PAPER 4: CORPORATE AND ALLIED LAWS

PART – I: RELEVANT AMENDMENTS APPLICABLE FOR November 2020 EXAMINATION

(A) Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc.
For November 2020 examinations for Paper 4: Corporate and Allied Laws, the significant
amendments made upto 30th April, 2020 are relevant.
Relevant publications: Students are advised to refer the following publications -
1 Study Material (Edition June 2018) containing Legislative amendments made upto
30th April, 2018.
2 RTP of November 2020 examination containing all the significant legislative
amendments i.e. from 1 st May 2018 to 30 th April, 2020 along with the suggested
sample questions and answers for understanding and practice.
3 Revised chapter of FEMA due to inclusion of topics in the scope of syllabus [hosted
on website at [Link]
4 Detailed announcement dated 9.7.2019 w.r.t. Inclusions/Exclusions in the scope of
syllabus [hosted on the website at [Link]

Relevant amendments: Given here are the relevant amendments which shall be read in
line with the principal Act. These amendments are arranged chapter wise as per the study
material for the convenience of the students.
Part I: COMPANY LAW & INSOLVENCY AND BANKRUPTCY CODE, 2016
The Companies Act, 2013 have been continuously amended by the Government vide
enforcement of various amendment Act, namely Companies (Amendment) Act, 2017, the
Companies (Amendment) Ordinance, 2018, the Companies (Amendment) Ordinance Act, 2019
and the Companies (Amendment) Second Ordinance, 2019 and Companies (Amendment) Act,
2019. However, on July 31, 2019, the Ministry of Corporate Affairs introduced the Companies
(Amendment) Act, 2019.
This Amendment Act considers the changes brought in by the Companies (Amendment)
Ordinance, 2018, the Companies (Amendment) Ordinance Act, 2019 and the Companies
(Amendment) Second Ordinance, 2019 to further amend the Companies Act, 2013.
The Amendment has enforced the 2018 Ordinance and 2019 Ordinances, and all provisions
deemed to have come into force from November 2, 2018 except some sections which have
come into force from August 15, 2019.

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 2 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

Following are the relevant amendments pertaining to Companies Act, 2013:-

CHAPTER 2: ACCOUNTS AND AUDIT
1. Enforcement of the Companies (Audit and Auditors) second Amendment Rules, 2018
vide Notification G.S.R. 432 (E) dated 7 th May 2018
The Central Government makes the Companies (Audit and Auditors) second Amendment
Rules, 2018 to amend the Companies (Audit and Auditors) Rules, 2014.
In the Companies (Audit and Auditors) Rules, 2014,
(i) In rule 3 which deals with the Manner and Procedure of selection and appointment
of auditors, following are the amendments:
(a) Explanation shall be omitted.
(b) proviso to sub-rule (7) shall be omitted.
(ii) In the principal rules, in rule 10A i.e., related to Internal Financial controls system,
for the words "adequate internal financial controls system", the words "internal
financial controls with reference to financial statements" shall be substituted.
(iii) In the principal rules, in rule 14 which deals with the remuneration of the cost auditor,
following are the changes-
(a) in clause (a), in sub-clause (i), for the words, "who is a cost accountant in
practice", the words "who is a cost accountant" shall be substituted;
(b) in clause (b) for the words "who is a cost accountant in practice", the words "who
is a cost accountant" shall be substituted.
2. Enforcement of the Companies (Accounts) Amendment Rules, 2018 vide
Notification G.S.R. 725(E) dated 31 st July, 2018
The Central Government makes the Companies (Accounts) Amendment Rules, 2018 to
amend the Companies (Accounts) Rules, 2014.
In the Companies (Accounts) Rules, 2014,
(i) In sub-rule (5) of Rule 8 which deals with the Matters to be included in Board's
report, after clause (viii) the following clauses shall be inserted, namely:-
“(ix) a disclosure, as to whether maintenance of cost records as specified by the
Central Government under sub-section (1) of section 148 of the Companies Act, 2013,
is required by the Company and accordingly such accounts and records are made
and maintained,
(x) a statement that the company has complied with provisions relating to the
constitution of Internal Complaints Committee under the Sexual Harassment of
Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013,”
(ii) after sub-rule (5), the following Sub Rule (6), rule shall be inserted, namely:-

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 PAPER – 4 : CORPORATE AND ALLIED LAWS 3

“(6) This rule shall not apply to One Person Company or Small Company”.
(iii) after rule 8, the following rule 8A shall be inserted, namely:-
“8A. Matters to be included in Board’s Report for One Person Company and Small
Company-
(1) The Board’s Report of One Person Company and Small Company shall be
prepared based on the stand alone financial statement of the company, which
shall be in abridged form and contain the following:-
(a) the web address, if any, where annual return referred to in sub-section (3)
of section 92 has been placed;
(b) number of meetings of the Board;
(c) Directors’ Responsibility Statement as referred to in sub-section (5) of
section 134;
(d) details in respect of frauds reported by auditors under sub-section (12) of
section 143 other than those which are reportable to the Central
Government;
(e) explanations or comments by the Board on every qualification, reservation
or adverse remark or disclaimer made by the auditor in his report;
(f) the state of the company’s affairs;
(g) the financial summary or highlights;
(h) material changes from the date of closure of the financial year in the nature
of business and their effect on the financial position of the company;
(i) the details of directors who were appointed or have resigned during the
year;
(j) the details or significant and material orders passed by the regulators or
courts or tribunals impacting the going concern status and company’s
operations in future.
(2) The Report of the Board shall contain the particulars of contracts or
arrangements with related parties referred to in sub-section (1) of section 188 in
the Form AOC-2.”.
3. Enforcement of the Companies (Corporate Social Responsibility Policy) Amendment
Rules, 2018 vide Notification G.S.R. 865 (E) dated 19th September, 2018
The Central Government makes the Companies (Corporate Social Responsibility Policy)
Amendment Rules, 2018 to amend the Companies (Corporate Social Responsibility Policy)
Rules, 2014.
In Companies (Corporate Social Responsibility Policy) Rules, 2014,

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 4 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

(i) in rule 2 which deals with the definitions, -

(a) in sub-rule (1), in sub-clause (i) of clause (c) which defines “Corporate Social
Responsibility (CSR)”, after the words “relating to activities”, the words “, areas
or subjects” shall be inserted;
(b) in sub-rule (1), in sub-clause (ii) of clause (c), for the words “cover subjects
enumerated”, the words “include activities, areas or subjects specified” shall be
substituted;
(c) in sub-rule (1), in clause (e) which defines “CSR Policy", for the words “company
as”, the words “company in areas or subjects” shall be substituted.
(ii) in rule 5 which deals with the “CSR Committees”, in clause (i) of sub rule (1),
for the words “an unlisted public company or a private company”, the words “a
company” shall be substituted.
(iii) In rule 6 which states of CSR Policy, following are the changes-
(a) in sub-rule (1), in clause (a), for the words “falling within the purview of” the
words “areas or subjects specified in” shall be substituted;
(b) in sub-rule (1), in second proviso to clause (b), for the words, “activities included
in Schedule VII” the words “areas or subjects specified in Schedule VII” shall be
substituted.
(iv) In rule 7 i.e., “CSR Expenditure”, for the words, “purview of”, the words “areas or
subjects, specified in” shall be substituted.
4. Constitution of NFRA
The Central Government vide Notification No. S.O. 5099(E) appoints the 1st October, 2018
as the date of constitution of National Financial Reporting Authority.
5. Enforcement of sub-sections (2), (4), (5), (10), (13), (14) and (15) of section 132 i.e.,
related “Constitution of National Financial Reporting Authority” of the Companies
Act, 2013
The Central Government vide Notification S.O. 5385(E) appoints the 24th October, 2018
as the date on which the sub-sections (2), (4), (5), (10), (13), (14) and (15) of section 132
of the Companies Act, 2013 shall come into force.
6. Amendments through the Companies (Amendment) Act, 2017
Relevant sections Amendment
Amendment of In section 129 of the principal Act, for sub-section (3), the
section 129 following sub-section shall be substituted, namely:—
(Financial statement) "(3) Where a company has one or more subsidiaries or
associate companies, it shall, in addition to financial
statements provided under sub-section (2), prepare a

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 PAPER – 4 : CORPORATE AND ALLIED LAWS 5

consolidated financial statement of the company and of all

the subsidiaries and associate companies in the same form
and manner as that of its own and in accordance with
applicable accounting standards, which shall also be laid
before the annual general meeting of the company along with
the laying of its financial statement under sub-section (2):
Provided that the company shall also attach along with its
financial statement, a separate statement containing the
salient features of the financial statement of its subsidiary or
subsidiaries and associate company or companies in such
form as may be prescribed:
Provided further that the Central Government may provide
for the consolidation of accounts of companies in such
manner as may be prescribed."
Amendment of section In section 134 of the principal Act,—
134 (Financial (a) for sub-section (1), the following sub-section shall be
statement, Board's substituted, namely:—
report, etc) "(1) The financial statement, including consolidated
financial statement, if any, shall be approved by
the Board of Directors before they are signed on
behalf of the Board by the chairperson of the
company where he is authorised by the Board or
by two directors out of which one shall be
managing director, if any, and the Chief Executive
Officer, the Chief Financial Officer and the
company secretary of the company, wherever they
are appointed, or in the case of One Person
Company, only by one director, for submission to
the auditor for his report thereon.";
(b) in sub-section (3),—
(i) for clause (a), the following clause shall be
substituted, namely:—
"(a) the web address, if any, where annual return
referred to in sub-section (3) of section 92
has been placed;";
(ii) in clause (p), for the words "annual evaluation has
been made by the Board of its own performance
and that of its committees and individual
directors", the words "annual evaluation of the
performance of the Board, its Committees and of
individual directors has been made" shall be
substituted;

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(iii) after clause (q), the following provisos shall be

inserted, namely:—
"Provided that where disclosures referred to in this sub-
section have been included in the financial statements,
such disclosures shall be referred to instead of being
repeated in the Board's report:
Provided further that where the policy referred to in
clause (e) or clause (o) is made available on company's
website, if any, it shall be sufficient compliance of the
requirements under such clauses if the salient features
of the policy and any change therein are specified in
brief in the Board's report and the web-address is
indicated therein at which the complete policy is
available.";
(c) after sub-section (3), the following sub-section 3A
shall be inserted, namely:— "(3A) The Central
Government may prescribe an abridged Board's report,
for the purpose of compliance with this section by One
Person Company or small company.".
Amendment of section In section 135 of the principal Act,—
135 (Corporate Social (i) in sub-section (1),—
Responsibility) (a) for the words "any financial year", the words "the
immediately preceding financial year" shall be
substituted;
(b) the following proviso shall be inserted, namely:—
"Provided that where a company is not required to
appoint an independent director under sub-section (4)
of section 149, it shall have in its Corporate Social
Responsibility Committee two or more directors.";
(ii) in sub-section (3), in clause (a), for the words and
figures "as specified in Schedule VII", the words and
figures "in areas or subject, specified in Schedule VII"
shall be substituted;
(iii) in sub-section (5), for the Explanation, the following
Explanation shall be substituted, namely:—
'Explanation.—For the purposes of this section "net
profit" shall not include such sums as may be
prescribed, and shall be calculated in accordance with
the provisions of section 198.'
Amendment of In section 137 of the principal Act,—
section 137 (Copy of (i) in sub-section (1),—

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 PAPER – 4 : CORPORATE AND ALLIED LAWS 7

financial statement (a) the words and figures "within the time specified
to be filed with under section 403" shall be omitted;
Registrar). (b) in the second proviso, the words and figures
"within the time specified under section 403" shall
be omitted;
(c) after the fourth proviso, the following proviso shall
be inserted, namely:—
'Provided also that in the case of a subsidiary which has
been incorporated outside India (herein referred to as
"foreign subsidiary"), which is not required to get its
financial statement audited under any law of the country
of its incorporation and which does not get such
financial statement audited, the requirements of the
fourth proviso shall be met if the holding Indian
company files such unaudited financial statement along
with a declaration to this effect and where such financial
statement is in a language other than English, along
with a translated copy of the financial statement in
English.'.
(ii) in sub-section (2), the words and figures “within the time
specified, under section 403” shall be omitted;
(iii) in sub-section (3), for the words and figures “in section
403”, the word “therein” shall be substituted.
Amendment of section In section 139 of the principal Act, in sub-section (1), the
139 (Appointment of first proviso shall be omitted.
auditors).
7. Amendments through the Companies (Amendment) Act, 2019
Relevant Amendment Date of enforcement
sections
Amendment (a) after sub-section (1), the following 15th August, 2019
of Section sub-section shall be inserted,
132 namely:—
“(1A) The National Financial
Reporting Authority (NFRA) shall
perform its functions through such
divisions as may be prescribed.”
(b) after sub-section (3), the following
sub-sections shall be inserted,
namely:—

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 8 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

“(3A) Each division of the NFRA shall

be presided over by the
Chairperson or a full-time
Member authorised by the
Chairperson.
(3B) There shall be an executive
body of the NFRA consisting of
the Chairperson and full-time
Members of such Authority for
efficient discharge of its
functions under sub-section (2)
[other than clause (a)] and sub-
section (4).”;
(c) in sub-section (4), in clause (c), for
sub-clause (B), the following sub-
clause shall be substituted,
namely:—
“(B) debarring the member or the
firm from—
I. being appointed as an
auditor or internal auditor
or undertaking any audit
in respect of financial
statements or internal
audit of the functions and
activities of any company
or body corporate; or
II. performing any valuation
as provided under section
247,
for a minimum period of six
months or such higher period
not exceeding ten years as
may be determined by the
NFRA.”
Amendment in sub-section (3),— 2nd November, 2018
of section (a) for the words “punishable with fine”,
137. the words “liable to a penalty” shall
be substituted;
(b) for the portion beginning with
“punishable with imprisonment”, and
ending with “five lakh rupees or with

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 PAPER – 4 : CORPORATE AND ALLIED LAWS 9

both”, the words “shall be liable to a

penalty of one lakh rupees and in
case of continuing failure, with a
further penalty of one hundred
rupees for each day after the first
during which such failure continues,
subject to a maximum of five lakh
rupees” shall be substituted.
Amendment for sub-section (3), the following sub- 2nd November, 2018
of section section shall be substituted, namely:—
140. “(3) If the auditor does not comply with
the provisions of sub-section (2), he
or it shall be liable to a penalty of fifty
thousand rupees or an amount equal
to the remuneration of the auditor,
whichever is less, and in case of
continuing failure, with a further
penalty of five hundred rupees for
each day after the first during which
such failure continues, subject to a
maximum of five lakh rupees.”.
8. Amendment in schedule VII: The MCA vide Notification No. G.S.R. 390(E) dated 30th
May, 2019 has inserted the following item after item (xi) to Schedule VII:
(xii) disaster management, including relief, rehabilitation and reconstruction activities.
9. Amendments in Schedule VII vide Notification G.S.R. 776(E) dated 11th October, 2019
The Central Government has amended the Schedule VII of the Companies Act, 2013.
In the said Schedule VII, for item (ix) and the entries relating thereto, the following item
and entries shall be substituted, namely:
“(ix) Contribution to incubators funded by Central Government or State Government or
any agency or Public Sector Undertaking of Central Government or State Government, and
contributions to public funded Universities, Indian Institute of Technology (IITs), National
Laboratories and Autonomous Bodies (established under the auspices of Indian Council of
Agricultural Research (ICAR), Indian Council of Medical Research (ICMR), Council of
Scientific and Industrial Research (CSIR), Department of Atomic Energy (DAE), Defence
Research and Development Organisation (DRDO), Department of Biotechnology (DBT),
Department of Science and Technology (DST), Ministry of Electronics and Information
Technology) engaged in conducting research in science, technology, engineering and
medicine aimed at promoting Sustainable Development Goals (SDGs).”

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10. Enforcement of the Companies (Accounts) Amendment Rules, 2019 vide Notification
G.S.R. 803 (E) dated 22nd October, 2019 w.e.f. 1 st December, 2019
The Central Government has amended the Companies (Accounts) Rules, 2014, by the
Companies (Accounts) Amendment Rules, 2019.
In the Companies (Accounts) Rules, 2014, in rule 8, in sub-rule (5), after clause (iii), the
following clause shall be inserted namely:—
“(iiia) a statement regarding opinion of the Board with regard to integrity, expertise and
experience (including the proficiency) of the independent directors appointed during the
year”.
Explanation.—For the purposes of this clause, the expression “proficiency” means the
proficiency of the independent director as ascertained from the online proficiency self-
assessment test conducted by the institute notified under sub-section (1) of section 150.
11. Explanation added in the definition of "Government company" [Section 2(45)]:
In this section, the following explanation has been inserted in the definition [inserted by
notification dated 2-3-2020 by way of Exemptions to Government Companies under
section 462 with effect from 3-3-2020]
“Explanation.- For the purposes of this clause, the "paid up share capital" shall be
construed as "total voting power", where shares with differential voting rights have been
issued.”
12. Amendments related to Schedule VII vide Notification G.S.R. 313(E) dated 26th May,
2020 w.e.f. 28th March, 2020
The Central Government has amended the Schedule VII of the Companies Act, 2013.
In Schedule VII, item (viii), after the words “Prime Minister’s National Relief Fund”, the words
“or Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM
CARES Fund)” shall be inserted.
CHAPTER 3: APPOINTMENT AND QUALIFICATION OF DIRECTORS
1. Enforcement of the Companies (Appointment and Qualification of Directors) Third
Amendment Rules, 2018 vide Notification G.S.R. 558 (E) dated 12th June 2018
The Central Government makes the Companies (Appointment and Qualification of
Directors) Third Amendment Rules, 2018 to amend the Companies (Appointment and
Qualification of Directors) Rules, 2014.
In the Companies (Appointment and Qualification of Directors) Rules, 2014, in the
annexure, for form DIR-3 which deals with the Application for allotment of Director
Identification Number, a new form shall be substituted.
2. Enforcement of the Companies (Appointment and Qualification of Directors) fourth
Amendment Rules, 2018 vide Notification G.S.R. 615(E) w.e.f. 10 thJuly, 2018

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The Central Government makes the Companies (Appointment and Qualification of

Directors) Fourth Amendment Rules, 2018 to amend the Companies (Appointment and
Qualification of Directors) Rules, 2014.
In Companies (Appointment and Qualification of Directors) Rules, 2014,
(i) The rule 11 (related to cancellation or surrender or deactivation of DIN) shall be
renumbered as sub-rule (1) thereof and after sub-rule (1) as so renumbered, the
following sub-rules shall be inserted, namely:-
"(2) The Central Government or Regional Director (Northern Region), or any officer
authorised by the Central Government or Regional Director (Northern Region)
shall, deactivate the Director Identification Number (DIN), of an individual who
does not intimate his particulars in e-form DIR-3-KYC within stipulated time in
accordance with Rule 12A.
(3) The de-activated DIN shall be re-activated only after e-form DIR-3-KYC is filed along
with fee as prescribed under Companies (Registration Offices and Fees) Rules,
2014. “
(ii) after rule 12,the following rule 12A shall be inserted, namely:-
“12A Directors KYC:- Every individual who has been allotted a Director Identification
Number (DIN) as on 31 st March of a financial year as per these rules shall, submit e-
form DIR-3-KYC to the Central Government on or before 30 th April of immediate next
financial year.
Provided that every individual who has already been allotted a Director Identification
Number (DIN) as at 31 st March, 2018, shall submit e-form DIR-3 KYC on or before 31st
August, 2018.”;
3. Enforcement of the Companies (Appointment and Qualification of Directors) Fifth
Amendment Rules, 2018 vide Notification G.S.R. 798 (E) dated 21st August 2018
The Central Government makes the Companies (Appointment and Qualification of
Directors) Fifth Amendment Rules, 2018 to amend the Companies (Appointment and
Qualification of Directors) Rules, 2014.
In the Companies (Appointment and Qualification of Directors) Rules, 2014,
(i) in the proviso to rule 12A i.e., Directors KYC, for the words and numbers “DIR-3 KYC
on or before 31st August, 2018, the words and numbers “DIR-3 KYC on or before
15th September, 2018” shall be substituted.
(ii) in the Annexure, for Form [Link]-3 KYC, a new Form shall be substituted.
4. Enforcement of the Companies (Appointment and Qualification of Directors) Sixth
Amendment Rules, 2018 vide Notification G.S.R. 904(E) dated 20th September 2018

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The Central Government makes the Companies (Appointment and Qualification of

Directors) Sixth Amendment Rules, 2018 to amend the Companies (Appointment and
Qualification of Directors) Rules, 2014.
In the Companies (Appointment and Qualification of Directors) Rules, 2014, in the proviso
to rule 12A, for the words and figures “before 15th September, 2018,” the words and
figures “before 5th October, 2018” shall be substituted.
6. Amendments through the Companies (Amendment) Act, 2017
Relevant Amendment
sections
Amendment of In section 149 of the principal Act,—
section 149 (i) for sub-section (3), the following sub-section shall be
(Company to substituted, namely:—
have board of "(3) Every company shall have at least one director who stays
directors) in India for a total period of not less than one hundred and
eighty-two days during the financial year:
Provided that in case of a newly incorporated company the
requirement under this sub-section shall apply
proportionately at the end of the financial year in which it is
incorporated";
(ii) in sub-section (6),—
(a) in clause (c), for the words "pecuniary relationship", the
words "pecuniary relationship, other than remuneration
as such director or having transaction not exceeding ten
per cent. of his total income or such amount as may be
prescribed," shall be substituted;
(b) for clause (d), the following clause shall be substituted,
namely:—
"(d) none of whose relatives—
(i) is holding any security of or interest in the
company, its holding, subsidiary or associate
company during the two immediately preceding
financial years or during the current financial year:
Provided that the relative may hold security or
interest in the company of face value not exceeding
fifty lakh rupees or two per cent. of the paid-up
capital of the company, its holding, subsidiary or
associate company or such higher sum as may be
prescribed;
(ii) is indebted to the company, its holding, subsidiary
or associate company or their promoters, or

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directors, in excess of such amount as may be

prescribed during the two immediately preceding
financial years or during the current financial year;
(iii) has given a guarantee or provided any security in
connection with the indebtedness of any third
person to the company, its holding, subsidiary or
associate company or their promoters, or directors
of such holding company, for such amount as may
be prescribed during the two immediately
preceding financial years or during the current
financial year; or
(iv) has any other pecuniary transaction or relationship
with the company, or its subsidiary, or its holding
or associate company amounting to two per cent.
or more of its gross turnover or total income singly
or in combination with the transactions referred to
in sub-clause (i), (ii) or (iii);";
(c) in clause (e), in sub-clause (i), the following proviso shall
be inserted, namely:—
"Provided that in case of a relative who is an employee, the
restriction under this clause shall not apply for his
employment during preceding three financial years.".
Amendment of In section 157 of the principal Act,—
Section 157 (i) in sub-section (1), the words and figures, “within the time
(Company to specified under section 403” shall be omitted;
inform DIN to (ii) in sub-section (2), the words and figures, “before the expiry
registrar) of the period specified under section 403 with additional fee”,
shall be omitted.
Amendment of In section 164 of the principal Act,—
section 164 (i) in sub-section (2), the following proviso shall be inserted,
(Disqualifications namely:—
for appointment "Provided that where a person is appointed as a director of a
of director”) company which is in default of clause (a) or clause (b), he
shall not incur the disqualification for a period of six months
from the date of his appointment."
(ii) in sub-section (3), for the proviso, the following proviso shall
be substituted, namely:—
"Provided that the disqualifications referred to in clauses (d),
(e) and (g) of sub-section (1) shall continue to apply even if
the appeal or petition has been filed against the order of
conviction or disqualification."

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Amendment of In section 167 of the principal Act, in sub-section (1),—

section 167 (i) in clause (a), the following proviso shall be inserted,
(Vacations of namely:—
office of "Provided that where he incurs disqualification under sub-
director). section (2) of section 164, the office of the director shall
become vacant in all the companies, other than the company
which is in default under that sub-section.";
(ii) in clause (f), for the proviso the following proviso shall be
substituted, namely,—
"Provided that the office shall not be vacated by the director
in case of orders referred to in clauses (e) and (f)—
(a) for thirty days from the date of conviction or order of
disqualification;
(b) where an appeal or petition is preferred within thirty days
as aforesaid against the conviction resulting in sentence
or order, until expiry of seven days from the date on
which such appeal or petition is disposed of; or
(iii) where any further appeal or petition is preferred against order
or sentence within seven days, until such further appeal or
petition is disposed of."
Amendment of In section 168 of the principal Act, in sub-section (1), in the
Section 168 proviso, for the words, "director shall also forward", the words
(Resignation of "director may also forward" shall be substituted.
Director)
7. Amendments through the Companies (Amendment) Act, 2019
Relevant Amendment Date of enforcement
sections
Amendment In section 157 of the principal Act, for 2nd November, 2018
of section sub-section (2), the following sub-
157. section shall be substituted,
namely:—
“(2) If any company fails to furnish
the Director Identification
Number under sub-section (1),
such company shall be liable to
a penalty of twenty-five
thousand rupees and in case of
continuing failure, with a further
penalty of one hundred rupees
for each day after the first during

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which such failure continues,

subject to a maximum of one
lakh rupees, and every officer of
the company who is in default
shall be liable to a penalty of not
less than twenty-five thousand
rupees and in case of continuing
failure, with a further penalty of
one hundred rupees for each
day after the first during which
such failure continues, subject
to a maximum of one lakh
rupees.”
Substitution For section 159 of the principal Act, 2nd November, 2018
of new the following Substitution of
section for section shall be substituted, namely:
section 159. Penalty for default of certain
provisions.
“[Link] any individual or director of a
company makes any default in
complying with any of the provisions
of section 152, section 155 and
section 156, such individual or
director of the company shall be
liable to a penalty which may extend
to fifty thousand rupees and where
the default is a continuing one, with a
further penalty which may extend to
five hundred rupees for each day
after the first during which such
default continues.”
Amendment In section 164 of the principal Act, in 2nd November, 2018
of section sub-section (1), after clause (h), the
164. following clause shall be inserted,
namely:—
“(i) he has not complied with the
provisions of sub-section (1) of
section 165.”
Amendment In section 165 of the principal Act, in 2nd November, 2018
of section sub-section (6), for the portion
165. beginning with “punishable with fine”
and ending with “contravention

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 16 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

continues”, the words “liable to a

penalty of five thousand rupees for
each day after the first during which
such contravention continues” shall
be substituted.
8. Enforcement of the Companies (Appointment and Qualification of Directors) Third
Amendment Rules, 2019 via G.S.R. 528(E) dated 25th July, 2019
The Central Government makes the Companies (Appointment and Qualification of
Directors) Third Amendment Rules, 2019 to amend Companies (Appointment and
Qualification of Directors) Rules, 2014.
In Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 12A,-
(i) for the words “who has been allotted”, the words “who holds” shall be substituted;
(ii) for the words, letters and figures “submit e-form DIR-3-KYC to the Central
Government on or before 30th June of immediate next financial year”, the words,
letters and figures “submit e-form DIR-3-KYC for the said financial year to the
Central Government on or before 30th September of immediate next financial year”
shall be substituted;
(iii) after the proviso, the following provisos shall be inserted, namely:-
“Provided further that where an individual who has already submitted e -form DIR-3
KYC in relation to any previous financial year, submits web-form DIR-3 KYC-WEB
through the web service in relation to any subsequent financial year it shall be
deemed to be compliance of the provisions of this rule for the said financial year:
Provided also that in case an individual desires to update his personal mobile number
or the e-mail address, as the case may be, he shall update the same by submitting
e-form DIR-3 KYC only.
Provided also that fee for filing e-form DIR-3 KYC or web-form DIR-3 KYC-WEB
through the web service, as the case may be, shall be payable as provided in
Companies (Registration Offices and Fees) Rules, 2014.”.
9. The Companies (Appointment and Qualification of Directors) Fifth Amendment
Rules, 2019 notified by MCA vide notification no. G.S.R. 804(E), dated 22nd October, 2019
w.e.f. 1st day of December, 2019. This amended rule is further to amend the Companies
(Appointment and Qualification of Directors) Rules, 2014.
For Rule 6, the following rule shall be substituted, namely: –
“6. Compliances required by a person eligible and willing to be appointed as an
independent director.─
(1) Every individual –

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(a) who has been appointed as an independent director in a company, on the

date of commencement of the Companies (Appointment and Qualification
of Directors) Fifth Amendment Rules, 2019, shall within a period of three
months from such commencement; or
(b) who intends to get appointed as an independent director in a company after
such commencement, shall before such appointment, apply online to the
institute for inclusion of his name in the data bank for a period of one year
or five years or for his life-time, and from time to time take steps as
specified in sub-rule (2), till he continues to hold the office of an
independent director in any company:
Provided that any individual, including an individual not having DIN, may
voluntarily apply to the institute for inclusion of his name in the data bank.
(2) Every individual whose name has been so included in the data bank shall file an
application for renewal for a further period of one year or five years or for his
life-time, within a period of thirty days from the date of expiry of the period upto
which the name of the individual was applied for inclusion in the data bank,
failing which, the name of such individual shall stand removed from the data
bank of the institute:
Provided that no application for renewal shall be filed by an individual who has
paid life-time fees for inclusion of his name in the data bank.
(3) Every independent director shall submit a declaration of compliance of sub -rule
(1) and sub-rule (2) to the Board, each time he submits the declaration required
under sub-section (7) of section 149 of the Act.
(4) Every individual whose name is so included in the data bank under sub-rule (1)
shall pass an online proficiency self-assessment test conducted by the institute
within a period of one year from the date of inclusion of his name in the data
bank, failing which, his name shall stand removed from the databank of the
institute:
Provided that the individual who has served for a period of not less than ten
years as on the date of inclusion of his name in the databank as director or key
managerial personnel in a listed public company or in an unlisted public
company having a paid-up share capital of rupees ten crore or more shall not be
required to pass the online proficiency self-assessment test:
Provided further that for the purpose of calculation of the period of ten years
referred to in the first proviso, any period during which an individual was acting
as a director or as a key managerial personnel in two or more companies at the
same time shall be counted only once.
Explanation: For the purposes of this rule,-

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(a) the expression “institute” means the ‘Indian Institute of Corporate Affairs at
Manesar’ notified under sub-section (1) of section 150 of the Companies
Act, 2013 as the institute for the creation and maintenance of data bank of
Independent Directors;
(b) an individual who has obtained a score of not less than sixty percent. in
aggregate in the online proficiency self-assessment test shall be deemed
to have passed such test;
(c) there shall be no limit on the number of attempts an individual may take for
passing the online proficiency self-assessment test.”
10. The Companies (Appointment and Qualification of Directors) Amendment Rules,
2020
MCA vide Notification G.S.R. 145(E) dated 28th February, 2020 notified the Companies
(Appointment and Qualification of Directors) Amendment Rules, 2020 further to amend
the Companies (Appointment and Qualification of Directors) Rules, 2014 w.e.f. the date of
their publication in the Official Gazette.
1In the Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 6:
(i) in sub-rule (1), in clause (a), for the words “three months”, the words “five months”
shall be substituted,
(ii) in sub-rule (4),- For the first Proviso, following proviso shall be substituted-
“Provided that an individual shall not be required to pass the online proficiency self -
assessment test, when he has served as a director or key managerial personnel, for
a total period of not less than ten years, as on the date of inclusion of his name in the
databank, in one or more of the following, namely:-
(a) listed public company; or
(b) unlisted public company having a paid-up share capital of rupees ten crore
or more; or
(c) body corporate listed on a recognized stock exchange:”
(iii) in sub-rule (4),- in the second proviso, for the word “companies”, the words
“companies or bodies corporate” shall be substituted.

1Vide notification no. G.S.R. 804(E), dated 22nd October, 2019 w.e.f. 1st day of December, 2019, Rule 6 have
been amended. The amended Rule 6 is given in Point no. I., the above para. This Rule have been further
amended by the Companies (Appointment and Qualification of Directors) Second Amendment Rules, 2020,
w.e.f. 29-3-2020 and Companies (Appointment and Qualification of Directors) Amendment Rules, 2020, w.e.f.
8-2-2020.

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11. The Companies (Appointment and Qualification of Directors) Second Amendment

Rules, 2020
Vide Notification G.S.R. 268 (E), dated 29th April, 2020, the Companies (Appointment and
Qualification of Directors) Second Amendment Rules, 2020 came into enforcement from
the date of their publication in the Official Gazette further to amend the Companies
(Appointment and Qualification of Directors) Rules, 2014.
In rule 6 in sub-rule (1), in clause (a), for the words “five months”, the words “seven
months” shall be substituted.
CHAPTER 4: APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL
1. Enforcement of the Companies (Appointment and Remuneration of Managerial
Personnel) Amendment Rules, 2018 vide Notification G.S.R 875(E) dated 12th
September 2018
The Central Government makes the Companies (Appointment and Remuneration of
Managerial Personnel) Amendment Rules, 2018 to amend the Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014. This amendment has omitted
the requirement of approval of the Central Government for making payment of
remuneration to the Managerial personnel (in case of inadequacy of profit) and accordingly
e-form MR-2 has also been amended.
In Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014,
(i) in rule 6 which deals with the Parameters for consideration of remuneration, following
are the amendments:
(a) for the heading ‘application to the Central Government’ the heading ‘Parameters
for consideration of remuneration’ shall be substituted.
(b) the words ‘Central Government’ shall be omitted.
(ii) in rule 7 i.e., related to Fees, sub-rule (2) shall be omitted
2. Amendment in Schedule V to the Companies Act, 2013
The Central Government vide Notification No. S.O. 4822(E) dated 12th September 2018
has amended the Schedule V to the Companies Act, 2013.
3. Amendments through the Companies (Amendment) Act, 2017
Relevant Sections Amendment
Amendment of In section 196 of the principal Act,—
section 196 (a) in sub-section (3), in clause (a), after the proviso, the
(Appointment of MD, following proviso shall be inserted, namely:—
WTD, Manager) “Provided further that where no such special resolution is
passed but votes cast in favour of the motion exceed the
votes, if any, cast against the motion and the Central

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 20 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

Government is satisfied, on an application made by the

Board, that such appointment is most beneficial to the
company, the appointment of the person who has
attained the age of seventy years may be made.”;
(b) in sub-section (4), for the words “specified in that
Schedule”, the words “specified in Part I of that Schedule”
shall be substituted.
Amendment of In section 197 of the principal Act,—
Section 197 (Overall (a) in sub-section (1),—
maximum (i) in the first proviso, the words "with the approval of
managerial the Central Government," shall be omitted;
remuneration and
(ii) in the second proviso, after the words "general
managerial
meeting,", the words "by a special resolution," shall
remuneration in case
be inserted;
of absence or
inadequacy of (iii) after the second proviso, the following proviso shall
profits) be inserted, namely:—
"Provided also that, where the company has
defaulted in payment of dues to any bank or public
financial institution or non-convertible debenture
holders or any other secured creditor, the prior
approval of the bank or public financial institution
concerned or the non-convertible debenture holders
or other secured creditor, as the case may be, shall
be obtained by the company before obtaining the
approval in the general meeting.";
(b) in sub-section (3), the words "and if it is not able to
comply with such provisions, with the previous approval
of the Central Government" shall be omitted;
(c) for sub-section (9), the following sub-section shall be
substituted, namely:—
"(9) If any director draws or receives, directly or indirectly, by
way of remuneration any such sums in excess of the limit
prescribed by this section or without approval required under
this section, he shall refund such sums to the company,
within two years or such lesser period as may be allowed by
the company, and until such sum is refunded, hold it in trust
for the company.";
(d) in sub-section (10),—
(i) for the words "permitted by the Central Government",
the words "approved by the company by special
resolution within two years from the date the sum

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 PAPER – 4 : CORPORATE AND ALLIED LAWS 21

becomes refundable" shall be substituted;

(ii) the following proviso shall be inserted, namely:—
"Provided that where the company has defaulted in
payment of dues to any bank or public financial
institution or non-convertible debenture holders or
any other secured creditor, the prior approval of the
bank or public financial institution concerned or the
non-convertible debenture holders or other secured
creditor, as the case may be, shall be obtained by
the company before obtaining approval of such
waiver.";
(e) in sub-section (11), the words "and if such conditions are
not being complied, the approval of the Central
Government had been obtained" shall be omitted;
(f) after sub-section (15), the following sub-sections shall
be inserted, namely:—
"(16) The auditor of the company shall, in his report under
section 143, make a statement as to whether the
remuneration paid by the company to its directors is in
accordance with the provisions of this section, whether
remuneration paid to any director is in excess of the limit
laid down under this section and give such other details
as may be prescribed.
(17) On and from the commencement of the Companies
(Amendment) Act, 2017, any application made to the
Central Government under the provisions of this section
[as it stood before such commencement], which is
pending with that Government shall abate, and the
company shall, within one year of such commencement,
obtain the approval in accordance with the provisions of
this section, as so amended."
Amendment of In section 198 of the principal Act,—
Section 198 (i) in sub-section (3),—
(Calculations of (a) in clause (a), after the words “sold by the company”,
Profits) the words, letter, brackets and figures “unless the
company is an investment company as referred to in
clause (a) of the Explanation to section 186” shall be
inserted;
(b) after clause (e), the following clause (f) shall be
inserted, namely:—

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 22 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

“(f) any amount representing unrealised gains,

notional gains or revaluation of assets.”;
(ii) in sub-section (4), in clause (l), the words "which begins
at or after the commencement of this Act" shall be
omitted.
Amendment of In section 200 of the principal Act, the words "the Central
section 200 (Central Government or" appearing at both the places shall be omitted.
Government or
company to fix limit
with regard to
remuneration).
Amendment of In section 201 of the principal Act,—
section 201 (Forms (a) in sub-section (1), for the words "this Chapter", the word
of, and procedure in and figures "section 196" shall be substituted;
relation to, certain (b) in sub-section (2), in clause (a), for the words "any of the
applications). sections aforesaid", the word and figures "section 196"
shall be substituted.
4. Amendments through the Companies (Amendment) Act, 2019
Relevant Amendment Date of enforcement
sections
Amendment In section 197 of the principal Act 2nd November, 2018
of section (a) sub-section (7) shall be omitted;
197. (b) for sub-section (15), the
following sub-section shall be
substituted, namely:—
“(15) If any person makes any
default in complying with the
provisions of this section, he shall
be liable to a penalty of one lakh
rupees and where any default has
been made by a company, the
company shall be liable to a
penalty of five lakh rupees.”.
Amendment In section 203 of the principal Act, 2nd November, 2018
of section for sub-section (5), the following sub-
203. section shall be substituted, namely:—
“(5) If any company makes any default
in complying with the provisions of this
section, such company shall be liable
to a penalty of five lakh rupees and

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 PAPER – 4 : CORPORATE AND ALLIED LAWS 23

every director and key managerial

personnel of the company who is in
default shall be liable to a penalty of
fifty thousand rupees and where the
default is a continuing one, with a
further penalty of one thousand rupees
for each day after the first during which
such default continues but not
exceeding five lakh rupees.”.
5. The Companies (Appointment and Remuneration of Managerial Personnel) Amendment
Rules, 2020
Vide Notification G.S.R. 13(E) dated 3rd January, 2020, the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 has been amended with the enforcement of
this amended rules 2020. It shall be applicable in respect of financial years commencing on or after
1st April, 2020.
Sl. No. Amended law
1. For rule 8A, the following shall be substituted as under:-
“8A. Every private company which has a paid up share capital of ten crore rupees
or more shall have a whole-time company secretary.”
2. in rule 9, in sub-rule (1),
(i) after clause (b), at the end, the word “or” shall be inserted.
(ii) after clause (b), the following clause (c) shall be inserted, namely:-
“(c) every company having outstanding loans or borrowings from banks or
public financial institutions of one hundred crore rupees or more.”.
(iii) following Explanation inserted, namely:-
“Explanation :- For the purposes of this sub-rule, it is hereby clarified that the paid
up share capital, turnover, or outstanding loans or borrowings as the case may be,
existing on the last date of latest audited financial statement shall be taken into
account.”
CHAPTER 5: MEETING OF BOARD AND ITS POWERS
1. Enforcement of the Companies (Meetings of Board and its Powers) Amendment
Rules, 2018 vide Notification G.S.R. 429 (E) dated 7th May, 2018
The Central Government makes the Companies (Meetings of Board and its Powers)
Amendment Rules, 2018 to amend the Companies (Meetings of Board and its Powers)
Rules, 2014.
In Companies (Meetings of Board and its Powers) Rules, 2014,

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 24 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

(i) in rule 4 i.e., related the matters not to be dealt with in a meeting trough video
conferencing or other audio visual means, the following proviso shall be inserted,
namely:-
“Provided that where there is quorum in a meeting through physical presence of
directors, any other director may participate through video conferencing or other
audio visual means.”
(ii) In the principal rules, in rule 6 related to the Committees to the Board, for the words
“every listed company”, the words “every listed public company” shall be substituted.
(iii) In the principal rules, for rule 13 i.e. related to the Special Resolution, the following
rule shall be substituted, namely:-
“13. Special Resolution- A resolution passed at a general meeting in terms of sub-
section (3) of section 186 to give any loan or guarantee or investment or providing
any security or the acquisition under sub-section (2) of section 186 shall specify the
total amount up to which the Board of Directors are authorised to give such loan or
guarantee, to provide such security or make such acquisition:
Provided that the company shall disclose to the members in the financial statement
the full particulars in accordance with the provisions of sub-section (4) of section 186.”
2. Amendments through the Companies (Amendment) Act, 2017
Relevant sections Amendment
Amendment of In section 173 of the principal Act,
section 173 in sub-section (2), after the first proviso, the following proviso
(Meetings of shall be inserted, namely:—
Board) "Provided further that where there is quorum in a meeting through
physical presence of directors, any other director may participate
through video conferencing or other audio visual means in such
meeting on any matter specified under the first proviso."
Amendment of In section 177 of the principal Act,—
section 177 (Audit (i) in sub-section (1), for the words "every listed company",
Committee). the words "every listed public company" shall be
substituted;
(ii) in sub-section (4), in clause (iv), after the proviso, the
following provisos shall be inserted, namely:—
"Provided further that in case of transaction, other than
transactions referred to in section 188, and where Audit
Committee does not approve the transaction, it shall make
its recommendations to the Board:
Provided also that in case any transaction involving any
amount not exceeding one crore rupees is entered into by a

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director or officer of the company without obtaining the

approval of the Audit Committee and it is not ratified by the
Audit Committee within three months from the date of the
transaction, such transaction shall be voidable at the option
of the Audit Committee and if the transaction is with the
related party to any director or is authorised by any other
director, the director concerned shall indemnify the
company against any loss incurred by it:
Provided also that the provisions of this clause shall not
apply to a transaction, other than a transaction referred to
in section 188, between a holding company and its wholly
owned subsidiary company."
Amendment of In section 178 of the principal Act,—
Section 178 (i) in sub-section (1), for the words "every listed company",
(Nomination and the words "every listed public company" shall be
Remuneration substituted;
Committee and (ii) in sub-section (2), for the words "shall carry out evaluation
stake holders of every director's performance", the words "shall specify
Relationship the manner for effective evaluation of performance of Board,
committee) its committees and individual directors to be carried out
either by the Board, by the Nomination and Remuneration
Committee or by an independent external agency and
review its implementation and compliance" shall be
substituted;
(iii) in sub-section (4), in clause (c), for the proviso, the
following proviso shall be substituted, namely:—
"Provided that such policy shall be placed on the website of
the company, if any, and the salient features of the policy
and changes therein, if any, along with the web address of
the policy, if any, shall be disclosed in the Board's report.";
(iv) in sub-section (8), in the proviso, for the words "non-
consideration of resolution of any grievance", the words
"inability to resolve or consider any grievance" shall be
substituted.
Substitution of new For section 185 of the principal Act, the following section shall
section for section be substituted, namely:—
185.
(Loan to Directors) '185. (1) No company shall, directly or indirectly, advance any
loan, including any loan represented by a book debt to, or give
any guarantee or provide any security in connection with any loan
taken by,—

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(a) any director of company, or of a company which is its

holding company or any partner or relative of any such
director; or
(b) any firm in which any such director or relative is a
partner.
(2) A company may advance any loan including any loan
represented by a book debt, or give any guarantee or provide
any security in connection with any loan taken by any person
in whom any of the director of the company is interested,
subject to the condition that—
(a) a special resolution is passed by the company in
general meeting:
Provided that the explanatory statement to the notice
for the relevant general meeting shall disclose the full
particulars of the loans given, or guarantee given or
security provided and the purpose for which the loan
or guarantee or security is proposed to be utilised by
the recipient of the loan or guarantee or security and
any other relevant fact; and
(b) the loans are utilised by the borrowing company for its
principal business activities.
Explanation.—For the purposes of this sub-section, the
expression "any person in whom any of the director of the
company is interested" means—
(a) any private company of which any such director is a
director or member;
(b) any body corporate at a general meeting of which not less
than twenty-five per cent. of the total voting power may
be exercised or controlled by any such director, or by two
or more such directors, together; or
(c) any body corporate, the Board of directors, managing
director or manager, whereof is accustomed to act in
accordance with the directions or instructions of the
Board, or of any director or directors, of the lending
company.
(3) Nothing contained in sub-sections (1) and (2) shall apply to—
(a) the giving of any loan to a managing or whole-time
director—
(i) as a part of the conditions of service extended by
the company to all its employees; or

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(ii) pursuant to any scheme approved by the

members by a special resolution; or
(b) a company which in the ordinary course of its business
provides loans or gives guarantees or securities for the
due repayment of any loan and in respect of such loans
an interest is charged at a rate not less than the rate
of prevailing yield of one year, three years, five years
or ten years Government security closest to the tenor
of the loan; or
(c) any loan made by a holding company to its wholly
owned subsidiary company or any guarantee given or
security provided by a holding company in respect of
any loan made to its wholly owned subsidiary
company; or
(d) any guarantee given or security provided by a holding
company in respect of loan made by any bank or
financial institution to its subsidiary company:
Provided that the loans made under clauses (c) and (d) are
utilized by the subsidiary company for its principal
business activities.
(4) If any loan is advanced or a guarantee or security is given
or provided or utilised in contravention of the provisions of
this section,—
(i) the company shall be punishable with fine which shall
not be less than five lakh rupees but which may extend
to twenty-five lakh rupees;
(ii) every officer of the company who is in default shall be
punishable with imprisonment for a term which may
extend to six months or with fine which shall not be
less than five lakh rupees but which may extend to
twenty-five lakh rupees; and
(iii) the director or the other person to whom any loan is
advanced or guarantee or security is given or provided
in connection with any loan taken by him or the other
person, shall be punishable with imprisonment which
may extend to six months or with fine which shall not
be less than five lakh rupees but which may extend to
twenty-five lakh rupees, or with both.’
Amendment of In section 186 of the principal Act,—
section 186 (Loan

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 28 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

and investment by (i) in sub-section (2), the following Explanation shall be

company). inserted, namely:—
'Explanation.—For the purposes of this sub-section, the
word "person" does not include any individual who is in the
employment of the company';
(ii) for sub-section (3), the following sub-section shall be
substituted, namely:—
'(3) Where the aggregate of the loans and investment so far made,
the amount for which guarantee or security so far provided to or in
all other bodies corporate along with the investment, loan,
guarantee or security proposed to be made or given by the Board,
exceed the limits specified under sub-section (2), no investment or
loan shall be made or guarantee shall be given or security shall be
provided unless previously authorised by a special resolution
passed in a general meeting:
Provided that where a loan or guarantee is given or where a
security has been provided by a company to its wholly owned
subsidiary company or a joint venture company, or acquisition is
made by a holding company, by way of subscription, purchase
or otherwise of, the securities of its wholly owned subsidiary
company, the requirement of this sub-section shall not apply:
Provided further that the company shall disclose the details of
such loans or guarantee or security or acquisition in the financial
statement as provided under sub-section (4).”.
(iii) for sub-section (11), the following sub-section shall be
substituted, namely:—
"(11) Nothing contained in this section, except sub-section
(1), shall apply—
(a) to any loan made, any guarantee given or any security
provided or any investment made by a banking company, or
an insurance company, or a housing finance company in the
ordinary course of its business, or a company established
with the object of and engaged in the business of financing
industrial enterprises, or of providing infrastructural
facilities;
(b) to any investment—
(i) made by an investment company;
(ii) made in shares allotted in pursuance of clause (a) of
sub-section (1) of section 62 or in shares allotted in
pursuance of rights issues made by a body corporate;

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(iii) made, in respect of investment or lending activities, by

a non-banking financial company registered under
Chapter III-B of the Reserve Bank of India Act, 1934
and whose principal business is acquisition of
securities.";
(iv) in the Explanation, in clause (a), after the words
"other securities" the following shall be inserted,
namely:—
"and a company will be deemed to be principally engaged
in the business of acquisition of shares, debentures or other
securities, if its assets in the form of investment in shares,
debentures or other securities constitute not less than fifty
per cent. of its total assets, or if its income derived from
investment business constitutes not less than fifty per cent.
as a proportion of its gross income."

3. Amendments through the Companies (Amendment) Act, 2019

Relevant Amendment Date of enforcement
sections
Amendment In section 191 of the principal Act, for 2nd November, 2018
of section 191 sub-section (5), the following sub-
section shall be substituted, namely:—
“(5) If a director of the company makes
any default in complying with the
provisions of this section, such director
shall be liable to a penalty of one lakh
rupees.”.
4. Enforcement of the Companies (Meetings of Board and its Powers) Amendment
Rules, 2019 dated 11th October, 2019
The Central Government makes the Companies (Meetings of Board and its Powers)
Amendment Rules, 2019to amend the Companies (Meetings of Board and its Powers)
Rules, 2014.
In the Companies (Meetings of Board and its Powers) Rules, 2014, in rule 11, in sub-rule
(2), for the words "business of financing of companies", the words "business of financing
industrial enterprises" shall be substituted.
5. The Companies (Meetings of Board and its Powers) Second Amendment Rules, 2019
Vide Notification G.S.R. 857(E) dated 18th November, 2019, the Central Government
hereby makes the following rules further to amend the Companies (Meetings o f Board and

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 30 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

its Powers) Rules, 2014 to be enforced from the date of their publication in the Official
Gazette.
Sl. No. Amended law
1. In rule 15, in sub-rule (3), in clause (a),-
(a) in sub-clauses (i) and (ii), the words “or rupees one hundred crore,
whichever is lower”, shall be omitted
2. In rule 15, in sub-rule (3), in clause (a),-
(a) in sub-clause (iii), for the words “amounting to ten per cent or more of the net
worth of the company or ten per cent or more of turnover of the company or rupees
one hundred crore, whichever is lower”, the words “amounting to ten per cent
or more of the turnover of the company” shall be substituted;
3. In rule 15, in sub-rule (3), in clause (a),-
(a) in sub-clause (iv), the words “or rupees fifty crore, whichever is lower”,
shall be omitted
6. The Companies (Meetings of Board and its Powers) Amendment Rules, 2020
Vide notification G.S.R. 186(E) dated 19th March, 2020, the Central Government hereby
amended the Companies (Meetings of Board and its Powers) Rules, 2014 through the
enforcement of the Companies (Meetings of Board and its Powers) Amendment Rules,
2020 from the date of their publication in the Official Gazette.
In the Companies (Meetings of Board and its Powers) Rules, 2014, rule 4 shall be
renumbered as sub-rule (1) thereof and after sub-rule (1) as so renumbered, the following
sub-rule shall be inserted, namely:-
“(2) For the period beginning from the commencement of the Companies (Meetings of
Board and its Powers) Amendment Rules, 2020 and ending on the 30th June, 2020, the
meetings on matters referred to in sub-rule (1) may be held through video conferencing or
other audio visual means in accordance with rule 3.”
7. Further exemptions to Government company: Vide Notification G.S.R. 151(E) dated
2nd March, 2020, the Central Government, in the public interest, hereby makes the
following further amendments in the notification of the Government of India, in the Ministry
of Corporate Affairs, number G.S.R. 463(E), dated the 5th June, 2015 which dealt with the
exemptions to Government Companies:
Sl. No. Amended law
1. Chapter XII, first and second proviso to sub-section (1) of section 188, Shall
not apply to –

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(a) a Government company in respect of contracts or arrangements

entered into by it with any other Government company, or with Central
Government or any State Government or any combination thereof;
(b) a Government company, other than a listed company, in respect of
contracts or arrangements other than those referred to in clause (a), in
case such company obtains approval of the Ministry or Department of
the Central Government which is administratively in charge of the
company, or, as the case may be, the State Government before
entering into such contract or arrangement.”.

CHAPTER 6: INSPECTION, INQUIRY AND INVESTIGATION

Amendments through the Companies (Amendment) Act, 2019
Relevant Amendment in law Date of
Section Enforcement
Amendment (a) in sub-section (8), for the words “If the Director, 15th August,
of Section Additional Director or Assistant Director” the 2019
212 words “If any officer not below the rank of
Assistant Director” shall be substituted;
(b) in sub-section (9), for the portion beginning with the
words “The Director” and ending with the word,
brackets and figure “sub-section (8)”, the words,
brackets and figure “The officer authorised under
sub-section (8) shall, immediately after arrest of
such person under such sub-section” shall be
substituted;
(c) in sub-section (10),—
(i) for the words “Judicial Magistrate”, the words
“Special Court or Judicial Magistrate” shall
be substituted;
(ii) in the proviso, for the words “Magistrate’s
court”, “Special Court or Magistrate’s court”
shall be substituted;
(d) New sub-section 14A inserted after sub-section 14,
namely:—
“(14A) Where the report under sub-section (11) or sub-
section (12) states that fraud has taken place in a
company and due to such fraud any director, key
managerial personnel, other officer of the company or any
other person or entity, has taken undue advantage or
benefit, whether in the form of any asset, property or cash

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or in any other manner, the Central Government may file

an application before the Tribunal for appropriate orders
with regard to disgorgement of such asset, property or
cash and also for holding such director, key managerial
personnel, other officer or any other person liable
personally without any limitation of liability.”
CHAPTER 7: COMPROMISES, ARRANGEMENTS AND AMALGAMATIONS
1. Amendments through the Companies (Amendment) Act, 2019
Relevant Amendment Date of Enforcement
sections
section 238 In section 238 of the principal Act, in sub- 2nd November, 2018
section (3), for the words “punishable with fine
which shall not be less than twenty-five
thousand rupees but which may extend to five
lakh rupees”, the words “liable to a penalty of
one lakh rupees” shall be substituted.

2. Clarification under Section 232(6) of the Companies Act, 2013

A clarification has been issued by the MCA on 21st August, 2019 regarding section 232(6).
According to the clarification,
(a) The provision of section 232(6) of the Act enables the companies in question to
choose and state in the scheme an 'appointed date'. This date may be a specific
calendar date or may be tied to the occurrence of an event such as grant of license
by a competent authority or fulfilment of any preconditions agreed upon by the parties,
or meeting any other requirement as agreed upon between the parties, etc., which
are relevant to the scheme.
(b) The 'appointed date' identified under the scheme shall also be deemed to be the
'acquisition date' and date of transfer of control for the purpose of con forming to
accounting standards (including Ind-AS 103 Business Combinations).
(c) Where the 'appointed date' is chosen as a specific calendar date, it may precede the
date of filing of the application for scheme of merger/amalgamation in NCLT.
However, if the 'appointed date' is significantly ante-dated beyond a year from the
date of filing, the justification for the same would have to be specifically brought out
in the scheme and it should not be against public interest.
(d) The scheme may identify the 'appointed date' based on the occurrence of a trigger
event which is key to the proposed scheme and agreed upon by the parties to the
scheme. This event would have to be indicated in the scheme itself upon occurrence
of which the scheme would become effective. However, in case of such event based

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date being a date subsequent to the date of filing the order with the Registrar under
section 232(5), the company shall file an intimation of the same with the Registrar
within 30 days of such scheme coming into force.
3. Enforcement of section 230(11) and 230(12): Government of India through Ministry of
Corporate Affairs vide notification dated 3rd February, 2020, appoints 3rd day of February,
2020 as the date on which the provisions of sub-sections (11) and (12) of section 230 of
the said Act shall come into force.
CHAPTER 8: PREVENTION OF OPPRESSION AND MISMANAGEMENT
1. Enforcement of the National Company Law Tribunal (Second Amendment) Rules,
2019 vide Notification G.S.R. 351(E) dated 8th May, 2019
The Central Government makes the National Company Law Tribunal (Second Amendment)
Rules, 2019 to amend the National Company Law Tribunal Rules, 2016.
In National Company Law Tribunal Rules, 2016,
In rule 84, after sub-rule (2), the following sub-rules shall be inserted, namely: –
“(3) In case of a company having a share capital, the requisite number of member or
members to file an application under sub-section (1) of section 245 shall be -
(i) (a) at least five per cent. of the total number of members of the company ; or
(b) one hundred members of the company,
whichever is less; or
(ii) (a) member or members holding not less than five per cent. of the issued
share capital of the company, in case of an unlisted company;
(b) member or members holding not less than two per cent. of the issued share
capital of the company, in case of a listed company.
(4) The requisite number of depositor or depositors to file an application under sub -
section (1) of section 245 shall be -
(i) (a) at least five per cent. of the total number of depositors of the company;
or
(b) one hundred depositors of the company,
whichever is less; or
(ii) depositor or depositors to whom the company owes five per cent. of total
deposits of the company.”

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2. Amendments through the Companies (Amendment) Act, 2019

Relevant Amendment Date of
Section Enforcement
Amendment (a) in sub-section (2), the following proviso is 15th August,
of Section inserted, namely:— 2019
241 “Provided that the applications under this sub-
section, in respect of such company or class of
companies, as may be prescribed, shall be made
before the Principal Bench of the Tribunal which
shall be dealt with by such Bench.”;
(b) New insertion of sub-sections (3),(4) & (5) after
sub-section (2), namely:—
“(3) Where in the opinion of the Central Government
there exist circumstances suggesting that––
(a) any person concerned in the conduct and
management of the affairs of a company is or has
been in connection therewith guilty of fraud,
misfeasance, persistent negligence or default in
carrying out his obligations and functions under
the law or of breach of trust;
(b) the business of a company is not or has not been
conducted and managed by such person in
accordance with sound business principles or
prudent commercial practices;
(c) a company is or has been conducted and
managed by such person in a manner which is
likely to cause, or has caused, serious injury or
damage to the interest of the trade, industry or
business to which such company pertains; or
(d) the business of a company is or has been
conducted and managed by such person with
intent to defraud its creditors, members or any
other person or otherwise for a fraudulent or
unlawful purpose or in a manner prejudicial to
public interest,
the Central Government may initiate a case
against such person and refer the same to the
Tribunal with a request that the Tribunal may
inquire into the case and record a decision as to
whether or not such person is a fit and proper
person to hold the office of director or any other

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office connected with the conduct and

management of any company.
(4) The person against whom a case is referred to
the Tribunal under sub-section (3), shall be
joined as a respondent to the application.
(5) Every application under sub-section (3)––
(a) shall contain a concise statement of such
circumstances and materials as the Central
Government may consider necessary for the
purposes of the inquiry; and
(b) shall be signed and verified in the manner
laid down in the Code of Civil Procedure,
1908, for the signature and verification of a
plaint in a suit by the Central Government.”.
Amendment New insertion sub-section 4A After sub-section (4), , 15th August,
of Section namely:–– 2019
242 “(4A) At the conclusion of the hearing of the case in
respect of sub-section (3) of section 241, the Tribunal
shall record its decision stating therein specifically as
to whether or not the respondent is a fit and proper
person to hold the office of director or any other office
connected with the conduct and management of any
company.”.
Amendment (a) new insertion of sub-section 1A & 1B after sub- 15th August,
of Section section (1), shall be inserted,:— 2019
243 “(1A) The person who is not a fit and proper
person pursuant to sub-section (4A) of section
242 shall not hold the office of a director or any
other office connected with the conduct and
management of the affairs of any company for a
period of five years from the date of the said
decision:
Provided that the Central Government may, with
the leave of the Tribunal, permit such person to
hold any such office before the expiry of the said
period of five years.
(1B) Notwithstanding anything contained in any
other provision of this Act, or any other law for the
time being in force, or any contract, memorandum
or articles, on the removal of a person from the
office of a director or any other office connected
with the conduct and management of the affairs of

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the company, that person shall not be entitled to,

or be paid, any compensation for the loss or
termination of office.”;
(b) in sub-section (2), after the word, brackets and
figure “sub-section (1)”, the words, brackets,
figure and letter “or sub-section (1A)” shall be
inserted.
CHAPTER 10: WINDING UP
Amendments through the Companies (Amendment) Act, 2019
Relevant Amendment Date of
sections Enforcement
Amendment In sub-section (3), for the words, brackets and letter “or 15th August,
of Section clause (e) of that sub-section”, the words “of that 2019
272 section” shall be substituted.

CHAPTER 16: SPECIAL COURTS

1. Amendments through the Companies (Amendment) Act, 2017
Relevant sections Amendment
Amendment of section For section 435 of the principal Act, the following shall be
435. substituted, namely:—
(Establishment of 435. (1) The Central Government may, for the purpose of
Special Courts) providing speedy trial of offences under this Act, by
notification, establish or designate as many Special
Courts as may be necessary.
(2) A Special Court shall consist of—
(a) a single judge holding office as Session Judge or
Additional Session Judge, in case of offences
punishable under this Act with imprisonment of two
years or more; and
(b) a Metropolitan Magistrate or a Judicial Magistrate
of the First Class, in the case of other offences,
who shall be appointed by the Central Government with the
concurrence of the Chief Justice of the High Court within
whose jurisdiction the judge to be appointed is working.".
Amendment of section In section 438 of the principal Act, for the words "deemed to
438 (Application of be a Court of Session", the words "deemed to be a Court of
Code to proceedings Session or the court of Metropolitan Magistrate or a Judicial
before Special court)

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Magistrate of the First Class, as the case may be," shall be

substituted.
Amendment of section In section 439 of the principal Act, in sub-section (2), after the
439 (Offences to be words "a shareholder", the words "or a member" shall be
non-cognizable). inserted.
Amendment of section In section 440 of the principal Act, for the words "Court of
440 (Transitional Session", at both the places, the words "Court of Session or
provisions). the Court of Metropolitan Magistrate or a Judicial Magistrate
of the First Class, as the case may be" shall be substituted.
2. Amendments through the Companies (Amendment) Act, 2019
Relevant Amendment Date of Enforcement
sections
Amendment In section 446B of the principal Act, for the 2nd November, 2018
of section portion beginning with “punishable with
446B. fine” and ending with “specified in such
sections”, the words “liable to a penalty
which shall not be more than one half of
the penalty specified in such sections”
shall be substituted.

CHAPTER 17: MISCELLANEOUS PROVISIONS

1. Enforcement of the Companies (Registered Valuers and Valuation) Second
Amendment Rules, 2018 vide Notification G.S.R. 559(E) dated 13th June, 2018
The Central Government makes the Companies (Registered Valuers and Valuation)
Second Amendment Rules, 2018 to amend the Companies (Registered Valuers and
Valuation) Rules, 2017.
In Companies (Registered Valuers and Valuation) Rules, 2017, in rule 19 which relates
to Committee to advise on valuation matters, in sub-rule 2, after clause (g), the following
clause shall be inserted, namely:-
“(h) Presidents of, the Institute of Chartered Accountants of India, the Institute of Company
Secretaries of India, the Institute of Cost Accountants of India as ex-officio members.”.
2. Enforcement of the Companies (Registered Valuers and Valuation) Third
Amendment Rules, 2018 vide Notification G.S.R. G.S.R. 925(E) dated
25th September, 2018
The Central Government makes the Companies (Registered Valuers and Valuation) Third
Amendment Rules, 2018 to amend the Companies (Registered Valuers and Valuation)
Rules, 2017.

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In the Companies (Registered Valuers and Valuation) Rules, 2017,

(i) in rule 11 i.e., related to Transitional Arrangement, for the figures, letters and word
“30thSeptember, 2018” occurring at both the places, the figures, letters and word “31st
January, 2019” shall be substituted.
(ii) In the said rules, in rule 14 i.e., related to Conditions of Recognition, in clause (f),
for the words “one year”, the words “two years” shall be substituted.
3. Enforcement of the Companies (Registered Valuers and Valuation) Fourth
Amendment Rules, 2018 vide Notification G.S.R.1108 (E) dated 13th November 2018
The Central Government makes the Companies (Registered Valuers and Valuation) Fourth
Amendment Rules, 2018 to amend the Companies (Registered Valuers and Valuation)
Rules, 2017.
In the Companies (Registered Valuers and Valuation) Rules, 2017 (hereinafter referred to
as “the said rules”)
(i) in rule 1, -
(a) for the marginal heading, the following marginal heading shall be substituted,
namely:-
“Short title, commencement and application”;
(b) after sub-rule (2), the following sub-rule shall be inserted, namely:-
“(3) These rules shall apply for valuation in respect of any property, stocks,
shares, debentures, securities or goodwill or any other assets or net worth of a
company or its liabilities under the provision of the Act or these rules.
Explanation.- It is hereby clarified that conduct of valuation under any other law other
than the Act or these rules by any person shall not be affected by virtue of coming
into effect of these rules.”.
(ii) In the said rules, in rule 3, in sub-rule (2), -
(a) in clause (a), the word “not” shall be omitted;
(b) in clause (c), after the brackets and letter “(e)”, the brackets and letter “(f),” shall
be inserted.
(iii) In the said rules, in rule 4,-
(a) in clause (c), the words, brackets and letters “and having qualification mentioned
at clause (a) or (b)” shall be omitted;
(b) in Explanation II, the words “and examination or training” shall be omitted;
(c) after Explanation II, the following Explanation shall be inserted, namely :-

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“Explanation III.─ For the purposes of this rule and Annexure IV, ‘equivalent’ shall
mean professional and technical qualifications which are recognised by the Ministry
of Human Resources and Development as equivalent to professional and technical
degree.”.
(iv) In the said rules, in rule 10, the words “and he may conduct valuation as per these
rules if required under any other law or by any other regulatory authority” shall be
omitted.
(v) In the said rules, in rule 12, in sub-rule (1), in clause (ii), for the words “a professional
institute”, the words “it is a professional institute” shall be substituted.
4. Enforcement of the Companies (Adjudication of Penalties) Amendment Rules, 2019
vide Notification G.S.R. 131(E) dated 19 th February, 2019
The Central Government makes the Companies (Adjudication of Penalties)
Amendment Rules, 2019 to amend the Companies (Adjudication of Penalties) Rules,
2014.
In the Companies (Adjudication of Penalties) Rules, 2014, for Rule 3, the following rule
shall be substituted:
“3. Adjudication of Penalties. - (1) The Central Government may appoint any of its
officers, not below the rank of Registrar, as adjudicating officers for adjudging penalty
under the provisions of the Act.
(2) Before adjudging penalty, the adjudicating officer shall issue a written notice in the
specified manner, to the company, the officer who is in default or any other person, as the
case may be, to show cause, within such period as may be specified in the notice (not
being less than 15 days and more than 30 days from the date of service thereon), why the
penalty should not be imposed on it or him.
(3) Every notice issued under sub-rule (2), shall clearly indicate the nature of non-
compliance or default under the Act alleged to have been committed or made by such
company, officer in default, or any other person, the company, and each of the officers in
default, or the other person. as the case may be and also draw attention to the relevant
penal provisions of the Act and the maximum penalty which can be imposed on the
company, and each of the officers in default, or the other person.
(4) The reply to such notice shall be filed in electronic mode only within the period as
specified in the notice.
However, the adjudicating officer may, for reasons to be recorded in writing, extend the
period referred to above by a further period not exceeding 15 days, if the company or
officer in default or any person as the case may be, satisfies the adjudicating officer that it
or he has sufficient cause for not responding to the notice within the stipulated period or

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the adjudicating officer has reason to believe that the company or the officer or the person
has received a shorter notice and did not have reasonable time to give reply.
(5) If, after considering the reply submitted by such company, its officer, or any other
person, as the case may be, the adjudicating officer is of the opinion that physical
appearance is required, he shall issue a notice, within a period of 10 working days from
the date of receipt of reply fixing a date for the appearance of such company, through its
authorised representative, or officer of such company, or any other person, whether
personally or through his authorised representative.
If any person, to whom a notice is issued under sub-rule (2), desires to make an oral
representation, whether personally or through his authorised representative and has
indicated the same while submitting his reply in electronic mode, the adjudicating officer
shall allow such person to make such representation after fixing a date of appear ance.
(6) On the date fixed for hearing and after giving a reasonable opportunity of being heard
to the person concerned, the adjudicating officer may, subject to reasons to be recorded
in writing, pass any order in writing as he thinks fit including an order for adjournment:
Provided that after hearing, adjudicating officer may require the concerned person to
submit his reply in writing on certain other issues related to the notice under sub-rule (2),
relevant for determination of the default.
(7) The adjudicating officer shall pass an order,-
(a) within 30 days of the expiry of the period referred in sub-rule (2) or of such extended
period as referred therein, where physical appearance was not required under sub-
rule (5);
(b) within 90 days of the date of issue of notice under sub-rule (2), where any person
appeared before the adjudicating officer under sub-rule (5):
Provided that in case an order is passed after the aforementioned duration, the reasons of
the delay shall be recorded by the adjudicating officer and no such order shall be invalid
merely because of its passing after the expiry of such 30 days or 90 days as the case may
be.
(8) Every order of the adjudicating officer shall be duly dated and signed by him and shall
clearly state the reasons for requiring the physical appearance under sub-rule (5).
(9) The adjudicating officer shall send a copy of the order passed by him to the concerned
company, officer who is in default or any other person or all of them and to the Central
Government and a copy of the order shall also be uploaded on the website.
(10) For the purposes of this rule, the adjudicating officer shall exercise the following
powers, namely:-
(a) to summon and enforce the attendance of any person acquainted with the facts and
circumstances of the case after recording reasons in writing;

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(b) to order for evidence or to produce any document, which in the opinion of the
adjudicating officer, may be relevant to the subject matter.
(11) If any person fails to reply or neglects or refuses to appear as required under sub-
rule (5) or sub-rule (10) before the adjudicating officer, the adjudicating officer may pass
an order imposing the penalty, in the absence of such person after recording the reasons
for doing so.
(12) While adjudging quantum of penalty, the adjudicating officer shall have due regard
to the following factors, namely:-
(a) size of the company;
(b) nature of business carried on by the company;
(c) injury to public interest;
(d) nature of the default;
(e) repetition of the default;
(f) the amount of disproportionate gain or unfair advantage, wherever quantifiable, made
as a result of the default; and
(g) the amount of loss caused to an investor or group of investors or creditors as a result
of the default:
However, in no case, the penalty imposed shall be less than the minimum penalty
prescribed, if any, under the relevant section of the Act.
(13) In case a fixed sum of penalty is provided for default of a provision, the adjudicating
officer shall impose that fixed sum, in case of any default therein.
(14) Penalty shall be paid through Ministry of Corporate Affairs portal only.
(15) All sums realised by way of penalties under the Act shall be credited to the
Consolidated Fund of India.
5. Amendments through the Companies (Amendment) Act, 2019
Relevant Amendment Date of Enforcement
sections
Amendment In section 248 of the principal Act, in 2nd November, 2018
of section sub-section (1),—
248 (i) in clause (c), for the word and
figures “section 455,”, the words
and figures “section 455; or” shall
be substituted;

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(ii) after clause (c) and before the long

line, the following clauses shall be
inserted, namely:—
“(d) the subscribers to the
memorandum have not paid
the subscription which they
had undertaken to pay at the
time of incorporation of a
company and a declaration to
this effect has not been filed
within one hundred and eighty
days of its incorporation
under sub-section (1) of
section 10A; or
(e) the company is not carrying
on any business or
operations, as revealed after
the physical verification
carried out under sub-section
(9) of section 12.”.
Amendment In section 447 of the principal Act, in the 2nd November, 2018
of section second proviso, for the words “twenty
447. lakh rupees”, the words “fifty lakh
rupees” shall be substituted.
Amendment of In section 454 of the principal Act, — 2nd November, 2018
section 454
(i) for sub-section (3), the following
sub-section shall be substituted,
namely: —
“(3) The adjudicating officer may, by an
order
(a) impose the penalty on the
company, the officer who is in
default, or any other person,
as the case may be, stating
therein any non-compliance
or default under the relevant
provisions of this Act; and
(b) direct such company, or
officer who is in default, or

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any other person, as the case

may be, to rectify the default,
wherever he considers fit.”;
(ii) in sub-section (4), for the words
“such company and the officer who
is in default”, the words “such
company, the officer who is in
default or any other person” shall
be substituted;
(iii) in sub-section (8),—
(a) in clause (i), for the words
“does not pay the penalty
imposed by the adjudicating
officer or the Regional
Director”, the words, brackets
and figures “fails to comply
with the order made under
sub-section (3) or sub-section
(7), as the case may be,” shall
be substituted;
(b) in clause (ii)—
(i) for the words “Where an
officer of a company”,
the words “Where an
officer of a company or
any other person” shall
be substituted;
(ii) for the words “does not
pay the penalty”, the
words, brackets and
figures “fails to comply
with the order made
under sub-section (3) or
sub-section (7), as the
case may be,” shall be
substituted.
Insertion of After section 454 of the principal Act, the 2nd November, 2018
new section following section shall be inserted,
454A. namely:

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Penalty for repeated default.

“454A. Where a company or an officer of
a company or any other person having
already been subjected to penalty for
default under any provisions of this Act,
again commits such default within a
period of three years from the date of
order imposing such penalty passed by
the adjudicating officer or the Regional
Director, as the case may be, it or he
shall be liable for the second or
subsequent defaults for an amount
equal to twice the amount of penalty
provided for such default under the
relevant provisions of this Act.”.

6. Amendment in Section 406: Section 406 has been substituted by the Companies
(Amendment) Act, 2017, with effect from 15th August, 2019
Section 406: (1) In this section, "Nidhi" or "Mutual Benefit Society" means a company
which the Central Government may, by notification in the Official Gazette, declare to be a
Nidhi or Mutual Benefit Society, as the case may be.
(2) The Central Government may, by notification in the Official Gazette, direct that an y
of the provisions of this Act specified in the notification—
(a) shall not apply to any Nidhi or Mutual Benefit Society; or
(b) shall apply to any Nidhi or Mutual Benefit Society with such exceptions,
modifications and adaptations as may be specified in the notification.
(3) A copy of every notification proposed to be issued under sub-section (2), shall be laid
in draft before each House of Parliament, while it is in session, for a total period of
thirty days, and if, both Houses agree in disapproving the issue of notification or both
Houses agree in making any modification in the notification, the notification shall not
be issued or, as the case may be, shall be issued only in such modified form as may
be agreed upon by both the Houses.
(4) In reckoning any such period of thirty days as is referred to in sub-section (3), no
account shall be taken of any period during which the House referred to in sub-section
(3) is prorogued or adjourned for more than four consecutive days.
(5) The copies of every notification issued under this section shall, as soon as may be
after it has been issued, be laid before each House of Parliament.
7. Enforcement of the Nidhi (Amendment) Rules, 2019 via G.S.R. 467(E) dated
15th August, 2019

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The Central Government makes the Nidhi (Amendment) Rules, 2019 to amend Nidhi Rules,
2014. In the Nidhi rules, 2014 (hereinafter referred to as “said rules”):
Sl. Nidhi rules, 2014 Amendment vide Nidhi (Amendment) Rules,
No. 2019
1. In rule 2, after clause (c) Insertion of clause (d), namely:-
“(d) every company declared as Nidhi or Mutual
Benefit Society under sub-section (1) of section 406
of the Act”.
2. In rule 3, after clause (d) Following clause (da) is inserted:-
‘(da) “Nidhi” means a company which has been
incorporated as a Nidhi with the object of cultivating
the habit of thrift and savings amongst its members,
receiving deposits from, and lending to, its members
only, for their mutual benefit, and which complies
with the rules made by the Central Government for
regulation of such class of companies.’
3. After rule 3 New rule 3A is inserted:-
“3A. Declaration of Nidhis.─ The Central
Government, on receipt of application (in Form
NDH-4 along with fee thereon) of a public company
for declaring it as Nidhi and on being satisfied that
the company meets the requirements under these
rules, shall notify the company as a Nidhi in the
Official Gazette:
Provided that a Nidhi incorporated under the Act
on or after the commencement of the Nidhi
(Amendment) Rules, 2019 shall file Form NDH-4
within sixty days from the date of expiry of:-
(a) one year from the date of its incorporation; or
(b) the period up to which extension of time has
been granted by the Regional Director under
sub-rule (3) of rule 5:
Provided further that nothing in the first proviso
shall prevent a Nidhi from filing Form NDH-4 before
the period referred therein:
Provided also that that in case a company does not
comply with the requirements of this rule, it shall
not be allowed to file Form No. SH-7 (Notice to

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 46 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

Registrar of any alteration of share capital) and

Form PAS-3 (Return of Allotment).”
4. In rule 4 (i) in sub-rule (1), the words, “to be incorporated
under the Act” shall be omitted;
(ii) in sub-rule (5), the words “Company
incorporated as a” shall be omitted.
5. In rule 5
(i) in sub-rule (1), for (i) the words “from the date of its
the words “from the incorporation” shall be substituted;
commencement of
these rules”, (ii) the following proviso shall be inserted,
(ii) in sub-rule (3), namely:-
before the
Explanation, “Provided that the Regional Director may
extend the period upto one year from the date
of receipt of application.”.
(iii) in sub-rule (4), after
(iii) the words, brackets and figures “and gets itself
the words, brackets
declared under sub-section (1) of section 406”
and figure
shall be inserted.
“contained in sub-
rule (1)”,
6. In rule 7, in sub-rule (1), the words “fully paid up” shall be inserted.
after the words “shall
issue”
7. In rule 12
(i) in sub-rule (1) after (i)
the following clause (ba) shall be inserted
clause (b) namely:-
“(ba) The date of declaration or notification as
(ii) in sub-rule (2), in Nidhi”;”;
clause (a), for the (ii) the words “Bench of the National Company
words “Registrar of Law Tribunal” shall be substituted.
Companies”,
8. In the said rules, in rule
23, in sub-rule (2),-
(i) for the words (i) the words, “Central Government” shall be
“concerned substituted;
Regional Director”, (ii) the words, “Central Government” shall be
(ii) for the words “such substituted;
Regional Director”,

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 PAPER – 4 : CORPORATE AND ALLIED LAWS 47

(iii) in the proviso, for the (iii) the words, “Central Government” shall be
words “Regional substituted.
Director”,
9. After rule 23 following rules 23A & 23B shall be inserted,
namely:-
23A. Compliance with rule 3A by certain
Nidhis:- Every company referred to in clause (b)
of rule 2 and every Nidhi incorporated under the
Act, before the commencement of Nidhi
(Amendment) Rules, 2019, shall also get itself
declared as such in accordance with rule 3A within
a period of one year from the date of its
incorporation or within a period of six months from
the date of commencement of Nidhi (Amendment)
Rules, 2019, whichever is later:
Provided that in case a company does not comply
with the requirements of this rule, it shall not be
allowed to file Form No. SH-7 (Notice to Registrar
of any alteration of share capital) and Form PAS-3
(Return of Allotment).
23B. Companies declared as Nidhis under
previous company law to file Form NDH-4:-
Every company referred in clause (a) of rule 2 shall
file Form NDH-4 along with fees as per the
Companies (Registration Offices and Fees) Rules,
2014 for updating its status:
Provided that no fees shall be charged under this
rule for filing Form NDH-4, in case it is filed within
six month of the commencement of Nidhi
(Amendment) Rules, 2019:
Provided further that, in case a company does not
comply with the requirements of this rule, it shall
not be allowed to file Form No. SH-7 (Notice to
Registrar of any alteration of share capital) and
Form PAS-3 (Return of Allotment).
8. The Nidhi (Second Amendment) Rules, 2020
Vide Notification G.S.R. 114(E) dated 14th February, 2020, to further amend the Nidhi
Rules, 2014, said Rule have come into force on the date of their publication in the Official
Gazette.

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 48 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

Sl. No. Nidhi rules, 2014 Amendment vide Nidhi (Amendment)

Rules, 2019
1. in rule 23A, for the words “six the words “nine months” shall be
months” substituted
9. Ministry of Corporate Affairs issued Corrigendum vide notification G.S.R. 150(E)
dated 2nd March, 2020
W.r.t. to the notification 2G.S.R. 114(E) of the Government of India, dated the 14th
February, 2020, for “rule 23A” read “rule 23A and first proviso to rule 23B”.
CHAPTER 19: INSOLVENCY AND BANKRUPTCY CODE, 2016
(I) The Insolvency and Bankruptcy Code (Second Amendment) Act, 2018
Vide Notification dated 17 th August, 2018, Ministry of Law and Justice here by amended
the Insolvency and Bankruptcy Code, 2016 through the enforcement of the Insolvency and
Bankruptcy Code (Second Amendment) Act, 2018. With the enforcement of this
Amendment Act, the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 have
been repealed. This amendment Act is effective from 6th June, 2018.
Following are the relevant amendments:
(1) In section 3(12), in the Insolvency and Bankruptcy Code, 2016 (Principal Act), for the
word "repaid", the word "paid" shall be substituted.
(2) In section 5 of the principal Act,
(i) after clause (5) i.e., after the definition of Corporate applicant, the following
clause 5A shall be inserted, namely:—
'(5A) "corporate guarantor" means a corporate person who is the surety in a
contract of guarantee to a corporate debtor;’
(ii) in clause (8) prescribing the term “Financial Debt” in the Code, in sub-clause
(f), the following Explanation shall be inserted, namely:—
'Explanation.—For the purposes of this sub-clause,—
(i) any amount raised from an allottee under a real estate project shall be
deemed to be an amount having the commercial effect of a borrowing; and
(ii) the expressions, "allottee" and "real estate project" shall have the
meanings respectively assigned to them in clauses (d) and (zn) of section
2 of the Real Estate (Regulation and Development) Act, 2016;
(iii) in clause (12) i.e., as to the “Insolvency commencement date”, the following
proviso shall be inserted, namely:—

2 Given above in Point no. 8

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"Provided that where the interim resolution professional is not appointed in the
order admitting application under section 7, 9 or section 10, the insolvency
commencement date shall be the date on which such interim resolution
professional is appointed by the Adjudicating Authority;";
(iv) after clause (24), the following clause shall be inserted, namely:—
'(24A) "related party", in relation to an individual, means—
(a) a person who is a relative of the individual or a relative of the spouse of the
individual;
(b) a partner of a limited liability partnership, or a limited liability partnership or
a partnership firm, in which the individual is a partner;
(c) a person who is a trustee of a trust in which the beneficiary of the trust
includes the individual, or the terms of the trust confers a power on the
trustee which may be exercised for the benefit of the individual;
(d) a private company in which the individual is a director and holds along with
his relatives, more than two per cent. of its share capital;
(e) a public company in which the individual is a director and holds along with
relatives, more than two per cent. of its paid-up share capital;
(f) a body corporate whose board of directors, managing director or manager,
in the ordinary course of business, acts on the advice, directions or
instructions of the individual;
(g) a limited liability partnership or a partnership firm whose partners or
employees in the ordinary course of business, act on the advice, directions
or instructions of the individual;
(h) a person on whose advice, directions or instructions, the individual is
accustomed to act;
(i) a company, where the individual or the individual along with its related
party, own more than fifty per cent. of the share capital of the company or
controls the appointment of the board of directors of the company.
Explanation.—For the purposes of this clause,—
(a) "relative", with reference to any person, means anyone who is related to
another, in the following manner, namely:—
(i) members of a Hindu Undivided Family,
(ii) husband,
(iii) wife,
(iv) father,

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(v) mother,
(vi) son,
(vii) daughter,
(viii) son's daughter and son,
(ix) daughter's daughter and son,
(x) grandson's daughter and son,
(xi) granddaughter's daughter and son,
(xii) brother,
(xiii) sister,
(xiv) brother's son and daughter,
(xv) sister's son and daughter,
(xvi) father's father and mother,
(xvii) mother's father and mother,
(xviii)father's brother and sister,
(xix) mother's brother and sister, and
(b) wherever the relation is that of a son, daughter, sister or brother, their
spouses shall also be included;'
(3) In section 7(1) of the principal Act which deals with the initiation of CIRP by financial
creditor, for the words "other financial creditors", the words "other financial creditors,
or any other person on behalf of the financial creditor, as may be notified by the
Central Government," shall be substituted.
(4) In section 8(2) of the principal Act which deals with the Insolvency resolution by
operational creditor, following are the amendments—
(i) in clause (a), for the words "if any, and", the words "if any, or" shall be
substituted;
(ii) in clause (b), for the word "repayment", the word "payment" shall be substituted;
In the Explanation, for the word "repayment", the word "payment" shall be substituted.
(5) In section 9(3) of the principal Act, which states of the provision related to the filing
of an application for initiation of corporate insolvency resolution process by
operational creditor—
(i) in clause (c), for the words "by the corporate debtor; and", the words "by the
corporate debtor, if available;" shall be substituted;
(ii) for clause (d), the following clauses shall be substituted, namely:—

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"(d) a copy of any record with information utility confirming that there is no
payment of an unpaid operational debt by the corporate debtor, if available;
and
(e) any other proof confirming that there is no payment of an unpaid
operational debt by the corporate debtor or such other information, as may
be prescribed.";
(6) in section 9(5) of the principle Code which deals with the provision related to the
filing of an application for initiation of corporate insolvency resolution process by
operational creditor —
(a) in clause (i), in sub-clause (b), for the word "repayment", the word "payment"
shall be substituted;
(b) in clause (ii), in sub-clause (b), for the word "repayment", the word "payment"
shall be substituted.
(7) Section 10 (3) of the principal Act, deals with the initiation of corporate insolvency
resolution process by corporate applicant, shall be substituted with the following -
"(3) The corporate applicant shall, along with the application, furnish—
(a) the information relating to its books of account and such other documents
for such period as may be specified;
(b) the information relating to the resolution professional proposed to be
appointed as an interim resolution professional; and
(c) the special resolution passed by shareholders of the corporate debtor or
the resolution passed by at least three-fourth of the total number of partners
of the corporate debtor, as the case may be, approving filing of the
application.";
(8) In Section 10 (4) related to the initiation of corporate insolvency resolution process
by corporate applicant, following amendments have been made—
(i) in clause (a), after the words "if it is complete", the words "and no disciplinary
proceeding is pending against the proposed resolution professional" shall be
inserted;
(ii) in clause (b), after the words "if it is incomplete", the words "or any disciplinary
proceeding is pending against the proposed resolution professional" shall be
inserted.
(9) In section 12(2) of the principal Act, related to the time limit for completion of
corporate insolvency resolution process, for the word "seventy-five", the word "sixty-
six" shall be substituted.
(10) After section 12 of the principal Act, the section 12A shall be inserted-

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 52 FINAL (OLD) EXAMINATION: NOVEMBER, 2020

"12A. Withdrawal of application admitted under section 7, 9, or 10: The

Adjudicating Authority may allow the withdrawal of application admitted under section
7 or section 9 or section 10, on an application made by the applicant with the approval
of ninety per cent. voting share of the committee of creditors, in such manner as may
be specified."
(11) Section 14(3) of the principal Act which deals with the moratorium, shall be
substituted, with the following—
"(3) The provisions of sub-section (1) shall not apply to—
(a) such transaction as may be notified by the Central Government in
consultation with any financial regulator;
(b) a surety in a contract of guarantee to a corporate debtor.".
(12) In section 15(1)(c) of the principal Act which deals with the provisions related to the
public announcement, for the word "claims", the words "claims, as may be specified"
shall be substituted.
(13) In section 16(5) of the principal Act which is related to the appointment and tenure
of interim resolution professional, for the words "shall not exceed thirty days from date
of his appointment", the words and figures "shall continue till the date of appointment
of the resolution professional under section 22" shall be substituted.
(14) In section 17(2)(d) of the principal Act which deals with the management of affairs of
corporate debtor by IRP, for the words "may be specified.", the words "may be
specified; and" shall be substituted;
(15) After section 17(2)(d) which deals with the management of affairs of corporate
debtor by IRP, the following section 17(2)(e), shall be inserted,
"(e) be responsible for complying with the requirements under any law for the time
being in force on behalf of the corporate debtor."
(16) In section 21 of the principal Act, which deals with the committee of creditors,
following are the relevant amendments —
(i) in sub-section (2), — in the proviso, for the words "related party to whom a
corporate debtor owes a financial debt", the words, brackets, figures and letter
"financial creditor or the authorised representative of the financial creditor
referred to in sub-section (6) or sub-section (6A) or sub-section (5) of section
24, if it is a related party of the corporate debtor," shall be substituted;
(ii) after this proviso under sub-section (2), the following proviso is inserted-
"Provided further that the first proviso shall not apply to a financial creditor,
regulated by a financial sector regulator, if it is a related party of the corporate
debtor solely on account of conversion or substitution of debt into equity shares
or instruments convertible into equity shares, prior to the insolvency
commencement date.";

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(iii) Insertion of new sub-section 6(A) & 6(B) after sub-section (6)-
"(6A) Where a financial debt—
(a) is in the form of securities or deposits and the terms of the financial debt
provide for appointment of a trustee or agent to act as authorised
representative for all the financial creditors, such trustee or agent shall act
on behalf of such financial creditors;
(b) is owed to a class of creditors exceeding the number as maybe specified,
other than the creditors covered under clause (a) or sub-section (6), the
interim resolution professional shall make an application to the
Adjudicating Authority along with the list of all financial creditors, containing
the name of an insolvency professional, other than the interim resolution
professional, to act as their authorised representative who shall be
appointed by the Adjudicating Authority prior to the first meeting of the
committee of creditors;
(c) is represented by a guardian, executor or administrator, such person shall
act as authorised representative on behalf of such financial creditors,
and such authorised representative under clause (a) or clause (b) or clause
(c) shall attend the meetings of the committee of creditors, and vote on
behalf of each financial creditor to the extent of his voting share.
(6B) The remuneration payable to the authorised representative—
(i) under clauses (a) and (c) of sub-section (6A), if any, shall be as per
the terms of the financial debt or the relevant documentation; and
(ii) under clause (b) of sub-section (6A) shall be as specified which shall
form part of the insolvency resolution process costs.";
(iv) for sub-sections (7) and (8), the following sub-sections shall be substituted,
namely:—
"(7) The Board may specify the manner of voting and the determining of the
voting share in respect of financial debts covered under sub-sections (6) and
(6A).
(8) Save as otherwise provided in this Code, all decisions of the committee of
creditors shall be taken by a vote of not less than fifty-one per cent. of voting
share of the financial creditors:
Provided that where a corporate debtor does not have any financial creditors,
the committee of creditors shall be constituted and shall comprise of such
persons to exercise such functions in such manner as may be specified."
(17) In section 22(2) of the principal Act, for the word, "seventy-five", the word "sixty-six"
shall be substituted;
(18) In section 23(1) of the principal Act, the following proviso shall be inserted-

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"Provided that the resolution professional shall, if the resolution plan under sub-
section (6) of section 30 has been submitted, continue to manage the operations of
the corporate debtor after the expiry of the corporate insolvency resolution process
period until an order is passed by the Adjudicating Authority under section 31."
(19) In section 24(3) of the principal Act, in clause (a), for the words "Committee of
creditors", the words, brackets, figures and letter "committee of creditors, including
the authorised representatives referred to in sub-sections (6) and (6A) of section 21
and sub-section (5)" shall be substituted;
(20) Insertion of new section 25A which deals with the Rights and duties of authorised
representative of financial creditors.
'25A. (1) Right to participate and Vote on behalf of FC: The authorised
representative(AR) under section 21(6) & 21(6A) or section 24(5) shall have the right
to participate and vote in meetings of the committee of creditors on behalf of the
financial creditor(FC) he represents in accordance with the prior voting instructions of
such creditors obtained through physical or electronic means.
Duty of AR to circulate agenda & minutes to FC: It shall be the duty of the
authorised representative to circulate the agenda and minutes of the meeting of the
committee of creditors to the financial creditor he represents.
AR to act on instruction of FC: The authorised representative shall not act against
the interest of the financial creditor he represents and shall always act in accordance
with their prior instructions:
Provided that if the authorised representative represents several financial creditors,
then he shall cast his vote in respect of each financial creditor in accordance with
instructions received from each financial creditor, to the extent of his voting share:
Provided further that if any financial creditor does not give prior instructions through
physical or electronic means, the authorised representative shall abstain from voting
on behalf of such creditor.
To ensure recording of instruction by IRP/RP: The authorised representative shall
file with the committee of creditors any instructions received by way of physical or
electronic means, from the financial creditor he represents, for voting in accordance
therewith, to ensure that the appropriate voting instructions of the financial creditor
he represents is correctly recorded by the interim resolution professional or resolution
professional, as the case may be.
(21) Amendment in section 27(2) of the principal Act which deals with the Replacement
of Resolution Professional (RP) by Committee of creditors (CoC): This sub-section is
substituted with the following provision-
“The committee of creditors may, at a meeting, by a vote of sixty-six per cent. of voting
shares, resolve to replace the resolution professional appointed under section 22 with

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another resolution professional, subject to a written consent from the proposed

resolution professional in the specified form."
(22) Amendment in section 28(3) of the principal Act which deals with the approval of
committee of creditors for certain actions, for the word, "seventy-five", the word "sixty-
six" shall be substituted.
(23) Amendment in Section 29 A, dealt with the persons not eligible to be resolution
applicant came into enforcement on 23rd day of November 2017 through the
enforcement of Insolvency and Bankruptcy Code (Amendment) Act, 2018 vide
notification dated 19th January, 2018.
(i) in clause (c),—
(a) for the words "has an account,", the words "at the time of submission of the
resolution plan has an account," shall be substituted;
(b) after the words and figures "the Banking Regulation Act, 1949", the words
"or the guidelines of a financial sector regulator issued under any other law
for the time being in force," shall be inserted;
(c) after the proviso, the following shall be inserted, namely:—'Provided further
that nothing in this clause shall apply to a resolution applicant where such
applicant is a financial entity and is not a related party to the corporate
debtor.
The expression "related party" here shall not include a financial entity,
regulated by a financial sector regulator, if it is a financial creditor of the
corporate debtor and is a related party of the corporate debtor solely on
account of conversion or substitution of debt into equity shares or
instruments convertible into equity shares, prior to the insolvency
commencement date.
For the purposes of this clause, where a resolution applicant has an
account, or an account of a corporate debtor under the management or
control of such person or of whom such person is a promoter, classified as
non-performing asset and such account was acquired pursuant to a prior
resolution plan approved under this Code, then, the provisions of this
clause shall not apply to such resolution applicant for a period of three
years from the date of approval of such resolution plan by the Adjudicating
Authority under this Code;
(ii) for clause (d), the following clause shall be substituted, namely:—
"(d) has been convicted for any offence punishable with imprisonment—
(i) for two years or more under any Act specified under the Twelfth Schedule; or
(ii) for seven years or more under any other law for the time being in force:

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Provided that this clause shall not apply to a person after the expiry of a period
of two years from the date of his release from imprisonment:
Provided further that this clause shall not apply in relation to a connected person
referred to in clause (iii) of Explanation I;"
(iii) in clause (e), the following proviso shall be inserted, namely:—
"Provided that this clause shall not apply in relation to a connected person
referred to in clause (iii) of Explanation I;";
(iv) in clause (g), the following proviso shall be inserted, namely:—
"Provided that this clause shall not apply if a preferential transaction,
undervalued transaction, extortionate credit transaction or fraudulent transaction
has taken place prior to the acquisition of the corporate debtor by the resolution
applicant pursuant to a resolution plan approved under this Code or pursuant to
a scheme or plan approved by a financial sector regulator or a court, and such
resolution applicant has not otherwise contributed to the preferential transaction,
undervalued transaction, extortionate credit transaction or fraudulent
transaction;"
(v) in clause (h), —
(a) for the words "an enforceable guarantee", the words "a guarantee" shall be
substituted;
(b) after the words "under this Code", the words "and such guarantee has been
invoked by the creditor and remains unpaid in full or part" shall be inserted;
(vi) in clause (i), for the words "has been", the word "is" shall be substituted;
(vii) the Explanation occurring after clause (j) shall be numbered as
Explanation I, and in Explanation I as so numbered, for the proviso, the following
provisos shall be substituted, namely:—
'Provided that nothing in clause (iii) of Explanation I shall apply to a resolution
applicant where such applicant is a financial entity and is not a related party of
the corporate debtor:
Provided further that the expression "related party" shall not include a financial
entity, regulated by a financial sector regulator, if it is a financial creditor of the
corporate debtor and is a related party of the corporate debtor solely on account
of conversion or substitution of debt into equity shares or instruments convertible
into equity shares, prior to the insolvency commencement date;';
(viii) after Explanation I as so numbered, the following Explanation shall be inserted,
namely:—
'Explanation II—For the purposes of this section, "financial entity" shall mean
the following entities which meet such criteria or conditions as the Central

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Government may, in consultation with the financial sector regulator, notify in this
behalf, namely:—
(a) a scheduled bank;
(b) any entity regulated by a foreign central bank or a securities market
regulator or other financial sector regulator of a jurisdiction outside India
which jurisdiction is compliant with the Financial Action Task Force
Standards and is a signatory to the International Organisation of Securities
Commissions Multilateral Memorandum of Understanding;
(c) any investment vehicle, registered foreign institutional investor, registered
foreign portfolio investor or a foreign venture capital investor, where the
terms shall have the meaning assigned to them in regulation 2 of the
Foreign Exchange Management (Transfer or Issue of Security by a Person
Resident Outside India) Regulations, 2017 made under the Foreign
Exchange Management Act, 1999.
(d) an asset reconstruction company registered with the Reserve Bank of India
under section 3 of the Securitisation and Reconstruction of Financial
Assets and Enforcement of Security Interest Act, 2002;
(e) an Alternate Investment Fund registered with the Securities and Exchange
Board of India;
(f) such categories of persons as may be notified by the Central Government.'.
(24) Amendment in section 30: The said section deals with the submission of resolution
plan. Following are the amendments-
(i) in sub-section (1), after the words "resolution plan", the words, figures and letter
"along with an affidavit stating that he is eligible under section 29A" shall be
inserted;
(ii) in sub-section (2),—
(a) in clauses (a) and (b), for the word "repayment" at both the places where it
occurs, the word "payment" shall be substituted;
(b) after clause (f), the following Explanation shall be inserted, namely:—
"Explanation.—For the purposes of clause (e), if any approval of
shareholders is required under the Companies Act, 2013 or any other law
for the time being in force for the implementation of actions under the
resolution plan, such approval shall be deemed to have been given and it
shall not be a contravention of that Act or law.";
(iii) in sub-section (4),—
(a) for the word "seventy-five", the word "sixty-six" shall be substituted;
(b) after the third proviso, the following proviso shall be inserted,

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namely:—
"Provided also that the eligibility criteria in section 29A as amended by the
Insolvency and Bankruptcy Code (Amendment) Ordinance, 2018 shall
apply to the resolution applicant who has not submitted resolution plan as
on the date of commencement of the Insolvency and Bankruptcy Code
(Amendment) Ordinance, 2018."
25. Amendment in section 31 of the principal Act, which deals with the approval of
resolution plan—
(a) in sub-section (1), the following proviso shall be inserted, namely:—
"Provided that the Adjudicating Authority shall, before passing an order for
approval of resolution plan under this sub-section, satisfy that the resolution plan
has provisions for its effective implementation."
(b) after sub-section (3), the following sub-section shall be inserted namely:—
"(4) The resolution applicant shall, pursuant to the resolution plan approved
under sub-section (1), obtain the necessary approval required under any law for
the time being in force within a period of one year from the date of approval of
the resolution plan by the Adjudicating Authority under sub-section (1) or within
such period as provided for in such law, whichever is later:
Provided that where the resolution plan contains a provision for combination, as
referred to in section 5 of the Competition Act, 2002, the resolution applicant
shall obtain the approval of the Competition Commission of India under that Act
prior to the approval of such resolution plan by the committee of creditors."
26. Amendment made in section 33(2) of the principal Act. This section deals with the
initiation of liquidation process. Amendments made is that after the words "d ecision
of the committee of creditors", the words "approved by not less than sixty-six per cent.
of the voting share" shall be inserted.
27. In section 34 of the principal Act, which states of appointment of liquidator and fee
to be paid, following amendments are made—
a. in sub-section (1), for the words and figures "Chapter II shall", the words and
figures "Chapter II shall, subject to submission of a written consent by the
resolution professional to the Adjudicatory Authority in specified form," shall be
substituted;
b. in sub-section (4),—
i. in clause (b), for the words "in writing", the words "in writing; or" shall be
substituted;
ii. after clause (b), the following clause shall be inserted, namely:—
"(c) the resolution professional fails to submit written consent under sub-
section (1).";

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c. in sub-section (5), for the word, brackets and letter "clause (a)", the words,
brackets and letters "clauses (a) and (c)" shall be substituted;
d. in sub-section (6), after the words "another insolvency professional", the words
"along with written consent from the insolvency professional in the specified
form," shall be inserted.
28. In section 42 of the principal Act, which deals with the provisions related to the appeal
against the decision of liquidator, after the words "of the liquidator", the words
"accepting or" shall be inserted.
29. In section 45(1) of the principal Act, which deals with the Avoidance of undervalued
transactions, the words and figures "of section 43" shall be omitted.
(II) Usage of the word “any other person on behalf of the financial creditor, as may be
notified by the Central Government” under section 7(1) of the IBC has been clarified by
notification issued by Ministry of Corporate Affairs. Vide Notification S.O. 1091(E), dated
27th February, 2019, the Central Government hereby notifies following persons who may
file an application for initiating corporate insolvency resolution process against a corporate
debtor before the Adjudicating Authority, on behalf of the financial creditor: -
(i) a guardian;
(ii) an executor or administrator of an estate of a financial creditor;
(iii) a trustee (including a debenture trustee); and
(v) a person duly authorised by the Board of Directors of a Company.
(III) The Insolvency and Bankruptcy Code (Amendment) Act, 2019
Ministry of Corporate Affairs vide Notification S.O. 2953(E) dated 16th August, 2019, in
exercise of the powers conferred by sub-section (2) of section 1 of the Insolvency and
Bankruptcy Code (Amendment) Act, 2019, the Central Government hereby appoints the
date of publication of this notification in the Official Gazette as the date on which the
provisions of the said Act shall come into force.
Following are the relevant amendments:
(i) In section 5(26) pertaining to the definition “resolution plan”, following explanation is
added.
“Explanation.—For the removal of doubts, it is hereby clarified that a resolution plan
may include provisions for the restructuring of the corporate debtor, including by way
of merger, amalgamation and demerger;”
(ii) In section 7(4) of the Code, following proviso shall be inserted:
“Provided that if the Adjudicating Authority has not ascertained the existence of
default and passed an order under sub-section (5) within such time, it shall record its
reasons in writing for the same.”

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(iii) In section 12which deals with the Time-limit for completion of insolvency resolution
process. – Following provisos have been added after the proviso to section 3:
“Provided further that the corporate insolvency resolution process shall mandatorily
be completed within a period of three hundred and thirty days from the insolvency
commencement date, including any extension of the period of corporate insolvency
resolution process granted under this section and the time taken in legal proceedings
in relation to such resolution process of the corporate debtor:
Provided also that where the insolvency resolution process of a corporate debtor is
pending and has not been completed within the period referred to in the second
proviso, such resolution process shall be completed within a period of ninety days
from the date of commencement of the Insolvency and Bankruptcy Code
(Amendment) Act, 2019”.
(iv) In section 25A after sub-section 3, following sub-section shall be added:
“(3A) Notwithstanding anything to the contrary contained in sub-section (3), the
authorised representative under sub-section (6A) of section 21 shall cast his vote on
behalf of all the financial creditors he represents in accordance with the decision
taken by a vote of more than fifty per cent, of the voting share of the financial creditors
he represents, who have cast their vote:
Provided that for a vote to be cast in respect of an application under section 12 A,
the authorised representative shall cast his vote in accordance with the provisions of
sub-section (3).”
(v) In section 30(2)(b), the following shall be substituted:
(b) provides for the payment of debts of operational creditors in such manner as
may be specified by the Board which shall not be less than—
(i) the amount to be paid to such creditors in the event of a liquidation of the
corporate debtor under section 53; or
(ii) the amount that would have been paid to such creditors, if the amoun t to be
distributed under the resolution plan had been distributed in accordance with the
order of priority in sub-section (1) of section 53,
whichever is higher, and provides for the payment of debts of financial creditors, who
do not vote in favour of the resolution plan, in such manner as may be specified by
the Board, which shall not be less than the amount to be paid to such creditors in
accordance with sub-section (7) of section 53 in the event of a liquidation of the
corporate debtor.
Explanation 1.—For the removal of doubts, it is hereby clarified that a distribution in
accordance with the provisions of this clause shall be fair and equitable to such
creditors.

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Explanation 2.—For the purposes of this clause, it is hereby declared that on and
from the date of commencement of the Insolvency and Bankruptcy Code
(Amendment) Act, 2019, the provisions of this clause shall also apply to the corporate
insolvency resolution process of a corporate debtor—
(i) where a resolution plan has not been approved or rejected by the Adjudicating
Authority;
(ii) where an appeal has been preferred under section 61 or section 62 or such an
appeal is not time barred under any provision of law for the time being in force;
or
(iii) where a legal proceeding has been initiated in any court against the decision of
the Adjudicating Authority in respect of a resolution plan;”
(vi) In section 31(1) of the Code, after the words “members, creditors,” the following
words shall be inserted:
“including the Central Government, any State Government or any local authority to
whom a debt in respect of the payment of dues arising under any law for the time
being in force, such as authorities to whom statutory dues are owed,”.
(vii) In section 33(2), following explanation shall be added:
“Explanation.—For the purposes of this sub-section, it is hereby declared that the
committee of creditors may take the decision to liquidate the corporate debtor, any
time after its constitution under sub-section (7) of section 21 and before the
confirmation of the resolution plan, including at any time before the preparation of the
information memorandum.”
IV. The Insolvency and Bankruptcy Code (Amendment) Act, 2020
Ministry of law and justice notified on 13 th March, 2020, the Insolvency and Bankruptcy
Code (Amendment) Act, 2020 w.e.f. 28th day of December, 2019. With the enforcement of
this Amendment Act, the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019
was hereby repealed.
Following are the relevant amendments:
1. In section 5 of the Insolvency and Bankruptcy Code, 2016 (here after referred to as
the principal Act),—
Sl. Amended Law
No.
1. in clause (12), the given proviso-
3
“Provided that where the interim resolution professional is not appointed in

3
Proviso was Ins. by Act No. 26 of 2018, sec. 3 (w.e.f. 6-6-2018)

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the order admitting application under section 7, 9 or 10, the insolvency

commencement date shall be the date on which such interim resolution
professional is appointed by the Adjudicating Authority” shall be omitted.
2. in clause (15), after the words "during the insolvency resolution process
period "occurring at the end the words "and such other debt as may be
notified" shall be inserted.
3. In section 7 of the principal Act, in sub-section (1), before the Explanation,
the following provisos inserted—
"Provided that for the financial creditors, referred to in clauses (a) and (b)
of sub-section (6A) of section 21, an application for initiating corporate
insolvency resolution process against the corporate debtor shall be filed
jointly by not less than one hundred of such creditors in the same class or
not less than ten per cent. of the total number of such creditors in the same
class, whichever is less:
Provided further that for financial creditors who are allottees under real
estate project, an application for initiating corporate insolvency resolution
process against the corporate debtor shall be filed jointly by not less than
one hundred of such allottees under the same real estate project or not
less than ten per cent. of the total number of such allottees under the same
real estate project, whichever is less:
Provided also that where an application for initiating the corporate
insolvency resolution process against a corporate debtor has been filed by
a financial creditor referred to in the first and second provisos and has not
been admitted by the Adjudicating Authority before the commencement of
the Insolvency and Bankruptcy Code (Amendment) Act, 2020, such
application shall be modified to comply with the requirements of the first
or second proviso within thirty days of the commencement of the said Act,
failing which the application shall be deemed to be withdrawn before its
admission."
4. In section 11 of the principal Act, the Explanation shall be numbered as
Explanation I and after Explanation I as so numbered, the following
Explanation shall be inserted, namely:—
"Explanation II—For the purposes of this section, it is hereby clarified that
nothing in this section shall prevent a corporate debt or referred to in
clauses (a) to(d) from initiating corporate insolvency resolution process
against another corporate debtor."
5. In section 14 of the principal Act,—
(a) in sub-section (1), the following Explanation inserted, namely:—
"Explanation.—For the purposes of this sub-section, it is here by clarified
that notwithstanding anything contained in any other law for the time being
in force, a license, permit, registration, quota, concession, clearances or

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a similar grant or right given by the Central Government, State

Government, local authority, sectoral regulator or any other authority
constituted under any other law for the time being in force, shall not be
suspended or terminated on the grounds of insolvency, subject to the
condition that there is no default in payment of current dues arising for the
use or continuation of the license, permit, registration, quota, concession,
clearances or a similar grant or right during the moratorium period;";

(b) after sub-section (2), the following sub-section 2A shall be inserted,

namely:—
"(2A) Where the interim resolution professional or resolution professional,
as the case may be, considers the supply of goods or services critical to
protect and preserve the value of the corporate debtor and manage the
operations of such corporate debtor as a going concern, then the supply of
such goods or services shall not be terminated, suspended or interrupted
during the period of moratorium, except where such corporate debtor has
not paid dues arising from such supply during the moratorium period or in
such circumstances as may be specified.";
(c) in sub-section (3), for clause (a), namely-
“(a) such transaction as may be notified by the Central Government in
consultation with any financial regulator;”
the following clause shall be substituted, namely:—
"(a) such transactions, agreements or other arrangements as may be
notified by the Central Government in consultation with any financial
sector regulator or any other authority;"
6. In section 16 in sub-section(1), for the words" within fourteen days from the
insolvency commencement date" The words "on the insolvency
commencement date" shall be substituted.
7. In section 21, in sub-section (2), in the second proviso, after the words
"convertible into equity shares" the words "or completion of such transactions
as may be prescribed," shall be inserted.
8. In section 29A of the principal Act-
(i) in clause (c), in the second proviso, in Explanation I, after the words,
"convertible into equity shares", the words "or completion of such
transactions as may be prescribed," shall be inserted;
(ii) in clause (j), in Explanation I, in the second proviso, after the words
"convertible into equity shares", the words "or completion of such
transactions as may be prescribed," shall be inserted.

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9. After section 32 of the principal Act, the following section 32A shall be
inserted, namely:—
"32A. (1) Notwithstanding anything to the contrary contained in this Code
or any other law for the time being in force, the liability of a corporate debtor
for an offence committed prior to the commencement of the corporate
insolvency resolution process shall cease, and the corporate debtor shall
not be prosecuted for such an offence from the date the resolution plan
has been approved by the Adjudicating Authority under section 31, if the
resolution plan results in the change in the management or control of the
corporate debtor to a person who was not—
(a) a promoter or in the management or control of the corporate debtor
or a related party of such a person; or
(b) a person with regard to whom the relevant investigating authority has,
on the basis of material in its possession, reason to believe that he
had abetted or conspired for the commission of the offence, and has
submitted or filed a report or a complaint to the relevant statutory
authority or Court:
Provided that if a prosecution had been instituted during the corporate
insolvency resolution process against such corporate debtor, it shall stand
discharged from the date of approval of the resolution plan subject to
requirements of this sub-section having been fulfilled:
Provided further that every person who was a "designated partner" as
defined in clause(j) of section2 of the Limited Liability Partnership Act ,2008, or
an "officer who is in default", as defined in clause (60) of section 2 of the
Companies Act,2013, or was in any manner incharge of, or responsible to
the corporate debt or for the conduct of its business or associated with the
corporate debtor in any manner and who was directly or indirectly involved
in the commission of such offence as per the report submitted or complaint
filed by the investigating authority, shall continue to be liable to be
prosecuted and punished for such an offence committed by the corporate
debtor notwithstanding that the corporate debtor's liability has ceased
under this sub-section.
(2) No action shall be taken against the property of the corporate debtor
in relation to an offence committed prior to the commencement of the corporate
insolvency resolution process of the corporate debtor, where such property
is covered under a resolution plan approved by the Adjudicating Authority
under section 31, which results in the change in control of the corporate
debtor to a person, or sale of liquidation assets under the provisions of
Chapter III of Part II of this Code to a person, who was not—

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(i) A promoter or in the management or control of the corporate debtor

or a related party of such a person; or
(ii) A person with regard to whom the relevant investigating authority has,
on the basis of material in its possession reason to believe that he
had abetted or conspired for the commission of the offence, and has
submitted or filed a report or a complaint to the relevant statutory
authority or Court.
Explanation.—For the purposes of this sub-section, it is hereby clarified
that,—
(i) An action against the property of the corporate debtor in relation to
an offence shall include the attachment, seizure, retention or confiscation
of such property under such law as may be applicable to the corporate
debtor;
(ii) nothing in this sub-section shall be construed to bar an action against
the property of any person, other than the corporate debtor or a
person who has acquired such property through corporate insolvency
resolution process or liquidation process under this Code and fulfils
the requirements specified in this section, against whom such an
action may be taken under such law as may be applicable.
(3) Subject to the provisions contained in sub-sections (1) and (2), and
notwithstanding the immunity given in this section, the corporate debtor
and any person who may be required to provide assistance under such law
as may be applicable to such corporate debtor or person, shall extend all
assistance and co-operation to any authority investigating an offence
committed prior to the commencement of the corporate insolvency
resolution process."

V. Enhancement in the limit of amount of default: Ministry of Corporate Affairs vide

notification S.O. 1205(E) dated 24th March, 2020, in exercise of the powers conferred by
the proviso to section 4 of the Insolvency and Bankruptcy Code, 2016, the Central
Government hereby specifies one crore rupees as the minimum amount of default for the
purposes of the said section.
VI. Ministry of Corporate Affairs Vide Notification S.O. 4126(E) dated 15th November, 2019,
in exercise of the powers conferred by sub-section (3) of section 1 of the Insolvency and
Bankruptcy Code, 2016, the Central Government hereby appoints the 1st day of
December, 2019 as the date on which clause (e) of section 2 of the Code in so far as they
relate to personal guarantors to corporate debtors, shall come into force.

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PART II: ALLIED LAWS

CHAPTER 20: SEBI ACT, 1992

1. Enforcement of the Banning of Unregulated Deposit Schemes Ordinance, 2019
Banning of Unregulated Deposit Schemes Ordinance, 2019 dated 21st February, 2019 has
substituted Clause (e) of sub-section (4) of Section 11 of the SEBI Act, 1992 which is as
follows:
(e) attach, for a period not exceeding ninety days, bank accounts or other property of any
intermediary or any person associated with the securities market in any manner involved
in violation of any of the provisions of this Act, or the rules or the regulations made there
under:
Provided that the Board shall, within ninety days of the said attachment, obtain confirmation
of the said attachment from the Special Court, established under section 26A, having
jurisdiction and on such confirmation, such attachment shall continue during the pendency
of the aforesaid proceedings and on conclusion of the said proceedings, the prov isions of
section 28A shall apply:
Provided further that only property, bank account or accounts or any transaction entered
therein, so far as it relates to the proceeds actually involved in violation of any of the
provisions of this Act, or the rules or the regulations made thereunder shall be allowed to
be attached.
2. Amendments through Finance Act, 2018 w.e.f. 8.3.2019
1. In the Securities and Exchange Board of India Act, 1992 (hereafter in this Part
referred to as the principal Act), in section 11 which deals with the Functions of
Board,—
(i) after sub-section (4), the following sub-section shall be inserted, namely:—
“(4A) Without prejudice to the provisions contained in sub-sections (1), (2), (2A),
(3) and (4), section 11B and section 15-I, the Board may, by an order, for
reasons to be recorded in writing, levy penalty under sections 15A, 15B, 15C,
15D, 15E, 15EA, 15EB, 15F, 15G, 15H, 15HA and 15HB after holding an inquiry
in the prescribed manner.”;
(ii) in sub-section (5), after the words and figures “the Depositories Act, 1996”, the
words, figures, letters and brackets shall be inserted, namely:—
“or under a settlement made under section 15JB or section 23JA of the
Securities Contracts (Regulation) Act, 1956 or section 19-IA of the Depositories
Act, 1996,”.
2. In section 11B, of the principal Act,—

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(a) in the marginal heading, after the word ‘‘directions’’, the words ‘‘and levy
penalty’’ shall be inserted;
(b) section 11B shall be numbered as sub-section (1) thereof and after subsection
(1) as so renumbered, the following sub-section shall be inserted, namely:—
“(2) Without prejudice to the provisions contained in sub-section (1), sub-section
(4A) of section 11 and section 15-I, the Board may, by an order, for reasons to
be recorded in writing, levy penalty under sections 15A, 15B, 15C, 15D, 15E,
15EA, 15EB, 15F, 15G, 15H, 15HA and 15HB after holding an inquiry in the
prescribed manner.’’.
3. In the principal Act, in section 15A which deals with the Penalty for failure to furnish
information, return, etc.,—
(i) in clause (a), after the words “fails to furnish the same”, the words “or who
furnishes or files false, incorrect or incomplete information, return, report, books
or other documents” shall be inserted;
(ii) in clause (b), after the words “furnish the same within the time specified therefor
in the regulations”, the words “or who furnishes or files false, incorrect or
incomplete information, return, report, books or other documents” shall be
inserted.
4. In the principal Act, after section 15E, the following sections shall be inserted,
namely:—
“15EA. Where any person fails to comply with the regulations made by the Board in
respect of alternative investment funds, infrastructure investment trusts and real
estate investment trusts or fails to comply with the directions issued by the Board,
such person shall be liable to penalty which shall not be less than one lakh rupees
but which may extend to one lakh rupees for each day during which such failure
continues subject to a maximum of one crore rupees or three times the amount of
gains made out of such failure, whichever is higher.
15EB. Where an investment adviser or a research analyst fails to comply with the
regulations made by the Board or directions issued by the Board, such investment
adviser or research analyst shall be liable to penalty which shall not be less than one
lakh rupees but which may extend to one lakh rupees for each day during which such
failure continues subject to a maximum of one crore rupees.”.
5. In the principal Act, in section 15F which deals with the Penalty for default in case of
stock brokers, in clause (b), for the words “he sponsors or carries on any such
collective investment scheme including mutual funds”, the words “such failure
continues” shall be substituted.
6. In the principal Act, in section 15-I which deals with the Power to adjudicate, in sub-
section (1),—

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(i) after the figures and letter “15E,”, the figures and letters “15EA, 15EB,” shall be
inserted;
(ii) for the word “shall” the word “may” shall be substituted.
7. In the principal Act, in section 15J,—
(a) for the marginal heading, the following marginal heading shall be substituted,
namely:— “Factors to be taken into account while adjudging quantum of
penalty.”;
(b) after the words, figures and letter “section 15-I, the adjudicating officer”, the
figures, letters and words “15-I or section 11 or section 11B, the Board or the
adjudicating officer” shall be substituted;
(c) in the Explanation, the words “of an adjudicating officer” shall be omitted.
8. In the principal Act, in section 15JB which deals with the Settlement of administrative
and civil proceedings, after sub-section (4), the following subsection shall be inserted,
namely:—
“(5) All settlement amounts, excluding the disgorgement amount and legal costs,
realised under this Act shall be credited to the Consolidated Fund of India.”.
9. In the principal Act, in section 24 which states about the Offences,—
(i) after the words “adjudicating officer” at both the places where they occur, the
words “or the Board” shall be inserted;
(ii) in sub-section (2), the words “of his” shall be omitted.
10. In the principal Act, in section 27 which deals with the Contravention by companies,—
(i) for the marginal heading, the following marginal heading shall be substituted,
namely:— “Contravention by companies.”;
(ii) in sub-section (1), for the words “an offence under this Act,”, the words “a
contravention of any of the provisions of this Act or any rule, regulation, direction
or order made thereunder” shall be substituted;
(iii) for the word “offence”, wherever it occurs, the word “contravention” shall be
substituted. 189. In the principal Act, in section 28A, in sub-section (1), for the
words “by the adjudicating officer”, the words “under this Act” shall be
substituted.
11. In the principal Act, after section 28A which deals with recovery of money, the
following section shall be inserted, namely:—
‘28B. (1) Where a person dies, his legal representative shall be liable to pay any sum
which the deceased would have been liable to pay, if he had not died, in the like
manner and to the same extent as the deceased: Provided that, in case of any penalty

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payable under this Act, a legal representative shall be liable only in case the penalty
has been imposed before the death of the deceased person.
(2) For the purposes of sub-section (1),—
(a) any proceeding for disgorgement, refund or an action for recovery before
the Recovery Officer under this Act, except a proceeding for levy of penalty,
initiated against the deceased before his death, shall be deemed to have
been initiated against the legal representative, and may be continued
against the legal representative from the stage at which it stood on the date
of the death of the deceased and all the provisions of this Act shall apply
accordingly;
(b) any proceeding for disgorgement, refund or an action for recovery before
the Recovery Officer under this Act, except a proceeding for levy of penalty,
which could have been initiated against the deceased if he had survived,
may be initiated against the legal representative and all the provisions of
this Act shall apply accordingly.
(3) Every legal representative shall be personally liable for any sum payable by him
in his capacity as legal representative if, while his liability for such sum remains
undischarged, he creates a charge on or disposes of or parts with any assets of
the estate of the deceased, which are in, or may come into, his possession, but
such liability shall be limited to the value of the asset so charged, disposed of or
parted with. Amendment of section 15JB. Amendment of section 24. Amendment
of section 27. Amendment of section 28A. Insertion of new section 28B.
Continuance of proceedings.
(4) The liability of a legal representative under this section shall be limited to the
extent to which the estate of the deceased is capable of meeting the liability.
Explanation.—For the purposes of this section “legal representative” means a
person who in law represents the estate of a deceased person, and includes any
person who intermeddles with the estate of the deceased and where a party
sues or is sued in a representative character, the person on whom the e state
devolves on the death of the party so suing or sued.’.
3. Inserted by Finance (No. 2) Act, 2019, w.e.f. 20-1-2020.
(i) In section 15C of the principal Act, which deals with the Penalty for failure to redress
investors’ grievances after the words "after having been called upon by the Board in
writing", the words "including by any means of electronic communication" shall be
inserted.
(ii) In section 15F of the principal Act, which deals with the Penalty for default in case of
stock brokers in sub-clause (a), after the words "one lakh rupees but which may
extend to", the words "one crore rupees" shall be inserted.

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(iii) After section 15HA of the principal Act, the following section shall be inserted,
namely:—
‘15HAA. Penalty for alteration destruction, etc., of records and failure to protect the
electronic database of Board
Any person, who—
(a) knowingly alters, destroys, mutilates, conceals, falsifies, or makes a false entry
in any information, record, document (including electronic records), which is
required under this Act or any rules or regulations made thereunder, so as to
impede, obstruct, or influence the investigation, inquiry, audit, inspection or
proper administration of any matter within the jurisdiction of the Board.
Explanation.—For the purposes of this clause, a person shall be deemed to have
altered, concealed or destroyed such information, record or document, in case
he knowingly fails to immediately report the matter to the Board or fails to
preserve the same till such information continues to be relevant to any
investigation, inquiry, audit, inspection or proceeding, which may be initiated by
the Board and conclusion thereof;
(b) without being authorised to do so, access or tries to access, or denies of access
or modifies access parameters, to the regulatory data in the database;
(c) without being authorised to do so, downloads, extracts, copies, or reproduces in
any form the regulatory data maintained in the system database;
(d) knowingly introduces any computer virus or other computer contaminant into the
system database and brings out a trading halt;
(e) without authorisation disrupts the functioning of system database;
(f) knowingly damages, destroys, deletes, alters, diminishes in value or utility, or
affects by any means, the regulatory data in the system database; or
(g) knowingly provides any assistance to or causes any other person to do any of
the acts specified in clauses (a) to (f), shall be liable to a penalty which shall not
be less than one lakh rupees but which may extend to ten crore rupees or three
times the amount of profits made out of such act, whichever is higher.
Explanation.—In this section, the expressions "computer contaminant",
"computer virus" and "damage" shall have the meanings respectively assigned
to them under section 43 of the Information Technology Act, 2000.
CHAPTER 21: The Securities Contracts (Regulation) Act, 1965
Vide Finance Act, 2018, w.e.f. 8.3.2019 following Changes are made in the SCRA-

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(i) In the Securities Contracts (Regulation) Act, 1956 (hereafter in this Part referred to as the
principal Act), section 12A shall be numbered as sub-section (1) thereof and after sub-
section (1) as so numbered, the following sub-section shall be inserted, namely:-
"(2) Without prejudice to the provisions of sub-section (1) and section 23-I, the Securities
and Exchange Board of India may, by an order, for reasons to be recorded in writing, levy
penalty under sections 23A, 23B, 23C, 23D, 23E, 23F, 23G, 23GA an d 23H after holding
an inquiry in the prescribed manner.".
(ii) In section 23 of the principal Act, in sub-section (1), in the long line, after the words
"Adjudicating officer", the words "or the Securities and Exchange Board of India" shall be
inserted.
(iii) In section 23A of the principal Act, in sub-clause (a), after the words "bye-laws of the
recognised stock exchange", the words "or who furnishes false, incorrect or incomplete
information, document, books, return or report" shall be inserted.
(iv) In section 23E of the principal Act, after the words "mutual fund", the words "or real estate
investment trust or infrastructure investment trust or alternative investment fund", shall be
inserted.
(v) In section 23G of the principal Act, after the words "periodical returns", the words "or
furnishes false, incorrect or incomplete periodical returns" shall be inserted.
(vi) After section 23G of the principal Act, the following section shall be inserted, namely:-
"23GA. Where a stock exchange or a clearing corporation fails to conduct its business with
its members or any issuer or its agent or any person associated with the securities markets
in accordance with the rules or regulations made by the Securities and Exchange Board of
India and the directions issued by it under this Act, the stock exchange or the clearing
corporations, as the case may be, shall be liable to penalty which shall not be less than
five crore rupees but which may extend to twenty-five crore rupees or three times the
amount of gains made out of such failure, whichever is higher.".
(vii) In section 23-I of the principal Act, in sub-section (1), for the word ''shall'', the word ''may''
shall be substituted.
(viii) In section 23J of the principal Act,-
(a) for the marginal heading, the following marginal heading shall be substituted,
namely:- "Factors to be taken into account while adjudging quantum of penalty.";
(b) for the word, figures and letter "section 23-I" the words, figures and letters "section
12A or section 23-I" shall be substituted.
(c) for the words "the adjudicating officer", the words "the Securities and Exchange Board
of India or the adjudicating officer" shall be substituted.
(ix) In section 23JA of the principal Act, after sub-section (4), the following sub-section shall
be inserted, namely:-

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"(5) All settlement amounts, excluding the disgorgement amount and legal costs, realised
under this Act shall be credited to the Consolidated Fund of India.".
(x) In section 23JB of the principal Act, in sub-section (1), for the words "by the adjudicating
officer", the words "under this Act" shall be substituted.
(xi) After section 23JB of the principal Act, the following section shall be inserted, namely:-
'23JC. (1) Where a person dies, his legal representative shall be liable to pay any sum
which the deceased would have been liable to pay, if he had not died, in the like manner
and to the same extent as the deceased: Provided that, in case of any penalty payable
under this Act, a legal representative shall be liable only in case the penalty has been
imposed before the death of the deceased person.
(2) For the purposes of sub-section (1),- (a) any proceeding for disgorgement, refund or
an action for recovery before the Recovery Officer under this Act, except a proceeding for
levy of penalty, initiated against the deceased before his death shall be deemed to have
been initiated against the legal representative, and may be continued against the legal
representative from the stage at which it stood on the date of the death of the deceased
and all the provisions of this Act shall apply accordingly; (b) any proceeding for
disgorgement, refund or an action for recovery before the Recovery Officer under this Act,
except a proceeding for levy of penalty, which could have been initiated against the
deceased if he had survived, may be initiated against the legal representative and all the
provisions of this Act shall apply accordingly.
(3) Every legal representative shall be personally liable for any sum payable by him in
his capacity as legal representative if, while his liability for such sum remains
undischarged, he creates a charge on or disposes of or parts with any assets of the estate
of the deceased, which are in, or may come into, his possession, but such liability shall be
limited to the value of the asset so charged, disposed of or parted with.
(4) The liability of a legal representative under this section shall, be limited to th e extent
to which the estate of the deceased is capable of meeting the liability. Explanation. -For
the purposes of this section ''Legal representative" means a person who in law represents
the estate of a deceased person, and includes any person who intermeddles with the
estate of the deceased and where a party sues or is sued in a representative character,
the person on whom the estate devolves on the death of the party so suing or sued.'.
(xii) In section 23M of the principal Act,-
(1) after the words "adjudicating officer" at both the places where they occur, the words
"or the Securities and Exchange Board of India" shall be inserted;
(2) in sub-section (2), for the words, "any of his direction or orders" the words "the
direction or order" shall be substituted.
(xiii) In section 24 of the principal Act,-

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(a) for the marginal heading, the following marginal heading shall be substituted: -
"Contravention by companies;'';
(b) in sub-section (1), for the words "an offence", the words "a contravention of a ny of
the provisions of this Act or any rule, regulation, direction or order made thereunder"
shall be substituted;
(c) in sub-section (2), for the words ''an offence under this Act'', the words ''a
contravention of any of the provisions of this Act or any rule, regulation, direction or
order made thereunder'' shall be substituted;
(d) for the word "offence", wherever it occurs, the word "contravention" shall be
substituted.
CHAPTER 22: The Foreign Exchange Management Act, 1999
1. Foreign Exchange Management (Permissible Capital Account Transactions)
(Amendment) Regulations, 2019
Reserve Bank of India makes the amendment in the FEM (Permissible Capital Account
Transactions) Regulations, 2000 through the enforcement of the Foreign Exchange
Management (Permissible Capital Account Transactions) (Amendment) Regulations,
2019 w.e.f. 26-2-2019. Following are the relevant amendments -
(i) In the Para 2 (Definitions) – After the clause (d), clause (da) is added:
“(da) 'Derivative' means a financial contract, to be settled at a future date, whose
value is derived from one or more financial, or non-financial variables.”
(ii) In schedule I (classes of capital account transactions of persons resident in India) of
FEM (Permissible Capital Account Transactions) Regulations, 2000, for the existing
clause (k), the following shall be substituted:

“(k) Undertake derivative contracts”

(iii) In the schedule II (classes of capital account transactions of persons resident outside
India) of FEM (Permissible Capital Account Transactions) Regulations, 2000, after
the existing clause (g), the following shall be added:

“(h) Undertake derivative contracts”

2. Amendment in Section 6 of the Foreign Exchange Management Act, 1999 vide
Finance Act, 2015 w.e.f 15.10.2019.
(1) Subject to the provisions of sub-section (2), any person may sell or draw foreign
exchange to or from an authorised person for a capital account transaction.
(2) The Reserve Bank may, in consultation with the Central Government, specify —
(a) any class or classes of capital account transactions, involving debt instruments,
which are permissible;

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(b) the limit up to which foreign exchange shall be admissible for such transactions;
(c) any conditions which may be placed on such transactions:
[Provided that the Reserve Bank or the Central Government shall not impose any
restrictions on the drawal of foreign exchange for payment due on account of
amortisation of loans or for depreciation of direct investments in the ordinary course
of business.
(2A) The Central Government may, in consultation with the Reserve Bank, prescribe —
(a) any class or classes of capital account transactions, not involving debt
instruments, which are permissible;
(b) the limit up to which foreign exchange shall be admissible for such transactions;
and
(c) any conditions which may be placed on such transactions.
(3) [***]
(4) A person resident in India may hold, own, transfer or invest in foreign currency,
foreign security or any immovable property situated outside India if such curre ncy,
security or property was acquired, held or owned by such person when he was
resident outside India or inherited from a person who was resident outside India.
(5) A person resident outside India may hold, own, transfer or invest in Indian currency,
security or any immovable property situated in India if such currency, security or
property was acquired, held or owned by such person when he was resident in India
or inherited from a person who was resident in India.
(6) Without prejudice to the provisions of this section, the Reserve Bank may, by
regulation, prohibit, restrict, or regulate establishment in India of a branch, office or
other place of business by a person resident outside India, for carrying on any activity
relating to such branch, office or other place of business.
(7) For the purposes of this section, the term "debt instruments" shall mean, such
instruments as may be determined by the Central Government in consultation with
the Reserve Bank.
3. Amendments in External Commercial Borrowings
Vide FED Master Direction No.5/2018-19, amendments have been made in the
Transactions on account of External Commercial Borrowings (ECB) . Here is the updated
master direction –external commercial borrowings.
Within the contours of the Regulations, Reserve Bank of India also issues directions to
Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA),
1999. These directions lay down the modalities as to how the foreign exchange business
has to be conducted by the Authorised Persons with their customers/constituents with a
view to implementing the regulations framed.

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Index
Para. Particulars
No.
External Commercial Borrowings Framework
2 Introduction
2.1 External Commercial Borrowings Framework
2.2 Limit and leverage
3 Issuance of Guarantee, etc. by Indian banks and Financial Institutions
4 Parking of ECB proceeds
4.1 Parking of ECB proceeds abroad
4.2 Parking of ECB proceeds domestically
5 Procedure of raising ECB
6 Reporting Requirements
6.1 Loan Registration Number
6.2 Changes in terms and conditions of ECB
6.3 Monthly reporting of actual transactions
6.4 Late Submission Fee for delay in reporting
6.5 Standard Operating Procedure for Untraceable Entities
7 Powers delegated to AD Category I banks to deal with ECB cases
7.1 Change of the AD Category I bank
7.2 Cancellation of LRN
7.3 Refinancing of existing ECB
7.4 Conversion of ECB into equity
7.5 Security for raising ECB
7.6 Additional Requirements
8 Special Dispensations under the ECB framework
8.1 ECB facility for Oil Marketing Companies
8.2 ECB facility for Start-ups
9 Borrowing by Entities under Investigation
10 ECB by entities under restructuring/ ECB facility for refinancing stressed
assets
11 Dissemination of information
12 Compliance with the guidelines

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Introduction: External Commercial Borrowings are commercial loans raised by eligible

resident entities from recognised non-resident entities and should conform to parameters
such as minimum maturity, permitted and non-permitted end-uses, maximum all-in-cost
ceiling, etc. The parameters given below apply in totality and not on a standalone basis.
2.1. ECB Framework: The framework for raising loans through ECB (hereinafter referred to as
the ECB Framework) comprises the following two options:
Sr. Parameters FCY denominated ECB INR denominated ECB
No.
i Currency of Any freely convertible Indian Rupee (INR)
borrowing Foreign Currency
ii Forms of ECB Loans including bank loans; Loans including bank loans;
floating/ fixed rate notes/ floating/ fixed rate
bonds/ debentures (other notes/bonds/ debentures/
than fully and compulsorily preference shares (other than
convertible instruments); fully and compulsorily
Trade credits beyond 3 convertible instruments);
years; FCCBs; FCEBs and Trade credits beyond 3 years;
Financial Lease. and
Financial Lease. Also, plain
vanilla
Rupee denominated bonds
issued overseas, which can
be either placed privately or
listed on exchanges as per
host country regulations.
iii Eligible All entities eligible to receive (a) All entities eligible to
borrowers FDI. Further, the following raise FCY ECB; and
entities are also eligible to (b) Registered entities
raise ECB: engaged in micro-
i. Port Trusts; finance activities, viz.,
ii. Units in SEZ; registered Not for Profit
iii. SIDBI; and companies, registered
societies/
iv. EXIM Bank of India.
trusts/cooperatives and
Non-Government
Organisations.
iv Recognised The lender should be resident of FATF or IOSCO compliant
lenders country, including on transfer of ECB. However,

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(a) Multilateral and Regional Financial Institutions where

India is a member country will also be considered as
recognised lenders;
(b) Individuals as lenders can only be permitted if they are
foreign equity holders or for subscription to
bonds/debentures listed abroad; and
(c) Foreign branches / subsidiaries of Indian banks are
permitted as recognised lenders only for FCY ECB
(except FCCBs and FCEBs).
Foreign branches / subsidiaries of Indian banks, subject to
applicable prudential norms, can participate as
arrangers/underwriters/market-makers/traders for Rupee
denominated Bonds issued overseas. However, underwriting
by foreign branches/subsidiaries of Indian banks for
issuances by Indian banks will not be allowed.
V Minimum MAMP for ECB will be 3 years. Call and put options, if any,
Average shall not be exercisable prior to completion of minimum
Maturity Period average maturity. However, for the specific categories
(MAMP) mentioned below, the MAMP will be as prescribed therein:
Sr. Category MAMP
No.
(a) ECB raised by manufacturing 1 year
companies up to USD 50 million or its
equivalent per financial year.
(b) ECB raised from foreign equity holder for 5 years
working capital purposes, general
corporate purposes or for repayment of
Rupee loans
4(c) ECB raised for 10
(i) working capital purposes or years
general corporate purposes
(ii) on-lending by NBFCs for working
capital purposes or general
corporate purposes
(d) ECB raised for 7 years
(i) repayment of Rupee loans availed
domestically for capital expenditure
(ii) on-lending by NBFCs for the same
purpose

4Inserted vide A.P.(DIR Series) Circular No. 04 dated July 30, 2019.

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(e) ECB raised for 10

(i) repayment of Rupee loans availed years
domestically for purposes other
than capital expenditure
(ii) on-lending by NBFCs for the same
purpose
for the categories mentioned at (b) to (e) –
(i) ECB cannot be raised from foreign branches /
subsidiaries of Indian banks
(ii) the prescribed MAMP will have to be strictly
complied with under all circumstances.
vi All-in-cost Benchmark rate plus 450 bps spread.
ceiling per
annum
vii Other costs Prepayment charge/ Penal interest, if any, for default or
breach of covenants, should not be more than 2 per cent over
and above the
contracted rate of interest on the outstanding principal
amount and will be outside the all-in-cost ceiling.
Viii End-uses The negative list, for which the ECB proceeds cannot be
(Negative list) utilised, would include the following:
(a) Real estate activities.
(b) Investment in capital market.
(c) Equity investment.
(d) 5Working capital purposes, except in case of ECB
mentioned at v(b) and v(c) above.
(e) General corporate purposes, except in case of ECB
mentioned at v(b) and v(c) above.
(f) Repayment of Rupee loans, except in case of ECB
mentioned at v(d) and v(e) above.
(g) On-lending to entities for the above activities, except in
case of ECB raised by NBFCs as given at v(c), v(d) and
v(e) above.

5
Substituted vide A.P.(DIR Series) Circular No. 04 dated July 30, 2019. Prior to substitution it read as below:
(a) Working capital purposes except from foreign equity holder.
(b) General corporate purposes except from foreign equity holder.
(c) Repayment of Rupee loans except from foreign equity holder.
(d) On-lending to entities for the above activities.

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ix Exchange rate Change of currency of FCY For conversion to Rupee, the

ECB into INR ECB can be at exchange rate shall be the
the exchange rate prevailing rate prevailing on the date of
on the date of the agreement settlement.
for such change between the
parties concerned or at an
exchange rate, which is less
than the rate prevailing on
the date of the agreement, if
consented to by the ECB
lender.
x Hedging The entities raising ECB are Overseas investors are
provision required to follow the eligible to hedge their
guidelines for hedging exposure in Rupee through
issued, if any, by the permitted derivative products
concerned sectoral or with AD Category I banks in
prudential regulator in India. The investors can also
respect of foreign currency access the domestic market
exposure. through branches /
Infrastructure space subsidiaries of Indian banks
companies shall have a abroad or branches of foreign
Board approved risk banks with Indian presence
management policy. Further, on a back to back basis.
such companies are required
to mandatorily hedge 70 per
cent of their ECB exposure in
case the average maturity of
the ECB is
less than 5 years. The
designated AD Category-I
bank shall verify that 70 per
cent hedging requirement is
complied with during the
currency of the ECB and
report the position to RBI
through Form ECB 2. The
following operational aspects
with respect to hedging
should be ensured:
a. Coverage: The ECB
borrower will be required to
cover the principal as well as

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the coupon through financial

hedges. The financial hedge
for all exposures on account
of ECB should start from the
time of each such exposure
(i.e. the day the liability is
created in the books of the
borrower).
b. Tenor and rollover: A
minimum tenor of one year
for the financial hedge would
be required with periodic
rollover, duly ensuring that
the exposure on account of
ECB is not unhedged at any
point during the currency of
the ECB.
c. Natural Hedge: Natural
hedge, in lieu of financial
hedge, will be considered
only to the extent of offsetting
projected cash flows /
revenues in matching
currency, net of all other
projected outflows. For this
purpose, an ECB may be
considered naturally hedged
if the offsetting exposure has
the maturity/cash flow within
the same accounting. Any
other arrangements/
structures, where revenues
are indexed to foreign
currency will not be
considered as a natural
hedge.
xi Change of Change of currency of ECB Change of currency from INR
currency of from one freely convertible to any freely convertible
borrowing foreign currency to any other foreign currency is not
freely convertible foreign permitted.
currency as well as to INR is
freely permitted.

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Note: The ECB framework is not applicable in respect of investments in Non -Convertible
Debentures in India made by Registered Foreign Portfolio Investors. 6Lending and
borrowing under the ECB framework by Indian banks and their branches/subsidiaries
outside India will be subject to prudential guidelines issued by the Department of Banking
Regulation of the Reserve Bank. Further, other entities raising ECB are required to follow
the guidelines issued, if any, by the concerned sectoral or prudential regulator.
2.2. Limit and leverage: Under the aforesaid framework, all eligible borrowers can raise ECB
up to USD 750 million or equivalent per financial year under the automatic route. Further,
in case of FCY denominated ECB raised from direct foreign equity holder, ECB liability -
equity ratio for ECB raised under the automatic route cannot exceed 7:1. However, this
ratio will not be applicable if the outstanding amount of all ECB, including the proposed
one, is up to USD 5 million or its equivalent. Further, the borrowing entities will also be
governed by the guidelines on debt equity ratio, issued, if any, by the sectoral or prudential
regulator concerned.
3. Issuance of Guarantee, etc. by Indian banks and Financial Institutions: Issuance of any
type of guarantee by Indian banks, All India Financial Institutions and NBFCs relating to
ECB is not permitted. Further, financial intermediaries (viz., Indian banks, All India
Financial Institutions, or NBFCs) shall not invest in FCCBs/ FCEBs in any manner
whatsoever.
4. Parking of ECB proceeds: ECB proceeds are permitted to be parked abroad as well as
domestically in the manner given below:
4.1 Parking of ECB proceeds abroad: ECB proceeds meant only for foreign currency
expenditure can be parked abroad pending utilisation. Till utilisation, these funds can be
invested in the following liquid assets (a) deposits or Certificate of Deposit or other
products offered by banks rated not less than AA (-) by Standard and Poor/Fitch IBCA or
Aa3 by Moody’s; (b) Treasury bills and other monetary instruments of one-year maturity
having minimum rating as indicated above and (c) deposits with foreign
branches/subsidiaries of Indian banks abroad.
4.2 Parking of ECB proceeds domestically: ECB proceeds meant for Rupee expenditure
should be repatriated immediately for credit to their Rupee accounts with AD Category I
banks in India. ECB borrowers are also allowed to park ECB proceeds in term deposits
with AD Category I banks in India for a maximum period of 12 months cumulatively. These
term deposits should be kept in unencumbered position.
5. Procedure of raising ECB: All ECB can be raised under the automatic route if they
conform to the parameters prescribed under this framework. For approval route cases, the

6 Inserted vide A.P. (DIR Series) Circular No. 17 dated January 16, 2019.

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borrowers may approach the RBI with an application in prescribed format (Form ECB) for
examination through their AD Category I bank. Such cases shall be considered keeping in
view the overall guidelines, macroeconomic situation and merits of the specific proposals.
ECB proposals received in the Reserve Bank above certain threshold limit (refixed from
time to time) would be placed before the Empowered Committee set up by the Reserve
Bank. The Empowered Committee will have external as well as internal members and the
Reserve Bank will take a final decision in the cases taking into account recommendation
of the Empowered Committee. Entities desirous to raise ECB under the automatic route
may approach an AD Category I bank with their proposal along with duly filled in Form
ECB.
6. Reporting Requirements: Borrowings under ECB Framework are subject to following
reporting requirements apart from any other specific reporting required under the
framework:
6.1 Loan Registration Number (LRN): Any draw-down in respect of an ECB should happen
only after obtaining the LRN from the Reserve Bank. To obtain the LRN, borrowers are
required to submit duly certified Form ECB, which also contains terms and conditions of
the ECB, in duplicate to the designated AD Category I bank. In turn, t he AD Category I
bank will forward one copy to the Director, Reserve Bank of India, Department of Statistics
and Information Management, External Commercial Borrowings Division, Bandra -Kurla
Complex, Mumbai – 400 051 (Contact numbers 022-26572513 and 022-26573612).
Copies of loan agreement for raising ECB are not required to be submitted to the Reserve
Bank.
6.2 Changes in terms and conditions of ECB: Changes in ECB parameters in consonance
with the ECB norms, including reduced repayment by mutual agreeme nt between the
lender and borrower, should be reported to the DSIM through revised Form ECB at the
earliest, in any case not later than 7 days from the changes effected. While submitting
revised Form ECB the changes should be specifically mentioned in the communication.
6.3 Monthly Reporting of actual transactions: The borrowers are required to report actual
ECB transactions through Form ECB 2 Return through the AD Category I bank on monthly
basis so as to reach DSIM within seven working days from the close of month to which it
relates.
Changes, if any, in ECB parameters should also be incorporated in Form ECB 2 Return.
6.4 Late Submission Fee (LSF) for delay in reporting:
6.4.1 Any borrower, who is otherwise in compliance of ECB guidelines, can regularise the delay
in reporting of drawdown of ECB proceeds before obtaining LRN or delay in submission of
Form ECB 2 returns, by payment of late submission fees as detailed in the following matrix:

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Sr. No. Type of Return/Form Period of delay Applicable LSF

1 Form ECB 2 Up to 30 calendar days from due INR 5,000
date of submission
2 Form ECB 2/Form ECB Up to three years from due date INR 50,000 per
of submission/date of drawdown year
3 Form ECB 2/Form ECB Beyond three years from due INR 100,000 per
date of submission/date of year
drawdown
6.4.2 The borrower, through its AD bank, may pay the LSF by way of demand draft in favour of
“Reserve Bank of India” or any other mode specified by the Reserve Bank. Such payment
should be accompanied with the requisite return(s). Form ECB and Form ECB 2 returns
reporting contraventions will be treated separately. Non-payment of LSF will be treated as
contravention of reporting provision and shall be subject to compounding or adjudication
as provided in FEMA 1999 or regulations/rules framed thereunder.
6.5 Standard Operating Procedure (SOP) for Untraceable Entities: The following SOP has
to be followed by designated AD Category-I banks in case of untraceable entities who are
found to be in contravention of reporting provisions for ECB by failing to submit prescri bed
return(s) under the ECB framework, either physically or electronically, for past eight
quarters or more.
i. Definition: Any borrower who has raised ECB will be treated as ‘untraceable entity’,
if entity/ auditor(s)/ director(s)/ promoter(s) of entity are not reachable/ responsive/
reply in negative over email/letters/phone for a period of not less than two quarters
with documented communication/ reminders numbering 6 or more and it fulfills both
of the following conditions:
(a) Entity not found to be operative at the registered office address as per records
available with the AD Bank or not found to be operative during the visit by the
officials of the AD Bank or any other agencies authorised by the AD bank for the
purpose;
(b) Entities have not submitted Statutory Auditor’s Certificate for last two years or
more;
ii. Action: The followings actions are to be undertaken in respect of ‘untraceable
entities’:
(a) File Revised Form ECB, if required, and last Form ECB 2 Return without
certification from company with ‘UNTRACEABLE ENTITY’ written in bold on top.
The outstanding amount will be treated as written-off from external debt liability
of the country but may be retained by the lender in its books for recovery through
judicial/ non-judicial means;

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(b) No fresh ECB application by the entity should be examined/processed by the

AD bank;
(c) Directorate of Enforcement should be informed whenever any entity is
designated
(d) ‘UNTRACEABLE ENTITY’; and
(e) No inward remittance or debt servicing will be permitted under auto route.
7. Powers delegated to AD Category I banks to deal with ECB cases: The designated AD
Category I banks can approve any requests from the borrowers for changes in respect of
ECB, except for FCCBs/FCEBs, duly ensuring that the changed conditions, including
change in name of borrower/lender, transfer of ECB and any other parameters, comply
with extant ECB norms and are with the consent of lender(s). Further, the following can
also be undertaken under the automatic route:
7.1 Change of the AD Category I bank: AD Category I bank can be changed subject to
obtaining no objection certificate from the existing AD Category I bank.
7.2 Cancellation of LRN: The designated AD Category I banks may directly approach DSIM
for cancellation of LRN for ECB contracted, subject to ensuring that no draw down against
the said LRN has taken place and the monthly ECB-2 returns till date in respect of the
allotted LRN have been submitted to DSIM.
7.3 Refinancing of existing ECB: Refinancing of existing ECB by fresh ECB provided the
outstanding maturity of the original borrowing (weighted outstanding maturity in case of
multiple borrowings) is not reduced and all-in-cost of fresh ECB is lower than the all-in-
cost (weighted average cost in case of multiple borrowings) of existing ECB. Further,
refinancing of ECB raised under the previous ECB frameworks may also be permitted,
subject to additionally ensuring that the borrower is eligible to raise ECB under the extant
framework. Raising of fresh ECB to part refinance the existing ECB is also permitted
subject to same conditions. Indian banks are permitted to participate in refinancing of
existing ECB, only for highly rated corporate (AAA) and for Maharatna/ Navratna public
sector undertakings.
7.4 Conversion of ECB into equity: Conversion of ECB, including those which are matured
but unpaid, into equity is permitted subject to the following conditions:
(i) The activity of the borrowing company is covered under the automatic route for FDI
or Government approval is received, wherever applicable, for foreign equity
participation as per extant FDI policy.
(ii) The conversion, which should be with the lender’s consent and without any additional
cost, should not result in contravention of eligibility and breach of applicable sector
cap on the foreign equity holding under FDI policy;

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(iii) Applicable pricing guidelines for shares are complied with; [Link] case of partial or full
conversion of ECB into equity, the reporting to the Reserve Bank will be as under:
(a) For partial conversion, the converted portion is to be reported in Form FC -GPR
prescribed for reporting of FDI flows, while monthly reporting to DSIM in Form
ECB 2 Return will be with suitable remarks, viz., "ECB partially converted to
equity".
(b) For full conversion, the entire portion is to be reported in Form FC-GPR, while
reporting to DSIM in Form ECB 2 Return should be done with remarks “ECB fully
converted to equity”. Subsequent filing of Form ECB 2 Return is not required.
(c) For conversion of ECB into equity in phases, reporting through Form FC-GPR
and Form ECB 2 Return will also be in phases.
(iv) If the borrower concerned has availed of other credit facilities from the Indian banking
system, including foreign branches/subsidiaries of Indian banks, the applicable
prudential guidelines issued by the Department of Banking Regulation of Reserve
Bank, including guidelines on restructuring are complied with;
(v) Consent of other lenders, if any, to the same borrower is available or atleast
information regarding conversions is exchanged with other lenders of the borrower.
(vi) For conversion of ECB dues into equity, the exchange rate prevailing on the date of
the agreement between the parties concerned for such conversion or any lesser rate
can be applied with a mutual agreement with the ECB lender. It may be noted that
the fair value of the equity shares to be issued shall be worked out with reference to
the date of conversion only.
7.5. Security for raising ECB: AD Category I banks are permitted to allow
creation/cancellation of charge on immovable assets, movable assets, financial securities
and issue of corporate and/or personal guarantees in favour of overseas lender / security
trustee, to secure the ECB to be raised/ raised by the borrower, subject to satisfying
themselves that:
i. the underlying ECB is in compliance with the extant ECB guidelines,
ii. there exists a security clause in the Loan Agreement requiring the ECB borrower to
create/cancel charge, in favour of overseas lender/security trustee, on immovable
assets/movable assets/financial securities/issuance of corporate and/or personal
guarantee, and
iii. No objection certificate, as applicable, from the existing lenders in India has been
obtained in case of creation of charge.
Once the aforesaid stipulations are met, the AD Category I bank may permit creation
of charge on immovable assets, movable assets, financial securities and issue of
corporate and/or personal guarantees, during the currency of the ECB with security
co-terminating with underlying ECB, subject to the following:

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iv Creation of Charge on Immovable Assets: The arrangement shall be subject to the

following:
(a) Such security shall be subject to provisions contained in the Foreign Exchange
Management (Acquisition and Transfer of Immovable Property in India)
Regulations, 2017, as amended from time to time.
(b) The permission should not be construed as a permission to acquire immovable
asset (property) in India, by the overseas lender/ security trustee.
(c) In the event of enforcement / invocation of the charge, the immovable asset/
property will have to be sold only to a person resident in India and the sale
proceeds shall be repatriated to liquidate the outstanding ECB.
v Creation of Charge on Movable Assets: In the event of enforcement/ invocation of
the charge, the claim of the lender, whether the lender takes over the movable asset
or otherwise, will be restricted to the outstanding claim against the ECB. Encumbered
movable assets may also be taken out of the country subject to getting ‘No Objection
Certificate’ from domestic lender/s, if any.
vi Creation of Charge over Financial Securities: The arrangements may be permitted
subject to the following:
(a) Pledge of shares of the borrowing company held by the promoters as well as in
domestic associate companies of the borrower is permitted. Pledge on other
financial securities, viz. bonds and debentures, Government Securities,
Government Savings Certificates, deposit receipts of securities and units of the
Unit Trust of India or of any mutual funds, standing in the name of ECB
borrower/promoter, is also permitted.
(b) In addition, security interest over all current and future loan assets and all
current assets including cash and cash equivalents, including Rupee accounts
of the borrower with ADs in India, standing in the name of the borrower/promoter,
can be used as security for ECB. The Rupee accounts of the borrower/promoter
can also be in the form of escrow arrangement or debt service reserve account.
(c) In case of invocation of pledge, transfer of financial securities shall be in
accordance with the extant FDI/FII policy including provisions relating to sectoral
cap and pricing as applicable read with the Foreign Exchange Management
(Transfer or Issue of Security by a Person Resident outside India) Regulations,
2017, as amended from time to time.
vii Issue of Corporate or Personal Guarantee: The arrangement shall be subject to
the following:
(a) A copy of Board Resolution for the issue of corporate guarantee for the company
issuing such guarantee, specifying name of the officials authorised to execute

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such guarantees on behalf of the company or in individual capacity should be

obtained.
(b) Specific requests from individuals to issue personal guarantee indicating details
of the ECB should be obtained.
(c) Such security shall be subject to provisions contained in the Foreign Exchange
Management (Guarantees) Regulations, 2000, as amended from time to time.
(d) ECB can be credit enhanced / guaranteed / insured by overseas party/ parties
only if it/ they fulfil/s the criteria of recognised lender under extant ECB
guidelines.
7.6. Additional Requirements: While exercising the delegated powers, the AD Category I
banks should ensure that:
i. The changes permitted are in conformity with the applicable ceilings / guidelines and
the ECB continues to be in compliance with applicable guidelines. It should also be
ensured that if the ECB borrower has availed of credit facilities from the Indian
banking system, including foreign branches/subsidiaries of Indian banks, any
extension of tenure of ECB (whether matured or not) shall be subject to applicable
prudential guidelines issued by Department of Banking Regulation of Reserve Bank
including guidelines on restructuring.
ii. The changes in the terms and conditions of ECB allowed by the ADs under the powers
delegated and / or changes approved by the Reserve Bank should be reported to the
DSIM as given at paragraph 6.2 above. Further, these changes should also get
reflected in the Form ECB 2 returns appropriately.
8. Special Dispensations under the ECB framework:
8.1 ECB facility for Oil Marketing Companies: Notwithstanding the provisions contained in
paragraph 2.1 (viii), 2.1 (x) and 2.2 above, Public Sector Oil Marketing Companies (OMCs)
can raise ECB for working capital purposes with minimum average maturity period of 3
years from all recognised lenders under the automatic route without mandatory hedging
and individual limit requirements. The overall ceiling for such ECB shall be USD 10 billion
or equivalent. However, OMCs should have a Board approved forex mark to market
procedure and prudent risk management policy, for such ECB. All other provisions under
the ECB framework will be applicable to such ECB.
8.2 ECB facility for Startups: AD Category-I banks are permitted to allow Startups to raise
ECB under the automatic route as per the following framework:
i. Eligibility: An entity recognised as a Startup by the Central Government as on date
of raising ECB.
ii. Maturity: Minimum average maturity period will be 3 years.

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iii. Recognised lender: Lender / investor shall be a resident of a FATF compliant

country. However, foreign branches/subsidiaries of Indian banks and overseas entity
in which Indian entity has made overseas direct investment as per the extant
Overseas Direct Investment Policy will not be considered as recognised lenders
under this framework.
iv Forms: The borrowing can be in form of loans or non-convertible, optionally
convertible or partially convertible preference shares.
v Currency: The borrowing should be denominated in any freely convertible currency
or in Indian Rupees (INR) or a combination thereof. In case of borrowing in INR, the
nonresident lender, should mobilise INR through swaps/outright sale undertaken
through an AD Category-I bank in India.
vi Amount: The borrowing per Startup will be limited to USD 3 million or equivalent per
financial year either in INR or any convertible foreign currency or a combination of
both.
vii All-in-cost: Shall be mutually agreed between the borrower and the lender.
viii End uses: For any expenditure in connection with the business of the borrower.
ix Conversion into equity: Conversion into equity is freely permitted subject to
Regulations applicable for foreign investment in Startups.
x Security: The choice of security to be provided to the lender is left to the borrowing
entity. Security can be in the nature of movable, immovable, intangible assets
(including patents, intellectual property rights), financial securities, etc. and shall
comply with foreign direct investment / foreign portfolio investment / or any other
norms applicable for foreign lenders / entities holding such securities. Further,
issuance of corporate or personal guarantee is allowed. Guarantee issued by a non
resident(s) is allowed only if such parties qualify as lender under ECB for Startups.
However, issuance of guarantee, standby letter of credit, letter of undertaking or letter
of comfort by Indian banks, all India Financial Institutions and NBFCs is not permitted.
xi Hedging: The overseas lender, in case of INR denominated ECB, will be eligible to
hedge its INR exposure through permitted derivative products with AD Category – I
banks in India. The lender can also access the domestic market through branches/
subsidiaries of Indian banks abroad or branches of foreign bank with Indian presence
on a back to back basis.
Note: Startups raising ECB in foreign currency, whether having natural hedge or not,
are exposed to currency risk due to exchange rate movements and hence are advised
to ensure that they have an appropriate risk management policy to manage potential
risk arising out of ECB.
xii Conversion rate: In case of borrowing in INR, the foreign currency - INR conversion
will be at the market rate as on the date of agreement.

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xiii Other Provisions: Other provisions like parking of ECB proceeds, reporting
arrangements, powers delegated to AD banks, borrowing by entities under
investigation, conversion of ECB into equity will be as included in the ECB framework.
However, provisions on leverage ratio and ECB liability: Equity ratio will not be
applicable. Further, the Start-ups as defined above [8.2. (i)] as well as other start-ups
which do not comply with the aforesaid definition but are eligible to receive FDI, can
also raise ECB under the general ECB route/framework.
9. Borrowing by Entities under Investigation: All entities against which investigation /
adjudication / appeal by the law enforcing agencies for violation of any of the provisions of
the Regulations under FEMA pending, may raise ECB as per the applicable norms, if they
are otherwise eligible, notwithstanding the pending investigations / adjudications / appeals,
without prejudice to the outcome of such investigations / adjudications / appeals. The
borrowing entity shall inform about pendency of such investigation / adjudication / appeal
to the AD Category-I bank / RBI as the case may be. Accordingly, in case of all applications
where the borrowing entity has indicated about the pending investigations / adj udications
/ appeals, the AD Category I Banks / Reserve Bank while approving the proposal shall
intimate the agencies concerned by endorsing a copy of the approval letter.
10. ECB by entities under restructuring/ ECB facility for refinancing stressed assets:
10.1 An entity which is under a restructuring scheme/ corporate insolvency resolution process
can raise ECB only if specifically permitted under the resolution plan.
10.2 7Eligible corporate borrowers who have availed Rupee loans domestically for capital
expenditure in manufacturing and infrastructure sector and which have been classified as
SMA-2 or NPA can avail ECB for repayment of these loans under any one time settlement
with lenders. Lender banks are also permitted to sell, through assignment, such loans to
eligible ECB lenders, provided, the resultant external commercial borrowing complies with
all-in-cost, minimum average maturity period and other relevant norms of the ECB
framework. Foreign branches/ overseas subsidiaries of Indian banks are not eligible to
lend for the above purposes. The applicable MAMP will have to be strictly complied with
under all circumstances.
10.3 Eligible borrowers under the ECB framework, who are participating in the Corporate
Insolvency Resolution Process under Insolvency and Bankruptcy Code, 2016 as resolution
applicants, can raise ECB from all recognised lenders, except foreign
branches/subsidiaries of Indian banks, for repayment of Rupee term loans of the target
company. Such ECB will be considered under the approval route, procedure of which is
given at paragraph No. 5 above.

7 Inserted vide A.P.(DIR Series) Circular No. 04 dated July 30, 2019.

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11. Dissemination of information: For providing greater transparency, information with

regard to the name of the borrower, amount, purpose and maturity of ECB under both
Automatic and Approval routes are put on the RBI’s website, on a monthly basis, with a
lag of one month to which it relates.
12. Compliance with the guidelines: The primary responsibility for ensuring that the
borrowing is in compliance with the applicable guidelines is that of the borrower concerned.
Any contravention of the applicable provisions of ECB guidelines will invite penal action
under the FEMA. The designated AD Category I bank is also expected to ensure
compliance with applicable ECB guidelines by their constituents.
4. Foreign Exchange Management (Export of Goods and Services) (Amendment)
Regulations, 2019
Vide Notification No. FEMA 23(R)/(2)/2019-RB dated December 09, 2019, the Reserve
Bank of India makes the following amendments in the Foreign Exchange Man agement
(Export of Goods & Services) Regulations, 2015 ('the Principal Regulations'), namely:
In the Principal Regulations, in regulation 4, after sub-regulation (e), the following shall
be inserted, namely :-
“(ea) re-export of leased aircraft/ helicopter and/or engines/auxiliary power units (APUs)
re-possessed by overseas lessor and duly de-registered by the Directorate General of Civil
Aviation (DGCA) on the request of Irrevocable Deregistration and Export Request
Authorisation (IDERA) holder under ‘Cape Town Convention’ subject to permission by
DGCA/Ministry of Civil Aviation for such export/s.”
5. Foreign Exchange Management (Export of Goods and Services) (Amendment)
Regulations, 2020
Vide Notification No. FEMA 23(R)/(3)/2020-RB dated March 31, 2020, the Reserve Bank
of India makes the following amendments in the Foreign Exchange Management (Export
of Goods & Services) Regulations, 2015 ('the Principal Regulations'), namely:
 In the Principal Regulations, in regulation 9, in sub-regulation (1) and sub-regulation
(2)(a), for the words “nine months”, the words “nine months or within such period
as may be specified by the Reserve Bank, in consultation with the Government,
from time to time” shall be substituted.
 Similarly, in sub-regulation (1) (a), for the words “fifteen months”, the words
“fifteen months or within such period as may be specified by the Reserve Bank,
in consultation with the Government, from time to time” shall be substituted.
 In Regulation 9 (1)(b), for the words “period of nine months or fifteen months, as
the case may be”, the words “said period” shall be substituted.
 In proviso to Regulation 9 (2)(a), for the words “period of nine months”, the words
“said period” shall be substituted.

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CHAPTER 23: THE COMPETITION ACT, 2002

The Competition Commission of India (Procedure in regard to the transaction of business
relating to combinations) Amendment Regulations, 2019, 13th August, 2019
Vide notification no. [Link]. CCI/CD/Amend/Comb. Regl./2019, the Competition Commission
of India hereby makes the following regulations further to amend the Competition Commission
of India (Procedure in regard to the transaction of business relating to combinations)
Regulations, 2011, namely:—
(1) These regulations may be called the Competition Commission of India (Procedure in
regard to the transaction of business relating to combinations) Amendment Regulations,
2019 w.e.f. 15th day of August, 2019.
(2) In regulation 5 of the Competition Commission of India (Procedure in regard to the
transaction of business relating to combinations) Regulations, 2011, the following
regulation shall be inserted, namely:-
“5A. Notice for approval of combinations under Green Channel.-
(1) For the category of combination mentioned in Schedule III, the parties to such combination
may, at their option, give notice in Form I pursuant to regulation 5 along with the declaration
specified in Schedule IV.
(2) Upon filing of a notice under sub-regulation (1) and acknowledgement thereof, the
proposed combination shall be deemed to have been approved by the Commission under
sub-section (1) of section 31 of the Act:
Provided that where the Commission finds that the combination does not fall und er
Schedule III and/or the declaration filed pursuant to sub-regulation (1) is incorrect, the
notice given and the approval granted under this regulation shall be void ab initio and the
Commission shall deal with the combination in accordance with the provisions contained
in the Act:
Provided further that the Commission shall give to the parties to the combination an
opportunity of being heard before arriving at a finding that the combination does not fall
under Schedule III and/or the declaration filed pursuant to sub-regulation (1) is incorrect.”;
(3) in regulation 13, of the Competition Commission of India (Procedure in regard to the
transaction of business relating to combinations) Regulations, 2011, following are the
amendments-
(a) for sub-regulation (1A), the following sub-regulation shall be substituted, namely: -
“(1A) A summary of the combination, not containing any confidential information, in
not more than 1000 words, comprising details regarding: (a) name of the parties to
the combination; (b) the nature and purpose of the combination; (c) the products,
services and business(es) of the parties to the combination; and (d) the respective

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markets in which the parties to the combination operate, shall be filed for the purpose
of publishing the same on the website of the Commission.”;
(b) sub-regulation (1B) shall be omitted;
CHAPTER 25: PREVENTION OF MONEY LAUNDERING ACT, 2002
1. Amendment in section 8 vide Finance Act, 2019, w.r.e.f. 20-3-2019.
Sub-section (3) dealing with the computation of period of attachment/ retention of
property / record seized / frozen during investigation, is amended as follows:
(3) Where the Adjudicating Authority decides that any property is involv ed in money-
laundering, he shall, by an order in writing, confirm the attachment of the property made
under section 5(1) or retention of property or record seized or frozen under section 17 or
section 18 and record a finding to that effect, whereupon such attachment or retention or
freezing of the seized or frozen property or record shall—
(a) continue during investigation for a period not exceeding three hundred and sixty-
five days or the pendency of the proceedings relating to any offence under this Act
before a court or under the corresponding law of any other country, before the
competent court of criminal jurisdiction outside India, as the case may be; and
(b) become final after an order of confiscation is passed under sub-section (5) or sub-
section (7) of section 8 or section 58B or sub-section (2A) of section 60 by the Special
Court.
Explanation.—For the purposes of computing the period of three hundred and sixty-
five days under clause (a), the period during which the investigation is stayed by any
court under any law for the time being in force shall be excluded.
2. Insertion of Section 11A vide the Aadhaar and Other Laws (Amendment) Act, 2019,
w.e.f. 25-7-2019
Verification of identity by reporting entity.
11A. (1) Every reporting entity shall verify the identity of its clients and the beneficial owner,
by—
(a) authentication under the Aadhaar (Targeted Delivery of Financial and Other
Subsidies, Benefits and Services) Act, 2016 if the reporting entity is a banking
company; or
(b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other
Subsidies, Benefits and Services) Act, 2016; or
(c) use of passport issued under section 4 of the Passports Act, 1967; or
(d) use of any other officially valid document or modes of identification as may be notified
by the Central Government in this behalf:

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Provided that the Central Government may, if satisfied that a reporting entity other than
banking company, complies with such standards of privacy and security under the Aadhaar
(Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016,
and it is necessary and expedient to do so, by notification, permit such entity to perform
authentication under clause (a):
Provided further that no notification under the first proviso shall be issued without
consultation with the Unique Identification Authority of India established under sub-section
(1) of section 11 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies,
Benefits and Services) Act, 2016 and the appropriate regulator.
(2) If any reporting entity performs authentication under clause (a) of sub-section (1), to
verify the identity of its client or the beneficial owner it shall make the other modes of
identification under clauses (b), (c) and (d) of sub-section (1) also available to such
client or the beneficial owner.
(3) The use of modes of identification under sub-section (1) shall be a voluntary choice
of every client or beneficial owner who is sought to be identified and no client or
beneficial owner shall be denied services for not having an Aadhaar number.
(4) If, for identification of a client or beneficial owner, authentication or offline verification
under clause (a) or clause (b) of sub-section (1) is used, neither his core biometric
information nor his Aadhaar number shall be stored.
(5) Nothing in this section shall prevent the Central Government from notifying additional
safeguards on any reporting entity in respect of verification of the identity of its client
or beneficial owner.
Explanation.—The expressions “Aadhaar number” and “core biometric information” shall
have the same meanings as are respectively assigned to them in clauses (a) and ( j) o f
section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and
Services) Act, 2016.’.
3. Amendment in section 12 vide Aadhaar and Other Laws (Amendment) Act, 2019,
w.e.f. 25-7-2019
Clause (c) & (d) of section 12(1) have been omitted by the Aadhaar and Other Laws
(Amendment) Act, 2019, w.e.f. 25-7-2019.
Prior to their omission, clauses (c) and (d) read as under:
"(c) verify the identity of its clients in such manner and subject to such conditions, as may
be prescribed;
(d) identify the beneficial owner, if any, of such of its clients, as may be prescribed;"

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PART – II : QUESTIONS AND ANSWERS

QUESTIONS

DIVISION A: INTEGRATED CASE SCENARIO/ MULTIPLE CHOICE QUESTIONS

Integrated Case scenario 1
DEF Limited is an unlisted public company, incorporated under the provisions of the Companies
Act, 2013 having its registered office in the state of Rajasthan.
The Registrar after the inspection of the books of account or an inquiry under section 206 and
other books and papers of DEF Limited under section 207, submitted a report in writing to the
Central Government including a recommendation that further investigation into the affairs of the
company was necessary, giving his reasons in support.
The Central Government was of the opinion, that it was necessary to investigate into the affairs
of the company by the Serious Fraud Investigation Office (SFIO).
The director, SFIO appointed an investigating officer who called on the directors of the company
and arrested the directors of the company. The directors demanded the reasons for such arrest
which were informed to them.
The directors of the company were produced before the jurisdictional Judicial Magistrate who
released them on bail though the prosecution opposed the application of bail in the court.
On completion of the investigation of the director, SFIO submitted the investigation report to the
Central Government. The Central Government, after examination of the report, directed the
SFIO to initiate prosecution against the company and its officers or employees, who are or have
been in employment of the company or any other person directly or indirectly connected with
the affairs of the company.
A charge sheet was presented against the accused directors of the company before the Specia l
Court and after the completion of the trial, the court convicted the directors and sentenced them
with imprisonment for a term of six months and a fine of Rs. Two Thousand each.
Given the above situation, your opinion is sought on the following matters:
[Question 1-5]
1. If the Central Government is of the opinion to order the investigation into affairs of a
company on receipt of a report of the Registrar under section 208 of the Companies Act,
state the correct statement as to the initiation of order of the investigation into affairs of a
company-
(a) It cannot order investigation by inspectors under the provisions of section 210 of the
Companies Act.
(b) It can order investigation by inspectors under the provisions of section 210 of the
Companies Act.

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(c) It cannot order investigation by SFIO under the provisions of section 212 of the
Companies Act.
(d) It can order investigation by inspectors under section 210 or by SFIO under section
212 of the companies Act.
2. Is Director, SFIO is a competent authority to arrest the directors of DEF Limited, an unlisted
public company?
(a) Yes, Director, SFIO is competent authority to arrest the directors of the unlisted public
company.
(b) Yes, Director, SFIO is competent authority subject to approval of Central
Government.
(c) No, Director, SFIO cannot arrest the directors of the unlisted public company.
(d) Yes, Director, SFIO is competent authority subject to approval of special court to
arrest the directors of the unlisted public company.
3. Is it the duty of the director, SFIO to inform the arrestee the grounds of arrest?
(a) Yes, it is the duty of the director, SFIO to inform the grounds of arrest and as well as
right of arrestee to know the grounds of his arrest.
(b) No, it is not necessary to inform the grounds of arrest.
(c) No, the ground of arrest may be informed, if asked for.
(d) No, it is prerogative of the authority to arrest the accused, there is no need to inform
the grounds of arrest.
4. Within how much time are the arrested directors of DEF Limited required to be produced
before jurisdictional judicial magistrate by the director, SFIO after arrest?
(a) Within 24 hours of such arrest.
(b) Within 48 hours of such arrest.
(c) Within 72 hours of such arrest.
(d) Within 60 hours of such arrest.
5. When do the directors of DEF Limited vacate the office of director in the company?
(a) On the date when the directors were arrested by the SFIO.
(b) On the date when the charge sheet was submitted in the court by the SFIO.
(c) On the date when the directors were arrested and produced before jurisdictional
Judicial Magistrate.
(d) On the date when the directors were convicted by the Special Court.

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Integrated Case Scenario 2

Hansraj Power Distribution Ltd. (HPDL) was incorporated in the year 2008. The annual turnover
of the company is two crore rupees. Mr. Raj Purohit, a Director of the company was appointed
by company four years back. Mr. Raj Purohit is eligible for retirement by rotation at this AGM.
The AGM is schedule to be held on 22nd August, 2020. He is also working as a director in Max
International Limited and Trinity Infrastructure Limited. Trinity Infrastructure Limited did not file
its financial statements for the last three years with the Registrar of Companies. Trinity
Infrastructure Limited also defaulted in paying interest on loans taken from a Public Financial
Institution in the last two years. The Board of HPDL has decided to propose Mr. Raj’s name for
re-appointment. Mr. Raj gave his consent for the same.
Application to the Tribunal for Compromise & Arrangement was submitted along with all the
documents. The Tribunal fixed the time and place of the meeting and appointed a Chairperson
for the meeting.
A meeting of members of the company was held as per the orders of the Court to consider a
scheme of compromise and arrangement. Notice of the meeting was sent to all 1000
members. Notice of the meeting was also sent to all the creditors or class of creditors and to
the debenture-holders of the company, individually at the address registered with th e company
which will be accompanied by a statement disclosing the details of the compromise or
arrangement, a copy of the valuation report, if any, and explaining their effect on creditors, key
managerial personnel, promoters and non-promoter members, and the debenture-holders and
the effect of the compromise or arrangement on any material interests of the directors of the
company or the debenture trustees.
In total, the 1000 members of the company holds in aggregate 10,00,000 equity shares. The
meeting was attended by 800 members holding 7,00,000 shares. Out of which 460 members
holding 4,70,000 shares voted in favour of the scheme; 190 members holding 1,25,000 shares
voted against the scheme. The remaining 150 members holding 1,05,000 shares abstained from
voting. All the members voted for the scheme either in person or through proxies.
As prescribed under this Act, a notice along with all the documents was also sent to the Central
Government, the Income-Tax Authorities, the Reserve Bank of India, the Securities and
Exchange Board, the Registrar, the respective stock exchanges, and the Competition
Commission of India. The Securities and Exchange Board made objection to scheme of
arrangements after 45 days of receiving all the documents.
According to the last audit financial report, the outstanding debt on the company is Rs. 50 lakh
rupees. The creditors of the company is as follows:
X-One financial Company 200,000 rupees 4%
Mr. Mohan Shah 1,250,000 rupees 25%
Radhey Finance Company 200,000 rupees 4%
Soham Company 700,000 rupees 14%

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Onex National bank 1,000,000 rupees 20%

DXY National bank 1,650,000 rupees 33%
So from the above mentioned Creditors’ list, X-One financial Company raised its objection in
the Tribunal, to the aforementioned scheme. The creditor file the petition in the Tribunal.
The Chairperson of the meeting submitted the report to the Tribunal within the time fixed by the
Tribunal. After hearing the creditors, the Tribunal finally approve the scheme of compromise and
arrangement between the company and its members. The order of the Tribunal is binding on
the company, all its members and creditors.
Answer the following questions in the light of the given information:
[Questions 6-10]
6. With reference to the provisions of the Companies Act, 2013, which value of the requisite
majority will be considered to approve the scheme?
(a) 3/4th of the total value of shares held by 650 members.
(b) 3/4th of the total value of shares held by 800 members.
(c) 3/4th of the total value of shares held by 1000 members.
(d) 3/4th majority of 1000 shares holders present and voting.
7. According to the provision of the Companies Act, 2013, X-One financial company objected
to the compromise held on the scheme in between the company and its shareholders?
According to their respective percentage in debt owed to the company, choose the correct
option?
(a) X-One Finance Company can raise the objection as aggregate loan amount needs to
be more than 2% of debt.
(b) X-One Finance Company jointly with Radhey Finance company can raise the
objection as the aggregate amount needs to be not less than 5℅.
(c) Only X-One Finance Company along with Soham Finance company can jointly raise
the objection as the aggregate amounts needs not to be less than 15℅.
(d) Only X-One Finance Company jointly with Soham Finance company and Radhey
Finance company can raise the objection the aggregate amounts needs not to be less
than 20%.
8. Evaluate the representation made by SEBI, after 45 days of receiving the notice an d all
the documents, is tenable or not?
(a) Not tenable. It is required to be made within 10 days
(b) Not tenable. It is required to be made within 15 days.
(c) Not tenable. It is required to be made within 30 days.

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(d) Not tenable. It is required to be made within 45 days

9. While finally approving the scheme of compromise and arrangements between the
company and its members, which of the below mentioned certificate is necessary to be
filed with the Tribunal?
(a) Certificate from the Central Government
(b) Certificate from the Registrar.
(c) Certificate from the audit and accounts committee of the company
(d) Certificate from the company's auditor.
10. According to the above mentioned facts under the directorship of Mr. Raj Purohit, Trinity
Infrastructure Limited, defaulted in filing statements and paying the interest due on the
loans. How the default of Trinity Infrastructure Limited going to affect the directorship of
Mr. Raj Purohit, in all the three companies?
(a) Mr. Raj has to immediately vacate his office as a director in all the three companies.
(b) Mr. Raj needs to vacate his office as a director in (HPDL).
(c) Mr. Raj needs to vacate his office as a director only in (HPDL) and in Max International
Limited.
(d) Mr. Raj need not resign in any of the company, as the default makes him only
ineligible for re-appointment.
INDEPENDENT MCQS [Questions 11-15]
11. The Board of Directors of Jip Rise Pharmaceuticals Limited are contemplating to declare
interim dividend in the last week of July, 2018 but the company has incurred loss during
the current financial year up to the end of June, 2018. However, it is noted that during the
previous five financial years i.e., 2013-14, 2014-15, 2015-16, 2016-17 and 2017-18, the
company had declared dividend at the rate of 8%, 9%, 12%, 11% and 10% respectively.
Advise the Board as to the maximum rate at which they can declare interim dividend
despite incurring loss during the current financial year.
(a) Maximum at the rate of 10%.
(b) Maximum at the rate of 11%.
(c) Maximum at the rate of 10.5%.
(d) Maximum at the rate of 11.5%.
12. Mr. Kamal is accused of an offence as mentioned in Part B of Schedule to the PMLA, 2002.
What must be the minimum amount of the offence for which Mr. Kamal is accused of?
(a) INR 25 Lakhs
(b) INR 50 Lakhs

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(c) INR 100 Lakhs

(d) INR 75 Lakhs
13. Financial statements shall be signed by -
(a) CFO
(b) Director/MD/CEO
(c) Company secretary
(d) All of the above
14. Mr. Z was appointed as representative of ABC Company for a corporate programme
organized in USA. During the said period in USA, he was diagnosed with the severe kidney
disease, so decided to have a kidney transplant done in USA. State the maximum amount
that can be drawn by Mr. Z as foreign exchange for the medical treatment abroad.
(a) USD 1,25,000
(b) USD 2,25,000
(c) USD 2,50,000
(d) As estimated by a medical institute offering treatment
15. MX Limited was admitted in the Corporate Insolvency Resolution Process (CIRP) under
section 7 of the Insolvency and Bankruptcy Code (Code). The Resolution Professional (RP)
of the MX Limited (Corporate Debtor) conducted the Committee of Creditors (CoC) meeting
but the same was adjourned due to lack of quorum. Accordingly, in the adjourned meeting,
a resolution was passed by the CoC members present, representing 51% of the voting
rights for liquidation of the Corporate Debtor before the expiry of the Corporate Insolvency
Resolution Process (CIRP). You as a qualified Chartered Accountant in the team of RP
and is required to advise RP whether the resolution of liquidation passed is valid in law
considering the provisions of the Insolvency and Bankruptcy Code.
(a) The resolution passed for liquidation is not valid in law as it has not been approved
by minimum of 90% of the voting shares of the financial creditors.
(b) The resolution passed for liquidation is not valid in law as it has not been approved
by minimum of 66% of the voting shares of the financial creditors.
(c) The resolution passed for liquidation is not valid in law as it cannot be passed before
the expiry of the CIRP.
(d) The resolution passed for liquidation is valid in law as it has been passed by 51% of
the voting shares of the financial creditors.

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Descriptive Questions [Questions 16-24]

16. The Board of Directors of the Universal Ltd. which is an MNC comprised of directors who
were Indian as well as of Foreign Nationals. Mr. “X”, who is a Director on the Board is very
often on business tour abroad. He approached you being legal expert of the company to
know from you the regulatory provisions of the Companies Act, 2013 relating to
appointment of Alternate Directors.
Examine the following situations and advise suitably, Mr. X referring to the provisions of
the Companies Act, 2013.
(a) Number of directors for which a person can be appointed as an alternate director.
(b) Where an alternate director is appointed in place of a director whose term is indefinite,
then, what will be the tenure of such alternate director?
(c) Can an Executive Director/Whole Time Director/Managing Director appoint alternate
directors?
17. International Technologies Limited, a listed company, being managed by a Managing
Director proposes to pay the following managerial remuneration:
(i) Commission at the rate of five percent of the net profits to its Managing Director, Mr.
Kamal.
(ii) The directors other than the Managing Director are proposed to be paid monthly
remuneration of `50,000 and also commission at the rate of one percent of net profits
of the company subject to the condition that overall remuneration payable to ordinary
directors including monthly remuneration payable to each of them shall not exceed
two percent of the net profits of the company. The commission is to be distributed
equally among all the directors.
You are required to examine with reference to the provisions of the Companies Act, 2013
the validity of the above proposals.
18. On an application filed from shareholder of Company, Tribunal (NCLT) passed an order on
20th December, 2019 without the consent of parties. Mr. Rama whose family’s condition
was not good so didn’t take much interest in order of tribunal but after few days due to
aggrieved by an order, he filled an appeal before Appellate Tribunal (NCLAT) on
15th March, 2020 showing sufficient cause of delay for not filling appeal up to 45 days from
the date of order. Even after receiving order from Appellate Tribunal dated 30 th April, 2020,
Mr. Rama was not satisfied and desires to make application to Supreme Court on
30th October, 2020.

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Considering the given situation, examine whether Appeal to be filed before the Supreme
Court will be admissible?
19. 'X' Stock Exchange Limited was granted recognition by Securities and Exchange Board of
India (SEBI). The stock brokers of the Stock Exchange did not pay much heed to the
concept of governance and focused on increasing their wealth and snubbed the protection
of investors. Their activities were against the interest of the trade and general public.
Examine whether the SEBI has the power to withdraw the recognition granted to 'X' Stock
Exchange Limited under the provisions of Securities Contracts (Regulations) Act, 1956?
Whether a person can be a member of an unrecognized Stock Exchange for the purpose
of performing any contracts in Securities?
20. The Income Tax Authorities in the current financial year 2019-20 observed, during the
assessment proceedings, a need to re-open the accounts of Chetan Ltd. for the financial
year 2008-09 and, therefore, filed an application before the National Company Law
Tribunal (NCLT) to issue the order to Chetan Ltd. for re-opening of its accounts and
recasting the financial statements for the financial year 2008-09. Examine the validity of
the application filed by the Income Tax Authorities to NCLT.
21. Mr. Kunal used his car for smuggling cash and for other illegal activities. On trial before
the Special Court, it was found that an offence of money laundering was committed by Mr.
'Kunal'. Also found that the car was under hypothecation to a Bank for the car loan
obtained. Referring to provisions of the PMLA, 2002, examine whether the car can be
confiscated in the light of the given situation?
22. Quality Rubber Limited, a supplier of raw materials filed a petition before the NCLT for the
recovery of ` 10,00,000 against Smart Latex Limited. Smart Latex Limited, the Corporate
Debtor, has other financial creditors to the extent of ` 1,50,00,000 and they also joined
together and filed petitions to NCLT. The Corporate Debtor has a total of 40 financial
creditors and 2 operational creditors. Further, all the financial creditors are having equal
voting rights/shares.
Notice was issued on 1 st August, 2019 for the conduct of the first meeting to be held on 5 th
August, 2019 at a common venue. The meeting was attended by all 40 financial creditors
and 2 operational creditors. A resolution was passed to appoint Mr. Naveen as a Resolution
Professional. 25 of the financial creditors voted in favour of the resolution and 10 voted
against the resolution and 5 financial creditors and 2 operational creditors abstained from
voting.

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Decide in terms of the given information whether the resolution passed to appoint Mr.
Naveen is valid? In the light of the provisions of Insolvency and Bankruptcy Code, 2016
read with rules framed thereunder, explain the requirements of valid quorum for the
conduct of the meeting.
23. Referring to the provisions of the Foreign Exchange Management Act, 1999, state the kind
of approval required for the following transactions:
(i) M requires U.S. $ 5,000 for remittance towards hire charges of transponders.
(ii) P requires U.S. $ 2,000 for payment related to call back services of telephones.
24. Mr. Ramesh Kulkarni conducts private tuition classes from his residence. It was alleged by
the Enforcement Directorate that Mr. Kulkarni has under reported his income and collected
income in tax and used the proceeds to purchase a house property in Marol, Mumbai. The
ED officers through written orders provisionally attached the properties on suspicion of it
being derived from the proceeds of crime. Comment on the validity of the provisional
attachment on the order issued by the ED officers.

SUGGESTED ANSWERS/HINTS

Answers to ICS/Multiple Choice Questions

1. (d)
2. (a)
3. (a)
4. (a)
5. (d)
6. (a)
7. (b)
8. (c)
9. (d)
10. (c)
11. (b)
12. (c)
13. (d)
14. (d)
15. (b)

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Answers to Descriptive Questions

16. (a) According to Section 161(2) of the Companies Act, 2013, the Board of Directors of a
company may, if so authorised by its articles or by a resolution passed by the company
in general meeting, appoint a person, not being a person holding any alternate
directorship for any other director in the company or holding directorship in the same
company, to act as an alternate director for a director during his absence for a period
of not less than three months from India.
According to section 165, no person shall hold office as a director, including any
alternate directorship, in more than twenty companies at the same time. However,
the maximum number of public companies in which a person can be appointed as a
director shall not exceed ten.
Hence, in the instant case, a person can be appointed as an alternate director for
only one director in the same company but maximum twenty different companies.
(b) According to second proviso to section 161(2), an alternate director shall not hold office
for a period longer than that permissible to the director in whose place he has been
appointed and shall vacate the office if and when the director in whose place he has
been appointed returns to India.
Third proviso says that if the term of office of the original director is determined before
he so returns to India, any provision for the automatic re-appointment of retiring
directors in default of another appointment shall apply to the original, and not to the
alternate director.
Hence, in the instant case, the alternate director shall hold office till the time original
director returns to India.
(c) As per section 161(2), the Board of Directors of a company may, if so authorised by
its articles or by a resolution passed by the company in general meeting, appoint a
person, not being a person holding any alternate directorship for any other director in
the company or holding directorship in the same company, to act as an alternate
director for a director during his absence for a period of not less than three months
from India.
From the above provision, it is clear that an alternate director can be appointed for
any director by the board of directors and not by an Executive Director/Whole Time
Director/Managing Director for themselves.
17. International Technologies Limited, a listed company, being managed by a Managing
Director proposes to pay the following managerial remuneration:
(i) Commission at the rate of 5% of the net profits to its Managing Director, Mr. Kamal:
Part (i) of the Second Proviso to Section 197(1), provides that except with the
approval of the company in general meeting by a special resolution, the remuneration
payable to any one managing director or whole time director or manager shall not

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exceed 5% of the net profits of the company and if there is more than one such
director then remuneration shall not exceed 10% of the net profits to all such directors
and manager taken together.
In the present case, since the International Technologies Limited is being managed
by a Managing Director, the commission at the rate of 5% of the net profit to Mr.
Kamal, the Managing Director is allowed and no approval of company in general
meeting is required.
(ii) The directors other than the Managing Director are proposed to be paid monthly
remuneration of ` 50,000 and also commission at the rate of 1 % of net profits of the
company subject to the condition that overall remuneration payable to ordinary
directors including monthly remuneration payable to each of them shall not exceed 2
% of the net profits of the company. Part (ii) of the Second Proviso to Section 197(1)
provides that except with the approval of the company in general meeting by a special
resolution, the remuneration payable to directors who are neither managing directors
nor whole time directors shall not exceed-
(A) 1% of the net profits of the company, if there is a managing or whole -time
director or manager;
(B) 3% of the net profits in any other case.
In the present case, the maximum remuneration allowed to directors other than
managing or whole-time director is 1% of the net profits of the company because the
company is managed by a managing director. Hence, if the company wants to fix
directors’ remuneration at not more than 2% of the net profits of the company, the
approval of the company in general meeting is required by passing a special
resolution.
18. According to Section 423 of the Companies Act, 2013, any person aggrieved by an order
of the Appellate Tribunal may prefer an appeal to the Supreme Court.
Every appeal shall be filed within a period of 60 days from the date on which a copy of the
order of the Appellate Tribunal is made available to the person aggrieved and shall be in
such form, and accompanied by such fees, as may be prescribed.
Supreme Court may entertain an appeal even after the expiry of the said period of 60 days
from the date aforesaid, but within a further period not exceeding 60 days, if it is satisfied
that the appellant was prevented by sufficient cause from filing the appeal within period.
In above case, since Mr. Rama even aggrieved by an order of Appellate Tribunal desires
to fill an application before Supreme Court on 30 th October 2020. But as Supreme Court
can entertain appeal only upto 60 days + 60 Days (Extension if sufficient cause). Since
this appeal was to be filled beyond 120 days by Mr. Rama, so, appeal to be filed before
the Supreme Court will not be admissible.

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19. (i) Section 5(1) of the Securities Contracts (Regulations) Act, 1956 states that if the
Central Government/ SEBI is of the opinion that the recognition granted to a stock
exchange under the provisions of this Act, should, in the interest of the trade or in
the public interest, be withdrawn, the Central Government or SEBI may serve on the
governing body of the stock exchange, a written notice that the Central Government
or SEBI is considering the withdrawal of the recognition for the reasons stated in the
notice and after giving an opportunity to the governing body to be heard in the matter,
the Central Government/SEBI may withdraw the recognition granted to the stock
exchange.
Thus, Central Government or SEBI can withdraw the recognition of ‘X’ Stock
Exchange Limited on the grounds that their activities were against the interest of the
trade and general public.
(ii) As per section 19 of the Securities Contracts (Regulations) Act, 1956, no person shall
organise or assist in organising or be a member of any stock exchange (other than a
recognised stock exchange) for the purpose of assisting in, entering into or
performing any contracts in securities, except with the approval of Central
Government or SEBI.
Hence, no person can be a member of an unrecognised Stock exchange for the
purpose of performing any contracts in Securities, except with the approval of Central
Government or SEBI.
20. As per section 130 of the Companies Act, 2013, a company shall not re -open its books of
account and not recast its financial statements, unless an application in this regard is made
by the Central Government, the Income-tax authorities, the Securities and Exchange
Board, any other statutory body or authority or any person concerned and an order is made
by a court of competent jurisdiction or the Tribunal to the effect that—
the relevant earlier accounts were prepared in a fraudulent manner; or
the affairs of the company were mismanaged during the relevant period, casting a doubt
on the reliability of financial statements:
However, no order shall be made in respect of re-opening of books of account relating to
a period earlier than eight financial years immediately preceding the current financial year.
In the given instance, an application was filed for re-opening and re-casting of the financial
statements of Chetan Ltd. for the financial year 2008-2009.
Though application filed by the Income Tax Authorities to NCLT is valid, its
recommendation for reopening and recasting of financial statements for the period earlier
than eight financial years immediately preceding the current financial year i.e. 2019-2020,
is invalid.

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21. Vesting of property in Central Government [Section 9]: Where an order of

confiscation has been made under section 8(5) or section 8(7) or section 58B or section
60(2A) of PMLA, 2002 in respect of any property of a person, all the rights and title in
such property shall vest absolutely in the Central Government free from all
encumbrances.
However, where the Special Court or the Adjudicating Authority, as the case may be,
after giving an opportunity of being heard to any other person interested in the property
attached under this Chapter, or seized or frozen, is of the opinion that any encumbrance
on the property or lease-hold interest has been created with a view to defeat the
provisions of this Chapter, it may, by order, declare such encumbrance or lease -hold
interest to be void and thereupon the aforesaid property shall vest in the Central
Government free from such encumbrances or lease-hold interest.
In the instant case, Mr. Kunal used his car for smuggling cash and for other illegal
activities for committing of an offence under the purview of the Prevention of Money
Laundering Act. The Special Court found on conclusion of trial that an offence of money
laundering was committed by Mr. Kunal. The car was under hypothecation with the bank
for the car loan obtained. As the encumbrance on the car has been created to defeat the
provisions and special court may order to declare such encumbrance to be void and
therefore the car can be confiscated and shall vest in the Central Government.
22. According to section 22 of the Insolvency and Bankruptcy Code, 2016, the first meeting
of the committee of creditors shall be held within seven days of the constitution of the
committee of creditors. The committee of creditors in the first meeting may by a majority
vote of not less than sixty-six percent of the voting share of the financial creditors,
either resolve to appoint the interim resolution professional as a resolution professional
or to replace the interim resolution professional by another resolution professional.
A meeting of committee of creditors shall quorate if members of the committee of
creditors representing at least thirty three percent of the voting rights are present either
in person or by video/audio means.
The adjourned meeting shall quorate with the members of the committee attending the
meeting.
As per the facts of the question and the provisions of law, the requisite quorum was
present in the meeting as all 40 financial creditors attended the meeting and 5 abstained
from voting.
The Act requires that not less 66% of the financial creditors shall resolve to appoint
resolution professional. However, in the given case 71.4% [(25/35)* 100] voted in favour
of Mr. Naveen. Hence, the said appointment is valid.

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23. Under section 5 of the Foreign Exchange Management Act, 1999, and Rules relating
thereto, some current account transactions require prior approval of the Central
Government, some others require the prior approval of the Reserve Bank of India, some
are free transactions and some others are prohibited transactions. Accordingly,
(i) It is a current account transaction, where M is required to take approval of the Central
Government for drawal of foreign exchange for remittance of hire charges of
transponders.
(ii) Withdrawal of foreign exchange for payment related to call back services of telephone
is a prohibited transaction. Hence, Mr. P will not succeed in acquiring US $ 2,000 for
the said purpose.
24. As per Section 5(5) of the Prevention of Money Laundering Act, 2002, the Director or any
other officer who provisionally attaches any property under sub-section (1) shall, within a
period of thirty days from such attachment, file a complaint stating the facts of such
attachment before the Adjudicating Authority.
As per Section 8(4) of the Prevention of Money Laundering Act, 2002, where the
provisional order of attachment made under sub-section (1) of section 5 has been
confirmed under sub-section (3), the Director or any other officer authorised by him in this
behalf shall forthwith take the possession of the property attached under section 5 or frozen
under sub-section (lA) of section 17, in such manner as may be prescribed. Accordingly
the Director is to file a petition with the Adjudicating Authority within 30 days of attachment.
After order of attachment is confirmed, the Director take possession of the attached
property.

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