institutions receiving deposits and financial institutions) of Reserve does not define the term “Public
Bank of India Act, 1934 states that, in this Chapter, unless the context Financial Institution”
otherwise requires, –

‘‘Financial Institution’’ means any non-banking institution which

carries on as its business or part of its business any of the following
activities, namely: –

(i) the financing, whether by way of making loans or advances or

otherwise, of any activity other than its own.

(ii) the acquisition of shares, stock, bonds, debentures or securities

issued by a Government or local authority or other marketable
securities of a like nature.

(iii) letting or delivering of any goods to a hirer under a hire-purchase

agreement as defined in clause (c) of section 2 of the Hire-
Purchase Act, 1972.

(iv) the carrying on of any class of insurance business;

(v) managing, conducting or supervising, as foreman, agent or in

any other capacity, of chits or kuries as defined in any law which
is for the time being in force in any State, or any business, which
is similar thereto;

(vi) collecting, for any purpose or under any scheme or arrangement

by whatever name called, monies in lumpsum or otherwise, by
way of subscriptions or by sale of units, or other instruments or
in any other manner and awarding prizes or gifts, whether in
cash or kind, or disbursing monies in any other way, to persons
from whom monies are collected or to any other person, but
does not include any institution, which carries on as its principal
business,–

(a) agricultural operations; or

(aa) industrial activity; or

(b) the purchase or sale of any goods (other than securities) or

the providing of any services; or

(c) the purchase, construction or sale of immovable property,

so however, that no portion of the income of the institution
is derived from the financing of purchases, constructions
or sales of immovable property by other persons;

Explanation: For the purposes of this clause, ‘‘industrial activity’’

means any activity specified in sub-clauses (i) to (xviii) of clause (c)
of section 2 of the Industrial Development Bank of India Act, 1964.

The term Financial Institutions (FI) is used as one of the criteria It is very clear, that the intent of the law maker is to keep an
for the purpose of statutory audit, whereas, the term PFI is eye on those big companies which have outstanding loans
used as one of the criteria for the other two audits, namely, or borrowings from banks or public financial institutions/
internal audit and secretarial audit. The definition of FI is a public borrowings from financial institution or outstanding
wider term which includes all non-banking finance companies
public deposits above specified amount, through various
(NBFCs), insurance companies (ICs) and others whereas the
definition of PFI is narrow and restrictive. The sources of funds Audits on regular basis making it mandatory for the
of NBFCs and ICs include capital, deposits, debentures and companies. However, from the criteria on applicability
other borrowings contributed by promoters as well as by public of various types of Audit on the Company, the loan or
at large. Deployment of such funds in every company is to be borrowings obtained by any Company from NBFCs or
checked not only by conducting statutory audit but also by ICs are not covered under the scope for internal and
conducting internal and secretarial audit. secretarial audit.

CHARTERED SECRETARY | AUGUST 2020 93

 Audit - Mechanism for enhancing Corporate Governance
ARTICLE

Further, the language employed for applicability of provisions It is very clear, that the intent of the
for types of audit, “borrowing from banks or public deposits,
banks or public financial institutions” may lead to interpretation
law maker is to keep an eye on those
and it is better to substitute the word “or” with “and”. This will big companies which have outstanding
make it clear that all the borrowings from various sources loans or borrowings from banks or public
are considered for calculating the aggregate borrowings. financial institutions/public borrowings
Incidentally a similar anomaly prevailed with respect to the
definition of “Small Company” using the twin criteria of Paid from financial institution or outstanding
Up Share Capital and Turnover, which was later clarified and public deposits above specified amount,
rectified. through various Audits on regular basis
making it mandatory for the companies.
EXTENSION OF INTERNAL AUDIT AND
SECRETARIAL AUDIT TO MATERIAL provisions relating to various audits applicable to the Companies
SUBSIDIARY by using the term “Financial Institutions” commonly in all the
In the case of listed companies, pursuant to the provisions of types of audits, instead of maintaining a distinction between
Regulation 24A of the SEBI (Listing Obligations and Disclosure “FI” and “PFI” for making applicable different thresholds for
Requirements) Regulations, 2015, Secretarial Audit is also triggering these audits for reasons that are not apparent.
extended to its Material Unlisted Subsidiary. This is a significant To make things clear and re-iterate that the public interest
requirement of Governance. Applying the same principle, if the aspect is also relevant in the case of borrowings from NBFC’s
provisions of Internal Audit under Section 138 and Secretarial also, it is suggested that with respect to Public Borrowings,
Audit under Section 204 of the Companies Act, 2013 are the term “Public Financial Institutions” be substituted with
applicable to a company, it would be worthwhile to extend “Financial Institutions” and to keep the criteria common for all
the provisions of Secretarial Audit to its material subsidiary as the types of audits. It is also equally important to amend the
well, using the same criteria as applicable for material unlisted provisions of applicability so that the “aggregate borrowings”
subsidiary of a listed company. is considered.

The principle of Secretarial Audit of Material Subsidiary may

SUGGESTIONS also be extended to unlisted companies by making necessary
In recent years, the rise of NBFC’s in India has become amendments to the governing framework under Section 204 of
predominant and contributed considerably to the financial the Companies Act, 2013 read with the rules made thereunder.
progress of the country by being the largest receiver of funds. Similar considerations may apply to Internal Audit under
Considering the fact that, a huge amount of loan & borrowings Section 138 of the Companies Act, 2013. The combined effect
of Banks, Public Financial Institutions, Public Borrowings of implementing the above two suggestions would significantly
from Financial Institution and public deposits are stuck in contribute to better Corporate Governance leading to a
the Companies, it is worth considering and streamlining the stronger national governance. CS

94 AUGUST 2020 | CHARTERED SECRETARY

Consumer Supremacy: Myth or Reality?

ARTICLE
‘Consumer is King’, but is it true? This saying stems from the belief that consumer is always right. With
most provisions of the Consumer Protection Act, 2019 coming into force with effect from July 20, 2020,
and remaining sections being notified with effect from July 24, 2020, this article aims to familiarise
readers with the age-old question posed - Is consumer really the King? If he was the King, does he
continue to be the King even amidst the pandemic and new consumer protection laws? The legislature,
courts, industry at large and the general public have regarded customer as the most important person for
any business. From time immemorial, trades have concluded between seller and the purchaser. In true
sense, both should be categorised as customers. A customer is a person who buys goods and services
from a seller and pays for it to fulfil his / her need. On the other hand, a consumer is one who purchases
the product for his / her own need and consumes it. While customer buys the product, consumer is one
who uses it. Realising the importance of the term ‘Customer’ in 1890, Mahatma Gandhi had remarked in
his speech in South Africa, “A customer is the most important visitor on our premises. He is not dependent
on us. We are dependent on him. He is not an interruption on our work. He is the purpose of it. He is not
an outsider on our business. He is part of it. We are not doing him a favour by serving him. He is doing
us a favour by giving us an opportunity to do so”.

Consumerism plays a very vital role in an economy and no

nation may consider it prudent to disregard the growing
consumer needs. While business opportunities and avenues
are on the rise, the emphasis of any business still remains the
consumer himself. Accordingly, the main focus of consumerism
is purely protection of consumer rights and interests. While
various economists have attempted to define consumerism
in different ways, the prime ideology of the term is - a social
movement seeking to safeguard consumer rights in order to
avoid treachery.
[Link], ACS I. HISTORY OF CONSUMERISM
Assistant Vice President - Legal and Company Secretary
Strugence Capital Advisors LLP The process of buying and selling is as old as human
Mumbai civilization. Even before the introduction of money, goods and
services were exchanged through barter system. History bears
[Link]@[Link]
testimony to the fact that system of barter existed during the
Stone age, Bronze age and Iron age. As the barter system was
replaced with currency, simultaneous adoption of malpractices
such as overpricing, adulteration, mis-selling were on the
rise, which made consumers resort to Trade Associations and
Unions, to seek shelter. The vagaries of change brought into
being, changes in the economic and business environment,
resulting in challenges globally, which the consumers were
forced to accept. In 1980s and 1990s, the country opened the
economy and wanted India to become a global partner. The
exposure to change, brought into being significant changes.
The consumer needed an enactment that can safeguard his
interests, which the Legislature and the Government brought
Suraj Subraman, ACS into being, through the enactment of the Consumer Protection
Act, in 1986 that came into effect from September 1, 1987.
Manager - Legal and Company Secretary
Prior to the enactment, consumers were not getting adequate
BSE Institute Limited protection although there were laws which gave certain respite.
Mumbai Some of them included - Prevention of Food Adulteration
[Link]@[Link] Act 1954, Drugs and Magic Remedies (Objectionable
Advertisements) Act 1954, Standards of Weights & Measures
Act 1976, Essential Commodities Act 1955, Monopolies and
Restrictive Trade Practices Act 1969.

I ncreased purchasing power coupled with the influence of

social media has enabled Indian consumers to splurge on
luxuries. The present era is marked as the era of consumers.
Post digitalisation, avenues and access for international
trade and global supply chains were made open, consumer

CHARTERED SECRETARY | AUGUST 2020 95

 Consumer Supremacy: Myth or Reality?
ARTICLE
vulnerability for advanced forms of unfair trade practices Some of the salient features of the Consumer Protection Act,
increased manifold, the consumer markets underwent 2019 (2019 Act) can be summarized as under:
further transformation and an ardent need was felt to prevent
consumer detriment by replacing the three-decade long  Purchase and sale of goods and services including digital
enactment to enforce quick intercessions and redressal products through online transactions, digital network,
remedies. This is when the Consumer Protection Bill, 2018 was electronic means, teleshopping direct selling and multi-
first placed before the Parliament. After a few amendments, it level marketing has been included within the ambit of the
was formally accepted as the Consumer Protection Act, 2019, Act.
which primarily focusses on covering the public, private and
cooperative sector and its applicability extends to all goods  The 2019 Act provides flexibility to consumers to file
and services, unless specifically exempted. Unlike existing complaints with the consumer forum located at the place
laws which are punitive or preventive in nature, the provisions of residence or work of the consumer. Earlier it was filed
of the newly notified Consumer Protection Act is particularly at the place of purchase or where the registered office
compensatory in nature. address of the seller was situated. The 2019 Act also
contains provisions for consumers to file complaints
electronically and for hearing and examining parties
II. NEED FOR AN UPGRADED CONSUMER through the video-conferencing mode.
PROTECTION LAW
 The 2019 Act has established Central Consumer
The need for changes in the Consumer Protection Act, 1986 Protection Authority (CCPA), headquartered at New
was necessitated since the age of digitalization which has Delhi, to regulate matters relating to violation of consumer
brought into being a completely new era of commerce enabling protection rights bestowed with powers of enforcement.
consumers to buy goods and avail services through electronic
means also. The Act has also ushered in flexibility to the  The 2019 Act has introduced the definition of product
consumers to file complaints online, from the place where the liability and contains provisions requiring the product
complainant resides or works. manufacturer, product service provider and product seller
to compensate for any harm caused to the consumer, due
With the business growing globally and continuous invention to defects or deficiencies. Moreover, the terms - product
of digitalization governing the industry, the Legislature thought liability action, product manufacturer, product seller and
it fit, to amend the law which gave justice to all consumers product service provider have been elaborately dealt with.
for around three decades and the Act was replaced vide the The term product manufacturer and product seller are
Gazette notification on August 9, 2019. A corrigendum was defined to include a person who is involved in placing the
then issued on April 24, 2020 for clarification on section 1. In product for commercial purposes and shall also include
terms of the Notification S.O. 2351(E) issued by Ministry of online platforms.
Consumer Affairs, Food and Public Distribution (Department of
Consumer Affairs) dated July 15, 2020, most of the provisions  Unfair Trade Practices have been described in detail,
of the Consumer Protection Act, 2019 came into force from entailing a list of activities such as unfair methods or unfair
July 20, 2020. With the recent Notification S.O. 2421(E) dated or deceptive practices etc.
July 23, 2020 remaining provisions of Consumer Protection
Act, 2019 have also come into force with effect from July 24, The need for changes in the Consumer
2020. The consumers can rejoice the introduction of the newly Protection Act, 1986 was necessitated
introduced Act, which has the capability of tightening the belt
to further safeguard rights of consumers. since the age of digitalization which has
brought into being a completely new
In addition to the above, Consumer Protection (Salary, era of commerce enabling consumers to
allowances and conditions of service of President and buy goods and avail services through
Members of the State Commission and District Commission)
Model Rules 2020, Consumer Protection (Mediation) Rules
electronic means also. The Act has also
2020, Consumer Protection (Central Consumer Protection ushered in flexibility to the consumers
Council) Rules 2020, Consumer Protection (Qualification for to file complaints online, from the place
appointment, method of recruitment, procedure of appointment, where the complainant resides or works.
term of office, resignation and removal of the President and
members of the State Commission and District Commission)  Considering time value of money, the pecuniary
Rules 2020, Consumer Protection (Consumer Disputes jurisdictions have been increased. Also, pecuniary
Redressal Commissions) Rules, 2020 have been issued and jurisdiction shall be decided on the basis of value of
the Consumer Protection (E-Commerce) Rules, 2020 has also goods and services. The compensation amount shall not
been notified vide Notification G.S.R. 462(E) dated July 23, be considered.
2020, issued by Department of Consumer Affairs.
 Central Consumer Protection Authority has been
The Consumer Protection Act, 2019 (hereinafter referred to as introduced in order to regulate the matters relating to
the 2019 Act) is a welcome legislation providing for timely and violation of Consumer Protection Rights and has been
effective administration and settlement of consumer disputes bestowed with the Authority to impose a penalty on
and for matters connected therewith or incidental thereto, a manufacturer or an endorser, for false, misleading
aimed at safeguarding the rights of the consumer community. advertisement and unfair trade practice.

96 AUGUST 2020 | CHARTERED SECRETARY

 Consumer Supremacy: Myth or Reality?

 The Act has introduced a separate chapter titled Mediation

ARTICLE
a body corporate having perpetual succession and a common
as an alternate dispute resolution for a more amicable and seal, with the power to acquire, hold and dispose of property,
responsive mechanism for settlement of disputes. both movable and immovable, to contract and shall, by the
said name, sue or be sued with effect from July 24, 2020.
 For parties desirous of filing an appeal, the Consumer
Protection Act, 2019 has made it mandatory for the Investigation Wing
appellants to deposit 50% of the amount ordered by the
respective Commissions, before filing an appeal to higher The CCPA shall have an Investigation Wing headed by
Authorities, in the order of hierarchy prescribed in the Director-General and such number of Additional Director-
Act. The earlier words ‘or rupees twenty-five thousand General, Director, Joint Director, Deputy Director and Assistant
whichever is less’, has been removed. Director having experience in the field of investigation. On the
basis of the Investigation, if the Central Authority is satisfied
 The State Commission and the National Commission that there has been a violation of consumer rights or unfair
have been bestowed with powers to declare terms of trade practice, the Central Authority has the power to recall
contract which is unfair to any consumer, to be null and and withdraw the unsafe goods and services, compensate
void. the purchaser by way of reimbursement or discontinue the
mala fide practice and avoid further damage to consumers, by
passing an order to that effect.
III. COMPONENTS OF CONSUMER
PROTECTION ACT 2019 A complaint relating to violation of consumer rights or unfair
trade practices or misleading advertisements which are
Central Council State Council District Council prejudicial to the interests of consumers as a class, can be
addressed to the District Collector / Commissioner of regional
Chief office / Central Authority.
Central
Commissioner,
Consumer Investigation Chief Commissioner, Director General, District Collector
Director General,
Protection Wing
District Collector
Authority (CCPA) The Chief Commissioner shall have powers of general
etc.
superintendence while the Director General and District
District State National Collector shall have powers to investigate and inquire into
Commission Commission Commission complaints, for protection of Consumers.

Central Council IV. REDRESSAL HIERARCHY

District Consumer Redressal Commission (District
The Central Council is an Advisory Council established by Commission)
the Central Government comprising of Minister in charge
of Department of Consumer Affairs (DCA) who shall be the The District Commission shall comprise of a President and
Chairperson along with members, who shall meet at least once minimum two members in consultation with the Central
a year for advising on Consumer rights and protection. Government to entertain complaints where value of goods
or services paid as consideration does not exceed rupees
State Council one crore. Complaints shall be disposed within three months
from date of receipt of notice by the opposite party which may
The State Council is an Advisory Council established by the extend to five months, if analysis or testing of the product is
State Government comprising of a Minister in charge of DCA involved.
who shall be the Chairperson along with members, who shall
meet at least twice a year for advising on Consumer rights and A complaint relating to violation of
protection, within the State. consumer rights or unfair trade practices
or misleading advertisements which are
District Council
prejudicial to the interests of consumers
The District Council is an Advisory Council established by the as a class, can be addressed to the District
State Government for every district comprising of a Collector Collector / Commissioner of regional office
who shall be the Chairperson along with members, who shall / Central Authority.
meet at least twice a year for advising on Consumer rights and
protection, within the District. State Consumer Redressal Commission (State
Commission)
Central Consumer Protection Authority (CCPA)
Any person aggrieved by an order made by the District
Also called as Central Authority, CCPA shall be the regulator Commission may prefer an appeal against such order to the
for violations of consumer protection rights. The procedure State Commission on the grounds of facts or law within a
for transaction of its business shall be regulated by CCPA period of forty-five days from the date of the order.
amongst Chief Commissioner and Commissioners specified in
the regulations. vide Notification S.O. 2422(E) dated July 23, The State Commission shall comprise of a President and
2020, the Central Government has established the CCPA as minimum four members in consultation with the Central

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 Consumer Supremacy: Myth or Reality?
ARTICLE
Government, to entertain complaints where value of goods V. WHAT PRECAUTIONS CAN
or services paid as consideration exceeds rupees one crore
but does not exceed rupees ten crores or complaints against CONSUMERS TAKE AMIDST THE
unfair contracts, where value of goods or services paid as PANDEMIC?
consideration exceeds rupees one crore but does not exceed In view of the pandemic, an issue of mis-selling supplies, is
rupees ten crores.
being resorted to by unscrupulous sellers. The role of offline
stores has seen a paradigm shift with online purchases gaining
National Consumer Disputes Redressal Commission
momentum across various categories, including essentials
(National Commission)
and FMCG products. Contactless deliveries, in-store pickup
and social distancing in stores with less customers and less
Any person aggrieved by an order made by the State
footfall per store, is putting more pressure on retailer’s profit
Commission may prefer an appeal against such order to the
share and margins. Many sellers are resorting to disposing of
National Commission on the grounds of facts or law within a
their old unsold stocks.
period of thirty days from the date of the order.
Consumers will have to carefully read the manufacturing date
The National Commission shall comprise of a President and expiry date of perishable products before purchase. For
and minimum four members in consultation with the Central
instance, even rainwear and shoes manufactured during the
Government to entertain complaints where value of goods or
previous monsoon are being sold at the same MRP in the
services paid as consideration is above rupees ten crores or
present season. It is also notable that there would have been
complaints against unfair contracts, where the value of goods
no production of the said product during the lockdown. Every
or services paid as consideration is above rupees ten crores.
consumer has a right to be aware of the product or service
that he purchases or avails, as the case may be. It is very
Every order of a District Commission or the State Commission
imperative that consumers take extra caution while purchasing
or the National Commission shall be final unless an appeal
goods and availing services.
has been preferred against such order under the provisions
of this Act. Online retailers are resorting to the same practice in the name
of clearance sale.

Masks, sanitisers and gloves are being sold in the open without
any invoice or proper packaging. Consumers must initiate a
basic glance of the product before purchasing.

On the online platforms, product specifications have to be

clearly read before purchasing. Due to lockdown, online
shopping sites have discontinued the return policy and even
genuine returns due to defective product, inappropriate fitting,
deficiency in service, discount vouchers etc. will all be withheld,
further frustrating the consumer.

Bills have to be carefully retained in order to evidence the

element of consideration.

Consumer ignorance is another reason encouraging the mala

fide sellers. Consumers should refrain from blindly believing
the words of an unknown seller and must refrain from
compromising on quality particularly, on online purchases.

In case of manufacturing defects observed, if any, the date of

noticing the defect should be documented.

Outdoor dining has drastically shrunk with parcels and home

delivery becoming a larger part of the restaurant business and
modified consumer mindset.
The Limitation period shall be 2 years from the date of cause
of action, unless specifically exempted. The real estate sector is adversely impacted considering delay
in occupancy in existing buildings and ongoing projects stalled,
In addition to the aforesaid commissions at the district, state and also because labourers and migrant workers have returned
national level, the State Government shall establish a consumer to their native land, adding to consumer misery of delayed
mediation cell to be attached to each District Commission construction and possession.
and State Commission while the Central Government shall
establish central mediation cell to be attached to the National Tenants are facing the burden of rent agreements being
commission. The mediator shall prepare a settlement report modified to include the force majeure and lockdown clause
and if it cannot be resolved through mediation, then the stating that there will be no waiver of rent or mentioning a
respective commissions shall continue hearing the issues mutually agreed percentage of rent that could be partially
involved in the consumer dispute. deferred subject to stipulated conditions.

98 AUGUST 2020 | CHARTERED SECRETARY

 Consumer Supremacy: Myth or Reality?

A ‘Make in India’ filter has now been enabled on the portal.

ARTICLE
Hence, property, food items and other perishable goods will
have to be dealt with an extra layer of caution. Sellers, who had already uploaded their products before
the introduction of the feature on GeM, are being regularly
In one of the recent orders, The District Consumer Disputes reminded to update the Country of Origin, with a warning that
Redressal Forum-I, UT Chandigarh ordered the seller to pay their products shall be removed from GeM if they fail to update
Rs. 2,500 for overcharging the consumer by Rs. 2 beyond the the same. GeM is a one stop Government e-market Place
maximum retail price (MRP) for one biscuit packet against portal for procurement by Government Officers hosted by
payment of Rs. 12/- while the MRP printed on the packet DGS&D. All these are additional safeguards for the consumers
was Rs. 10/- (Vinod Kumar Anand vs. M/s Shail Marketing as a whole.
Company).
‘Jago Grahak Jago’ was an initiative from The Ministry of
Consumer Affairs, Food & Public Distribution, Government of
In order to promote the ‘Make in India’ and ‘Aatmanirbhar
India to raise awareness amongst consumers.
Bharat’, even Government e-Market Place (GeM) has taken a
significant step by making it mandatory for sellers to enter the A table depicting the changes in the revised enactment is
Country of Origin while registering all new products on GeM. furnished below:

Particulars Consumer Protection Act, 1986 (now repealed) Consumer Protection Act, 2019
Sections 31 107
Chapters IV VIII
District Forum: District Commission:
Up to rupees 20 lakh; ≤ rupees one crore;
Pecuniary State Commission: State Commission:
jurisdiction Between rupees 20 lakh and up to rupees one crore; Above rupees one crore up to rupees ten crores;
National Commission: National Commission:
Above rupees one crore. ≥ rupees ten crores.
Central Consumer Protection Authority (CCPA)
Regulator No specific Regulator assigned to promote, protect, and enforce the rights of
consumers.
All goods and services, including online or offline
transactions through electronic means, direct
Applicability All goods and services for a consideration
selling, teleshopping or multi-level marketing, for a
consideration.
Product liability claim can be made against product
manufacturer, service provider, and seller. However,
Product liability Not expressly defined product liability cannot be bought against the seller if
at the time of harm, the product was misused, altered
or modified.
District Forum:
District Judge shall be the President and two District Commission:
members one of whom shall be a woman A President and at least two members in consultation
State Commission: with Central Government.
Person who is / was High Court Judge appointed by State Commission:
Composition of
State Government shall be the President and at least A president and at least four members in consultation
Commission
two members. with Central Government.
National Commission: National Commission:
Person who is / was Supreme Court Judge appointed A president and at least four members in consultation
by Central Government shall be the President and at with Central Government
least four members.
Alternate
Mediation cells will be attached to the District, State,
dispute No specific provision
and National Commissions
redressal
Section 72 - A person who fails to comply with orders
of the Commissions shall face imprisonment between
Section 27 - If a person does not comply with orders
one up to three years, or a fine not less than Rs
Penal of the Commissions, he may face imprisonment
25,000 extendable to Rs one lakh, or both.
consequences between one month and three years or fine between
Additionally, Chapter VIII titled offences and penalties
Rs 2,000 to Rs 10,000, or both.
(Sections 88 to Section 93) has been introduced in
the Act
e-commerce No provision for e-commerce platforms in the earlier Defines direct selling, e-commerce and electronic
Act service providers.

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 Consumer Supremacy: Myth or Reality?
ARTICLE
VI. BENEFITS OF CONSUMER Since the Consumer Protection Act, 2019
PROTECTION ACT 2019 has given reference to Mediation and
The benefits of the Consumer Protection Act, 2019 can be establishment of Consumer Mediation
quickly understood by the following diagram: cells attached to each level namely District
Forum, State Commission and National
Commission, a Practising Company
Secretary can also look to tap their role
further, by enrolling themselves to be
one of the empanelled Mediators. This
would rather ensure faster redressal of
grievances of aggrieved consumers.
Moreover, a Company Secretary being well
versed with laws, can play an important
role in instilling consumer awareness and
confidence.

VII. ROLE OF COMPANY SECRETARIES VIII. CONCLUSION

The Consumer Protection Act, 2019 has opened avenues for Although it is very often quoted that gone are the days where the
a Company Secretary in employment as well as Company consumer was asked to be aware, the pandemic and resultant
Secretary in Practice. The Institute of Company Secretaries lockdown has complicated the flexibility of replacement and
(ICSI) has always endeavoured Company Secretaries to return policies. The enhanced enactment is enforced with an
aid in safeguarding stakeholders’ interest and a consumer
aim to aid in rejecting the age-old maxim of Caveat Emptor and
is no exception to the stakeholder community. While
upholding governance standards has always been the vision pave way for Caveat Venditor (Seller beware).
of the fraternity, a Company Secretary can represent the
Company or a consumer or other persons, before Consumer One distinguishing feature of the Consumer Protection Act,
Commissions, quasi-judicial bodies and Tribunals, advise 2019, is that the State Government shall make Rules while
and assist on fair trade practices, draft replies to show cause Central Authority has been given powers to make Regulations
notices etc. Since the Consumer Protection Act, 2019 has (with prior approval of Central Government). If there is a defect
given reference to Mediation and establishment of Consumer in a product as a result of supply of old stocks, defect in the
Mediation cells attached to each level namely District Forum, quality etc, the consumers ordinarily would have difficulty in
State Commission and National Commission, a Practising
initiating actions against such practices. However, this may be
Company Secretary can also look to tap their role further, by
enrolling themselves to be one of the empanelled Mediators. effectively addressed by the Consumer Protection Act, 2019
This would rather ensure faster redressal of grievances of due to e-filing of complaints from anywhere. The business
aggrieved consumers. Moreover, a Company Secretary being community is expected to be extra careful to ensure that they
well versed with laws, can play an important role in instilling comply. CS

consumer awareness and confidence.

REFERENCES:
a) The Consumer Protection Act, 2019

b) The Consumer Protection Act 1986

c) Consumer Protection Law in India - An Eco Legal Treatise

on Consumer Justice

d) [Link]
protection

e) [Link]

f) [Link]

g) [Link]
made-mandatory-gem-promote-make-india-and-
aatmanirbhar-bharat

100 AUGUST 2020 | CHARTERED SECRETARY

Force Majeure, et al –Is it a Cogent Line of

ARTICLE
Defence?
Broadly, the doctrine of ‘force majeure’ is applied to a situation where it becomes impossible for a party to
undertake its promises or contractual obligations in the wake of prohibitive circumstances. The COVID-19
pandemic has triggered many discussions in the context of Force Majeure. The provisions pertaining to
frustration of contract are contained in sections 32 and 56 of the Indian Contract Act, 1872, albeit with distinct
perspectives, which has evolved over a period of time in the context of the doctrine of force majeure. Courts in
India have applied a very high standard in relation to frustration of contract on account of occurrence of a force
majeure event. This article discusses the doctrine of force majeure in light of judicial pronouncements, where
the doctrine has been tested and applied to determine whether there are valid grounds to declare frustration
of a contract, and thus, void, on account of ‘Force Majeure’.

The concept of ‘force majeure’ is an import of the French civil

law system, which means ‘superior force’ in English. In common
parlance, it denotes an event or effect that can neither be
reasonably anticipated nor controlled, or an unexpected event
that prevents someone from doing or completing something
that he or she had agreed or planned to do. Even though ‘force
majeure’ is, generally, understood to encompass both natural
and human-initiated events, very often a distinction has been
drawn between ‘force majeure’ and ‘act of God’. The latter
phrase can roughly be understood to be a subset of the former.
As per Black’s Law Dictionary, ‘act of god’ would include an
Vipul Ganda* overwhelming, unpreventable event caused exclusively by
forces of nature, and exclude an event where human agency,
Advocate
by act or negligence, had a part to play.
High Court of Delhi
New Delhi
[Link]@[Link] FORCE MAJEURE IN INDIA
Broadly, the doctrine of ‘force majeure’ is applied to a situation
where it becomes impossible for a party to undertake its legal
obligation in the wake of unavoidable circumstances. The
application of the doctrine of force majeure would normally
entail frustration of contract, leading to the contract being
BACKGROUND declared as void.

C olloquially, we have come across the phrase ‘force majeure’

or ‘act of god’, most times interchangeably, and more so,
after release of the Hindi motion picture Oh My God! (pun
The doctrine of frustration is an aspect of the law of discharge
of contract by reason of supervening impossibility or illegality
of the act agreed to be done. The English law on the doctrine
intended). Well, does it exist in legal regime in India? of frustration contemplates interruption of such a character and
Due to the rapid spread of the novel coronavirus disease duration that it vitally and fundamentally changes the conditions
(COVID-19), India was forced to go into a nationwide for performance of the contract, and could not possibly have
lockdown on March 25, 2020 resulting in suspension of most been in the contemplation of the parties to the contract when
of its economic activities. This situation which was indeed it was made. In terms of the judicial precedents in India,
unforeseen has considerably impacted the economy. over a period of time, the doctrine of force majeure must be
applied only in such situations where the force majeure event
Whilst, it appears that the economy and commerce would is of such a prohibitive gravity as to prevent the promisor from
bear the impact of COVID-19 crisis for a significant period, performance of its obligations under the contract.
the community at large is faced with myriad of questions
and thoughts in their minds in relation to their contractual The test, therefore, is not just the occurrence of a force majeure
obligations - whether such obligations are enforceable against event but also whether such force majeure event leads to a
the so called ‘promisor’, whether I am entitled to a relaxation in prohibition on performance of the contract.
performance of my obligation to pay under a contract, whether
rent for the period of the lockdown payable, etc., on account of Broadly speaking, in this context, there are two kinds of
‘force majeure’, etc. contracts which may be required to be construed, interpreted
or adjudicated in the context of frustration of contract due
*The views expressed are the personal views of the author to a ‘force majeure’ event. One, a contract which sets out a

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 Force Majeure, et al –Is it a Cogent Line of Defence?
ARTICLE
clause dealing with force majeure events and consequences (iii) the nature of the supervening event; and
on occurrence thereof, and the other, which does not set
out any provision in relation to a force majeure event and (iv) the parties’ reasonable and objectively ascertainable
consequences on occurrence thereof. calculations as to the possibilities of the future performance
in the circumstance.
Whilst, the doctrine of force majeure does not specifically
find mention in the Indian statute, the concept of frustration Courts in India have applied a very high
of contract, under common law, has been encapsulated in
standard in relation to frustration of
Sections 32 and 56 of the Indian Contract Act, 1872 (“Contract
Act”). contract. In cases where an untoward event
or change of circumstance totally upsets
The judicial pronouncements in India, and the bare Sections 32 the very foundation upon which the parties
and 56 of the Contract Act, create a distinction in applicability entered into an agreement, it has been held
of the two provisions, in as much as, Section 32 would apply
in relation to a contract which contains provisions pertaining
that the promisor finds it impossible to
to occurrence of force majeure events, and Section 56 would do the act which he had promised to do.
apply to contracts which do not contain provisions pertaining Further, merely because the circumstances
to force majeure events. in which a contract was made have altered
the contract would not be considered to
Where the contract itself either implicitly or expressly contains a
term, according to which performance would stand discharged have frustrated the contract.
in certain circumstances, the dissolution of the contract
would take place under the terms of the contract itself, and THE PANDEMIC
such cases are required to be dealt with under Section 32 of With the substantial restriction on commercial activities to
the Contract Act. However, if the frustration is to take place varying extent during different phases of the lockdown, it is
dehors the contract, it would be governed by Section 56 of inevitable that performance of contractual obligations (including
the Contract Act. In case of the former, courts would be limited payments of rent) would have been hampered. Various
to only interpreting the provisions of the contract, rather than circulars issued by the departments within the Government
going beyond the provisions of the contract and rewriting the have indicated that disruption in the supply chains caused by
contract. the spread of coronavirus disease in China and elsewhere
should be considered as a natural calamity and the doctrine of
Courts in India have applied a very high standard in relation force majeure should be invoked, wherever appropriate.
to frustration of contract. In cases where an untoward event or
change of circumstance totally upsets the very foundation upon The executive orders would, perhaps, be subjected to judicial
which the parties entered into an agreement, it has been held review before the constitutional courts of India. However,
that the promisor finds it impossible to do the act which he had keeping in view the peculiar circumstances and public health
promised to do. Further, merely because the circumstances in and safety, normally, the courts are unlikely to interfere with
which a contract was made have altered the contract would them.
not be considered to have frustrated the contract. The courts
would, generally, not absolve a party from the performance of a It would be imperative for the courts to peruse the contract
contract merely because its performance has become onerous as a whole, in order to determine if the obligations under
on account of unforeseen turn of events. the contract, required to be performed, were of such nature
as are prohibited in terms of the various executive orders /
Natural calamity, directly or substantially affecting the circulars. In case the same were permitted, the restrictions or
lockdown due to coronavirus disease are unlikely to weigh in
performance of obligations, and judicial order preventing a
positively with the courts. However, if the activities at the core
party from performing its obligations under a contract, are
of a commercial contract were prohibited, the doctrine of force
certain basic illustrations, where courts have applied the
majeure would be required have to be applied.
doctrine of force majeure to declare that the contract stands
frustrated. The Hon’ble High Court of Delhi, on April 20, 2020, in Halliburton
Offshore Services Inc. v. Vedanta Ltd. and another passed an
The courts would, therefore, be required to infer from the order imposing ad interim temporary injunction against Vedanta
nature of the contract and the surrounding circumstances that Limited from invoking bank guarantees issued in its favour by
a condition which is not expressed in the contract was the M/s Halliburton Offshore Services Incorporation. Due to the
foundation upon which the parties contracted. The doctrine of unprecedented order of nationwide lockdown, the Petitioner
frustration would require a multi - factorial approach. Among could not complete its work by March 31, 2020 as the work of
the factors, ones which ought to be considered are: drilling three oilfields of the Respondent required mobilization
of labour and other personnel, within and outside India. The
(i) the terms of the contract itself, its matrix or context; Respondent opposed the grant of the temporary injunction that
invocation of bank guarantee could be stayed only on ground
(ii) the parties’ knowledge, expectations, assumptions and of egregious fraud. It was also the case of the Respondent that
contemplations, in particular as to risk, as at the time of petroleum being an essential commodity the production thereof
the contract, at any rate so far as these can be ascribed to was exempted from the rigors of lockdown. The Bench arrived
mutually and objectively; at the conclusion that besides egregious fraud, invocation of

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 Force Majeure, et al –Is it a Cogent Line of Defence?

ARTICLE
bank guarantee could also be stayed under special equities or Therefore, where no written agreement exists between a
special circumstances and the petitioner being involved only landlord or tenant, it would be required to be established that
in drilling of the wells and not in direct production of petroleum the lockdown was a force majeure event of such permanent and
was subjected to the restrictions of the lockdown. The Bench prohibitive nature, bearing in mind various factors which have
also, prima facie, viewed the nationwide lockdown as a force been highlighted here, which prevented the tenant to perform
majeure event. Accordingly, an ad interim injunction restraining his end of the obligation i.e. to make payment to the landlord.
or encashment of the bank guarantees was passed. Additionally, it would be worthwhile to consider that the banks
were functioning even during the lockdown, therefore, allowing
However, in the final judgment of the case, dated May 29, making of payment through banking channels.
2020, the Hon’ble Court arrived at the conclusion that the
Petitioner had breached the existing agreement between Whilst, the law of the doctrine of force majeure, in the context
the Petitioner and the Respondent in September, 2019 itself, of frustration of contract, in relation to the executive orders
well before the COVID-19 pandemic and the lockdown set in issued by the Government to control the spread of COVID – 19
afterwards. Hence, the Petitioner could not take recourse of a pandemic, is yet to evolve, the courts and the arbitral tribunals
force majeure event, and accordingly, the ad-interim injunction would be required to decide each case in light of the peculiar
passed on April 20, 2020 (as modified on April 24, 2020) stood circumstances and facts.
vacated.
Setting the tone, the Hon’ble High Court of Delhi had the
On the other side of the spectrum, the case of Standard Retail opportunity to consider the nature of the advisories issued by
Pvt. Ltd. v. M/s G.S. Global Corp & others stands out. This the Ministry of Shipping regarding charging of ground rent,
case was decided by the Hon’ble High Court of Bombay on detention charges etc. It has been observed and clarified by the
April 8, 2020. The Petitioner in this case submitted that in Hon’ble Court that such advisories are by no extent directory
view of the lockdown, the contract between the Petitioner and or mandatory in nature. They have been issued only to advise
the Respondent for supply of steel by the latter to the former the port authorities to adopt a sympathetic and humanitarian
from Korea, stood frustrated under Section 56 of the Indian approach.
Contract Act, 1872. However, the ad-interim prayers of the
Petitioner stood rejected because the Respondent had already Relying on few of the above-mentioned cases, a Single Judge
dispatched the steel to India from south Korea and distribution Bench of the Hon’ble Delhi High Court, in the matter of Rashmi
of steel had been declared an essential service and there was Cement Ltd. vs. World Metals and Alloys (FZC) & Anr. refused
no restriction on movement thereof to India and within the to grant an interlocutory relief to the Petitioner in a petition
territory as well. under Section 9 of the Arbitration and Conciliation Act, 1996.
Whilst, the Petitioner in the given case sought to rely upon a
Further, in cases dealing with contractual relationship between contractual force majeure clause to recuse from its liability to
a tenant and a landlord, the Hon’ble High Court of Delhi on pay demurrage, the Ld. Single Judge held that whether the
May 21, 2020, in Ramanand & Others v. Dr. Girish Soni & force majeure clause could be invoked, and consequently,
another, while analysing Sections 32 and 56 of the Contract whether demurrage was required to be paid or not is required
Act and Section 108 (B) of the Transfer of Property Act, 1882 to be decided in the arbitration proceeding, the same could not
held that a relationship between such parties can be governed be decided by the Court under the scope of examination of
either by contract or by law. The manner in which the rights Section 9. It was also observed, that a force majeure clause
and obligations of the parties amidst pandemics, such as could not be invoked merely upon request of one of the parties
COVID-19 can play out in the realm of contracts, would be to a contract and the same ought to be decided in light of the
determined by the terms and conditions of the contract itself. facts and circumstances of each case.

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 Force Majeure, et al –Is it a Cogent Line of Defence?
ARTICLE
Whilst, the law of the doctrine of force relevant especially in case of contracts involving a promise to
majeure, in the context of frustration of pay, such as finance / loan agreements and rent agreements.
contract, in relation to the executive orders In a case where the court takes a view that performance of
issued by the Government to control the a particular contract, in light of the facts and circumstances
spread of COVID – 19 pandemic, is yet to surrounding, is not hit by the doctrine of force majeure on
evolve, the courts and the arbitral tribunals account of the COVID – 19 pandemic, and consequently, the
contract is not frustrated, it is possible for the court to hold
would be required to decide each case in that the executive orders imposing nationwide lockdown have
light of the peculiar circumstances and caused a material adverse effect on the performance of the
facts. contract by the promisor, and invoke certain special equities
and not hold the contract as void on account of frustration.
In a similar context, a co-ordinate bench of the same court has
held that a force majeure clause comes into effect when it has
been acknowledged by the other contracting party. In such a Whilst, the concept of material adverse effect is not ripe in
case, the need to explicitly invoke the force majeure clause the legal regime in India, the judicial fora in India may take
does not arise. references from the observations and interpretations of courts
at United States of America (where the law of material adverse
As the consequence of application of the doctrine of force effect has evolved considerably), for their persuasive value.
majeure, i.e. frustration of contract, is draconian, keeping in
mind the peculiar facts and circumstances of each case, the Accordingly, albeit, it is possible to argue the doctrines
Court would be, inter alia, required to examine, whether: pertaining to force majeure, frustration of contract or material
adverse effect as a defence in relation to performance of
(i) the terms of the contract itself, its matrix or context; contract which has been hindered on account of the instant
pandemic, much will depend on the peculiar facts and
(ii) the contract itself contains provisions pertaining to circumstances of each case. However, it is desirable that the
consequences, upon occurrence of a force majeure event; parties explore equitable and commercially viable options for
enforcing contracts, performance of which have been impacted
(iii) the parties’ knowledge, expectations, assumptions and owing to the COVID – 19 nationwide lockdown. CS

contemplations, in particular as to risk, as at the time of

the contract, at any rate so far as these can be ascribed to REFERENCES:
mutually and objectively;
1. Black’s Law Dictionary 983 (10th ed. 2009).
(iv) the executive orders issued by the Government, imposing 2. Satyabrata Ghose v. Mugneeram Bangur and Co. and
the lockdown, were of such prohibitive nature, so as to Ors., AIR 1954 SC 44.
prevent the promisor from performing its obligations under
the contract, or making them impossible to perform; 3. Metropolitan Water Board v. Dick Kerr and Co. Ltd., 1918
AC 119.
(v) the period for performance of the contract, and whether,
the contract was to be performed and determined during 4. Lanco Hills Technology Park Pvt. Ltd. v. Manisha
the time when such restrictions were in place or whether Balkrishna Kulkarni and Anr., 2019 SCC OnLine SC 1649.
such restrictions came to be in force, for a certain
5. M/s Halliburton Offshore Services Inc. v. Vedanta Ltd. and
intervening period, during the course of the performance
Anr., O.M.P. (I) (Comm.) & I.A. 3697 of 2020.
of the contract;
6. Boothalinga Agencies v. V.T.C. Poriaswami Nadar, AIR
(vi) the impact is such, so as to permanently or for a 1969 SC 110.
significant period of time, prevent the promisor to perform
its obligations under the contact; and 7. The Naihati Jute Mills Ltd. v. Khyaliram Jagannath, AIR
1968 SC 522.
(vii) the parties’ reasonable and objectively ascertainable
calculations as to the possibilities of the future performance 8. Energy Watchdog v. CERC & Ors., (2017) 14 SCC 80
in the circumstances. 9. Standard Retail Pvt. Ltd. v. M/s G.S. Global Corp and
Ors., Commercial Arbitration Petition (L) No. 404 of 2020.
Potentially, it is possible, in multiple cases, for the contract to
not attract the doctrine of force majeure, as the court may find, 10. Ramanand & Ors. v. Dr. Girish Soni & Anr., RC. REV.
subject, obviously, to the peculiar facts and circumstances of 447/2017.
each case, that the COVID – 19 pandemic did not have an
impact of such nature so as to permanently or for a significant 11. Rashmi Cement Ltd. vs. World Metals and Alloys (FZC)
period of time prevent the performance of the contract. & Anr., O.M.P. (I) (Comm.) 117/2020 and O.M.P. (I)
(Comm.) 118/2020.
In examining whether the COVID – 19 pandemic has had such
an impact, so as to permanently or for a significant period of 12. M/S Polytech Trade Foundation vs. Union of India and
time, prevent the promisor to perform its obligations under the Ors., W.P. (C ) 3092 of 2020, order dated May 22, 2020.
contact, perhaps, consider the global economic impact, and 13. MEP Infrastructure Developers Ltd. vs. SDMC, W.P. (C)
the resultant payment capacity of a promisor. This would be 2241 of 2020, order dated June 12, 2020

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Analysis of some Court rulings against

ARTICLE
Enforcement of Restrictive Negative Covenants
against employees and performing artists
In the context of recent suicide by a young film artist and allegations against one of the leading film production
houses of insisting on completion of full term of the a fixed time frame contract and also in the context of
repeated attempts being made by many employers to create impediments in the relinquishment of employment
contract by insisting on fulfilling the negative covenants contained in the appointment letters of such
employees, it has become necessary to analyse how and whether such restrictions are legally enforceable. The
article analyses the decided cases in the High Court and Supreme Court to illustrate how the Courts in India
have rescued the aggrieved employees and artists/performers.

a lawful profession, trade or business of any kind, is to

that extent void.

Exception-1: Saving of agreement is not to carry on

business of which goodwill is sold – One who sells the
goodwill of a business may agree with the buyer to refrain
from carrying on a similar business, within specified local
limits, so long as the buyer, or any person deriving title to
the goodwill from him, carries on a like business therein,
provided that such limits appear to the Court reasonable,
regard being had to the nature of the business.”
Delep Goswami, FCS
Advocate A three-Judge Bench of the Hon’ble Supreme Court of India
Supreme Court of India examined the provisions of Section 27 of the Indian Contract
New Delhi Act in the famous case of Superintendence Company of India
delepgoswami@[Link] private Limited –vs- Shri Krishan Murgai (1981-2 SCC 246)
while it was examining the negative covenant restricting the
right of an employee, after he left the services of the employer
company, to engage in any business similar to or competitive
with that of the employer and whether such a restraint
was void under Section 27 of the Indian Contract Act. The
Supreme Court was examining the following clause (clause
10) in the employment contract between the Appellant and the
Respondent:-

“That you will not be permitted to join any firm of our

competitors or run a business of your own in similarity as
directly and/or indirectly, for a period of two years at the
place of your last posting after you leave the company.”
Anirrud Goswami
In that case, the Appellant company terminated the services
Advocate
of its employee, who then started his own business in Delhi
Goswami & Goswami on identical lines to that of the business of the Appellant.
New Delhi The Appellant brought out legal action claiming damages
anirrud@[Link] on account of breach of the aforesaid negative covenant
contained in clause 10 of the employment contract. Two
Judges gave concurring decision. Justice Untwalia and Justice
Tulzapurkar held that “assuming that the negative covenant
P erhaps, the most important legal provision which is relevant
while dealing with restrictive negative covenants in contracts
with employees and performing artists is contained in Section
contained in clause 10 is valid and not hit by section 27 of the
Contract Act, what requires to be determined is whether the
said covenant is on its terms enforceable at the instance of the
27 of the Indian Contract Act, 1872 which reads as under: - Appellant company against the employee. In terms of clause
“27. Agreement in restraint of trade void - Every 10, it provides that the restriction contained therein will come
agreement by which any one is restrained from exercising into operation “after you (respondent) leave the company” …

CHARTERED SECRETARY | AUGUST 2020 105

 Analysis of some Court rulings against Enforcement of Restrictive Negative Covenants against employees and
performing artists
ARTICLE

Having regard to the context in which the expression “leave” Recently, the Hon’ble Delhi High Court in the case of Modicare
occurs in clause 10 of the service agreement and reading it Limited –vs- Gautam Bali & Others, (CS (COMM.) 763 of 2016)
along with all the other terms of employment, it seems clear was basically hearing the case of the Plaintiff which related to
that in the instant case, the word “leave” was intended by issuance of permanent injunction restraining its ex-employees
the parties to refer only to a case where the employee has and the businesses set up by them from using the plaintiff’s
voluntarily left the services of the applicant company of databases and database relating to consultants (appointed by
his own, and since here the Respondent’s services were the plaintiff) resulting in infringement of plaintiff’s copyright and
terminated by the appellant company, the restrictive covenant the defendants acting as selling agents using any proprietary
contained in clause 10 would be inapplicable and therefore, or confidential information of the plaintiff, including the financial
not enforceable against the Respondent at the instance of the models and rewards systems practiced by the plaintiff and
Appellant company.” thereby the defendants committing breach of contract and
enticing the customers and other consultants in the marketing
Justice A.P. Sen in his concurring judgement held that under network of the plaintiff and the plaintiff therefore asked for
section 27, which is general in terms, a service contract, which injunction, rendition of accounts and recovery of damages.
has for its object a restraint of trade, whether general or partial, During the course of arguments, the Plaintiff contended that
unqualified or qualified, extended beyond the termination of the the breaches entitled the Plaintiff to claim damages under the
service is prima-facie void. The agreement in question is not a laws of torts.
“goodwill of business” type of contract. The onus rests on the
Appellant that the restraint is reasonable in the present case. During the course of hearing of the Modicare (supra) case, the
Therefore, to put a restraint on the part of the Respondent, HC made it clear that under Section 27 of the Contract Act,
even though partial, it is void and therefore the contract must there can be no restraint by contract against an employee from
be treated as one which cannot be enforced. competing with the ex-employer and the effect thereof cannot
be whittled down by holding that the said employee, while
The Supreme Court further held that what the employee carrying on his competing business, would not be entitled to
covenants should be carefully scrutinized because in this case, offer terms to other employees or the customers of the ex-
there is inequality of bargaining power between the parties; employer, which would attract them to enter into a contract
indeed, no bargaining power may occur because the employee with the employee and break the existing contracts with the
is presented with standard form of contract to accept or reject. ex-employer. In that eventuality, the remedy, if any, of the ex-
The Courts view with disfavour a restrictive covenant by which employer in such a situation would be of suing for breach of
an employee is required not to engage in a business similar to contract and not to restrain the employee.
or competitive with that of the employer after termination of his
contract of employment. The true rule of construction is that The HC further held that if a contract is terminable by its very
when a covenant or agreement is impeached on the ground nature, even though with liability for damages, the contractee
that it is in restraint of trade, the duty of the Court is, first to cannot also be bound down by the contract and the same, it
interpret the covenant or agreement itself, and to ascertain appears, would also be in violation of the freedom of trade
according to the ordinary rules of construction what is the fair and commerce. The Court even recalled that the rights under
meaning of the parties. If there is an ambiguity, it must receive Section 27 of the Contract Act have also been held to be
a narrower construction than the wider. The employee ought within the domain of Article 21 of the Constitution of India and
to have the benefit of doubt. The restraint may not be greater would thus have a better claim for enforcement than of a tort
than necessary to protect the employer, and not unduly harsh of interference with contractual relations. The Delhi HC also
and oppressive to the employee. emphasised that it needs to be considered, where the line

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 Analysis of some Court rulings against Enforcement of Restrictive Negative Covenants against employees and
performing artists

ARTICLE
should be drawn between what constitutes inducement and not as if a different relief is claimed in enforcement of a contract
what constitutes competition. As to where the Court should by invoking the law of torts whereas the same is impermissible
draw the line between what constitutes enticement to commit in terms of the general law of contract. What is not contractually
breach of contract and unlawful interference in business on enforceable is not enforceable invoking law of torts. The Delhi
the one hand and competition on the other hand, the Court HC in this judgement further noted that the Supreme Court of
noted that any new entrant in the market, to be able to create a India in its judgement in Superintendence Company of India
niche for itself, in spite of the existing players, has to compete Private Limited (supra), has also held that principles of English
with the existing players, by approaching the same customers Law cannot be imported once the Parliament has codified the
and the same cache of employees who have, over the years, said principles in the Contract Act; it is the language of the
acquired expertise in that particular field. When launching the Statute which alone has to be considered to ascertain its true
same product/service, the new entrant to the business cannot meaning and scope.
possibly create a new set of customers for that product or
service. Thus, the consumers to be approached by the new As to where the Court should draw the
entrant would be same who were earlier having contractual line between what constitutes enticement
relationships with the existing players. Similarly, a new entrant
cannot possibly compete if it does not have the requisite to commit breach of contract and unlawful
expertise/finesse, required for launching a particular product interference in business on the one hand
or service and to be able to provide the same class or quality of and competition on the other hand, the
service, has to necessarily have with it, hands which have been Court noted that any new entrant in the
making the subject product and/or providing the said service in
the past, may be under contract with the existing players. In market, to be able to create a niche for
the Court’s view, therefore, it is practically impossible to draw a itself, in spite of the existing players, has
line between such persons, on their own approaching the new to compete with the existing players, by
entrant, and the new entrant approaching them. The process is approaching the same customers and
quite complex and no precise rules can be made with respect
thereto. The Courts would not lay down the law in the name the same cache of employees who have,
of being a matter of evidence, in respect of matters which are over the years, acquired expertise in that
incapable of determination by Courts. Thus, the Court held that particular field.
a claim founded on unlawful interference with business or of
enticement to commit a breach of contract with the plaintiff, is Another important aspect in this legal framework is that of
not enforceable in a court of law, neither contractually nor by restraining the artists working in the film industry from pursuing
invoking the law of tort. Such a claim is thus not required to be other film projects while continuing with a particular production
put to trial. house. The Calcutta High Court in SVF Entertainment Pvt. Ltd.
vs. Anupriyo Sengupta (A.P. 1160 of 2017) had to deal with this
Interestingly, in this case, the HC noted that section 27 aspect and its judgement dated 30th April, 2018 will clear the
of the Contract Act makes void i.e. unenforceable, every myth and threat that performing artists cannot break away from
agreement by which anyone is restrained from exercising a fixed-period contracts before completion of the term of such
lawful profession, trade or business of any kind. Thus, even contract. The brief facts of this case are that an application was
if the defendants or any of them, under their agreement with filed under Section 9 of the Arbitration and Conciliation Act by
the plaintiff, had undertaken not to carry on or be involved in the Petitioner-Producer praying for orders of injunction against
any capacity in any business competing with the business of the Respondent-Artist and for the enforcement of a negative
the plaintiff, even after leaving employment with/association of covenant in an agreement dated 1st July, 2013 as amended by
the plaintiff, the said agreement, owing to Section 27 of the subsequent agreement dated 28th April, 2016. By the said Film
Contract Act, would be void and unenforceable and the plaintiff Artist Agreement, the Respondent, an actor by profession,
on the basis thereof could not have restrained any of the agreed to render his services as a part of the star-cast, on
defendants from carrying on any business or vocation, even an exclusive basis, to the Petitioner as per the production
the one which the defendant had agreed not to carry on. The schedule to be communicated to him from time to time for a
Delhi HC in Modicare (supra) further observed that it “found premium remuneration. As per the Petitioner, vide clauses
it incongruous that the law, on the one hand would disable 5.1.9 and 9.3 of the said Agreement, the Respondent had
a plaintiff from enforcing a contract where the defendant had confirmed his engagement for providing services exclusively
voluntarily agreed not to do something, by going to the extent to the Petitioner for the “entire” term of the said Agreement and
of declaring such contract void, but on the other hand, enable that he shall not, without the written consent of the Petitioner
the same plaintiff to the same relief under the law of tort and to create or participate in any manner in any other film, television
hold so, would make the law look like an ass.” serial or advertisement outside the banner of the Petitioner.
The said Agreement was valid for a period of three years. On
In its judgement dated 23rd September, 2019, the Delhi HC 28th April, 2016, the parties executed an Addendum Agreement
reiterated that the Courts in India have held that Section 27 extending the validity of the said Agreement for a period of five
of the Contract Act has been enacted as a matter of public years. By virtue of clause 2A of the Agreement, the Respondent
policy of India, and does not create any personal right, which agreed to render his services to the Petitioner on an exclusive
can be waived. It is the public policy of India that there can be basis for the extended term of the Agreement till 30th June,
no restraint on any one exercising a lawful profession, trade or 2018, and thereafter for a period of three months, i.e., up to
business, not even when such person has voluntarily agreed 30th September, 2018.
not to and it belies logic that such public policy would not apply
when the mischief sought to be prevented is sought to be The Respondent signed with the Petitioner for altogether five
practiced invoking the law of torts. Actually, in such a case, it is films, out of which, three films had already been released and

CHARTERED SECRETARY | AUGUST 2020 107

 Analysis of some Court rulings against Enforcement of Restrictive Negative Covenants against employees and
performing artists
ARTICLE
the remaining two films were under production. The Petitioner Khan & Anr. reported in (2006)4-SCC-227 and Bombay High
claimed that it had never failed to perform its obligation under Court decision in Percept Talent Management vs. Yuvraj Singh
the said Agreement. However, in early December, 2017, the (2008 (2) ARBLR 49 Bom). On behalf of Petitioner reference
Petitioner came to know that the Respondent had engaged was made to Section 23 and Section 42 of the Specific
himself for providing film related services to a third party Relief Act, 1963, and it was submitted that even though the
for which he did not obtain any written consent from the petitioner was unable to obtain specific performance of the
Petitioner. By a notice dated 12.12.2017, the Petitioner called said agreement by the respondent it could obviously obtain
upon the Respondent, inter-alia, to cease from providing his an order of injunction against the Respondent for enforcement
services to any third party in breach of the said Agreement. of the negative covenant of the said Agreement. During the
The Petitioner alleged that the conduct of the Respondent course of arguments, the Court also noted that clause 10.2
has caused it to suffer irreparable damage, loss of business of the said Agreement provided for right of the Petitioner to
profits and has jeopardised its upcoming productions. The terminate the said Agreement, inter-alia, on the ground of
Respondent expressed his unwillingness to back out of the certain breaches committed by the Respondent and that it can
other film under third party for which shooting had already claim damages/losses from the Respondent on account of
started. The Petitioner alleged to have made considerable direct or indirect consequences of any unauthorized absence
amount of investment on the Respondent so as to make or non-performance by the Respondent.
him a star from a non-entity and it had also developed the
Respondent’s skill and spent enormous sums for building up With regard to the contention for specific performance of the
his brand. The Petitioner therefore sought enforcement of service by the Respondent, the Court noted that such services
the “exclusivity” term incorporated in the said Agreement to are purely personal and that the specific performance of such
recover its investments on the Respondent, both direct and contract by the Respondent would be prima-facie barred
indirect exceeding Rs.1 crore. by clauses (a), (b) and (d) of sub-section (1) of Section 14
of the Specific Relief Act [After the Amendment in 2018, it is
In its judgement dated 23rd September, Section 14(c)]. The contract between the parties being purely
a contract for personal services of which specific performance
2019, the Delhi HC reiterated that the cannot prima-facie be granted and hence, the Court rejected
Courts in India have held that Section such argument having found no merit in this case. The Court
27 of the Contract Act has been enacted also noted that it is trite law that negative covenant which
as a matter of public policy of India, and operates beyond the expiry of the term of the contract is void
on the ground of being a restraint of trade under Section 27 of
does not create any personal right, which the Contract Act and drew reference from the Supreme Court
can be waived. It is the public policy of judgement in Niranjan Shankar Golikari -vs. - Century Spinning
India that there can be no restraint on and Manufacturing Company Limited (AIR-1967-SC-1098)
any one exercising a lawful profession, and Gujarat Bottling Co. Ltd. & Anr.- vs.- Coca Cola Co. and
Ors. (1995-5-SCC-545) case and Zaheer Khan’s case (supra).
trade or business, not even when such Therefore, the Court held that it is clear that negative covenant
person has voluntarily agreed not to and it contained in clause 2A of the said Agreement, in so far as it
belies logic that such public policy would precludes the Respondent from entering into any arrangement
not apply when the mischief sought to for providing services or performance in theatre or otherwise
in favour of any third party without first obtaining the written
be prevented is sought to be practiced approval of the Petitioner and not to engage himself in any
invoking the law of torts. role similar to the content of the character depicted by himself
The Respondent contended before the Court that neither in any film produced by the Petitioner, even after expiry of the
the said Agreement nor the Addendum thereto contemplated Agreement, is void under Section 27 of the Contract Act and
that the Petitioner has either made or was required to make that the Petitioner cannot enforce the same.
any investment on account of the Respondent or that it had The Calcutta High Court therefore concluded that it did not find
anything to do with developing the Respondent’s skill. The that the balance of convenience was in favour of the Petitioner
Respondent also contended that the Petitioner did not disclose or that if the Petitioner’s prayer for injunction under Section 9
any documentary evidence to substantiate Petitioner’s alleged of the Arbitration Act is disallowed, the Petitioner would suffer
claim and further contended that on an earlier occasion, irreparable injury.
the Petitioner did not raise any objection to the Respondent
doing a film with another production house and thus, argued CONCLUSION
that even if the negative covenant in the said Agreement is
considered valid and lawful, the Petitioner had however waived A brief analysis of the aforesaid judgements clearly indicates
its right to enforce the negative covenant by not objecting to that negative covenants contained in employment/artist
the Respondent doing another film with another outside party agreements cannot be enforced as they are hit by Section 27
during the subsistence of the Agreement. of the Indian Contract Act and are also against public policy
and many a times such agreements are entered into on the
The Court noted that it is settled law that in the event of basis of inequality of bargaining power of each party which
termination of the contract, a plaintiff is entitled to claim damages gets revealed during the course of litigation. Also, in relation
against the defendant for committing any breach of contract to contracts of personal service, the Court does not seek to
and that the Court shall not pass any order of injunction at compel persons against their will to perform such contract
the instance of the Plaintiff against the Defendant for enforcing since contracts of personal service require special knowledge,
even a negative covenant. Reliance was placed on Supreme ability, skill or expertise, etc. and are dependent on the personal
Court’s decision in Percept D’Mark (India) (P) Ltd.- vs.- Zaheer will and volition of the employee or artist/performer. CS

108 AUGUST 2020 | CHARTERED SECRETARY

 LEGAL WORLD
2
n ICICI BANK LTD v. SIDCO LEATHERS LTD. & ORS [SC]
n ARUNA OSWAL v. PANKAJ OSWAL & ORS [SC]
n WAYNE-BURT PETRO CHEMICALS [Link] v. CHAIN TOOLS & PRODUCTS PVT. LTD. & ORS [NCLAT]
n DIRECTOR OF INCOME TAX –II (INTERNATIONAL TAXATION) v. M/S SAMSUNG HEAVY INDUSTRIES CO. LTD [SC]
n M/S ULTRATECH CEMENT LTD & ANR v. THE STATE OF RAJASTHAN & ORS [SC]
n ONGC PETRO ADDITIONS LTD v. FERNAS CONSTRUCTION CO. INC [Del]
n PRACHI AGARWAL & ANR v. M/S SWIGGY [CCI]
n SANDEEP MISHRA v. NATIONAL HIGHWAYS AUTHORITY OF INDIA [CCI]

CHARTERED SECRETARY | AUGUST 2020 109

LEGAL WORLD
Decision: Appeal allowed.

Reason:

Corporate A non-obstante clause must be given effect to, to the extent the
Parliament intended and not beyond the same.

Laws Section 529-A of the Companies Act does not ex facie contain
a provision (on the aspect of priority) amongst the secured
creditors and, hence, it would not be proper to read there into
things, which the Parliament did not comprehend. The subject
Landmark judgement
of mortgage, apart from having been dealt with under the
common law, is governed by the provisions of the Transfer of
LMJ [Link] Property Act. It is also governed by the terms of the contract.
ICICI BANK LTD v. SIDCO LEATHERS LTD. & ORS [SC]
The Punjab National Bank granted loan to the 1st Respondent
Civil Appeal No. 2332 of 2006 herein knowing fully well that, over the assets of the mortgagor,
the Appellant held the first charge. It in no uncertain terms
S.B. Sinha & P.K. Balasubramanyan, JJ. [Decided on
28/04/2006] stated that the charges created by reason of the loan
agreement entered into by and between itself and the 1st
Equivalent citations: (2006) 131 Comp Case 451; Respondent was subservient to the charges of the appellant
as also the Respondent Nos. 3 and 4. The admission of the
Companies Act, 1956-section 529A- Company in PNB in this behalf is absolutely clear and explicit. Even in the
liquidation- payment of debts- secured creditors holding suit filed by it for recovery of the mortgage money as against
pari passu charge- whether the subsequent charge
the 1st Respondent, it not only in no uncertain terms stated
holder could be preferred in payment of claim-Held, No.
that the Appellant and Respondent Nos. 3 and 4 herein were
Brief facts: the first charge holders in respect of movable and immovable
properties of the 1st Respondent, but its prayers in regard
Interpretation of Sections 529 and 529-A of the Companies thereto were also limited, as would appear from prayer (f)
Act, 1956 is involved in this appeal. The short issue before the made in the suit.
court was, when there are more than one secured creditors
having pari passu charge over same property of a company While enacting a statute, the Parliament cannot be presumed
under liquidation, whether any priority could be given to any to have taken away a right in property. Right to property is a
one of them under section 529A of the Act. constitutional right. Right to recover the money lent by enforcing
a mortgage would also be a right to enforce an interest in the
Appellant along with Industrial Finance Corporation of India
property. The provisions of the Transfer of Property Act provide
(IFCI) and Industrial Development Bank of India (IDBI),
for different types of charges. In terms of Section 48 of the
advanced various loans to Respondent No.1 with a view to give
Transfer of Property Act claim of the first charge holder shall
financial assistance to it in setting up a plant for manufacture
prevail over the claim of the second charge holder and in a
of leather boards. The Punjab National Bank (PNB) also
given case where the debts due to both, the first charge holder
advanced a loan to the said Respondent for providing working
and the second charge holder, are to be realized from the
capital funds.
property belonging to the mortgagor, the first charge holder will
The 1st Respondent, in order to secure the amounts lent to have to be repaid first. There is no dispute as regards the said
it, created a first charge in favour of the appellant along with legal position.
other financial institutions, i.e., Respondent Nos.3 (IFCI) and
Respondent No.4 (IDBI) herein by way of equitable mortgage Such a valuable right, having regard to the legal position as
by deposit of title deeds of its immovable property. A second obtaining in common law as also under the provisions of the
charge was created in favour of PNB by way of constructive Transfer of Property Act, must be deemed to have been known
delivery of title deeds remaining in deposit with Respondent to the Parliament. Thus, while enacting the Companies Act,
No.3 herein, clearly indicating that the charge in favour of the the Parliament cannot be held to have intended to deprive
latter was subject and subservient to charges in favour of IFCI, the first charge holder of the said right. Such a valuable right,
IDBI and ICICI. therefore, must be held to have been kept preserved.

In the winding up proceedings of respondent company, Section 529(1) (c) of the Companies Act speaks about the
priority was given to Punjab National Bank based on its pari respective rights of the secured creditors which would mean
pasu second charge. The challenge of the appellant to this the respective rights of secured creditors vis-`-vis unsecured
treatment was unsuccessful before the High court and in creditors. It does not envisage respective rights amongst
appeal it approached the Supreme Court. the secured creditors. Merely because Section 529 does

110 AUGUST 2020 | CHARTERED SECRETARY

 LEGAL WORLD
not specifically provide for the rights of priorities over the two companies. Further he filed a petition before the NCLT
mortgaged assets, that, in our opinion, would not mean that claiming oppression and suppression against his mother and
the provisions of Section 48 of the Transfer of Property Act in others. The appellant challenged the maintainability of the
relation to a company, which has undergone liquidation, shall petition, inter alia, under the ground that the respondent No.1
stand obliterated. is not holding the required shares to file such petition.

If we were to accept that inter se priority of secured creditors The NCLT dismissed the application challenging the company
gets obliterated by merely responding to a public notice petition’s maintainability. NCLT held respondent No.1 as legal
wherein it is specifically stated that on his failure to do so, he heir was entitled to one-fourth share of the property/shares.
will be excluded from the benefits of the Dividends that may Aggrieved thereby, three appeals were filed before NCLAT,
be distributed by the Official Liquidator, the same would lead which have been dismissed vide the impugned judgment and
to deprivation of the secured creditor of his right over the order. Aggrieved thereby, the appellants are before this Court.
security and would bring him at par with an unsecured creditor.
The logical sequitur of such an inference would be that even Decision: Appeal allowed.
unsecured creditors would be placed at par with the secured
creditors. This could not have been the intendment of the Reason:
legislation.
Admittedly, respondent No.1 is not holding the shares to the
The provisions of the Companies Act may be a special statute extent of eligibility threshold of 10% as stipulated under section
but if the special statute does not contain any specific provision 244 in order to maintain an application under sections 241 and
dealing with the contractual and other statutory rights between 242. He has purchased the holding of 0.03% in M/s. Oswal
different kinds of the secured creditors, the specific provisions Agro Mills Ltd. in June 2017 after filing civil suit and remaining
contained in the general statute shall prevail. 9.97% is in dispute, he is claiming on the strength of his being
a legal representative. In M/s. Oswal Greentech Ltd., the
shareholding of the deceased was 11.11%, out of which one-
For the aforesaid reasons, we are of the view that the High
fourth share is claimed by respondent No.1. Admittedly, in a
Court has overlooked salient aspects of the provisions of the
civil suit for partition, he is also claiming a right in the shares
relevant Acts including that of the Provincial Insolvency Act.
held by the deceased to the extent of one-fourth. The question
Hence, the impugned judgment cannot be sustained. It is set
as to the right of respondent no.1 is required to be adjudicated
aside accordingly. The appeal is allowed. The 1st Respondent
finally in the civil suit, including what is the effect of nomination
shall bear the costs of the Appellant throughout.
in favour of his mother Mrs. Aruna Oswal, whether absolute
right, title, and interest vested in the nominee or not, is to be
LW [Link] finally determined in the said suit. The decision in a civil suit
would be binding between the parties on the question of right,
ARUNA OSWAL v. PANKAJ OSWAL & ORS [SC] title, or interest. It is the domain of a civil court to determine the
right, title, and interest in an estate in a suit for partition.
Civil Appeal No.9340 of 2019 with connected appeals
Arun Mishra & S. Abdul Nazeer, JJ. [Decided on It is admitted by respondent no.1 that he was not involved in
06/07/2020] day to day affairs of the company and had shifted to Australia
Companies Act,2013- sections 72, 241 & 242 – to set up his independent business w.e.f. 2001. His grievance
Nomination shares in favour of wife- son disputing the is that the family had not recognised him as holder of the one-
nomination and claiming one-fourth share in the total fourth shares. They were registered in the ownership of his
number of shares in a civil suit- son filed petition before mother Mrs. Aruna Oswal; that also he had submitted to be an
NCLT- NCLT admitted the petition inspite of the civil suit act of oppression. He acquired 0.03% share capital after filing
pending- whether admission of the petition is tenable- of the civil suit, otherwise he was not having any shareholding
Held, No. in M/s. Oswal Agro Mills Ltd.
Brief facts: In the instant case, we are satisfied that respondent no.1,
The case is the outcome of a family tussle. Appellant is the as pleaded by him, had nothing to do with the affairs of the
mother while the respondent No.1 is the son of Late Mr. Abhey company and he is not a registered owner. The rights in estate/
Kumar Oswal, who was holding 39.88% shares in Oswal shares, if any, of respondent no.1 are protected in the civil suit.
Agro Mills. Ltd. and 11.11% shares in M/s. Oswal Greentech Thus, we are satisfied that respondent no.1 does not represent
Ltd. He filed a nomination according to section 72 of the Act the body of shareholders holding requisite percentage of
in favour of the appellant, his wife. The name the appellant, shares in the company, necessary in order to maintain such
was registered as a holder as against the shares held by her a petition.
deceased husband.
It is also not disputed that the High Court in the pending civil
The respondent No.1, filed a partition suit claiming one- suit passed an order maintaining the status quo concerning
fourth share in the shareholdings of his father in the above shareholding and other properties. Because of the status quo

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LEGAL WORLD
order, shares have to be held in the name of Mrs. Aruna Oswal
until the suit is finally decided. It would not be appropriate, given LW [Link]
the order passed by the civil Court to treat the shareholding in WAYNE-BURT PETRO CHEMICALS [Link] v. CHAIN
the name of respondent No.1 by NCLT before ownership rights TOOLS & PRODUCTS PVT. LTD. & ORS [NCLAT]
are finally decided in the civil suit, and propriety also demands
it. The question of right, title, and interest is essentially Company Appeal (AT) Nos. 181 of 2019 & 183 0f 2019
adjudication of civil rights between the parties, as to the effect [Link], Balvinder Singh & [Link]. [Decided on
of the nomination decision in a civil suit is going to govern the 23/07/2020]
parties’ rights. It would not be appropriate to entertain these Companies Act, 2013- section 244- oppression
parallel proceedings and give waiver as claimed under section and suppression- complainants holding 19.28%
244 before the civil suit’s decision. Respondent No.1 had shares- admitted by the company- later objected the
himself chosen to avail the remedy of civil suit, as such filing of maintainability of the petition- whether petition is
an application under sections 241 and 242 after that is nothing maintainable-Held, Yes.
but an afterthought. Brief facts:
M/s Chain Tools and Products Pvt. Ltd. and Mr. R Vashudevan
We refrain to decide the question finally in these proceedings Respondent No. 1 and 2 filed a Company Petition stating
concerning the effect of nomination, as it being a civil dispute, that they together hold 19.38 % of the issued, subscribed
cannot be decided in these proceedings and the decision and paid up share capital of the Appellant Company. It was
may jeopardise parties’ rights and interest in the civil suit. alleged that the huge funds of the Appellant Company were
With regard to the dispute as to right, title, and interest in the entrusted to Appellant No. 2 and Respondent No. 3 to 5
securities, the finding of the civil Court is going to be final and after, which they started acting detrimental to the interest of
conclusive and binding on parties. The decision of such a the Respondent No. 1 and 2 (Petitioners) by directing the
question has to be eschewed in instant proceedings. It would investments in unscrupulous and unwanted means with sole
not be appropriate, in the facts and circumstances of the case, purpose for advancement of their personal agendas. They
to grant a waiver to the respondent of the requirement under are indulged in oppressive and illegal practices. On these
the proviso to section 244 of the Act, as ordered by the NCLAT. allegations Respondent No. 1 and 2 filed Company Petition
under Sections 130, 213, 241 and 244 of the Act.
It prima facie does not appear to be a case of oppression and
mismanagement. Our attention was drawn by the learned Admittedly, the Appellants instead of filing reply to the
senior counsel appearing for respondent No.1 to certain Petition, filed preliminary objection that in terms of Section
company transactions. From transactions simpliciter, it cannot 244(1) (a) of the Act the petition is not maintainable because
be inferred that it is a case of oppression and mismanagement. the Respondent No. 1 and 2 has not paid the consideration
towards the shares allotted to them. Learned Tribunal by the
We are of the opinion that the proceedings before the impugned order dated 01.04.2019 rejected the objection and
NCLT filed under sections 241 and 242 of the Act should held that the Respondent No. 1 and 2 together hold 19.38% of
not be entertained because of the pending civil dispute and the paid up share capital of the Appellant Company. Therefore,
considering the minuscule extent of holding of 0.03%, that the Petition is not hit by Section 244 (1) (a) of the Act.
too, acquired after filing a civil suit in company securities, of
respondent no. 1. In the facts and circumstances of the instant Decision: Appeals dismissed.
case, in order to maintain the proceedings, the respondent
should have waited for the decision of the right, title and
Reason:
interest, in the civil suit concerning shares in question. The Firstly, we have considered the scope of enquiry under
Section 244 (1) (a) of the Act. At an initial stage maintainability
entitlement of respondent No.1 is under a cloud of pending
of the company Petition on certain preliminary objection is
civil dispute. We deem it appropriate to direct the dropping of
analogous to the power of Civil Court to decide the Application
the proceedings filed before the NCLT regarding oppression
for rejection of plaint under Order 7 Rule 11 of Code of Civil
and mismanagement under sections 241 and 242 of the Act
Procedure. The Hon’ble Supreme Court in the Case of Bhau
with the liberty to file afresh, on all the questions, in case of
Ram Vs Janak Singh (2012) 8 SCC 701 has laid down the
necessity, if the suit is decreed in favour of respondent No.1
law that to decide the Application for rejection of plaint under
and shareholding of respondent No.1 increases to the extent Order 7 rule 11 CPC, the Court is precluded from considering
of 10% required under section 244. the defense of the defendants and their evidence. The Court
has to look into the pleadings in the plaint and the documents
We reiterate that we have left all the questions to be decided annexed with the plaint. The stand of the defendants in the
in the pending civil suit. Impugned orders passed by the NCLT written statement or in the Application is wholly immaterial for
as well as NCLAT are set aside, and the appeals are allowed deciding the application under Order 7 Rule 11 of the CPC.
to the aforesaid extent. We request that the civil suit be
decided as expeditiously as possible, subject to cooperation It is settled law that an objection as to maintainability of the
by respondent No.1. Parties to bear their costs as incurred. Company Petition is only to be allowed at an initial stage if there

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 LEGAL WORLD
is absolutely, no doubt that the Petition is not maintainable. It
is general principle that a Petition is to be thrown out at an
initial stage if it is unarguable on the demurrer. The issue of
qualification was a mixed question of fact and law and the
correct position is required to be ascertained on hearing the
parties on merits.
Tax Laws
In the light of this preposition of law we have examined the
facts of Company Appeal (AT) No. 181 of 2019. Learned
Tribunal considered the averments in the Company Petition
and documents i.e. list of shareholders, financial statements
for relevant years and return of allotment filed by the Appellant LW [Link]
Company before Registrar of Companies, in which it is shown
DIRECTOR OF INCOME TAX –II (INTERNATIONAL
that the Respondent No. 1 and 2 hold 2, 32,937 and 87,972 TAXATION) v. M/S SAMSUNG HEAVY INDUSTRIES CO.
fully paid up shares respectively and thus they together hold LTD [SC]
19.38% of the paid up share capital of the Appellant Company.
Hence, the Tribunal rightly found that the Petition is not hit by Civil Appeal No. 12183 of 2016
Section 244 (1) (a) of the Act. R. F. Nariman, Navin Sinha & [Link], JJ. [Decided on
22/07/2020]
The Appellants have admitted in their preliminary counter
Section 90 of the Income Tax Act, 1961 read with Indo-
dated 28.01.2019 that they have received a total sum of Rs. South Korea DTAA- International taxation- turnkey
17.65 crores. However, for the first time, it is argued before this project- designed, fabricated outside India and installed
Appellate Tribunal that Rs. 14.75 crores received against the in India- local office functioned as liaison office – whether
allotment of Cetex Company Shares and by mistake Rs. 14.75 assesse had PE in India so as to get taxed in India-Held,
Crores were appropriated towards the allotment of shares No.
to the Appellant Company. In the considered opinion of this
Tribunal such plea cannot be considered at this stage. Brief facts:
This appeal by the Department revisits the question as to the
Thus we are of the view that Respondent No. 1 and 2 at an taxability of income attributable to a “permanent establishment”
initial stage satisfied that they hold 19.38% of the paid up share set up in a fixed place in India, arising from the ‘Agreement for
capital and therefore, they satisfy the requirements under avoidance of double taxation of income and the prevention of
Section 244(1) (a) of the Act. It is however made clear that fiscal evasion’ with the Republic of Korea (“DTAA”).
issue of qualification in the present Petition is a mixed question
of fact and law and therefore, the correct position is required ONGC awarded a “turnkey” contract to a consortium
to be ascertained on hearing the parties on merits as well. In
comprising of the Respondent/Assessee, and Larsen & Toubro
other words the issue of maintainability of the Petition is still
Limited, being a contract for carrying out the “Work”, inter alia,
open and it will be decided finally after hearing the parties on
of surveys, design, engineering, procurement, fabrication,
merits. Therefore, we do not find any fault in the impugned
installation and modification at existing facilities, and start-up
order dated 01.04.2019.
and commissioning of entire facilities covered under the ‘Vasai
Now, we have considered the impugned order dated East Development Project’ (“Project”).
04.07.2019. The Tribunal while passing the impugned order
dated 01.04.2019 observed that “it is clear that this section is The Assessee set up a Project Office in Mumbai, India, which,
applicable when calls or made for call money, against which as per the Assessee, was to act as “a communication channel”
when call money is not paid then only the Petition filed by the between the Assessee and ONGC in respect of the Project.
Petitioners is hit by Section 244 of the Companies Act, 2013, Pre- engineering, survey, engineering, procurement and
not otherwise” fabrication activities which took place abroad, all took place
in the year 2006. Commencing from November, 2007, these
It seems that the Appellants tried to take advantage of this platforms were then brought outside Mumbai to be installed
observation and sent a call notice to the Respondent No. 1 and at the Vasai East Development Project. The Project was to be
2. Such notice is deliberately, sent to disturb the findings of the completed by 2009.
impugned order dated 01.04.2019. In such a situation, Learned
Tribunal by the impugned order dated 04.07.2019 rightly
The Revenue considered the project office of the assesse
stayed the call notice and directed the Appellants to file their
as “permanent establishment” and subjected it to taxation
reply to the Petition within 15 days otherwise the Petition be
distinguishing the supreme court’s judgement in Commissioner
decided as per the pleadings and material available on record.
We find no error in impugned order dated 04.07.2019. With the of Income Tax and Another v. Hyundai Heavy Industries Co.
aforesaid, we find no merit in these Appeals. Therefore, the Ltd., (2007) 7 SCC 422. Hence this ultimate appeal before the
Appeals are dismissed. Supreme Court.

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LEGAL WORLD
Decision: Appeal dismissed.

Reason:
A reading of the aforesaid judgments makes it clear that when
it comes to “fixed place” permanent establishments under General
Laws
double taxation avoidance treaties, the condition precedent
for applicability of Article 5(1) of the double taxation treaty
and the ascertainment of a “permanent establishment” is that
it should be an establishment “through which the business
of an enterprise” is wholly or partly carried on. Further, the
profits of the foreign enterprise are taxable only where the said LW [Link]
enterprise carries on its core business through a permanent
establishment. What is equally clear is that the maintenance of M/S ULTRATECH CEMENT LTD & ANR v. THE STATE OF
a fixed place of business which is of a preparatory or auxiliary RAJASTHAN & ORS [SC]
character in the trade or business of the enterprise would Civil Appeal No. 2773 of 2020 @ SLP (Civil) No. 2252 of
not be considered to be a permanent establishment under 2019
Article 5. Also, it is only so much of the profits of the enterprise
that may be taxed in the other State as is attributable to that A.M. Khanwilkar & Dinesh Maheshwari, JJ. [Decided on
permanent establishment. 17/07/2020]

Rajasthan Investment Promotion Scheme, 2003- State

A reading of the Board Resolution would show that the Project incentive scheme for new industrial units- availment
Office was established to coordinate and execute “delivery of more than eligible incentives- order passed for the
documents in connection with construction of offshore platform recovery of the excess incentive along with interest-
modification of existing facilities for ONGC”. Unfortunately, whether tenable- Held, Yes. [However, interest reduced]
the ITAT relied upon only the first paragraph of the Board
Resolution, and then jumped to the conclusion that the Mumbai Brief facts:
office was for coordination and execution of the project itself. The matter in issue in the present case essentially relates to
The finding, therefore, that the Mumbai office was not a mere the extent to which the appellant No.1 Company was entitled,
liaison office, but was involved in the core activity of execution under RIPS- 2003, to avail the Capital Investment Subsidy in
of the project itself is therefore clearly perverse. Equally, when it relation to its Kotputli Unit.
was pointed out that the accounts of the Mumbai office showed
that no expenditure relating to the execution of the contract Put in a nutshell, case of the appellant is that the subsidy in
was incurred, the ITAT rejected the argument, stating that as question, to the extent of 75% of tax payable and deposited,
accounts are in the hands of the Assessee, the mere mode was availed by it under the Rajasthan Investment Promotion
of maintaining accounts alone cannot determine the character Scheme-2003 only in terms of and pursuant to: (a) the
of permanent establishment. This is another perverse finding decision taken by the high-powered Board of Infrastructure
which is set aside. Equally the finding that the onus is on the Development and Investment Institution on 01.04.2006; (b)
Assessee and not on the Tax Authorities to first show that the the Memorandum of Understanding entered with the State
project office at Mumbai is a permanent establishment is again Government on 30.11.2007; and (c) the Entitlement Certificates
in the teeth of our judgment in E-Funds IT Solution Inc. (supra). issued by SLSC on 29.04.2011 and 24.11.2011. Therefore,
according to the appellant, there was no occasion for the
Though it was pointed out to the ITAT that there were only ACS to invoke Clause 13 of the Scheme; and the appellant
two persons working in the Mumbai office, neither of whom can neither be forced to repay the amount of subsidy already
was qualified to perform any core activity of the Assessee, the availed of nor could any interest be charged. Per contra, stand
ITAT chose to ignore the same. This being the case, it is clear, of the respondents is that the decision of BIDI dated 01.04.2006
therefore, that no permanent establishment has been set up is of no good for the appellant because the package referred
within the meaning of Article 5(1) of the DTAA, as the Mumbai therein was withdrawn and the corresponding provisions in the
Project Office cannot be said to be a fixed place of business Scheme were deleted on 28.04.2006; and the benefits under
through which the core business of the Assessee was wholly or the deleted provisions could have been granted only until the
partly carried on. Also, as correctly argued by Shri Ganesh, the date of their deletion, i.e., 28.04.2006. Thus, according to the
Mumbai Project Office, on the facts of the present case, would respondents, understanding of the State Government with the
fall within Article 5(4) (e) of the DTAA, inasmuch as the office company had only been to extend the benefit of incentive in
is solely an auxiliary office, meant to act as a liaison office terms of subsidy to the extent permissible under the Scheme
between the Assessee and ONGC. This being the case, it is and not beyond. The respondents would assert that the
not necessary to go into any of the other questions that have aforesaid Entitlement Certificates were erroneously issued
been argued before us. The appeal against the impugned High by SLSC and the matter being related to public exchequer,
Court judgment is therefore dismissed, but for the reasons the appellant is not entitled to claim any relief contrary to the
stated by us. applicable provisions/stipulations.

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 LEGAL WORLD
Decision: Petition partially allowed. erroneously issued by the State Level Screening Committee.
The SLSC was rightly directed to issue the new Entitlement
Reason: Certificate for subsidy to the limit of 50% of total tax to the
The discussion foregoing leads to the clear answers that BIDI, said Kotputli Unit of the appellant company; and the company
in its decision dated 01.04.2006 never directed for grant of was rightly directed to refund the amount of subsidy availed in
75% subsidy to the appellant company in terms of proviso excess of 50% of payable and deposited tax.
to Clauses 7(i)(a) and 7(i)(b) of RIPS-2003 nor allowed any
customised package to the company. The position of record Hence, when availing of subsidy to the tune of 75% (and
is crystal clear that BIDI’s decision dated 01.04.2006 had only thereby availing 25% in excess) is not referable to any
been for allowing ‘recently announced cement package’38 to misrepresentation by the appellants and there is no allegation
the company and that was also coupled with the requirement of breach of any of the conditions of RIPS-2003 by the
of applicability of RIPS-2003. The initial part of this decision appellants while availing such benefit, the respondent cannot
of BIDI dated 01.04.2006 and the company’s prayer dated be held entitled to demand interest at the rate stipulated in
26.04.2006 for registration in terms of sub-clause (vii) of Clause 10 of RIPS-2003. However, and at the same time,
Clause 7 of RIPS-2003 became redundant on 28.04.2006 when the appellant company had obtained undue advantage
with the amendment of Clause 7 of RIPS-2003 and deletion in monetary terms by availing 25% extra subsidy; and had
of sub-clauses (vi) and (vii) thereof because no decision had given undertaking to refund any excessive benefit with interest
been taken by SLSC to grant subsidy to the company in terms at the rate of 12% per annum, in our view, the appellant
of the said sub-clauses (vi) and (vii) of Clause 7 by that date company remains liable to refund the excess amount together
i.e., 28.04.2006. Further, the view taken by SLSC in its initial with interest at the rate agreed upon, i.e., 12% per annum.
decisions, to grant 75% subsidy to the appellant on the basis Accordingly, this appeal is partly allowed to the extent and in
of the decision of BIDI, while reading as if BIDI had taken such the manner indicated above.
decision under proviso to Clauses 7(i) (a) and 7(i) (b) of RIPS-
2003, had been entirely perverse and unauthorised; and had LW [Link]
not been a possible view of the matter. There had not been any
ambiguity in the decision of BIDI; and if at all there was any ONGC PETRO ADDITIONS LTD v. FERNAS CONSTRUCTION
doubt or ambiguity, the benefit thereof could not have gone to CO. INC [Del]
the appellant. The appellant company was entitled to subsidy I.A. 4989/2020 in OMP (MISC) (COMM) 256/2019
under RIPS-2003 only to the extent of 50% of tax payable and V. Kameswar Rao, J. [Decided on 21/07/2020]
deposited and not 75% as allowed by SLSC.
Arbitration and Conciliation Act, 1996- section 29A-
time limit for passing award- whether applicable to
It is also clear that the doctrine of Contemporanea Expositio international arbitration-Held, No.
neither applies to this case nor inures to the benefit of appellant.
The principles of promissory estopple are equally inapplicable Brief facts:
and the State Government has rightly exercised the powers Facts are immaterial. The question of law involved in this case
of revision under Clause 13 of RIPS-2003 to interfere with was whether the time limit prescribed under section 29A, for
passing award after completion of pleadings, is applicable to
the erroneous decisions of SLSC whereby the 38 As noticed
an international arbitration.
repeatedly, the said expression ‘recently announced cement
package’ is only referable to sub-clauses (vi) and (vii) of Clause Decision: Time limit not applicable to international arbitration.
7 of RIPS-2003. appellant was allowed 25% extra subsidy and
which was, obviously, prejudicial to the interest of revenue; Reason:
and mere availing of the benefits by the appellant under the Having heard the learned counsel for the parties, at the outset I
erroneous decisions of SLSC is of no effect, particularly when may state that the petitioner through this application is seeking
the State Government has exercised the powers of revision a clarification to the extent, de hors the Order dated September
within the time stipulated in Clause 13 of RIPS-2003. 25, 2019 on an application filed by the petitioner under Section
29A of the Act whereby this Court had extended the time for
In view of the above, we have no hesitation in affirming the Arbitral Tribunal to complete the proceedings and render the
order of the High Court dated 11.01.2019 and in turn, approving Award by a period of eighteen months effective June 24, 2019,
the order of revision dated 12.03.2018 insofar the Additional that such time limit is not applicable for the Arbitral Tribunal
Chief Secretary held that the Kotputli Cement Works Unit of to complete the proceedings and render the Award, being an
the appellant company was entitled to Capital Investment international commercial arbitration.
Subsidy only to the extent of 50% of the payable and deposited
tax and not to the extent of 75%, as availed by it pursuant to It is an admitted position that by an amendment brought to
the Entitlement Certificates dated 29.04.2011 and 24.11.2011 Section 29A of the Act by the Amendment Act of 2019 as

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LEGAL WORLD
notified on August 30, 2019, it is specified that an Award, in
matters other than international commercial arbitrations, shall
be made by the Arbitral Tribunal within a period of twelve
months from the date of completion of pleadings. In fact, as
per proviso to Section 29A (1), the time limit of twelve months Competition
Law
is not rigid in an international commercial arbitration.

There is also no dispute that the respondent herein is a

foreign party. I have been informed that an issue whether the
respondent is a necessary party in the proceedings in pending
consideration before the Arbitral Tribunal. In any case, the
question before this Court is, if the proceedings before the
LW [Link]
Arbitral Tribunal are in nature of an international commercial PRACHI AGARWAL & ANR v. M/S SWIGGY [CCI]
arbitration then whether the time limit as fixed by this Court
Case No. 39 of 2019
vide Order dated September 25, 2019 shall be applicable or
not. To answer this question, it is necessary to decide whether [Link], Sangeeta Verma & [Link] [Decided on
the arbitration proceedings in the case in hand having started 19/06/2020]
before the amendment to Section 29A (1) of the Act as notified
Competition Act, 2002- section 4- complaint of charging
on August 30, 2019 shall be applicable. excess price- whether abuse of dominance-Held, No.

Before I proceed to answer the question, it is necessary to refer Brief facts:

to the view taken by two Coordinate Benches of this Court in The gravamen of allegations of the Informants appears to be
this regard. In the case of Shapoorji (supra), the Court held that Swiggy is charging prices higher than the prices (menu
that the amended Section 29A (1) of the Act being a procedural prices) charged by the respective restaurants for walk-in
law would also apply to the pending arbitrations as on the date customers, without the knowledge of the customers. This
of the amendment. Whereas, learned Single Judge in MBL means that the customers ordering food online via app/website
Infrastructure (supra), by referring to the Notification August 30, of Swiggy end up paying higher prices than they would have
2019 held that, from the perusal of the said Notification it does paid by walking-in or ordering directly through phone from that
not have a retrospective effect. Apparently both the orders are particular restaurant. On this account, the Informants have
at variance. I also note in the latter order, MBL Infrastructure alleged that Swiggy is abusing its dominance by charging
(supra), the attention of the Court was not drawn to the earlier unfair price to its customers, thus, acting in contravention of
order in Shapoorji (supra). To that extent the order in MBL Infra Section 4(2) (a) (ii) of the Act.
(supra) is per incuriam.
Decision: Dismissed.
By the Amendment of 2019 to Section 29A (1), the time period
for making an Arbitral Award in international commercial Reason:
arbitration been made inapplicable. The prescription of time Before examining the abuse of dominance by an entity
limit by Amendment Act of 2015 had not conferred any rights or generally the first step is to delineate the relevant market
liabilities on a party rather it was a procedural law establishing in terms of Section 2(r) of the Act, which in turn requires
a mechanism for the Arbitral Tribunal to render the award, delineation of Relevant Product Market and Relevant
which determine the rights and liabilities of parties in twelve Geographic Market in terms of Section 2(t) and 2(s) of the
months and surely the removal thereof also does not confer/ Act, respectively. The Informant has suggested the relevant
affect rights of any party to be given effect prospectively. product market to be app-based food delivery with restaurant
search platform, as iterated in earlier paras. Swiggy does not
In view of my above discussion, it must be held that the agree with the relevant market identified by the Informants.
provisions of Section 29A (1) shall be applicable to all pending As per Swiggy, the distinguishing factor of the food delivery
arbitrations seated in India as on August 30, 2019 and business is the service of receiving a restaurant’s food without
commenced after October 23, [Link] is also held that there is leaving the comfort of one’s home and not the ability to search
no strict time line of 12 months prescribed to the proceedings for restaurants. Swiggy asserted that the consumers can use
which are in nature of international commercial arbitration as phone based direct ordering from the restaurants or order
defined under the Act, seated in India. It is clarified that the directly from the restaurant’s website, and merely the search
Arbitral Tribunal shall not be bound by the time line prescribed function does not put the platform in a different relevant market
vide Order dated September 25, 2019, if the proceedings are as compared to other food delivery options. Thus, the relevant
in the nature of an international commercial arbitration. market should be defined as ‘market for food delivery’.

116 AUGUST 2020 | CHARTERED SECRETARY

 LEGAL WORLD
The Commission notes that the main grievance of the Request for Proposal (RFP) for engaging consultants, is different
Informants is of charging high prices on the platform by Swiggy. from the criteria followed by Ministry of Road Transport and
The Commission further notes that Swiggy has denied the said Highways/ National Highways and Infrastructure Development
allegation with reference to the contractual arrangement it has Corporation Ltd. Based on this, the Informant has averred that
entered into with its various Partners (restaurants) seeking the Opposite Party is following monopolistic and restrictive
them to maintain a uniform price of food items sold by such trade practice resulting in abuse of dominant position in the
Partners to customers when dealing with them directly or market. The Informant has prayed the Commission to initiate
through the platform of Swiggy. Further, it is evidenced that an inquiry under the Act.
Swiggy, as and when it has received complaints pertaining to
Decision: Dismissed.
price differentia from its customers, has taken up the matter
with the concerned Partner. This indicates, that allegations Reason:
against Swiggy do not appear to be substantiated in the In this regard, it is observed that the instant matter relates to
present case. prescription of specific eligibility criteria for engagement of
highway engineering consultancy services by NHAI. In relation
Further, Swiggy has stated that it only acts as an ‘intermediary’ to prescription of specific conditions in a tender, the Commission
as defined under Section 79 of the Information Technology has held on numerous occasions that it is the prerogative
Act, 2000 and its role is limited to providing access to a of the procurer to decide the tender conditions/technical
communication system over which information made available specifications/conditions/clauses in the tender document as
by third parties is transmitted or temporarily stored/hosted. The per its requirements. Specifically, the Commission, in Suntec
Commission also notes the contention of Swiggy that it does not Energy Systems And National Dairy Development Board and
select or modify the information contained in the transmission Another, Case No. 69 of 2016 decided on 10th November,
made through the platform, and thus, any discrepancy in the 2016, while dealing with the allegation that a tender condition
rates, is solely attributable to Partners and not to it. In this resulted into making only one manufacturer a preferred
regard, the Commission observes that it would be apposite for supplier, observed as under:
Swiggy to give sufficient disclosures on its platform that it is
“a procurer, as a consumer, can stipulate certain technical
not involved in fixation of price of the products/menus of the specifications/ conditions/ clauses in the tender document as
restaurants on its platform, so as to allay misgivings, if any, in per its requirements which by themselves cannot be deemed
the minds of any stakeholders including the consumers. anticompetitive. It may be noted that the party floating the
tender is a consumer and it has the right to decide on the
The Commission, in the facts and circumstances of the present appropriate eligibility conditions based on its requirements.
case observes that it may not be germane to define a precise The Commission also observes that in a market economy,
relevant market and conduct further analysis. Having been consumers’ choice is considered as sacrosanct and in such an
satisfied with the averments of Swiggy that it has no role to economy, a consumer must be allowed to exercise its choice
play in the pricing of the products offered by the Partners on freely while purchasing goods and services in the market. It is
the platform, the Commission finds that no prima facie case expected that a consumer can decide what is the best for it and
of contravention of the provisions of Section 4 of the Act is will exercise its choice in a manner which would maximise its
made out against Swiggy in the instant matter. Accordingly, the utility that is derived from the consumption of a good/ service.”
matter is closed under the provisions of Section 26(2) of the
Thus, the Commission has acknowledged the prerogative of
Act.
the procurer/buyer to decide the tender conditions/technical
specifications/ clauses in the tender document as per its
LW [Link] requirements. Needless to add, such discretion of procurers
would yield to the discipline of the Act if tender documents
SANDEEP MISHRA v. NATIONAL HIGHWAYS AUTHORITY framed by dominant player contain terms and conditions
OF INDIA [CCI] which are demonstrably unfair/ discriminatory. Based on the
Case No. 13 of 2020 information provided by the Informant and otherwise available
in public domain, the prescription of eligibility criteria in the
[Link], Sangeeta Verma & [Link] [Decided on present matter, does not appear to be unfair/discriminatory.
08/07/2020]
Any service provider with the prescribed certification is eligible
Competition Act, 2002- Section 4-different criteria to participate in the tender.
prescribed for appointing engineers-whether abuse of
dominance-Held, No. In view of the above, the Commission is of the view that no
case is made out against the Opposite Party for contravention
Brief facts: of the provisions of Section 4 of the Act and the Information
The Informant has alleged that the sub-criteria for relevant is ordered to be closed forthwith in terms of the provisions
experience being prescribed by the Opposite Party in its contained in Section 26 (2) of the Act.

CHARTERED SECRETARY | AUGUST 2020 117

118 AUGUST 2020 | CHARTERED SECRETARY
 GOVERNMENT
FROM THE
3
n COMPANIES (INDIAN ACCOUNTING STANDARDS) AMENDMENT RULES, 2020

n NOTIFICATION OF SPECIAL COURTS IN STATE OF ASSAM UNDER SECTION 435(2)(B)

n EXTENSION OF THE LAST DATE OF FILING OF FORM NFRA-2

n COLLECTION AND REPORTING OF MARGINS BY TRADING MEMBER (TM) / CLEARING MEMBER (CM)
IN CASH SEGMENT

n USE OF DIGITAL SIGNATURE CERTIFICATIONS FOR AUTHENTICATION / CERTIFICATION OF FILINGS /

SUBMISSIONS MADE TO STOCK EXCHANGES

n CLARIFICATION ON APPLICABILITY OF REGULATION 40(1) OF SEBI (LISTING OBLIGATIONS AND

DISCLOSURE REQUIREMENTS) REGULATIONS, 2015 TO OPEN OFFERS, BUYBACKS AND DELISTING
OF SECURITIES OF LISTED ENTITIES

n IMPLEMENTATION OF SEBI CIRCULAR ON ‘MARGIN OBLIGATIONS TO BE GIVEN BY WAY OF PLEDGE

/ RE-PLEDGE IN THE DEPOSITORY SYSTEM’

CHARTERED SECRETARY | AUGUST 2020 119

n RELAXATION IN TIMELINES FOR COMPLIANCE WITH REGULATORY REQUIREMENTS

n RELAXATION IN TIMELINES FOR COMPLIANCE WITH REGULATORY REQUIREMENTS

n EXTENSION OF TIME FOR SUBMISSION OF FINANCIAL RESULTS FOR THE QUARTER/HALF YEAR/
FINANCIAL YEAR ENDED 30TH JUNE 2020
n RELAXATIONS RELATING TO PROCEDURAL MATTERS – TAKEOVERS AND BUY-BACK

n RECORDING OF ALL TYPES OF ENCUMBRANCES IN DEPOSITORY SYSTEM

n RELAXATIONS RELATING TO PROCEDURAL MATTERS – ISSUES AND LISTING

n REPORTING TO STOCK EXCHANGES REGARDING VIOLATIONS UNDER SECURITIES AND EXCHANGE

BOARD OF INDIA (PROHIBITION OF INSIDER TRADING) REGULATIONS, 2015 RELATING TO THE CODE
OF CONDUCT (COC).
n ALLOWING OFFER FOR SALE (OFS) AND RIGHTS ENTITLEMENTS (RE) TRANSACTIONS DURING
TRADING WINDOW CLOSURE PERIOD.
n SECURITIES AND EXCHANGE BOARD OF INDIA (SETTLEMENT PROCEEDINGS)
(AMENDMENT) REGULATIONS, 2020
n TRANSACTION IN CORPORATE BONDS/COMMERCIAL PAPERS THROUGH RFQ PLATFORM AND
ENHANCING TRANSPARENCY PERTAINING TO DEBT SCHEMES
n REVIEW OF STRESS TESTING METHODOLOGY FOR POSITIONS WITH EARLY PAY-IN

n FRAMEWORK TO ENABLE VERIFICATION OF UPFRONT COLLECTION OF MARGINS FROM CLIENTS IN

CASH AND DERIVATIVES SEGMENTS
n ELIGIBILITY CRITERIA FOR SELECTION OF UNDERLYING COMMODITY FUTURES FOR OPTIONS ON
COMMODITY FUTURES
n SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF INSIDER TRADING) (AMENDMENT)
REGULATIONS, 2020
n MANNER AND MECHANISM OF PROVIDING EXIT OPTION TO DISSENTING UNIT HOLDERS PURSUANT
TO REGULATION 22(6A) AND REGULATION 22(8) OF SEBI REAL ESTATE INVESTMENT TRUSTS
REGULATIONS, 2014 (“SEBI (REIT) REGULATIONS”)
n MANNER AND MECHANISM OF PROVIDING EXIT OPTION TO DISSENTING UNIT HOLDERS PURSUANT
TO REGULATION 22(5C) AND REGULATION 22(7) OF SEBI INFRASTRUCTURE INVESTMENT TRUSTS
REGULATIONS, 2014 (“SEBI (INVIT) REGULATIONS”)
n RELAXATION FROM COMPLIANCE WITH PROVISIONS OF THE SEBI (ISSUE AND LISTING OF DEBT
SECURITIES) REGULATIONS, 2008 (“ILDS REGULATION”), SEBI (NON-CONVERTIBLE REDEEMABLE
PREFERENCE SHARES) REGULATIONS, 2013 (“NCRPS REGULATIONS”) AND SEBI CIRCULARS
RELATING TO LISTING OF COMMERCIAL PAPERS.
n GUIDELINES FOR ISSUE AND LISTING OF STRUCTURED PRODUCTS/ MARKET LINKED DEBENTURES-
AMENDMENTS
n MASTER CIRCULAR FOR COMMODITY DERIVATIVES MARKET

n SECURITIES AND EXCHANGE BOARD OF INDIA (INTERNATIONAL FINANCIAL SERVICES CENTRES)

GUIDELINES, 2015 - AMENDMENTS

n RELAXATION FROM COMPLIANCE WITH CERTAIN PROVISIONS OF THE SEBI (ISSUE AND LISTING
OF MUNICIPAL DEBT SECURITIES) REGULATIONS, 2015 (ILDM REGULATIONS) AND CERTAIN SEBI
CIRCULARS DUE TO THE COVID -19 VIRUS PANDEMIC

n SECURITIES AND EXCHANGE BOARD OF INDIA (INVESTMENT ADVISERS) (AMENDMENT)

REGULATIONS, 2020

120 AUGUST 2020 | CHARTERED SECRETARY

 FROM THE GOVERNMENT
after the beginning of the first annual reporting period
beginning on or after the 1st April, 2020 and to asset
acquisitions that occur on or after the beginning of
that period.ʼʼ;

Corporate (iii) in Appendix A, for definition of the term ʻʻbusinessʼʼ,

Laws
the following definition shall be substituted,
namely:-

ʻʻbusiness An integrated set of activities and assets

that is capable of being conducted and managed
for the purpose of providing goods or services to

01
Companies (Indian Accounting Standards) customers, generating investment income (such as
dividends or interest) or generating other income
Amendment Rules, 2020 from ordinary activities.ʼʼ;

(iv) in Appendix B,-

[Issued by the Ministry of Corporate Affairs Vide [Link].01/01/2009-CL-V (I) for paragraph B7, the following shall be substituted,
(Part-VIII) dated 24.07.2020. Published in the Gazette of India, Extraordinary, namely:-
Part-II, Section 3, Sub-Section (ii)]
ʻʻB7 A business consists of inputs and processes
In exercise of the powers conferred by section 133 read with
applied to those inputs that have the ability to
section 469 of the Companies Act, 2013 (18 of 2013), the
contribute to the creation of outputs. The three
Central Government, in consultation with the National Financial
elements of a business are defined as follows (see
Reporting Authority, hereby makes the following rules further to
paragraphs B8-B12D for guidance on the elements
amend the Companies (Indian Accounting Standards) Rules,
of a business)ʼʼ:
2015, namely:—
(a)
Input: Any economic resource that creates
1. Short title and commencement.-(1) These rules may be
outputs, or has the ability to contribute to
called the Companies (Indian Accounting Standards)
the creations of outputs, when one or more
Amendment Rules, 2020.
processes are applied to it. Examples include
non-current assets (including intangible assets
(2) They shall come into force on the date of their
or rights to use non-current assets), intellectual
publication in the Official Gazette.
property, the ability to obtain access to necessary
materials or rights and employees.
2. In the Companies (Indian Accounting Standards) Rules,
2015, in the ʻʻAnnexure‖ʼʼ, under the heading ʻʻB. Indian (b)
Process: Any system, standard, protocol,
Accounting Standards (Ind AS)ʼʼ,- convention or rule that, when applied to an
input or inputs, creates outputs or has the
(A) ʻʻin Indian Accounting Standard (Ind AS) 103 ʼʼ, ability to contribute to the creations of outputs.
Examples include strategic management
(i) for paragraph 3, the following shall be substituted, processes, operational processes and resource
namely:- management processes. These processes
typically are documented, but the intellectual
ʻʻ3 An entity shall determine whether a transaction capacity of an organised workforce having the
or other event is a business combination by necessary skills and experience following rules
applying the definition in this Ind AS, which and conventions may provide the necessary
requires that the assets acquired and liabilities processes that are capable of being applied to
assumed constitute a business. If the assets inputs to create outputs. (Accounting, billing,
acquired are not a business, the reporting entity payroll and other administrative systems typically
shall account for the transaction or other event are not processes used to create outputs.)
as an asset acquisition. Paragraphs B5–B12D
provideguidance on identifying a business (c)
Output: The result of inputs and processes
combination and the definition of a business.ʼʼ; applied to those inputs that provide goods or
services to customers, generate investment
(ii) after paragraph 64O, the following shall be inserted, income (such as dividends or interest) or
namely:- generate other income from ordinary activities.

ʻʻ64P Definition of a Business (Amendments to Ind (II) after paragraph B7, the following shall be inserted,
AS 103), added paragraphs B7A–B7C, B8A and namely:-
B12A– B12D, amended the definition of the term ʻʻOptional test to identify concentration of fair
‗ʻʻbusinessʼʼ in Appendix A, amended paragraphs 3, value B7A Paragraph B7B sets out an optional
B7–B9, B11 and B12 and deleted paragraph B10. An test (the concentration test) to permit a simplified
entity shall apply these amendments to ʻʻbusinessʼʼ assessment of whether an acquired set of activities
combinations for which the acquisition date is on or and assets is not a business. An entity may elect

CHARTERED SECRETARY | AUGUST 2020 121

FROM THE GOVERNMENT
to apply, or not apply, the test. An entity may make automobiles) unless they are considered a
such an election separately for each transaction or single identifiable asset in accordance with the
other event. The concentration test has the following criterion in subparagraph (d);
consequences ʼʼ:-
(iii) identifiable intangible assets in different classes
(a) if the concentration test is met, the set of activities (for example, brand names, licences and
and assets is determined not to be a business intangible assets under development);
and no further assessment is needed;
(iv) a financial asset and a non-financial asset;
(b) if the concentration test is not met, or if the entity
elects not to apply the test, the entity shall then (v) financial assets in different classes (for example,
perform the assessment set out in paragraphs accounts receivable and investments in equity
B8–B12D. instruments); and

(vi) identifiable assets that are within the same

B7B The concentration test is met if substantially all of the fair class of asset but have significantly different risk
value of the gross assets acquired is concentrated in a single characteristics.
identifiable asset or group of similar identifiable assets. For the
concentration test: B7C The requirements in paragraph B7B do not modify the
guidance on similar assets in Ind AS 38, Intangible Assets; nor
(a) gross assets acquired shall exclude cash and cash do they modify the meaning of the term ʻʻclass in Ind AS 16,
equivalents, deferred tax assets, and goodwill Property, Plant and Equipment, Ind AS 38 and Ind AS 107,
resulting from the effects of deferred tax liabilities; Financial Instruments: Disclosures.ʼʼ;

(b) the fair value of the gross assets acquired shall (III) for paragraph B8, the following shall be substituted,
include any consideration transferred (plus the fair namely:-
value of any non-controlling interest and the fair
value of any previously held interest) in excess of ʻʻElements of a Business
the fair value of net identifiable assets acquired. The
fair value of the gross assets acquired may normally ʻʻB8 Although businesses usually have outputs, outputs
be determined as the total obtained by adding the are not required for an integrated set of activities
fair value of the consideration transferred (plus the and assets to qualify as a business. To be capable
fair value of any non-controlling interest and the fair of being conducted and managed for the purpose
value of any previously held interest) to the fair value identified in the definition of a business, an integrated
of the liabilities assumed (other than deferred tax set of activities and assets requires two essential
liabilities), and then excluding the items identified in elements—inputs and processes applied to those
sub-paragraph (a). However, if the fair value of the inputs. A business need not include all of the inputs
gross assets acquired is more than that total, a more or processes that the seller used in operating that
precise calculation maysometimes be needed; business. However, to be considered a business, an
integrated set of activities and assets must include, at
(c) a single identifiable asset shall include any asset a minimum, an input and a substantive process that
or group of assets that would be recognised and together significantly contribute to the ability to create
measured as a single identifiable asset in a business output. Paragraphs B12-B12D specify how to assess
combination; whether a process is substantive.ʼʼ;

(d) if a tangible asset is attached to, and cannot be (IV) after paragraph B8, the following shall be inserted,
physically removed and used separately from, namely:-
another tangible asset (or from an underlying asset
ʻʻB8 A If an acquired set of activities and assets has
subject to a lease, as defined in Ind AS 116, Leases),
outputs, continuation of revenue does not on its own
without incurring significant cost, or significant
indicate that both an input and a substantive process
diminution in utility or fair value to either asset (for
have been acquired.ʼʼ;
example, land and buildings), those assets shall be
considered a single identifiable asset; (V) for paragraph B9, the following shall be substituted,
namely:-
(e) when assessing whether assets are similar, an entity
shall consider the nature of each single identifiable ʻʻB9 The nature of the elements of a business varies
asset and the risks associated with managing and by industry and by the structure of an entity‘s
creating outputs from the assets (that is, the risk operations (activities), including the entity‘s stage
characteristics); of development. Established businesses often
have many different types of inputs, processes and
(f) the following shall not be considered similar assets: outputs, whereas new businesses often have few
inputs and processes and sometimes only a single
(i) a tangible asset and an intangible asset; output (product). Nearly all businesses also have
liabilities, but a business need not have liabilities.
(ii) tangible assets in different classes (for example, Furthermore, an acquired set of activities and assets
inventory, manufacturing equipment and that is not a business might have liabilities.ʼʼ;

122 AUGUST 2020 | CHARTERED SECRETARY

 FROM THE GOVERNMENT
(VI) for paragraph B10, the following shall be substituted, B12C If a set of activities and assets has outputs at the
namely:- acquisition date, an acquired process (or group of
processes) shall be considered substantive if, when
ʻʻB10 [Refer Appendix 1]ʼʼ; applied to an acquired input or inputs, it-
(VII) for paragraph B11, the following shall be substituted, (a) is critical to the ability to continue producing outputs,
namely:- and the inputs acquired include an organised
workforce with the necessary skills, knowledge,
ʻʻB11 Determining whether a particular set of activities or experience to perform that process (or group of
and assets is a business shall be based on whether processes); or
the integrated set is capable of being conducted and
managed as a business by a market participant. (b) significantly contributes to the ability to continue
Thus, in evaluating whether a particular set is a producing outputs and-
business, it is not relevant whether a seller operated
(i) is considered unique or scarce; or
the set as a business or whether the acquirer intends
to operate the set as a business.ʼʼ; (ii) cannot be replaced without significant cost,
effort, or delay in the ability to continue producing
(VIII) for paragraph B12, the following shall be substituted, outputs.
namely:-
B12D The following additional discussion supports both
ʻʻAssessing whether an acquired process is substantive paragraphs B12B and B12C:
ʻʻB12 Paragraphs B12A–B12D explain how to assess (a) an acquired contract is an input and not a substantive
whether an acquired process is substantive if the process. Nevertheless, an acquired contract,
acquired set of activities and assets does not have for example, a contract for outsourced property
outputs (paragraph B12B) and if it does have outputs management or outsourced asset management,
(paragraph B12C).ʼʼ; may give access to an organised workforce. An
entity shall assess whether an organised workforce
(IX) after paragraph B12, the following shall be inserted, accessed through such a contract performs a
namely:- substantive process that the entity controls, and thus
has acquired. Factors to be considered in making
B12A An example of an acquired set of activities and that assessment include the duration of the contract
assets that does not have outputs at the acquisition and its renewal terms;
date is an early-stage entity that has not started
generating revenue. Moreover, if an acquired set (b) difficulties in replacing an acquired organised
of activities and assets was generating revenue at workforce may indicate that the acquiredorganised
the acquisition date, it is considered to have outputs workforce performs a process that is critical to the
at that date, even if subsequently it will no longer ability to create outputs;
generate revenue from external customers, for
(c) a process (or group of processes) is not critical if, for
example because it will be integrated by the acquirer.
example, it is ancillary or minor within the context of
B12B If a set of activities and assets does not have outputs all the processes required to create outputs.
at the acquisition date, an acquired process (or group (v) in Appendix 1, for paragraph 6, the following shall be
of processes) shall be considered substantive only if- substituted, namely:-
(a) it is critical to the ability to develop or convert an 6. ʻʻThe following paragraph numbers appear as ʻʻDeletedʼʼ
acquired input or inputs into outputs; and in IFRS 3. In order to maintain consistency with paragraph
numbers of IFRS 3, the paragraph numbers is retained in
(b) the inputs acquired include both an organised Ind AS 103:
workforce that has the necessary skills, knowledge,
or experience to perform that process (or group of (a) Paragraph B10
processes) and other inputs that the organised (b) Paragraphs B28-B30
workforce could develop or convert into outputs.
Those other inputs could include- (c) Paragraph B32(a)ʼʼ,

(i) intellectual property that could be used to (B) in ʻʻIndian Accounting Standard (Ind AS) 107ʼʼ, -
develop a good or service;
(i) after paragraph 24G, the following shall be inserted,
(ii) other economic resources that could be namely:-
developed to create outputs; or
ʻʻUncertainty arising from interest rate benchmark reform
(iii) rights to obtain access to necessary materials or
rights that enable the creation of future outputs. 24 H For hedging relationships to which an entity applies
the exceptions set out in paragraphs 6.8.4-6.8.12of Ind
Examples of the inputs mentioned in AS 109, an entity shall disclose-
subparagraphs (b)(i)–(iii) include technology, in-
(a) the significant interest rate benchmarks to which the
process research and development projects, real
entity‘s hedging relationships are exposed;
estate and mineral interests.

CHARTERED SECRETARY | AUGUST 2020 123

FROM THE GOVERNMENT
(b) the extent of the risk exposure the entity manages with the concurrence of the Chief Justice of the High Court
that is directly affected by the interest ratebenchm ark of Gauhati hereby designates the Court mentioned in column
reform; (2) of the Table below as Special Court for the purposes of
providing speedy trial of offences under clause (b) of sub-
(c) how the entity is managing the process to transition section (2) of section 435 of the said Act, namely:-
to alternative benchmark rates;
TABLE
(d) a description of significant assumptions or judgements
the entity made in applying these paragraphs (for Sl. No. Court Jurisdiction as
example, assumptions or judgements about when Special Court
the uncertainty arising from interest rate benchmark (1) (2) (3)
reform is no longer present with respect to the timing
and the amount of the interest rate benchmark-based 1 Court of Chief Judicial State of Assam.
cash flows); and Magistrate, Kamrup (M) at
Guwahati
(e) the nominal amount of the hedging instruments in
those hedging relationships. K. V. R. MURTY
Joint Secretary
(ii) after paragraph 44CC, the following shall be inserted,

03
namely:-
Extension of the last date of filing of Form
44DD [Refer Appendix 1]; NFRA-2
44DE Interest Rate Benchmark Reform (amendments to
[Issued by the Ministry of Corporate Affairs Vide F. No.7/39/2019-CL-l
Ind AS 109 and Ind AS 107) added paragraphs 24H and
Part I dated 06.07.2020 To be published in the Gazette of India, Extraordinary,
44DF. An entity shall apply these amendments when it
Part II, Section 3, Sub-Section (ii)]
applies the amendments to Ind AS 109.
ln continuation of the Ministry's General circular No. 19/2020
44DF In the reporting period in which an entity first dated 30th April, 2020 and after due examination, it has been
applies Interest Rate Benchmark Reform, an entity is not decided that the time limit for filing of Form NFRA-2, for the
required to present the quantitative information required reporting period FY 2018-19, will be 270 days from the date of
by paragraph 28(f) of Ind AS 8, Accounting Policies, deployment of this form on the website of National Financial
Changes in Accounting Estimates and Errors.” Reporting Authority (NFRA).

(iii) in Appendix 1, for paragraph 5, the following shall be 2. This issues with the approval of Competent Authority.
substituted, namely:-
K.M.S. NARAYANAN
Assistant Director
ʻʻ5 Paragraphs 42I-42S of IFRS 7 have not been included

04
in Ind AS 107 as these paragraphs relate to initial
application of IFRS 9 which are not relevant in Indian Collection and Reporting of Margins by Trading
context. Paragraphs 43-44BB related to effective date Member (TM) / Clearing Member (CM) in Cash
and transition given in IFRS 7 have not been given in Ind Segment
AS 107 since it is not relevant in Indian context. However,
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
in order to maintain consistency with paragraph numbers
of IFRS 7, these paragraph numbers are retained in Ind HO/MIRSD/DOP/CIR/P/2020/146 dated 31.07.2020]
AS 107. Paragraph 44DD relates to IFRS 17, Insurance 1. SEBI, vide circular no. CIR/HO/MIRSD/DOP/CIR/P/2019/139
Contracts, for which corresponding Ind AS is under dated November 19, 2019, issued guidelines with regard to
formulation.”; collection of margins from clients and reporting of short-collection
/ non-collection of margins by Trading Member (TM) / Clearing
K. V. R. MURTY Member (CM).
Joint Secretary
2. In view of the representations received from investors, TMs
Complete details are not published here for want of space. For complete details / CMs, stock broker associations, in this regard, following has
readers may log on to [Link] been decided:
2.1. If TM / CM collects minimum 20% upfront margin in lieu
of VaR and ELM from the client, then penalty for short-

02
collection / non-collection of margin shall not be applicable.
Notification of Special Courts in state of However, it is reiterated that Clearing Corporation shall
Assam under section 435(2)(b) continue to collect the upfront margin from the TM / CM
based on VaR and ELM.
2.2. The penalty provision for short-collection / non-collection of
[Issued by the Ministry of Corporate Affairs Vide F. No. 01/12/2009-CL-I (Vol. upfront margin in cash segment shall be implemented with
IV) dated 24.07.2020. Published in the Gazette of India, Extraordinary, Part effect from September 01, 2020.
II, Section 3, Sub-Section (ii)]
3. SEBI circular dated November 19, 2019 is modified to the extent
In exercise of the powers conferred by section 435 of the of the above. All other provisions of the said circular dated
Companies Act, 2013 (18 of 2013), the Central Government, November 19, 2019 shall continue to remain applicable.

124 AUGUST 2020 | CHARTERED SECRETARY

 FROM THE GOVERNMENT
4. This circular is being issued in exercise of powers conferred participate in open offers, buybacks and delisting of
under Section 11 (1) of the Securities and Exchange Board of securities of listed entities since the securities held by
India Act, 1992 to protect the interests of investors in securities them were not in dematerialized form.
and to promote the development of, and to regulate the securities
market. 3. In this context, it is clarified that shareholders holding
securities in physical form are allowed to tender shares
NARENDRA RAWAT in open offers, buy-backs through tender offer route and
General Manager
exit offers in case of voluntary or compulsory delisting.

05
However, such tendering shall be as per the provisions
Use of digital signature certifications for of respective regulations.
authentication / certification of filings / 4. This Circular shall come into force with immediate effect.
submissions made to Stock Exchanges Stock Exchanges are advised to bring the provisions of
this circular to the notice of all listed entities, Registrars
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/ and Share Transfer Agents and Depositories and also
HO/CFD/CMD1/CIR/P/2020/145 dated 31.07.2020] disseminate on their websites.
1. SEBI, vide circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/63 5. The Circular is issued in exercise of the powers conferred
dated April 17, 2020, had permitted use of digital signature under Section 11(1) of the Securities and Exchange
certifications for authentication / certification of filings / Board of India Act, 1992 read with Regulation 101 of the
submissions made under the SEBI (Listing Obligations LODR Regulations. This Circular is available at www.
and Disclosure Requirements) Regulations, 2015 (‘LODR
Regulations’), to the Stock Exchanges, till June 30, 2020. [Link] under the link “LegalCirculars”.
PRADEEP RAMAKRISHNAN
2. SEBI has received a representation from the Institute of General Manager
Company Secretaries of India (ICSI) stating that due to

07
the COVID -19 pandemic and precautionary measures
for its curtailment, Company Secretaries continue to face Implementation of SEBI circular on ‘Margin
operational challenges in carrying out certification and obligations to be given by way of Pledge /
authentication of documents in physical form.
Re-pledge in the Depository System’
3. Accordingly, authentication / certification of any filing
/ submission made to stock exchanges under the [Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
LODR Regulations may be done using digital signature HO/MIRSD/DOP/CIR/P/2020/143 dated 29.07.2020]
certifications till December 31, 2020.
1. SEBI, vide circular no. SEBI/HO/MIRSD/DOP/
4. This Circular shall apply for filings / submissions made from CIR/P/2020/28 dated February 25, 2020, specified
July 1, 2020. Stock Exchanges are advised to bring the mechanism with regard to Margin obligations to be given
provisions of this circular to the notice of all listed entities by way of Pledge / Re-pledge in the Depository System.
and also disseminate on their websites. The provisions of this circular were initially to come into
effect from June 01, 2020. The implementation date
5. The Circular is issued in exercise of the powers conferred
under Section 11(1) of the Securities and Exchange Board of the circular was extended till August 01, 2020 vide
of India Act, 1992 read with Regulation 101 of the LODR SEBI circular no. SEBI/HO/MIRSD/DOP/CIR/P/2020/88
Regulations. This Circular is available at [Link] dated May 25, 2020 read with SEBI circular no. SEBI/
under the link “LegalCirculars”. HO/MIRSD/DOP/CIR/P/2020/90 dated May 29, 2020 in
view of disruptions on account of COVID-19 pandemic
PRADEEP RAMAKRISHNAN including restrictions in movement of people.
General Manager
2. In view of the prevailing situation due to COVID-

06
Clarification on applicability of regulation 19pandemic, partial lockdowns in various areas of the
country, representations received from the stock brokers
40(1) of SEBI (Listing Obligations and and stock broker associations and that the changes to the
Disclosure Requirements) Regulations, 2015 systems and software development still under progress, it
to open offers, buybacks and delisting of has been decided that
securities of listed entities 2.1. The mechanism of pledge / re-pledge issued vide
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/ circular no. SEBI/HO/MIRSD/DOP/CIR/P/2020/28
dated February 25, 2020 shall be implemented with
HO/CFD/CMD1/CIR/P/2020/144 dated 31.07.2020]
effect from August 01, 2020. Trading member (TM) /
1. The proviso to regulation 40(1) of the SEBI (Listing Clearing member (CM) shall endeavor to align their
Obligations and Disclosure Requirements) Regulations, systems and accept client collateral and margin
2015 (‘LODR Regulations’) states that “..except in case funded stocks by way of creation of pledge / re-
of transmission or transposition of securities, requests pledge in the Depository system.
for effecting transfer of securities shall not be processed
2.2. The TM / CM shall also be allowed to accept client
unless the securities are held in the dematerialized form
securities as collateral by way of title transfer into the
with a depository.”
Client Collateral Account as per the present system.
2. SEBI has received representations from investors The system of parallel acceptance of the client
expressing concerns that they have not been able to securities by way of title transfer shall be available

CHARTERED SECRETARY | AUGUST 2020 125

 08
FROM THE GOVERNMENT
only upto August 31, 2020 and no further extension Relaxation in timelines for compliance with
shall be granted.
regulatory requirements
2.3. Funded stocks held by the TM / CM under the margin
trading facility shall preferably be held by the TM /
CM by way of pledge with effect from August 01, [Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
2020. TM / CM may continue to hold funded stocks HO/MIRSD/DOP/CIR/P/2020/142 dated 29.07.2020]
in respect of margin funding in ‘Client Margin Trading
1. In view of the situation arising due to COVID-19
Securities Account’ till August 31, 2020 by which date
pandemic, lockdown imposed by the Government
all such accounts shall be closed.
and representations received from the Depositories,
3. It is reiterated that, in terms of paragraph 12 of the circular SEBI had earlier provided relaxations in timelines for
dated February 25, 2020, the TM / CM shall be required to compliance with various regulatory requirements by the
close all existing demat accounts tagged as ‘Client Margin depository participants (DPs) / Registrars to an Issue &
/ Collateral’ by August 31, 2020. Share Transfer Agents (RTAs), vide circular nos. SEBI/
HO/MIRSD/DOP/CIR/P/2020/62 dated April 16, 2020,
4. Stock Exchanges, Clearing Corporations and Depositories
and SEBI/HO/MIRSD/DOP/CIR/P/2020/72 dated April
are directed to bring the provisions of this circular to the
24, 2020. Later, vide circular no. SEBI/HO/MIRSD/DOP/
notice of their members / participants and also disseminate
CIR/P/2020/112 dated June 30, 2020, timelines / period
the same on their websites.
of exclusion was further extended for certain compliance
5. This circular is issued in exercise of powers conferred requirements.
under Section 11(1) of the Securities and Exchange Board
of India Act, 1992, and Section 19 of the Depositories Act, 2. In view of the prevailing situation due to COVID-19
1996 to protect the interests of investors in securities pandemic and representation received from the
and to promote the development of, and to regulate the Depositories, it has been decided to further extend the
securities markets. timelines for compliance with the regulatory requirements
NARENDRA RAWAT by DPs / RTAs / KRAs, mentioned in the SEBI circulars,
General Manager as under:

Compliance requirements for which timelines were S. Nos. for Extended timeline / Period of
extended vide SEBI circular No. SEBI/HO/MIRSD/DOP/ which timeline is exclusion
CIR/P/2020/62 dated April 16, 2020. extended
Processing of the demat request form by Issuer / RTA. I Period of exclusion shall be from
March 23, 2020 till September 30,
Processing of the demat request form by the Participants. II 2020.
KYC application form and supporting documents of the III
clients to be uploaded on system of KRA within 10 working A 15-day time period after
days. September 30, 2020 is allowed to
Depository / DPs, to clear the back
log.
Compliance requirements for which timelines were S. Nos. for Extended timeline / Period of
extended vide SEBI circular No. SEBI/HO/MIRSD/DOP/ which timeline is exclusion
CIR/P/2020/72 dated April 24, 2020. extended
Submission of half yearly Internal Audit Report (IAR) by DPs II September 30, 2020.
for half year ended March 31, 2020.
Redressal of investor grievances. III Period of exclusion shall be from
March 23, 2020 till September 30,
Transmission of securities. IV 2020.
Closure of demat account. V
A 15-day time period after September
30, 2020 is allowed to Depository /
DPs, to clear the back log.
Systems audit on annual basis. VI September 30, 2020 for the financial
year ended on March 31, 2020.

3. All other conditions specified in the aforementioned of India Act, 1992, and Section 19 of the Depositories Act,
circulars shall continue to remain applicable. 1996 to protect the interests of investors in securities
4. Depositories are directed to bring the provisions of and to promote the development of, and to regulate the
this circular to the notice of their participants and also securities markets.
disseminate the same on their websites.
5. This circular is issued in exercise of powers conferred NARENDRA RAWAT
under Section 11(1) of the Securities and Exchange Board General Manager

126 AUGUST 2020 | CHARTERED SECRETARY

09

FROM THE GOVERNMENT

Relaxation in timelines for compliance with CIR/P/2020/61 dated April 16, 2020, SEBI/HO/MIRSD/
DOP/CIR/P/2020/62 dated April 16, 2020, and SEBI/HO/
regulatory requirements MIRSD/DOP/CIR/P/2020/68 dated April 21, 2020. Later,
vide circular nos. SEBI/HO/MIRSD/DOP/CIR/P/2020/82
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/ dated May 15, 2020 and SEBI/HO/MIRSD/DOP/
HO/MIRSD/DOP/CIR/P/2020/141 dated 29.07.2020] CIR/P/2020/101 dated June 19, 2020, timelines / period
of exclusion was further extended for certain compliance
1. In view of the situation arising due to COVID-19 requirements.
pandemic, lockdown imposed by the Government 2. In view of the prevailing situation due to COVID-19
and representations received from Stock Exchanges, pandemic and representations received from the Stock
SEBI had earlier provided relaxations in timelines for Exchanges, it has been decided to further extend the
compliance with various regulatory requirements by timelines for compliance with the regulatory requirements
the trading members / clearing members / depository by the Trading Members / Clearing Members / Depository
participants, vide circular nos. SEBI/HO/MIRSD/DOP/ Participants, mentioned in the SEBI circulars, as unde:

Compliance requirements for which timelines were S. Nos. for which timeline Extended timeline / Period of
extended vide SEBI circular SEBI/HO/MIRSD/DOP/ is extended exclusion
CIR/P/2020/61 dated April 16, 2020.
Client Funding Reporting for the months of June and July 2020. I Till September 30, 2020.
Reporting for Artificial Intelligence (AI) and Machine II
Learning (ML) applications for the quarter ended on June
30, 2020.
Compliance certificate for Margin Trading for CM Segment III
for the half year ended (HYE) on March 31, 2020.
Risk based supervision for the year ended March 31, 2020. IV
Internal Audit Report for HYE March 31, 2020. V
System Audit Report (Algo) for HYE March 31, 2020. VI
Annual System Audit Report for the year ended March VII
31,2020.
Net worth certificate in Margin Trading for CM Segment for VIII
HYE March 31, 2020.
Net worth certificate for all members for HYE March 31, 2020. IX
Maintaining call recordings of orders/instructions received XI
from clients.
Compliance requirements for which timelines were S. Nos. for which timeline Extended timeline / Period of
extended vide SEBI circular SEBI/HO/MIRSD/DOP/ is extended exclusion
CIR/P/2020/62 dated April 16, 2020.
KYC application form and supporting documents of the III Period of exclusion shall be from
clients to be uploaded on system of KRA within 10 working March 23, 2020 till September
days. 30, 2020.
Compliance requirements for which timelines were S. Nos. for which timeline Extended timeline / Period of
extended vide SEBI circular SEBI/HO/MIRSD/DOP/ is extended exclusion
CIR/P/2020/68 dated April 21, 2020.
Submission towards weekly monitoring of client funds under I Till September 30, 2020.
the provisions of Enhanced Supervision.
Submission of data on monthly basis towards clients’ and II
fund balance under the provisions of Enhanced Supervision.
Daily margin trading reporting. III
Update in Income Tax Permanent Account Number of Key IV Five months from the due date.
Management Personnel / Directors.
Issue of Annual Global Statement to clients. V
New relaxation (not included in above SEBI circulars)
Cyber Security & Cyber Resilience Audit for the year ended - Till September 30, 2020.
March 31, 2020.

CHARTERED SECRETARY | AUGUST 2020 127

 11
FROM THE GOVERNMENT
3. All other conditions specified in the aforementioned Relaxations relating to procedural matters –
circulars shall continue to remain applicable.
Takeovers and Buy-back
4. Stock Exchanges, Clearing Corporations and
Depositories are directed to bring the provisions of this
circular to the notice of their members / participants and [Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
also disseminate the same on their websites. HO/CFD/DCR2/CIR/P/2020/139 dated 27.07.2020]
5. This circular is issued in exercise of powers conferred 1. SEBI vide Circular no. SEBI/CIR/CFD/DCR1/
under Section 11(1) of the Securities and Exchange CIR/P/2020/83 dated May 14, 2020 granted one time
Board of India Act, 1992, to protect the interests of relaxations from strict enforcement of certain regulations
investors in securities and to promote the development of SEBI (Substantial Acquisition of Shares and Takeovers)
of, and to regulate the securities markets. Regulations, 2011 and SEBI (Buy-back of securities)
Regulations, 2018 pertaining to open offers and buy-back
NARENDRA RAWAT through tender offers opening upto July 31, 2020.
General Manager
2. Based on the representations received from the market

10
Extension of time for submission of financial participants, the validity of relaxations, as provided by
Circular No. SEBI/CIR/CFD/DCR1/CIR/P/2020/83 dated
results for the quarter/half year/ financial May 14, 2020 is further extended and shall be applicable
year ended 30th June 2020 for open offers and buy-back through tender offers
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/ opening upto December 31, 2020.
HO/CFD/CMD1/CIR/P/2020/140 dated 29.07.2020] 3. This Circular is issued in exercise of powers conferred by
Section 11(1) of the Securities and Exchange Board of
1. SEBI, vide circular No. SEBI/HO/CFD/CMD1/ India Act, 1992.
CIR/P/2020/106 dated June 24, 2020, had extended
the timeline for submission of financial results by listed 4. A copy of this circular is available on SEBI website at
entities for the quarter / half-year / financial year ended [Link] under the categories “Legal Framework/
31st March 2020 to July 31, 2020 due to the impact of the Circulars.”
COVID-19 pandemic. RAJESH GUJJAR
General Manager
2. Regulation 33 of the SEBI (Listing Obligations and

12
Disclosure Requirements) Regulations, 2015 (‘LODR Recording of all types of Encumbrances in
Regulations’) requires a listed entity to submit its
quarterly/half year/annual financial results within forty five Depository system
days or sixty days, as applicable, from the end of each
quarter/half year/financial year. Accordingly, listed entities
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
are required to submit the financial results for the quarter/
half year ended June 30, 2020, on or before August 14, HO/MRD2/DDAP/CIR/P/2020/137 dated 24.07.2020]
2020. 1. SEBI (Substantial Acquisition of Shares and Takeover)
3. SEBI has received representations requesting extension Regulations, 2011 requires promoters of a company to
of time for submission of financial results for the quarter/ disclose details of their encumbered shares. In this regard,
half year ended June 30, 2020, due to the shortened it was observed that apart from pledge, hypothecation
time gap between the extended deadline for submission and non-disposal undertakings(NDUs), currently there
of financial results for the period ended March 31, 2020 is no framework to capture the details of other types of
(31st July) and the quarter/half year ended June 30, 2020 encumbrances in the depository system.
(14th August). 2. It has now been decided that Depositories shall put in
4. After consideration, it has been decided to extend place a system for capturing and recording all types of
the timeline for submission of financial results under encumbrances, which are specified under Regulation
Regulation 33 of the LODR Regulations, for the quarter/ 28(3) of SEBI (Substantial Acquisition of Shares and
half year/financial year ended 30th June 2020, to Takeovers) Regulations, 2011, as amended from time to
September 15, 2020. time. Towards this end, Depositories shall follow processes
and other norms similar to that stipulated for the purpose
5. This Circular shall come into force with immediate effect. of capturing and recording NDUs in Depository system.
Stock Exchanges are advised to bring the provisions of This is apart from pledge and hypothecation, whose
this circular to the notice of all listed entities and also processesand specific norms are separately provided in
disseminate on their websites. SEBI (Depositories & Participants) Regulations, 2018 and
6. The Circular is issued in exercise of the powers conferred circulars issued thereon.
under Section 11(1) of the Securities and Exchange Board
of India Act, 1992 read with Regulation 101 of the LODR 3. The freeze and unfreeze instructions executed by the
Regulations. Participant for recording all encumbrances will be subject
to 100% concurrent audit.
7. This Circular is available at [Link] under the link
“LegalCirculars”. 4. The Depository Participant shall not facilitate or be party to
PRADEEP RAMAKRISHNAN any type of encumbrance outside the Depository system
General Manager as outlined herein.

128 AUGUST 2020 | CHARTERED SECRETARY

 FROM THE GOVERNMENT
5. The Depositories shall implement the provisions of this 2. In terms of clause 13 of Schedule B (in case of
circular within one month from the date of this circular. listed companies) and clause 11 of Schedule C
(in case of intermediaries and fiduciaries) read
6. The Depositories are advised to:
with Regulation 9 of the PIT Regulations, the listed
i. make amendments to the relevant bye-laws, rules companies, intermediaries and fiduciaries shall
and regulations for the implementation of the above promptly inform the Stock Exchange(s) where the
decision, as may be applicable/necessary; concerned securities are traded, regarding violations
ii. to carry out system changes if any to implement the relating to CoC under PIT Regulations in such form
above; and manner as may be specified by the Board from
time to time.
iii. disseminate the provisions of this circular on their
website; 3.
SEBI, vide Circular No. SEBI/HO/ISD/ISD/
iv. communicate to SEBI, the status of implementation CIR/P/2019/82 dated July 19, 2019, had specified the
of the provisions of this circular in their Monthly standard format for reporting of violations related to CoC.
Development Report. The said format has been suitably modified and placed
at Annexure A. The listed companies, intermediaries and
7. This circular is being issued in exercise of the powers fiduciaries shall inform the violations of PIT Regulations
conferred by Section 11(1) of Securities and Exchange relating to CoC as per the revised format to the Stock
Board of India Act, 1992 and section 19 of the Depositories Exchange(s).
Act, 1996 to protect the interest of investors in securities
and to promote the development of, and to regulate the 4. Further, in terms of clause 12 of Schedule B and
securities market. clause 10 of Schedule C read with Regulation 9 of
VERSHA AGARWAL the PIT Regulations, any amount collected by the
Deputy General Manager
listed companies, intermediaries and fiduciaries under

13
these clauses for violation(s) of CoC shall be remitted
Relaxations relating to procedural matters – to the Board for credit to the Investor Protection
Issues and Listing and Education Fund (IPEF) administered by the
Board under the Securities and Exchange Board of
India Act, 1992.
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
HO/CFD/DIL1/CIR/P/2020/136 dated 24.07.2020] 5. As per Regulation 4(2) of SEBI (Investor Protection and
1. SEBI vide Circular no. SEBI/HO/CFD/DIL2/CIR/P/2020/78 Education Fund) Regulations, 2009, such amounts shall
dated May 6, 2020 granted one time relaxations from be credited to the IPEF through the online mode or by
strict enforcement of certain regulations of SEBI (Issue of way of a demand draft (DD) in favour of the Board (i.e.
Capital and Disclosure Requirements) Regulations, 2018, SEBI – IPEF) payable at Mumbai.
pertaining to Rights Issue opening upto July 31, 2020.
The bank account details of SEBI – IPEF for online transfer is
2. Based on the representations received from the market given below:
participants, the validity of relaxations, as provided by
Circular No. SEBI/HO/CFD/DIL2/CIR/P/2020/78 dated Name of Beneficiary SEBI – IPEF
May 6, 2020 is further extended and shall be applicable
for Rights Issues opening upto December 31, 2020. Bank Name Bank of India

3. This Circular is issued in exercise of powers conferred by Bank Branch Bandra Kurla Complex (BKC)
Section 11(1) of the Securities and Exchange Board of Account Number 012210210000008
India Act, 1992.
IFSC Code BKID0000122
4. A copy of this circular is available at [Link]
under the categories “Legal - Circulars.” 6. This circular is issued in supersession of Circular No.
SEBI/HO/ISD/ISD/CIR/P/2019/82 dated July 19, 2019.
JEEVAN SONPAROTE
Chief General Manager
7. This circular is issued in exercise of the powers conferred

14
Reporting to Stock Exchanges regarding under section 11(1) of the Securities and Exchange
Board of India Act, 1992 read with regulations 4(3) and
violations under Securities and Exchange 11 of the PIT Regulations and to protect the interests of
Board of India (Prohibition of Insider investors in securities and to promote the development
Trading) Regulations, 2015 relating to the of and to regulate the securities market and shall come
into force with immediate effect.
Code of Conduct (CoC).
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/ 8. This circular is available on SEBI website at [Link].
[Link] under the category “Circulars”.
HO/ISD/ISD/CIR/P/2020/135 dated 23.07.2020]
1. Vide Gazette Notification No. SEBI/LAD-NRO/GN/2020/23 N SUNIL
Deputy General Manager
dated July 17, 2020, Securities and Exchange Board of
India (Prohibition of Insider Trading) Regulations, 2015 Annexures not published here for want of space. For complete notification
(PIT Regulations) have been further amended. readers may log on to [Link]

CHARTERED SECRETARY | AUGUST 2020 129

 15
FROM THE GOVERNMENT
Allowing Offer for Sale (OFS) and Rights 2. They shall come into force on the date of their publication
in he Official Gazette.
Entitlements (RE) transactions during trading
window closure period. 3. In the Securities and Exchange Board of India (Settlement
Proceedings) Regulations, 2018 -
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
(1) In the regulation 15, in the sub-regulation (2),
HO/ISD/ISD/CIR/P/2020/133 dated 23.07.2020]
(i) in clause (a),
1. Vide Gazette Notification No. SEBI/LAD-NRO/GN/2020/23
dated July 17, 2020, Securities and Exchange Board of (a) after the words “not later than” and before the
India (Prohibition of Insider Trading) Regulations, 2015 words “calendar days from the date of receipt”,
(PIT Regulations) have been further amended. for the word, “fifteen”, the word “thirty”, shall be
substituted;
2. Clause 4 (3) (b) of Schedule B read with Regulation 9 (b) for the words, “by fifteen calendar days”, the
of PIT Regulations, inter-alia, states that trading window words “by sixty calendar days, only after receipt
restrictions shall not apply in respect of transactions of an application seeking extension of time within
mentioned therein or transactions undertaken through thirty days from the date of receipt of notice of
such other mechanism as may be specified by the Board demand” shall be substituted;
from time to time.
(ii) in the explanation to the clause (a),-
3. It has been decided that in addition to the transactions
(a) the words “by way of a demand draft drawn in
mentioned in Clause 4 (3) (b) of Schedule B read
favour of 'Securities and Exchange Board of
with Regulation 9 of PIT Regulations, trading window
India' payable at Mumbai or” shall be omitted;
restrictions shall not apply in respect of OFS and RE
(b) after the words “or any other authorised” and
transactions carried out in accordance with the framework
before the words “mode of payment”, the word
specified by the Board from time to time.
“electronic” shall be inserted;
4. Stock Exchanges are advised to bring the provisions of (2) Chapter VIII, shall be omitted.
this circular to the notice of all listed companies and also
disseminate the same on their websites. (3) In regulation 34, after sub-regulation (3), following sub-
regulation, shall be inserted, -
5. This circular is issued in exercise of the powers conferred
“(4) Notwithstanding the omission of Chapter VIII, a
under section 11(1) of the Securities and Exchange Board
Settlement Notice issued under regulation 18, shall
of India Act, 1992 read with regulations 4(3) and 11 of the
be dealt with as if the Chapter VIII is still in force and
PIT Regulations and to protect the interests of investors
continue to be dealt with accordingly.”
in securities and to promote the development of and to
regulate the securities market and shall come into force (4) In Schedule I, in Part – B ,
with immediate effect.
(i) the words “by way of a demand draft in favour of
6. This circular is available on SEBI website at [Link]. ‘Securities and Exchange Board of India’ Payable at
[Link] under the category “Circulars”. Mumbai or”, shall be omitted;
N SUNIL (ii) after the words “or any other” and before the word
Deputy General Manager “mode”, the word “electronic” shall be inserted.

16
(5) In Schedule II, in Chapter I, after Clause 11, following
Securities and Exchange Board of India clause shall be inserted, -
(Settlement Proceedings) “11A. The applicant shall be provided opportunity of hearing
(Amendment) Regulations, 2020 or meeting only before the Internal Committee.”
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/ (6) In the Schedule II, in Chapter VI, in Table VI, the last row
LAD-NRO/GN/2020/24. dated 22.07.2020] shall be substituted with the following:
In exercise of the powers conferred by Section 15JB of the WHERE THE INFRUCTUOUS BY INFRUCTUOUS BY
Securities and Exchange Board of India Act, 1992, Section MAKING OF THE AN ACT OF THE AN ACT OF THE
23JA of the Securities Contracts (Regulation) Act, 1956 and OPEN OFFER IS ACQUIRER COMPANY OR BY
Section 19-IA of the Depositories Act, 1996 read with Section INFRUCTUOUS ANY OTHER REASON
30 of the Securities and Exchange Board of India Act, 1992,
RUPEES 1 CRORE ANY AMOUNT
Section 31 of the Securities Contracts (Regulation) Act, 1956
OR OPEN OFFER BETWEEN RUPEES
and Section 25 of the Depositories Act, 1996, the Securities
SIZE, WHICHEVER 10 LAKHS TO
and Exchange Board of India hereby makes the following
IS HIGHER RUPEES 35 LAKHS;
regulations to amend the Securities and Exchange Board of
WITH A MULTIPLIER
India (Settlement Proceedings) Regulations, 2018, namely:—
BETWEEN 1 TO 3 AS
1. These regulations may be called the Securities and DECIDED BY THE IC
Exchange Board of India (Settlement Proceedings) OR HPAC OR THE
(Amendment) Regulations, 2020. PANEL OF WTMS

130 AUGUST 2020 | CHARTERED SECRETARY

 FROM THE GOVERNMENT
(7) In Schedule II, in Chapter VI, in Table X shall be substituted with the following table,
TABLE-X
RESIDUARY BA, FOR EACH UNIT OF ALLEGED DEFAULT FOR EACH APPLICANT OR ON JOINT LIABILITY BASIS (AS PER THE SUM OF APPLICABLE AMOUNTS IN CASE OF
JOINT APPLICANTS)
INDIVIDUAL BODY PROMOTERS, SECTION 15B FAILURE IN MARKET FUND RELATED
(PROMOTERS CORPORATE PRINCIPAL AND 15F OF REDRESSING INFRASTRUCTURE DEFAULTS
AND PRINCIPAL & FIRM OFFICERS SEBI ACT INVESTOR INSTITUTIONS (INCLUDING
OFFICERS NOT (INCLUDING & & SIMILAR GRIEVANCES (INCLUDING PROMOTERS
INCLUDED) PROMOTERS COMPLIANCE DEFAULTS (INCLUDING PROMOTERS AND PRINCIPAL
AND PRINCIPAL OFFICERS (INCLUDING PROMOTERS AND PRINCIPAL OFFICERS
(I) OFFICERS [WHEN NOT IN II, PROMOTERS AND PRINCIPAL OFFICERS IN CASES IN CASES
IN CASES IV- VII] AND PRINCIPAL OFFICERS IN RELATING TO JOINT RELATING TO
RELATING TO OFFICERS IN CASES RELATING LIABILITY WITH THE JOINT LIABILITY
JOINT LIABILITY (III) CASES RELATING TO JOINT LIABILITY INSTITUTION) WITH THE
WITH THE BODY TO WITH THE (VI) FUND)
CORPORATE JOINT LIABILITY INTERMEDIARY/ (VII)
/FIRM) WITH THE ISSUER)
(II) INTERMEDIARY) (V)
(IV)
(FOR DELAY
REDUCE TO 1/4)
BA WHERE: RUPEES 15 RUPEES 1 RUPEES 45 RUPEES 15 RUPEES 30 LAKHS RUPEES 5 CRORES RUPEES 33
DEFAULT LAKHS CRORES LAKHS LAKHS LAKHS OR
RELATES TO FUTP 0.01% OF THE
OR IT, FALSE/ AVERAGE
MISLEADING/ ASSET UNDER
INCORRECT/ MANAGEMENT,
INCOMPLETE AT TIME OF
DISCLOSURES VIOLATION
IN OFFER OR
DOCUMENTS,
FAILURE 0.5% OF THE
BY MARKET AVERAGE
INFRASTRUCTURE NET WORTH,
INSTITUTIONS AT TIME OF
TO CONDUCT VIOLATION,
BUSINESS IN
THE REQUIRED WHICHEVER IS
MANNER, HIGHER

A RECKLESS
VIOLATION, OR
A DISGORGEMENT/
REFUND IN EXCESS
OF RUPEES 1
CRORE (M)
BENCHMARK RUPEES 60 RUPEES 3 RUPEES 2 RUPEES 60 RUPEES 80 LAKHS RUPEES 10 CRORES RUPEES 60
WHERE VIOLATION LAKHS CRORES CRORES LAKHS LAKHS OR
INVOLVED AT (M) 0.05% OF THE
AND, -
AVERAGE
SUCH VIOLATION ASSET UNDER
DIRECTLY OR MANAGEMENT,
INDIRECTLY – AT TIME OF
VIOLATION
(I) RESULTED
IN SUBSTANTIAL
OR
LOSSES TO OTHER
PERSONS,
0.75% OF THE
AVERAGE
(II) CREATED A
NET WORTH,
SIGNIFICANT RISK
AT TIME OF
OF SUBSTANTIAL
VIOLATION,
LOSSES TO OTHER
PERSONS, OR WHICHEVER IS
HIGHER
(III) AFFECTED
THE INTEGRITY OF
THE SECURITIES
MARKETS (N)

CHARTERED SECRETARY | AUGUST 2020 131

FROM THE GOVERNMENT
RESIDUARY (O) RUPEES 3 RUPEES 15 RUPEES 10 RUPEES 3 LAKHS RUPEES 6 LAKHS RUPEES 3 CRORES RUPEES 15
LAKHS LAKHS LAKHS LAKHS OR
0.001% OF THE
AVERAGE
ASSET UNDER
MANAGEMENT,
AT TIME OF
VIOLATION

OR

0.05% OF THE
AVERAGE
NET WORTH,
AT TIME OF
VIOLATION,

WHICHEVER IS
HIGHER”

(8) Part – B of the Schedule – III shall be omitted. another mutual fund shall also be counted for the
AJAY TYAGI aforesaid 10% requirement.
CHAIRMAN
B. In partial modification of SEBI circular no. CIR/IMD/

17
DF/21/2012 dated September 13, 2012 it is decided
Transaction in Corporate Bonds/Commercial for debt schemes that, such disclosure shall be done
Papers through RFQ platform and enhancing on fortnightly basis within 5 days of every fortnight.
transparency pertaining to debt schemes In addition to the current portfolio disclosure, yield
of the instrument shall also be disclosed. The
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/ disclosure shall be made in the format mentioned in
HO/IMD/DF3/CIR/P/2020/130 dated 22.07.2020] the aforementioned circular.

1. In order to enhance the transparency and disclosure 2. The above shall come into force with effect from October
pertaining to debt schemes and investments by mutual 1, 2020.
funds in Corporate Bonds/Commercial Papers, SEBI
based on the recommendation of Mutual Fund Advisory 3. This circular is issued in exercise of the powers conferred
Committee (MFAC) has decided the following: under Section 11 (1) of the Securities and Exchange
Board of India Act, 1992, read with Regulation 77 of the
A. In order to increase the liquidity on exchange platform, Securities and Exchange Board of India (Mutual Funds)
i. On monthly basis, Mutual Funds shall undertake Regulations, 1996 to protect the interests of investors
at least 10% of their total secondary market trades in securities and to promote the development of, and to
by value (excluding Inter Scheme Transfer trades) regulate the securities market.
in the Corporate Bonds by placing/seeking quotes
DEENA VENU SARANGADHARAN
through one-to-many mode on the Request for Quote Deputy General Manager
(RFQ) platform of stock exchanges. The percentage

18
as specified shall be reckoned on the average of
secondary trades by value in immediate preceding
Review of Stress Testing Methodology for
three months on rolling basis. Positions with Early Pay-in
For example, for the month of October 2020, Mutual
Funds shall undertake 10% (by value) of their average [Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
secondary market trades (excluding IST) done in HO/CDMRD/DRMP/CIR/P/2020/128 dated 21.07.2020]
immediate preceding Securities and Exchange
Board of India three months i.e. July 2020, August 1. SEBI vide Circular SEBI/HO/CDMRD/DRMP/
2020 and September 2020 for Corporate Bonds by CIR/P/2018/111 dated July 11, 2018, inter alia, prescribed
placing / seeking quotes through RFQ platform of norms related Stress Testing. In consultation with Clearing
stock exchanges. Corporations (CCs), to address the concern regarding
high stress loss figures on positions with early pay-in,
ii. All transactions in Corporate Bonds and Commercial following clause stands inserted at end of Part-B provided
Papers wherein Mutual Fund is on both sides of the under Annexure to the SEBI Circular SEBI/HO/CDMRD/
trade shall be executed through RFQ platform of DRMP/ CIR/P/2018/111 dated July 11, 2018:-
stock exchanges in one-toone mode.
"h) While calculating the residual losses as per 'd'
iii. Any transaction entered by mutual fund in Corporate and 'f' above, for positions on which early pay-in are
Bonds in one to many mode and gets executed with

132 AUGUST 2020 | CHARTERED SECRETARY

 FROM THE GOVERNMENT
given by the clients/brokers, and margin exemption Stock Exchanges/ Clearing Corporations shall adopt the
are granted on such positions, CCs are permitted to framework specified in the Annexure, for the purpose
consider the 'margin exemption granted' or 'value of of ‘Mechanism for regular monitoring of and penalty for
early paid-in goods', whichever is lower, as 'margins short-collection/ non-collection of margins from clients’ in
supporting those positions'.". Cash and Derivatives segments, as specified vide SEBI
Circulars CIR/DNPD/7/2011 dated August 10, 2011, SEBI/
2. The circular shall be effective from date of issuance of the HO/CDMRD/DRMP/CIR/P/2016/80 dated September 07,
Circular. 2016, CIR/HO/MIRSD/DOP/CIR/P/2019/88 dated August
01, 2019 and CIR/HO/MIRSD/DOP/CIR/P/2019/139
3. This circular is issued in exercise of the powers conferred dated November 19, 2019.
under Section 11(1) of the Securities and Exchange Board
of India Act 1992, read with Section 10 of the Securities 5 It is reiterated that the applicable upfront margins are
Contracts (Regulation) Act, 1956 to protect the interests of required to be collected from the clients in advance of
investors in securities and to promote the development of, the trade. The aforesaid framework prescribed in the
and to regulate the securities market. Annexure is only for the purpose of verification of upfront
collection of margin and levy of penalty.
4. This circular is available on SEBI website at [Link]. 6 The provisions of the Circular SEBI/HO/CDMRD/
[Link]. DRMP/CIR/P/2019/149 dated November 29, 2019 shall,
accordingly, be amended to the extent mentioned above.
VISHAL V. NAIR All other provisions/ conditions specified in the Circular
Deputy General Manager
dated November 29, 2019 shall remain unchanged.

19
Framework to Enable Verification of Upfront 7 The provisions of this Circular shall come into effect from
December 01, 2020.
Collection of Margins from Clients in Cash
and Derivatives segments 8 Stock Exchanges and Clearing Corporations are directed
to:
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
a) take necessary steps to put in place systems for
HO/MRD2/DCAP/CIR/P/2020/127 dated 20.07.2020]
implementation of the circular, including necessary
amendments to the relevant bye-laws, rules and
1 With respect to equity derivatives and currency derivatives
regulations;
segments, Stock Exchanges/ Clearing Corporations have
mandated clearing members/ trading members to collect b) bring the provisions of this circular to the notice of
applicable margins from their clients/ constituents on an their members and also disseminate the same on
upfront basis. Similarly, SEBI Circulars CIR/CDMRD/ their websites; and
DRMP/01/2015 dated October 01, 2015 and SEBI/
c) communicate to SEBI, the status of implementation
HO/CDMRD/DRMP/CIR/P/2016/80 dated September
of the provisions of this circular in the Monthly
07, 2016 directed to National Commodity Derivatives
Development Report.
Exchanges, inter alia, require members to collect Initial
Margin and ELM upfront from their clients as applicable at 9 This circular is issued in exercise of the powers conferred
the time of the trade. under Section 11(1) of the Securities and Exchange Board
of India Act 1992, read with Section 10 of the Securities
2 In order to align and streamline the risk management Contracts (Regulation) Act, 1956 to protect the interests of
framework of both cash and derivatives segments, investors in securities and to promote the development of,
with respect to collection of margins from the clients and to regulate the securities market.
and reporting of short-collection/non-collection of
10 This circular is available on SEBI website at [Link].
margins, SEBI, vide Circular no. CIR/HO/MIRSD/DOP/
[Link] at “Legal Framework-Circulars”.
CIR/P/2019/139 dated November 19, 2019, inter alia,
required the Trading Members (TMs) / Clearing Members AMIT TANDON
(CMs) in cash segment as well to mandatorily collect General Manager
upfront VaR margins and ELM from their clients.
Annexure not published here for want of space. For complete notification
readers may log on to [Link]
3 Subsequent to the aforesaid Circular dated November

20
19, 2019, representations were received from the Eligibility Criteria for Selection of Underlying
market participants raising issues in operationalization
of collection of upfront margin from clients. SEBI held
Commodity Futures for Options on
detailed discussions with the market participants so as to Commodity Futures
evolve a monitoring mechanism for verification of upfront
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
collection of margin from clients.
HO/CDMRD/DNPMP/CIR/P/2020/125 dated 20.07.2020]
4 Based on deliberations with the market participants, with 1.
SEBI vide circular SEBI/HO/CDMRD/DMP/
an objective to enable uniform verification of upfront CIR/P/2017/55 dated June 13, 2017 regarding “Options
collection of margins from clients by TM/ CM and levy of on Commodity Futures - Product Design and Risk
penalty across segments, it has been decided that the Management Framework” under Clause ‘3a’ had

CHARTERED SECRETARY | AUGUST 2020 133

 prescribed the following eligibility criteria for selection of
FROM THE GOVERNMENT
I. in regulation 3,
commodity futures as underlying for options:
i. sub-regulation 5, shall be substituted with the
“The underlying 'Futures contracts' on the corresponding following, namely-
commodity shall be amongst the top five futures contracts
in terms of total trading turnover value of previous twelve “(5) The board of directors or head(s) of the
months;” organisation of every person required to handle
2. Based on representations received from stock unpublished price sensitive information shall ensure
exchanges and deliberations with the stakeholders, it that a structured digital database is maintained
has been decided that the abovementioned provision containing the nature of unpublished price sensitive
stands repealed. The other provisions of circular SEBI/ information and the names of such persons who
HO/CDMRD/DMP/CIR/P/2017/55 dated June 13, 2017 have shared the information and also the names of
shall continue to prevail. such persons with whom information is shared under
this regulation along with the Permanent Account
3. The provisions of this circular shall be effective from the Number or any other identifier authorized by law
date of this circular. where Permanent Account Number is not available.
Such database shall not be outsourced and shall be
4. This circular is issued in exercise of powers conferred maintained internally with adequate internal controls
under Section 11 (1) of the Securities and Exchange and checks such as time stamping and audit trails to
Board of India Act, 1992, to protect the interests of ensure non-tampering of the database.”
investors in securities and to promote the development
of, and to regulate the securities market. ii. after sub-regulation 5, the following shall be inserted,
namely, -
5. The stock exchanges are advised to:
“(6) The board of directors or head(s) of the
i. to make necessary amendments to the relevant bye- organisation of every person required to handle
laws, rules and regulations. unpublished price sensitive information shall ensure
ii. bring the provisions of this circular to the notice that the structured digital database is preserved for a
of the stock brokers of the Exchange and also to period of not less than eight years after completion
disseminate the same on their website. of the relevant transactions and in the event of
receipt of any information from the Board regarding
iii. communicate to SEBI, the status of the implementation any investigation or enforcement proceedings, the
of the provisions of this circular relevant information in the structured digital database
shall be preserved till the completion of such
6. This circular is available on SEBI website [Link] proceedings.”
under the category “Circulars” and “Info for Commodity
Derivatives”. II. in regulation 7, in sub-regulation 2, after clause (b), the
VIKAS SUKHWAL following shall be inserted, namely, ─
General Manager
“(c) The above disclosures shall be made in such

21
Securities and Exchange Board of India form and such manner as may be specified by the
Board from time to time.”
(Prohibition of Insider Trading) (Amendment)
Regulations, 2020 III. in Schedule B,
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/ i. in clause 4, sub-clause 3 (b), after the words
LAD-NRO/GN/2020/23 dated 17.07.2020] “delisting offer”, the words “or transactions which are
undertaken through such other mechanism as may
In exercise of the powers conferred under Section 30 read be specified by the Board from time to time” shall be
with clause (g) of sub-section (2) of Section 11 and clauses (d) inserted.
and (e) of Section 12A of the Securities and Exchange Board
of India Act, 1992 (15 of 1992), the Board hereby makes the ii. clause 12 shall be substituted with the following,
following regulations to amend the Securities and Exchange namely-
Board of India (Prohibition of Insider Trading) Regulations,
2015, namely: – “Without prejudice to the power of the Board under the
Act, the code of conduct shall stipulate the sanctions
1. These regulations may be called the Securities and and disciplinary actions, including wage freeze,
Exchange Board of India (Prohibition of Insider Trading) suspension, recovery, etc., that may be imposed,
(Amendment) Regulations, 2020. by the listed company required to formulate a code
of conduct under sub-regulation (1) of regulation 9,
2. They shall come into force on the date of their publication for the contravention of the code of conduct. Any
in the Official Gazette. amount collected under this clause shall be remitted
to the Board for credit to the Investor Protection and
3. In the Securities and Exchange Board of India (Prohibition Education Fund administered by the Board under the
of Insider Trading) Regulations, 2015, ─ Act.”

134 AUGUST 2020 | CHARTERED SECRETARY

 iii. in clause 13, the words “inform the Board promptly” Exchange(s). The broad contents of LoF are indicated in

FROM THE GOVERNMENT

shall be replaced by the words “promptly inform the Annexure-II of this circular.
stock exchange(s) where the concerned securities
are traded, in such form and such manner as may be 4. Upon completion of exit option process, a due diligence
specified by the Board from time to time”. certificate in line with format specified in the Form D in
Annexure-I of SEBI circular no. IMD/DF/136/2016 dated
IV. in Schedule C,
December 19, 2016, shall be filed by the lead manager(s)
i. clause 10 shall be substituted with the following, namely- with the Board within two working days of payment of
consideration by the acquirer.
“Without prejudice to the power of the Board under the
Act, the code of conduct shall stipulate the sanctions 5. This circular is being issued in exercise of powers
and disciplinary actions, including wage freeze, conferred under Section 11(1) of the Securities and
suspension, recovery, etc., that may be imposed, by Exchange Board of India Act, 1992 and Regulation 33 of
the intermediary or fiduciary required to formulate a
the SEBI (REIT) Regulations.
code of conduct under sub-regulation (1) and sub-
regulation (2) of regulation 9, for the contravention of
the code of conduct. Any amount collected under this 6. This circular is available on the website of the Securities
clause shall be remitted to the Board for and Exchange Board of India at [Link] under
the sub-category “Circulars” under the category “Legal”.
credit to the Investor Protection and Education Fund
administered by the Board under the Act.”
RICHA G. AGARWAL
Deputy General Manager
ii. in clause 11, the words “inform the Board promptly”
shall be replaced by the words Annexures not published here for want of space. For complete notification
readers may log on to [Link]
“promptly inform the stock exchange(s) where the

23
concerned securities are traded, in such form and Manner and mechanism of providing exit
such manner as may be specified by the Board from
time to time”. option to dissenting unit holders pursuant to
Regulation 22(5C) and Regulation 22(7) of SEBI
AJAY TYAGI Infrastructure Investment Trusts Regulations,
CHAIRMAN
2014 (“SEBI (InvIT) Regulations”)

22
Manner and mechanism of providing exit [Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
option to dissenting unit holders pursuant to HO/DDHS/DDHS/CIR/P/2020/122 dated 17.07.2020]
Regulation 22(6A) and Regulation 22(8) of SEBI 1. Regulation 22 (5C) and Regulation 22 (7) of SEBI
Real Estate Investment Trusts Regulations, 2014 (InvIT) Regulations provide for exit option to be given to
(“SEBI (REIT) Regulations”) dissenting unit holders.

[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/ 2. This circular details the guidelines in respect of conditions,
HO/DDHS/DDHS/CIR/P/2020/123 dated 17.07.2020] manner and mechanism of exit option to be provided to
dissenting unit holders. The detailed guidelines have
1. Regulation 22 (6A) and Regulation 22 (8) of SEBI been provided in Annexure - I.
(REIT) Regulations provide for exit option to be given to
dissenting unit holders. 3. An acquirer providing exit option to dissenting unitholders
in terms of this circular shall appoint one or more merchant
2. This circular details the guidelines in respect of conditions, bankers, registered with the Board, as lead manager(s)
manner and mechanism of exit option to be provided to for the exit option/offer, who shall ensure compliance
dissenting unit holders. The detailed guidelines have with the provisions of SEBI (InvIT) Regulations and this
been provided in Annexure - I. circular. Lead manager(s) shall send the Letter of Offer
(LoF) to all dissenting unit holders and shall also file the
3. An acquirer providing exit option to dissenting unitholders same along with the due diligence certificate, in line with
in terms of this circular shall appoint one or more merchant format specified in Form A in Annexure-I of SEBI circular
bankers, registered with the Board, as lead manager(s) no. CIR/IMD/DF/55/2016 dated May 11, 2016, with the
for the exit option/offer, who shall ensure compliance Exchange(s). The broad contents of LoF are indicated in
with the provisions of SEBI (REIT) Regulations and this Annexure-II of this circular.
circular. Lead manager(s) shall send the Letter of Offer
(LoF) to all dissenting unit holders and shall also file the 4. Upon completion of exit option process, a due diligence
same along with the due diligence certificate, in line with certificate in line with format specified in the Form D in
format specified in Form A in Annexure-I of SEBI circular Annexure-I of SEBI circular no. CIR/IMD/DF/55/2016
IMD/DF/136/2016 dated December 19, 2016, with the dated May 11, 2016, shall be filed by the lead manager(s)

CHARTERED SECRETARY | AUGUST 2020 135

FROM THE GOVERNMENT
with the Board within two working days of payment of 6. This circular is issued in exercise of the powers conferred
consideration by the acquirer. under Section 11(1) of the Securities and Exchange
Board of India Act, 1992 read with Regulations 31 and
5. This circular is being issued in exercise of powers 32 of the SEBI (ILDS) Regulations, 2008, Regulations
conferred under Section 11(1) of the Securities and 26 and 27 of SEBI (NCRPS) Regulations, 2013,
Exchange Board of India Act, 1992 and Regulation 33 of the relaxations contained herein are subject to the
the SEBI (InvIT) Regulations. provisions of the Companies Act, 2013 and rules
made thereunder.
6. This circular is available on the website of the Securities
and Exchange Board of India at [Link] under 7. This circular is available on SEBI website at [Link].
the sub-category “Circulars” under the category “Legal”. [Link] under the category - 'Legal -Circulars'.

RICHA G. AGARWAL RICHA G. AGARWAL

Deputy General Manager Deputy General Manager

25
Annexures not published here for want of space. For complete notification
readers may log on to [Link]
Guidelines for Issue and Listing of Structured
Products/ Market Linked Debentures-

24
Relaxation from compliance with provisions of Amendments
the SEBI (Issue and Listing of Debt Securities) [Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
Regulations, 2008 (“ILDS Regulation”), SEBI HO/DDHS/CIR/P/2020/120 dated 13.07.2020]
(Non-Convertible Redeemable Preference Shares)
1. SEBI vide circular no. CIR/IMD/DF/17/2011 dated
Regulations, 2013 (“NCRPS Regulations”) and SEBI September 28, 2011 (hereinafter referred as
Circulars relating to Listing of Commercial Papers. “MLD circular”) prescribed guidelines for issue
and listing of structured products/ Market linked
[Issued by the Securities and Exchange Board of India vide Circular No. SEBI/
Debentures (MLDs).
HO/DDHS/CIR/P/2020/121 dated 15.07.2020]

1. ILDS Regulations, NCRPS Regulations and circulars 2. Para 4(f)(i) of the MLD circular, specifies that issuer
related to Listing of Commercial Papers (CPs) require of MLDs shall appoint a third party valuation agency
an Issuer to inter-alia submit its latest audited financials which shall be a Credit Rating Agency (CRA)
which should not be older than six months. Compliant registered with SEBI for carrying out valuation
listed entities are, however, permitted to use unaudited of MLDs.
financials with limited review in lieu of the audited
financials for the stub period, subject to these unaudited 3. Pursuant to amendment to SEBI (Credit Rating Agencies)
financials not being older than six months. Regulation, 1999 on May 30, 2018, a CRA cannot carry
out any activity other than rating of securities post May
2. On account of COVID pandemic, SEBI vide circular 30, 2020.
no. SEBI/HO/CFD/CMD1/CIR/P/2020/106 dated
June 24, 2020 extended the timelines for submission 4. In view of the above, therefore, it has been decided
of financial results for the quarter/half year/annual that valuation of MLDs shall be carried out by an
financial year for the period ending March 31, 2020 till agency appointed by AMFI for the purpose of carrying
July 31, 2020. out valuation (“hereinafter referred as AMFI appointed
valuation agency”).
3. SEBI has now received representations from listed
entities seeking extension of time for listing their Non- 5. Accordingly, paragraph 4.f (i) of MLD circular
Convertible Debentures (NCDs) / Non-Convertible stands modified as under: “It shall be mandatory
Redeemable Preference Shares (NCRPS)/ for the issuer to appoint a third party valuation
Commercial Paper(s) (CPs), pending finalization of agency which shall be an AMFI appointed valuation
their annual accounts for the financial year ending agency.”
March 31, 2020.
6. This circular is issued in exercise of powers conferred
4. Accordingly, it has been decided to permit listed
under Section 11(1) of the Securities and Exchange
Issuers who have issued NCDs/NCRPS/CPs, on or
Board of India Act, 1992.
after July 01, 2020 and intend/propose to list such
issued NCDs/NCRPS/CPs, on or before July 31, 2020,
7. This circular is available on SEBI website at [Link].
to use available financials as on December 31, 2019.
[Link] under the categories,“Legal Framework” and
5. Stock Exchanges are advised to bring the provisions under the drop down “Circulars”.
of this circular to the notice of all listed entities and
RICHA G. AGARWAL
also disseminate on their websites. Deputy General Manager

136 AUGUST 2020 | CHARTERED SECRETARY

26

FROM THE GOVERNMENT

acquire or hold more than five per cent of the paid up equity
Master Circular for Commodity Derivatives share capital in a recognised stock exchange in IFSC, subject
Market to applicable law.

Provided that,—
[Issued by the Securities and Exchange Board of India vide Circular SEBI/HO/
CDMRD/DNPMP/CIR/P/2020/118. dated 10.07.2020] (a) a stock exchange,
1. Securities and Exchange Board of India (SEBI) has been (b) a depository,
issuing various circulars/directions from time to time for
(c) a banking company,
commodity derivatives market.
(d) an insurance company,
2. This Master Circular is a compilation of the circulars
(e) a commodity derivatives exchange
issued by Commodity Derivatives Market Regulation
Department (CDMRD) pertaining to domestic [whether Indian or of foreign jurisdiction for (a) to (e)]
commodity derivatives segment, which have been
(g) a public financial institution of Indian jurisdiction, and
issued till the date of this circular. Further, references
in the circular to the Statutes/Regulations which now (h) a bilateral or multilateral financial institution approved
stand repealed have been suitably updated. Efforts by the Central Government,
have also been made to incorporate certain applicable
provisions of existing circulars (as on date) issued may acquire or hold, either directly or indirectly, either
by other departments of SEBI relevant to commodity individually or together with persons acting in concert, upto
derivatives markets. fifteen per cent of the paid up equity share capital of a
recognised stock exchange with prior approval of the Board.
3. It is hereby clarified that in case of any inconsistency
between the Master Circular and the original applicable Provided further that the provisions of Regulation 19 and
circular, the content of the original circular shall prevail. 20 of Securities Contracts (Regulation) (Stock Exchanges
and Clearing Corporations) Regulations, 2018 should be
4. This Master Circular shall supersede previous
complied with”.
Master Circular CDMRD/DMP/CIR/P/2018/126 dated
September 07, 2018.
3. This circular is issued in exercise of powers conferred under
5. This circular is available on SEBI Website at [Link]. Section 11 (1) of the Securities and Exchange Board of India
[Link]. Act, 1992, to protect the interests of investors in securities
and to promote the development of, and to regulate the
VIKAS SUKHWAL securities market. This circular is available on SEBI website
General Manager at [Link].

27
Securities and Exchange Board of India SANJAY PURAO
General Manager
(International Financial Services Centres)

28
Guidelines, 2015 - Amendments Relaxation from compliance with certain
provisions of the SEBI (Issue and Listing of
[Issued by the Securities and Exchange Board of India vide Circular SEBI/HO/ Municipal Debt Securities) Regulations, 2015
IFSC/CIR/P/2020/117. dated 09.07.2020]
(ILDM Regulations) and certain SEBI Circulars
Kindly refer to SEBI (IFSC) Guidelines, 2015 which were due to the COVID -19 virus pandemic
notified by SEBI on March 27, 2015 and SEBI Circular dated
July 27, 2017. [Issued by the Securities and Exchange Board of India vide Circular SEBI/HO/
DDHS/CIR/P/2020/116. dated 07.07.2020]
2. In order to further streamline the operations at IFSC, based 1. SEBI, vide circular No. SEBI/HO/DDHS/CIR/P/2020/41
on the internal discussions and consultations held with the dated March 23, 2020, had granted extension of timelines
stakeholders, it has been decided to amend clause 4 (1) of for certain requirements for issuers of Municipal Debt
SEBI (IFSC) Guidelines, 2015 to read as follows: Securities.
“4. 1) Eligibility and shareholding limit for stock exchange 2. It has been decided to partially modify the clause 7 of the
desirous of operating in IFSC circular (dealing with investor grievance report, financial
results and Accounts maintained by issuers under
Any Indian recognized stock exchange or any stock exchange ILDM Regulations) and further extend the timelines for
of a foreign jurisdiction may form a subsidiary to provide the submission to July 31, 2020.
services of stock exchange in IFSC wherein at least fifty one
per cent. of paid up equity share capital is held by such stock 3. This circular shall come into force with immediate effect.
exchange and remaining share capital may be offered to Stock Exchanges are advised to bring the provisions of
any other person (whether Indian or of foreign jurisdiction) this circular to the notice of all listed entities that have
and such person shall not at any time, directly or indirectly, issued Municipal Debt Securities and also disseminate on
either individually or together with persons acting in concert, their websites.

CHARTERED SECRETARY | AUGUST 2020 137

 iv. after clause (g) and before clause (h), the following
FROM THE GOVERNMENT
4. The circular is issued in exercise of the powers conferred
under Section 11(1) of the Securities and Exchange clauses shall be inserted, namely, -
Board of India Act, 1992 read with Regulation 29 of ILDM
Regulations. “(ga) “CPE” means continuing professional
education in terms of clause (f) of sub regulation
5. The circular is available on SEBI website at [Link]. (1) of regulation 2 of the SEBI (Certification of
[Link] under the category - 'Legal -Circulars'
Associated Persons in the Securities Markets)
RICHA G. AGARWAL Regulations, 2007;
Deputy General Manage
(gb) “family of client” shall include individual

29
Securities and Exchange Board of India client, dependent spouse, dependent children
(Investment Advisers) (Amendment) and dependent parents;
Regulations, 2020 (gc) “family of an individual investment adviser”
shall include individual investment adviser,
[Issued by the Securities and Exchange Board of India vide Circular No. spouse, children and parents;”
SEBI/LAD-NRO/GN/2020/22. dated 03.07.2020]
In exercise of the powers conferred by sub-section (1) of v. After clause (p) and before clause (q), the following
section 30 read with clause (b) of sub-section (2) of section clause shall be inserted, namely, -
11 of the Securities and Exchange Board of India Act,
1992 (15 of 1992), the Board hereby makes the following “(pa) “non-individual” means a body corporate
regulations to further amend the Securities and Exchange including a limited liability partnership and a
Board of India (Investment Advisers) Regulations, 2013, partnership firm;”
namely, –
vi. clause (r) shall be substituted with the following
1. These Regulations may be called the Securities clause, namely, –
and Exchange Board of India (Investment
Advisers) (Amendment) Regulations, 2020. “(r) “persons associated with investment advice”
shall mean any member, partner, officer, director
2. They shall come into force on the ninetieth day or employee or any sales staff of such investment
from the date of their publication in the Official adviser including any person occupying a similar
Gazette. status or performing a similar function irrespective
of the nature of association with the investment
3. In the Securities and Exchange Board of India adviser who is engaged in providing investment
(Investment Advisers) Regulations, 2013, - advisory services to the clients of the investment
adviser; Explanation. — All client-facing
I. in sub-regulation (1) of regulation 2, - persons such as sales staff, service relationship
managers, client relationship managers, etc., by
i. after clause (a) and before clause (b), the whatever name called shall be deemed to be
following clause shall be inserted, namely, - persons associated with investment advice, but
do not include persons who discharge clerical or
“(aa) “assets under advice” shall mean the office administrative functions where there is no
aggregate net asset value of securities and client interface.”
investment products for which the investment
adviser has rendered investment advice vii. After clause (r) and before sub-clause (2), the
irrespective of whether the implementation following clause shall be inserted, namely, -
services are provided by investment adviser or
concluded by the client directly or through other “(s) “principal officer” shall mean the managing
service providers;” director or designated director or managing
partner or executive chairman of the board or
ii. in clause (c), the words, symbols and numbers “under equivalent management body who is responsible
sub-section (7) of section 2 of the Companies Act, for the overall function of the business and
1956 (1 of 1956)” shall be substituted with the words, operations of non-individual investment
symbols and numbers “under sub-section (11) of adviser.”
section 2 of the Companies Act, 2013 (18 of 2013);”
AJAY TYAGI
iii. in clause (f), after the words, symbols and numbers CHAIRMAN
“Companies Act, 1956”, the words, symbols and Complete details are not published here for want of space. For complete details
numbers “or Companies Act, 2013” shall be inserted. readers may log on to [Link]

138 AUGUST 2020 | CHARTERED SECRETARY

CHARTERED SECRETARY | AUGUST 2020 139
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CHARTERED SECRETARY | AUGUST 2020 147
STARTUP INDIA

Fund of Funds for Startups

A ccelerating innovation driven entrepreneurship and

business creation through Start-ups is crucial for
large-scale employment generation. Start-ups face
BELOW ARE THE KEY ELIGIBILITY CRITERIA FOR
APPLYING FOR CONTRIBUTION UNDER FFS
several challenges - limited availability of domestic  Funds are registered as either Category I or II AIF with
risk capital, constraints of conventional bank finance, SEBI or have applied for the same with SEBI.
information asymmetry and lack of hand holding support  Funds with corpus of less than Rs 1,000 crores.
from credible agencies. A large majority of the successful
Start-ups have been funded by foreign venture funds  Fund’s investment strategy to include investment
and many of them are locating outside the country to in startups (Startup as defined as per the Gazette
receive such funding. Notification G.S.R.127 (E) dated February 19,
2019issued by Government of India and as amended
With the objective of supporting development and growth of from time to time).
innovation driven enterprises, the Union Cabinet, chaired  Fund to agree to invest at least twice the amount of
by the Prime Minister Shri Narendra Modi, approved the contribution sought from FFS into Startups. (For instance,
establishment of “Fund of Funds for Startups” (FFS) with a if contribution sought is Rs 100 crore under FFS, Fund
corpus of Rs 10,000 crore at Small Industries Development should invest at least Rs 200 crore in Startups).
Bank of India (SIDBI) for contribution to various Alternative
Investment Funds (AIF), registered with Securities and  Fund Manager / team should have prior track record in
Exchange Board of India (SEBI) which would extend Fund management or prior investment experience. All
funding support to Startups. the Key members of the Fund should have CIBIL score
more than 650 (Key member is defined as Director,
Sponsor and Senior Personnel of the Fund).
As per the operating guidelines issued by Department for
Promotion of Industry and Internal Trade (DPIIT), FFS  All the Key members should be legally eligible to be a
shall invest at least twice the contribution out of FFS, in Director or in a Managerial position under Indian law (i.e.,
Startups as defined by Government of India under Startup not barred to be a Director or in a Managerial position
India, scheme vide Gazette Notification G.S.R.127 (E) under Indian Law).
dated February 19, 2019 and as amended from time to As on March 31, 2020, SIDBI has committed Rs 3798 Cr to
time. 53 SEBI registered AIFs out of which Rs.3582 crore have
been invested into 338 startups1.
Each AIF sets up its own Investment Committee and the
investment Committee of each Fund takes a decision Thus, a dedicated fund for carrying out Fund of Funds
on its investment decisions. The investment committee operations would address these issues and enable flow
(IC) of each AIF, comprising of investment experts drawn of assistance to innovative Startups through their journey
from different domains takes decisions on investing to becoming full-fledged business entities. This would
into particular startup. These decisions are largely a encompass support at seed stage, early stage, and growth
matter of business decisions which depend on a host stage. Government contribution to the target corpus of the
of factors like uniqueness, innovativeness, intellectual individual Fund as an investor would encourage greater
property and business potential. To avail funds from the participation of private capital and thus help leverage
corpus, an eligible VC fund has to make a presentation mobilization of larger resources. CS

before the IC.

148 AUGUST 2020 | CHARTERED SECRETARY

 NEWS FROM THE
4
INSTITUTE

n MEMBERS RESTORED DURING THE MONTH OF JUNE 2020

n CERTIFICATE OF PRACTICE SURRENDERED DURING THE MONTH OF JUNE 2020
n EXTENSION IN THE LAST DATE FOR PAYMENT OF ANNUAL MEMBERSHIP AND CERTIFICATE OF PRACTICE FEE FOR
FY 2020-2021
n OBITUARIES
n MEMBERS HOLDING CERTIFICATE OF PRACTICE

CHARTERED SECRETARY | AUGUST 2020 149

NEWS FROM THE INSTITUTE
41 CS EMANI V REDDY ACS 19321 SIRC
42 CS RAMAN BAWA FCS 3954 NIRC
43 CS DEEPIKA VAID ACS 35626 NIRC

Institute 44
45
CS SAYONI SUBIR BASU
CS TAGORE PRASAD TIWARI
ACS 42660
ACS 38028
WIRC
SIRC

News 46
47
48
CS ASHMITA JAYESH THAKUR
CS PRAMOD TYAGI
CS SHYAM NARAYAN MEHROTR
ACS 23432
ACS 11480
ACS 8765
WIRC
NIRC
F/EIRC
49 CS POONAM RAVINDRA PACHARNE ACS 40528 WIRC
50 CS SANJAY KUMAR ACS 43804 WIRC
MEMBERS RESTORED DURING THE MONTH OF JUNE
2020 51 CS NIKHILRAJIV JOGLEKAR ACS 46486 WIRC
52 CS N. JAYANTHI FCS 5808 SIRC
SL. NAME MEMBNO REGION 53 CS AKASH KUMAR JAIN ACS 13158 WIRC
NO
54 CS NIKITA MEHTA ACS 20591 WIRC
1 CS PADMAPRIYA A  ACS 32656 SIRC
55 CS SUNITHA DEVI KORLAPATI ACS 51468 SIRC
2 CS SAMIKSHA SHARMA ACS 33735 NIRC
56 CS KETKI VYANKAT KULKARNI ACS 30935 WIRC
3 CS OSTWAL HEMANT ACS 35398 WIRC
57 CS AARTI CHANDRA ACS 12085 SIRC
4 CS DARSHANA KOTHARI ACS 32468 SIRC
58 CS VARSHA SHUKLA ACS 14996 WIRC
5 CS SHAGUN MURARKA ACS 49662 NIRC
59 CS ASTHA ARORA ACS 14182 NIRC
6 CS PRAN NATH KUMAR FCS 1223 NIRC
60 CS APEKSHA PARAKH ACS 52374 WIRC
7 CS AANVI PANKAJ DOSHI ACS 52060 WIRC
61 CS KANCHANA B. ACS 17426 F/SIRC
8 CS SAURAV NARANG ACS 32813 EIRC
62 CS SHEETAL KATTA ACS 41092 NIRC
9 CS VAIBHAV JAIN ACS 31576 EIRC
63 CS SONAM AJIT SINGH ACS 40634 WIRC
10 CS MONIKA KALRA ACS 37755 NIRC
64 CS V SUDHA ACS 41349 SIRC
11 CS VINEET SAHAY ACS 18173 NIRC
65 CS MAHALAKSHMI MEHTA FCS 5412 WIRC
12 CS NEENA ACS 10323 F/NIRC
13 CS SONIA REETESH ARORA ACS 18943 WIRC CERTIFICATE OF PRACTICE SURRENDERED DURING
14 CS SATISH KUMAR PANDEY ACS 18657 WIRC THE MONTH OF JUNE 2020
15 CS RENU KUMARI KUSHWAHA ACS 41754 NIRC SL. NAME COP
MEMBNO REGION
NO NO
16 CS PRIYANKA BANGARI ACS 46767 NIRC
1 CS V SHIVPRAKASH A- 7488 7123 SIRC
17 CS RIVA RAMESH KUMAR MAINI ACS 49612 NIRC
2 CS GAURAV PRAKASH A- 37013 19758 NIRC
18 CS VISHAL BIPINCHANDRA MEHTA ACS 33172 WIRC
3 CS LABDHI SANDIP SHAH A- 57600 22744 WIRC
19 CS NISHTHA KUKREJA ACS 39446 NIRC
4 CS RUPALI KULSHRESTHA A- 41565 20982 NIRC
20 CS SUSHMA BAREJA FCS 6300 NIRC
5 CS JAYANTHAR SUBANYA A- 43154 15984 SIRC
21 CS ABHISHEK MOHAN YADAV ACS 19233 WIRC
22 CS A S DEEPASREE ACS 25941 SIRC 6 CS SHWETA ANAND NAIK A- 24096 10389 WIRC
23 CS GOURAV JAIN ACS 25399 NIRC 7 CS PRASEEDA WARRIER A- 24640 21977 SIRC
24 CS ANITA KUMARI ACS 32609 NIRC 8 CS MEGHA MEHRISHI A- 57846 21821 NIRC
25 CS RUCHITA ANIL GANDHI ACS 41101 WIRC 9 CS ALKA SINGH A- 39791 21560 NIRC
26 CS K. BASKAR FCS 4973 SIRC 10 CS ZAID BIN FAROOQ A- 60539 22776 NIRC
27 CS G S KURMI ACS 11970 WIRC 11 CS SHWETA GARG A- 35929 17924 NIRC
28 CS SUDHA AGARWAL ACS 34913 EIRC 12 CS VANDANA SINGH A- 32135 11996 EIRC
29 CS NITI MANGLA ACS 52859 NIRC 13 CS USHA KIRAN A- 44578 21177 SIRC
30 CS SONAM KANT ACS 50144 NIRC 14 CS DEEPIKA KARNANI A- 31000 11390 WIRC
31 CS ANURAG ARORA ACS 30737 NIRC 15 CS ABHIJIT NAGEE F- 9584 15758 EIRC
32 CS RITU KHURANA ACS 46242 NIRC 16 CS ANKIT AGARWAL A- 32360 12118 WIRC
33 CS SUNIL KUMAR JAIN FCS 4237 NIRC 17 CS REETU JINDAL A- 46715 21411 NIRC
34 CS SUDHA KHURANA ACS 8436 NIRC 18 CS SAGAR DHIRUBHAI SIYANI A- 55224 21899 WIRC
35 CS M RAMA SUBBA RAO ACS 11944 SIRC 19 CS RAKESH A- 57773 21816 NIRC
36 CS RAJ MANI MISHRA ACS 14688 NIRC 20 CS POOJA BIMAL MASTER F- 8627 7630 WIRC
37 CS SAKET KHANNA ACS 13068 NIRC 21 CS NITIN KUMAR A- 45968 16733 NIRC
38 CS SHRUTI RAJINDER CHOPRA ACS 33979 NIRC 22 CS MARIAPPAN KUMAR A- 32149 22812 SIRC
39 CS LATA PRAJAPATI ACS 23804 NIRC 23 CS MAYANK JAIN A- 56028 20946 NIRC
40 CS AAKRITI AGARWAL ACS 53318 SIRC 24 CS RAHUL JHA A- 49206 19052 EIRC

150 AUGUST 2020 | CHARTERED SECRETARY

 NEWS FROM THE INSTITUTE
25 CS VARAD DUDHERIA A- 59511 22415 EIRC 38 CS NEHA MEHROTRA A- 51810 19945 NIRC
26 CS POOJA KUMARI A- 21832 20378 NIRC 39 CS SUCHARITA BHAUMIK A- 41731 15999 EIRC
27 CS ANKITA GOEL A- 25773 9201 EIRC 40 CS SHILPA SHARAD JOSHI A- 11620 5300 WIRC
28 CS ANKITA DUJARI A- 50062 22190 EIRC 41 CS SAVITA LOHIT KARKERA A- 51283 19154 WIRC
29 CS MADHURA KIRAN UBALE F- 9338 21578 WIRC 42 CS PRITI JAIN A- 55951 21105 NIRC
30 CS AKSHAY KUMAR GUPTA A- 60508 22736 NIRC 43 CS MOHIT MISHRA A- 42649 21587 NIRC
31 CS SHILPA GUPTA F- 10234 11214 NIRC 44 CS SHUBHANGI SONI A- 36775 14705 WIRC
32 CS PREETI KHANDELWAL A- 47320 18583 EIRC 45 CS VIDYADHAR ANANT APTE F- 2203 21576 WIRC
33 CS SUDEEPTI SRIVASTAVA A- 24752 21045 NIRC 46 CS RENU DUA F- 2006 2299 NIRC
34 CS DILIPKUMAR BHIMSEN A- 23014 22057 WIRC 47 CS MRINAL SHANKAR A- 28898 11376 EIRC
MAHARANA
48 CS POONAM A- 37303 20838 NIRC
35 CS MOHD ARIF A- 49783 18049 NIRC
49 CS RICHA HINGLE A- 32094 14961 NIRC
36 CS SEJAL KHAN A- 43059 21150 NIRC
50 CS VISHAL SARAWAGI A- 44919 22397 NIRC
37 CS RUCHIKA A- 47200 17299 WIRC
KAMLESHKUMAR KOTHARI 51 CS PRERANA BHARGAV GOR F- 7215 7814 WIRC

ATTENTION !

For latest admission of Associate and Fellow Members, Life Members of Company Secretaries Benevolent
Fund (CSBF), Licentiates and issuance of Certificate of Practice, kindly refer to the link [Link]
member

EXTENSION IN THE LAST DATE FOR PAYMENT OF ANNUAL MEMBERSHIP AND CERTIFICATE OF
PRACTICE FEE FOR FY 2020-2021

Dear Member,
You need not worry about the lockdown
Team ICSI is always at your service. Reach us at [Link]
Common problems and their solutions when paying annual membership fees the PDF & PPT is available at https://
[Link]/contact-us/faq/ & [Link]

The annual membership and certificate of practice fee for FY 2020-21 has become payable w.e.f. 1st April, 2020, the last date
for receiving both payment has been extended till 30th September, 2020 without additional Restoration and Entrance fees.
The membership and certificate of practice fee payable is as follows:

Particulars Associate Associate Fellow

(admitted till 31.03.2019) (admitted on or after 01.04.2019)
Annual Membership fee* Rs. 2950 Rs. 1770 Rs. 3540
Certificate of Practice fee* Rs. 2360 Rs. 1770 Rs. 2360

* Fee includes GST@18%.

A member who is seventy years and above in age pays only 25% while a physically challenged member pays only 50%
of the Associate/Fellow Annual Membership fee as per The Company Secretaries (Amendment) Regulations, 2020.

MODE OF REMITTANCE OF FEE

The fee can be remitted ONLINE only using Institute’s website [Link] through the member login portal https://
[Link]/student/[Link] entering Username and Password, selecting option Manage Account and then Annual
Membership Fee. User Name is the ACS / FCS number e.g. A12345 / F12345. Payment through other modes is not
accepted.

CHARTERED SECRETARY | AUGUST 2020 151

NEWS FROM THE INSTITUTE

Members not having Password can retrieve it if their email id & mobile number is registered with the Institute, otherwise
the member needs to make a request for providing Password on [Link] attaching a scanned copy of
Photo ID proof. 
The following be kindly noted/ensured before making online payment of fee: 

1. Non-CoP holders need to register for eCSIN if not registered yet.

2. CoP holders need to register for UDIN if not registered yet.
3. Declaration of PAN & Aadhaar is required.
4. Members are required to verify and update their address and contact details as required under Regulation 3 of
the CS Regulations, 1982 amended till date.
5. Declaration of GSTIN (optional) is required if one wants to claim GST Input Tax Credit. If GSTIN is not given, it
will not be reflected in fee receipt.
6. The fee is calculated by the system including GST@18%.
7. CoP holders can pay CoP renewal fee alongwith the annual membership fee or separately after having paid the
annual membership fee first.
8. Submission of online Form-D is a pre-requisite for CoP holders.

For more details, kindly refer to FAQs (Link is available on home page of [Link] at top right corner) Point
6-16 (about membership fee), 20-26 (about CoP fee) and 88-92 (about PCH) at the link: [Link]
webmodules/FAQ_Pertains_Membership.pdf

ATTENTION !

For members login For any further assistance, If you are looking for job, please
portal [Link] we are available to help you register at ICSI Placement
[Link]/student/Login. at [Link] Portal [Link]
aspx to apply for Jobs

Team ICSI

OBITUARIES
Chartered Secretary deeply regrets to record the sad demise of the following Member:

CS P V Subbarao (27.05.1953 – 18.12.2019), an Associate Member of the Institute from Hyderabad.

May the Almighty give sufficient fortitude to the bereaved family members to withstand the irreparable loss.

May the departed soul rest in peace.

MEMBERS HOLDING CERTIFICATE OF PRACTICE

The Institute has brought out a CD containing List of Members holding Certificate of Practice of the Institute as on 31st
March 2020. The CDs are available at Noida office of the Institute and will be provided free of cost to the members
holding Certificate of Practice on receipt of request. Request may please be sent to the Directorate of Membership  at
e-mail id: member@[Link]

152 AUGUST 2020 | CHARTERED SECRETARY

 NEWS FROM THE INSTITUTE
Documents downloadable from the DigiLocker Platform

The National Digital Locker System, launched by Govt. of India, is a secure cloud based
platform for storage, sharing and verification of documents and certificates. In the wake of
digitization and in an attempt to issue documents to all the members in a standard format
and make them electronically available on real-time basis, the Institute of Company
Secretaries of India had connected itself with the DigiLocker platform of the Government of
India. The initiative was launched on 5th October, 2019 in the presence of the Hon'ble
President of India.

In addition to their identity cards and Associate certificates, members can also now access
and download their Fellow certificates and Certificates of Practice from the Digilocker
anytime, anywhere.

How to Access:
 Go to [Link] and click on Sign Up
 You may download the Digilocker mobile app from mobile store (Android/iOS)

How to Login:
 Signing up for DigiLocker with your mobile number.
 Your mobile number is authenticated by an OTP (one-time password).
 Select a username & password. This will create your DigiLocker account.
 After your DigiLocker account is successfully created, you can voluntarily provide your
Aadhaar number (issued by UIDAI) to avail additional services.

How to Access your Documents digitally:

On successful validation of credential go to "Pull Documents" in the Issued document
section, select the partner name “The Institute of Company Secretaries of India” &
document type “Identity Card” and enter the document details asked for to fetch the same.

We believe that this initiative shall go a long way in providing ease of access of all
documents of our members and rendering them just a click away.

CHARTERED SECRETARY | AUGUST 2020 153

NEWS FROM THE INSTITUTE
LIST OF PEER REVIEWED UNITS DURING JUNE-JULY,2020

Sl. Year of Sl. Year of

Firm Name City Cer. No. Firm Name City Cer. No.
No. Review No. Review
1 M/s. Suraj Tiwari & Raipur 2018-19 760/2020 33 Ms. Rekha Mittal New Delhi 2019-20 794/2020
Associates 34 M/s. V. Swamidason Chennai 2018-19 795/2020
2 M/s. Jalan Alkesh & Ahmedabad 2018-19 761/2020 & Co.
Associates 35 M/s. Parikh Dave & Ahmedabad 2019-20 796/2020
3 M/s. Ashish Bhatt & Thane 2018-19 762/2020 Associates
Associates 36 M/s. Baheti Gupta Hyderabad 2019-20 797/2020
4 M/s. P. Mehta & Mumbai 2019-20 763/2020 & Co
Associates 37 M/s. K H & Vadodara 2018-19 798/2020
5 M/s. Nitesh Jain & Navi Mumbai 2018-19 764/2020 Associates
Co. 38 M/s. K. P. Rachchh Rajkot 2018-19 737/2020
6 M/s. Mohan Kumar & Chennai 2018-19 765/2020 & Co.
Associates 39 M/s. Rajesh Garg Hisar 2018-19 799/2020
7 M/s. Umesh Ved & Ahmedabad 2018-19 766/2020 and Co.
Associates
40 M/s. PB & Delhi 2018-19 801/2020
8 M/s. Ajit Jain & Co. Indore 2018-19 767/2020 Associates
9 Mr. Rajagopalan Bengaluru 2018-19 768/2020 41 M/s. Kaushal Doshi Mumbai 2018-19 802/2020
Parthasarathy & Associates
10 M/s. Alturi Ramesh & Hyderabad 2019-20 769/2020
42 Ms. Manjula Aleti Hyderabad 2019-20 803/2020
Associates
43 M/s. S Khurana and Delhi 2019-20 804/2020
11 M/s. Heena Mumbai 2019-20 770/2020
Associates
Jaysinghani & Co.
12 M/s. Jatin Gupta & Delhi 2019-20 771/2020 44 Mr. Dinesh Kumar Indore 2018-19 805/2020
Associates Gupta
13 M/s. PG & Noida 2018-19 772/2020 45 M/s. SSM & Bhubaneswar 2018-19 806/2020
Associates Associates
14 M/s. VLA & New Delhi 2018-19 773/2020 46 Mr. Konanur Bangalore 2018-19 807/2020
Associates Nanundiah Nagesha
15 Mr. Sundararajan Coimbatore 2018-19 774/2020 Rao
Baalaji 47 Ms. Rakhi Agarwal Hyderabad 2019-20 808/2020
16 M/s. Jayashree Bengaluru 2018-19 775/2020 48 Mr. Punit Ahmedabad 2018-19 809/2020
Parthasarathy & Co. Santoshkumar Lath
17 M/s. Amit Kumar Jain Bhopal 2018-19 776/2020 49 M/s. JVS & Gurgaon 2019-20 810/2020
& Associates Associates
18 M/s. Mayekar & Mumbai 2018-19 777/2020 50 Mr. R. Dhanasekaran Coimbatore 2018-19 811/2020
Associates 51 M/s. T. K. Satapathy Bhubaneswar 2018-19 812/2020
19 M/s. DMK Associates New Delhi 2018-19 779/2020 & Co.
20 M/s. MAKS & Co. Noida 2018-19 780/2020 52 Mr. Sital Prasad Jamshedpur 2018-19 813/2020
21 M/s. Vinod Kothari Kolkata 2018-19 781/2020 Swain
and Company 53 Mr. Dinesh Bhandari Chandigarh 2019-20 814/2020
22 M/s. Meghana Mumbai 2018-19 783/2020 54 M/s. Arunesh Dubey New Delhi 2019-20 815/2020
Mhatre & Associates & Co.
23 Mr. Kunjithapadham Bengaluru 2019-20 784/2020 55 M/s. Manish Jain & Co. Indore 2019-20 816/2020
Jayachandran 56 M/s. ARMS & Jaipur 2018-19 818/2020
24 M/s. Saurabh Poddar Hyderabad 2019-20 785/2020 Associates LLP
& Associates 57 M/s. Jaya Sharma & Mumbai 2019-20 819/2020
25 M/s. Mehta & Mehta Mumbai 2019-20 786/2020 Associates
26 M/s. Saroj Panda Bhubaneswar 2018-19 787/2020 58 M/s. A. Someswara Hyderabad 2019-20 820/2020
& Co. Rao & Associates
27 M/s. Sunil Agarwal Thane 2019-20 788/2020 59 M/s. Mihen Halani & Mumbai 2018-19 821/2020
& Co. Associates
28 M/s. Nitin Kulkarni & Pune 2018-19 789/2020
60 M/s. Manish Ghia & Mumbai 2018-19 822/2020
Associates
Associates
29 Ms. Gayathri Chennai 2018-19 790/2020
61 M/s. Dilip Bharadiya Mumbai 2019-20 823/2020
Raghavan
& Associates
30 M/s. Nilesh A. Mumbai 2019-20 791/2020
Pradhan & Co. LLP 62 Mr. Gaurav Vesasi Ahmedabad 2018-19 824/2020
31 Mr. Asim Kumar Kolkata 2019-20 792/2020 63 M/s. R K Adlakha & Gurgaon 2019-20 825/2020
Chattopadhyay Associates
32 M/s. Akansha Rathi Mumbai 2019-20 793/2020 64 M/s. A.K. Kuchhal Noida 2019-20 826/2020
& Associates & Co

154 AUGUST 2020 | CHARTERED SECRETARY

 MISCELLANEOUS
5
CORNER

n GST CORNER
n ETHICS IN PROFESSION
n CG CORNER

CHARTERED SECRETARY | AUGUST 2020 155

GST CORNER NOTIFICATIONS

NOTIFICATION NO. 58/2020- CENTRAL 1. (1) These rules may be called the Central Goods and
Services Tax (Ninth Amendment) Rules, 2020.
TAX DATED 1ST JULY, 2020
In exercise of the powers conferred by section 164 of the (2) They shall come into force on the date of their
Central Goods and Services Tax Act, 2017 (12 of 2017), publication in the Official Gazette.
the Central Government, on the recommendations of the
Council, hereby makes the following rules further to amend 2. In the Central Goods and Services Tax Rules, 2017,
the Central Goods and Services Tax Rules, 2017, namely: - for FORM GST INV-01, the following form shall be
substituted, namely:-
1. (1) These rules may be called the Central Goods and
Services Tax (Eighth Amendment) Rules, 2020. “FORM GST INV – 1
(See Rule 48)
(2) They shall come into force from 1st July, 2020. Format/Schema for e-Invoice
2. In the Central Goods and Services Tax Rules, 2017
Note 1: Cardinality means whether reporting of the item(s) is
(hereinafter referred to as the said rules), for the rule 67A,
mandatory or optional as explained below:
the following rule shall be substituted, namely:-

“67A. Manner of furnishing of return or details of 0..1: It means that reporting of item is optional and when
outward supplies by short messaging service facility.- reported, the same cannot be repeated.
Notwithstanding anything contained in this Chapter, for a
registered person who is required to furnish a Nil return under 1..1: It means that reporting of item is mandatory but cannot
section 39 in FORM GSTR-3B or a Nil details of outward be repeated.
supplies under section 37 in FORM GSTR-1 for a tax period,
any reference to electronic furnishing shall include furnishing 1..n: It means that reporting of item is mandatory and can be
of the said return or the details of outward supplies through a repeated more than once.
short messaging service using the registered mobile number
and the said return or the details of outward supplies shall 0..n: It means that reporting of item is optional but can be
be verified by a registered mobile number based One Time repeated more than once if reported. For example, previous
Password facility. invoice reference is optional but if required one can mention
many previous invoice references.
Explanation - For the purpose of this rule, a Nil return or Nil
details of outward supplies shall mean a return under section Note 2: Field specification Number (Max length: m, n)
39 or details of outward supplies under section 37, for a indicates ‘m’ places before decimal point and ‘n’ places after
tax period that has nil or no entry in all the Tables in FORM decimal point. For example, Number (Max length: 3,3) will
GSTR-3B or FORM GSTR-1, as the case may be.”. have the format 999.999

NOTIFICATION NO. 59/2020- CENTRAL For Complete details readers may visit to the below link:
TAX DATED 13TH JULY, 2020 [Link]
In exercise of the powers conferred by section 148 of the [Link]
Central Goods and Services Tax Act, 2017 (12 of 2017), the
Government, on the recommendations of the Council, hereby NOTIFICATION NO. 61/2020- CENTRAL
makes the following further amendment in the notification of
the Government of India in the Ministry of Finance (Department TAX DATED 30TH JULY, 2020
of Revenue), No. 21/2019- Central Tax, dated the 23rd April, In exercise of the powers conferred by sub-rule (4) of rule
2019, published in the Gazette of India, Extraordinary, Part II, 48 of the Central Goods and Services Tax Rules, 2017,
Section 3, Sub-section (i) vide number G.S.R. 322(E), dated the Government, on the recommendations of the Council,
the 23rd April, 2019, namely:– hereby makes the following amendments in notification of the
Government of India in the Ministry of Finance (Department
In the said notification, in the third paragraph, in the first of Revenue), No.13/2020 – Central Tax, dated the 21st March,
proviso, for the figures, letters and words “15th day of July, 2020, published in the Gazette of India, Extraordinary, Part II,
2020”, the figures, letters and words “31st day of August, Section 3, Sub-section (i), vide number G.S.R. 196(E), dated
2020” shall be substituted. the 21st March, 2020, namely:–

NOTIFICATION NO. 60/2020- CENTRAL In the said notification, in the first paragraph,
TAX DATED 30TH JULY, 2020 (i) before the words “those referred to in sub-rules”,
In exercise of the powers conferred by section 164 of the the words “a Special Economic Zone unit and” shall
Central Goods and Services Tax Act, 2017 (12 of 2017), be inserted;
the Central Government, on the recommendations of the
Council, hereby makes the following rules further to amend (ii) for the words “one hundred crore rupees”, the words “five
the Central Goods and Services Tax Rules, 2017, namely: - hundred crore rupees” shall be substituted.

156 AUGUST 2020 | CHARTERED SECRETARY

FREQUENTLY ASKED QUESTIONS ON

ETHICS IN PROFESSION
PROFESSIONAL AND OTHER MISCONDUCT IN
RELATION TO COMPANY SECRETARIES
UNDER SECOND SCHEDULE TO THE
COMPANY SECRETARIES ACT, 1980
Q1. Whether a Company Secretary in Practice can misconduct under Item (2) of Part I of the Second
disclose information acquired by him during Schedule to the Company Secretaries Act, 1980.
the course of his professional engagement?
Q3. Can a Company Secretary in Practice permit
Ans. Disclosure of information acquired by a Company use of his or his firm’s name in connection with
Secretary in Practice during the course of his any report or statement contingent upon future
professional engagement to any person other than transactions in a manner which may lead to the
his client who has engaged him, without the consent belief that he vouches for the accuracy of the
of his client, or otherwise than as required by any forecast?
law for the time being in force would amount to
professional misconduct under Item (1) of Part I of Ans. No. A Company Secretary in Practice cannot
the Second Schedule to the Company Secretaries permit his name or the name of his firm to be
Act, 1980. Accordingly, a Company Secretary in used in connection with any report or statement
Practice cannot disclose such information. contingent upon future transactions in a manner
which may lead to the belief that he vouches for
Any communication acquired by a Company
the accuracy of the forecast. It is prohibited under
Secretary in practice in the course of his
Item (3) of Part I of the Second Schedule to the
professional engagement on behalf of his client,
any communication or any advice given by him Company Secretaries Act, 1980.
to his client in the course and for the purpose of
A Company Secretary in Practice should not certify
his engagement is a privileged communication
and should not be disclosed without the express any possible happening or non happening or give
consent of his client, the contents or conditions a report about the future e.g. it would be improper
of any document with which he has become for a Company Secretary in Practice to certify
acquainted in the course and for the purpose of his the future earning capacity, future shareholding
professional engagement. pattern, future profitability or similar future figures
and numbers.
Q2. Can a Company Secretary in Practice certify or
submit in his name a report of an examination Q4. Can a Company Secretary in Practice express
of the matters relating to company secretarial his opinion on any report or statement given
practice without examination of such to any business or enterprise in which he, his
statements? firm, or a partner in his firm has a substantial
interest?
Ans. No, a Company Secretary in Practice cannot
certify or submit in his name, or in the name of Ans. No, a Company Secretary in Practice cannot
his firm, a report of an examination of the matters express his opinion on any report or statement
relating to company secretarial practice and
given to any business or enterprise in which
related statements unless the examination of such
he or his firm, or a partner in his firm, has a
statements has been made by him or by a partner
substantial interest. If a Company Secretary in
or an employee in his firm or by another Company
Practice does so, he shall be deemed to be guilty
Secretary in Practice.
of professional misconduct under Item (4) of
Such certification or submission without Part I of the Second Schedule to the Company
examination would amount to professional Secretaries Act, 1980.

CHARTERED SECRETARY | AUGUST 2020 157

 Q5. What happens if a Company Secretary in Q8. What happens if a Company Secretary in
ETHICS IN PROFESSION
Practice fails to disclose a material fact known Practice fails to obtain sufficient information
to him in his report or statement, where such which is necessary for expression of an opinion
disclosure is necessary in a professional or its exceptions are sufficiently material to
capacity? negate the expression of an opinion?

Ans. A Company Secretary in Practice shall be deemed Ans. If a Company Secretary in Practice fails to obtain
sufficient information which is necessary for
to be guilty of professional misconduct under
expression of an opinion or its exceptions are
Item (5) of Part I of the Second Schedule to the sufficiently material to negate the expression of
Company Secretaries Act, 1980, if, he fails to an opinion, he shall be deemed to be guilty of
disclose a material fact known to him in his report or professional misconduct under Item (8) of Part I of
statement but the disclosure of which is necessary the Second Schedule to the Company Secretaries
in making such report or statement, where he is Act, 1980.
concerned with such report or statement in a Q9. What happens if a Company Secretary in
professional capacity, Practice fails to invite attention to any material
Q6. What happens if a Company Secretary in departure from the generally accepted
Practice fails to report a material mis-statement procedure relating to the secretarial practice?
known to him and with which he is concerned Ans. If a Company Secretary in Practice fails to invite
in a professional capacity? attention to any material departure from the
generally accepted procedure relating to the
Ans. A Company Secretary in Practice shall be deemed secretarial practice he shall be deemed to be
to be guilty of professional misconduct under guilty of professional misconduct under Item (9)
Item (6) of Part I of the Second Schedule to the of Part I of the Second Schedule to the Company
Company Secretaries Act, 1980, if, he fails to Secretaries Act, 1980.
report a material mis-statement known to him It is the duty of a Company Secretary in Practice
and with which he is concerned in a professional to invite attention to material departure from
capacity. generally accepted secretarial practice. Where
the standard secretarial practice in respect to any
Q7. What happens if a Company Secretary in matter is not recommended by the Institute, a
Practice does not exercise due diligence, Company Secretary in Practice should follow the
or is grossly negligent in the conduct of his existing well recognized secretarial practices and
professional duties? invite attention to departure which is material.

Ans. If a Company Secretary in Practice does not Q10. What happens if a Company Secretary in
exercise due diligence, or is grossly negligent in Practice fails to keep moneys of his client other
the conduct of his professional duties he shall be than fees or remuneration or money meant to
deemed to be guilty of professional misconduct be expended in a separate banking account or
under Item (7) of Part I of the Second Schedule to to use such moneys for purposes for which
the Company Secretaries Act, 1980. they are intended within a reasonable time?
Ans. If a Company Secretary in Practice fails to
A Company Secretary in Practice has to exercise keep moneys of his client other than fees or
due diligence while discharging his professional remuneration or money meant to be expended in a
duties. A Company Secretary in Practice should separate banking account or to use such moneys
check relevant statutory and other records and for purposes for which they are intended within a
be fully satisfied before doing certification for his reasonable time he shall be deemed to be guilty of
clients. professional misconduct under Item (10) of Part I of
the Second Schedule to the Company Secretaries
A Company Secretary in Practice has to be more Act, 1980.
vigilant where he is aware of any dispute between It is the duty of a Company Secretary in Practice
the Directors and/or shareholders of the Company to ensure that the money of his client is separately
and he should exercise extra caution in verifying all accounted for and that such money is specifically
the facts and details from the records of the client. used only for the purpose for which it is paid by its
client. It is also the duty of a Company Secretary in
Gross negligence may be determined upon facts Practice to ensure use of such money of its client
and circumstances of each case. within reasonable time only.

158 AUGUST 2020 | CHARTERED SECRETARY

Q11. What happens if, a member of the Institute, statement, return or form, which they submit to the

ETHICS IN PROFESSION
whether in practice or not, contravenes any Institute, Council or any of its Committees, Director
of the provisions of the Company Secretaries (Discipline), Board of Discipline, Disciplinary
Act, 1980 or the Regulations made thereunder Committee, Quality Review Board or the Appellate
or any Guidelines issued by the Council? Authority.
Ans. A member of the Institute, whether he is in practice If a member of the Institute, whether in practice
or not, has to abide by all the provisions of the or not, submitted any information, statement,
Company Secretaries Act, 1980; the Company return or form to the Institute, Council or any of
Secretaries Regulations, 1982 and Guidelines its Committees, Director (Discipline), Board of
issued by the Council from time to time. Discipline, Disciplinary Committee, Quality Review
If a member of the Institute whether in practice Board or the Appellate Authority, includes therein
or not, contravenes any of the provisions of the any particulars which the member knows them to
Company Secretaries Act, 1980 or the Regulations be false, in such case, he shall be deemed to be
made thereunder or any Guidelines issued by guilty of professional misconduct under Item (3) of
the Council, he shall be deemed to be guilty of the Part II of the Second Schedule to the Company
professional misconduct under Item (1) of the Secretaries Act, 1980.
Part II of the Second Schedule to the Company
Secretaries Act, 1980. Q14. What happens if, a member of the Institute
It is necessary for all the members to go through whether in practice or not, defalcates or
the provisions of the Company Secretaries Act, embezzles moneys received in his professional
1980 and the Regulations made thereunder capacity?
and make themselves fully acquainted with the
guidelines issued by the Council from time to time Ans. A member of the Institute whether in practice
and to follow them in true letter and spirit. or not, should not defalcate or embezzle
moneys received by them in their professional
Q12.
Can a member of the Institute disclose capacity.
confidential information acquired by him in the
course of his employment? If a member of the Institute, whether in practice
or not, defalcates or embezzles moneys received
Ans. A member of the Institute in employment with any by him in his professional capacity, he shall be
company, firm or person, is required to maintain deemed to be guilty of professional misconduct
the relationship of trust and confidence with his under Item (4) of the Part II of the Second Schedule
employer. Such a member has to keep secret all
to the Company Secretaries Act, 1980.
the confidential information, which he has acquired
in the course of his employment and not to disclose Q15. What happens if, a member of the Institute is
the same to others, under any circumstances, held guilty by any civil or criminal court for an
directly or indirectly. offence which is punishable with imprisonment
If any member of the Institute, whether in practice for a term exceeding six months?
or not, discloses such information, he shall be
deemed to be guilty of professional misconduct Ans. If a member of the Institute, whether in practice or
under Item (2) of the Part II of the Second Schedule not, is held guilty by any civil or criminal court for an
to the Company Secretaries Act, 1980. offence which is punishable with imprisonment for
Such confidential information may be a technical a term exceeding six months, he shall be deemed
secret, important policy decision, business strategy to be guilty of other misconduct under Part III of the
or any other matter having bearing on the interest of Second Schedule to the Company Secretaries Act,
the employer and if disclosed, it might be harmful or 1980.
may have potential to cause harm to the employer.
CASE STUDY 1
Q13. What happens if, a member of the Institute
whether in practice or not, includes any  The Complainant has inter-alia alleged that Mr.
particulars knowing them to be false in any X, the Respondent has obtained duplicate digital
information, statement, return or form to be signature of the Complainant by misrepresentation
of his name and was obtained with the email
submitted to the Institute, Council or any of its
address of the Respondent. The said duplicate
Committees or authorities? digital signatures have been affixed on Form 32
Ans. A member of the Institute whether in practice or not, filed in respect of appointment of one person as a
has to furnish correct particulars in any information, Director of the Company.

CHARTERED SECRETARY | AUGUST 2020 159

  The Disciplinary Committee held that the Respondent amount has been recovered from the Respondent
ETHICS IN PROFESSION
is ‘guilty’ of Professional Misconduct under Item through cash vide Chapter’s Acknowledgement.
(6) and (7) of Part I of the Second Schedule of the The Respondent has admitted that the cash
Company Secretaries Act, 1980 as the Respondent collected in the Chapter was not being deposited
failed to report a material fact known to him and with on the following day in the bank on regular basis
which he was concerned in a professional capacity and that only the amount left after paying expenses
and also did not exercise due diligence. He was was being deposited in the bank. The Disciplinary
grossly negligent in the conduct of his professional Committee held the Respondent ‘Guilty’ of
duties. professional misconduct under Item (1) of Part Il of
the Second Schedule of the Company Secretaries
 The Disciplinary Committee ordered removal of
Act, 1980 as he contravened the Company
name of the Respondent from the Register of
Secretaries Chapter Guidelines, 1983 and the
members for a period of 30 days. Financial Guidelines issued by the Council of the
CASE STUDY 2 ICSI and ordered Reprimand and fine of Rs. 3,000/-
against the Respondent.
 One information was received inter-alia alleging that
Mr Z, the Respondent had falsely certified form DIN CASE STUDY 4
3 pertaining to appointment of directors on Board of
M/s ABC Association.  The Complainant inter-alia stated that they had
appointed the Respondent as a whole time
 The Respondent rebutted the allegation and he had Company Secretary of their company and form
not signed the impugned forms and submitted that pertaining to his appointment was filed with the
his PFX DSC had been hacked /misused without his Registrar of Companies. During his tenure he signed
knowledge. several documents including the Annual Accounts
 The Director (Discipline) in prima-face opinion representing himself as a Company Secretary of the
observed that the Respondent was responsible for company. The Complainant further stated that the
safeguarding his DSC and plea of misuse by some Respondent had stopped reporting for his duties and
other person is not tenable and held the Respondent was subsequently terminated. When they attempted
Guilty of professional misconduct under Item (7) of to upload form for his cessation, they came to know
Part (I) of the Second Schedule to the Company that he is also holding the Certificate of Practice
Secretaries Act 1980. of the Institute even during his employment with
the company. Hence, they could not file the form
 The Respondent admitted that as a Practicing pertaining to his cessation.
company Secretary due responsibility of diligence
lies on him. He was unable to bring report before  The Disciplinary Committee held that the
the Disciplinary Committee and pleaded guilty Respondent ‘Guilty’ for contravening Item (1) of
of professional misconduct. The Disciplinary Part Il of the Second Schedule of the Company
Committee ordered a Fine of Rs. 10000/- against Secretaries Act, 1980 since the Respondent
the Respondent. had accepted the employment of M/S. ABI Ltd.
CASE STUDY 3 while holding Certificate of Practice in violation of
the Resolution dated 12th May, 1991 passed by
 The Complainant has inter-alia alleged that the the Council of the ICSI prohibiting the Members
Mr. R, the Respondent who was a treasurer of to accept the employment while holding the
a Chapter of the Institute, not only took charge of Certificate of Practice and also held the Respondent
the cash collected, deposited and disbursed from ‘Guilty’ of contravention of Item (2) of Part-III of
an employee of the Chapter but unauthorisedly the First Schedule of the Company Secretaries
collected cash payments and instead of depositing Act, 1980 for not supplying the information
the same in the bank, kept the amount with himself called for.
and deposited some of the cash in the bank account
after considerable delay or did not deposit the cash  The Disciplinary Committee ordered removal of
payment received by him in the account and some name for a period of 90 days from the Register
of the amounts were deposited by him at the advice of Members and a fine of Rs. 20000/- against the
of the appropriate authority or after the findings of Respondent.
the special audit report. Head Office compliance to
be reported was not ensured to be done by him and CASE STUDY 5
the respondent also did not get the internal audit  The Complainant has inter-alia alleged that the
completed in time. Respondent while holding the Certificate of Practice
 The Disciplinary Committee observed that a of the Institute was also employed with M/s AKS Pvt.
settlement note of Chapter states that a certain Ltd., from the 1st September, 2007.

160 AUGUST 2020 | CHARTERED SECRETARY

 The Respondent submitted that M/s AKS Pvt. Ltd. is with M/S. LFP Limited. The Respondent admitted

ETHICS IN PROFESSION
a share broking firm having membership of multiple to have been working as a whole time Company
Stock Exchanges and his association with a stock Secretary while holding the certificate of practice.
broker is allowed under Clause (2) c (iv) of the The Respondent also admitted to have been
Company Secretaries Act, 1980. working with one M/s XYZ Group and also working
in seven other companies as a Company Secretary.
 The Disciplinary Committee came to the conclusion He also stated about his sharing of his emoluments
that the Respondent is ‘Guilty’ of professional with another person.
misconduct under Item (1) of Part II of the Second
Schedule of the Company Secretaries Act, 1980,  The Disciplinary Committee held that the
as he had violated the resolution dated the 12th Respondent is ‘Guilty’ of professional misconduct
May, 1991, passed by the Council prohibiting the under Item (1) of Part II of the First Schedule of
members holding Certificate of Practice to accept the Company Secretaries Act, 1980 as he has
any employment and also held him ‘Guilty’ of Item paid / agreed to pay part of his emoluments to
(2) of Part-III of First Schedule of the Company another person and Item (1) Part II of the Second
Secretaries Act, 1980 as he did not supply Schedule of the Company Secretaries Act, 1980 as
information sought by the Disciplinary Committee. he has contravened the Resolution dated the 12th
 The Disciplinary Committee ordered removal of May, 1991 passed by the Council of the Institute
name of the Respondent for a period of 120 days prohibiting the members holding the Certificate of
from the Register of members. Practice to engage in any business or occupation
other than Practising as Company Secretary without
CASE STUDY 6 general or specific permission of the Council. The
 The Complainant inter-alia alleged that Mr. B, the Disciplinary Committee ordered removal of name of
Respondent while holding the Certificate of Practice the Respondent for a period of 90 days and imposed
has accepted the position of Company Secretary a fine of Rs. 1000/- against the Respondent.

CHARTERED SECRETARY | AUGUST 2020 161

 THE FINNISH CG CODE 2020
CG CORNER

T
he new Corporate Governance Code for Finnish listed team will in future be provided on the company’s website. The
companies (“2020 CG Code”) entered into force from remuneration reporting section also includes a checklist to
01 January 2020 replacig the previous CG Code applied clarify the reporting obligations. Similarly, the board must in
since 2016 (“2015 CG Code”). The purpose of the Corporate future report which of the board members are independent of
Governance Code is to harmonise the procedures of listed the company and which are independent of the company’s
companies and to promote openness with regard to corporate significant shareholders. In addition, the reasoning for
governance and remuneration. From the perspective of a determining that a board member is not independent must
shareholder and an investor, the Corporate Governance Code also be reported. The criteria to be taken into account in
increases the transparency of corporate governance and the the overall assessment of independence have also been
ability of shareholders and investors to evaluate the practices supplemented so that under the interpretation of the criteria,
applied by individual companies. The Corporate Governance the benefits paid and offered to a member of the board by a
Code also provides investors with an overview of the kinds of shareholder otherwise than on the basis of an employment or
corporate governance practices that are acceptable for Finnish service relationship may require assessment.
listed companies.
The Finnish Securities Market Association’s board adopted
While the number of recommendations in the 2020 CG Code the amended and updated CG Code in September 2019. As
has decreased, the 2020 CG Code introduces additional a result of which the new 2020 CG Code came into force in
requirements on listed companies, in particular in relation January 2020 replacing the previous Finnish CG Code.
to remuneration and related party transactions as required
by the Shareholders’ Rights Directive and the national The ‘comply or explain’ principle applies to the CG Code.
rules implementing the Directive. The 2020 CG Code also Thus, the starting point is that the company must comply with
introduces changes to the recommendation concerning the all recommendations set out in the CG Code. CS

audit committee and clarifications to the recommendation

concerning the assessment and disclosure of independence of
board members. For example, the company’s remuneration
SOURCES:
statement has been replaced by the remuneration policy for [Link]
governing bodies (“remuneration policy”) and remuneration governance-code-for-finnish-listed-companies-what-actions-
report for governing bodies (“remuneration report”), which are-required/
are supplemented by information provided on the company’s
website. The remuneration policy and report concern the [Link]
company’s board of directors, supervisory board, if any,
[Link]
and the managing director and deputy managing director.
[Link]
Information on the remuneration of the rest of the management

162 AUGUST 2020 | CHARTERED SECRETARY

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Regn. No. 21778/71 Date of Publication : 04-08-2020