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Covid-19 Related Restrictions in Tamil Nadu

Night Curfew:

  • Night curfew shall continue to be enforced throughout the State from 10:00 P.M to 4:00 A.M.
  • During the night curfew, private and public bus transport (including intra-state and inter-state public or private bus transport), auto, taxi and private vehicles are not permitted.

Relaxations in Night Curfew:

The following relaxations have been provided in respect of the night curfew:

  • Auto, taxi and private vehicles will be allowed for medical emergencies and to transport passengers from/to railways and airports.
  • Essential services, such as supply of milk, distribution of newspapers, hospitals, medical labs, pharmaceutical shops, ambulance and hearse services, medical services, goods vehicles, fuel vehicles (petrol, diesel, and LPG) will be allowed.
  • Electronic and print media shall continue to operate.
  • Petrol and Diesel bunks shall be permitted to function.
  • Continuous Process Industries and Industries manufacturing essential commodities are permitted to function. (as mentioned in G.O Ms. 348, Revenue and Disaster Management Department dated 20 Apr. ’21).
  • Telecommunication and its related activities.
  • Night shift operations of IT/ITES companies’ workforce to operate from the office.
  • Maintenance and operations of data centres and other critical IT infrastructure needed to support backend operations of medical, financial, transport and other critical services.
  • Warehousing activities including loading, unloading and storage of goods.
  • Movement of goods and workers to and from all seaports, during night curfew and lockdown on Sundays shall be permitted.

Complete Lockdown on Sundays:

  • Complete lockdown shall be enforced throughout the State on all Sundays without any relaxations.
  • Chicken and other meat stalls, fish markets, vegetable shops, cinema theatres and shopping malls and all other shops shall be closed.

Relaxations in the Complete Lockdown:

  • There are no restrictions for the movement of officials/party functionaries or food suppliers, in connection with the counting of votes for the General Elections to the Tamil Nadu Legislative Assembly, 2021 and the Bye-Election of Kanniyakumari Parliamentary Constituency.
  • Essential services, such as supply of milk, distribution of newspapers, hospitals, medical labs, pharmaceutical shops, ambulance and hearse services, medical services, goods vehicles, vehicles carrying agricultural produce, fuel vehicles will be permitted.
  • Chennai Metro Rail will be permitted to operate skeletal services during the complete lockdown.
  • Parcel food and food delivery through E-commerce entities shall only be permitted from 6:00 A.M to 10 A.M., 12:00 Noon to 3:00 P.M and 6:00 P.M to 9 P.M.
  •  Electronic and print media to continue to operate.
  • Continuous Process Industries and industries manufacturing essential commodities are permitted to function.
  • Telecommunication and its related activities.
  • Night shift operations of IT/ITES companies’ workforce to operate from office.
  • Maintenance and operations of data centres and other critical IT infrastructure needed to support backend operations of medical, financial, transport and other critical services.
  • Warehousing activities including loading, unloading and storage of goods.
  • In case of un-exempted establishments, essential maintenance services shall be permitted.
  • Weddings shall be permitted with less than 50 guests on all days.
  • Funerals shall be permitted with less than 25 guests on all days.
  • Movement of goods and workers to and from all seaports during night curfew and lockdown on Sunday shall be permitted.

Prohibited Activities:

  • All international air travel, except as permitted by MHA, remain prohibited.
  • Fish markets, meat stalls and other stalls shall remain closed on Saturdays.
  • In modification of earlier orders, Kudamuzhukku shall be permitted without the general public and with the participation of temple employees only by following the Standard Operating Procedure. Permission shall not be granted for new/ proposed Kudamuzhukku.
  • Fruits and vegetable retail outlets in Koyambedu and other wholesale markets are prohibited.
  • All cinemas, gyms, recreation clubs, bars, auditoriums, meeting halls and other similar places shall remain closed.
  • Big format shops (size of above 3000 sq.ft.), shopping complex and malls shall not be permitted to operate.
  • Provision stores, vegetable shops and other shops (not in a shopping complex or mall) shall be permitted to function following Standard Operating Procedure.
  • Standalone departmental stores selling provisions and vegetables shall be permitted to function without air conditioning at a maximum capacity of 50% at a time.
  • Beauty parlours, barber shops etc. are prohibited.
  • All religious places shall be closed for public worship.
  • Both local and outstation tourists shall not be permitted in all the tourist places like Nilgiris, Kodaikanal and Yercaud.
  • All beached shall be closed on all days.
  • Parks, gardens, zoological parks, museums, archaeological monuments, and excavation sites shall be closed on all days.
  • Summer camps shall not be permitted.

Activities Permitted with Restrictions:

  • Industries to be permitted to function by following the Standard Operating Procedures.
  • Industrial establishments to arrange for the vaccination of all their employees.
  • Public and private intra-state and inter-state bus transport and Metropolitan buses shall be permitted. The passengers should be restricted to seating capacity and standing passengers are not allowed.
  • All persons entering Tamil Nadu from other States (other than Puducherry) shall be permitted to enter after showing their e-registration details entered on the website http://:eregister.tnega.org .
  • All persons coming from abroad by air and ship shall be permitted to enter Tamil Nadu by showing their e-registration details entered on the website http://:eregister.tnega.org .
  • Take away service shall be permitted in all restaurants, hotels, mess, tea shops and dine-in facility shall not be allowed.
  • Entertainment/amusement parks can function at 50% capacity by following Standard Operating Procedure.
  • All social, political, academic, entertainment, sports, cultural and other functions shall be permitted in closed spaces with a maximum of 50% of the hall capacity up to 200 persons after following Standard Operating Procedure.
  • Professors at colleges/universities can conduct online classes from home.
  • Exams in respect of Government, Private Colleges, Universities shall be conducted online only.
  • All educational training institutions shall conduct online classes only.
  • All sports training academies, including golf and tennis clubs, shall not be permitted. However, training for the international and national games/sports shall be permitted.
  • Stadia and playgrounds can function for conducting sports competitions with no spectators.
  • Exhibition Halls can function for business-to-business purposes following the Standard Operating Procedures.
  • Swimming pools can function for sports training following the Standard Operating Procedure.
  • Shooting of films and TV serials shall continue to be permitted. However, the respective production establishment shall ensure that the artists and workers involved in the shooting undergo RTPCR tests/vaccinations.
  • E-commerce activities shall be permitted on all days except on Sunday.
  • At least 50% of the employees of IT/ITES organizations shall compulsorily work from home.
  • Rental vehicles and taxis can operate with 3 passengers and autos can ply with 2 passengers (excluding driver).

General:

  • Candidates appearing for the SSC/UPSC/RRB/TNSPC exams shall be permitted on production of valid admit card.
  • Hotels functioning as Covid care centres can function. The officials of the Health Department shall inspect and accord the necessary permission in this regard. Guests are not allowed in these hotels.

Covid Appropriate Behaviour:

  • Wearing a mask is mandated. The District Administration may impose a fine on persons not wearing masks in public and workspaces.
  • Social distancing in crowded places must be observed.
  • Standard Operating Procedures for regulating travel in planes, trains and metros shall be strictly enforced.
  • The National Directives for Covid-19 Management shall be strictly followed.

Strict Adherence to the Prescribed Standard Operating Procedures (“SOPs”)

  • All activities have been permitted outside Containment Zones by following the SOPs.
  • The SOPs must be strictly enforced by the concerned authorities.

Vaccination:

The District Administration is advised to rapidly step-up vaccination to cover all priority groups, as recommended by the National Expert Group on Vaccine Administration for Covid-19 (“NEGVAC”).

Local Restrictions:

Based on their assessment of the situation, local restrictions at the district/sub-district/city/ward level can be imposed.

Protection of Vulnerable Persons:

Senior citizens (above 65 years of age), persons with co-morbidities, pregnant women, and children below 10 are advised to take necessary precautions.

Use of Arogya Setu:

Use of Arogya Setu app may continue on a best effort basis with compatible mobile phones.

Strict Enforcement of Guidelines:

  • The District Administration may use the provisions of section 144 of the Criminal Procedure Code, 1973.
  • Any person violating these measures shall be liable to be proceeded against under section 51 to 60 of the Disaster Management Act, 2005 and legal action under section 188 of the Indian Penal Code.
  • No activities shall be permitted in the Containment Zones and restrictions in the Containment Zones would be intensified.
  • The Commissioner, Greater Chennai Corporation/District Collectors may take appropriate action for violation of these guidelines and SOPs.

National Directives for Covid-19 Management:

  • Wearing a face mask is mandatory in public, at work and during transport.
  • Individuals must maintain a minimum distance of 6 feet in public.
  • Spitting in public places will be a punishable with a fine.
  • As far as possible, Work From Home should be followed.
  • Staggering of work, business hours will be followed in offices, work places, shops, markets and industrial and commercial establishments.
  • Provision for thermal screening, hand wash, sanitizer shall be made available at all entry points and exit points and common areas.
  • Frequent sanitation of the entire workplace, common facilities and all points which come into human contact should be undertaken.
  • All persons in charge of workplaces must ensure social distancing between workers and other staff.

State of Karnataka – Closedown update

The Government of Karnataka has announced a 14 (fourteen) days closedown in the state starting from 9pm, April 27, 2021 to be in force until 6am, May 12, 2021. In this regard, the Government of Karnataka has issued the attached guidelines on April 26, 2021 clarifying the state of operations during the closedown. A summary of the guidelines is given below for your reference:

Prohibited Activities:

  • Only flights and trains previously scheduled will continue to operate during the period of closedown.
  • Metro rail services will cease.
  • Taxis (including auto rickshaws) and services of cab aggregators prohibited, except while hired for emergency and as permitted in the guidelines.
  • Schools, colleges, educational/coaching institutions etc. will remain closed. Online/ distance teaming shall continue to be permitted and shall be encouraged. However, examination already scheduled shall be permitted with strict adherence to National Directives for COVID 19 management.
  • Hotels, restaurants and hospitality services shall be prohibited except those meant for housing health/ police/ Government officials/ healthcare workers/stranded persons including tourists. However, hotels, restaurants and eateries shall be permitted to operate kitchens for take away/home delivery of food items only.
  • All cinema halls, shopping malls, gymnasiums, sports complexes, stadia, swimming pools, entertainment parks, clubs, theatres, bars and auditoriums, assembly halls and similar places shall be closed.
  • Stadia and playground are closed. However, stadia and playground are allowed for organizing sports events and practice purpose, without spectators.
  • Swimming pools approved by Swimming Federation of India to be opened for sports persons for training purpose only.
  • All social/ political/ sports/ entertainment/ academic/ cultural/religious functions/ other gatherings and large congregations are prohibited.
  • All religious places/ places of worship shall be closed for public. However, all personnel engaged in the service of the place of worship shall continue to perform their rituals and duties without involving any visitors.

Only government offices and their autonomous bodies, subordinate offices, public corporations etc. are permitted to function outside containment zone, as further detailed in paragraphs 3 and 4 under Annexure I of the attached

All health services inter alia including construction pertaining to medical / health infrastructure can remain functional (outside containment zone) as detailed in paragraph 5 under Annexure I.

All agriculture and allied activities, including shops and godowns, related to farming, custom hiring centers, machineries are permitted outside containment zones. Allied activities include fisheries, poultry, meat and dairy etc.

Social sector shall remain functional outside containment zones as per paragraph 7 under Annexure I of the attached.

There will be unrestricted movement of all types of goods and cargo, outside containment zones as detailed below:

  • All facilities in the supply chain of essential goods, whether involved in manufacturing, wholesale or retail or such goods through local stores, large brick and mortar stores or E-commerce companies shall be allowed to operate adhering to National Directives for COVID 19 management.
  • Movement of all types of goods including empty goods vehicles.

Movement of People, as set out in paragraph 9 under Annexure I (inter alia include):

  • No movement of public or private buses or passenger vehicles except as permitted under the guidelines.
  • Inter-State and Intra-State movement of passenger vehicles, only in cases of emergencies or as permitted under the guidelines.
  • Intra-district movement of passenger vehicles and buses only in emergency cases and strictly adhering to the prevailing SOPs/guidelines issued by Department of Health and Family Welfare.
  • Passes to facilitate movement of construction workers to be issued by the concerned construction agency.

The following commercial and private establishments are allowed:

  • Shops dealing with food , groceries, fruits and vegetables, dairy and milk booths, meal and fish, and animal fodder shall be allowed to function from 6 am to 10 am. Public Distribution System shops are allowed. Standalone liquor shops and outlets, take away only, allowed from 6 am to 10 am. Home delivery items shall be encouraged 24×7 to minimize movement of individuals outside their homes. Operations shall be subject to adhering to National Directives for Covid 19 management.
  • All facilities in the supply chain of essential goods, whether involved in manufacturing, wholesale or retail of such goods through local stores, large brick and mortar stores or E-commerce companies should be allowed to operate adhering to National Directives for COVID 19 management.
  • All food processing and related industries.
  • Banks, insurance offices and ATM.
  • Print and electronic media.
  • Telecommunication, internet services, broadcasting and cable services.
  • Employees and vehicles of Telecom and Internet Service providers shall be allowed unrestricted movement on producing valid ID card issued by their respective organization/institution.
  • Only essential staff/employees of IT and ITeS companies/organization shall work from office. Rest will work from home.
  • Delivery of all items through E-commerce and home delivery.
  • Power generation, transmission and distribution units and services.
  • Capital and debt market services as notified by the Securities and Exchange Board of lndia.
  • Cold storage and warehousing services.
  • Private security services.
  • Aviation and related services (airlines, airports, maintenance, cargo, ground services, catering, fuelling, security. etc) are permitted.

All industries/ industrial establishments/ production units, except related to garments manufacturing, are permitted to operate outside containment zones, adhering to COVID appropriate behaviour. The movement of staff shall be allowed by producing valid ID/authorization issued by concerned industries/industrial establishment.

Construction activities, listed below, will be allowed to operate outside containment zones adhering to National Directives for COVID 19 management:

  • All construction activities, civil repair activities are permitted.
  • Works pertaining to pre-monsoon preparation are permitted.
  • All the above activities shall be permitted by strictly adhering to COVID appropriate behaviour as stipulated in the National Directives for COVID 19 management.
  • During the weekends, only in-situ construction (where workers are available onsite and no workers are required to be brought in from outside) is permitted.

Annexure II in the attached inter alia includes the following on night curfew between 9pm to 6am during the period of closedown:

  • All industries/companies which require operations at night shall be permitted to operate. Movement of employees of such organizations shall be allowed on producing valid lD card/authorization issued by their respective Organization/Institution.
  • Employees and vehicles of telecom and internet service providers shall be allowed movement on producing valid ID card issued by their respective organization/institution. Only essential staff / employees of IT and ITeS companies /organization shall work from office.

Further, Annexure III in the attached sets out the National Directives for COVID 19 management to be followed.

Any person violating these measures will be liable to be proceeded against as per the provisions of Section 51 to 60 of the Disaster Management Act, 2005, besides legal action under Section 188 of the lPC and other legal provisions as applicable. Extracts of penal provisions are provided in Annexure IV of the attached.

Extension of lockdown till 31 May 2020 in Tamil Nadu

The government of Tamil Nadu had taken several first hand measures since January 2020 with a view to contain the spread of Covid-19. Between the period of January to March 2020, the government had sanctioned essential medicines worth Rs. 146 crores, 21 lakh protective gears, 1.45 crore face masks and 24 lakh N95 masks. The World Health Organization declared Covid-19 as a pandemic, following which the government has undertaken several measures under the Tamil Nadu Public Health Act, 1939 and the Epidemic Diseases Act, 1897 in order to curtail the spread of this disease.

In pursuance of the disaster management laws as applicable in Tamil Nadu, the Tamil Nadu government decided to extend the lock down from 17 May 2020 till 31 May 2020 (12.00 midnight), under the below mentioned guidelines/conditions (“Lock Down Period”). The circular can be accessed here.

Existing restrictions for the below mentioned operations shall stand unaltered until further notification:

  1. Functioning of schools, colleges, training institutes, research institutes.
  2. Public gatherings in places of worship and religious centers.
  3. Cinema halls, amusement parks, bars, gymnasiums, beach, tourist spots, parks, museums, swimming pools, stadiums, auditoriums.
  4. All types of religious, social, political, entertainment, educational, sports, cultural gathering and processions.
  5. Public travel via air, trains, buses including inter-state trains and bus travels shall remain prohibited. (Special flights, trains and public transport with exclusive permission from the centre/state government shall be permitted)
  6. Taxis, autos, cycle rickshaws.
  7. Metro trains and electric trains.
  8. Guest houses (excluding for employees’ accommodation), hotels, resorts.
  9. Funeral procession with not more than 20 persons.
  10. Weddings upon adherence to existing directions.

The restrictions already in place are as follows:

  1. The 12 districts of Chennai, Kanchipuram, Thiruvallur, Chengalpattu, Vizhupuram, Kadalur, Ranipet, Thirupatthur, Kallakuruchi, Thiruvannamalai, Ariyalur and Perambalur shall continue to function under the existing restrictions without any relaxations.
  2. Tourists shall not be allowed to visit the tourist areas of Nilgiris, Kodaikanal and Yercaud.
  3. The lockdown shall function without any relaxations at the Containment Zones.
  4. Apart from the Containment Zones in the Greater Chennai Police limits, all other activities as permitted under the existing list of permitted activities shall continue to be allowed.
  5. Except in the containment zones within the limits of the Greater Chennai Police and the containment zones within the other parts of the state of Tamil Nadu, all other activities as permitted under the existing list of permitted activities shall continue to be allowed.

New restrictions:

As a measure to ease restrictions step by step and in accordance with the advice of the High Level Committee the following relaxations have been introduced:

  1. The following relaxations shall be applicable in the districts of Coimbatore, Salem, Erode, Thiruppur, Namakkal, Karur, Thirunelveli, Thuthukudi, Thenkasi, Kanniyakumari, Theni, Madhurai, Sivaganga, Viruthunagar, Ramanathapuram, Dindugal, Pudhukottai, Trichy, Thiruvaroor, Tanjore, Nagapattinam, Dharmapuri, Krishnagiri, Vellore and Nilgiris:
  • Intra-state transportation shall be allowed without TN e-Pass.

  • In order to prevent the spread of the virus, the public is requested to use the transportation facilities for the purposes of the permitted activities and essential services alone.

  • TN e-pass shall continue to be availed for all inter-state movement.

  • Government and private buses that ply for the transportation of government and private employees shall carry upto 20 persons, vans shall carry upto 7 persons, SUVs and cars such as Innova shall carry upto 3 persons, small cars shall carry upto 2 persons (apart from the driver).

  • Taxis and rented vehicles that function for the purposes of essential services, businesses, healthcare etc. within these 25 districts shall do so without availing TN e-pass. Public should avoid venturing out of their houses unless absolutely required to do so.

  1. The National Rural Employment Guarantee Act – The existing limit of 50% workers shall be extended to 100%.
  2. Apart from the areas within the Greater Chennai Police limits, all the State Municipal Corporations, Municipalities and Town Panchayats shall have further relaxations in terms of the number of workers as follows : (i) Establishments employing less than 100 workers shall function with 100% capacity. (ii) Establishments employing more than 100 workers shall work with a maximum capacity of 50% of its workforce or with atleast 100 workers.
  3. Establishments that have been closed down as a result of the lockdown shall function for the purposes of essential general maintenance with a limited number of workers.
  4. Evaluation of the answer sheets pertaining to Class XII Public (Board) Examination is permitted.
  5. Training for national and international games under an individual trainer is permitted. Permission shall be obtained for the same from the chief of district administration and the Municipal Commissioner of Chennai.
  6. Among the 12 districts where transportation is not permitted, taxis, autos that are used for medical purposes shall be allowed.

General guidelines:

  1. All district collectors and Municipal Commissioners are advised to wear masks, follow social distancing, sanitize their hands at frequent intervals, use disinfectants, ensure safety of workers and ensure strict implementation of the Standing Operating Procedures.
  2. The State Government of Tamil Nadu is strictly monitoring the spread of the disease. The government shall come out with further relaxations as the spread decreases.
  3. Through the 10 special flights under the ‘Vande Bharath’ scheme of the Central Government, 1665 people belonging to Tamil Nadu have been brought back to the country and 264 people have returned through 2 ships.
  4. Steps are being taken to bring back persons struggling to return to Tamil Nadu from other states.
  5. 2 special Rajdhani trains have arrived at Tamil Nadu from New Delhi this week. Similarly, the government shall undertake measures to ensure that these trains ply for two days in a week with the permission of the Central Government.

Karnataka Lockdown Extension Order

Pursuant to the updated order issued by the Ministry of Home Affairs, Government of India dated May 17, 2020 bearing No. 40-3/2020-DM-I(A) (“Order”) with the new guidelines on the measures to be taken by Ministries / Department of Government of India / states and state authorities for containing the spread of COVID-19, the Karnataka state government has issued updated guidelines on the measures to be taken for containing the spread of COVID-19 which will come into effect immediately and be valid till May 31, 2020 (“Karnataka Order”). The Karnataka Order can be accessed here.

Below is a brief overview of the Karnataka Order, in addition to those set out by the Order:

1. Permitted Activities

  • In all zones areas except containment zones, taxis/autorickshaws (with a maximum of 2 (two) passengers excluding the driver), maxi cabs and aggregators will be permitted to ply with restrictions.

  • Barber shops, saloons and spas will be permitted to operate subject to the standard operating procedure prescribed by the Ministry of Health and Family Welfare.

  • Government and municipal parks will be open to the public between specified times subject to restrictions.

2. Curfew: Sundays will be full day lockdown, that is, on Sundays no movement will be permitted from 7AM to 7PM in addition to the 7PM to 7AM curfew, except for essential activities.

3. Demarcation of Zones: The Department of Health and Family Welfare, Government of Karnataka will demarcate taluks/wards into red, orange and green zones only for the purpose of monitoring and will not impose any additional restrictions to the activities permitted under these guidelines.

Lockdown 4.0 – MHA Guidelines

The National Disaster Management Authority (NDMA) issued Order Number 1-29/2020 -PP on 17 May 2020, by virtue of its power under Section 6(2)(i) of the Disaster Management Act, 2005 (Act) directing the National Executive Committee (NEC) to continue to implement lockdown measures in all parts of the country, to contain the spread of COVID-19.

Such lockdown measures to contain the spread of COVID-19 were first imposed by the NDMA on 24 March 2020, and has now been imposed for the fourth time, until 31 May 2020.

In furtherance of the NDMA orders, the NEC in exercise of its powers under Section 10(2)(l) of the Act, had issued corresponding orders on lockdown measures on 24 March 2020, 29 March 2020, 14 April 2020, 15 April 2020 and 01 May 2020 along with respective addendums (NEC Orders).

Pursuant to the NDMA order on 17 May 2020, the Ministry of Home Affairs (MHA) vide Order No. 40-3/2020-DM-I(A) dated 17 May 2020 (Order), has issued guidelines on the measures to be taken by Ministries/ Departments of Government of India, State/ UT Governments and State/ UT Authorities for containment of COVID-19 in India, up to 31 May 2020.

On and from 18 May 2020, all the previous orders issued by the NEC in exercise of its powers under Section 10(2)(l) of the Act, including the NEC Orders, shall cease to have effect, unless expressly excepted under this Order.

Demarcation of Zones:

  1. The delineation of Red, Green and Orange zones will be decided by the respective State/ UT Governments, after taking into due consideration the parameters issued by the Ministry of Health and Family Welfare (MoHFW).
  2. Further, within the Red and Orange zones, Containment zones and Buffer Zones will be demarcated by the District Authorities, after taking into consideration the guidelines issued by the MoHFW.
  3. In the Containment Zones: (i) only essential activities shall be allowed. (ii) there shall be no movement of people in or out of the zones except for medical emergencies and for maintaining supply of essential goods and services; (iii) there shall be intensive contact tracing, house-to-house surveillance and other clinical interventions, as required.
  4. In other zones, all other activities except those specifically prohibited hereunder, are permitted.

Prohibited activities throughout the country:

  1. All domestic and international air travel, except for medical and security purposes.
  2. Metro rail services.
  3. School, colleges, educational, training and coaching institutions. Online/ distance learning is permitted.
  4. Cinema halls, shopping malls, theatres, parks, gyms, swimming pools, bars, assembly halls and auditoriums.
  5. Sports complexes and stadia are permitted to be open, however, spectators will not be allowed.
  6. Social, political, sports, entertainment, academic, cultural, religious functions and gatherings.
  7. Religious places, places of worship and religious congregations.
  8. Hotels, restaurants and other hospitality services, except, those meant for housing health, police, government officials, healthcare workers, stranded persons, tourists, quarantine facilities and running of canteens at bus depots, railway stations and airports.
  9. Restaurants shall be permitted to operate kitchens for home delivery of food items.

Movement of persons, except in Containment zones:

  1. Inter-state movement of passenger vehicles and buses with mutual consent of the States/UTs involved.
  2. Intra-state movement of passenger vehicles and buses as decided by the States/UTs.

Curfew:

  1. Irrespective of the zones, the Order prohibits all movement of individuals between 7.00 pm to 7.00 am, except for essential activities.
  2. The local authorities shall invoke appropriate provisions of law and issue such orders as it deems fit to ensure strict compliance of the curfew.
  3. Persons above 65 years of age, persons with co-morbidities, pregnant women and children below 10 years of age have been directed to stay at home, except for essential and health purposes.

Movement of certain persons and goods that are permitted:

  1. Inter-State and Intra-State movement of medical professionals, nurses, para-medical staff, sanitisation personnel and ambulances are permitted without any restrictions.
  2. Inter-State movement of all types of goods/ cargo, including empty trucks.
  3. Movement of any type of goods/ cargo for cross land-border trade under Treaties with neighbouring countries.

Standard Operating Procedures:

The Order directs strict adherence to the following Standard Operating Procedures for movement of persons:

  1. SOP for transit arrangements for foreign nationals in India issued vide Order dated April 02, 2020.
  2. SOP on movement of stranded labour within States/ UTs, issued vide Order dated April 19, 2020.
  3. SOP on sign-on and sign-off of Indian seafarers, issued vide Order dated April 21, 2020.
  4. SOP on movement of stranded migrant workers, pilgrims, tourists, students and other persons, issued vide Order dated April 29, 2020 and Order dated May 01, 2020.
  5. SOP on movement of Indian Nationals stranded outside the country and of specified persons to travel abroad, issued vide Order dated May 5, 2020.
  6. SOP on movement of person by train, issued vide Order dated May 11, 2020.

The Order further allows the States/ UTs, to prohibit certain other activities/ impose restriction, in the various zones as deemed necessary, based on their assessment of the situation.

Extending the lockdown till 31 May 2020, the Government of Tamil Nadu and Maharashtra, the states with leading count of active cases, have issued fresh guidelines for restrictions and relaxations of activities in the states.
Gujarat, the state with second highest number of cases, is yet to issue guidelines in this regard.

Use of Aarogya Setu Application (App):

To provide timely medical attention and to ensure safety in offices and workplaces, the Order directs employers to ensure that the App is installed by all employees, on a best effort basis.

Key relaxations provided by SEBI from the disclosure obligations under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015

In view of the COVID 19 pandemic, the Securities and Exchange Board of India (“SEBI”) has provided certain relaxations to listed entities, from compliance with certain provisions of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“SEBI LODR Regulations”) vide its circulars, most recent of which is the circular dated May 12, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/79), which provides for (i) additional relaxations in line with clarifications released by the Ministry of Corporate Affairs (“MCA”) dated April 8, 2020 and April 13, 2020; and (ii) further extension to certain relaxations already provided by SEBI vide its circulars dated March 19, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/38), March 26, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/48), April 17, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/63) and April 23, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/71.

Set out below are the key relaxations to the SEBI LODR Regulations provided:

1. Extension of timelines for submission of certificates

In terms of the SEBI LODR Regulations, listed entities are required to file certain compliance certificates with the stock exchanges, indicating compliance with regulatory requirements. These include

(a) Certificate on maintenance of share transfer facility as per Regulation 7 (3) which is to be filed within one month of the end of each half of the financial year.

Pursuant to the SEBI circular dated March 19, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/38), the due date for the submission of the compliance certificate for the half year ended March 31, 2020 has been extended from April 30, 2020 to May 31, 2020.

(b) Secretarial compliance report for listed entities and their material unlisted subsidiaries in terms of Regulation 24A, which is to be annexed to the annual report.

This requirement has been relaxed vide the SEBI circular dated March 19, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/38) from May 30, 2020 to June 30, 2020 for the financial year ended March 31, 2020.

(c) Certificate from practicing company secretary on share certificates as per Regulation 40(9) to be submitted within one month of the end of each half of the financial year, certifying that all certificates have been issued within thirty days of the date of lodgement for transfer, sub-division, consolidation, renewal, exchange or endorsement of calls/allotment monies and submit the same with the stock exchange.

SEBI vide its circular dated March 26, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/48), has extended the due date for submission of the aforementioned certificate, for the half year ended March 31, 2020, from April 30, 2020 to May 31, 2020.

2. Financial results

As per Regulation 33(3)(c) of the SEBI LODR Regulations, a listed entity is required to submit with the stock exchange, its standalone and consolidated (if applicable) quarterly financial results within 45 days of the end of the particular quarter. This requirement has been relaxed for the quarter ended March 31, 2020 pursuant to SEBI circular dated March 19, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/38). The due date for submission of the aforementioned financial results is revised from May 15, 2020 to June 30, 2020.

Further, as per Regulation 33(3)(d) of the SEBI LODR Regulations, a listed entity is required to submit with the stock exchange, its standalone and consolidated (if applicable) annual audited financial results within sixty days of the end of the financial year. This requirement has been relaxed for the quarter ended March 31, 2020 pursuant to SEBI circular dated March 19, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/38). The due date for submission of the aforementioned financial results is revised from May 30, 2020 to June 30, 2020.

In addition to the above, by way of SEBI circular dated May 12, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/79), SEBI took note of the representation from listed entities that are banks and insurance companies with relation to the difficulties faced by them in the preparation of consolidated financial results under regulation 33(3)(b) in view of different accounting standards being followed by companies belonging to same group and the difficulties in restating those financials as per Indian Accounting Standards (“Ind AS”) due to the prevailing circumstances in view of COVID 19 pandemic. The Reserve Bank of India through its notification dated March 22, 2019, has deferred the implementation of Ind AS until further notice to provide relief to scheduled commercial banks.

In light of the above, SEBI in the circular dated May 12, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/79) has clarified that listed entities which are banking and / or insurance companies or having subsidiaries which are banking and / or insurance companies may submit consolidated financial results under regulation 33(3)(b) for the quarter ending June 30, 2020 on a voluntary basis. However, they shall continue to submit the standalone financial results as required under regulation 33(3)(a) of the LODR. If such listed entities choose to publish only standalone financial results and not consolidated financial results, they shall give reasons for the same.

3. Provisions relating to frequency of meetings

As the lockdown has imposed restrictions on physical gatherings and companies have been facing difficulties in conducting meetings completely through electronic audio-visual means, SEBI has provided certain relaxations pertaining to the frequency of meetings to be held by listed entities. It may be noted that certain of these provisions will also require a corresponding relaxation from the MCA, which one can hope will be forthcoming shortly.

(a) As per Regulation 17(2), the board of directors of a listed entity is required to meet at least four times a year, with a maximum time gap of one hundred and twenty days between any two meetings and as per the Regulation 18(2)(a), the audit committee of a listed entity is also required to meet at least four times a year, with a maximum time gap of one hundred and twenty days between any two meetings. SEBI vide its circular dated March 19, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/38) has exempted listed entities from observing the maximum gap between the meetings held or proposed to be held between December 1, 2019 and June 30, 2020. However, it has been clarified that there is no relaxation provided to the board of directors / audit committee from ensuring that they meet four times in a year.

(b) SEBI has vide its circular dated March 26, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/48), extended the time limit provided to listed entities to have one meeting of the nomination and remuneration committee, stakeholders relationship committee and risk management committee as required under Regulation 19(3A), Regulation 20(3A) and Regulation 21(3A), respectively, of the SEBI LODR Regulations. A listed entity is now required to comply with this requirement by June 30, 2020 instead of March 31, 2020.

(c) As per Regulation 44(5) of the SEBI LODR Regulations, the top 100 listed entities by market capitalization, determined as on March 31st of every financial year, shall hold their annual general meetings within a period of five months from the date of closing of the financial year. SEBI vide its circular dated March 26, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/48), has extended the time limit for conducting the annual general meeting from August 31, 2020 to September 30, 2020. Further, SEBI has in its circular dated April 23, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/71 clarified that the extended time limit of up to September 30, 2020 shall also be applicable to the top 100 listed entities by market capitalization, whose financial year ended on December 31, 2020.

4. Provisions relating to publication and dispatch of forms and advertisements

In view of the impact of the current lockdown on postal services and physical newspapers, SEBI has also dispensed with or relaxed requirements relating to postal dispatch of forms or publication in physical newspapers, including:

(a) SEBI vide its circular dated May 12, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/79), has temporarily dispended the requirement of sending proxy forms for general meeting to holders of securities as per Regulation 44(4), in case such meetings are held through electric mode. This relaxation is available for listed entities who conduct their AGMs through electronic mode during the calendar year 2020 (i.e. till December 31, 2020).

(b) Regulation 36 (1)(b) and (c) of SEBI LODR Regulation prescribes that a listed entity shall send a hard copy of the statement containing salient features of all the documents, as prescribed in Section 136 of the Companies Act, 2013 to the shareholders who have not registered their email addresses and hard copies of full annual reports to those shareholders, who request for the same, respectively. Regulation 58 (1)(b) &(c) of the SEBI LODR Regulations extend similar requirements to entities which have listed their NCDs and NCRPS. SEBI vide its circular dated May 12, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/79), has dispensed the aforementioned requirements for listed entities who conduct their annual general meetings during the calendar year 2020 (i.e. till December 31, 2020).

(c) SEBI vide its circular dated March 26, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/48) read with its circular dated May 12, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/79) has exempted publication of advertisements in newspapers, as required under Regulation 47 of SEBI LODR Regulations, for all events scheduled till June 30, 2020, since some newspapers had stopped their print versions due to the COVID 19 pandemic.

5. Timelines for provision of intimation to stock exchanges

In view of the difficulties caused by the pandemic to normal operations of companies, SEBI has provided temporary relaxations regarding certain intimations to be provided to stock exchanges:

(a) As per Regulation 29 (2) of the SEBI LODR Regulations, stock exchanges need to be provided prior intimation about meetings of the board (excluding the date of the intimation and date of the meeting) as follows: (i) at least five days before the meeting if financial results are to be considered; and (ii) two working days in other cases.

SEBI vide its circular dated April 17, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/63) has decided that the above requirement under Regulation 29 (2) of SEBI LODR Regulations of prior intimation of five days / two working days shall be reduced to two days, for board meetings held till July 31, 2020.

(b) As per Regulation 39 (3) of the SEBI LODR Regulation, requires listed entities to submit information regarding loss of share certificates and issue of the duplicate certificates, to the stock exchange within two days of the listed entity receiving information.

SEBI vide its circular dated April 17, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/63) has decided that any delay beyond the stipulated time will not attract penal provisions laid down vide SEBI circular no. SEBI/HO/CFD/CMD/CIR/P/2018/77 dated May 3, 2018. This relaxation is for intimations to be made between March 1, 2020 to May 31, 2020.

6. Use of digital signature and electronic payment methods

(a) SEBI vide its circular dated April 17, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/63) has clarified that authentication / certification of any filing / submission made to stock exchanges under the SEBI LODR Regulations may be done using digital signature certifications until June 30, 2020.

(b) As per Regulation 12 of the SEBI LODR Regulations, issuance of ‘payable at par’ warrants or cheques in case it is not possible to use electronic modes of payment. Further, in case the amount payable as dividend exceeds Rs.1500, the ‘payable-at-par’ warrants or cheques shall be sent by speed post.

SEBI by way of the circular dated May 12, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/79) has clarified that the requirements of this regulation will apply upon normalization of postal services and in cases where email addresses of shareholders are available, listed entities shall endeavor to obtain their bank account details and use the electronic modes of payment specified in Schedule I of the SEBI LODR Regulation.

7. Deferral of effective date of operation of the SEBI circular on standard operating procedure

SEBI vide circular no. SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January 22, 2020 issued the Standard Operating Procedure (“SoP”) on imposition of fines and other enforcement actions for non-compliances with provisions of the SEBI LODR Regulations, the effective date of operation of which is for compliance periods ending on or after March 31, 2020. Pursuant to the SEBI circular dated March 26, 2020 (Circular No. SEBI/HO/CFD/CMD1/CIR/P/2020/48), the said circular dated January 22, 2020 shall now come into force with effect from compliance periods ending on or after June 30, 2020. It may be noted that the SoP circular dated May 3, 2018 would be applicable till such date.

SEBI notifies eight entities to carry out e-KYC Aadhar authentication

In view of the COVID-19 pandemic, the Government of India, Department of Revenue had vide Gazette Notification No. G.S.R. 261(E) dated April 22, 2020 (“Notification”) permitted, interalia eight reporting entities to carry out electronic know-your-customer (“e-KYC”) Aadhar authentication by exercising its powers under the proviso to Section 11A of the Prevention of Money-Laundering Act, 2002 (“PMLA”).

Section 11A of PMLA lays down the documents using which a reporting entity must verify the identity of its clients and the beneficial owner. E-KYC using Aadhar authentication is only permitted to banking companies. However, if the Central Government is satisfied that a reporting entity other than a banking company, complies with the standards of privacy and security under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 then it may, post consultation with Unique Identification Authority of India (“UIDAI”) and the appropriate regulator, permit such entity to perform e-KYC using Aadhar authentication.

Accordingly, in furtherance of the Notification, the Securities and Exchange Board of India (“SEBI”), vide its circular dated May 12, 2020 (circular no. SEBI/HO/MIRSD/DOP/CIR/P/20 has allowed the following eight entities to undertake e-KYC Aadhar authentication of their clients:

  1. BSE Limited
  2. National Securities Depository Limited
  3. Central Depository Services (India) Limited
  4. CDSL Ventures Limited
  5. NSDL Database Management Limited
  6. NSE Data and Analytics Limited
  7. CAMS Investor Services Private Limited
  8. Computer Age Management Services Private Limited

The Central Government had also notified Link Intime India Private Limited for carrying out the authentication of the Aadhaar number of clients using e-KYC authentication facility. However, SEBI is yet to recommend them.

The eight notified entities have to register themselves with UIDAI as KYC user agency post which they shall allow SEBI registered intermediaries / mutual fund distributors to undertake Aadhaar authentication in respect of their clients for the purpose of the KYC. The SEBI registered intermediaries / mutual fund distributors who want to avail the facility of Aadhar authentication will have to enter into an agreement with a KYC user agency as well as get themselves registered with UIDAI as sub KYC user agency. The intermediaries registered as KYC user agencies or as sub KYC user agencies are required to follow the processes set out in the SEBI circular dated November 5, 2019, including obtaining permission from UIDAI for sharing e-KYC data, maintenance of auditable logs of transactions were e-KYC data is shared and mechanisms for monitoring irregular transactions. The process and use of technology for online KYC verification has also been clarified by SEBI by way of circular dated April 24, 2020.

This is a welcome move by SEBI given the lockdown prevailing in the country, as this will allow investors to comply with the applicable KYC requirements using Aadhar authentication and they will not have to physically visit the intermediaries. Moreover, it will lead to ease of investing, customer convenience, increased efficiency and reduced timelines for onboarding of clients. Using the e-KYC Aadhar authentication, one can now complete the KYC requirement of their demat account, brokerage account, trading account, make investments in mutual funds and other securities including applying to new systematic investment plan, systematic transfer plan and, dividend transfer plan, subscribe to overseas direct investments. Resident Indian foreign portfolio investors may also utilise the e-KYC Aadhaar authentication to comply with their KYC requirements. Further, one may now undertake e-KYC using Aadhar authentication with their SEBI registered portfolio managers, asset managers and wealth managers and other SEBI registered intermediaries and mutual fund distributors.

It is to be noted that e-KYC using Aadhar authentication is only optional and investors may continue to use the other officially valid documents as notified by the Central Government to be KYC compliant. Additionally, none of the reporting entities can store a client’s core biometric information or the Aadhar number.

Please refer to the SEBI circular dated May 12, 2020 (circular no. SEBI/HO/MIRSD/DOP/CIR/P/20) for more details.

Economic challenges of pandemic: Indirect tax measures that govt may consider

This article was originally published in Times Now on 13 May 2020. Link to article available here.

As the world deals with the challenges posed by the COVID-19 pandemic, India Inc. struggles to overcome the economic slowdown triggered by unceasing lockdowns. The shutdown of businesses, slowdown in demand, and complete disruption in the supply-chain have wrought a severe liquidity crisis in the economy.


Goods and Services Tax (‘GST’) collections are major source of revenue for the Government and key indicators to the country’s economic health. GST collections in the month of March 2020 stood at a five-month low of Rs. 97,500 crore, falling short of the target of Rs. 125,000 crore. The release of data for the month of April has been deferred due to the lower mop-ups expected on account of the lockdown and extended timelines for return filing announced by the Government. However, the April collections are expected to be significantly lower, as only a few sectors, such as telecom, pharma, food, and fast-moving consumer goods (FMCG), have been operational during the lockdown.


At the same time, GST being a transactions tax has a significant impact on the prices as well as working capital requirements of businesses. Demand slowdown and the liquidity crisis have disrupted the payment cycles, challenging businesses in meeting their GST liabilities, even with the extended timelines prescribed by the Government.


The unfavourable business climate has led to increasing demand for a stimulus package, including GST rate cuts, to stabilize the economy. This compels the Government to be ready for a tightrope walk, as it evaluates the indirect tax measured that may be taken while keeping an eye on managing the increasing fiscal deficit.


GST rate cuts across the board may not be viable in the long run, as they could cause a fund crunch for the Government. At the same time, certain sectors, such as aviation, tourism, and hotels and restaurants, which have borne the brunt of the crisis while being virtually shut down for the last couple of months, need robust support for survival. Government should offer relief to these vulnerable sectors by lowering the GST rates, and possibly suspending GST payments for a couple of quarters until such time that demand picks up again.


With the crude oil prices expected to remain at an all-time low in near future, the time is opportune to revisit the exclusion of petroleum products from the GST ambit. However, considering that transportation fuels contribute to a significant proportion of the Centre and State revenues, a complete inclusion may be strongly opposed. However, the way forward could begin by including aviation fuel under the purview of GST, providing substantial working capital to the airlines and thereby enabling them to claim credits of taxes levied for such fuel procurement. States may be more amenable to include aviation fuels under GST rather than face the threat of larger revenue loss in the event some airlines shut down or curtail their operations.


Another step that may ease industry’s anxiety is to allow businesses to pay GST on a cash basis instead of accruals, as was the norm in the Service tax regime prior to April 2011. This would allow businesses to discharge their GST liability as and when they receive the consideration along with GST charged on invoices instead of from their own pocket. In addition, provisions may be created in the law to claim adjustments in GST payment for bad debts and short realization of invoices.


On the export front, while the Government has issued instructions to clear the pending GST refunds filed by the exporters, in addition it needs to institute an incentive package for exporters to motivate competitiveness and ensure availability of sufficient working capital. To this end, Merchandise Exports from India Scheme (‘MEIS’) and Services Exports from India Scheme (‘SEIS’), which provide incentive to exporters as a percentage of the value of goods and services exported, need to extend the period of their offer as may be necessary to help exporters meet the challenge of the current global slowdown in demand.


As the country prepares to come out of the lockdown, the liquidity crisis and the demand and supply vacuum must be addressed. The measures suggested may provide partial relief to businesses without substantially compromising the fiscal realities for the Government. However, with day-to-day life and the business environment showing no signs of an early return to normalcy, these are merely few of many steps that may be vital to revive the economy.

Further relaxations for compliances under Goods and Services Tax and Customs Laws

In view of the extension of the nation-wide lockdown on account of the COVID-19 pandemic, the Government of India and the State Government of Kerala have issued further relaxations pertaining to extension of due dates for filing returns for Kerala Flood Cess and extension of facility of accepting undertaking in lieu of bonds.
Key relaxations have been summarized below, for ease of reference.

A. Extension of due date for filing of return for Kerala Flood Cess

The Government of Kerala had notified that the due date of filing returns in Form GSTR 3B (i.e. 20th of the succeeding month) will also be applicable to filing returns for Kerala Flood Cess. However, on account of practical challenges in filing the said return due to the unprecedented spread of the COVID-19 pandemic, the due dates for the tax periods from February, 2020 to May, 2020 have been extended vide Notification No. 7/2020-State Tax dated April 28, 2020 as follows:

Class of registered persons Tax Period Extended Date
Taxpayers having an aggregate turnover of more than INR 5 crores in the preceding financial year February 2020, March 2020 and April 2020 June 24, 2020
Taxpayers having an aggregate turnover of more than INR 1.5 crores and up to rupees five crores in the preceding financial year February 2020 and March 2020 June 29, 2020
April 2020 June 30, 2020
Taxpayers having an aggregate turnover of up to INR 1.5 crores in the preceding financial year February 202 June 30, 2020
March 2020 July 3, 2020
April 2020 July 6, 2020
Taxpayers having an aggregate turnover of more than INR 5 crore rupees in the previous financial year May 2020 June 27, 2020
Taxpayers having an aggregate turnover of up to INR 5 crore rupees in the previous financial year May 2020 July 12, 2020

B. Extension of facility of accepting undertaking in lieu of bonds

Central Board of Indirect Taxes & Customs (‘CBIC’) has issued Circular No. 23/2020-Customs dated May 11, 2020 for reviewing Circular No. 17/2020 dated April 3, 2020 on ‘Measure to facilitate trade during the lockdown period- section 143AA of the Customs Act, 1962’. On account of the outbreak of the COVID-19 pandemic, CBIC had issued Circular No. 17/2020 dated April 3, 2020 providing relaxation to the taxpayers, by accepting an undertaking in lieu of a bond required during customs clearance, subject to conditions as underlined in the circular. The facility was extended till May 15, 2020 vide Circular No. 21/2020 dated April 21, 2020. Given the further extension of lockdown, and considering the time required to normalise the situation, this facility will continue for the period till May 30, 2020 and, consequently, the date for submission of proper bond in lieu of the undertaking is now extended till June 15, 2020. This relaxation will be revisited by CBIC at the end of the lockdown.

Key aspects of SEBI’s circular re relaxations relating to procedural matters in issues and listings

Introduction

In light of the recent developments relating to the COVID-19 pandemic (and its ongoing consequent impact on the Indian and global economy), the Securities and Exchange Board of India (“SEBI”), had recently, vide its two circulars, each dated April 21, 2020 (“April Circulars”), granted (a) temporary relaxations from compliance with certain provisions of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended (“SEBI ICDR Regulations”), and (b) one-time relaxation with respect to validity of SEBI observations, in respect of rights issues, with an intent to improve fund raising access to listed corporate entities as well as revive investor confidence in the securities market. With the aforesaid intention in mind, SEBI has issued another circular dated May 6, 2020 (Circular No. SEBI/HO/CFD/CIR/CFD/DIL/67/2020) (“Circular”), for granting relaxation relation to (a) certain procedural matters in relation to rights issues, and (b) authentication of offer documents and inspection of documents electronically for all capital markets issues.

The Circular shall be applicable for all rights issues (including fast track rights issues) opening before July 31, 2020, and for all offer documents filed until July 31, 2020.

Key aspects of the Circular

A. Relaxation in respect of rights issues

i. Availability of letter of offer and other issue materials

Regulation 77(2) of the SEBI ICDR Regulations prescribes that the abridged letter of offer (along with application form), can be despatched either through registered post, speed post, courier service or by electronic transmission to all existing shareholders of the issuer company, prior to the opening of the issue.

However, keeping in mind the various practical challenges that may arise in the COVID-19 era, particularly in relation to engaging courier or postal services, SEBI has now specifically clarified that failure to dispatch the aforesaid offering material through registered post or speed post or courier services, due to prevailing COVID-19 related conditions, will not be treated as non-compliance, for rights issues opening up to July 31, 2020. To supplement the aforesaid relaxation, the following additional steps are required to be undertaken:

  • issuers are required to publish the letter of offer, abridged letter of offer and application forms on its website as well as on the websites of the lead manager(s) to the issue, registrar to the issue and stock exchanges; and

  • issuers as well as the lead manager(s) to the issue are required to undertake adequate steps to reach out to the shareholders through other means, including through SMS, ordinary post, audio-visual advertisements on television, as well as digital advertisements.

These measures help issuers negate the difficulties they may face in respect of physical distribution of offering material. The availability of offering material on the internet would ensure that potential investors get access to the same through virtual means. Having said that, digital modes of communication may not be preferred by a select set of investors, who are either not accustomed to such platforms, or may face challenges in receiving uninterrupted internet network connectivity.

Thus, the aforesaid clarification showcases SEBI’s positive intent towards making the Indian capital markets regime a technologically driven and an environment friendly one, and we may hope for increased usage of electronic transmission systems for dispatch of the aforesaid offering materials, not only during the next couple of months, but also in the coming years in the post COVID-19 era.

Further, in light of the Circular and other representations received re provision of clarification on mode of issue of notice (referred to in Sections 62(1)(a)(i) of the Companies Act, 2013 (“Companies Act”) for rights issues by listed companies, in view of difficulties faced by such companies in sending notices through postal/courier services on account of the threat posed by the COVID-19 situation, the Ministry of Corporate Affairs, Government of India, issued a clarificatory circular dated May 11, 2020 (General Circular No. 21/2020) (the “MCA Circular”). The MCA Circular clarified that the inability to dispatch the notice (referred to hereinabove) by listed companies (which comply with the Circular) to their shareholders through registered post, speed post or courier would not be viewed as a violation of Section 62(2) of the Companies Act. The MCA Circular shall be applicable in case of rights issues opening up to July 31, 2020.

ii. Issue-related advertisements

Prior to the opening of the rights issue, the issuer is required to publish advertisement(s) in certain specific newspapers (“Statutory Newspapers”), containing the disclosures mandated under Regulation 84(1) of the SEBI ICDR Regulations (“Statutory Advertisement(s)”). However, given the difficulties in publishing physical advertisements (i.e. in newspapers, hoardings, banners, etc.) and the potential inefficacies with respect to their outreach in the COVID-19 era, SEBI has provided a few additional mechanisms for publication of Statutory Advertisements and other issue-related advertisements:

(a) issuers have the flexibility to publish the Statutory Advertisement confirming dispatch of abridged letter of offer and application form in newspapers other than the Statutory Newspapers;

(b) all such advertisements must also be made available on the websites of the issuer, lead manager(s) to the issue, registrar to the issue, and the stock exchanges; and

(c) issuers are also required to make use of advertisements through other electronic media such as television channels, radio and the internet for disseminating information relating to the application process. Further, for the first time, SEBI has permitted such advertisements to be made in the form of crawlers or tickers as well.

The Circular also requires issuers to disclose additional details in Statutory Advertisement(s), specifically in relation to the application process for shareholders who have not been served notice via electronic modes.

iii. Application by physical shareholders

In 2008, SEBI, while acknowledging the market practice of trading of rights entitlements in physical form, envisaged the establishment of a uniform and exchange driven mode of trading of rights entitlements, and released a paper for receiving public comments on the proposed electronic rights issue process and e-trading of rights entitlements. While the proposal for establishing an e-trading platform for rights entitlements did not see the light of the day, SEBI had issued a circular for streamlining certain aspects of the rights issue process on January 22, 2020 (“January Circular”), with the intention of, among other things, reducing issue timelines and permitting trading of rights entitlements in dematerialized form. Pursuant to the January Circular, rights entitlements would have to be mandatorily credited to the demat account of eligible shareholders in dematerialized form, and physical shareholders were required to provide their demat account details to issuer or the registrar to the issue for credit of rights entitlements (within a period of two working days prior to the issue closing date). However, given certain impossibilities during the COVID-19 era, investors (especially those holding securities in physical form) may face several hurdles while undertaking the process of opening a demat account or communicating their demat account details to the issuer or registrar, prior to the issue closing date. While the January Circular was introduced with an intention of establishing an efficient process of credit of rights entitlements to respective demat accounts (which in turn would facilitate the existence of a robust rights entitlements trading platform), the onset of the COVID-19 pandemic has forced SEBI to offer certain relaxations to shareholders.

Keeping in mind the aforesaid challenges, SEBI has, vide the Circular, allowed physical shareholders to submit their applications re the rights issue, irrespective of whether they are able to open demat accounts or communicate details of the demat accounts in accordance with the requirements prescribed in the January Circular. However, the submission of applications by such physical shareholders would be allowed, subject to (a) the institution of a mechanism by the issuer, lead manager(s) to the issue and other intermediaries for allowing such shareholders to apply in the rights issue, and (b) adequate steps being taken by the issuer and lead manager(s) to the issue for communicating the mechanism described in (a) hereinabove to the aforesaid shareholders prior to opening of the issue. Further, such physical shareholders availing of the aforesaid relaxation shall not be eligible to renounce their rights entitlements, and shall receive shares in dematerialized form only.

In light of the aforesaid, we believe that issuers and intermediaries may need to consider utilizing the issuer’s suspense accounts (including the one opened in accordance with Regulation 39 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (“SEBI Listing Regulations”)) where such rights entitlements and shares (to be credited to the physical shareholders who have applied for allotment of equity shares), will be kept in abeyance in electronic mode by issuers, until the aforesaid shareholders provide details of their demat account particulars to the issuer or registrar, in accordance with the procedure as prescribed under Regulation 39 of the SEBI Listing Regulations.

iv. Non-cash based application process

Pursuant to the January Circular, all eligible shareholders are mandatorily required to use the application supported by blocked amount (“ASBA”) mechanism while applying for shares in a rights issue. However, the onset of the COVID-19 pandemic may have created certain practical roadblocks with respect to the transition to an ASBA only mechanism.

Shareholders who have not transitioned to using an ASBA account may face hurdles while trying to do so in the COVID-19 era, especially in light of the existence of a nation-wide lockdown. Further, an SCSB, a critical intermediary at the forefront of the ASBA process, may find it difficult to function optimally with reduced staff strength, given the remote working landscape that is now prevalent across industries.

In light of the practical difficulties and systemic challenges faced by both investors as well as intermediaries, SEBI has permitted issuers (along with the lead manager(s), the registrar, and other intermediaries) to institute optional mechanisms (non-cash mode only) to accept the application money from the shareholders. In view of the aforesaid, issuers and other intermediaries may look to establish mechanisms whereby application monies can be paid by way of online transfers into designated accounts. However, the Circular clarifies that no third party payments shall be allowed in respect of any application.

In order to ensure that relaxations provided hereinabove are utilised by the issuer and intermediaries towards achieving investor protection, SEBI has, vide the Circular, imposed a duty on the issuer and the lead manager(s) to the issue to ensure, in respect of the mechanisms referred in points (iii) and (iv) above, that:

(a) the mechanisms shall serve as an additional option, and would not be a replacement of the existing process, and efforts are made to adhere to the existing prescribed framework;

(b) the mechanisms function in a transparent and robust manner (with adequate checks and balances), and the transparency, fairness and integrity of such mechanisms are to the satisfaction of the lead managers and registrar to the issue, without imposing additional costs on investors;

(c) FAQs, a dedicated online investor helpdesk and helpline are created to guide investors through the application process, and to resolve difficulties faced on a priority basis; and

(d) the issuer, lead manager(s), registrar and other intermediaries are responsible for all investor complaints.

B. Relaxations in respect of all offer documents

i. Relaxations in relation to digital signatures and electronic inspection of material documents

In respect of all offer documents filed until July 31, 2020, SEBI has now permitted:

(a) usage of digital signature certifications for authenticating and certifying offer documents; and

(b) the issuer and lead manager(s) to establish a procedure for electronic inspection of material documents.

While the former is an option that may be used by the issuer, the latter appears to be a mandatory requirement. In light of the aforesaid, issuers may now be required to look for cost-effective ways of providing access to these documents, which may be through secured mechanisms, such as password-protected dedicated portal on the issuer’s website (wherein entry may be permitted via communications sent by way of SMS, emails, etc.).

Moreover, on a plain reading of the Circular, it appears that this part of the Circular shall be applicable for ‘all offer documents filed until July 31, 2020’ (and not just limited to rights issues alone), which may mean that inspection of material documents shall only be done electronically in case of all issues wherein the respective offer document (i.e. red herring prospectus, prospectus, shelf prospectus and letter of offer, as the case may be) is filed until July 31, 2020.

Conclusion

In these turbulent times of the COVID-19 pandemic, SEBI is trying to leave no stone unturned to revive Indian capital markets. With the issuance of the April Circulars and the Circular, it is quite evident that SEBI is looking to improve access to real-time fund raising options, with a specific focus on making the rights issue process technology friendly. While SEBI has tried to restore issuers’ and investors’ confidence in Indian capital markets with a slew of relaxations, it has kept in mind investor protection ideals and traditions while offering the same.

However, it must be borne in mind that issuers, lead manager(s), registrars and other market intermediaries may face increased costs in the process of setting up the mechanisms discussed hereinabove. Moreover, it must not be forgotten that advertisements and other publicity materials issued pursuant to these relaxations would still have to pass the rigours of publicity restrictions prescribed under the SEBI ICDR Regulations. Regardless of the aforesaid, the efficacy of these relaxations can be completely examined only after the completion of few rights issues and interaction with market intermediaries.

Please refer to the SEBI circular dated May 6, 2020 (circular no. SEBI/HO/CFD/DIL2/CIR/P/2020/78) for more details.