No limits for royalty/lumpsum payment in FEMA under Current Account Transaction as per PN 8 – DIPP allowed it under Automatic route (ie) without the approval of RBI

Press Note 8 of 2009 as notified by 0/0 IPP F. No. 5(6)/2008-FC dated 16.12.2009

The existing policy of Government of India on the payment of royalties under Foreign Technology Collaboration provides for automatic approval for foreign technology transfers involving payment of lumpsum fee of US$ 2 million and payment of royalty of 5% on domestic sales and 8% on exports. In addition, where there is no technology transfer involved, royalty up to 2% for exports and 1% for domestic sales is allowed under automatic route on use of trademarks and brand names of the foreign collaborator. Separate norms are available for the hotel sector vide Press Note 18 (1991 Series) and Press Note 1 (1995 Series). Technology transfers involving payments above these limits required prior permission of the Government of India (Project Approval Board, Department of Industrial Policy and Promotion).

The Government of India has reviewed the extant policy and it has been decided to permit, with immediate effect, payments for royalty, lumpsum fee for transfer of technology and payments for use of trademark/brand name on the automatic route i.e. without any approval of the Government of India. All such payments will be subject to Foreign Exchange Management (Current Account Transactions) Rules, 2000 as amended from time to time.

Meaning, Payment of Royalty and Lumpsum fees is fully liberalised now without any ceiling limits and will fall under Automatic Route.

Consumer Protection & MRTP cases for CS Executive Program/Final exams, interesting read and All the best for December exams 2009

For the world, its the expectation of Christmas week & the New Year Celebrations!!! (but for the blessed few: those who are appearing for Company Secretary exams).

CS Final (Old Syllabus) and CS Executive Program Students do read the recent Economic Law cases as compiled by Mr. Ankur Garg and published here: http://www.caclubindia.com/articles/article_list_detail.asp?article_id=3851

Yehseeyes wishes all the very best for your December 2009 exams.  As of now, forget other things, just remember the following,

1. Read again what you have read before (called as Revision) which is a must to remember atleast something.
2. Fear not for the exams.  Be confident as it is supposed to be faced that way!
3. Have your Hall Ticket, you can take prints also from the link http://icsi.edu/Student/Queries/tabid/1587/Default.aspx and then click “Admit Card Extract Link”, which also requires you to register with www.icsi.in (take print & keep spare copy to avoid last minute misplacement).
4. Keep ready smart writing pens.  Never go for fancy colour inks.  Blue is excellent, at places and rarely you may add it up with Black.
5. Focus on the Questions more in the exam.  Whether it is law or issues or problems, it requires lot of understanding before giving the solutions. 

Its Only This Much.  Hi Only This Much book readers for Company Secretary exams, waiting for your constructive feedbacks (onlythismuch@lawlabz.com) to make CS studies more exciting.

Again wishing you all the best!!! Finish the exams and then we will discuss, what next!!! forget the world, its your exams now…

Manufacturing Enterprise is same as Industry or Industrial Undertaking (SSI) as the Act uses enterprise for both manufacturing & service – MSME Clarifies

The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED) uses the terminology enterprise for the establishments engaged in manufacturing sector as well in service sector.  Therefore, the present terminology “manufacturing enterprise” should be considered as equivalent to the term “industry” or industrial undertaking”, which was used earlier in the definition of Small Scale Industries (SSI).  The establishment engaged in services are termed as “Service Enterprises” in the MSMED Act, 2006.

Source: 16(20)/1/2009-MSME POL dated 5th November 2009

As you know [MSMED]Small Scale Industry definition only under MSMED Act for IDRA too.

To understand all the notifications of industry, read Industries DIPP updates

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NFE shall be calculated in rupees for SEZ unit approval, fluctuations may be considered, if negative – Ministry Clarification

F.No.C.6/9/2009-SEZ dated November 2009 under Ministry of Commerce & Industry as Instruction No. 41

Sub: Clarification on calculation of NFE as per Rule 53 of the SEZ Rules, 2006

• It is hereby clarified that Net Foreign Exchange (NFE) is to be calculated in rupee terms only.
• In case a unit is NFE negative and claims that it is due to foreign exchange fluctuation, the Approval Committee may consider such cases provided that the unit gets the computations certified by the Authorised Bank, on a case to case, basis.

Records to be maintained from transaction, Non profit organisation included, Suspicious transaction defined in amendment of Money Laundering Rules 2009

Notification No 13/2009/F.No. 6/8/2009- ES & G.S.R 816(E) dated 12th November 2009

Prevention of Money-laundering Act (PMLA), 2002 read with Rules is amended by Prevention of Money-laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries)  Amendment Rules, 2009

Rule 2(1)(ca) “non profit organisation” means any entity or organisation that is registered as a trust or a society under the Societies Registration Act, 1860 (21 of 1860) or any  similar State legislation or a company registered under section 25 of the Companies Act, 1956 (1 of 1956);

Rule 3(BA) all  transactions involving receipts by non-profit organisations of  value  more than  Rs. 10 lakh, or its equivalent in foreign currency; Kindly note, Rule 3 deals with Maintenance of records of transactions (nature and value) by banking company or financial institution or intermediary. [thus, covering Charitable trusts, whether temples, churches or mosques, non-government organisations (NGOs), educational institutions or societies and other Non-profit organisations, even Section 25 Company – see definition above]

Rule 6  Retention of records of transactions– The records referred to in rule 3 shall be maintained for a period of ten years from the date of [the word CESSATION OF is removed] transactions between the client and the banking company, financial institution or intermediary, as the case may be.  [Hence, the 10 year period begins from the date of transaction itself].

Rule 2(fa)  “Regulator” means a person or an authority or a Government which is vested with the power to license, authorise, register, regulate or supervise the activity of banking companies, financial institutions or intermediaries, as the case may be;

Rule 2(g)  “Suspicious transaction" means a transaction referred to in clause (h) [which defines the term transaction], including an attempted transaction, whether or not made in cash, which to a person acting in good faith -

(a) gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence specified in the Schedule to the Act, regardless of the value involved; or

(b) appears to be made in circumstances of unusual or unjustified complexity; or

(c) appears to have no economic rationale or bonafide purpose; or

(d) gives  rise  to  a  reasonable  ground  of  suspicion  that  it may involve financing of the activities relating to terrorism;

Rule 8 after sub-rule (3),  the following proviso shall be inserted at the end, namely:-

“Provided that a banking company, financial institution or intermediary, as the case may be, and its employees shall keep the fact  of furnishing information in respect of transactions referred to in clause (D) of sub-rule (1) of rule 3 strictly confidential.  [Thus, the records of transactions are made STRICTLY CONFIDENTIAL!]

In rule 9,-
(a)   for sub-rules (1) and (2), the following sub-rules shall be substituted, namely:-

“(1) Every banking company, financial institution and intermediary, as the case may be, shall,

(a)  at the time of commencement of an account-based relationship, identify its clients, verify their identity and obtain information on the purpose and intended nature of the business relationship,  and

(b) in all other cases, verify identity while carrying out:

(i) transaction of an amount equal to or exceeding rupees fifty thousand, whether conducted as a   single transaction or several transactions that appear to be connected, or

(ii)  any international  money transfer operations.

(1A) Every banking company, financial institution and intermediary, as the case may be, shall identify the beneficial owner and take all reasonable steps to verify his identity.

(1B) Every banking company, financial institution and intermediary, as the case may be, shall exercise ongoing due diligence with respect to the business relationship with every client and closely examine the transactions in order to ensure that they are consistent with their knowledge of the customer, his business  and risk profile.

(1C) No banking company, financial institution or intermediary, as the case may be, shall  keep any anonymous account or account in fictitious names.

(2) Where the client is an individual, he shall for the purpose of sub-rule (1), submit to the banking company, financial institution and intermediary, as the case may be, one certified copy of an ‘officially valid document’ containing details of his identity and address, one recent photograph and such other documents including in respect of the nature of business and financial status of the client as may be required by the banking company or the financial institution or the intermediary, as the case may be.

Provided that photograph need not be submitted by a client falling under clause (b) of sub-rule (1).”;

(b)   after sub-rule (6),  the following sub-rule shall be inserted, namely:-

“(6 A) Where the client is a  juridical person, the banking company, financial institution and intermediary, as the case may be, shall verify that any person purporting to act on behalf of  such client is so authorised and verify the identity of that person.”;

(c) for sub-rule (7), the following sub-rule shall be substituted, namely:-

“ (7) (i)The regulator shall issue guidelines incorporating the requirements of sub- rules (1) to (6A) above and may prescribe enhanced measures to verify the client’s identity taking into consideration type of client, business relationship or nature and value of transactions.

(ii) Every banking company, financial institution and intermediary as the case may be, shall formulate and implement a Client Identification Programme to determine the true identity of its clients, incorporating requirements of sub-rules (1) to (6A) and guidelines issued under clause (i) above.

Prevention of Money Laundering Act (PMLA), 2002 can be downloaded here.   Click here for SEBI Master circular on Money Laundering.

Accordingly, all authorized persons are advised to furnish Suspicious Transaction Report (STR) to FIU-IND in respect of their money changing activities within 7 days of arriving at a conclusion that a transaction, including attempted transaction, whether or not made in cash, or a series of transaction integrally connected are of suspicious nature. The formats of STR, both manual and electronic, have been made available by FIU-IND in their website http://fiuindia.gov.in. [A.P. (DIR Series) Circular No.15 & A.P. (FL/RL Series) Circular No.02 dated November 19, 2009]

Priority lending to Training centres & consultancy services registered as Micro or Small enterprise – RBI instructs banks

Priority Sector Lending – Categorisation of activities under service under the Micro Small & Medium Enterprises Development (MSMED) Act, 2006

Understand the broad CATEGORIES OF PRIORITY SECTOR,
(i) Agriculture (Direct and Indirect finance)
(ii) Small Enterprises (Direct and Indirect Finance)
(iii) Retail Trade
(iv) Micro Credit
(v) Education loans
(vi) Housing loans

Understand about MSMED from http://yehseeyes.blogspot.com/search?q=MSMED

It has been decided to include loans granted by banks in respect of following activities under Micro and Small (Service) Enterprises within the priority sector, provided such enterprises satisfy the definition of Micro and Small (Service) Enterprises in respect of investment in equipment (original cost excluding land and building and furniture, fittings and other items not directly related to the service rendered or as may be notified under the MSMED Act, 2006) (i.e. not exceeding Rs. 10 lakh and Rs. 2 crore respectively).

1. Consultancy Services including Management Services;
2. Composite Broker Services in Risk and Insurance Management;
3. Third Party Administration (TPA) Services for Medical Insurance Claims of Policy Holders;
4. Seed Grading Services;
5. Training-cum-Incubator Centre;
6. Educational Institutions;
7. Training Institutes;
8. Retail Trade;
9. Practice of Law, i.e. legal services;
10. Trading in medical instruments (brand new);
11. Placement and Management Consultancy Services; and
12. Advertising agency and Training centres

Accordingly, there will be no separate category for "Retail Trade" under priority sector. Loans granted by banks for Retail Trade [i.e. advances granted to retail traders dealing in essential commodities (fair price shops), consumer co-operative stores; and advances granted to private retail traders with credit limits not exceeding Rs. 20 lakh) would henceforth be part of the Small (Service) Enterprises.

The commercial banks may report such loans under the head "Total credit to Small Enterprises" in the half-yearly (Ad-hoc) [under 2 (a) and 2 (ii)] and yearly (final) [under 14, 15, 19, 20 and 21] return on priority sector advances.

For All Primary (Urban) Co-operative Banks (read this circular UBD.CO.BPD(PCB) Cir.No.50/09.09.001/2009-10 dated March  25, 2010)

Source: RBI/2009-10/164 RPCD.CO.Plan.BC. 24 /04.09.01/2009-10 dated 18th September 2009

FEM (Deposit) (Amendment) Regulations, 2009 permits transfer of funds from rupee account of diplomatic mission in India which are collected as Visa fees

Foreign Exchange management (Deposit) (Amendment) Regulations, 2009

In exercise of the powers conferred by clause (f) of sub section (3) of section 6 and sub section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999), the Reserve Bank of India makes the following amendments in the Foreign Exchange Management (Deposit) Regulations, 2000 (Notification No.FEMA.5/2000-RB dated May 3, 2000) namely : -
Amendment of the Regulations: -
In the Foreign Exchange Management (Deposit) Regulations, 2000 (Notification No.FEMA.5/2000-RB dated May 3, 2000), Regulation 4, in sub-regulation (3), for clause (a), the following shall be substituted, namely:-
“(a) credits to the account shall be only by way of:-
(i) proceeds of inward remittances received from outside India through normal banking channels; and
(ii) transfer of funds, from the rupee account of the diplomatic mission in India, which are collected in India as visa fees and credited to such account.”

Source: Notification No.FEMA 193/2009-RB dated 2nd June, 2009

The Prevention of Money Laundering (Amendment) Act, 2009 [PMLA] has come into force with effect from 1st June 2009 & Master Circular – RBI/SEBI & Multi Level Marketing (MLM) firms

Download RBI Master Circular on Money Laundering / Know Your Customer (KYC).  This is in continuation of the same.

Preservation  Period of Records

The Prevention of Money Laundering (Amendment) Act, 2009 (No. 21 of 2009) has come into force with effect from June 01, 2009 as notified by the Government. In terms of Sub-Section 2(a) of Section 12 of The Prevention of Money Laundering (Amendment) Act, 2009 (PMLA, 2009), the records referred to in clause (a) of Sub-Section (1) of Section 12 shall be maintained for a period of ten years from the date of transaction between the clients and the banking company and in terms of Sub-Section 2(b) of Section 12 of the Act ibid, the records referred to in clause (c) of Sub-Section (1) of Section 12 shall be maintained for a period of ten years from the date of cessation of transaction between the clients and the banking company.

Accordingly, in modification of paragraph 2.16(iii) (a) of the above said master circular dated July 1, 2009, banks are advised to maintain for at least ten years from the date of transaction between the bank and the client, all necessary records of transactions referred to at Rule 3 of the Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing Information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005 (PMLA Rules), both domestic or international, which will permit reconstruction of individual transactions (including the amounts and types of currency involved, if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity.

However, records pertaining to the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, utility bills etc.) obtained while opening the account and during the course of business relationship, as indicated in paragraph 2.16(iii)(b) of the above said master circular dated July 1, 2009, would continue to be preserved for at least ten years after the business relationship is ended as required under Rule 10 of the Rules ibid.

Accounts of Politically Exposed Persons (PEPs)

Detailed guidelines on Customer Due Diligence (CDD) measures to be made applicable to Politically Exposed Person (PEP) and their family members or close relatives are contained in paragraph 2.5(iv) of the master circular.  It is further advised  that in the event of an existing customer or the beneficial owner of an existing account,subsequently becoming a PEP, banks should obtain senior management approval to continue the business relationship and subject the account to the CDD measures as applicable to the customers of PEP category including enhanced monitoring on an ongoing basis.

Principal Officer

Banks have been advised in Para 2.15 of the master circular referred to above that banks should appoint a senior management officer to be designated as Principal Officer and the role and responsibilities of the Principal Officer have been detailed therein. With a view to enable the Principal Officer to discharge his responsibilities,  it is advised that that the Principal Officer and other appropriate staff should have timely access to customer identification data and other CDD information, transaction records and other relevant information. Further, banks should ensure that the Principal Officer is able to act independently and report directly to the senior management  or  to the Board of Directors.

Source: RBI/2009-10/152 DBOD. AML.BC. No.43 /14.01.001/2009-10 dated 11/09/2009

Further, in view of opening and conduct of the accounts of Multi Level Marketing (MLM) firms, we (RBI) advise that banks should be careful in opening accounts of the marketing/trading agencies etc. Especially, strict compliance with KYC and AML guidelines contained in circulars UBD.CO.BPD (PCB) No. 1/12.05.001/2008-09 dated July 02, 2008 and UBD.PCB. Cir. 30/09.161.00/2004-05 dated December 15, 2004 issued by RBI should be ensured in the matter.

In cases where accounts have already been opened in the names of the marketing agencies, retail traders, investment firms, the banks may undertake quick reviews. Wherever large number of cheque books has been issued to such firms, the relative decision may be reviewed in the light of the following:

• Whether the cheque books have been issued to customers on the basis of their express request and after following the internal processes laid down in the matter.
• Whether the number of cheque books is consistent with/matching the profile of the customers as also their nature of business operations.

Even where the volume of transactions/profile of the customers apparently justify the number of cheque books issued, special ongoing monitoring of the operations in the accounts of such types of firms should be made especially if large volumes of small cash deposits are being made in those accounts and withdrawals are being made there from, through cheques written for small amounts, either across the counters or through clearing. In respect of such account holders banks may, in specific cases, call for the data from the account holders on the number and aggregate amount of post dated cheques issued. The data/information so collected should be analysed in select cases to rule out the possibility of the firms being engaged in deposit taking activities. Certain indicative parameters for selecting accounts for further scrutiny and action are the bunching of dates of the post dated cheques, the uniformity in the amounts of cheques etc. These data should be analysed together with data on cash deposits of small amounts on previous distant dates resembling the deposit contracting/mobilizations dates in terms of similar bunching and uniformity of amounts.

Please acknowledge receipt. Also, unusual operations noticed during the above review may be immediately reported to us and other appropriate authorities, such as, Financial Intelligence Unit (FIU-IND), Department of Revenue, Ministry of Finance, Government of India, Hotel Samrat (6th Floor), Chanakyapuri, New Delhi - 110 021.

Source: RBI/2009-10/158 UBD. CO. BPD. PCB.Cir. No.9/12.05.001 / 2009-10 dated 16/09/2009

Understand New FTP 2009 – introduction of towns for export excellence,diamond bourses,EDI & more technology benefits apart from increase in duty scrips and extension of time limits

The New FTP Policy is released and shall come into force w.e.f. 27th August, 2009.  Kindly note, FTP is a Export Import (EXIM) policy published by Director General of Foreign Trade (DGFT)  under Ministry of Commerce under the powers of Foreign Trade (Development & Regulation) Act, 1992.  FTP is published for every 5 years.

Source : Foreign Trade Policy 2009-2014 & Foreign Trade Procedures 2009-2014 [Handbook of Procedures (Volume 1) & Appendices]

Erstwhile foreign trade policy (FTP) 2004-2009 had set two objectives, namely,

(i) to double our percentage share of global merchandize trade within 5 years and (ii) use trade expansion as an effective instrument of economic growth and employment generation.

Understand the basics of Policy from WTO - FTP - Understand this way ....

FOREIGN TRADE POLICY [FTP] 2009 – 2014

Understand the basic amendments,

• To make the environment conducive for foreign trade and it was decided to continue with the DEPB Scheme upto December 2010 and income tax benefits.
• Further under Section 10A for IT industry (STPI) and under Section 10B of Income Tax Act for 100% export oriented units for one additional year till 31st March 2011.
• To encourage value addition in our manufactured exports and towards this end, have stipulated a minimum 15% value addition on imported inputs under advance authorization scheme.
• The Government seeks to promote Brand India through 6 or more ‘Made in India’ shows to be organized across the world every year.
• Technological upgradation of exports is sought to be achieved by promoting imports of capital goods for certain sectors under EPCG at 0% duty.  Additional Duty Credit Scrips shall be given to Status Holders @ 1% of the FOB value of past exports.  The duty credit scrips can be used for procurement of capital goods with Actual User condition.  This Scheme will be available for engineering & electronic products, basic chemicals & pharmaceuticals, apparels & textiles, plastics, handicrafts, chemicals & allied products and leather & leather products (subject to exclusions of current beneficiaries under Technological Upgradation Fund Schemes (TUFS), administered by Ministry of Textiles and beneficiaries of Status Holder Incentive Scheme in that particular year). The scheme shall be in operation till 31.3.2011.
• For upgradation of export sector infrastructure, ‘Towns of Export Excellence’ and units located therein would be granted additional focused support and incentives.  For instance, Jaipur, Srinagar and Anantnag have been recognised as ‘Towns of Export Excellence’ for handicrafts; Kanpur, Dewas and Ambur have been recognised as ‘Towns of Export Excellence’ for leather products; and Malihabad
  for horticultural products.
• To enable support to Indian industry and exporters, especially the Micro Small & Medium Enterprises, in availing their rights through trade remedy instruments under the WTO framework, we propose to set up a Directorate of Trade Remedy Measures.
• In order to reduce the transaction cost and institutional bottlenecks, the e-trade project would be implemented in a time bound manner to bring all stake holders on a common platform.  Additional ports/locations would be enabled on the Electronic Data Interchange (EDI) over the next few years.
• To further EDI initiatives, Export Promotion Councils/Commodity Boards have been advised to issue RCMC through a web based online system. It is expected that issuance of RCMC would become EDI enabled before the end of 2009. 
• An Inter-Ministerial Committee has been established to serve as a single window mechanism for resolution of trade related grievances.
• In an endeavour to make India a diamond international trading hub, it is planned to establish “Diamond Bourse(s)”.

Understand more highlights from Highlights of Foreign Trade Policy

Within 12 months of Export of Goods and Software, Realise & Repatriate export Proceeds till 30th June 2010 now - RBI liberalises

Attention of Authorised Dealer Category-I (AD Category-I) banks is invited to A.P.(DIR Series) Circular No.50 dated June 5, 2008, enhancing the period of realisation and repatriation to India of the amount representing the full export value of goods or software exported, from six months to twelve months from the date of export, subject to review after one year.

2. The issue has since been reviewed and it has been decided in consultation with Government of India to extend the above relaxation for a further period of one year i.e. up to June 30, 2010, subject to review.

3. The provisions in regard to period of realisation and repatriation to India of the full export value of goods or software exported by a unit situated in Special Economic Zone (SEZ) as well as exports made to warehouses established outside India remains unchanged.

Source: RBI/2008-09/ 516 A.P. (DIR Series) Circular No.70 dated 30th July 2009

Like, it keep getting updating through mails

Violation of ECB provisions mandates RBI approval route, instead of automatic route & SEZ can avail for devlopment now

Attention of Authorized Dealer Category - I (AD Category - I) banks is invited to the A.P. (DIR Series) Circular No. 46 dated January 2, 2009 relating to External Commercial Borrowings (ECB).

On a review, it has been decided to modify some aspects of the ECB policy vide RBI/2008-09/517 A.P. (DIR Series) Circular No.71 dated 30th June 2009 as indicated below:

(i) ECB for Integrated Township
As per the extant policy, corporates, engaged in the development of integrated township, as defined in Press Note 3 (2002 Series) dated January 04, 2002, issued by DIPP, Ministry of Commerce & Industry, Government of India are permitted to avail of ECB, under the Approval route, until June 2009 [which is extended to 31st December 2009], still under RBI approval route.

(ii) ECB for NBFC sector
As per the current ECB norms, Non-Banking Finance Companies (NBFCs), which are exclusively involved in financing of the infrastructure sector, are permitted to avail of ECBs from multilateral / regional financial institutions and Government owned development financial institutions for on-lending to the borrowers in the infrastructure sector under the Approval route, subject, inter-alia, to the condition that the direct lending portfolio of these lenders vis-à-vis their total ECB lending to NBFCs, at any point of time, should not be less than 3:1 [the ratio is dispensed from 1st July 2009], still under RBI approval route.

(iii) ECB for Development of Special Economic Zone
As per the extant guidelines, ECB is permissible for the Infrastructure sector, which is defined as (i) power, (ii) telecommunication, (iii) railways, (iv) road including bridges, (v) sea port and airport, (vi) industrial parks, (vii) urban infrastructure (water supply, sanitation and sewage projects) and (viii) mining, refining and exploration. Further, units in the Special Economic Zone (SEZ) are also permitted to access ECBs for their own requirements. However, ECB is not permissible for the development of SEZ. It has now been decided to allow SEZ developers also to avail of ECB under the Approval route for providing infrastructure facilities, as defined in the ECB policy, within the SEZ. However, ECB shall not be permissible for development of integrated township and commercial real estate within the SEZ.

(iv) Corporates under Investigation
Currently, the ECB policy is not explicit about accessing of ECB by the corporates, which have violated the extant ECB policy and are under investigation by the Reserve Bank and / or Directorate of Enforcement. It is clarified that corporates, which have violated the extant ECB policy and are under investigation by Reserve Bank and / or by Directorate of Enforcement, will not be allowed to access the Automatic route for ECB. Any request by such corporates for ECB will be examined under the Approval route.

Click here to read all about External Commercial Borrowings

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Competition law applicability till date,sections w.e.f. 20th May 2009,including anti-competitive agreements & abuse of dominance,excepting combinations & CCI provisions

Competition Act, 2002, as amended by Competition (Amendment) Act, 2007 readwith The Competition Commission of India (Meeting for Transaction of Business) Regulations, 2009, The Competition Commission of India (General) Regulations, 2009 & The Competition Commission of India (Procedure for Engagement of Experts and Professionals) Regulations, 2009 were notified by CCI, including establishment of Competition Appellate Tribunal (CAT) in New Delhi.

Broadly, almost all the provisions of Competition Act are notified EXCEPT provisions regarding Combinations (Mergers, Amalgamations, Acquisitions & Takeovers - MAAT) & provisions before Competition Commission of India (CCI) benches.

Erstwhile, only the following provisions of Competition Act are effective –

	All definitions as contained in section 2
	Establishment of Competition Commission of India, Composition of Commission, Salary and allowances and terms and conditions of members of Commission – sections 7 to 15
	Appointment of Director General – section 16
	Appointment of Secretary, officers and employees of the CCI, Appointment of experts and professionals – section 17
	Commission to regulate its own procedure – section 36
	Competition Advocacy – section 49
	Finance, Accounts and Audit – sections 50 to 53
	Establishment of Competition Appellate Tribunal – section 53A and 53C to 53M
	Powers to Central Government, rule making powers, powers to make regulations etc. – sections 54 to 65

Source: http://www.dateyvs.com

Sections 3, 4, 18, 19, 21, 26, 27, 28, 32, 33, 35, 38, 39, 41, 42, 43, 45, 46, 47, 48, 54, 55 & 56 of Competition Act, 2002 are notified w.e.f 20^th day of May 2009 [Sections of Competition (Amendment) Notified w.e.f 20^th day of May 2009 vide Notification No. S.O. 1242(E) dated 15 May 2009]

Kindly note the following Sections of Competition Act, 2002 as amended by Competition (Amendment) Act, 2007 are notified Sections 3, 10, 13, 15, 16, 19, 20, 21, 25, 26, 28, 31, 33, 34, 35, 36, 38, 39 & 43, 53B, 53N, 53O, 53P, 53Q, 53R, 53S, 53T & 53U w.e.f 20^th day of May 2009 [Sections of Competition Act notified w.e.f 20^th day of May 2009 vide Notification No. S.O. 1241(E) dated 15 May 2009]

Establishment of Competition Appellate Tribunal (CAT) headquartered in New Delhi [Establishment of Competition Appellate Tribunal vide Notification No. S.O. 1240(E) dated 15 May 2009]

On combined reading, to understand the applicability of notified Competition Act till date, you can consolidate as follows:

The following Sections of Competition Act, 2002 were NOT notified,

Section 5, 6, 20, 29, 30 & 31 regarding regarding Combinations (Mergers, Amalgamations, Acquisitions & Takeovers – MAAT)

Sections 22, 23, 24, 25, 34, 37 & 44 regarding Competition Commission of India (CCI) benches, to award compensation, to review its orders, appeal, etc..

The following Sections of Competition (Amendment) Act, 2007 were NOT notified,

Sections 4, 5, 14 & 24 regarding Combinations (MAAT)

Sections 6, 7, 8, 9, 11, 12, 17, 18, 22, 23, 27, 29, 30, 32, 37, 44, 45, 46, 47, 48 & 49 regarding regarding CCI benches, appointment of Director general, secretary, experts, professionals, etc… to CCI,

Sections 40, 41 & 42 regarding funds, accounts & audit of CCI

Section 53A & 53C-M regarding Competition Appellate Tribunal (CAT)

Section 50 regarding repeal of Monopolies Restrictive Trade Practices Act, 1969 (MRTP).

 

To understand Competition Law as on May 2009 in detail, you may click Understand Competition Act, 2002, as amended by Competition (Amendment) Act, 2007 as notified by 2009 Notifications w.e.f. 20th May as to Agreements & Abuse of dominance

CCI Collegium Meetings with 6 regulations transact the business on the basis of information or reference & decided by majority

The Competition Commission of India (Meeting for Transaction of Business) Regulations, 2009 ( No. 3 of 2009) by way of Notification No R-40007/6/ Reg- Meeting/ Noti/ 04- CCI dated 22nd May 2009.

 

As you know, the Competition Commission (CCI) functions in the way of collegium (sitting for meetings) and decisions are based on majority, on receipt of Information [u/r 2(1) (e)] or Reference [u/r 2(1)(h)] unlike MRTPC sittings on applications.

 

Reg 3 - Meetings for transaction of business and their procedure. As per Reg 3, the meetings of the Commission (CCI) shall ordinarily be held at its head office situated in New Delhi Provided that the Commission may also hold meetings at its other offices or at any other place in India, whenever, in the opinion of the Commission, it is expedient to do so.  There is separate procedure for ordinary & special meetings. 

 

The power to regulate procedure & irregularity of procedure is given under Reg 4 & 5.

 

Reg 6 - Removal of difficulty: In the matter of implementation of these regulations, if any doubt or difficulty arises, the same shall be placed before the Commission and the decision of CCI thereon shall be final.

CCI logo in its general regulations 2009 with details about manner of conducting proceedings consisting of 54 regulations

The Competition Commission of India (General) Regulations, 2009;( No. 2 of 2009) by way of Notification No R-40007/6/ Reg- General/ Noti/ 04- CCI dated 22nd May 2009 with immediate effect.  Let us understand the scheme of the said regulations.

 

Competition Commission of India (CCI) unveils its New Seal & Emblem as per Regulation 4 read with the Annexure to this regulation.

Reg 2(1)(g) –> “media” includes newspapers, magazines, periodicals, journals, radio, cinema, television and internet.

 

Reg 2(1)(i) –> “Party” includes a consumer or an enterprise or a person defined in clauses (f), (h) and (l) of section 2 of the Act respectively, or an information provider, or a consumer association or a trade association or the Director General defined in clauses (g) of section 2 of the Act, or the Central Government or any State Government or any statutory authority, as the case may be, and shall include an enterprise against whom any inquiry or proceeding is instituted and shall also include any person permitted to join the proceedings or an intervener.

 

Reg 5 - The language of the Commission shall be English.

 

Reg 47 - Proceedings before Commission not to be open to public.

 

The regulation further provides for determination of holidays, computation of time, contents of information or reference & signing thereof, procedure for filing information or reference by registered post or courier or FAX or in electronic form as and when so desired by the Commission through a public notice,  powers & functions of Secretary to CCI, procedure for scrutiny of information or reference (See Regulation 15 for the time limits), CCI opinion on existence of prima facie case as per Regulation 16 (which may be determined by Preliminary Conference as per Regulation 17), investigation by Director General as per Regulation 20, procedure for inquiry as per Regulation 21, mode of service of notice (Reg 22), manner of filings before CCI (Reg 23), powers of CCI as per Reg 24 to 28. Reg 30 to 32 & Reg 44-45, manner of making submissions or arguments by parties before Commission (Reg 29), reference as per Reg 33 & 34, Confidentiality (with “restriction of publication claimed” in red ink on top of the first page) as per Reg 35,  Compliance of orders & effect of non-compliance, taking evidence, etc… is dealt from Reg 36 to 43, authorizing a representative to appear as per Reg 46, penalties & fees as per Reg 48 to 50.

 

Click here to understand Competition Act - http://thisisvj.googlepages.com/Competition.pdf

CCI to engage CS, CA, CWA, MBA, Lawyer & Economists specialising in Competition law with good academic record for sound packages

The Competition Commission of India (Procedure for Engagement of Experts and Professionals) Regulations, 2009 ( No1 of 2009) through Notification No R-40007/6/ Reg- Expert/ Noti/ 04- CCI dated 15th May 2009 with an immediate effect.  Let us understand the said regulation.

 

Reg 2(1)(e) –> “expert or professional” for the purpose of these regulations means a person of integrity and outstanding ability having special knowledge of, and experience in, economics, law, business or such other discipline related to competition as the Commission deems necessary to assist it in discharge of its functions under the Act.

 

Reg 5(1) - The experts and professionals to be engaged shall be classified on the basis of their qualifications and experience in the respective fields of specialization and/or the eminence in their professions as given in Schedule I, which lists qualifications such as Company Secretaries (with PMQ- Corporate Governance- Details - Brochure), Chartered Accountants with Post qualification course in International Trade Laws & WTO), Cost Accountants, Post Graduate in Economics (with Ph.d), B.L/LL.B (law graduate specailising in IPR, Competition & Trade Laws), MBA or post graduate diploma in business management (specialising in finance), engineering or medical or sciences with excellent academic record.  It aims at inducting professionals with sound knowledge in Mergers, Amalgamations & such other Corporate Restructuring matters.

 

Reg 5(2) - Subject to Reg 5(1) and depending upon the qualification, specialization and experience in respective disciplines, the experts shall be categorized into four levels as given in Schedule II, which is as follows:

 

Category of expert and professional	Preferred experience in years
Level I	UPTO 3 years
Level II	3 – 5 years
Level III	5 – 10 years
Level IV	10 – 15 years
Level V	15 – 30 years

 

Reg 6 - The remuneration to be paid by the Commission to different categories of experts and professionals shall be in accordance with Schedule III, which is as follows,

Level of expert and professional	Lumpsum monthly remuneration
I	Rs. 30,000 with 10% increase on completion of each year
II	Rs. 50,000 with 10% increase on completion of each year
III	Rs. 75,000 with 10% increase on completion of each year
IV	Rs. 1,00,000 with 10% increase on completion of each year
V	Rs. 1,25,000 with 10% increase on completion of each year

 

The experts and professionals shall ordinarily be engaged by the Commission (CCI) on contractual basis (with Confidentiality clause) for 3 months to 5 years as per Regulation 8 by sending offer letters for engagement by giving a time period of atleast 10 days to accept the offer and thereafter letter of engagement shall be issued by giving a time period of atleast 30 days to join.  CCI has the power, in addition to other remedies, to terminate the engagement as per Regulation 9 and may debar the expert from future engagement of the Commission.

 

As per Regulation 11, in the matter of implementation of these regulations, if any doubt or difficulty arises, the same shall be placed before the Commission and the decision of the Commission (CCI) shall be final.

[FEMA]FC-TRS reporting amended & is subject to KYC & to be submitted within 60 days of consideration for transfer of equity instruments involving foreign nationals or NRI’s

Foreign Direct Investment in India -
Transfer of Shares / Preference Shares / Convertible Debentures
by way of Sale - Modified Reporting Mechanism

Vide RBI/2008-09/447 A. P. (DIR Series) Circular No.63 dated April  22, 2009

1.In order to capture the details of investment received by way of transfer of the existing shares / compulsorily and mandatorily convertible preference shares (CMCPS) / debentures [hereinafter referred to as equity instruments], of an Indian company, by way of sale, in a more comprehensive manner, the form FC-TRS has been revised (format in Annex I). Accordingly, the proforma for reporting of inflows / outflows on account of remittances received / made in connection with the transfer of equity instruments by way of sale, submitted by IBD/FED/nodal branch of the AD Category – I bank to the Reserve Bank has also been modified (format in Annex III).
2.The sale consideration in respect of equity instruments purchased by a person resident outside India, remitted into India through normal banking channels, shall be subjected to a KYC check (format in Annex II) by the remittance receiving AD Category – I bank at the time of receipt of funds. In case, the remittance receiving AD Category – I bank is different from the AD Category - I bank handling the transfer transaction, the KYC check should be carried out by the remittance receiving bank and the KYC report be submitted by the customer to the AD Category – I bank carrying out the transaction along with the form FC-TRS.
3.Further, in order to ensure that the form FC-TRS is submitted within a reasonable timeframe, it has been decided that henceforth, the form FC-TRS should be submitted to the AD Category – I bank, within 60 days from the date of receipt of the amount of consideration.  The onus of submission of the form FC-TRS within the given timeframe would be on the transferor / transferee, resident in India.
4.In case of transfer of equity instruments where the non-resident acquirer proposes deferment of payment of the amount of consideration, prior approval of the Reserve Bank would be required, as hitherto. Further, in case approval is granted for a transaction, the same should be reported in form FC-TRS, duly certified by the AD Category – I bank, within 60 days from the date of receipt of the full and final amount of consideration.
5. These directions will become operative with immediate effect.

Kindly note,

Attention of the Authorised Dealer Category – I (AD Category - I) banks is invited to paragraph 6 of the Annex to A. P. (DIR Series) Circular No.16 dated October 4, 2004, wherein, it has been stipulated that in case of transfer of shares from a resident to a non-resident / non-resident Indian and vice versa, the transferee / his duly appointed agent is required to approach the investee company to record the transfer in their books along with the certificate in form FC-TRS from the designated AD branch that the remittances have been received by the transferor / payment has been made by the transferee.  In addition, the designated AD branch is also required to submit two copies of the form FC-TRS received from their constituents / customers together with the statement of inflows / outflows on account of remittances received / made in connection with transfer of shares, by way of sale, to IBD/FED or the nodal office designated for the purpose by the AD Category – I bank. The IBD/FED or the nodal office of the AD Category – I bank in turn submits a consolidated monthly statement in respect of all the transactions reported by the branches to the Reserve Bank, in the prescribed proforma.  Further, it may be noted that in terms of Regulation 2 of Notification No. FEMA 20/2000-RB dated 3rd May 2000, as amended from time to time, "preference shares" mean compulsorily and mandatorily convertible preference shares and "debenture" means compulsorily and mandatorily convertible debentures.

[FTP-Hp] LUT & BG for duty credit scrips before realisation of export proceeds

Obtaining transferable duty credit scrips made easier

Source: TNC Rajagopalan / New Delhi April 06, 2009, 0:09 IST

Ref: Handbook of Procedures (FTP)

The Director General of Foreign Trade has notified the procedures for executing legal undertaking and bank guarantee for obtaining transferable duty credit scrips under Duty Entitlement Passbook scheme and under the reward schemes such as Focus Product Scheme, Focus Market Scheme etc. before realisation of export proceeds. The formats of legal undertaking and bank guarantee have also been notified

The good news is recognised export houses and PSUs need not furnish bank guarantees. Manufacturer exporters registered with Central Excise and with exports in the preceding two years of at least Rs 1 crore and manufacturer exporters who have paid excise duty of over Rs 1 crore in the preceding year need not execute bank guarantee.

The relevant Public Notice (no. 167/2008 dated 30th March 2009) says the applicant shall execute the legal undertaking and bank guarantee as per Customs circular no. 58/2004 dated 21st October 200 4. The said circular exempts exporters who have a turnover (physical exports) of Rs 5 crore in the current or preceding fiscal and having a track record of three years of exports.

Other manufacturer exporters need furnish bank guarantee of only 15 per cent of the amount of legal undertaking. Other exporters have to furnish bank guarantee covering 100 per cent of the amount involved.

Apparently, the amount of legal undertaking should cover the full duty credit amount. The exporter, however, has the option to file a revolving legal undertaking for a higher amount which will act as a limit i.e., within the limit, it will be debited if a duty credit scrip is issued and credited whenever the exporter submits evidence of realisation of export proceeds relating to any shipping bill against which the duty credit scrip was issued.

The revolving legal undertaking has to be submitted separately for each scheme. The legal undertaking/bank guarantee should be kept valid for 24 months from the let export order date. Perhaps, the DGFT expects that few payments will be delayed beyond 24 months from the date of exports.

The DGFT circular says that in case the export proceeds are not realised within 12 months of export, the exporter should either produce Reserve Bank approval extending the period for realisation of export proceeds or deposit amount equal to the duty credit or produce duty credit scrip for debit of equivalent amount within further 60 days failing which he will have to pay, in addition, 15 per cent per annum interest on the duty credit amount. The legal undertaking/bank guarantee will be enforced if the exporter does not surrender the benefits.

The Customs credit the duty drawback at All Industry Rates in the exporter’s bank account immediately after shipment based on only a declaration along with the shipping bill. The exporter is not required to submit a bond or bank guarantee but a six monthly certificate of export bills outstanding beyond the period allowed by RBI from authorised dealer(s) or chartered accountant.

Click here to understand Foreign Trade Policy 2004-2009.

[MSMED]Small Scale Industry definition only under MSMED Act for IDRA too

Small Scale & Ancillary Industry becomes Small or Medium Enterprise even for the purpose of IDRA.

Rescinding of Notification No.857(E) dated 10 December, 1997

The above said notification lists the factors on the basis of which an industrial undertaking shall be regarded as a small scale or as an ancillary industrial undertaking for the purposes of Industries (Development and Regulation) Act, 1951 (IDRA).  It is the impact of Micro, Small & Medium Enterprises Development Act, 2006, the said notification was rescinded.  Read about MSMED Act in http://yehseeyes.blogspot.com/2007/11/micro-small-and-medium-enterprises.html

The central Government considers it necessary with a view to ascertain which ancillary and small scale industrial undertakings need supportive measures, exemption or other favourable treatment under the Industries (Development and Regulation) Act, 1951 (65 of 1951) herein after referred to as the said Act) to enable them to maintain their viability and strength so as to be effective in –

1. promoting in a harmonious manner the industrial economy of the country and easing the problem of unemployment, and

2. securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good.

& for which purpose has rescinded the above said notification vide Notification SO. 563(E) dated 27th February 2009.

Consequently even the format of Industrial Entrepreneurial Memorandum (IEM) got amended, which now reads instead for IDRA – enterprise for goods pertaining to Schedule-I industry or employing plant & machinery as value addition to final product with distinct name/character/use. Find the said amendment in http://www.laghu-udyog.com/publications/circulars/GazNot/SO-199(E).pdf

Keep tracking Industries amendment using Industries DIPP updates

[FEMA]Foreign Exchange Management (Deposit) Regulations, 2000 – Amendment

Dear All,

As you may be aware of that as per existing Schedule I ( giving the permissible credits to the Non-Resident (External) Rupee (NRE) account) to the Foreign Exchange Management (Deposit) Regulations, 2000 [Notification No. FEMA 5/2000-RB dated May 3, 2000], as amended from time to time, . Further, in terms of Anti-Money Laundering guidelines [cf A. P. (DIR Series) Circular No. 14 dated October 17, 2007], FFMCs are permitted to encash foreign currency and make cash payment only up to USD 3000 or its equivalent. Amount exceeding USD 3000 or its equivalent has to be paid by way of demand draft or bankers' cheque.

RBI vide its A. P. (DIR Series) Circular No. 45 dated 30th May 2008 as a measure of liberalization and also to meet the genuine needs of the NRE account holders, it has been decided that AD Category – I banks and authorized banks may credit proceeds of demand drafts / bankers' cheques issued against encashment of foreign currency to the NRE account of the NRI account holder where the instruments issued to the NRE account holder are supported by encashment certificate issued by AD Category – I / Category – II. So, now there is no question of limit for encashment.

Thanks & Regards
--
Alagar
Investment Banking
Karvy Investor Services Limited
Chennai
Tel: 044-28151034/3445/3658
Moble: 919884731993/ 919790906827
e-mail: alagar.muthu@karvy.com

[FEMA][Revised FC-GPR, KYC report & FIRC]Reporting under FDI Scheme - Revised procedure - Amendment

Dear All,

Reporting under FDI Scheme - Revised procedure

Circular Summary by Mr. G. Thirupal, Practising Company Secretary

In a nut shell,
-Format is prescribed for Advanced Reporting
-Advanced reporting should be signed by Authorised Dealer, apart from company
-Advanced report is routed through Authorised Dealer
-KYC made must for allotments in specific format
-KYC should be signed by the remitting bank on behalf of the non resident
-FC-GPR is revised comprehensively
-Now FC-GPR should be filed with RBI directly
-Practising Company Secretaries are recognized in providing certificates.

The RBI vide its APDIR Circular No.44 dated 30th May 2008 amended provisions of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, to modify reporting requirement through Form FC-GPR.

As you aware that In terms of para 9 (1) A of Schedule I to the Notification, Indian companies are required to report the details of the amount of consideration received for issuing shares and convertible debentures under the Foreign Direct Investment (FDI) scheme to the Regional Office of the Reserve Bank in whose jurisdiction the Registered Office of the company operates, within 30 days of receipt of the amount of consideration. Further, in terms of Para 9 (1) B of Schedule ibid, the companies are required to report the details of the issue of shares / convertible debentures in form FC-GPR, to the Regional Office concerned, within 30 days of issue of shares / convertible debentures.

Further, RBI vide its A. P. (DIR Series) Circular No.40 dated April 20, 2007 has revised FC-GPR In order to capture the details of FDI in a more comprehensive manner. The reporting framework was again reviewed and further revisions were proposed and the revised draft of form FC-GPR was placed in public domain on March 14, 2008 inviting feedback from the public. Based on the feedback received, form FC-GPR has been revised. The revised form is enclosed at Annex I. Further, a standard format for reporting of the receipt of the amount of consideration for issue of shares / convertible debentures has been prescribed as Annex II. A format for the KYC report on the non-resident investor from the overseas bank remitting the amount required to be submitted along with the form FC-GPR has also been introduced (Annex III). The KYC report should, henceforth, be submitted at the time of reporting the receipt of the amount of consideration from the non-resident investor.

Accordingly, Indian companies are required to report the details of the receipt of the amount of consideration for issue of shares / convertible debentures in Annex II, together with a copy/ies of the FIRC/s evidencing the receipt of the remittance along with the KYC report on the non-resident investor in Annex III, through an AD Category – I bank, not later than 30 days from the date of receipt of the amount of consideration. The report would be acknowledged by the Regional Office concerned, which would allot a Unique Identification Number (UIN) for the amount reported.

The details of the issue of shares / convertible debentures should, henceforth, be reported in the revised form FC-GPR (Annex I). While forwarding form FC-GPR to the Regional Office concerned, the AD Category – I bank should ensure that the UIN is correctly indicated in the form. It is also clarified that the annual report of all investments which is to be filed in Part B of the revised form FC-GPR, which is hitherto to be submitted by June 30 every year, would now have to be submitted by July 31 every year.

Thanks & Regards
Alagar
Investment Banking
Karvy Investor Services Limited
Chennai
Tel: 044-28151034/3445/3658
Moble: 919884731993/ 919790906827
e-mail: alagar.muthu@karvy.com