Pre-pack scheme: Insolvency resolution time may be cut to just 3-4 months

Source: The Financial Express, Nov 25, 2020

The government is weighing a proposal to reduce by more than a half the time limit for the resolution of stressed assets under a so-called ‘pre-pack’ insolvency scheme. Any such move would not just expedite the resolution of bad debt but also cut costs. The “pre-pack” scheme will require amendments to the Insolvency and Bankruptcy Code (IBC) to take effect, and the government may introduce a Bill to this effect as early as the next session of Parliament, sources said. As reported by FE earlier, the “pre-pack” scheme will be a pre-IBC window for resolution of toxic assets, which will only complement the existing framework but not substitute it.

At present, under the IBC, the corporate insolvency resolution process has to be wrapped up within a maximum of 270 days. Of course, in many cases, especially the large ones recommended by the central bank that included Essar Steel and Bhushan Steel, the resolution process dragged on for months, far exceeding the mandatory time-frame. But that was primarily due to litigation.

While details are being worked out, the “pre-pack” scheme will typically allow a stressed company to prepare a financial reorganisation plan with the approval of its at least two-thirds of creditors (and share-holders). The resolution plan so reached can then be placed before the NCLT for approval and subsequent implementation. However, the fineprint of the scheme will be crucial to its success, analysts have said.

Under the extant IBC norms, a creditor can drag a debtor to the NCLT if the default amount is `1 crore or more. Once the creditor’s application is admitted by the NCLT, the resolution process starts and it has to be wrapped up in 180 days, which can be extended by a maximum of 90 days. “The time limit may be reduced to just 3-4 months under the ‘pre-pack’ scheme. The government is in the process of finalising the changes,” one of the sources said.

Data available with the Insolvency and Bankruptcy Board of India (IBBI) show, of the 2,108 ongoing cases as of June 2020, the resolution of as many as 1, 094 has been dragging on beyond the mandatory 270 days. Analysts have attributed this delay to the legal hurdles posed primarily by defaulting promoters’ dogged pursuit to hold on to their companies.

Earlier, the government had set up a committee under IBBI chairman MS Sahoo to submit a report on ‘pre-pack’ insolvency. The planned amendments are expected to be based on the Sahoo panel report. Since a resolution plan under a “pre-pack” arrangement is already endorsed by the lenders, it will effectively bypass various requirements and interventions by the NCLT at different stages under the usual IBC process, thus, reducing litigation costs and delays. It will also help decongest the over-burdened NCLTs, especially after the lifting of the suspension of insolvency cases against fresh Covid-related defaults. The government has already extended the suspension by three months from September 25, upon the expiry of a six-month deadline last week. The idea was to help cash-strapped firms tide over the Covid impact without the fears of getting dragged to the NCLT.

India bans AliExpress, 42 other Chinese apps over security concerns

Source: Business Standard, Nov 25, 2020

Bengaluru: In another blow to Chinese apps functioning in India, the government has banned 43 more apps in the country, including the popular online retail portal AliExpress, belonging to Jack Ma-owned e-commerce giant Alibaba Group.

The Ministry of Electronics and Information Technology (Meity) on Tuesday issued the order for blocking the access to these apps under Section 69A of the Information Technology Act.

“This action was taken based on the inputs regarding these apps for engaging in activities which are prejudicial to sovereignty and integrity of India, defence of India, security of state and public order,” it said in an official statement. The decision was taken based on the comprehensive reports received from Indian Cyber Crime Coordination Centre, Ministry of Home Affairs, Meity said.

Other popular apps on the list include Snack Video, a short video app which was gaining traction after the earlier ban on TikTok, and Alipay Cashier, which helped users collect payments from Alipay by scanning a QR Code. AliExpress and Snack Video have over a 100 million downloads each on Google Play Store. While shopping apps like Shien and Club Factory were blocked weeks ago, AliExpress had evaded the ban earlier. This time, over a dozen Chinese dating apps, including Chinese Social and We Date, have also been red-flagged by the country.

“This was due for a while now and even more could be in the pipeline. E-commerce, payments and online dating are the primarily targeted infrastructures that have access to quite a lot of critical consumer information. What needs to be seen is whether Indian alternatives can replace these existing platforms with profits rather than just replace them with a burn,” said Ankit Chaudhari, CEO & founder, Aiisma, a data marketplace.

Some industry players claimed that some of these apps were banned earlier as well but they cloaked themselves under a new identity to enter the Indian market again. “The ban is a very smart move and sends out a clear message that Chinese apps can’t use such tactics to engage in activities that are prejudicial to India’s sovereignty,” said Sumit Ghosh, CEO and co-founder of Chingari, which claims to have the highest engagement time in the short-form video space in India.

Experts say the biggest security concern is that a lot of apps on smartphones collect massive amounts of data which has nothing to do with the services they provide. “As the threat to secure user data is increasing, users must make sure their mobile phones are protected, secured and encrypted,” said Aditya Narang, co-founder & managing director, SafeHouse Technologies, a cyber security tech enterprise. Overall, the government has banned 220 apps since June amid continuing tensions along the India-Chinese border. These include PUBG, WeChat and Alipay. After being banned for over two months in India, the creators of PUBG are preparing to launch PUBG Mobile India, a mobile version of the popular game, to cater to the India market. According to reports, PUBG Corp has registered an Indian subsidiary in Bengaluru indicating a relaunch in the country soon.

New national retail policy: Licence rationalisation among five focus areas

Source: Business Standard, Nov 24, 2020

Mumbai: The government had identified five areas in its proposed national retail policy, Anil Agrawal, joint secretary in the department for promotion of industry and internal trade (DPIIT), Ministry of Commerce, said on Tuesday. Agrawal was addressing delegates at the Confederation of Indian Industry’s (CII’s) virtual retail summit, saying a discussion paper had been launched and that the final stages of revision would be undertaken shortly.

The five areas that would be addressed in the policy are ease of doing business, rationalisation of the licence process, digitisation of retail, focus on reforms and an open network for digital commerce.

“Offline retail and e-commerce have to be looked at in an integral manner. There is also a need for skilling and reskilling the retail workforce,” Agrawal said.

Setting up a shop or department store requires 24 to 57 licences, with the compliance burden having grown in the past few years.

The need to unwind the knots in retail has been necessitated owing to its importance in the country’s economy. Retail is India’s third-largest sector, showed a report by consultancy firm Kearney released at the CIl summit. Growing at the rate of 10-11 per cent in the past few years, its pace has now slowed to about 9 per cent, due in part to the Covid-19 pandemic, which has curtailed business activity.

Of the segments seeing a surge in business include channels like e-commerce, which has been growing at the rate of 28 per cent per annum. This came as digital adoption continued to increase in the pandemic and post-pandemic world, Kearney said.

Modern trade and general trade, on the other hand, have been growing at the rate of 10 per cent and 8 per cent each per annum, the consultancy said, with the need for a truly omni-channel play to be adopted by retailers for future development and growth.

Also, close to 50 million people were employed in the country’s retail sector, implying that jobs had to be protected and nurtured, even as digitisation improved efficiency, experts said.

Shashwat Goenka, chairman of the CII national committee on retail, said the industry had the potential to create an additional 3 million jobs, if a cohesive national retail policy was introduced in the country. Goenka is the head of the retail and fast-moving consumer goods verticals at the RP-Sanjiv Goenka group.

“Moving forward, as the industry revives from its slump, new and emerging models need to be deliberated in order to accelerate the recovery process. The industry is still hampered by the loss in demand. Therefore, proactive steps need to be taken in order to revive consumer confidence,” Goenka said.

The national retail policy was expected to address concerns of small and medium retail entrepreneurs who had borne the brunt of the lockdown and pandemic, analysts said.

“The government has always been proactive for the retail sector and has taken several measures to help create a robust environment which has allowed retail to thrive. However, now as we recover from the pandemic, a policy-led approach where the industry and government work together cohesively will allow the retail industry to bounce back and grow exponentially in the years to come,” Goenka added. The Kearney report says that improving access to capital, especially for traditional retailers, rapid adoption of technology and modernisation by offline players, bridging logistics and supply chain infrastructure gaps, and enhancing labour participation and productivity are some of the building blocks for the future.

Govt looks to revamp key exports incentive scheme for services sector

Source: The Economic Times, Nov 25, 2020

New Delhi: The government is looking to revamp a key exports incentive scheme for the services sector, the hardest hit by the Covid-19 pandemic. The proposed revamp could see some widening of the scheme to bring in more beneficiaries and sectors, said an official.

The Service Export from India Scheme (SEIS) covers nine broad sectors, including business services, communication, construction and tourism.

“We are looking at a new form of SEIS and what could be the upper limits, new beneficiaries and new services to be included in the scheme,” said the official.

SEIS was launched in 2015 to boost services exports. It offers incentives of 5-7% of net foreign exchange earned.

Under the scheme, benefit is extended in the form of duty credit scrip which enables the holder to import all goods which are freely importable without payment of basic customs duty.

The scrip and the goods imported against the scrip are freely transferable.
“There are talks of capping the incentive under the scheme due to limited budget and the government does not want only the big players to benefit,” said an industry representative.

RBI asks banks not to approve proposals of foreign law firms to open branch office in India

The RBI on Monday asked banks not to approve any proposal of foreign law firms to open a branch office, project office or liaison office in the country under FEMA for the purpose of practicing legal profession.

The RBI has issued a circular in this regard in view of a Supreme Court order wherein the apex court held that advocates enrolled under the Advocates Act, 1961 alone are entitled to practice law in India and foreign law firms or foreign lawyers cannot practice the profession of law.

“… banks are directed not to grant any approval to any branch office, project office, liaison office or other place of business in India under FEMA for the purpose of practicing legal profession in India,” the RBI said.

Further, “they shall bring to the notice of the Reserve Bank in case any such violation of the provisions of the Advocates Act comes to their notice”, it added.

The RBI in October 2015 had advised banks not to grant fresh permissions or renew permissions already granted to any foreign law firm for opening of liaison office in India till the policy in this regard is reviewed based on, among others, final disposal of the matter by the Supreme Court.

The Supreme Court, it said, while disposing of the case, held that advocates enrolled under the Advocates Act, 1961 alone are entitled to practice law in India and that foreign law firms/companies or foreign lawyers cannot practice the profession of law in India.
As such, foreign law firms/companies or foreign lawyers or any other person resident outside India, “are not permitted” to establish any branch office, project office, liaison office or other place of business in India for the purpose of practicing legal profession, the circular said.

Govt levies 5% duty on TV parts import

Source: LiveMint.com, Nov 12, 2020

New Delhi: Taking the policy of using import tariff to encourage domestic manufacturing a step further, the government on Wednesday imposed a 5% basic customs duty on key components used in production of television displays.

The Central Board of Indirect Taxes and Customs (CBIC) notified that a 5% basic customs duty will apply on imported components that are used in liquid crystal displays (LCDs) and light emitting diode (LED) television panels from Friday. The duty will apply on chips, printed circuit board assemblies and glass boards.

The move comes immediately after the union cabinet extended production incentives for 10 sectors including technology products aimed at encouraging local manufacturing. The Narendra Modi administration is using both tariffs and incentives to encourage investments into local manufacturing but officials have in the past reiterated that these temporary measures are taken while remaining committed to an open global economy.

The government recently categorised television sets as a restricted item for the purposes of imports and have now increased the customs duty on specified components used in manufacture of open cell used in LED or LCD panels from zero to 5%, clearly conveying their intention that the value addition in respect of LED and LCD manufacturing should be centered in India, in line with the phased manufacturing programme, said Abhishek Jain, Tax Partner, EY. A 20% customs duty has been in place on television imports since December 2017 and television import has been put on the restricted category with effect from end of July this year. BCD represents the tariff protection offered to competing local products. 

All discoms to come under Energy Conservation Act: Power ministry

Source: The Economic Times, Nov 09, 2020

NEW DELHI: The power ministry on Monday said it has mandated all electricity distribution utilities or discoms to comply with the Energy Conservation (EC) Act, 2001, which would reduce energy losses and bring in more transparency in the sector. Earlier, only discoms with annual energy losses equal to or above 1,000 MU (million units), notified as designated consumers, used to come under the purview of the EC Act.

The ministry had issued a notification on September 28, 2020 to cover all electricity distribution companies (discoms) under the preview of the EC Act, it said in a statement.

As per the notification, which was formulated in consultation with the Bureau of Energy Efficiency (BEE), “All entities having issued distribution license by State/Joint Electricity Regulatory Commission under the Electricity Act, 2003…” are notified as designated consumers (DCs).

After this notification, all discoms will be governed under various provisions of the EC Act, such as appointment of energy manager, energy accounting and auditing, identification of energy losses category-wise, and implementation of energy conservation and efficiency measures.

With this, the number of discoms covered under the EC Act will increase from 44 to 102.

This decision will facilitate energy accounting and auditing as mandatory activity for all the discoms, leading to the actions towards reducing losses and increase their profitability, the ministry said.
The amendment is expected to help discoms to monitor their performance parameters and bring in transparency in the distribution sector through professional inputs, it added.

It will also assist in developing projects for reducing the electricity losses by discoms and implementing effective solutions.

The amendment is expected to improve the financial state of discoms. The quarterly data of these discoms will be collected and monitored by the government to suggest measures for increasing the efficiency and reduce the energy losses.

This move is expected to gradually become more effective if extended upto the level of end-consumers.

The Bureau of Energy Efficiency (BEE) is a statutory body under the Ministry of Power. It assists in developing policies and strategies with the primary objective of reducing the energy intensity of the Indian economy.

NPCI gives approval for WhatsApp to go live on UPI in graded manner

Source: Business Standard, Nov 06, 2020

Mumbai: The National Payment Corporation of India (NPCI), which manages Unified Payment Interface (UPI), has decided to allow Facebook backed messaging service WhatsApp to go live on UPI in the multi-bank model. WhatsApp can expand its UPI user base in a graded manner starting with a maximum registered user base of 20 million in UPI, NPCI said in a statement today.

Though the condition of 20 million will be a dampener, it is some relief for WhatsApp, which began its pilot run two years ago, while it awaited regulatory clearances to launch its UPI-based payments for its 400 million users in India.

In August, NPCI had informed the Reserve Bank of India (RBI) that WhatsApp had met data localisation requirements.

In a related development, NPCI has capped the share of total number of transaction that a third party application can process at 30 per cent of total volume of transactions processed in UPI, effective January 1,2021.

“…with UPI reaching 2 billion transactions a month and with potential for future growth, it has issued a cap of 30 per cent of total volume of transactions processed in UPI, applicable on all Third Party App Providers (TPAPs)”, NPCI said.

NPCI has said, the cap of 30 per cent will be calculated basis the total volume of transactions processed in UPI during the preceding three months (on a rolling basis). And, the existing TPAPs who have exceeded the cap, will have a period of two years from January 2021, to comply with the same in a phased manner.

Currently, third party applications such as PhonePe, Google Pay, Paytm, and Amazon Pay, dominate the UPI ecosystem, controlling majority of the transactions.According to industry estimates, the biggest player is Google Pay with over a 40 per cent market share, closely followed by PhonePe.

“It is a surprising move. Having a standard cap of 30 per cent is probably not the best way to do this because it stifles competition and makes people stick to edges. In general having an anti-monopolistic policy with specific limit would make sense. So, controlling monopoly is good but I am not sure if it’s the best way to do it. The positive thing is there is two years’ time for existing players so maybe we will have better implementation of this as we come to the two year time line”, said Harshil Mathur, CEO& Co-founder, Razorpay.

Experts agree on the fact that a hard cut off at 30 per cent is not the best way to curb dominance. UPI being an interoperable platform there should be a stance on monopoly but having hard limit is not the best thing.

UPI recorded over two billion transactions in October, a milestone that highlights the faster adoption of digital payments in a post-Covid-19 world. Launched in 2016, it had crossed 1 billion transactions for the first time in October 2019. While it took UPI three years to reach a billion transactions in a month, the next billion came in just a year. As businesses open up, there is huge uptake in UPI payments as an increasing number of customers opt for digital payments, owing to convenience and safety. With the festive season in full bloom, October has seen a huge surge in UPI payments.

Govt eases norms for ITES sector, new norms to facilitate ‘work from home’

Source: Business Standard, Nov 05, 2020

New Delhi: The government on Thursday announced simplified guidelines for Business Process Outsourcing (BPO) and IT Enabled Services (ITES) players to reduce the compliance burden for the industry and facilitate ‘Work from Home’ and ‘Work from Anywhere’.

The new rules for ‘Other Service Providers’ (OSPs) would create a friendly-regime for ‘Work from Home’ and ‘Work from Anywhere’ while removing several reporting and other obligations for such companies.

OSPs are entities providing applications services, IT enabled services or any kind of outsourcing services using telecom resources. The term refers to BPOs, KPOs (Knowledge Process Outsourcing), ITES, call centres, amongst others.

The new rules are aimed at providing a strong impetus to the industry and positioning India as one of the most competitive IT jurisdictions in the world, an official release said.

The new regulations would boost flexibility for these companies to adopt ‘Work from Home’ and ‘Work from Anywhere’ policies, a development especially relevant at a time when COVID-19 has forced IT/BPO firms to enable employees to work from home.

The new rules also do away with registration requirement for OSPs, while the BPO industry engaged in data related work has been taken out of the ambit of the said regulations.

“India’s IT sector is our pride. The prowess of this sector is recognised globally. We are committed to doing everything possible to ensure a conducive environment for growth and innovation in India. Today’s decisions will especially encourage young talent in the sector!,” Prime Minister Narendra Modi tweeted.

An official release said that under the revamped guidelines, the requirements such as deposit of bank guarantees, requirement for static IPs, frequent reporting obligations, publication of network diagram, and penal provisions have also been removed.

“Similarly, several other requirements, which prevented companies from adopting ‘Work from Home’ and ‘Work from Anywhere’ policies have also been removed,” the release said, adding that additional dispensations to enhance flexibility for the industry have been allowed.

“With an aim to qualitatively improve the Ease of Doing Business of the IT industry particularly Business Process Outsourcing and IT Enabled Services, the government has drastically simplified the Other Service Provider guidelines of the Department of Telecom.

The new guidelines tremendously reduce the compliance burden of the BPO industry,” the release added.

It further said that the new guidelines are aimed at removing “unnecessary bureaucratic restrictions” in order to allow the industry to focus on innovative new products and solutions.

“With this reform, the Government of India sends out a strong signal of its support to the IT industry with a view to encouraging increased investment in the sector.

“The reform will certainly unleash the potential of our talented youth by making India as a preferred destination for Information and Knowledge Outsourcing Industry and would further the vision of ‘AtmaNirbhar Bharat’,” the release added.

Communications and IT Minister Ravi Shankar Prasad tweeted, “Today @narendramodi Govt has taken a major reform initiative to liberalize the regulatory regime for Other Service Provider. This will boost the IT/ ITeS/ BPO industry and create a friendly regime for Work from Home in India.”

Nasscom termed the move as a bold reform for ITES/BPO players.

“These will provide several benefits…India is a global outsourcing hub and the new guidelines will promote outsourcing at scale, bringing in more work to India. With the relaxations in WFH regulations, companies will be able to tap into talent from small towns and remote parts of the country,” Nasscom Senior Director and Public Policy Head Ashish Aggarwal said.

Overall, the new guidelines offer further clarity and will bring in ease of doing business, he added.

Nasscom President Debjani Ghosh tweeted that the “game changing reform” signals start of a new chapter for Indian IT and for India as a leading IT hub for the world. WNS Group CEO Keshav Murugesh tweeted that this “brilliant step” will catapult Indian IT and BPM to the next level of growth, global impact, job creation and development of small towns and cities in tier III and IV locations.

Government issues ordinance to amend arbitration law

Source: The Economic Times, Nov 04, 2020

New Delhi: The government on Wednesday issued an ordinance to amend the arbitration law to ensure that all stakeholder parties get an opportunity to seek an unconditional stay on enforcement of arbitral awards where the arbitration agreement or contract is “induced by fraud or corruption”.

The ordinance which further amends the Arbitration and Conciliation Act, 1996 also does away with the 8th Schedule of the Act which contained the necessary qualifications for accreditation of arbitrators.

This provision had faced criticism from some quarters that the conditions prescribed in the law came in way of India getting the benefit of having foreign arbitrators.

“But that was not the case and a wrong impression had got created. Still, to do away with that impression, the concerned schedule has been dropped,” a government functionary explained.

Now, the qualifications based on which arbitrators will be accredited will be prescribed by regulations, which will be framed by a proposed arbitration council.

Till recently, an arbitration award was enforceable even if an appeal was filed against it in the court under Section 36 of the law. But the court could grant a stay on the award on conditions as it deemed fit.
As per the latest amendment brought through the ordinance, if the award is being given on the basis of an agreement based on fraud or corruption, then the court will not impose a condition to stay the award and grant an unconditional stay during the pendency of the appeal if it has been challenged under Section 34 of the arbitration law.

The Law Ministry ordinance said the amendment was necessary “to address the concerns raised by stakeholders after the enactment of the Arbitration and Conciliation (Amendment) Act, 2019 and to ensure that all the stakeholder parties get an opportunity to seek an unconditional stay of enforcement of arbitral awards where the underlying arbitration agreement or contract or making of the arbitral award are induced by fraud or corruption.”

In Section 36 of the Arbitration and Conciliation Act, 1996, sub-section (3), after the proviso, a clause has been inserted which states that “Provided further that where the court is satisfied that a prima facie case is made out, (a) that the arbitration agreement or contract which is the basis of the award; or (b) the making of the award, was induced or effected by fraud or corruption, it shall stay the award unconditionally pending disposal of the challenge under section 34 to the award.”

The provision will come into effect retrospectively from October 23, 2015, the ordinance states.