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Writer's pictureArtha Institute of Management

BUSINESS NEWS -Weekly round up for professionals - Dec 3rd week

SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2024 

 

Amendment Regulations inter alia provides that every listed entity and its material unlisted subsidiaries incorporated in India shall undertake Secretarial Audit by a Secretarial Auditor who shall be a Peer Reviewed Company Secretary and shall annex a Secretarial Audit Report in such form as specified, with the annual report of the listed entity. On the basis of recommendation of board of directors, a listed entity shall appoint or re-appoint:

 

(i) an individual as Secretarial Auditor for not more than one term of five consecutive years; or

(ii) a Secretarial Audit firm as Secretarial Auditor for not more than two terms of five consecutive years, with the approval of its shareholders in its Annual General Meeting.

Further, according to the amended Regulations, Secretarial Compliance Report submitted to the stock exchange(s) on annual basis is signed only by the Secretarial Auditor or by a Peer Reviewed Company Secretary who satisfies the conditions as mentioned.

 

 

 

 Dabur India Limited - A plastic positive company

Since FY 2022-23, Dabur has been a plastic positive company, sustainably disposing more plastic than it uses for its product packaging. Dabur has continued Plastic Positivity by Processing 103% Post Consumer Plastic Waste in FY 2023-24. During the year, Dabur achieved significant milestones in plastic waste management, with approximately 73% of post-consumer plastic waste being recycled, and the remaining 27% safely disposed of through methods such as waste-to-energy and utilization in cement industries. Notably, Dabur’s commitment to Plastic Positivity led to the processing of 103% of post- consumer plastic waste in FY 2023-24, reflecting its dedication to sustainable practices.

 

 

Pro-rata and pari-passu rights of investors of AIFs

SEBI has specified the requirements of maintaining investors’ rights pro-rata to their commitment to the scheme, shall not be applicable in an investment of a scheme and distribution of proceeds of the investment to the extent an investor has been excused or excluded from participating in the said investment; or, an investor has defaulted on providing his/her pro-rata contribution for the said investment.

 

 

ACIT, Central Circle, Ghaziabad  vs. Al-Dua Food Processing Pvt. Ltd. decided by ITAT Delhi

 

Merely comparing current Gross Profit and Net Profit rates to prior years without corroborative evidence is insufficient to reject books of account.

 

Facts of the Case:

 The assessee business were incorporated in the year 2005 under the Companies Act, 1956, engaged in exporting meat and meat products, with a processing plant in Aligarh, UP. The assessee purchases raw meat from suppliers, mainly on a per-kilogram basis. The Assessment Year in Dispute, the assessee declared Gross Profit (GP) of 5.89% and Net Profit (NP) of 1.72% compared to preceding year Gross Profit (7.19%) and Net Profit (2.35%), there was a decline in the Net Profit and Gross Profit ratio as compared to previous year.

The Assessing Officer’s (AO) Observations that there is significant cash withdrawals suggested possible violations of Section 40A(3). Accordingly, the Books of account were rejected under Section 145 of the Income Tax Act, 1961.

Further, the AO applied an estimated Net Profit rate of 4% and made an addition of Rs. 23,47,88,621/-. Also, alleged cash payments of Rs. 12.04 crore in violation of Section 40A(3)

 

CIT(A)’s Decision: After reviewing submissions, CIT(A) found that only Rs. 2.76 crore (0.33% of purchases) was made in cash, not Rs. 12.04 crore as claimed by the AO. Accordingly, deleted the additions made by the AO.

 

 

ITAT Findings:

• Observations on NP and GP:Merely comparing current GP and NP rates to prior years without corroborative evidence is insufficient to reject books of account. The decline in profit margins was explained in detail by the assessee, and the reasons were accepted by CIT(A).: Merely comparing current GP and NP rates to prior years without corroborative evidence is insufficient to reject books of account. The decline in profit margins was explained in detail by the assessee, and the reasons were accepted by CIT(A).

• Cash Payments: Out of total purchases, 99.67% were made via bank transactions, leaving only 0.33% in cash payments. The AO’s claim of Rs. 12.04 crore in cash payments was factually incorrect.

• Section 80IB Exemption: The assessee is eligible for a deduction under Section 80IB, and any addition to profits would still result in the same tax liability due to this exemption.

• Rejection of Books of Account: The AO’s rejection of the books was not supported by substantive evidence.

 

Conclusion: The Tribunal upheld the findings of the CIT(A) and dismissed the Revenue’s appeal. The additions made by the AO were deleted, and the explanation provided by the assessee for lower profits was accepted.

 

 

 

Rajive Raturi (Petitioner) Versus Union of India & Ors. (Respondents) decided by SC

 

Writ Petition 

 

Accessibility for Person with Disabilities (PWDs) as Fundamental & Human Right

 

 

Judgement

This judgment arises from a Writ Petition instituted in 2005 seeking directions to ensure meaningful access to public spaces for persons with disabilities, Hon’ble Apex Court inter alia observed that accessibility is not merely a convenience, but a fundamental requirement for enabling individuals, particularly those with disabilities, to exercise their rights fully and equally. Without accessibility, individuals are effectively excluded from many aspects of society, whether that be education, employment, healthcare, or participation in cultural and civic activities. Accessibility ensures that persons with disabilities are not marginalised but

are instead able to enjoy the same opportunities as everyone else, making it an integral part of ensuring equality, freedom, and human dignity. By embedding accessibility as a human right within existing legal frameworks, it becomes clear that it is an essential prerequisite for the exercise of other rights.

Further, Supreme Court said that the inclusion of accessibility within the fundamental rights framework ensures that PWDs are entitled to full participation in society under Articles 14, 19, and 21 of the Constitution. Article 14 upholds equal access to spaces, services, and information; Article 19 guarantees the freedom to move and express oneself; and Article 21 ensures the right to live with dignity. Together, these provisions guarantee not only formal equality but also substantive equality, which requires the state to take positive steps to ensure that individuals can enjoy their rights fully, irrespective of disabilities. This Court in

a plethora of judgments has repeatedly recognized that the right to dignity and the right to a meaningful life under Article 21 necessitate conditions that enable PWDs to enjoy the same freedoms and choices as others.

 

Thus, the right to accessibility is foundational, enabling PWDs to exercise and benefit from other rights enshrined in Part III of the Constitution.

 

 

Nearly 11.6 Lakh Women Directors associated with Public and Private companies

 

The cumulative number of women directors in listed companies, un- listed public companies and private companies as on 30 November 2024 are as follows;

Category Women Directors

Listed Public companies 8,672

Unlisted public companies 46,939

Private companies (including OPCs) 11,11,040

The Ministry of Corporate Affairs, with a view to encourage women participation in decision making at various levels in companies, has included the following provisions in the Companies Act, 2013:

• Second proviso to sub-section (1) of section 149 of the Companies Act, 2013 (Act) provides that prescribed class of companies shall have at least one-woman director.

• Further, as per Rule 3 of Companies (Appointment and Qualification of Directors) Rules, 2024, every listed company and every other public company having paid up share capital of Rs. 100 crore or more or having turnover of Rs. 300 crore or more, is required to appoint

at least one-woman director.

• If a company makes default in complying with this provision of the Act, the company and every officer of the company who is in default, is liable for

 

 

Prohibition of Single Gender Board/Ceiling on Single Gender Board-International Regulatory Framework - different countries

❖ Stock Exchange of Hong Kong Limited’s (SEHK) Corporate Governance Code and Listing Rules, which prohibit single-gender boards among listed companies.

❖ EU Directive mandates large listed EU companies that do not meet the target of 40% among non- executive board members or 33% among all directors of the under-represented sex by 30 June 2026 have to ensure fair and transparent selection procedures for the selection of candidates for board positions.

❖ Chile prescribes 60% limit on the representation of a single gender on the boards of public

companies and state-owned societies.

❖ As per Kenya’s Capital Markets Act, 2015, no gender should occupy more than two-thirds of boardroom seats in state-owned companies or those in which the government is the majority owner.

 

E-Shram Portal: World’s Largest Database of Unorganised Workers

 

 

 

The E-Shram Portal is a flagship initiative by the Government of India to support and empower the unorganized workforce, which forms the backbone of the nation’s economy. Launched by the Ministry of Labour and Employment on 26th August 2021, this portal is designed to create a comprehensive National Database of Unorganised Workers (NDUW), verified and seeded with Aadhaar, enabling the delivery of targeted welfare schemes and benefits. By leveraging technology, the E- Shram Portal ensures that workers gain access to social security, job opportunities, and financial inclusion, fostering a more equitable and resilient labor ecosystem. Registration on the E-Shram portal is free of cost.

 

A total of Rs. 704.01 crores were allocated for NDUW for the period FY 2019-20 to FY 2024-25. By December 19, 2024, the E-Shram portal has 30,48,02,313 registrations. Beneficiaries can register themselves by visiting e-SHRAM portal (www.eshram.gov.in) or by visiting nearest Common Services Centres (CSCs) & State Seva Kendras (SSKs).

 

 

 

 

LinkedIn appeals Corporate Ministry's order for SBO norms violation

 

LinkedIn has appealed against the order of the Ministry of Corporate Affairs that held it in violation of Significant Beneficial Ownership (SBO) norms and penalised Microsoft’s CEO Satya Nadella and LinkedIn’s chief Ryan Roslansky, among seven others. On May 22, 2024 the Ministry of Corporate Affairs (MCA) imposed a fine of Rs 27.1 lakh on Nadella and eight other executives for violating SBO norms related to LinkedIn Technology Information, according to an order by RoC for Delhi and Haryana.

 

 

Case laws

 

 

 

1. Companies Act

 

Jyoti Limited [Appellant(s)] Vs. BSE Limited & Anr [Respondent(s)]

 

Approval of the Shareholders would be Mandatory before the Shares are accepted for Listing

 

Facts

The appellant-Jyoti Limited applied for listing of certain equity shares to the Bombay Stock Exchange1 but the application to that effect was not accepted for the reason that the appellant had not taken in principle approval from the Stock Exchange and that the appellant had not even taken the approval of the shareholders for the allotment of the shares to the Asset Reconstruction Private Limited (RARE). The above order of the BSE rejecting the application

of the appellant for the listing of shares was upheld and confirmed by the Securities Appellate Tribunal by the order impugned. Thereafter Appellant appeal to the Supreme Court.

Order

Hon’ble Supreme Court ruled that the conversion of the debt into additional shares had taken place with the agreement of the appellant company and RARE, and it is on the basis of such an agreement between the parties that a resolution was passed on 02.05.2018 by the Board of Directors of the appellant company accepting the proposal to convert the debt into shares and to allot them in favor of RARE, thus, resulting in increase of the equity capital of the appellant company. Even the application for listing of the aforesaid additional shares was made by the appellant company to the BSE meaning thereby that the proposal for increasing the subscribed capital of the company by converting part of the debt into equity shares, as aforesaid, was initiated by the appellant company itself and not actually by RARE. Therefore, the proposal was that of the company only. Accordingly, as contemplated by Section

62(1)(c) of the Companies Act, 2013, the approval of the shareholders would be mandatory before the shares are accepted for listing on the BSE.

 

Hon’ble Court said that insofar as the other ground for rejection of the application is concerned, that is to say, for want of approval of the BSE, the Securities Appellate Tribunal has returned a clear finding that the approval of the BSE is necessary in view of Regulation 28 of the SEBI (Listing Obligations and Disclosure\ Requirements) Regulations, 2015

and we do not have different opinion on it rather we accept the said finding which is not perverse in any manner.

 

In view of the aforesaid facts and circumstances, Apex Court opined that no error or illegality has been committed either by the BSE or the Securities Appellate Tribunal in refusing to accept the request of the appellant company for] the listing of the shares at the Stock Exchange inasmuch as Section 62 of the Companies Act stands duly attracted and

in the light of sub-clause (c) of sub-section (1) of Section 62 of the Companies Act, special resolution of the shareholders is necessary which is lacking in the instant case.

 

 

 

2. SARFAESI ACT

 

Celir LLP{Petitioner(S)} Vs. Mr. Sumati Prasad Bafna & Ors{Respondent(s)} -Supreme Court of India

 

 

Confirmed Sale Cannot be Set Aside under SARFAESI Act & it can only be interfered with when there was any fraud or collusion

 

Judgement

In the above case Hon’ble Apex Court reliance placed upon the case of PHR Invent Educational Society v. UCO Bank reported in (2024) 6 SCC 579, wherein it was reiterated that an auction-sale which stands confirmed can only be interfered with when there was any fraud or collusion, and entertaining of issues regarding the validity

of such auction would amount to reopening issues which have achieved finality. The relevant observations read as under: -

 

“In our view, the High Court ought to have taken into consideration that the confirmed auction-sale could have been interfered with only when there was a fraud or collusion. The present case was not a case of fraud or collusion. The effect of the order of the High Court would be again reopening the issues which have achieved finality.

Supreme Court inter alia observed that any sale by auction or other public procurement methods once already confirmed or concluded ought not to be set-aside or interfered with lightly except on grounds that go to the core of such sale process, such as either being collusive, fraudulent or vitiated by inadequate pricing or underbidding. Mere irregularity or deviation from a rule which does not have any \ fundamental procedural

error does not take away the foundation of authority for such proceeding. In such cases, courts in particular should be mindful to refrain entertaining any ground for challenging an auction which either could have been taken earlier before the sale was conducted and confirmed or where no substantial injury has been caused on account of such irregularity.

 

Apex Court said that in the present lis, apart from the want of statutory notice period, no other challenge has been laid to the 9th auction proceedings on the ground of it being either collusive, fraudulent or vitiated by inadequate pricing or underbidding, thus, the auction cannot be said to suffer from any fundamental procedural error, and as such does not warrant the interference of this Court, particularly when the plea sought to be raised to challenge the same could have been raised earlier.

 

 

 

 

3. PAYMENT OF GRATUITY ACT

 

Sadhoo Beedi Enterprises (Petitioner) Vs The Controlling Authority Under the Payment of Gratuity Act & Ors (Respondent) - High Court of Kerala

 

'Gratuity' is a gratuitous lump sum payment given by an employer to an employee. Law does not provide for payment of gratuity in installments

 

 

Judgement

The question to be considered in this writ petition is whether gratuity can be paid in installments. The Hon'ble HighCourt referred to the case of Maniben Maganbhai Bhariya v. District Development Officer, Dahod and Others , while considering the object and scope of the Payment of Gratuity Act, 1972, Hon'ble Supreme Court observed as follows:

“7. Act, 1972 on the genre of Statutes like The Minimum Wages Act, Employees State Insurance Act, etc. is a welfare measure to secure social and economic justice to employees to assist them in old age and to ensure them a decent standard of life on retirement.

8. Derived from a Latin word 'Gratuitas', the term Gratuity means a 'Gift.' In the industrial sector, gratuity is considered as a gift from the employers to their employees. Gratuity is a lump sum payment paid by an employer to the employee for his/her past dedicated services. It is a gesture to appreciate the efforts of a person towards the betterment, development

and prosperity of an establishment and that is the reason for which gratuity is considered to be a social security, and with passage of time, it has become a statutory obligation on the part of employers.”

 

Further Hon’ble High Court held that 'Gratuity' is a gratuitous lump sum payment given by an employer to an employee upon the termination of his employment due to superannuation, retirement, resignation, death, or disablement caused by an accident or disease. While pension is payable periodically, gratuity is paid only once on termination of employment. The law does not provide for payment of gratuity in installments as the purpose of gratuity is to serve as a retirement or terminal benefit ensuring immediate financial support to the employee or their dependents, as the case may be. It provides financial protection during the autumn years of a retired employee's life. Financial distress of the employer is not at all an excuse for denying or delaying payment of gratuity, which provides socio-economic security

to the employee. Gratuity is to be paid in lump sum, that too, within 30 days from the date it becomes payable.

 

 No further time can be granted to the petitioner for payment of gratuity as ordered in Ext.P2. Pursuant to the interim order of this Court dated 21.10.2024, the petitioner has deposited an amount of Rs. 20,000/- with the 1st respondent as condition for stay of further proceedings pursuant to Ext.P5. The petitioner shall deposit the balance amount along with interest before the 1st respondent within 30 days from the date of receipt of a copy of this judgment. On such deposit, the 1st respondent shall disburse the amount to the 2nd respondent within a period of ten days therefrom.

 

 

 

 

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