Sunday, 9 July 2017

Alpha celebrates its 5th anniversary. Ex-Alpha-ites joined to celebrate too...


It is not unheard of that a case when instituted in India seeking recovery of money may take several years before the party suing for recovery is actually able to receive the money claimed. Such scenario inevitably deters several companies from approaching the court, thus leading to settlements at far lesser amounts for which the company would have otherwise pursued.

Owing to growing concern for cost effective and faster resolution of commercial disputes, the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (“Act”) was introduced.

Post promulgation of the Act, the trade and commerce sector of the country has become very hopeful. This is because the Act has now put into place much needed processes to ensure that cases are decided in a time bound manner. The procedure for conducting a suit filed before a civil court is governed by the Code of Civil Procedure, 1908 (‘CPC’). To ensure that in commercial disputes where time is of essence, be it either for recovery of money basis a contract or for that matter intellectual property right cases for infringement of trademarks/copyright/patents, the CPC has been suitably amended to incorporate provisions which are likely to make delay and latches a thing of the past. 

One of the crucial amendments which have been brought into the CPC by the Act is the insertion of Order 13A for summary judgment. Order 13A of the amended CPC provides that disputes which are of commercial nature and as such recognized as commercial dispute under the Act, shall be disposed off by the commercial court established under the Act without a full-fledged trial. The provision entitles the plaintiff or the defendant in a suit, to show as to why the claim of the defense as the case may be, is not likely to succeed. Upon filing an application under this Order, the plaintiff shall have to establish that there are no triable issues and that the Defendant has no real prospect in successfully defending the claim. To such an application, the defendant then shall be afforded an opportunity to show to the court that there are triable issues which are required to be inquired into and for which evidence is necessary. Upon hearing the arguments of both the parties, if the court is of the opinion that the defendant is not likely to succeed in defending the claim of the plaintiff, the court shall pass a judgment in favour of the Plaintiff.

While Order 13 A introduces a new perspective for deciding commercial disputes, however, provisions such as Order 13 A existed much prior, in the CPC in the form of Order 37. A suit filed under Order 37 of CPC provides that if a suit for recovery is filed on the basis of admitted debt, the same shall be tried summarily. Similarly, in a suit under Order 37 of CPC, the defendant is given an opportunity to plead existence of triable issues and plead the leave to defend the suit. The only difference between Order 13A and Order 37 is such that an Order 37 suit is applicable only to debts which are admitted, while on the other hand Order 13A can be invoked and is available to all kinds of suit, subject to the fact that the dispute should be a commercial dispute recognized by the Act.
Provisions like Order 13 A is likely to be a game changer in suits filed for infringement of intellectual property rights. This is because, in a suit for enforcement of intellectual property rights, the plaintiff who usually claims to be the proprietor or owner of the intellectual property rights is more concerned with enforcement of its rights and restrain upon availability of spurious/counterfeit or infringing product/services. The newly inserted provision is likely to save the intellectual property rights owner from going through the entire ordeal of the trial and secure protection of its rights without delay.

Recently, the Delhi High Court in the case of ‘Ahuja Radios vs. A Karim bearing CS(COMM) 35/2017” passed a summary judgment upon an application filed in a suit alleging infringement of trademark. It is however interesting to note that in the said case, the plaintiff did not press for damages. A necessary understanding for releasing the claim for damages would be that in the event the plaintiff would have pleaded for damages, then it would have had to lead evidence to show the extent of loss which it suffered, thus negating the entire reasoning behind filing of such an application. While the judgment is worth appreciating and has been analyzed by many, the said cardinal aspect of release of damages was left out. Therefore, in a suit for infringement of intellectual property rights, claim for damages may have to be released when an application under Order 13A of CPC is filed, unless of-course the plaintiff has documentary evidence to prima facie establish the quantum of damages.

To conclude, the amendments brought about by the Act is a welcome move and abreast with the changing commercial scenario, which is likely to have far reaching benefits for trade and commerce of the country.


                               (As per MCA Notification dated 13-06-2017)

Chapter I Section 2 (40)
Earlier, only one person companies, small companies and dormant companies were exempted from including cash flow statement in their financial statements.
In addition to other classes of companies exempted under the Act, the notification exempts the private companies (if such private company is a start-up) from including the cash flow statements in its financial statements.

For the purposes of this document, start-up companies shall refer to the companies incorporated under the Companies Act, 2013 (“Act”) and recognized as a start up as per the notification issued by DIPP.

Chapter V
Section 73 (2) (a) to (e)
Vide notification dated June 05, 2015, private companies  accepting monies from its members not exceeding  100% of aggregate of paid up share capital and free reserves and filing the details of monies so received with the Registrar of Companies (“ROC”), were exempted from complying with the conditions listed in Section 73 (2) (a) to (e), listed below:

(a)      Issue of circular in the prescribed format;
(b)      Filing of circular in (a) above with the ROC;
(c)      Deposit of not less than 15% of the amount of deposits in a scheduled bank account;
(d)      Provision of deposit insurance;
(e)      Certification that the company has not committed any default in repayment of deposits;
(f)       Provision of security for due repayment of deposits and interest thereon.

The current notification substitutes the exemption provision in the notification dated June 05, 2015 with the current exemption provision which exempts the following classes of private companies from complying with the conditions listed in  Section 73 (2) (a) to (e) of the Act, provided that such companies file the details of monies so accepted with the ROC-

(A)   which accept monies from its members, not exceeding 100% percent of aggregate of the paid up share capital, free reserves and securities premium account; or

(B)   which is a start-up, for 5 years from the date of its incorporation; or

(C)   which fulfils all of the following conditions, namely:-

(a)    which is not an associate or a subsidiary company of any other company;

(b)    if the borrowings of such a company from banks or financial institutions or body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and

(c)    the company has not defaulted in the repayment of such borrowings subsisting at the time of accepting deposits under this section.

Chapter VII section 92 (1) (g)
Every company is required to prepare an annual return in the prescribed format containing inter alia the details of remuneration of directors and key managerial personnel (“KMP”).
By means of this notification, private companies which are small companies are required to disclose only the aggregate amount of remuneration drawn by directors instead of the details of remuneration of directors and KMP, in its annual return.

Chapter VII section 92 (1)
The annual return of a one person company and a small company are required to be signed by the company secretary or where there is no company secretary, by the director of such companies.
Proviso (1) to section 92(1) of the Act has been substituted to the following effect:

In addition to one person company and small company, a private company which is a start-up would also be required to get its annual return signed by the company secretary or where there is no company secretary, by the director of such company.

Chapter X
Section 143 (3) (i)
Section 143(3)(i) requires the auditor to comment upon the presence, adequacy and effectiveness of the internal financial controls system in the company, in his report.
The provision contained in section 143(3)(i) will not apply to the following classes of private companies:

A.     one person or a small company; or

B.     which has turnover of less than rupees 50 crores as per latest audited financial statement or which has aggregate borrowings, from banks or financial institutions or any body corporate, at any point of time during the financial year less than rupees 25 crores.

Chapter XII
Section 173 (5)
One person companies, small companies and dormant companies are deemed to have complied with the provisions of section 173 of the Act, if it has held at least one meeting of the board of directors in each half of the calendar year and the gap between the two meetings is not less than 90 days.
Section 173(5) of the Act has been substituted to include a private company (if such private company is a start-up) within its scope. Accordingly, a start up private company will be deemed to have complied with the provisions of section 173 of the Act, if it has held at least one meeting of the board of directors in each half of the calendar year and the gap between the two meetings is not less than 90 days.

Chapter XII
Section 174 (3)

Earlier, as per section 174(3) of the Act, only the uninterested directors present at the meeting, were counted towards the quorum of the meeting.
Section 174(3) of the Act will apply to the private companies with the exception that the interested director would also be counted towards quorum in such meeting after disclosure of his interest pursuant to section 184 of the Act.

The exceptions, modifications and adaptations provided in the above table will be applicable to private companies which have not committed a default in filing its financial statements or the annual return with the ROC.


A composite suit essentially refers to a suit wherein different causes of action are joined in order to form a single suit. Order II Rule 3 of the Code of Civil Procedure, 1908 deals with joinder of causes of action i.e. a suit wherein the plaintiff can unite one or more causes of action against the same defendant. The second part of the rule deals with the case where several plaintiffs can join their causes of actions against the same defendant or defendants.

Typically, a composite suit could be referred to as a class action lawsuit in which one or more group of persons or plaintiffs file a case on behalf of a large number of injured parties, commonly referred to as the ‘class’. Class action suits are also known as multi-district litigation or mass tort litigation. Though class action suit is not understood or interpreted in the strictest sense in India, the Indian judiciary has relaxed the criterion or requirements for locus standi in certain types of suits especially those which are filed under Article 32 or 226 of Indian Constitution. A classic example of such a case was and more popularly known as the Bhopal Gas Tragedy case where the Government of India acting as parens patraie, aggregated all the claims of the victims and initiated a legal proceedings against Union Carbide Corporation (respondent).  With the advent of the Companies Act, 2013, class action suits have now been formally recognized in India. In terms of Section 245 of the Companies Act, 2013 the members, depositors of a company can file class action suits against the company, its directors, auditor, expert advisor, consultant etc.

The advantage of such type of suits is that primarily, the multiplicity of litigations is obviated. This, in turn, saves the time of the courts and facilitates accelerated dispensation of justice. Class Action Suits become desirable where the defendant party enjoys a higher status and it becomes impossible for the victim to file a suit against the other party in spite of suffering grave injuries.

However, like all good things, a composite suit also suffers from a number of disadvantages. Firstly for a composite suit to be maintainable, the cause of action has to be under the jurisdiction of the same court where the suit is supposed to be filed. For instance, if A has to file a composite suit against B with respect to matters ‘x’, ‘y’ and ‘z’, then all these three causes of action should come under the court’s jurisdiction to try such matter before which the suit is preferred. This has been highlighted in the case of Dabur India Ltd. v. K.R. Industries[1], where the Delhi High Court didn’t have the jurisdiction to try ‘passing off’  and hence, inclusion of that, lead to the appeal being dismissed.

[1] AIR 2008 SC 3123

Abolition of Foreign Investment Promotion Board

Foreign Investment Promotion Board (“FIPB”) was set up in early 1990s to consider the foreign direct investment (“FDI”) proposals requiring government approval. FIPB, housed in the Department of Economic Affairs (“DEA”), Ministry of Finance, offered a single window clearance system for disposing off the FDI applications falling under the approval route in India.

Abolition of FIPB was proposed in the budget of 2017-18 in light of the following circumstances and the proposal was finally approved by the government on May 24, 2017:

     i.        More than 90% of the foreign direct investments were under the automatic route; and
   ii.        Reduction in number of sectors requiring government approval. A total of 11 sectors under the approval route have been notified in this regard.

Subsequent to the abolition of FIPB:

1. The administrative ministries/departments will be entrusted with the responsibility of dealing with:

(a)       the foreign direct investment proposals requiring government approval;
(b)   monitoring of compliance of conditions subject to which such approvals would have been granted;
(c)        RTI applications and appeals pending with the FIPB Secretariat; and
(d)     all the past, present and future litigations and liabilities, in various courts and adjudicatory forums. An affidavit to this effect will be filed in all such pending and ongoing cases.

2.      Department of Industrial Policy and Promotion (“DIPP”) will majorly be responsible for the following:

(a)      FDI by non-resident investors (“NRIs”) and export oriented units (“EOUs”);
(b) applications relating to issue of equity shares for import of capital goods/machinery/equipment;
(c)      applications for issue of equity shares against pre-incorporation expenses;
(d)   identification of administrative ministry/department in case there is a doubt about the administrative ministry/department concerned;
(e)   oversight of FIPB portal; and
(f)  development of a standard operating procedure with detailed guidelines ensuring uniformity of approach across sectors in consultation with the administrative ministries/department.

3.      Applications involving investments from countries of concern would require approval from the Ministry of Home Affairs;

4.      Foreign investments into core investment companies or investment companies engaged in investment in capital of Indian companies will be processed by DEA, irrespective of the sector in which the investment is made;

5.      Any decision of a competent authority to reject or subject an application to conditions not provided in the FDI policy, would require the consent of DIPP;

6.      During the transition period, the Secretary, DEA and the Secretary DIPP will meet quarterly to discuss the pendency of proposals with the government.

7.      Procedurally:

(a)      The control of FIPB portal will be transferred by DEA to DIPP within four weeks;

(b)      All the pending cases on FIPB portal will be transferred to the respective administrative ministry/department by DIPP;

(c)      The aforesaid administrative ministry/department will be given an access to the FIPB portal for processing the applications pending before them;

(d)      The administrative ministry/ department will seek the approval of the Minister-in-charge / Cabinet Committee on Economic Affairs (CCEA);

(e)      Ordinarily FDI applications, including those related to NRls, EOUs, food processing, single and multi brand retail trading, should be decided in sixty days.