Volume 2, Issue 3, May 05, 2013
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Law & Policy
Consolidated FDI Policy applicable as on April 10, 2012
Highlights of the new Consolidated Foreign Direct Policy effective as on April 10, 2012 (“FDI Policy”) are attached.
The FDI Policy is an exercise in removing ambiguities.
The issue of dual control of the Reserve Bank of India and the Government of India has also been addressed.
Prior approval of the Reserve Bank of India is now not required:
- In transactions attracting provisions of SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997
- For transfer of capital instruments in financial services sector
- Where Government approval has already been obtained
- For transfer of capital instruments in sectors falling under Government route
The FDI Policy delivers no surprises. However, the clarifications were much needed.
The RBI/2011-12/481 A. P. (DIR Series) Circular No.101 under FEMA, 1999
The RBI Circular No.101 was issued to all Category-I Authorised Dealer Banks in relation to Foreign Currency Accounts by persons resident in India.
Highlights of the Circular
- An Indian party is now allowed to open, hold and maintain Foreign Currency Accounts abroad for overseas direct investments.
- The Indian party must be eligible under FEMA Regulations.
- The host country regulations should require routing investments through a designated account.
- The FCA must be maintained according to host country regulations.
- Remittances sent to the FCA should be utilized only for overseas direct investments.
- Dividend or entitlements received must be repatriated to India within 30 days.
- Indian parties must submit yearly debit and credit details certified by statutory auditors.
- The FCA must be closed immediately or within 30 days of disinvestment.
Necessary amendments to FEMA Regulations were issued separately.
SEBI Guidelines for Credit Rating Agencies dated 1st March, 2012
SEBI issued Circular No. CIR/MIRSD/3/2012 relating to ratings of securities, instruments, loans and facilities provided by banks.
Credit Rating Agencies registered with SEBI must follow:
- Applicable rating process and methodology
- Transparency and disclosure norms
- Avoidance of conflict of interest
- Code of conduct requirements
The half-yearly internal audit prescribed by SEBI shall also cover such ratings.
SEBI Circular for Clearing and Settlement of OTC trades in CPs & CDs dated 5th March, 2012
SEBI decided that all SEBI regulated entities shall settle OTC trades in Commercial Papers and Certificates of Deposit through:
- National Securities Clearing Corporation Limited (NSCCL)
- Indian Clearing Corporation Limited (ICCL)
The circular came into effect from April 01, 2012.
Legal Pronouncements
Constitutional Law
Society for Un-aided Private Schools of Rajasthan Vs. Union of India
The Supreme Court upheld the constitutional validity of the Right to Education Act, 2010.
The Act mandates free and compulsory education for poor children aged 6-14 years.
The Government will reimburse private schools admitting poor students.
The judgement included both majority and dissenting opinions.
Hardeep Kaur Vs. Malkiat Kaur
The Supreme Court held that High Courts cannot entertain second appeals without formulating substantial questions of law.
Criminal Law
Ashok Sadarangani and Anr. Vs. Union of India
The Supreme Court held that continuation of criminal proceedings after compromise between parties may amount to abuse of process of law.
Property Law
Maria Margarida Sequeria Fernandes Vs. Erasmo Jack de Sequeria
The Supreme Court held that no person acquires title to property merely by gratuitous stay.
Caretakers and servants hold property only on behalf of the principal.
Civil Law
Rameshkumar Agarwal Vs. Rajmala Exports Pvt. Ltd.
The Supreme Court observed that courts should ordinarily permit bona fide amendments to pleadings to avoid multiplicity of litigation.
Analysis – ANTI-MONEY LAUNDERING LAWS IN INDIA : A brief overview
The literal meaning of laundering is washing or cleaning dirty clothes.
Money laundering refers to disguising illicit income to make it appear legitimate.
Money laundering is associated with criminal activities such as:
- Drug trafficking
- Arms trafficking
- Terrorism
- Extortion
India became the 34th member of the Financial Action Task Force (FATF) in 2010.
India is also a signatory to various United Nations conventions dealing with anti-money laundering and combating financing of terrorism.
India criminalised money laundering under:
- The Prevention of Money Laundering Act, 2002 (PMLA)
- The Narcotic Drugs and Psychotropic Substances Act, 1985
Prior to PMLA, various statutes partially addressed money laundering including:
- Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974
- Income Tax Act, 1961
- Benami Transactions (Prohibition) Act, 1988
- Indian Penal Code
- Code of Criminal Procedure, 1973
- NDPS Act, 1985
The Prevention of Money Laundering (Amendment) Bill, 2011
The Bill introduced concepts such as:
- Corresponding law
- Reporting entity
- Expanded definition of money laundering offences
The Bill proposed:
- Removal of upper limit on fines
- Provisional attachment and confiscation of property
- Director’s power to call records and investigate
- Responsibility on reporting entities and directors
- Appeals directly to Supreme Court
- Transfer of scheduled offence cases to Special Courts
Viewpoint: The Prevention of Money Laundering (Amendment) Bill, 2011 was necessitated to align India’s anti-money laundering framework with global standards and FATF obligations.
Business News
March 1, 2012
- Government approved proposal for disinvestment through buyback route.
- Proposal to amend Motor Vehicles Act under consideration.
- EU regulators raised concerns over Google privacy policy.
March 2, 2012
Supreme Court dismissed PIL challenging Justice Kapadia in Vodafone tax matter.
March 3, 2012
- Finance Ministry considering stronger customs law provisions.
- CCI relaxed merger and acquisition regulations.
- Independent directors may lose posts under Companies Bill.
March 4, 2012
Government mulling National Cyber Coordination Centre.
March 13, 2012
- TRAI proposed additional powers.
- COAI challenged TDSAT verdict regarding GSM spectrum allocation.
March 15, 2012
- National Telecom Policy 2012 likely by June.
- UK clarified OCI citizens to receive consular support.
- RBI clarified treatment of fixed deposits.
March 16, 2012
- Telecom Department rejected extension for tracking device deadline.
- Finance Budget proposed subsidy cuts and tax reforms.
March 20, 2012
- TRAI sought easing of mobile connection guidelines.
- Government defended retrospective tax amendments.
March 21, 2012
Supreme Court declined to reconsider Vodafone offshore acquisition ruling.
March 22, 2012
- Bharti Airtel, Idea and Loop officials summoned for MNP violations.
- Government considering FDI guideline modifications for retail.
March 23, 2012
RBI directed banks not to honour cheques older than three months.
March 24, 2012
- FIIs shifting holdings to Singapore.
- RBI may raise capital requirements for urban cooperative banks.
March 26, 2012
RBI released Fair Practices Code for NBFCs.
March 27, 2012
- RBS halted tanker payments due to Iran sanctions.
- TRAI recommended no separate exit policy for telecom operators.
March 31, 2012
Government likely to oppose Vodafone invoking investment treaty protections.
April 1, 2012
Gujarat High Court ruled banks cannot freeze accounts for non-submission of KYC documents.
April 2, 2012
- Real Estate Regulator Bill proposed compulsory registration.
- SEBI considering relaxation for private equity sponsor contribution.
- Government filed review petition in 2G matter.
April 3, 2012
- SEBI introduced Alternative Investment Fund framework.
- Private equity, hedge funds and real estate funds to register with SEBI.
April 4, 2012
- Income Tax Department to revive Vodafone tax demand.
- Supreme Court hearing plea relating to 2G scam.
April 5, 2012
Supreme Court declined review petitions against cancellation of 122 telecom licences.
April 6, 2012
- Government proposed stricter customs offences.
- Supreme Court refused to reconsider telecom licence cancellation.
- Foreign-held private banks not to be treated as foreign banks.
April 7, 2012
- Government proposed amendments to Banking Regulation Act.
- RBI implemented web-based auctions for government securities.
April 9, 2012
CBDT introduced tax forms requiring disclosure of overseas assets.
April 10, 2012
Google unified privacy policy faced criticism in Europe.
April 12, 2012
- GAAR proposed in Finance Budget 2012.
- Proposal for foreign airlines to hold up to 49% stake in Indian carriers.
April 16, 2012
- India sought data secure status from EU.
- Oracle vs Google smartphone technology dispute trial began.
April 18, 2012
Vodafone served dispute notice on Indian Government under bilateral treaty.
April 19, 2012
Software coalition lobbied against retrospective tax changes.
April 20, 2012
Government ruled out amicable settlement with Vodafone.
April 21, 2012
TRAI mandated per-second billing options for telecom users.
April 23, 2012
- GAAR could target domestic taxpayers.
- Non-resident consortium taxable as Association of Persons.
April 24, 2012
TRAI recommended 13-fold increase in spectrum pricing.
April 25, 2012
Supreme Court ordered 2G auctions to be conducted by August 31.
April 26, 2012
Government reviewing investment treaties for problematic clauses.
April 27, 2012
SEBI directed companies to reduce promoter holdings within prescribed time.
April 28, 2012
Government stated Parliament views would guide tax amendment decisions.
April 30, 2012
- Telenor warned of exit from India.
- Telecom Commission sought clarification from TRAI.
