Author: JSA

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SEBI grants extension for filings related to listing of NCDs and more

In continuation of the circular of 19 March 2020, SEBI issued a circular on 23 March 2020 (SEBI/HO/DDHS/ON/P/2020/41) further relaxing certain timelines with respect to listed entities.

Particular	Frequency	Date of available Audited Financials	Original Date of Issuance	Relaxation Period	Extended Date of Issuance
Cut-off date for issuance of NCD/ NCRPS/ CP	Within 6 months of the date of the latest audited financials	30 September 2019	On or before 31 March 2020	60 days	On or before 31 May 2020

2. Extension of timeline for filings under SEBI (LODR) Regulation 2015

Regulation and Filings	Frequency	Original Due Date	Relaxation Period	Extended Date
Large Corporate-Initial Disclosure and Annual Disclosure (SEBI Circular HO/DDHS/CIR/P/2018/144 dated November 26, 2018)	Yearly
Initial Disclosure – within 30 days from the beginning of Financial Year	30 April 2020	60 days	30 June 2020
Annual Disclosure – within 45 days from the end of Financial Year	15 May 2020	45 days	30 June 2020
Non-Convertible Debentures (NCDs) / Non-Convertible Redeemable Preference Shares (NCRPS)
Regulation 52 (1) and (2) relating to Financial Results	Half Yearly/ Yearly
45 days from the end of the Half Year	15 May 2020	45 days	30 June 2020
60 days from the end of Financial Year for Annual Financial Results	30 May 2020	30 days	30 June 2020
Common obligations prescribed under Chapter-III of SEBI (LODR) Regulations, 2015	As prescribed in SEBI Circular SEBI/HO/CFD/CMD1/CIR/P/2020/38
Commercial Papers (CPs)
Financial Results	Half yearly/Yearly
45 days from the end of the Half Year	15 May 2020	45 days	30 June 2020
60 days from the end of Financial Year for Annual Financial Results	30 May 2020	30 days	30 June 2020

3. Extension of timeline for filings prescribed for Issuers of Municipal Debt Securities

Regulation and Filings	Frequency	Original Due Date	Relaxation Period	Extended Date
Investor Grievance Report as per Municipal Bond	Half Yearly	Within 30 working days from end of the Half Year	45 days	30 June 2020
Financial Results	Half Yearly 60 days from the end of Financial Year for Annual Financial Results	30 May 2020	30 days	30 June 2020
Accounts maintained by Issuers under ILDM Regulations	Quarterly 45 days from end of quarter

Tags SEBI

21-day nationwide lock-down – Guidelines issued by the Ministry of Home Affairs

On 24 March 2020, the Ministry of Home Affairs vide its order no. 40-3/2020-DM-I(A) issued guidelines to be followed by ministries/departments of the Government of India, State/ Union Territory Governments and Authorities, containing measures to combat the spread of COVID-19.

These guidelines were issued by the National Executive Committee under the directions of the National Disaster Management Authority (order No. 1-29/2020-PP(Pt. II) dated 24 March 2020) and in exercise of its powers conferred under Section 10(2)(l) of the Disaster Management Act, 2005.

The Guidelines, inter alia, provide for the following containment measures which shall remain applicable for a period of 21 days with effect from 25 March 2020:

All offices of the Government of India, its autonomous/subordinate offices and public corporations shall remain closed except for defence, central armed police forces, public utilities (including petroleum, LPG, CNG, PNG), disaster management, power generation and transmission units, post offices, National Informatics Centre, Early Warning Agencies etc. Certain offices, like that of the treasury, MCA-21 registry, GSTN, RBI etc., shall function with bare minimum staff.
The offices of the State/Union Territory Governments, their autonomous bodies and corporations etc. shall remain closed except for police, home guard, civil defence, fire and emergency services, disaster management, prisons, district administration and treasury, electricity, water, sanitation and municipal bodies (relating to essential services like water supply and sanitation only), Mandis operated by the Agricultural Produce Market Committee or as notified by the state government, etc.
All hospitals and related medical establishments including dispensaries, chemist, medical equipment shops, laboratories, clinics, nursing homes, ambulance, veterinary hospitals, pharmacies and pharmaceutical research labs etc. shall remain functional. Further, transportation of medical personnel, nurses, other hospital support services etc. shall be permitted.
All commercial and private establishments to be closed other than shops dealing in food, groceries, fruits and vegetables, dairy, meat, fertilizers, seeds, pesticides etc.; bank, ATMs, insurance offices; print and electronic media; telecommunication, internet services, broadcasting and cable services; delivery of essential goods through e-commerce; petrol pumps, LPG, petroleum and gas retail and storage outlets; power generation and transmission units; private security services; farming operations by farmers and farm workers in the field, etc.
All industrial establishments shall remain closed; other than those engaged in the manufacturing of essential goods, including drugs, pharmaceuticals, medical devices, their raw materials and intermediates; those production units which require continuous process and have obtained the approval from the state government; coal and mineral production, transportation, supply of explosives etc.; manufacturing units of packaging materials for food items, drugs, pharmaceuticals and medical devices and manufacturing and packaging units for fertilizers, pesticides and seeds.
All transport services, other than for the transport of essential commodities or of fire or law and order or emergency services or for cargo movement, relief and evacuation and their related operational organisations, inter-state movement of goods/cargo for inland and exports, transit arrangements for foreign nationals in India according to the specified standard operating procedure, etc., shall remain suspended.
All educational, training, research, coaching institutions etc. to remain closed.
All places of worship shall remain closed.

(Please refer to the Guidelines, the first Addendum to the Guidelines (dated 25 March 2020), the second Addendum to the Guidelines (dated 27 March 2020), the third Addendum to the Guidelines (dated 02 April 2020), the fourth Addendum to the Guidelines (dated 03 April 2020) and the fifth Addendum to the Guidelines (dated 10 April 2020) for the complete list of containment measures and exceptions)

Wherever any exception has been provided to the containment measures, the organisation/ employer shall ensure necessary precautions, including social distancing measures, as advised by the Health Department.

Any violation of the containment measures specified in the Guidelines shall be liable to action under Sections 51 to 60 of the Disaster Management Act, 2005 and Section 188 of the Indian Penal Code, 1860.

Tags GST, LOCKDOWN, SOCIAL DISTANCING

SEBI relaxes compliance requirement pertaining to Mutual Funds, REITs and InvITs

SEBI, vide its circular dated 23 March 2020 (SEBI/HO/IMD/DF3/CIR/P/2020/47) has provided for the following relaxations in compliance requirement with respect to mutual funds.

A. Relaxations specified in SEBI (Mutual Funds) Regulations, 1996 and circulars issued thereunder:

All schemes (NFO) which are yet to be launched but where observation letter was issued by SEBI shall remain valid for a period of 1 year from the date of such SEBI letter.
All new schemes (NFO) where final observation letter is yet to be issued shall remain valid for a period of 1 year from the date of the SEBI letter.
Timelines for disclosures have also been relaxed, as follows:

Particulars of disclosure/ Regulation/ Circular	Frequency	Original Due Date	Extended Date
Half yearly disclosures of unaudited financial results as required under Regulation 59 of SEBI (Mutual Funds) Regulations, 1996	Half yearly 1 month from the close of the half year, i.e, 31 March 2020.	30 April 2020	31 May 2020
Disclosure of commission paid to distributors as required under Point 2(a) of SEBI circular No. SEBI/HO/IMD/DF2/CIR/P/2016/42 dated 18 March 2016	Half yearly Within 10 days from the half year end i.e. 31 March 2020	10 April 2020	10 May 2020
Yearly disclosure of investor complaints with respect to Mutual Funds as required under Point 4 (b) of SEBI circular No. Cir/IMD/DF/2/2010 dated 13 May 2010	Yearly Within 2 months of the close of the financial year i.e. 31 March 2020	31 May 2020	30 June 2020

B. Extension in the date of implementation for certain policy initiatives:

Circular	Particulars	Original Due Date	Extended Date
Risk management framework for liquid and overnight funds and norms governing investment in short term deposits dated 20 September 2019	Liquid funds shall hold at least 20% of its net assets in liquid assets	1 April 2020	1 May 2020
Review of investment norms for mutual funds for investment in Debt and Money Market Instruments dated 1 October 2019	Existing open ended mutual fund schemes shall comply with the revised limits for sector exposure	1 April 2020	1 May 2020
Review of investment norms for mutual funds for investment in Debt and Money Market Instruments dated 1 October 2019	Maximum investment in unlisted NCDs as % of the debt portfolio of the scheme.	15% – 31 March 2020	15% – 30 April 2020
Valuation of money market and debt securities dated 24 September 2019	Amortization based valuation shall be dispensed with and irrespective of residual maturity, all money market and debt securities shall be valued in terms of paragraph 1.1.2.2 of the Circular.	1 April 2020	1 May 2020

Further, SEBI issued a circular on 23 March 2020 (SEBI/HO/DDHS/CIR/P/2020/42), extending the due date for regulatory filings and compliances for REITs and InvITs for the period ending 31 March 2020 by 1 month, over and above the timelines prescribed under the SEBI (Infrastructure Investment Trusts) Regulations, 2014 and SEBI (Real Estate Investment Trusts) Regulations, 2014 and related circulars.

Tags SEBI

COVID-19: Dos and don’ts for Borrowers and Lenders

It is an understatement that Covid-19 has wreaked a havoc in all major economies across the globe. While nations (including India) are grappling to keep their citizens safe, the impact this pandemic will have on the financial health of businesses is unimaginable at this stage. The stock markets are highly volatile, valuations are plummeting, businesses are suffering from the domestic and global lock-down and financial defaults are likely to rise. In these circumstances, if you are a borrower or a lender, it is imperative that you take immediate stock of the financial repercussions of this pandemic and what steps you can take to mitigate the impact. Below are some points to consider.

Points for borrowers and promoters

Review existing debt obligations: Borrowers must carefully review the documents under which they have incurred any indebtedness. The review should be, at the bare minimum, to check (a) impending payment obligations, (b) any existing or potential covenant breaches, and (c) any existing or potential events of default. Lending documents may have various provisions including those on default interest, mandatory prepayment, material adverse effect, financial covenants, non-compliance with law, deterioration of the financial health, credit rating downgrade, termination of material contracts and delays in project implementation. They seldom contain provisions that will permit non-compliance due to force majeure situations. It is important for borrowers to acknowledge their obligations and the consequences of the breach of those obligations.
Assess cashflows: Once borrowers have re-confirmed their obligations, they should also asses their cash flow position. In the Indian context, lenders usually do not press the trigger unless there are payment defaults (and that too, generally, after a considerable delay in payments). If the cash flow situation is robust or not worrisome, then even if there are existing or potential covenant breaches, lenders may be willing to grant waivers. If the cash flow situation is troublesome, then borrowers need to assess if this is a temporary situation or whether the effects will be long lasting. They should also evaluate ways in which the situation can be improved. For example, they may decide to cut back unnecessary expenses or halt expansion plans and save the resources they have for servicing debt and paying their employees. They may consider selling non-essential assets and use the sale consideration to deleverage. Each sector and each borrower will have its own peculiarities and it is important to assess this at the earliest. Under the Insolvency and Bankruptcy Code, 2016 (“IBC”), a payment default of Rs. 100,000 is sufficient for creditors to initiate the insolvency process. The IBC also currently has no carve-out for a payment default due to force majeure situations.
Reach out to customers: Customers are the lifeline of any business. It is important to keep them assured. During this time, your customers may also be suffering and may need some leniency. If you are in the real estate construction business, you may need to provide your customers (who have lost a chunk of their financial wealth due to tumbling of the markets) some grace period or adjustments in their payment schedules. If you are in the retail business, you may be able to provide them home-deliveries of items (subject to relevant lock-down restrictions) and continue to the revenue flow. If you are in the services business, you may still be able to continue to provide services through electronic communication. If some customers can give you advances for goods to be sold or services to be rendered, those advances could alleviate some of your debt servicing burden.
Re-assure your suppliers: For your business to continue functioning, your suppliers are a key stakeholder. Re-assure them of your business prospects, inform them of the steps you are taking to keep your business running or of the pitfalls due to which your business may be undergoing temporary stress. Try to negotiate longer payment periods with your suppliers. Re-look at any existing take or pay provisions in long term supply contracts and try to seek waivers or relaxations.
Take care of your employees: The strains of the pandemic are likely to be felt to a much greater degree by employees than the promoters of businesses. This is a time when promoters and businesses need to provide their employees with job security. Ultimately, if these employees aren’t around, you will not be able to service your debts and your business may crumble.
Re-assess business plans: This is the time to re-assess business plans for the foreseeable future. Annual or multi-year plans that were formulated a few months ago may not be relevant today. You may have to revisit any future fund-raising options given that investors may be cautious in the interim few months and lenders may be tight pursed given the global impact of this pandemic. However, if you are a cash rich entity, this period may also give rise to opportunities to acquire businesses at cheaper valuations in India and other geographies across the world.
Impact on promoters: Promoters of borrowers must also evaluate their contractual and legal liabilities when companies under their management or control are facing potential defaults or insolvencies. They must consider if they have provided any guarantees, indemnities, sponsor support undertakings or comfort letters, or any quasi-security or security on their assets. They need to re-confirm their obligations and evaluate their ability and readiness to perform such obligations.
Work together with creditors: Last but not the least, it is important that borrowers keep a constant dialogue with their creditors (through audio or web-based video apps, not in person please!) Borrowers who foresee that Covid-19 will have a minimal impact on their operations may want to provide the necessary comfort to their creditors. For those who are likely to be adversely impacted because of Covid-19, it is important to discuss the same with creditors and understand what can and can’t be done. Borrowers may also need to provide more information to creditors than they are used to doing to give the latter comfort about the operations and stability of the borrower. In case of pedigree borrowers or borrowers who had sound financial health pre-Covid-19, several lenders are likely to be supportive and understanding. Some of them may even be willing to grant temporary reliefs, waivers or moratoria. Some may also be willing to provide an additional credit line to ease out the temporary stress. For instance, State Bank of India has already introduced a scheme to provide additional working capital at attractive interest rates for existing customers impacted by Covid-19.

Points for lenders

Review existing portfolios: Lenders need to take a hard look at their existing portfolios and determine which of their accounts are or may be adversely impacted. Besides meticulous monitoring the financial health of their borrowers and assessing their capability to service their debt obligations, lenders must immediately assess their remedies under their existing lending documents and under law. It would also be a good time for them to re-confirm whether their loan documents are validly executed, whether their existing security package is created and perfected and whether there are any bottlenecks that need to be ironed out (should they decide to take any action).
Evaluate options: Lenders also need to evaluate their options. While accelerating the debt may seem to be the only way out, before pressing the trigger, the lenders should consider whether that is the best approach. Generally, lenders may have the following options available:

a) Reservation of rights: If the lenders believe that any event of default has occurred under the terms of their lending documents, they may consider issuing reservation of rights letters. This does not necessarily mean that the debt is being accelerated. However, it is a warning to the borrower that the lender is reserving its rights under the lending documents and under law and the non-exercise of any such rights immediately would not tantamount to a waiver of such rights.

b) Levy default interest: They can charge default interest (if the terms of their debt permit) without accelerating the debt. Borrowers may be willing to pay the default interest for a short duration rather than prematurely repaying the entire debt.

c) Grant waivers: They can provide a waiver of a default if there is a covenant default or relax the covenant to avoid any potential default. Payment of any waiver fees for lenders of external commercial borrowings (“ECBs”) will need to be examined from an exchange control perspective.

d) Restructure the debt: In certain cases (primarily where the debt is in the form of bonds or debentures), creditors may be able to grant a moratorium on interest or principal payments or restructure the principal payment schedule. Creditors who are foreign portfolio investors or lenders of ECBs need to assess the viability of any restructuring given exchange control regulations. Indian banks and non-banking finance companies need to consider the impact of the circular dated June 7, 2019 of the Reserve Bank of India on the prudential framework for resolution of stressed assets before agreeing to any restructuring proposals.

e) Recovery proceedings: Where lenders are unable to find any other suitable options and debt recovery action seems to be the only plausible option, lenders should determine what steps they need to take for such action. Certain classes of lenders may be able to take action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, whereas some lenders may have to approach civil courts. However, before initiating any action, it is important to check with your legal advisors on whether the courts and tribunals are functioning and whether they are only taking on urgent applications or all applications.

f) Enforcement of security: Certain lenders may have security which can be enforced. Before enforcement of security, it is vital that lenders confirm that the security has been validly created and all steps required for perfection of security have been taken. Any imperfections may adversely impact the security enforcement process. Certain types of security can be enforced without recourse to courts, such as enforcement of pledge on securities. However, certain security enforcement actions will have to go through a court process, such as enforcement of an equitable mortgage. Lenders (especially those who hold a pledge of listed securities) may also find it beneficial to wait and watch before enforcing their pledges if the value of their security has fallen substantially (with the hope that stock markets will correct themselves in the coming months). Security enforcement may also need consents of, notifications to or filings with existing lenders, shareholders, governmental authorities or third parties. In the current scenario, if security enforcement needs reliance on any third parties, then the enforcement process may be delayed given the general lock-down and work from home policies. These aspects need to be carefully evaluated or else the enforcement process may become unproductive.

g) Insolvency proceedings: Given the general lock-down, admission of corporate insolvency resolution applications may be delayed. Preparation of the insolvency applications and filing these applications may also be delayed. Further, general considerations for initiating insolvency proceedings such as the level of financial and operational debt, the viability of the business and availability of suitors, constitution of the committee of creditors etc. will continue to apply.

Lenders should note that that the Supreme Court has in an order dated March 23, 2020 extended the limitation period for various proceedings before any courts and tribunals with effect from March 15, 2020 until further orders. This should provide a breather for lenders who are unable to proceed with enforcement proceedings.

Cross defaults: Triggering an event of default by a lender under one facility may result in triggering cross defaults across other facilities to the same borrower group by that lender, or for that matter cross defaults across other facilities to the same borrower or borrower group by other lenders as well. Therefore, lenders must evaluate the possibility of such cross defaults and their ability to take any effective enforcement action against the borrower / borrower group.
Refinancing and priority financing opportunities: While borrowers grapple with the turmoil, they may either need to refinance their existing debts, or may require priority financing or last mile financing to complete certain projects. This may provide an opportunity to distressed debt lenders and investors. They need to assess the viability of the borrower, the value of the security and their ranking when providing any new debt. Also, given the recent judgement of the Supreme Court in the case of Jaypee Infratech, incoming lenders must conduct their due diligence and evaluate the risks of any avoidance transactions under the IBC before providing such debt.
Consent requirements: Certain borrowers may approach their existing lenders for consents, for instance, for incurring new debt (including any refinancing or priority financing mentioned above) or creation of new security. At the time when banks/financial institutions are under lock-down and operating with marginal staff, it may be difficult to obtain necessary internal approvals for banks/financial institutions in a timely manner. Internal committees may find it difficult to co-ordinate and meet and internal processes for sanctioning of approvals may get delayed. At times such as this, it may be prudent for borrowers to err on the side of caution. Incoming lenders from whom the borrower proposes to raise new debt or in whose favour the borrower proposes to create security must also be wary of lending and accepting security where the consents required from existing lenders are not obtained. Otherwise, this could lead to disputes in the future, especially if the borrower undergoes corporate insolvency resolution proceedings under the IBC.

The above are just some of the steps that borrowers and lenders can take to minimise the impact. While our Government is taking several measures to shield the virus explosion, one fact that Covid-19 has brought to the forefront is that we all need to (and must and can) work together to fight this pandemic. Borrowers and lenders also need to work together during this phase. Borrowers and their promoters will need to be co-operative, conservative and constructive in their approach, whereas lenders will need to be patient. Borrowers and lenders have always shared a symbiotic relationship – let’s hope that the virus does not kill it.

Tags Capital Markets

SEBI relaxes Filing and Meeting requirements

On 19 March 2020, SEBI issued a circular (SEBI/HO/CFD/CMD1/CIR/P/2020/38) providing relaxations in filing timelines under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR”). They are as follows:

Reg no.	Nature of filing	Frequency	Original due date	Relaxation period	Extended due date
7(3)	Compliance certificate on share transfer facility	Half yearly One month from the end of each half of the financial year	30 April 2020	1 month	31 May 2020
13(3)	Statement of Investor complaints	Quarterly 21 days from the end of each quarter	21 April 2020	3 weeks	15 May 2020
24A [1]	Secretarial Compliance Report	Yearly 60 days from the end of the financial year	30 May 2020	1 month	30 June 2020
27(2)	Corporate Governance Report	Quarterly 15 days from the end of the quarter	15 April 2020	1 month	15 May 2020
31	Shareholding Pattern	Quarterly 21 days from the end of the quarter	21 April 2020	3 weeks	15 May 2020
33	Financial Results	Quarterly 45 days from the end of the quarter	15 May 2020	45 days	30 June 2020
Annual 60 days from the end of Financial Year	30 May 2020	1 month	30 June 2020

Regulations 17(2) and 18(2)(a) of the LODR require listed entities to conduct a minimum of 4 board and audit committee meetings each year, with a gap of no more than 120 days between two successive meetings. SEBI relaxed this requirement vide its circular (SEBI/HO/CFD/CMD1/CIR/P/2020/38) stating that although the Board and Audit Committee must meet no less than 4 times each year, listed companies are exempted from the need to observe the stipulated time lapse of 120 days between 2 successive meetings. This concession applies only to meetings that are to be held between 01 December 2019 and 30 June 2020.

[1] Read with circular No CIR/CFD/CMD1/27/2019 dated 08 February 2019

Tags SEBI

Implications of Data Collection during the Pandemic on Data Principals In India

Documented pandemics have occurred at periodic intervals, often causing widespread devastation to the human community. In the wake of the alarming numbers and visuals of the ongoing COVID-19 pandemic, it becomes important for citizens to stay aware on multiple fronts, including the knowledge of how mass surveillance and access to their personal data by the government can affect their legal rights and privacy.

A preparedness planning exercise certainly requires enhanced surveillance measures to monitor the evolution of the disease. This post aims to analyse the various measures that countries adopt to collect personal data and how they are legitimizing restrictions on freedoms during such an emergency, with special emphasis on the existing and upcoming data laws in India.

Technology, Public health Vs. Personal Privacy – The Emerging Trends

COVID-19 has clearly indicated how several countries, including India have leaned on technology, especially Artificial Intelligence, to monitor and track the data of quarantined and potentially exposed individuals. BlueDot, Infervision, Google’s Verily and the Alibaba AI systems are significant examples of how AI assists in predictions, data collection, surveillance analysis of the official numbers and most importantly, contact tracing.

In China, for example, under the guidance of the e-government office of the State Council General, AI has accelerated the development of a new unified national Health Code for epidemic prevention and control based on the national integrated government service platform “System”. To apply for a code, residents must register with their name, national identification number, and phone number; and answer basic questions, including travel history and health status – all this self-reported information is verified using public data. The system generates green, yellow, or red codes based on these answers. Individuals with a green code can move around the city freely, yellow codes require a seven-day quarantine, and red-coded persons must observe a fourteen-day quarantine.

In EU, the European Data Protection Board has released a statement [1], which was adopted on 19th March 2020, where it was confirmed that safeguarding public health will enjoy the national and/or public security exemption (Articles 6 and 9) of the General Data Protection Regulation (GDPR). The public security exemption refers to the global emergency posed by the pandemic and recognizes that this emergency is a legal condition which may legitimize restrictions of freedoms, provided these restrictions are proportionate and limited to the emergency period.

The Centre for Disease Control and Prevention (CDC) at the United States has a Field Epidemiology Manual[2] which lists out actions that can potentially stop the spread of disease. These include obtaining clinical specimens, including data, from persons affected by an outbreak; obtaining data from healthcare facilities; protecting the privacy of personal information; and implementing and enforcing control measures (such as vaccination, chemoprophylaxis, quarantine), through appropriate actions which could extend to seizure or destruction of private property.

In India, there have been reports of government officials obtaining citizen and reservation data from airlines and the railways to track suspected infections. Some states were using indelible ink to stamp people arriving at airports. The hand stamps include the data that a person must remain under home quarantine and some people have reportedly signed self-declaration forms stating that they would not travel as they could be potential carriers. Thousands of squads have been formed to track people following reports of people skipping quarantine. Use of GPS, travel data, address tracking, facial recognition techniques, etc. are some of the most common mechanisms currently being used in India for data collection and mass surveillance.

Indian law relating to COVID-19 response through Data Processing and Mass Surveillance

The landmark Justice Puttaswamy judgment[3] called the right to privacy a fundamental right, which should be subject to ‘reasonable restrictions’ and demanded a comprehensive data protection policy. The population of India generates a phenomenal volume of health-related information, but, unfortunately, such information remains unprotected as draft laws in this sphere are yet to be enacted and the present laws on data protection in general, and health data privacy in particular, are woefully inadequate.

This raises a critical question- What legal authority do Indian governments have to access health-related personal data and impose restrictions?

Generally, the state is often provided with significant authoritarian powers in circumstances that entail ‘legitimate or public interest’, in order to ensure general well-being and protection of its citizens.

The Epidemic Diseases Act 1897, which was enacted to tackle the bubonic plague in Bombay, has been used routinely to contain various diseases in India. It explicitly bestows power on the Central Government to take special measures if the state is threatened with an outbreak of any dangerous epidemic disease, and where the ordinary provisions of the law, for the time being in force, are insufficient for the purpose[4].
The Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules (the SPDI Rules), 2011 recognize health information as constituting ‘sensitive personal data’[5] and, thus, regulate its collection, use and disclosure. However, SPDI Rules apply only to a very limited section – “body corporate”. Body Corporate, for the purpose of the SPDI Rules, is defined in Explanation (i) of Section 43A (Compensation for failure to protect data) to mean “any company and includes a firm, sole proprietorship or other association of individuals engaged in commercial or professional activities”. This definition will encompass the for-profit private sector and instrumentality of state engaged in commercial activities (such as BSNL). But, non-profit organizations (whose activities cannot be called “commercial” or “professional” and sovereign state actions (such as Aadhar/ID cards, public health initiatives) will remain outside the scope of the SPDI Rules. This becomes problematic when considering data privacy of health information.
The Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations 2002 set the professional standards for medical practice whereby physicians are obliged to protect the confidentiality of patients during all stages of interaction. These Regulations govern all aspects of information provided by the patient to the doctor, including information relating to their personal and domestic lives. It also imposes an obligation on the physician to enlighten the public concerning quarantine regulations and measures for prevention of epidemic and communicable diseases. The only exception to this mandate of confidentiality is if the law requires the revelation of certain information, or if there is a serious and identifiable risk of a notifiable disease to a specific person and/or community[6]. In case of such communicable/notifiable diseases, the concerned public health authorities should be informed immediately.
It is evident that the world today has pinned its hopes for salvation from COVID-19 on clinical trials for development of vaccines. Data protection and privacy rights for clinical trials are governed by the Ethical Guidelines for Biomedical Research on Human Subjects [7], under which confidentiality is an important principle. The researcher is obligated to safeguard the data of participants involved in clinical trials. The guidelines mandate that best practices should be adhered to for the collection of data; that researchers should be sensitive to the participants’ needs; and that due informed consent shall be obtained in the prescribed manner[8].
Surveillance powers are vested in the Central Government primarily under the Information Technology Procedure and Safeguards for Interception, Monitoring and Decryption of Information) Rules, 2009 which was framed under Section 69 of the Information Technology Act, 2000. Under this Rule, the government authorized ten agencies, including the Intelligence Bureau, the Central Bureau of Investigation, the National Investigation Agency, etc., to conduct surveillance[9]. However, there was backlash against this move as it led people to feel that the country was becoming a surveillance state.

Significant Bills on Data protection in India

(a) Digital Information in Security and Healthcare, 2018 (DISHA)

In 2018, the Ministry of Health and Family Welfare published the draft of the “Digital Information in Security and Healthcare, Act – DISHA” and solicited public comments. The Ministry planned to set up a nodal body called the “National Digital Health Authority”, through an Act of Parliament, as a statutory body for the promotion/ adoption of e-health standards, to enforce privacy & security measures for electronic health data, and to regulate storage & exchange of electronic health records.
Some of the main objectives of the Act are: (a) to provide for electronic health data privacy, confidentiality, security and standardization; (b) to standardize and regulate the processes related to collection, storing, transmission and use of digital health data; (c) to ensure reliability, data privacy, confidentiality and security of digital health data; and (d) such other incidental or related matters.
Under this proposed Act, ‘Sensitive health-related information’ refers to information, that if lost, compromised, or disclosed, could result in substantial harm, embarrassment, inconvenience, violence, discrimination or unfairness to an individual and it includes, but is not limited to, one’s physical or mental health condition and HIV status.
The processing of health data by smartphone apps and the like is not permissible, even if consent is in place. DISHA, moreover, goes on to place an express bar on all commercial uses of health data, whether such data is in an identifiable form or has been anonymized.[10]
Under DISHA, government departments, through their respective secretaries, may submit request for digital data in de-identified or anonymized form, to the National Electronic Health Authority to improve public health activities and facilitate the early identification and rapid response to public health threats and emergencies, including bio-terror events and infectious disease outbreaks[11].

(b) Personal Data Protection (PDP) Bill, 2019

The Personal Data Protection Bill, 2019 is one of the most anticipated, discussed and well-known draft legislation on data protection in India. Despite being nearly 2 years in the making, it is still under scrutiny by a Joint Parliamentary Committee (JPC).
In this Bill, ‘Health data’ is categorized as ‘Sensitive Personal Data’ under s.3(36)(2). Similar to the GDPR, this Bill provides for processing of Personal Data without consent, if such processing is necessary to respond to any medical emergency involving a threat to the life of a person or a severe threat to the health of the data principal or any other individual[12]. The Bill also authorizes the State to take any measure to provide medical treatment or health services to any individual during an epidemic, outbreak of disease or any other threat to public health;
The Bill provides a plethora of exemptions and powers to the sovereign. , Section 35 is a broad and sweeping section that permits the Central Government to, by order, specify that all or any of the provisions of this Act (now, Bill) shall not apply to any agency of the Government with respect to processing of such personal data, as may be specified in the order, if it is in the interest of sovereignty and integrity of India, security of the State or friendly relations with foreign states . If the Bill had been enacted, as is, prior to the pandemic, these provisions would have given the government carte blanche to obtain and process personal data of individuals.

If one compares DISHA and the PDP Bill 2019, one observes that DISHA contains far more stringent restrictions on the processing of health data than the PDP Bill 2019. These contradictions are problematic. In scenarios like the present COVID-19 pandemic, if India had had conflicting laws, i.e., if both Disha and the PDP Bill had co-existed in their current forms, it does not tax the imagination to envision a scenario where all players, but particularly State players, seek refuge under the PDP Bill, to benefit from its flexibility. State actors, in particular, would certainly seek the benefit of the blanket exemptions under Section 35 of the PDP Bill. However, despite the public consultation process, DISHA was never pursued as a law to be enacted and was never introduced in the Parliament because, by this time, the Srikrishna Committee Report on Data Privacy and the Personal Data Protection Bill, 2018 (predecessor of the PDP Bill, 2019) had taken over the role of addressing all data privacy concerns.

To ensure that the goal of data privacy and protection is met, it is incumbent on the Government to prioritize the enactment of a comprehensive data privacy law in India which will meet the stated objective of safeguarding personal data, including health data.

Conclusion

A pandemic like COVID-19 requires certain restrictions to be placed by the government in order to contain its effects. Scientific experiments, contact tracing, clinical trials, statistical analyses, all require the processing of sensitive health data of individuals. However, privacy is an important and deep routed issue that haunts such data collection and storage.

Like the EU laws require, public authorities should first seek to process location data in an anonymous way (i.e. processing data aggregated in a way that individuals cannot be re-identified), which could enable generating reports on the concentration of mobile devices at a certain location (“cartography”). Personal data protection rules do not apply to data which has been appropriately anonymized. When it is not possible to only process anonymous data, the e-Privacy Directive enables Member States to introduce legislative measures to safeguard public security (Art. 15). If measures allowing for the processing of non-anonymized location data are introduced, a Member State is obliged to put in place adequate safeguards, such as providing individuals of electronic communication services the right to a judicial remedy.

In order to seek a balance of conflicting requirements, it is important that data collectors such as the government address questions relating to use of data collected once the health crisis is over, and make voluntary submissions to data principals that restricting the use of data is the duty of the government. The purpose limitation principle should be adhered to while collecting and processing personal data under such emergencies and a commitment that, while data principals will offer informed consent, by the same token governments must guarantee that this data will not be normalized in order to track people for other ‘public interest’ causes. The balance between protecting public health and the personal privacy of individuals will be a long drawn out battle for rights of data principals and data collectors. However, the State, in a democratic system, must never become the perpetual owner of such data to use it at its will alone.

[1] EDPB official statement available at: https://edpb.europa.eu/sites/edpb/files/files/news/edpb_statement_2020_processingpersonaldataandcovid-19_en.pdf
[2] Available at: https://www.cdc.gov/eis/field-epi-manual/chapters/Legal.html
[3] Justice Puttaswamy and Anr Vs. Union of India Ors {WRIT PETITION (CIVIL) NO 494 OF 2012} ; Full Judgment available at: https://main.sci.gov.in/supremecourt/2012/35071/35071_2012_Judgement_24-Aug-2017.pdf
[4] s.2(1) of the Epidemic Diseases Act
[5] s. 3(iii) of the SPDI Rules.
[6] Chapter 7, reg.7.14 (ii) and 7.14(iii)
[7] Available at : https://www.icmr.nic.in/sites/default/files/guidelines/ICMR_Ethical_Guidelines_2017.pdf
[8] Guideline 3.3.2 of the Ethical Guidelines for Biomedical Research, 2017
[9] The order can be viewed at : http://egazette.nic.in/WriteReadData/2018/194066.pdf
[10] s. 29(5), DISHA: Purposes of collection, storage, transmission and use of digital health data
[11] s.34(3) of the DISHA read with S.29 (1) (d).
[12] s.12 (d) and (e) of the Personal Data Protection Bill 2019

Tags AADHAR

Corporate Expenditure on COVID-19 to count as eligible CSR Expenditure

As regulators across India grapple with the impact of COVID-19, amendments and relaxations are announced constantly. On 23 March 2020, the Ministry of Corporate Affairs (“MCA”), announced that corporate expenditure on fighting COVID-19 will constitute eligible expenditure towards corporate social responsibility (CSR).

CSR is the obligation laid on companies requiring them to spend a portion of their income in giving back to the society in which they prosper. Every company having:

a net worth of INR 500,00,00,000 (Indian Rupees Five Hundred Crores) or more, or
turnover of INR 1000,00,00,000 (Indian Rupees One Thousand Crores) or more or
a net profit of INR 5,00,00,000 (Indian Rupees Five Crores) or more

during the 3 immediately preceding financial years from the date of reckoning, shall be required to spend at least 2% of its average net profits from the 3 preceding financial years towards CSR.

Such companies are also required to set up a CSR Committee. (It must be noted that draft amendments to the CSR Rules are in the works, although, at the time of writing, no amendments have been notified.)

Schedule VII of the Companies Act, 2013 lists out acceptable areas of CSR expenses. Among these:

Schedule VII (i) states that “Eradicating hunger, poverty and malnutrition, promoting health care including preventive health care and sanitation including contribution to the Swach Bharat Kosh set-up by the Central Government for the promotion of sanitation and making available safe drinking water” are eligible CSR expenses. (emphasis supplied); and
Schedule VII (xii) notes that “disaster management, including relief, rehabilitation and reconstruction activities” is a valid CSR expense under the Act.

Further, the MCA, through its General Circular No. 21/2014 dated 18 June 2014, has categorically stated:

“The statutory provision and provisions of CSR Rules, 2014, is to ensure that while activities undertaken in pursuance of the CSR policy must be relatable to Schedule VII of the Companies Act 2013, the entries in the said Schedule VII must be interpreted liberally so as to capture the essence of the subjects enumerated in the said Schedule. The items enlisted in the amended Schedule VII of the Act, are broad-based and are intended to cover a wide range of activities… It is further clarified that CSR activities should be undertaken by the companies in project/ programme mode as referred in Rule 4 (1) of Companies CSR Rules, 2014. One-off events such as marathons/ awards/ charitable contribution/ advertisement/ sponsorship of TV programmes etc. would not be qualified as part of CSR expenditure.”

The MCA clarification dated 23 March 2020, further incentivises corporate expenditure to combat COVID-19.

This is a good step to help prod business communities into contributing generously and to enable the society to avail of additional sources of corporate funds to finance the battle against the pandemic. With paucity in testing kits and their high cost (approx. Indian Rupees 4,500 for a bundle of two tests); the difficulties in screening and testing patients; scarcity of beds, ventilators and other life-saving equipment; the economic burden of both the pandemic and its containment measures (such as lock-downs; need for financial stimulus; reimbursements required for loss of day wage earners etc.) this is a welcome move by the government.

Update

Schedule VII(viii) of the Companies Act, 2013 considers contributions to Central Government funds for socio-economic development and relief as a valid CSR expense. On 28 March 2020, the MCA issued an Office Memorandum notifying that contributions to the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund, or PM CARES Fund, which was established to handle the COVID-19 crisis, shall constitute valid CSR expenditure.

Tags CSR

COVID-19 and Section 144

If you follow Indian news, your feed is sure to have been inundated with announcements that one state or another had imposed “Section 144” within its limits. This post seeks to demystify the meaning and import of this section, particularly in the context of its current use.

The COVID-19 pandemic poses a key public health challenge to countries – how does one prevent community transmission? In epidemiology, “community transmission” means that the source of infection can no longer be traced i.e., an infected person can no longer be shown to have a link to the carrier of the disease – the virus is everywhere. The World Health Organisation defines it by saying: “Community transmission is evidenced by the inability to relate confirmed cases through chains of transmission for a large number of cases, or by increasing positive tests through sentinel samples (routine systematic testing of respiratory samples from established laboratories).”[i]

One of the key strategies that has been used to combat the risk of community transmission is Social Distancing – a technique that the Indian governments (Central and State) have been encouraging vociferously. The persistent bugbear, however, has been the sheer reluctance of people to stay at home. In a populous country like India, with her overcrowded public transport, spotty sense of hygiene, penchant for large public gatherings, and a large and vulnerable at-risk population of older people, this is a recipe for disaster. To begin with various state governments announced shutdowns of public gathering places including malls, gyms, shopping centres (other than essential commodities), and wedding halls. However, as the incidence of new cases increases in geometric progression and as global infection rates and fatalities show no signs of abating, several state governments have started imposing Section 144 orders in their states.

Section 144 of India’s Criminal Procedure Code, 1973 is titled “Power to issue order in urgent cases of nuisance or apprehended danger”. It empowers a District Magistrate to pass an order, in writing, to order a person/persons or the public at large to do or refrain from doing anything that could be a “danger to human life, health or safely, or a disturbance of the public tranquility”. An order under this section can remain valid only for 2 months, although the relevant State Government has the power to extend it for a further 6 months. A contravention of this order is punishable under Section 188 of the Indian Penal Code, 1860 (Disobedience to order duly promulgated by public servant) with imprisonment for up to 6 months or a fine up to INR 1,000 or both.

To offer a mere taste of the scale of its use, as of 21 March 2020:

· The union territory of Puducherry has imposed Section 144 across all its districts (i.e. Puducherry, Mahe, Karaikal and Yanam) restricting public gatherings to no more than 4 people. This will not apply to essentials such as groceries and medicines, although vegetable markets will have more restricted hours. The government has appealed to its people to refrain from overcrowding.

· Section 144 has been imposed in South Goa[ii] and North Goa[iii] to restrict large public gatherings. Section 144 was imposed in a staggered manner, covering an increasing number of establishments.[iv] Inter-state supply of non-essentials has also been suspended.

· Noida, an early adopter of Section 144, has extended the order until April 5, banning public gatherings of more than 4 people.

· Erstwhile Jammu and Kashmir (now union territories of Jammu & Kashmir, and Ladakh), no stranger to Section 144 orders, now faces this prohibition to promote public health, instead of as a means to address law and order challenges. Multiple districts in Jammu[v] have imposed restrictions. Anantnag prohibits gatherings of more than 5 people, as do the districts of Budgam, Shopian, Kishtwar and Ramban[vi].

· Section 144 has been imposed in Rajasthan to prevent a gathering of 4 or more people.

· In Mumbai, Section 144 has been against tour operators. Other Maharashtrian regions of Nashik and Nagpur have broader Section 144 orders. Nevertheless, extensive lock-downs have been ordered in Mumbai over the coming weeks.

· Four districts in Himachal Pradesh (Una, Chamba, Hamirpur and Solan) are under Section 144.

· The southern state of Kerala, and one of the epicenters of COVID-19 in India, has imposed stringent prohibitions against public gatherings under the Epidemic Disease Control Act, 1897 and has authorized district magistrates to issue Section 144.

· The Kodagu district of Karnataka also faces a Section 144 which shall remain in place till 31 March 2020.

UPDATE: On 22 March 2020, Section 144 was imposed in two more key locations:

· The National Capital Territory of Delhi – this will be in force till midnight on 31 March 2020. No public gathering of more than 5 people will be permitted. Only half of Delhi’s buses will run during this time. No one is allowed to leave their houses unless for a purpose related to essential services.

· All cities in Maharashtra – only 5% of government employees will come in to work. No public gathering of more than 5 people will be permitted. All forms of public transport will be unavailable. There will be no inter-state buses and international flights will not be permitted to land.

It is easy to see why Section 144 is such a powerful and desirable tool in the fight against SARS-CoV-2 (COVID-19) – State governments can, for their most affected districts, order a limitation of public gathering, delineate working hours for public transport and essential services and, act quickly to mitigate risks in high-risk districts. Above all, this kind of order has a crucial advantage over other lock-down orders (such as those passed under Epidemic Diseases Control Act, 1897), which is that governments can enforce Section 144 orders, through well-established modes of criminal prosecution, against those who disobey them. This can be a huge deterrent for those who would otherwise have been asymptomatic/mildly infected vectors of a deadly disease.

Caution must, however, be exercised to ensure minimal disruption of essentials (such as vegetables, groceries and pharmacies) to prevent panic buying and hoarding. Constant communication of reliable information from authentic government sources, regarding what is and is not prohibited, can serve the dual purpose of educating the public while also fighting the scourge of fake news that inundates social media.

In short, Section 144 orders are unambiguous communications by a state of the seriousness of the public health situation in a district. While these can, and do, pose large economic and social burdens on many, the public health benefits they can usher will outweigh their difficulties. Section 144, to be truly effective, must be coupled with intensive screening and testing, regular follow-up of suspicious cases, stringent enforcement of quarantine for those infected or suspected of infection, constant awareness of hygiene best practices, co-opting of India’s vast private sector healthcare infrastructure to ease the burden on state resources, travel restrictions and coordinated international efforts to find effective means of risk management (including vaccines). These must also be coupled with economic stimulus packages or social security payments to those whose livelihoods and employment will be derailed by such restrictions.

Section 144 is no magic wand, but as part of the arsenal in a holistic approach to fighting COVID-19, it is a robust weapon.

[i] Available at https://www.who.int/docs/default-source/coronaviruse/situation-reports/20200320-sitrep-60-covid-19.pdf?sfvrsn=d2bb4f1f_2 As an example, if people infected in India have no history of international travel and no contact, direct or indirect, can be established between them and any person with such travel history/a confirmed patient, then the community transmission stage will have begun.

[ii] https://www.goa.gov.in/wp-content/uploads/2020/03/Order-Section-144-Collectorate-South.pdf

[iii] https://www.goa.gov.in/wp-content/uploads/2020/03/order-977-collectorate-north.pdf

[iv] https://www.goa.gov.in/covid-19/

[v] https://jk.gov.in/jammukashmir/sites/default/files/Order%20for%20Imposition%20of%20section%20144.pdf

[vi] https://jk.gov.in/jammukashmir/sites/default/files/Order%20for%20Imposition%20of%20section%20144.pdf

Tags Capital Markets, KARNATAKA, SOCIAL DISTANCING

Department of Financial Services: Trade Notice Issued to Enable Smooth Functioning of Banking and Insurance Related Operations

A. In view of the COVID-19 situation, the Department of Financial Services issued a trade notice on 12 March 2020 listing the steps it has taken to ease the global disruption caused to banking and insurance related operations. Public Sector Banks (PSBs) have been given the following directions:

i. To immediately set up special cells that will provide comprehensive assistance to industry segments and MSME units affected by COVID-19 and to process requests for assistance with appropriate sensitivity;

ii. Customers should be informed about all documents/procedural requirements upfront, in a one-time effort. Further, banks shall accept self-certifications as far as possible to ensure that procedural deficiencies do not inhibit fund remittance;

iii. Identify opportunities for import substitution/ramping up of production to counteract the inevitable impact of the pandemic. If units require support in this regard, all necessary assistance shall be rendered.

B. Insurance Development Authority of India (IRDAI) has been requested to assess/review the existing insurance products/policies to ensure that the policy covers loss due to abnormal delay in delivery of shipments (where such delay is due to COVID-19) . Additionally, and against this background, IRDAI has been asked to permit necessary modification to the terms and conditions of the policy.

On 16 March 2020, the Reserve Bank of India (RBI) followed suit with its press release on “Operational and Business Continuity Measures”. The RBI directed all banks and financial institutions to do as follows:

i. Design and implement strategies and monitoring mechanisms to control the spread of COVID-19 within the organization – this will include directions to the staff, quarantine policy and travel policies;

ii. Revisit and revise business continuity plans in the context of the current pandemic and ensure that critical services can continue without disruptions;

iii. Instructing, sensitizing and training staff with the latest reliable information;

iv. Encourage and promote a shift to digital banking services among customers.

These two notices show one common purpose – a commitment from regulators to ensure non-disruption of internet and banking services despite the determined spread of COVID-19. Since high-speed (and affordable) internet and a robust banking system are both crucial to any economy, the sustained maintenance of such infrastructure, even during a lock-down, can go a long way towards minimizing the destructive impact of the pandemic on lives and livelihoods.

Indian Council of Medical Research (ICMR): Testing guidelines for COVID-19

Woman getting a mouth swab to test for coronavirus

The Ministry of Health and Family Welfare and the Indian Council of Medical Research have issued guidelines on 17th March 2020, detailing the testing process for COVID-19 in India.

It is the firm belief of government authorities that India is currently (as of mid-March 2020) in its second stage of COVID-19 transmission. These guidelines have been issued to contain the spread of this infection via community transmission (stage III) by providing free of cost and reliable diagnosis to every person who meets the eligibility for COVID-19 testing.

The guidelines state that the government will provide free testing although the cost of first step screening assay is INR 1500 and additional confirmatory assays is INR 3000. Indian Council of Medical Research (ICMR) has engaged with non-ICMR/MoHFW government laboratories to initiate testing facilities, to expand the number of laboratories testing for COVID-19. This includes CSIR, DBT, DRDO, government medical colleges etc. The testing strategies are being continually reviewed and the advisories issued for testing are being updated regularly (i.e. on 9th March 2020 and on 16th March 2020).

The current testing strategy states the following:

i. All asymptomatic people who have undertaken international travel should stay in home quarantine for 14 days. They should be tested only if they have developed symptoms of COVID-19 like fever, cough, difficulty in breathing etc.

ii. Every person in contact with patients confirmed positive by the laboratory should stay in home quarantine for 14 days. They should be tested only if they have developed symptoms of COVID-19.

iii. Health care workers managing respiratory distress/severe illness should be tested when they develop symptoms of COVID-19.

The guidelines further contained provision for private laboratories planning to initiate testing for COVID-19. It, inter alia, states:

i. Laboratories shall test only those patients whose testing has been prescribed by a qualified physician as per ICMR guidance for testing.

ii. Commercial kits may be used for testing based on the validations conducted by lCMR’s National Institute of Virology (NIV), Pune.

iii. Private testing laboratories shall take all appropriate bio-safety and bio-security precautions while collecting samples and may consider creating a separate collection site for COVID-19 samples.

iv. All the private testing laboratories shall report on real-time basis to the state officials of the Integrated Disease Surveillance Program of the Government of India and to the ICMR headquarters in order to enable them to timely initiate the tracing of contacts and for research activities.

On 21 March 2020, ICMR has permitted private laboratories to carry out testing if certain conditions are satisfied. Private laboratories are not permitted to charge more than INR 4,500 per test.

It is to be hoped that, as the private and public sector join hands, they become a formidable infrastructure in the fight against COVID-19.