SC rules that leave encashment should not be included in wages for PF calculation

Credits to Mr. CS Ravichandran of AIG.

In a significant ruling reducing the deductions on the salary sheet , the Supreme Court has held that the money got by an employee from encashing earned leave could not be taken as wages for calculation of provident fund (PF) contributions. Deciding a bunch of petitions in favour of the employees, a bench comprising Justices Arijit Pasayat and P Sathasivam rejected the stand of regional PF commissioner that the amount received on encashment of earned leave had to be taken into account for the purpose of calculating PF contributions.
The bench allowed the appeals -- the lead case being the one filed by Manipal Academy of Higher Education -- saying "the inevitable conclusion is that basic wage was never intended to include amounts received for leave encashment". It took note of a Mumbai case where an employer was including the amount of leave encashment as emoluments for the purpose of calculating PF dues from the employer as well as employees' contribution. When the Employees' Union took up the issue with the commissioner, it was informed that the provision did not provide for deduction of PF on leave encashment.
"Where the wage is universally, necessarily and ordinarily paid to all across the board, such emoluments are basic wages. Conversely, any payment by way of a special incentive or work, is not basic wages," the court said.

Civil Appeal No. 1832 of 2004 With Civil Appeal Nos. 2535, 2536, 2539, 2540 and 2541 of 2004
MANIPAL ACADEMY OF HIGHER EDUCATION
Vs
PROVIDENT FUND COMMISSIONER
Arijit Pasayat and P Sathasivam, JJ.
Dated : March 12, 2008
PF Contribution: Basic wages:
(a) Where the wage is universally, necessarily and ordinarily paid to all across the board such emoluments are basic wages.
(b) Where the payment is available to be specially paid to those who avail of the opportunity is not basic wages. By way of example it was held that overtime allowance, though it is generally in force in all concerns is not earned by all employees of a concern. It is also earned in accordance with the terms of the contract of employment but because it may not be earned by all employees of a concern, it is excluded from basic wages.
(c) Conversely, any payment by way of a special incentive or work is not basic wages.

"The inevitable conclusion is that basic wage was never intended to include amounts received for leave encashment."

For detailed judgment, click http://thisisvj.googlepages.com/basicwagewasneverintendedtoincludeam.doc

Changes in definition of QIB under SEBI DIP Guidelines

The SEBI vide its circular dated today, National Investment Fund (NIF), a fund set up by the Government of India vide Gazette Notification no. F. No. 2/3/2005-DD-II dated November, 23, 2005 , has been included in the definition of QIB, in the SEBI (DIP) Guidelines. NIF is a fund consisting of the proceeds from disinvestment of Central Public Sector Undertakings, which would invest in equity in accordance with broad investment guidelines provided by the Government of India.

SEBI has issued necessary instructions to all registered Merchant Bankers in this regard.
Accordingly the SEBI amended the definitionof QIB to insert NIF in definition part. you can access entire text of the ciruclar at http://groups.google.com/group/cschennai/files.

Erstwhile definition & Understanding:
2.2.2B(v) of SEBI (DIP) Guidelines, 2000 defines ''Qualified Institutional Buyer'' shall mean:
a. public financial institution as defined in section 4A of the Companies Act, 1956;
b. scheduled commercial banks;
c. mutual funds;
d. foreign institutional investor registered with SEBI;
e. multilateral and bilateral development financial institutions;
f. venture capital funds registered with SEBI.
g. foreign Venture capital investors registered with SEBI.
h. state Industrial Development Corporations.
i. insurance Companies registered with the Insurance Regulatory and Development Authority (IRDA).
j. provident Funds with minimum corpus of Rs. 25 crores
k. pension Funds with minimum corpus of Rs. 25 crores.

Yes....analysing the definition, it uses the word "SHALL" making the following meaning, a mandatory one and very strict. Then uses the word "MEANS", so its an Exhaustive Definition (NOT an Inclusive Definition); i.e., the scope of the term is limited to extent which is listed below. So, now because of this amendment, NIF = QIB. Keep Understandin....Vj

Thanks & Regards
Alagar
-- Karvy Investor Services Limited
G-1 Swathi Court22, Vijayaraghava Road
T.Nagar, Chennai - 600 017
Tel: 044-28151034/3445/3658
Moble: 919884731993
e-mail: alagar.muthu@karvy.com

Changes in FDI Policy - DIPP Press Notes Series 2008

Dear All,

Department of Industrial Policy & Promotion has issued 6 Press Notes under 2008 series on 12^th March 2008. Brief amendments in FDI policy in said press notes are as follows:

Press Note 1 (2008): Change in FID on Credit Information Company (CIC):

As per PN-1 of 2008, Foreign Investment is permitted to the extent of 49% through composite ceiling i.e both Foreign Direct Investment and as well Investment by FII through portfolio investment, subject to the approval from FIPB and necessary regulatory clearance from RBI and subject to the following conditions.

• Portfolio investment by FII should not exceed 24% at any case.
• Further no such FII should hold more than 10% either directly or indirectly.
• Any acquisition in excess of 1% is subject to the reporting to the RBI.
• FII's who are going to invest in CICs Companies, should not seek any representation in the Board based on their shareholding.

Press Note 2 (2008): Foreign Investment on Commodities Exchange:

As per PN-2 of 2008, Foreign Investment is permitted to the extent of 49% through composite ceiling i.e both Foreign Direct Investment and as well Investment by FII through portfolio investment, subject to the specific approval of the Government and necessary regulatory clearance from RBI and subject to the following conditions.

• FII can invest only through secondary market i.e Portfolio investment route only to the extent of 23% at any case.
• Investment under FDI scheme will be allowed to the extent of 26%.
• No foreign investor, including person acting in concert with can hold more than 5% either directly or indirectly.

Press Note 3 (2008): Clarification on FID in Industrial Park:

You may be aware of that as per press note 2 of 2000, 100% FDI is allowed for industrial park under the automatic route. Further through press note 2 of 2005, the Govt of India stipulated certain conditions for FDI upto 100% under the automatic route for development industrial projects subject to the terms and conditions as stipulated PN 2 of 2005. But, Companies which are in established industrial park are falling under 100% automatic route without complying with PN 2 of 2005.

Further through this PN 3 of 2008, it is clarified FDI will be permitted under the automatic route without complying with PN 2 of 2005 both for setting up industrial park and as well established industrial park.

Besides, DIPP has also issued press notes on the following subject, Press Note 4 (2008): Change in FDI Policy in Civil Aviation Sector, Press Note 5 (2008): Change in FDI Policy in petroleum and Natural Gas Sector, Press Note 6(2008: FDI Policy for mining of titanium bearing mineral and ores.

You can access entire text of press notes 2008 series at http://groups.google.com/group/cschennai/files in PDF format.

Thanks & Regards

Alagar

Investment Banking

Karvy Investor Services Limited
G-1 Swathi Court
22, Vijayaraghava Road
T.Nagar, Chennai - 600 017
Tel: 044-28151034/3445/3658
Moble: 919884731993
e-mail: alagar.muthu@karvy.com
website: karvy.com

for more information about cschennai visit to
http://groups.google.com/group/cschennai

RBI proposal of amending form FCGPR for your comment

Dear All,

Yes, the following proposal is approved now. Click here for details.

The Reserve Bank of India, today placed on its website for public comments, draft format for reporting ( ie Form FCGPR) foreign direct investments (FDIs).

In the revised form the class of investors has been broadened to include several new entities viz., foreign nationals, foreign companies, foreign institutional investors (FIIs), foreign venture capital investors (FVCIs) registered with SEBI, foreign trusts, private equity and other funds, pension/ provident funds, partnership / proprietorship firms, financial institutions, NRIs / PIOs. Secondly, the details of investment received in units of venture capital funds from FVCIs are proposed to be separately captured. Thirdly, Part B of the form has been modified so as to capture breakup of the details of foreign investor class. The date of filing of Part B of the form has been extended from June 30 of every year to July 31.

The Reserve Bank has invited feedback from all interested stakeholders on the draft format of FC-GPR. The feedback may be sent to the Chief General Manager, Foreign Exchange Department, Reserve Bank of India, 11th Floor, Shahid Bhagat Singh Road, Mumbai – 400 001 on or before March 31, 2008. The feedback may also be sent by fax (022-22610623/30) or by email

It may be noted that Foreign Direct Investments (FDIs) in India are permitted under the automatic and government/approval route. An Indian company issuing shares and convertible debentures to non-residents under automatic and government / approval routes is required to submit the details of the investment in a two-stage reporting procedure. In the first stage, receipt of funds has to be reported to the Reserve Bank of India within 30 days of receipt. In the second stage, the company has to file form FC-GPR with the Reserve Bank within 30 days from the date of issue of shares / convertible debentures.

In order to capture the details of FDI in a more comprehensive manner, form FC-GPR was revised in April 2007, in terms of which the AD Category – I bank in India receiving foreign remittance for issue of shares was required to obtain a Know Your Customer (KYC) report in respect of the foreign investor from the overseas bank remitting the amount. In the wake of the recent policy changes in foreign investment and also taking into account the suggestions and feedback received from various entities, form FC-GPR has now been further modified.

Link is available in this mail to access new form, respected members can give their comment to RBI in this regard.

Thanks & Regards

Alagar

Consolidated Updates flash

FEMA Master Circulars http://thisisvj.googlepages.com/MasterCircularRFO.pdf & http://thisisvj.googlepages.com/MasterCiruclar-remittancefacilitiest.pdf

UPDATES FROM Dr.KSR's DESK

Date: 11/03/2008	MCA	RBI	SEBI	Dept. of Commerce (DoC)	Dept. of Industrial Policy & Promotion (DIPP)
Circulars	Nil	---	SEBI/CFD/DIL/MB/IS/1/2008/11/03 Instructions to Registered Merchant Bankers on PAN card along with Public Issue applications	---	Nil
Notifications	Nil	Nil	---	Nil	Nil
Guidelines	Nil	Nil	Nil	---	---
Reports	---	---	Nil	Nil	---
Rules	Nil	---	Nil	Nil	Nil
Regulations	Nil	Nil	Nil	Nil	Nil
Master Circulars	---	Nil	---	Nil	Nil
Concept Papers / Papers for Discussion / Public Comments	Nil	---	Nil	Nil	Nil
Press Release	Nil	Nil	PR No.88/2008 SEBI instructs Merchant Bankers not to demand for photocopy of PAN card along with Public Issue applications	Nil	Nil

Date: 12/03/2008	MCA	RBI	SEBI	Dept. of Commerce (DoC)	Dept. of Industrial Policy & Promotion (DIPP)
Circulars	Nil	---		---	Nil
Notifications	Nil	Nil	---	Nil	Nil
Guidelines	Nil	Nil	Nil	---	---
Reports	---	---	Nil	Nil	---
Rules	Nil	---	Nil	Nil	Nil
Regulations	Nil	Nil	Nil	Nil	Nil
Master Circulars	---	Nil	---	Nil	Nil
Concept Papers / Papers for Discussion / Public Comments	Nil	---	Nil	Nil	Nil
Press Release / Press Note	Nil	Press Release: 2007-2008/1186 Respect Your Banknotes: RBI appeals to Public	Nil	Nil	Press Note No.1 (2008) Guidelines for foreign investment in Credit Information Companies Press Note No.2 (2008) Guidelines for foreign investment in Commodity Exchanges Press Note No.3 (2008) Guidelines for Foreign Direct Investment in Industrial Parks Press Note No.4 (2008) FDI Policy for the Civil Aviation Sector Press Note No.5 (2008) Rationalisation of FDI Policy for the Petroleum & Natural Gas sector Press Note No.6 (2008) FDI Policy for mining of Titanium bearing minerals and ores

Date: 10/03/2008	MCA	RBI	SEBI	Dept. of Commerce (DoC)	Dept. of Industrial Policy & Promotion (DIPP)
Circulars	Nil	---	Nil	---	Nil
Notifications	Nil	RBI/2007-2008/260 DPSS No.1405 / 02.10.02 / 2007-2008 Customer charges for use of ATMs for cash withdrawal and balance enquiry RBI/2007-2008/261 DPSS No. 1407 / 02.10.02 / 2007-2008 Use of electronic mode of payment for large value transactions	---	Nil	Nil
Guidelines	Nil	Nil	Nil	---	---
Reports	---	---	Nil	Nil	---
Rules	Nil	---	Nil	Nil	Nil
Regulations	Nil	Nil	Nil	Nil	Nil
Master Circulars	---	Nil	---	Nil	Nil
Concept Papers / Papers for Discussion / Public Comments	Nil	---	Nil	Nil	Nil
Press Release	Nil	Nil	Nil	Prohibition on Export of Basmati & Non-Basmati Rice – PR Dated 07/03/2008	Nil