Monday, 10 April 2017

Reported comments

The agreement states that the development authority..... reported in Hindustan Times on March 22, 2017

a promoter cannot terminate an agreement on..... reported in Hindustan Times on March 22, 2017

If the promoter fails to deliver or do something,.....  reported in Hindustan Times on March 22, 2017

In a situation where the promoter of the developer company is sent to jail, .... reported on April 4, 2017 on

And it is back…..

For a person who loves adventure and challenges such as rash driving and walking into dark alleys, it is the best time to be in the corporate law, and especially in the Companies Act, practice, since our Companies Act, 2013 presents new challenges and things to ponder on, on almost a weekly basis.
Recently, I stumbled upon a clarification from MCA which states that Section 392(2) applies only to foreign companies which have issued prospectus and IDRs pursuant to the provisions of Chapter XXII, viz. the chapter under which Section 392 falls and which governs foreign companies having a place of business in India.
A little background. Companies and other body corporates which are foreign i.e. incorporated outside India, which need to have a place of business in India (uch as branch offices, liaison offices, project offices, but not a subsidiary) have to comply with and register under Chapter XXII. I covered the issues related to Chapter XXII in my earlier post.  
Once you are done with India, you may wish to close that place of business formally. For this closure, Section 392(2) provides that provisions of winding up of companies (Chapter XX) which are otherwise applicable to Indian companies will mutatis mutandis apply for closure of the place of business of a foreign company India, as if it were a company incorporated in India. The verbiage cannot be simpler.
There are other Sections (ex. 384) in the same Chapter where the Act makes sections applicable to Indian companies apply (with or without modification) to the foreign companies having a place of business in India. Further, it appears that in order to curb foreign companies who raise funds from Indian public (crowd funding, get-rich-quick schemes etc), an attempt (though not completely accurate) has been made to provide for elaborate provisions so that such companies come within the ambit of the Act and the capital markets regulators, whether or not they have an actual physical place of business and have to formally issue a prospectus and comply with provisions relevant to the type of funding or investment schemes that they run.
Although Section 392(2) presents a huge inconvenience as one will have to take recourse of tribunal etc. for winding up a simple branch office, it is a section of a statute and one has to live with it and is capable of being amended only by the Parliament. To further clarify the fun, Section 391 is repeated below:
Application of Sections 34 to 36 and Chapter XX
391.(1) The provisions of sections 34 to 36 (both inclusive) shall apply to—
(i) the issue of a prospectus by a company incorporated outside India under section 389 as they apply to prospectus issued by an Indian company;
(ii) the issue of Indian Depository Receipts by a foreign company.
(2) The provisions of Chapter XX shall apply mutatis mutandis for closure of the place of business of a foreign company in India as if it were a company incorporated in India.
Turns out, the inconvenience of approaching the tribunal took over the need to go to the Parliament and in a jiffy, MCA clarified that Subsection (2) applies only to those companies who have issued prospectus and/or IDR’s. Essentially, the clarification attempts to state that subsection (2) applies to only those companies which are covered under subsection (1), an intention which by no stretch of imagination or statutory interpretation rules can be possible, unless the section itself is amended for which one has to knock the doors of the Parliament.
Also, it basically means that one has to go to the tribunal for winding up only for those companies which are into vicarious fund raising, fly by night operations, crowd funding etc., which have actually registered under Chapter XXII as a place of business and which, because of applicability of all the provisions related to issue of prospectus etc., have actually complied with them, and now they wish to wind up.
Too ambitious I say.
Another issue is that if at all such an interpretation is possible, how does one close a place of business of a foreign company who has not issued a prospectus or issued IDR’s in India? Does this clarification mean that one doesn’t have to get such place of business closed or de-registered under the Companies Act, 2013 and only has to get things done at RBI and income tax? What happens to the requirement of RBI to have a report from Registrar of Companies submitted that compliances related to winding up are complete?

Criminal Prosecution: The New Modus of Money Recovery

Sumit Roy

“It takes a lifetime to build a good reputation, but you can lose it in a minute” said Will Rogers.
Filing of criminal cases for alleged non-payment of money under a commercial contract (ex. vendor agreements, supplier agreements or service contracts) seems to have become a trend today. The trend is also attributable to the fact that decision in a civil case, be it a case before the Court or a claim before the arbitral tribunal requires substantial time and cost for adjudication. Moreover, getting a decree or award does not end the story and the claimant, even if it eventually wins the claim, may as well get entangled in the whirlpool of appeals and review before the higher courts, thus making realization of money inconvenient.
Under such circumstances, lodging what is known as First Information Report or FIR with police for alleged cheating, criminal intention, fraud etc. seems more luring. The stigma of having a criminal case against you and the fear of getting arrested surpasses monetary inconvenience, thus making criminal cases one of the most preferred mode for recovery of monies.
In a cash crunched startup community, cases of companies defaulting on payments to third party vendors, employees and sometimes lessors have substantially increased. As a consequence thereto, the new modus of recovering money seems to be filing of criminal cases. Two cases which have recently come into light where the promoters of two prominent start-up companies were arrested on charges of fraud and non-payment of monies owed to the respective complainants were Ringing Bells (the 251 rupees mobile company) and Stayzilla. 
In both cases, it appears from the media articles that the criminal complaints were filed for money due for services and in other case, for non-supply of products. While it is true that both of the scenarios mentioned above fall within the ambit of a civil case, nonetheless, if allegations of cheating are averred, it will pull it within the purview of criminal justice system.  Mere allegations of cheating or fraud are not sufficient, the averments along with documents backing such allegations should be able to establish that the intent to cheat was present from the inception of the commercial transaction. If the necessary constituent of the offence is not shown in the FIR, it shall not stand before the court for very long.
If in the eventuality a FIR is lodged against the company and its promoters or employees, it is necessary that the FIR is approached with caution. The company may feel that the entire case is based upon false and frivolous facts or certain facts may have been averred to make out a criminal case, even though the same may not have transpired, however, a decision taken in haste will most likely than not be detrimental to the defense which the company is likely to put forward. Thus, it is necessary to strategize the legal options available and avail remedies which are best suited having regard to the facts and circumstances.
In many cases it has been seen that in zest to finish the criminal proceedings initiated by the FIR, propositions of settling the dispute amicably is explored. While amicable resolution of the dispute may be win-win for all, however, once the criminal justice is set in motion, the proposition of settlement should be handled with utmost caution. It should be ascertained as to when the talks for settlement should be invoked or responded to. Anticipating that paying the money in the beginning of the matter shall be a very good defense and thereafter, making payment of the money without any proper settlement arrangement may twist the case completely in the opposite direction, taking out of the picture certain defenses which otherwise may have been available.
Additionally, at all times one should cooperate with the investigative agency. It is necessary and one should not lose sight of the fact that the Court inevitably looks into the bona fides of the one seeking reliefs. Trying to evade the Police only leads to negative inference by the Court.
As mentioned, the legal options should be well assessed. The FIR may or may not have non-bailable offences. The offences under the Indian Penal Code, 1860 may be categorized as being bailable or non-bailable. A bailable offence is one where bail is granted as a matter of right, while in non-bailable offence grating of bail is at the discretion of the court. If the FIR only has bailable offences, then the first step is to surrender before the Court and to get bail. However, if the FIR discloses non-bailable offences, it incumbent that first an anticipatory bail is procured. An anticipatory bail is granted prior to surrendering before the court and ensures that the accused is released on bail when arrested subject such terms which the court deems fit and proper. There are instances when an accused may not be informed with the contents of the FIR and the Police instead of arresting the accused issues a notice to appear. Under such circumstances, before hurriedly appearing before the Police as directed, the anticipatory bail should be procured.    
Once bail or anticipatory bail as the case may be has been secured, one may approach the High Court seeking quashing of the FIR. It is however very important that the pros and cons of approaching the High Court is properly analyzed. If the FIR discloses no prima facie case, the High Court shall end the entire criminal proceedings and quash the FIR.
While initiating criminal prosecution may have become the new modus of money recovery, however, merely filing of an FIR does not establish the allegations leveled therein. Therefore, instead of considering the purported societal stigma associated with the criminal prosecution and giving into the demands, the legal options should be well explored and the criminal proceedings should be approached with substantive strategy. 

Sunday, 9 April 2017

Firm News

April last year, Alpha combined its practice with Seth Dua & Associates. As of this April, we have reverted to our original firm and brand ‘Alpha Partners’. The departure has been for certain strategic reasons, both as an organisation and the manner in which our practice is to be conducted. 

Alpha Partners was awarded the best start up law firm of the year in 2015, in the third year of its inception by IDEX Legal and was ranked as a recommended law firm by Legal 500 in 2016 for its corporate and dispute resolution practices. Alpha, with its vibrant and young, yet experienced team, promises to conduct legal practice as a ‘service’ to clients. Alpha follows the principals of project management in legal practice, having distinct practice verticals with focus on a specific area of practice and/or sector. This enables Alpha to provide focused and specialized services at reasonable, predictable and in most cases, fixed costs.


·         Corporate transactional practice
·         Dispute Resolution practice
·         Compliance and Regulatory


·         Real estate and infrastructure
·         Entertainment
·         Health care and pharmaceuticals
·         E-commerce, new age companies and technology
·         Franchise and trading

Please feel free to write to us for further details. Following are our contact details:

Office: C-48, Sector 20, NOIDA

Phone: 91-120-4562203 , 91-120-4374911