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Recent Legal and Regulatory Changes Impacting Debt Transactions

In March 2020, there have been several changes in the Indian legal and regulatory landscape that will have an impact on debt transactions. Many of these changes have been precipitated due to the nationwide lock-down imposed as a result of COVID-19. The key changes are summarised below.

1. Insolvency regime

  • Increase in default threshold: The threshold for initiating the corporate insolvency resolution process (“CIRP”) under section 4 of the Insolvency and Bankruptcy Code, 2016 (“IBC”) has been increased from Rs. 100,000 to Rs. 10,000,000. This move will benefit various companies, especially medium and small enterprises, who may be unable to repay their debts in a timely manner and be forced into insolvency due to COVID-19.

  • Extension of CIRP timelines: The period of lockdown (i.e. March 24, 2020 to April 15, 2020) in relation to COVID-19 will be excluded for the purpose of calculating the 330-day period for completion of the CIRP. This will be applicable for all cases where the CIRP has been initiated and pending before any bench of the National Company Law Tribunal (“NCLT”) or in appeal before the National Company Law Appellate Tribunal (“NCLAT”).

  • Extension of timelines due to lockdown: The Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 (“CIRP Regulations”) were amended to provide that if any activity in relation to the CIRP cannot be completed during the lockdown period imposed by the Government due to COVID-19, then such lockdown period will not be counted for the purposes of any timeline within which such activity has to be completed under the CIRP Regulations. This will provide a breather to many resolution professionals who were struggling to complete certain activities given the nationwide lockdown.

  • Priority financing: The Central Government has sponsored the Special Window for Affordable and Middle-Income Housing Investment Fund I for providing priority debt financing for completion of stalled housing projects that are in the affordable and middle-income housing sector. Any debt availed from such fund will be treated as “interim financing” under the IBC and will receive priority in repayment under the CIRP or liquidation of the corporate debtor.

  • Special GST process: Corporate debtors undergoing CIRP have to obtain a new GST registration in each state and union territory where they are carrying on business. The same must be obtained within 30 days of appointment of the interim resolution professional or resolution professional. Where any CIRP is ongoing on March 21, 2020 (the date of the notification), then the new registration has to be obtained within 30 days of such notification. The process set out in the notification has to be followed for filing returns and availing input tax credit.

  • Applicability to Jammu & Kashmir: The application of the IBC has been extended to the Union Territory of Jammu and Kashmir with effect from March 18, 2020 pursuant to the Jammu and Kashmir Reorganisation (Adaptation of Central Laws) Order, 2020.

  • December 2019 Ordinance codified by an IBC amendment: Various amendments that were introduced to the IBC pursuant to an ordinance in December 2019 were codified pursuant to a formal amendment to the IBC on March 13, 2020. These amendments are effective from December 28, 2019 (the date of the ordinance). The key changes brought about pursuant to the ordinance and this amendment include the following:

    (i) Restrictions on governmental authorities and regulators from suspending or terminating any license, quota, concession, clearance or similar right granted to the corporate debtor;(ii) No interruption of supply of goods and services to the corporate debtor which are critical to preserve the value and manage the operations of the corporate debtor

    (iii) Protection to the corporate debtor its assets from offences committed prior to the CIRP period by the erstwhile management and promoters of the corporate debtor; and

    (iv) Minimum number or percentage of applicants required to initiate CIRP proceedings by certain classes of creditors.

 

2. Moratorium permitted by the Reserve Bank of India (“RBI”)

On March 27, 2020, the RBI announced certain regulatory measures to ease the burden of debt servicing brought about by disruptions on account of COVID-19. The measures were aimed at ensuring continuity of viable businesses. One of the measures was to provide a moratorium to borrowers.

  • Moratorium on Term loans: The RBI permitted all commercial banks (including regional rural banks, small finance banks and local area banks), co-operative banks, all-India Financial Institutions, and non-banking financial companies (including housing finance companies) (“lending institutions”) to grant a moratorium in respect of term loans (including agricultural term loans, retail and crop loans), of three months on payment of all “instalments” falling due between March 1, 2020 and May 31, 2020. The “instalments” will include (i) principal and/or interest components, (ii) bullet repayments, (iii) equated monthly instalments, and (iv) credit card dues. The repayment schedule for such loans as also the residual tenor, will be shifted across the board by three months after the moratorium period. However, interest will continue to accrue on the outstanding portion of the term loans during the moratorium period. It is noteworthy that the moratorium related provisions are not applicable to foreign lenders, foreign portfolio investors (“FPIs”), mutual funds or alternative investment funds that have extended any debt to Indian borrowers.

  • Deferment of interest on Working capital facilities: In relation to working capital facilities sanctioned in the form of cash credit/overdraft (“CC/OD”), lending institutions have been permitted by RBI to defer the recovery of interest applied in respect of all such facilities during the period from March 1, 2020 upto May 31, 2020 (“deferment”). The accumulated accrued interest will be recovered immediately after the completion of this period.

  • Recalculation of Drawing power: Lending institutions can also recalculate the drawing power of borrowers facing stress due to COVID-19 in relation to CC/OD facilities sanctioned to them. The recalculation can be by reducing the margins and/or by reassessing the working capital cycle. This relief is available in respect of all such changes effected up to May 31, 2020 and contingent on the lending institutions being satisfied that the change is necessitated due to a fallout of COVID-19.

  • Asset classification: Any moratorium / deferment / recalculation of drawing power will not be treated as a concession or change in terms and conditions of loan agreements due to financial difficulty of the borrower under the RBI (Prudential Framework for Resolution of Stressed Assets) Directions, 2019 dated June 7, 2019. Therefore, such measure itself will not result in a downgrade of asset classification. The asset classification of term loans which are granted any relief mentioned above will be determined based on the revised due dates and the revised repayment schedule. Further, for working capital facilities where relief is provided, the special mention account status and the out of order status will be evaluated considering the application of accumulated interest immediately after the completion of the deferment period as well as the revised terms.

  • No adverse impact on credit history: Any rescheduling of payments, including interest, will not qualify as a default for the purposes of supervisory reporting and reporting to credit information companies (“CICs”) by the lending institutions. CICs shall ensure that the actions taken by lending institutions pursuant to the above announcements do not adversely impact the credit history of the beneficiaries.

  • Board approved policy: The board of each lending institution must frame appropriate policies to deal with the above measures. The policies must set out objective criteria for considering the abovementioned reliefs and must also be made available in the public domain.

 

 

3. Increased corporate bond limits

The RBI has increased the limit for FPI investment in corporate bonds to 15% of the outstanding stock for the financial year April 1, 2020 to March 31, 2021. The revised limits for FPI investment in corporate bonds are as follows:

FPI Investment limit in corporate bonds for FY 2020-2021 Rs. (crores)
Current limit 3,17,000
Revised limit: April 1, 2020 to September 2020 429,244
Revised limit: October 2020 to March 2021 541,488

 

4. Time periods for creating reserves extended

  • Under the Companies Act, 2013, certain type of companies that have issued secured debentures are required to invest at least 15% of the value of debentures maturing in the next financial year into certain prescribed form of investments by April 30. The timeline to make such prescribed investments has now been extended to June 30 for this financial year.

  • Under the Companies Act, companies which have accepted deposits from the public or its members have to deposit an amount equal to 20% of the deposits maturing in the following financial year in a separate deposit repayment reserve account with a scheduled bank. Such deposit has to be made by April 30 each year. The timeline for this deposit has now been extended to June 30 for this financial year.

 

 

5. Certain relaxations under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”)

  • Financial information: Companies that propose to issue non-convertible debentures, non-convertible preference shares or commercial paper which are to be listed can now provide audited financial information for the period ending September 30, 2019 for all issuances upto May 31, 2020 (instead of issuances upto March 31, 2020).

  • Extension of timelines for filings/disclosures: Timelines for certain filings and disclosures that need to be made in relation to listed non-convertible debentures, non-convertible preference shares or commercial paper have been extended. These include the following: (i) The timeline for initial disclosures for large corporates have been extended by 45 days upto June 30, 2020; (ii) The timeline for annual disclosures for large corporates have been extended by 60 days upto June 30, 2020; (iii) The timeline for declaration of half-yearly financial results has been extended by 45 days to June 30, 2020; and (iv) The timeline for declaration of annual financial results has been extended by 30 days to June 30, 2020.

 

 

6. Encumbrances on units of Real Estate Investment Trusts (“REITs”)

  • Creation of encumbrance: On March 23, 2020, the Securities and Exchange Board of India (“SEBI”) has, by way of a circular, permitted sponsors and sponsor group entities holding any units under the SEBI (Real Estate Investment Trusts) Regulations, 2014 (“REIT Regulations”) during the mandatory holding period to create an encumbrance on such units. The encumbrance will include a pledge, lien, negative lien, non-disposal undertaking etc. or any other covenant, transaction, condition or arrangement in the nature of encumbrance. Any agreement in relation to the encumbrance shall include the conditions for creation and invocation of encumbrance under the SEBI circular.
  • Invocation of encumbrance: Any encumbrance cannot be invoked during the holding period prescribed under the REIT Regulations unless the following conditions are fulfilled: (i) the person(s) invoking the encumbrance (whether directly or through any trustee or agent acting on its behalf) shall get itself or its nominee to become re-designated sponsor upon compliance with the terms and conditions for re-designation of sponsor as specified under REIT Regulations; however this condition is not applicable in case the person invoking the encumbrance is already a member of the sponsor group; and (ii) the re-designated sponsor has to fulfil the obligations specified for sponsor under REIT Regulations.
  • Disclosures of encumbrance to the REIT manager: The sponsor(s) and sponsor group entity creating any encumbrance on the REIT units held by them has to provide details of the encumbrance to the manager of the REIT within two working days from the date of creation of such encumbrance in a prescribed format. Further, they must also notify the manager of any change in the above information pursuant to release or invocation of encumbrance, or in any other manner, within two working days from the date of such event.
  • Disclosures to stock exchanges: Within two working days from the receipt of encumbrance related details mentioned above, the REIT must disclose such information to every stock exchange where units of the REIT are listed. The disclosure has to be in a prescribed format.

 

 

7. Encumbrances on units of Infrastructure Investment Trusts (“INVITs”)

  • Creation of encumbrance: On March 23, 2020, the SEBI has, by way of a circular, permitted sponsors and sponsor group entities holding any units under the SEBI (Infrastructure Investment Trusts) Regulations, 2014 (“INVIT Regulations”) during the mandatory holding period to create an encumbrance on such units. The encumbrance will include a pledge, lien, negative lien, non-disposal undertaking etc. or any other covenant, transaction, condition or arrangement in the nature of encumbrance. Any agreement in relation to the encumbrance shall include the conditions for creation and invocation of encumbrance under the SEBI circular.

  • Invocation of encumbrance: Any encumbrance cannot be invoked during the holding period prescribed under the INVIT Regulatio

  • Disclosures of encumbrance to the INVIT manager: The sponsors creating any encumbrance on the INVIT units held by them has to provide details of the encumbrance to the manager of the INVIT within two working days from the date of creation of such encumbrance in a prescribed format. Further, they must also notify the manager of any change in the above information pursuant to release or invocation of encumbrance, or in any other manner, within two working days from the date of such event.

  • Disclosures to stock exchanges: Within two working days from the receipt of encumbrance related details mentioned above, the INVIT must disclose such information to every stock exchange where units of the INVIT are listed. The disclosure has to be in a prescribed format.

 

 

8. Extension of amendments to stamp duty on Debentures

  • Pursuant to certain amendments that were made to the stamp duty law, the stamp duty rate on the debentures was modified from a maximum of 0.25% or Rs. 25 lacs, whichever was lower, to an ad valorem rate of 0.005% of the value of the debentures. These new stamp duty rates were to come into effect from April 1, 2020. However, they are now proposed to come into effect from July 1, 2020.

Relaxations provided on compliances to be met by units / developers / co‐developers of SEZs

In view of the sudden outbreak of COVID‐19 pandemic and the nation-wide lockdown, the Department of Commerce on 30 March 2020, provided certain relaxations on compliances to be met by units / developers / co‐developers of Special Economic Zones (“SEZs”). Such compliances to which the relaxations will apply, includes:

  1. Requirement to file Quarterly Progress Report (QPR) attested by Independent Chartered Engineers by Developers/ Co‐developers;
  2. SOFTEX form to be filed by IT/ITES units;
  3. Filing of Annual Performance Reports (APR) by SEZ units;
  4. Extension of Letter of Approvals (LoA) which may expire, in the cases of:

    a) Developers/co‐developers who are in the process of developing and operationalising the SEZ;

    b) Units which are likely to complete their 5 years block for NFE assessment;

    c) Units which are yet to commence operations.

The Development Commissioners of SEZs has been directed to ensure that in cases where any compliance is not met during this period impacted by the above disruption, no hardship is caused to Developers / Co‐Developer / Units and no punitive action is taken.

Further, as may be possible, all extensions of LoAs and other compliances may be facilitated through electronic mode in a time‐bound manner. In the cases where it is not possible to grant extension through electronic mode or in cases where a physical meeting is required, the Development Commissioners has been asked to ensure that the Developer / Co‐developer / Units do not face any hardship due to such expiry of validity during this period of disruption. Ad‐hoc interim extension / deferment of the expiry date may be granted without prejudice till 30 June 2020 or further instructions of the Department on the matter, whichever is earlier.

Clarifications issued in furtherance of the guidelines issued by the Ministry of Home Affairs

Official Advisory
Breakup marriage couple with divorce certification

The Ministry of Home Affairs has issued guidelines on the measures to be taken by Ministries/ Departments of Government of India, State/Union Territory Governments, and State/ Union Territory Authorities for containment of the COVID-19 epidemic in the country on March 24, 2020 (Annexure to the order). This was further modified on March 25, 2020 and March 27, 2020. A summary of these guidelines is available at https://jsacovid19.blogspot.com/2020/03/21-day-nationwide-lock-down-guidelines.html.

In furtherance to the guidelines issued on 24 March 2020 and the addenda on March 25, 2020 and March 27, 2020, certain clarifications have been issued by the Home Secretary on March 29, 2020. These clarifications are as follows:

  1. Transportation of all goods, without distinction between essential and non-essential goods, will be allowed;
  2. Pension and provident fund services provided by Employees Provident Fund Organisation shall remain functional;
  3. Services of the Indian Red Cross Society will continue to remain functional;
  4. Shops dealing with groceries, including hygiene products, such as hand wash, soap, disinfectants, body wash, shampoos, surface cleaners, detergents and tissue papers, toothpaste/oral care, sanitary pads and diapers, battery cells, chargers, etc. shall remain open;
  5. The entire supply chain of milk collection and distribution, including its packaging material shall remain functional; and
  6. Newspaper delivery supply chain shall also remain functional.

Further, the Central Government has allowed the use of the State Disaster Response Fund (SDRF) for the benefit of homeless people, including migrant labourers, stranded due to lockdown measures and sheltered in relief camps, and other places, in order to provide them food etc., as part of COVID-19 containment measures. The Ministry of Health Affairs has issued further orders under the Disaster Management Act, 2005, directing district authorities, to ensure strict implementation of additional measures to stop the movement of migrants, to provide them with quarantine facilities, shelter, food, etc.; and to protect their economic rights by ensuring payment of wages; and protecting them from eviction by landlords.

Introduction of the “Companies Fresh Start Scheme, 2020” and revised the “LLP Settlement Scheme, 2020” to provide relief to law abiding companies and Limited Liability Partnerships (LLPs) in the wake of COVID-19

In order to reduce compliance burden during the unprecedented public health situation caused by COVID-19, the Ministry of Corporate Affairs, on 30 March 2020 issued a press release pertaining to the introduction of the “Companies Fresh Start Scheme, 2020” and revised the “LLP Settlement Scheme, 2020” (the revised LLP Settlement Scheme, 2020 is available here), which is already in effect, to provide a first of its kind opportunity to both companies and LLPs to make good any filing related defaults, irrespective of the duration of default, and make a fresh start as a fully compliant entity.

During the period starting from 1st April 2020 and ending on 30th September 2020, the following benefits are available to companies and LLPs, under the Fresh Start Scheme and Modified LLP Settlement Scheme, respectively:

  1. It incentivizes compliance and reduces compliance burden;
  2. Companies and LLPs are permitted to file any and all belated filings i.e., filings that the company or LLP are yet to carry out and for which the statutorily prescribed time limit has expired;
  3. A one-time waiver of additional filing fees for delayed filings by the companies or LLPs with the Registrar of Companies;
  4. Provides longer timelines for entities to comply with various filing requirements under the Companies Act, 2013 and Limited Liability Partnership Act, 2008;
  5. Significantly reduces certain financial burden on companies and LLPs, especially for those with long standing defaults, thereby giving them an opportunity to make a “fresh start”;
  6. Provides the opportunity to file for immunity from penal proceedings, including against imposition of penalties for late submissions and provides additional time for filing appeals before the concerned Regional Directors against imposition of penalties, if already imposed. However, the immunity is only against delayed filings in MCA21 and not against any substantive violation of law. The application seeking immunity shall be filed after 30 September 2020, and can be filed only if there are no pending appeals against notices or adjudicated orders (appeals, if any, are to be withdrawn before filing application for immunity).

Suspension of Limitation Period

Taking suo moto cognisance of difficulties faced by litigants in view of the COVID-19 pandemic, and to avoid overcrowding at filing counters in courts, the Supreme Court has passed an order dated 23 March 2020 with respect to the period of limitation for filing requirements.

A 3 judge bench of the Supreme Court headed by the Chief Justice of India, exercising its powers under Article 142 read with Article 141 of the Constitution of India, directed that the period of limitation in all proceedings before any Court/Tribunal, irrespective of the limitation prescribed under the general law or special law, whether condonable or not, would stand extended with effect from 15 March 2020 till any further orders passed by the Supreme Court in this regard.

In effect, if the limitation period for filing of any proceeding, be it a petition, application, suit, appeal or any other proceeding, expired on or after 15 March 2020, the same stands extended. The date till which limitation would stand extended will be notified by the Supreme Court in its subsequent orders.

The order, having been passed under Articles 141 and 142 of the Constitution of India, has the effect of law and is binding on all courts, tribunals and authorities.

Notification issued by the MoHFW in order to regulate the doorstep delivery of drugs to consumers

Pharmacy in a supermarket during coronavirus pandemic. BRISTOL, UK, March 30, 2020

The Ministry of Health and Family Welfare, on 26th March 2020 notified that retail sale of drugs to the doorstep of consumers is essential to meet the requirements of emergency arising due to pandemic COVID-19. Therefore, in order to regulate the sale and distribution of drugs for their delivery to customers, the following directions have been issued:

In case any person holding a license in Form-20 or Form-21 under the Drugs and Cosmetics Rules, 1945 intends to sell, stock or exhibit or offer for sale, or distribute drugs by retail, intends to sell any drug including the drugs specified in Schedule H except narcotics, psychotropics and controlled substances as defined in the Narcotic Drugs and Psychotropic Substances Act, 1985 and the drugs as specified in Schedule H1 & Schedule X to the said rules, by retail with doorstep delivery of the drug, the licensee can sell such drugs subject to the condition that:

Any such sale of a drug specified in Schedule H shall be based on receipt of prescription physically or through e-mail; The licensee shall submit an e-mail ID for registration with the licensing authority if prescriptions are to be received through email; The drugs shall be supplied at the doorstep of the patients located within the same revenue district where the licensee is located; In case of chronic diseases, the prescription shall be dispensed only if it is presented to the licensee within 30 days of its issue and in acute cases, the prescription shall be dispensed only if it is presented to licensee within 7 days of its issue; and The bill or cash memo shall be sent by the return email and records of all such transactions shall be maintained by the licensee.

SEBI takes steps to make short selling harder – Press Release 20 March 2020

On 20 March 2020, SEBI issued a press release taking note of the continued volatility in Indian and global stock markets and observed that significant market movements had not yet disrupted settlement cycles in India. SEBI announced a slew of measures which came into effect at the start of trading on 23 March 2020 for a period of 1 month (subject to review at the end of this period).

These changes include revision of market wide position limits for stocks in the futures and options segment, increase in margin for stocks in the futures and options segment, increase in cash market margins for stocks which are not futures/options, revised position limits for equity index derivatives, and flexing of dynamic price bands for futures and options stocks.

  1. Revision of Market Wide Position Limit (MWPL)[1]:

For futures and options stocks (“F&O Stocks”) whose:

(a) average Daily Price High Low variation percentage[2] (during last 5 trading days) was more than or equal to 15%; or,

(b) whose average MWPL utilization percentage (during last 5 trading days) was more than or equal to 40%,

MWPL may be revised to 50% of the existing levels. This re-calculated MWPL shall be used to impose ban periods on fresh positions and not to determined enhanced eligibility criteria for derivative stocks.

If MWPL utilization for any security crosses 95%, derivative contracts will enter a ban period and further trading will be allowed only to decrease positions through offsetting positions[3].

Stock exchanges and clearing corporations have been instructed to put monitoring mechanisms in place and to conduct checks on an intra-day basis. Violations will result in penalties that will range from an amount 10 times higher than the current minimum penalty up to an amount 5 times higher than the current maximum penalty.

  1. Increase in margin rate in Cash Market:

For the stocks mentioned in (1) above, the margin to be maintained in the Cash Market will be increased in a phased manner: 20% (as on 23.03.2020); 30% (from 26.03.2020); and 40% (from 30.03.2020). These will apply for 1 month.

  1. Revised position limits in equity index derivatives:

Mutual Funds, foreign portfolio investors, proprietary trading members and clients shall be subject to the following limits in equity index derivatives:

(a) Short position[4] shall not exceed the notional value of their holding of stocks; and

(b) Long position[5] shall not exceed their holding of treasure bills, cash, government securities and similar instruments.

Additionally, equity index futures contracts and equity index options contracts shall each be capped at INR 500 crores.

Breach of these conditions will require an additional deposit that is twice the margin amount (chargeable on the excess) and stock exchanges and clearing houses shall retain such deposits for 3 months. However, positions that existed prior to the circulars issued by stock exchanges and clearing houses were permitted to continue till their expiry.

This position applies to institutional and proprietary trading members for 1 month from 23 March 2020. For all others, it applies on and from 27 March 2020.

  1. Flexing of dynamic price bands for F&O stocks:

As on date of this press release, F&O stocks are subject to a dynamic price band which relaxes based on certain specified market movement in either direction. For instance, if at least 25 trades occurred involving no less than 5 unique client codes (UCC) on each side of the trade, where each trade is at or above 9.9% of the base price.

To prevent premature relaxation of price bands, SEBI has now imposed a 15-minute cooling off period. After the relevant F&O stock satisfies any requirement specified by a stock exchange to qualify for a relaxation of the price band, no relaxation can occur until the expiry of a mandatory 15-minute cooling-off period.

These measures were taken by SEBI to prevent market distortion. For instance, after the implementation of this press release, speculative short selling has become much harder, given that the changed margin requirements make it expensive, there is now a limit of number of shares that can be traded in the derivatives segment, and there is a sharp increase in penalty for violation of these revised norms.

SEBI’s timely actions, both in easing the compliance burden on listed entities and in acting swiftly to stem the tide of market volatility are laudable and, one expects, will improve our market resilience.

[1] A market-wide position limit is defined, with respect to a specific underlying stock, as the maximum number of open positions allowed across all futures and options contracts of that stock.
[2] This is the percentage of the difference between the highest and lowest trading values of a particular stock on any given trading day.
[3] i.e. the taking of an equivalent but opposite position to reduce the net position to zero.
[4] In layman terms, this is the sale of a stock the investor does not own in the belief that she will buy it in future – this is based on the assumption that the price of the stock is expected to fall in future, therefore they expect to make a profit by selling the stock at a higher price now and buying it a lower price later.
[5] In layman terms, this is the purchase of a security in the hope that it will increase in value.

Guidelines issued to the management of factories and establishments

In the backdrop of the catastrophic outbreak of COVID-19, the Ministry of Labour and Employment of India on 20 March 2020[1], has advised the Employers of Public/ Private Establishments to extend their coordination by not terminating their employees, particularly, casual or contractual workers from job or reduce their wages. If any worker takes leave, he should be deemed to be on duty without any consequential deduction in wages for this period. Further, if the place of employment is to be made non-operational due to COVID-19, the employees of such unit will be deemed to be on duty.

The Government of Karnataka, on 22 March 2020[2] ordered that all shops, commercial establishments, workshops, godowns dealing with non-essential services be closed. And all labour intensive industries must work at 50% of their strength on rotation basis. The Government has also advised that the employers do not remove any worker on this account and to sanction paid leave on these days to the remaining workers.

The Government of Telengana, vide a notification[3] has ordered for closure of all shops and establishments, except as notified, between the period from 22 March 2020 to 31 March 2020 and declared it as a paid holiday for all categories of employees.

The government of Tamil Nadu, Haryana and Odisha have issued certain guidelines to the management of factories /establishments in view of the prevailing COVID-19 outbreak. These guidelines have been issued on in order to ensure strict compliance with the measures that every factory/ an establishment should necessarily undertake and follow so that it results in containing the spread of COVID-19, as one of the major tools to prevent the spread of COVID-19 is by way of observing social distancing, Therefore, one should adopt highest level of hygiene and sanitation along with social distancing. The following guidelines have been formulated on these lines:

  • Promote frequent handwashing;
  • Workers should be encouraged to stay home if they are sick;
  • Never avail public transport facility to hospital, if suspected of possible exposure of COVID-19;
  • Encourage respiratory etiquettes;
  • Establish policies and practices which facilitate flexible worksite and work hours;
  • Discourage workers from using others’ phones, desks, tools or equipment’s to the extent possible.
  • Avoid grouping;
  • Prompt identification and isolation of infected individuals;
  • Educate the employees to self-monitor signs and symptoms of COVID-19;
  • The district administration should be informed of any employees who has returned from a foreign location or if someone from any foreign location has visited the premises of the factory/establishment;
  • Provide personal protective equipments like prescribed nose mask, face shield / goggles, gloves, apron etc.;
  • Provide facilities for safe disposal of the soiled nose mask, gloves, apron etc.
  • Provide facilities for drying clothing
  • Resist from insisting on the medical certificate of employees who are sick with acute respiratory illness;
  • Permit employee to stay at home to take care of a family member who has been sick;
  • Reduce the number of employees on site, allowing them to maintain distance from one another;
  • Maintain regular housekeeping practices including routine cleaning and disinfecting of surfaces, equipment’s and other elements in the factory/establishment;
  • Maintain the canteens and dining rooms in proper hygienic condition;
  • If possible, all workers or visitors, to be screened by infrared thermometer before entering the premises;
  • Avoid bio-metric attendance of the people;
  • To the extent possible, every establishment/factory should have an isolation room, or atleast an area designated with closable doors;
  • Creches shall be specifically monitored and disinfected thoroughly;
  • Health provisions prescribed in chapter III of the Factories Act, 1948 and Chapter VII of The Building and Other Construction Workers Act, 1996 and related provisions of the Tamil Nadu Factories Rules, 1950 and Tamil Nadu BOCW Rules, 2006 should be strictly complied with;
  • Factories having public address/virtual display system may utilize the same for educating workers on the measures for preventing possible exposure of COVID-19.

 

The most effective way of containing the spread of COVID-19 is by way of observing ‘social distancing’. Government establishments including Secretariat, Directorates, District Level Offices and Sub-district Level Offices as well as certain private establishments including shops, workshops and factories that remain operational during the said period will have to comply with the following guidelines, in order to break the chain of contact to prevent the further spread of the disease. In this regard, the government of Odisha has formulated the following guidelines:

[1] https://labour.gov.in/sites/default/files/file%201.pdf
[2] No. DD/SSU/COVID-19/17/19-20
[3] G.O. Rt No. 160 available at https://goir.telangana.gov.in/

Special measures notified and implemented by the Ministry of Corporate Affairs

Following are the special measures notified and implemented by the Ministry of Corporate Affairs (MCA) under Companies Act, 2013 and Limited Liability Partnerships Act, 2008 in view of COVID 19 outbreak.

Exemption on additional filing fees Any additional fees which is applicable for late filings to any Company or LLPs, will not be charged during a moratorium period from April 01, 2020 to September 30, 2020, in respect of any document, return, statement etc., required to be filed in the MCA registry, irrespective of its due date.
Holding Board meetings as per section 173 of the Companies Act, 2013 As a one-time relaxation the gap between two consecutive meetings of the Board has been extended to 180 days till September 30, 2020, instead of 120 days.
Applicability of The Companies (Auditor’s Report) Order, 2020 The Companies (Auditor’s Report) Order, 2020 will now be applicable from financial year 2020-21 instead of being applicable from 2019-20.
Para VII (1) of Schedule IV to Companies Act, 2013 For the financial year 2019-20 the Independent Directors are allowed to share their views via telephone or email or any other mode of communication (if they deem to be necessary). This is in lieu of their meeting which is required to be held during the financial year 2019-20.
Deposit repayment reserve- Section 73(2)(c) of Companies Act, 2013 Creation of deposit repayment reserve of 20% of deposits maturing during the financial year 2020-21 before April 30, 2020 will now be allowed to complied with till June 30, 2020.
Declaration for commencement of business- Section 10A of the Companies Act, 2013 An additional period of 180 days is allowed for filing this declaration.
Relaxation to Rule 18 of the Companies (Share Capital & Debentures) Rules, 2014 Time period for investing or depositing at least 15% of amount of debentures maturing in specified methods of investments or deposits before April 30, 2020 can now be complied with June 30, 2020.
Resident director compliance requirements-Section 149 of the Companies Act, 2013 For the financial year 2019-20 the requirement of meeting 182 days by a resident director has been relaxed.


This initiative of MCA is to support and enable Companies and LLPs in India to focus on taking necessary measures to address the COVID-19 threat, including the economic disruptions caused by it.

India under Lockdown – Center invokes Disaster Management Act to contain COVID-19. What happens to State orders?

The Indian Prime Minister, Mr. Narendra Modi, while addressing the nation on March 24, 2020, announced a nationwide lockdown for 21 days to contain the spread of COVID-19.

Shortly thereafter, the National Disaster Management Authority (“NDMA”) issued an order dated March 24, 2020 under the Disaster Management Act, 2005 (“DM Act”) noting that it was satisfied that the country is threatened by the spread of COVID-19, and that there is an urgent need to bring about consistency in the application and implementation of various measures across the country while ensuring maintenance of essential services and supplies (“NDMA Order”). To this end, the NDMA directed that necessary guidelines be issued immediately.

Pursuant to the NDMA Order, and in exercise of the powers conferred under Section 10(2)(l) of the DM Act, 2005, the Ministry of Home Affairs, through the National Executive Committee under the DM Act, issued an order dated March 24, 2020 (“Lockdown Order”) for the prevention and containment of COVID-19. The Lockdown Order will be operative for a period of 21 days, with effect from March 25, 2020.

Under the Lockdown Order, all States and Union Territories need to ensure strict implementation of the guidelines set out therein, which can be accessed here.

The Lockdown Order has effectively placed India under a nationwide lockdown for 21 days. In the days leading up to the Lockdown Order, several State Governments had issued orders notifying curfews and restrictions in their respective States for containment and prevention of COVID-19 (“State Orders”). At the time of writing, the State Orders have not yet been revoked by the respective States. However, under Section 72 of the DM Act, the provisions of the DM Act will have an overriding effect over any other law or instrument issued under any other law for the time being in force. Accordingly, the guidelines issued under the Lockdown Order will, to the extent of any conflict with the previous State Orders, have an overriding effect. Therefore, all State Governments would need to comply with the guidelines issued under the Lockdown Order.

That being said, State Governments are also empowered under Section 38 of the DM Act to undertake such further measures, over and above the guidelines issued by the NDMA, they may deem necessary or expedient. Therefore, there is no restriction on States to implement further or more stringent measure than those set out in the Lockdown Order, provided such measures are not in conflict the Lockdown Order. Accordingly, measures taken by State Governments under previous State Orders will continue to have force, to the extent that they are not in conflict with the Lockdown Order.

It remains to be seen whether any State Government will implement further or more stringent measures, given the variation in the impact of COVID-19 across States.

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