Thursday, 28 July 2016

Seeking to check prevalent malpractices the Lok Sabha has passed a comprehensive Benami Transactions Amendment Bill.

Benami Transactions Amendment Bill

Key Highlight :


The Act previously defined  a benami transaction as a transaction where a property is held by or transferred to a person, but has been provided for or paid by another person.  The Bill further widens the scope of  this definition to add other transactions which qualify as benami, such as property transactions where:
(i) the transaction is made in a fictitious name,
(ii) the owner is not aware or denies knowledge of the ownership of the property, or 
(iii) the person providing the consideration for the property is not traceable.


The Bill also specifies certain cases will be exempt from the definition of a benami transaction.  These include cases when a property is held by:
 (i) a member of a Hindu undivided family, and is being held for his or another family member’s benefit, and has been provided for or paid off from sources of income of that family; 
(ii) a person in a fiduciary capacity; 
(iii) a person in the name of his spouse or child, and the property has been paid for from the person’s income; and

3.Benamidar :

The Bill defines benamidar as the person in whose name the benami property is held or transferred, and a beneficial owner as the person for whose benefit the property is being held by the benamidar. 

4.Regulatory Authorities:

Under the Act, an Authority to acquire benami properties was to be established by the Rules.  The Bill seeks to establish four authorities to conduct inquiries or investigations regarding benami transactions: (i) Initiating Officer, (ii) Approving Authority, (iii) Administrator and (iv) Adjudicating Authority. 

If an Initiating Officer believes that a person is a benamidar, he may issue a notice to that person.  The Initiating Officer may hold the property for 90 days from the date of issue of the notice, subject to permission from the Approving Authority.  At the end of the notice period, the Initiating Officer may pass an order to continue the holding of the property.

If an order is passed to continue holding the property, the Initiating Officer will refer the case to the Adjudicating Authority.  The Adjudicating Authority will examine all documents and evidence relating to the matter and then pass an order on whether or not to hold the property as benami.

Based on an order to confiscate the benami property, the Administrator will receive and manage the property in a manner and subject to conditions as prescribed. 

The Bill also seeks to establish an Appellate Tribunal to hear appeals against any orders passed by the Adjudicating Authority.  Appeals against orders of the Appellate Tribunal will lie to the high court.

5.Penalty:The Bill also specifies the penalty for providing false information to be rigorous imprisonment of six months up to five years, and a fine which may extend to 10% of the fair market value of the benami property.

Under the Act, the penalty for entering into benami transactions is imprisonment up to three years, or a fine, or both.  The Bill seeks to change this penalty to rigorous imprisonment of one year up to seven years, and a fine which may extend to 25% of the fair market value of the benami property. 

Certain sessions courts would be designated as Special Courts for trying any offences which are punishable under the Bill.

For more information and staying updated on corporate laws and related updates log on to

Tuesday, 26 July 2016

The Real Estate (Regulation and Development) Act, 2016 (Act)


The Real Estate (Regulation and Development) Act, 2016 (Act) was  passed by the on 25 March 2016 after receiving the assent of the President. Various provisions have been notified while the others await notification.

The Act   was first introduced in 2013 was passed  with the underlying  intention :
·        To bring transparency and safety in the market for consumers of residential and commercial projects by introducing a sectoral regulatory mechanism.
·        To address distortions in the real estate market due to the asymmetrical relationship between real estate developers and consumers.
·        To prevent structural abuse of dominance

Key Highlights

The Act contains several necessities to fill the gaps in the real estate market - by way of establishing a disclosure framework and setting strict liabilities for promoter irregularities.
Ø Regulatory Authorities: Setting-up of Real Estate Regulatory Authorities (RERAs) and real estate appellate tribunals in all states and union territories (except Jammu & Kashmir) within 1 year of its notification.
Ø Registration: Mandatory registration of real estate projects with the RERA where the total area of land proposed to be developed exceeds 500 square meters or where more than eight apartments are proposed to be developed inclusive of all phases (where phase-wise development is proposed). The Act also requires every phase of a project to be registered separately as a standalone project. Projects cannot be advertised, booked or sold in any form prior to registration and obtaining the necessary construction approvals. The RERA is required to either grant or reject registration applications within 30 days.
Ø Disclosures: Publicly accessible disclosures of the project and promoter details, along with a self-declared timeline within which the promoter is required to complete the project, are compulsory. Quarterly project related disclosures are also required. The disclosures are to be made available online.
Ø Standardisation: Key terms such as 'apartment', 'carpet area' and '(rate of) interest', which will help in homogenising sector practices and prevent abuse of consumers due to biased classifications such as 'super built-up area' etc.
Ø Ring-fencing of project receivables: Promoters must park 70% of all project receivables in a separate account. Drawdown from such account is permitted for land and construction costs only, in line with the percentage of project completion (as certified by an architect, an engineer and a chartered accountant). Further, a promoter can accept only up to 10% of the apartment cost prior to entering into a written agreement for sale with the consumer.
Ø Warranties: The promoter is required to declare that it has legal title to the project land or authenticate validity of title, if such land is owned by another person. The promoter is also required to obtain insurance for title and buildings along with construction insurance.
Ø Bar on encumbrance: The promoter is prohibited from creating any charge or encumbrance on any apartment after executing an agreement for the same. In the event such charge or encumbrance is created, it will not affect the right and interest of the concerned consumer.
Ø Project sanctity: Prior consent of the 2-3rd of the allottees and RERA is required for alteration in plans ,to transfer or assign majority of its rights and liabilities in a project without such consent.
Ø Model agreement: A specified form of agreement for sale between promoters and consumers may be prescribed, which will prevent inclusion of biased provisions in it. Consumers have also been granted the right to seek relief for unilateral termination of such agreements by promoters without cause.
Ø Defects liability of the promoter: Promoter is responsible for structural defects or other deficiencies for a period of 5 years from the date of delivery of possession.
Ø Agents:  Real estate agents cannot  facilitate any sale or purchase of plots/apartments in projects without obtaining registration with the RERA. The agents are required to facilitate access of project information to consumers at the time of booking and refrain from making false statements, misleading representations and indulging in unfair trade practices.
Ø Legal recourse: Provides for time bound resolution of complaints and disputes by the RERAs and the real estate appellate tribunals. The Act also provides for refund of amounts paid by consumers (along with interest and compensation) for promoter's failure to give possession of the apartment in accordance with the agreement for sale, or any breach of such agreement.
Ø Existing projects: Existing projects which have not received completion certificate as on the date of commencement of this regulation will be required to obtain registration with the RERA within 3 months of such commencement.
Penalties: Imposition of  monetary penalties on the promoter of up to 5% of the 'estimated cost of the project' (as determined by the RERA) for disclosure related defaults, and up to 10% for other defaults, along with a maximum imprisonment of 3 years. Consumers are liable to a fine of up to 10% of the apartment cost or imprisonment up to 1 year for non-compliance with orders of the real estate appellate tribunal.

Saturday, 23 July 2016



Well begin, if half done!

In the world of clicks and rat race who wants to wait for years to get Justice, who wants to suffer the loss and the real cost when it comes to Business?  
For adjudicating the matters of Business transactions there were three agencies working simultaneously for different subjects;
  • ·         the High Courts;
  • ·         the Company Law Boards; and
  • ·         the Board for Industrial and Financial Reconstruction.

There are plethora of cases pending before High Courts making them over burdened and inefficient but perhaps the best administration of justice. The other two agencies were also over burdened and not so efficient.

To smoothen the speedy delivery of Justice, the  Ministry of Corporate Affairs (MCA) vide a notification dated 1st June, 2016 has constituted the National Company Law Tribunal (NCLT) a quasi-judicial body and its appellate authority, the National Company Law Appellate Tribunal (NCLAT) with effect from the same date.  The Central Government under Section 408 and 410 of the Companies Act, 2013 (18 of 2013) is empowered to form NCLT and NCLAT through a notification. It has dissolved the Company Law Board (CLB) constituted under the Companies Act, 1956 from that day.  In the first phase company law matters related to CLB has been transferred to NCLT.

Earlier the above stated three bodies were working separately having different powers like High Courts were having power to deal with cases of Winding up, Amalgamation, demergers, Capital Reduction, appeals against CLB orders, AAIFR orders etc. CLB on the other hand had power to adjudicate the matters related to Oppression and mismanagement, rectification of Register of members, Compounding of Offences, Complaints related to Deposits, etc. while, BIFR had power to adjudicate the matters related to Sick Industrial Companies and form Schemes of their rehabilitation. NCLT has emerged as “A single platform for all Corporate Litigation”.

The NCLT has its Principal bench in New Delhi followed by the 10 other regional benches in Ahmedabad, Allahabad, Bengaluru, Chandigarh, Chennai, Guwahati, Hyderabad, Kolkata, Mumbai and New Delhi having its territorial jurisdiction in various states. It is headed by a President who must be a judge of High Court for five years followed by a Judicial member and a Technical member. A Judicial Member must be a present or retired Judge of High Court or a District Judge for five years or an Advocate with 10 years of practice while, a Technical member must be a ICLS or ILS having 15 years of experience or PCS/PCA/PCWA having 15 years of practice or is a person of proven ability, integrity and standing having special knowledge and experience, of not less than 15 years or a presiding officer of a Labour Court for atleast 5 years.

The present President of NCLT is Hon’ble Mr Justice M.M Kumar a retired judge of Punjab and Haryana High Court and Ex Chief Justice of Jammu and Kashmir High Court.

According to Section 412 of the Companies Act, 2013 the President of the Tribunal shall be appointed after the  consultation of the Chief Justice of India and the members of the Tribunal shall be appointed on the recommendation of the selection committee  (a) Chief Justice of India or his nominee—Chairperson; (b) a senior Judge of the Supreme Court or a Chief Justice of High Court— Member; (c) Secretary in the Ministry of Corporate Affairs—Member; (d) Secretary in the Ministry of Law and Justice—Member; and (e) Secretary in the Department of Financial Services in the Ministry of Finance— Member.

The working tenure of President and every other member is five years and they are eligible for reappointment also or until the President attains the age of sixty seven years and a Member attain the age of sixty five years, as per section 413 of the Companies Act, 2013.

The President shall, for the disposal of any case relating to rehabilitation, restructuring, reviving or winding up of companies, constitute one or more Special Benches consisting of three or more Members, majority necessarily being of Judicial Member as per Section 419(4) of the Act.

MCA vide its notification dated 6th July’16 has stated that, the Division bench is entitled to function as a bench and exercise powers of the Tribunal irrespective of any class of cases except those specified by an order of the President. The Single Judicial Member is also empowered to function like a bench and exercise powers of the Tribunal in the cases where:

i) All cases which have been transferred from erstwhile Company Law Board. However, in terms of second proviso to Section 419 (3) of the Act, the Member judicial shall be entitle to refer the matter to the President with the opinion that the matter ought to be heard by two members for the reason to be recorded in writing

ii) All the petitions where company has paid up share capital of Rs. 50 lacs or less where the Division Bench is available. However, where the Division Bench is not available the pecuniary limit of Rs. 50 lacs should not be applied iii) any matter which the President may authorise by passing a specific or general order.

MCA vide a notification dated 19th July’16 has assigned the following matters to the Principal Bench, New Delhi. They are
i)             Section 245: Class Action Suits
ii)           Section 379 to 393: Application of Act to foreign companies
iii)          Section 394: Annual Reports of government companies

And also, any other matters related to the above provisions if, filed anywhere else then, they shall be transferred to the Principal Bench, New Delhi.

The NCLT, its members and their working, powers of benches and everything else has been discussed in Chapter XXVII form Section 407 to Section 434 of the Companies Act, 2013.
Recently, MCA has released Rules related to NCLT and NCLAT for procedures and practice before these forums.

With this the Government has provided a big platform for adjudication of corporate law matters in a speedy manner and would certainly have a positive impact in the adjudication and implementation of corporate law, but the task is yet half done as consolidation of corporate law matters related to BIFR and High Courts are yet in limbo.
          “The updated version of oneself is the best version”

For more information on the Companies Act, 2013, National Company Law Tribunal and National Company Law Appellate Tribunal please visit

To download your copy of NCLT and NCLAT Rules, 2016 please visit below links on

The author (Mr Pankaj Jain) is Partner, Veda Legal, Advocate & Solicitors, New Delhi.  Views expressed are personnel.   

Friday, 22 July 2016

Can a writ petition be filed against a private company?

 Article 32: Remedies for enforcement of rights(Right of Constitutional Remedy)

(1) The right to move the Supreme Court by appropriate proceedings for the enforcement of the rights conferred by this Part is guaranteed
(2) The Supreme Court shall have power to issue directions or orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, whichever may be appropriate, for the enforcement of any of the rights conferred by this Part
(3) Without prejudice to the powers conferred on the Supreme Court by clause ( 1 ) and ( 2 ), Parliament may by law empower any other court to exercise within the local limits of its jurisdiction all or any of the powers exercisable by the Supreme Court under clause ( 2 )
(4) The right guaranteed by this article shall not be suspended except as otherwise provided for by this Constitution Remedies for enforcement of rights conferred by this Part

226. Power of High Courts to issue certain writs
(1) Notwithstanding anything in Article 32 every High Court shall have powers, throughout the territories in relation to which it exercise jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeascorpus, mandamus, prohibitions, quowarranto and certiorari , or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose
(2) The power conferred by clause ( 1 ) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories
(3) Where any party against whom an interim order, whether by way of injunction or stay or in any other manner, is made on, or in any proceedings relating to, a petition under clause ( 1 ), without
(a) furnishing to such party copies of such petition and all documents in support of the plea for such interim order; and
(b) giving such party an opportunity of being heard, makes an application to the High Court for the vacation of such order and furnishes a copy of such application to the party in whose favour such order has been made or the counsel of such party, the High Court shall dispose of the application within a period of two weeks from the date on which it is received or from the date on which the copy of such application is so furnished, whichever is later, or where the High Court is closed on the last day of that period, before the expiry of the next day afterwards on which the High Court is open; and if the application is not so disposed of, the interim order shall, on the expiry of that period, or, as the case may be, the expiry of the aid next day, stand vacated
(4) The power conferred on a High Court by this article shall not be in derogation of the power conferred on the Supreme court by clause ( 2 ) of Article 32
A writ is  a  "form of written command in the name of a court or other legal authority to act, or abstain from acting, in a particular way".

Writ of Habeas Corpus:

Protection of Individual’s liberty when detained illegally and wrongfully
Filed before court by any individual or organization not necessarily the aggrieved party
Against state as well as individual
Physically producing in court incase the detention is questioned
The court may not insist on physical production in court incase the if all the material facts relating to detention are made available
If detention is found to be illegal or unlawful, the ccourt may direct release
Writ of Mandamus
Filed on the violation of a legal right only by the aggrieved party
Private rights cannot be enforced-cannot be issued against an individual or a private person
Issued only against a public authority or a person  holding office
Means to command ,i.e. , a command to do or not to do something in nature of public duty
Cannot be issued against President or Governors
Writ of Prohibition
Filed by an aggrieved individual against a judicial or quasi judicial body (a lower court or a tribunal) when it is acting in excess or absence of its jurisdiction

Writ of Certiorari
Similar to Writ of Prohibition except it is filed in the case wherein the judgement has been delivered
 Thus the purpose of the writ is to quash or nullify the judgement/direction/order issued by such a judicial/quasi-judicial body. 

Writ of Quo Warranto
Filed by any person to ensure that a public office is not held by  a person   who is not qualified to hold the office

A brief reading of Articles 32 and 226 of the constitution clearly explains that a writ can be issued "to any person or authority" and "for enforcement of any of the rights conferred by Part III and for any other purpose." The scope is sure very wide and can be interpreted in various  ways.

The Supreme Court through its judgements has tried to clarify its stance on whether a  writ petition can be filed against a private company.

S.D. Siddiqui vs University Of Delhi And Ors. is a landmark in this regard .In this it was held that while ordinarily a writ is filed only against the state or the instrumentality of the state as it was held in previous judgements of   Tekraj Vasandhi v. Union of India, General Manager,  Kisan Sahkari Chini Mills Ltd. v. Satrughan Nishad  ,Pradeep Kumar Biswas v. Indian Institute of Chemical Biology and Ors .

The court reiterated its stance as was in the case of Binny Ltd. v. Sadasivan where the Supreme Court observed that a writ will lie against a private body only when it performed a public function or discharged a public duty. This public function or duty was explained by the court in the S.D Siddiqui case –“A private body or a person may be amenable to writ jurisdiction only where it may become necessary to compel such body or association to enforce any statutory obligations or such obligations of public nature casting positive obligation upon it

We can say that a writ petition is only maintainable against the state or its organs ,or a person holding public office discharging his duties in capacity of that office, ordinarily. Writ petitions are filed essentially for the violation of a fundamental right as mentioned in Part III of the Constitution of India.

It can thus be summarized that a writ against a company is not maintainable except where the company is discharging a public function.

Friday, 15 July 2016

Key Managerial Personnel

SECTION 203:Appointment of Key Managerial Personnel (KMP)
 (1) Every company belonging to such class or classes of companies as may be
prescribed shall have the following whole-time key managerial personnel,—
(i) managing director, or Chief Executive Officer or manager and in their absence,
a whole-time director;
(ii) company secretary; and
(iii) Chief Financial Officer :
Provided that an individual shall not be appointed or reappointed as the chairperson
of the company, in pursuance of the articles of the company, as well as the managing director
or Chief Executive Officer of the company at the same time after the date of commencement
of this Act unless,—
(a) the articles of such a company provide otherwise; or
(b) the company does not carry multiple businesses:
Provided further that nothing contained in the first proviso shall apply to such class of
companies engaged in multiple businesses and which has appointed one or more Chief
Executive Officers for each such business as may be notified by the Central Government.
(2) Every whole-time key managerial personnel of a company shall be appointed by
means of a resolution of the Board containing the terms and conditions of the appointment
including the remuneration.
(3) A whole-time key managerial personnel shall not hold office in more than one
company except in its subsidiary company at the same time:
Provided that nothing contained in this sub-section shall disentitle a key
managerial personnel from being a director of any company with the permission of the
Provided further that whole-time key managerial personnel holding office in more than
one company at the same time on the date of commencement of this Act, shall, within a period
of six months from such commencement, choose one company, in which he wishes to
continue to hold the office of key managerial personnel:
Provided also that a company may appoint or employ a person as its managing director,
if he is the managing director or manager of one, and of not more than one, other company
and such appointment or employment is made or approved by a resolution passed at a
meeting of the Board with the consent of all the directors present at the meeting and of which
meeting, and of the resolution to be moved thereat, specific notice has been given to all the
directors then in India.
(4) If the office of any whole-time key managerial personnel is vacated, the resulting
vacancy shall be filled-up by the Board at a meeting of the Board within a period of six
months from the date of such vacancy.
(5) If a company contravenes the provisions of this section, the company shall be
punishable with fine which shall not be less than one lakh rupees but which may extend to
five lakh rupees and every director and key managerial personnel of the company who is in
default shall be punishable with fine which may extend to fifty thousand rupees and where
the contravention is a continuing one, with a further fine which may extend to one thousand
rupees for every day after the first during which the contravention continues.

Wednesday, 13 July 2016

Duties of Ministry Of Corporate Affairs (MCA)

The Ministry of Corporate Affairs("MCA") deals enforces law and order on all the Industrial and Service Company in India on the basis of the Companies Act 2013, Companies Act 1956, The Limited Liability Partnership Act 2008 and other related acts and rules & regulations. Framed under the guidelines of MCA, the act and rules & regulations were framed primarily to regulate companies under corporate sector in accordance with the Law.

Ministry of Corporate Affairs also administrates the competition act 2002 to prevent false practices in competition and to promote sustainable and healthy competition between the companies. Hence it also saves the interest of a common consumer from being depleted.

 Ministry of Corporate Affairs

Beside administrating companies and therefore maintaining law and order on the corporate enterprise, the MCA also supervises over three underlying professional bodies which were constituted under the Parliament to ensure a proper and orderly growth for the professions which all three bodies are concerned with.
MCA supervises the following three bodies
1.    Institute of Chartered Accountants of India (ICAI),
2.    Institute of Company Secretaries of India (ICSI) and
3.    Institute of Cost Accountant of India (ICAI).

The MCA also takes care of the administration of the Partnership Act 1932, the Company's’ (Donation to national funds) Act and Societies Registration Act 1980 and carries out all the functions of the Central Government which relates to above mentioned acts.