February 27, 2018
New Bill on Unregulated Deposit Schemes May Impact Cryptocurrency Traders
The Union Cabinet chaired by Prime Minister Modi has given its approval to introduce ‘The Banning of Unregulated Deposit Schemes Bill, 2018’ in Parliament. This bill is aimed at protecting investors who may be investing in deposit taking schemes run by institutions that are exploiting the current regulatory gaps. The bill proposes to:
- create three different types of offences – running of unregulated deposit schemes, fraudulent default in regulated deposit schemes, and wrongful inducement in relation to unregulated deposit schemes; and
- set up competent authorities to “ensure repayment of deposits in the event of default by a deposit taking establishment”.
Clear-cut timelines have been provided for attachment of property and restitution to depositors.
In Chapter II of this Bill, the term “Deposit” has been defined as “the receipt of money, by way of advance or loan or in any other form, to be returned, whether after a specified period or otherwise, either in cash or in kind or in the form of a specified service, by any Deposit Taker, with or without any benefit in the form of interest, bonus, profit or in any other form. Given the RBI’s already stated concerns about cryptocurrency and Arun Jaitley in his Union Budget Speech clearly stating that “the Government does not consider crypto-currencies legal tender or coin and will take all measures to eliminate use of these cryptoassets in financing illegitimate activities or as part of the payment system”, this can be seen as the Government’s first move in bringing cryptocurrency under the regulatory umbrella. This bill is likely to be tabled when the Parliament meets again next month for the remaining 23 sittings.
NCLAT on Conversion of Loan into Share Capital
The National Companies Law Appellate Tribunal (“NCLAT”) on January 23, 2018 has held that for the issue of further share capital, conversion of loan into share capital would be permissible only if there was special resolution passed by company in a General Meeting to that effect.
“In view of sub-Section (3) of Section 62 when the question of issue of further share capital is taken up, conversion of loan into share capital would be permissible provided there was special resolution passed by the company in General Meeting which granted option as a term attached to the loan raised by the Company permitting conversion of such loan into shares of the company.”
NCLAT held that the special resolution must grant an option of conversion of such loan into shares of company as a term attached to the loan raised by company.
RBI notifies the Ombudsman Scheme for Non-Banking Financial Companies, 2018
In order to promote a conducive credit culture among the Non-Banking Financial Companies (“NBFCs”) and to regulate the credit system of the country to its advantage, a scheme for redressal of complaints against deficiency in services concerning deposits, loans and advances and other specified matters, has been initiated. The appointed ombudsman shall be responsible for addressing these complaints. An ombudsman is an official who is charged with representing the interests of the public by investigating and addressing complaints of maladministration or a violation of rights. Additionally, the RBI also notified the Ombudsman Scheme for Non-Banking Financial Companies, 2018 – Appointment of the Nodal Officer/Principal Nodal Officer; for the appointment of nodal officers who shall represent the respective NBFCs and shall be responsible for furnishing information to the Ombudsman in respect of complaints filed against the respective NBFC.
‘Condonation of Delay Scheme 2018’ e-form now made available for filing purposes
The Ministry of Corporate Affairs in September 2017, identified 3,09,614 directors associated with the companies that had failed to file financial statements or annual returns in the MCA21 online registry for a continuous period of three financial years 2013-14 to 2015-16 under sections 164(2) read with 167(1)(a) of the Act. These directors were barred from accessing the online registry and a list of such directors was published on the website of MCA. With a view to giving an opportunity for the non-compliant, defaulting companies to rectify the default, the Central Government has introduced a scheme called the ‘Condonation of Delay Scheme 2018’. As per a notification dated December 29, 2017, the scheme shall come into force with effect from January 01, 2018 and shall remain in force up to March 31, 2018. The application form has now been made available here.
Supreme Court on Liquor Ban on Highways
The Supreme Court had banned liquor sale within 500 metres of highways in December, 2016. This was followed by a clarification in July, 2017 wherein the Court stated that its ban on sale of liquor does not apply to licenced outlets within municipal limits of a city. Reiterating the rationale held in its July, 2017 order, the Supreme Court through an order dated February 23, 2018 has stated that the liquor ban along the highways does not apply to licenced establishments falling within the municipal areas. Furthermore, the Court directed the state governments to determine whether the rationale held in the July, 2017 order, should also apply to areas covered by local self-governing bodies and statutory development authorities or is the area developed enough to warrant a ban.
Supreme Court on FDI violations by Multinational Chartered Accountancy Firms
In light of the recently uncovered INR 11,400 Cr. PNB scam, the Supreme Court in S Sukumar v The Secretary, Institute of Chartered Accountants of India & ors. directed the Government to initiate investigation into allegations of auditory oversight and FDI violations by multinational chartered accountancy firms. Specifically, the Court, in this judgment, directed the Government to constitute a three member committee of experts to look into the enforcement of the letter and spirit of Sections 25 and 29 of the Chartered Accountants Act, 1949 and the statutory Code of Conduct for Chartered Accountants.