CS News September 2015 - J Sundharesanjsundharesan.com/pdf/2015/CS News_September 2015.pdf · 2017-12-15 · J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015 Governance is dictatorship,

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CS NEWS C o n n e c t i n g

S t a t u t e s

2015

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2015 - “The year of Governance”. To be Moral or Amoral Initiative by J Sundharesan

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015 Governance is dictatorship, nor democracy –

Sundharesan Jayamoorthi, life coach for directors & compliance guru

Corporate Development Judicial –

! Vijay Mallya v. Enforcement Directorate, Ministry of Finance [SC]

! PCP International Limited v. Lanco Infratech Limited [DEL]

From The Government –

! Clarification with regard to circulation and filing of financial statement under

relevant provisions of the Companies Act, 20l3-reg.

! Relaxation of additional fees and extension of last date of in filing of forms MGT-7

(Annual Return) and AOC-4 (Financial Statement) under the Companies Act, 2013-

reg.

Save our Earth–

! Oceans will rise much more than predicted, NASA says!!

Monthly Compliance

! Don’t miss it ☺

! Did you miss it #

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015 Governance is dictatorship, not democracy

“The King Commission describes Corporate Governance simply as “the system by which companies are directed and controlled.” (King 1994)

The synonym for governance is power, control or authority, which means a non-living thing called corporate, has to be controlled, as it is not capable of being managed efficiently by living beings (the Board) and thus emerges the new meaning to corporate governance. As Boards were not in a position to control the Corporate on its own, the regulator had to step in as a dictator and issue instructions on how corporates has to be managed by living beings. This started in 1992 when Cadbury committee was formed in UK after a scam in 80’s, primarily to tame corporates and emerged the concept corporate governance. This emerged as a concept that was dictatorial in character to control the corporates from running amuck.

Governance is rigid and does not allow flexibility as in the case of democracy, there is no code that was voluntary that has succeeded in any part of the globe. India was no exeption, governance was voluntary on the same line of democracy, but it failed and stricter codes to ensure there are no major scams was introduced. In 1999 prior to the scam era, India was a pioneer to introduce the concept of Corporate Governance, by constituting Birla committee a code for governance. As Indians love to have celebrities in all walks of life – idol worshippers; the regulator identified a big name Birla to manage this issue of governance. Without any big effort it was replicated from the UK code and was called clause 49.

Governance became a dictatorial form of managing corporates with the implementation of codes that achieved FAT – Fairness accounting and transparency; which means a fair playing checklist is drawn by the regulator and the highest paid clerk is made to submit a report accounting for all these checklist and in the name of transparency such disclosures are made public. These bunch of checklist covers structural issues and not social issues. Governance is driven by structured codes to control the maverick CEO not turning out to be a maniac. It is a form of checks and balances to ensure that the external agency called Independent Directors are given the power and authority through legislation to control the affairs of the company.

Thus it is sad but true that Governance is being practiced NOT on account of love that would have been a success story for democracy; but is practiced out of pressure and fear that has resulted in Governance becoming a tool for the dictator.

“Among a people generally corrupt, liberty cannot long exist.” - Edmund Burke (Political philosopher)

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015

CASE LAW Vijay Mallya v. Enforcement Directorate, Ministry of Finance [SC]

DECIDED ON July 13, 2015

LEGISLATION Foreign Exchange Regulation Act,1973

BRIEF FACTS Foreign Exchange Regulation Act, 1973 – sections 40 and 56 – wilful failure to appear before the investigating authorities – SC imposes exemplary costs.

Facts: The appellant was summoned by the Chief Enforcement Officer, Enforcement Directorate, under FERA with his passport and correspondence relating to a transaction with Flavio Briatore of M/s. Benetton Formula Ltd., London, to which the appellant, as Chairman of United Breweries Ltd., was a party. Allegation against the appellant was that he entered into an agreement dated 1st December, 1995 with the earlier mentioned English Company for advertisement of ‘Kingfisher’ brand name on racing cars during Formula-I World Championships for the years 1996, 1997 and 1998 providing for fee payable. Requisite permission of the Reserve Bank of India was not taken which was in violation of provisions of the FERA. Since the appellant failed to appear in response to summons issued more than once, a complaint dated 8th March, 2000 was filed before the Additional Chief Metropolitan Magistrate, New Delhi. The trial court after considering the material on record summoned the appellant and framed charge against him. The appellant challenged the above order of the Magistrate before the High Court which dismissed the petition by holding that framing of composite charge could not be treated to have caused prejudice so as to vitiate the proceedings. It was further observed that default of the appellant in relation to summons dated 15th September, 1999 for attendance on 27th September, 1999 could not be taken into account and to that extent the charge was liable to be deleted but with regard to the defaults in relation to summons dated 7th October, 1989, 8th November, 2009 and 21st December, 1999, the proceedings were not liable to be interfered with as the appellant could contest the matter before the trial court itself in the first instance.

Decision: Appeal dismissed with exemplary costs.

Reason: It is respectfully submitted that the accused has been intentionally avoiding his appearance before the Enforcement Directorate knowing fully well that non-compliance of the directions renders the person liable for prosecution in a Court of law which is a nonbailable offence. It is further submitted that the accused was bound to appear before the Officers of the Enforcement Directorate in the best interest of investigation. As regards summons dated 8th November, 1999, the appellant has offered the following explanation: “As you will appreciate, I am the Chairman of several public Companies both in India as well as in the USA and, therefore, my schedule is finalized several months in advance. During the fiscal year end period, the problem only gets compounded. I would, therefore, request you to excuse me from the personal appearance on November 26, 1999 as I will be out of India. I am willing to

Corporate Development Judicial

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015 fix a mutually convenient date to appear before you.” From the tenor of the letter, it appears that it was not a case of mere seeking accommodation by the appellant but requiring date to be fixed by his convenience. Such stand by a person facing allegation of serious nature could hardly be appreciated. Obviously, the enormous money power makes him believe that the State should adjust its affairs to suit his commercial convenience. In our opinion, the appeal is required to be dismissed for more than one reason. The fact that the adjudicating officer chose to drop the proceedings against the appellant herein does not absolve the appellant of the criminal liability incurred by him by virtue of the operation of Section 40 read with Section 56 of the Act. The offence under Section 56 read with Section 40 of the Act is an independent offence. If the factual allegations contained in the charge are to be proved eventually at the trial of the criminal case, the appellant is still liable for the punishment notwithstanding the fact that the presence of the appellant was required by the adjudicating officer in connection with an enquiry into certain alleged violations of the various provisions of the Act, but at a subsequent stage the adjudicating officer opined that there was either insufficient or no material to proceed against the appellant for the alleged violations of the Act, is immaterial. Secondly, an appeal against the conclusion of the adjudicating officer that the proceedings against the appellant herein for the alleged violation of the various provisions of the FERA Act are required to be dropped has not even attained finality. Admittedly, such an order of the adjudicating officer confirmed by the statutory appellate authority is pending consideration in an appeal before the High Court. Though, in our opinion, the result of such an appeal is immaterial for determining the culpability of the appellant for the alleged violation of Section 40 read with Section 56, we must record that the submission made on behalf of the appellant in this regard itself is inherently untenable. For all the above mentioned reasons, we do not see any merit in the appeal. We are also of the opinion that the entire approach adopted by the appellant is a sheer abuse of the process of law. Any other view of the matter would only go to once again establishing the notorious truth stated by Anatole France that – “the law in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets and to steal bread”. The appeal is dismissed with exemplary costs quantified at rupees ten lakhs to be paid to the Supreme Court Legal Service Authority.

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015 CASE LAW PCP International Limited v. Lanco Infratech Limited [DEL]

DECIDED ON July 17, 2015

LEGISLATION Arbitration and Conciliation Act,1996

BRIEF FACTS

Arbitration and Conciliation Act,1996 – section 11 – appointment of arbitrator by court – jurisdiction – neither the contract was executed at Delhi nor the contract was to be performed (or is breached) at Delhi and nor is any payment made under the contract at Delhi – whether Delhi court has jurisdiction – Held, No.

Facts: This is a petition filed by the petitioner with respect to disputes arising between the parties under the contract dated 3.11.2010 by which petitioner was awarded the contract for erection, testing and commissioning of 2 x 660 MW Boiler Units and Auxiliaries (Part A) at the Lanco Vidharbha Thermal Power Project situated in the village of Mandwa, Wardha district, Maharashtra, India. Petitioner's office is at Chandigarh and respondent's office is at Gurgaon. Territorial jurisdiction of the Court was claimed on the basis of paras 55.6.0 and 55.7.0 of the general conditions of contract which give exclusive jurisdiction to the courts at New Delhi.

Decision: Petition dismissed.

Reason:

It is trite and a settled principle of law that parties by consent cannot confer jurisdiction on a court which does not have any vide the judgment in the case of M/s. Patel Roadways Limited, Bombay Vs. M/s. Prasad Trading Company (1991) 4 SCC 270. In a contractual matter, there are four courts which have jurisdiction. Firstly where the contract is executed, secondly where the contract is to be performed, thirdly where the payment under the contract has to be made and fourthly where the defendant/respondent resides. This is the ratio laid down by the Supreme Court in the judgment in the case of A.B.C. Laminart Pvt. Ltd. & Anr. Vs. A.P. Agencies, Salem, AIR 1989 SC 1239. Accordingly, I have put it to the learned senior counsel for the petitioner to show me if the contract in question was executed at Delhi or the contract was to be performed at Delhi or payment under the contract was made at New Delhi. Neither the contract is executed at Delhi nor the contract was to be performed (or is breached) at Delhi and nor is any payment made under the contract at Delhi. Even the respondent does not carry on business or work at Delhi but does so either at Gurgaon in Haryana or at Hyderabad in Telangana. Clearly therefore this Court would have no territorial jurisdiction to try this petition inasmuch as merely because a party chooses a contractual clause to give them jurisdiction at Delhi, this Court would not have territorial jurisdiction once cause of action wholly or in part does not arise within the territorial jurisdiction of this Court. The petitioner has sought to argue by placing reliance upon the Constitution Bench judgment of the Supreme Court in the case of Bharat Aluminium Company & Ors v. Kaiser Aluminium Technical Service, Inc & Ors, (2012) 9 SCC 552 that once the venue of arbitration is in Delhi, this Court would have territorial jurisdiction. In my opinion, the argument urged on behalf of the

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015 petitioner that merely because the venue of arbitration is in Delhi, this Court would have territorial jurisdiction is a misconceived argument because there is a difference between venue of the arbitration and seat of arbitration. It is only the seat of arbitration which will give territorial jurisdiction and not the venue of jurisdiction. I note that 'seat' means the place where court is, which has the territorial jurisdiction with respect to the subject matter/cause of action of the matter, and venue is the place, which is a place where the arbitral tribunal sits to hold the arbitration proceedings and which sitting of the arbitral tribunal need not be at the place where the 'seat' of arbitration is located. Nowhere the Supreme Court in the judgment in the case of Bharat Aluminium Company and Ors. etc. etc. (supra) lays down the law that even if there is a difference between the seat of arbitration and venue of arbitration, the venue of arbitration (which is not the 'seat') will confer territorial jurisdiction to a Court. In fact, Supreme Court speaking through Hon'ble Mr. Justice S.S. Nijjar and who was also the author of the judgment in the case of Bharat Aluminium Company (supra) has clarified the difference between the venue of arbitration and seat of arbitration in the recent judgment in the case of Enercon (India) Limited & Ors v. Enercon GMBH & Anr (2014) 5 SCC 1. The aforesaid judgment in the case of Enercon (India) Limited and Others (supra) make it clear as to what is the difference between the venue and the seat of arbitration and that merely because the arbitrator chooses to hold the arbitration at a venue which is different than the seat of the arbitration does not confer territorial jurisdiction on the court where the venue of the arbitration exists. Therefore merely because the venue of arbitration is in Delhi, this Court would not have territorial jurisdiction.

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015

Clarification with regard to circulation and filing of financial statement under relevant provisions of the Companies Act, 2013-reg. [Issued by the Ministry of Corporate Affairs vide General Circular No. II/2015, No. 1/19/2013-CL-V, dated 21.07.2015.]

Stakeholders have drawn attention to the proviso to section 101(1) of the Companies Act, 2013 (Act) which allows general meetings to be called at a shorter notice than twenty one days, and sought clarification as to whether provisions of section 136 would also allow circulation of financial statements at a shorter notice if conditions under section 101 are fulfilled.

1.2 The matter has been examined and it is clarified that a company holding a general meeting after giving a shorter notice as provided under section 101 of the Act may also circulate financial statements (to be laid/considered in the same general meeting) at such shorter notice.

2.1 Attention has also been drawn to the provisions of clause (a) of fourth proviso to section 136(1) which require every company having a subsidiary or subsidiaries to place on its website, if any, separate audited accounts in respect of each of its subsidiary. Further, fourth proviso to section 137(1) requires that a company shall attach along with its financial statements to be filed with the Registrar, the accounts of its subsidiary(ies) which have been incorporated outside India and which have not established their place of business in India. Clarification has been sought on -

(a) Whether a company covered under above provisions can place/file unaudited accounts of a foreign subsidiary if the audit of such foreign subsidiary is not a mandatory legal requirement in the country where such foreign subsidiary has been incorporated and such audit has not been conducted, and;

(b) Whether accounts of such foreign subsidiary would need to be as per format under Schedule III/Accounting Standards or the format as per country of incorporation of the foreign subsidiary would be sufficient.

2.2 The matter has been examined in the Ministry in consultation with ICAI and it is clarified that in case of a foreign subsidiary, which is not required to get its accounts audited as per legal requirements prevalent in the country of its incorporation and which does not get such accounts audited, the holding/parent Indian may place/file such unaudited accounts to comply with requirements of Section 136(1) and 137(1) as applicable. These, however, would need to be translated in English, if the original accounts are not in English. Further, the format of accounts of foreign subsidiaries should be, as far as possible, in accordance with requirements under Companies Act, 2013 ln case this is not possible, a statement indicating the reasons for deviation may be placed/filed alongwith such accounts.

This issues with the approval of the competent authority.

JSA Take: What a relief, wish better sense had prevailed from April 1, 2014.

From The Government

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015 Relaxation of additional fees and extension of last date of in filing of forms MGT-7 (Annual Return) and AOC-4 (Financial Statement) under the Companies Act, 2013-reg.

[Issued by the Ministry of Corporate Affairs vide General Circular No.10 / 2015, F.No. 01/34/2013 CL-V, dated 13.07.2015.]

This Ministry has clarified vide General Circular 8/2014 dated 04/04/2014 that provisions of the Companies Act, 2013 relating to financial statements, auditors report and board's report shall apply in respect of financial years commencing on or after 1st April, 2014. Form AOC-4 or Form AOC-4 XBRL (Format of filing of financial statement) shall, as applicable, have to be used for filing of such statement for financial years commencing on or after 1st April, 2014. Attention is also invited to this Ministry's General Circular 22/2014 dated 25/06/2014 wherein it has been clarified that MGT-7 (Form of Annual Return) shall apply to annual returns in respect of financial years ending after 1st April, 2014.

2. The electronic versions of Forms AOC-4, AOC 4 XBRL and MGT-7 are being developed and shall be made available for electronic filing latest by 30th September 2015. In addition, a separate form for filing of Consolidated Financial Statement (CFS) with the nomenclature AOC-4 CFS will be made available latest by October 2015. MGT-7 has been notified while AOC-4, AOC-4 XBRL and AOC-4 CFS will be notified shortly.

3. In view of this, it has been decided to relax the additional fee payable on Forms AOC-4, AOC-4 XBRL and Form MGT-7 upto 31/10/2015. Further, a company which is not required to file its financial statement in XBRL format and is required to file its CFS would be able to do so in the separate form for CFS without any additional fees upto 30/11/2015.

This issues with the approval of the competent authority.

JSA Take: The regulators themselves seem to be stuggling to get the contents in these forms right but the stakeholders are expected to study and file immediately.

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015

Predictions from a few years ago already are outdated. “Sea levels are rising faster than they were 50 years ago, and it's very likely to get worse,” scientist says. Year by year, millimeter by millimeter, the seas are rising. Fed by melting glaciers and ice sheets, and swollen by thermal expansion of water as the planet warms, the world's oceans now on average are about eight inches higher than a century ago. And this sea change is only getting started.

The question is: How much higher will they go?

NASA scientists are now warning that recent projections seem too conservative: Since 1992, sea levels have increased by an average of 3 inches around the world. Three years ago, the Intergovernmental Panel on Climate Change reported that by 2100 sea levels could rise 28 to 98 centimeters (11 to 38 inches), depending on the volumes of greenhouse gases emitted. Even if greenhouse gas emissions are stabilized and global warming is limited to no more than 2° C, the oceans could reach levels that would transform the world's coasts in the centuries ahead, NASA scientists say.

“With future warming, we may lock ourselves into multiple-meter sea level rise” over the coming centuries, says Eric Rignot, a glaciologist at NASA's Jet Propulsion Laboratory in Pasadena, California. “We're talking about 6 meters—18 feet—and higher of sea level rise. Sea level rise might rise half a meter per century, or several meters per century. We just don't know.” Of the world's ten largest cities, eight are located on coasts. Over the next century and beyond, rising seas will threaten Tokyo, New York, Shanghai, Mumbai, and other megacities.

One researcher described a new five-year project that will explore one of the biggest unknowns in climate science: How fast is the Greenland ice sheet melting?

Josh Willis, a JPL oceanographer who is leading the project, said the new NASA mission may help scientists better understand what happens when warm ocean water laps against the bottoms of Greenland's glaciers. The mission is called Oceans Melting Greenland, or OMG. “I picked that name while I was deleting old texts off my cell phone,” says Willis. The first phase of OMG started this summer, when a refitted fishing boat used sonar to map the undersea canyons carved by ancient glaciers along a fjord in western Greenland. Scientists believe the canyons funnel warm water to the base of glaciers. Next year, two specially equipped NASA Gulfstream jets will begin a five-year mission using radar to map more than 90 percent of Greenland's coast. The map will provide the most accurate record to date of the annual retreat of the ice sheet's glaciers. The aircraft will also drop 250 expendable probes that will measure the temperature and salinity at the edge of the ice sheet to depths of 3,000 feet.

Source: http://news.nationalgeographic.com/2015/08/150827-NASA-climate-oceans-seas-greenland/

SAVE OUR ENVIRONMENT

OCEANS WILL RISE MUCH MORE THAN PREDICTED, NASA SAYS

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015

DON’T MISS IT☺

Compliance Calendar for the month of September 2015

DIRECT AND INDIRECT TAX

15th Advance Tax Payment

30th Income Tax Return

5th Excise Duty for all other units other than SSI units

6th Excise Duty for all other units other than SSI units through Internet Banking

15th Excise Duty for SSI units - Monthly for other mode(only quarterly)

16th Excise Duty for SSI units - Monthly for electronic mode

5th Service Tax Return for the month of August 2015

6th Service Tax Return for the month of August 2015 through online

7th Payment of TDS

10th Monthly Excise return by all assesses(except SSIs &EOUs) coming under CAE in form ER-1

10th Monthly Excise return by EOU assesses coming under CEA in Form ER-2

20th VAT payment - Monthly Cases

21st VAT - Monthly Returns (Electronically)

20th CST Payment - Monthly

21st CST - Monthly Returns (Electronically)

5th Payment of Service Tax

6th Payment of Service Tax (Electronically)

30th Payment of Professional Tax for the month of August 2015

30th Professional Tax Return for the month of August 2015

FEMA

6th Monthly return in Form ECB-2 for companies availing External Commercial Borrowings under FEMA Regulations

LABOUR LAW COMPLIANCES

Comply or Explain

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015 15th Monthly Declaration and filing of form (for the employees joined during the previous month)

under ESI Act, 1948

15th Monthly Return of Employees qualifying for the first time under EPF & MP Act, 1952 in Form 5

15th Payment of contribution under EPF & MP Act, 1952

15th Nomination Forms to be submitted by new Joinees for the month under EPF & MP Act, 1952 in Form 2

25th Monthly Return on Employees leaving Organisation under EPF & MP Act, 1952 in Form 10

15th Monthly Declaration and filing of Form (for the Employees joined during the previous month) under EPF &MP Act, 1952

21st Payment of contribution under ESI Act, 1948

25th Monthly Return of Contribution under EPF & MP Act, 1952 in Form 12A

COMPANIES ACT, 2013 COMPLIANCES

30th Last date for holding the Annual General Meeting of the Company

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015 DIDYOU MISS IT#

Compliance Calendar for the month of August 2015

DIRECT AND INDIRECT TAX

5th Excise Duty for all other units other than SSI units

6th Excise Duty for all other units other than SSI units through Internet Banking

15th Excise Duty for SSI units - Monthly for other mode(only quarterly)

16th Excise Duty for SSI units - Monthly for electronic mode

5th Service Tax Return for the month of July 2015

6th Service Tax Return for the month of July 2015 through internet banking

7th Payment of TDS

10th Monthly Excise return by all assesses(except SSIs &EOUs) coming under CAE in form ER-1

10th Monthly Excise return by EOU assesses coming under CEA in Form ER-2

20th Excise return by SSI coming under CEA in Form ER- 3 - Quarterly

20th VAT payment - Monthly Cases

21st VAT - Monthly Returns (Electronically)

20th CST Payment - Monthly

21st CST - Monthly Returns (Electronically)

6th Payment of Service Tax

6th Payment of Service Tax (Electronically)

31st Payment of Professional Tax for the month of July 2015

31st Professional Tax Return for the month of July 2015

FEMA

6th Monthly return in Form ECB-2 for companies availing External Commercial Borrowings under FEMA Regulations

LABOUR LAW COMPLIANCES

15th Monthly Declaration and filing of form (for the employees joined during the previous month) under ESI Act, 1948

J SUNDHARESAN & ASSOCIATES CS NEWS – SEPTEMBER 2015 15th Monthly Return of Employees qualifying for the first time under EPF & MP Act, 1952 in Form 5

15th Payment of contribution under EPF & MP Act, 1952

15th Nomination Forms to be submitted by new Joinees for the month under EPF & MP Act, 1952 in Form 2

25th Monthly Return on Employees leaving Organisation under EPF & MP Act, 1952 in Form 10

15th Monthly Declaration and filing of Form (for the Employees joined during the previous month) under EPF &MP Act, 1952

21st Payment of contribution under ESI Act, 1948

25th Monthly Return of Contribution under EPF & MP Act, 1952 in Form 12A

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