Disqualified directors of debarred companies may approach courts



The government’s move to debar directors of companies who have not filled annual returns for three successive years is likely to be challenged in courts citing retrospective application of Companies Act, 2013. As a general rule, law is always applicable prospectively, unless any prior date is mentioned specifically says Sumit Naib. 



According to corporate law experts, Section 164 (2) (a) of the Companies Act, 2013, which pertains to disqualification of directors due to non-filing of financials and annual returns for three years is applicable to all types of companies including private ones with effect from April 1, 2014.
      The government’s move to debar directors of companies who have not filled annual returns for three successive years is likely to be challenged in courts citing retrospective application of Companies Act, 2013. As a general rule, law is always applicable prospectively, unless any prior date is mentioned specifically says Sumit Naib.

According to corporate law experts, Section 164 (2) (a) of the Companies Act, 2013, which pertains to disqualification of directors due to non-filing of financials and annual returns for three years is applicable to all types of companies including private ones with effect from April 1, 2014. Prior to the enactment of this new section under the Companies Act 2013, the corresponding section under the Companies Act, 1956 was applicable only to public companies The Ministry of Corporate Affairs earlier this month struck off the names of around 209,000 companies from the records, found to be without any business activity, including  those that had not filed financial statements for three years or more. Subsequently the directors, or the authorized signatories, of the debarred companies have been disqualified from being appointed in any other company in that position.

As per government estimates, at least 200,00-300,000 disqualified directors shall get debarred in the process. Many directors feel the period of default being considered while issuing the list of defaulters is prior to the enactment of section 164 under Companies Act, 2013. Accordingly, such directors may approach the court seeking relief on this ground, says Naib. One could take a view that to the extent the disqualification relates to non-compliance by private companies the law was introduced only with effect from FY 2014-15, he says. However, if the director was appointed after introduction of Companies Act, 2013 and at that point such non-compliance existed he or she would still stand disqualified points out Ahmed.

Legal experts note that during introduction of new company law in 2014 the government had introduced a Company Law Settlement Scheme – a two–month window – for companies that defaulted on filing statements to come good by paying a lower fee. However for companies that took advantage of this scheme, the provisions of Section 164 (2) would apply only for prospective defaults if any, says Ahmed. As per Companies Act, 2013, any aggrieved director could apply to the National Company Law Tribunal (NCLT) within three years of debarment order If, in the opinion of NCLT, removal is not justified it may order restoration of the name of the company in the Register of Companies.

Source: https://www.unimarkslegal.com/blog/corporate-law-2/disqualified-directors-debarred-companies-may-approach-courts/ 
                                                                                                                        

                                                                                                                                                  
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INSOLVENCY AND BANKRUPTCY CODE – KEY FACTORS

INSOLVENCY AND BANKRUPTCY CODE

An effective and efficient insolvency regime is the foundation of a strong economy. Though there are several laws and forums in India deals with financial breakdown and insolvency of companies, it failed to find effective solutions and timely recovery of defaulted payments and credits. To improve Business environment in India and to gain confidence of domestic and foreign investors the GOI specially constituted ‘Bankruptcy Law Reforms Committee’ (BLRC) under Ministry of Finance. 


INSOLVENCY AND BANKRUPTCY CODE

An effective and efficient insolvency regime is the foundation of a strong economy. Though there are several laws and forums in India deals with financial breakdown and insolvency of companies, it failed to find effective solutions and timely recovery of defaulted payments and credits. To improve Business environment in India and to gain confidence of domestic and foreign investors the GOI specially constituted ‘Bankruptcy Law Reforms Committee’ (BLRC) under Ministry of Finance. The Committee introduced the Insolvency and Bankruptcy Code Bill in November 2015, replacing the existing framework of insolvency proceedings and focusing creditor driven insolvency resolution. The IBC offers a standardized, comprehensive financial condition legislation encompassing all corporations, partnerships and Sole Proprietorship. One in every of the elemental options of the Code is that it permits creditors to assess the viability of the debtors and encourage reconciliation for its revival or a speedy liquidation. The IBC creates a brand new institutional framework, consisting of insolvency professional, regulator professionals, and adjudication forum to facilitate a proper and time bound insolvency resolution process and liquidation.

INSOLVENCY AND BANKRUPTCY

Definition of Insolvency:

The condition of one who is unable to pay his debts as they fall due and his insufficiency to discharge all debts he owned in the usual course of trade and business is termed as insolvent. In a nutshell, Insolvency is the condition of having more debts than assets.

Signs of Insolvency

There are two main test for insolvency, the first test is that the company is unable to its debts as and when they need to do, the second test would be that the Company’s assets are less than its liability. One of the warning signs of insolvency would be the Company not being able to pay their debts to creditors including non-compliance with payment within the deadline. The other sign would be the creditor threatening legal action or they have commenced steps to try to liquidate the company to compensate the dues.

However, there is no single point to determine at what point a person or a company became insolvent as there are several indicators of is detected during the investigation  by insolvency professionals. A detailed analysis of the financial information would establish the exact date upon which the Company or person became insolvent.

During the investigation, the liquidator will identify the indicators of insolvency such as whether the company or a person;

• suffering recurrent losses every quarter/financial year
• failed to pay taxes and other obligations required under law
• issued dishonoured or post dated cheques
• had set-off or arrangements for his loans
• exceeding his due date of payment to creditors
• availing multiple loans intending to stabilize the business and etc.,

Bankruptcy :
Bankruptcy is a legal method of discharging individual or company’s debts and obligations to pay back money that was loaned to them. It allows people who have found themselves in deep financial trouble to be able to discharge their debts and have a fresh start.  Part III of IBC deals with insolvency resolution process and bankruptcy process relating to individuals and partnership firms. It aimed to provide an opportunity to individual debtors having assets and income lower than a specified amount and offers them a fresh start by discharging them from the qualified debts.

In earlier, the laws deals with bankruptcy of individuals was divided geographically under two different legislations being (i) The Presidency Town Insolvency Act 1909, which dealt with Calcutta, Bombay and Madras and; (ii) The Provincial Insolvency Act, 1920 for rest of India. The above acts are now repealed by the Code.

Definition of Bankruptcy

The debtor creditor can initiate the insolvency resolution and bankruptcy proceedings under Section 78(1) of the IBC. The minimum debt to initiate the process may vary upto Rs. 1 Lakh.

Section 79(3) defines bankrupt as,

  • An Individual debtor who has been adjudged as bankrupt by a bankruptcy order passed by the DRT under Sec 126 of the Code. [Sec 79(3)(a)]
  • In case of partnership firm, each of the partners of a firm, where a bankruptcy order under section 126 has been made by the DRT against the said firm. [Sec 79(3)(b)]
  • Any person adjudged as an undischarged insolvent [Sec 79(3)(c)]

STRUCTURE OF CODE

Four different forums—High Courts, Company Law Board (CLB), Board for Industrial and Financial Reconstruction (BIFR) and Debt Recovery Tribunal (DRT)—have overlapping jurisdiction, which gives rise to systemic delays and complexities in the process. The code overcomes these challenges and would reduce the burden on the courts as all litigation will be filed under the code before the National Company Law Tribunal (NCLT) for corporate insolvency and insolvency of LLPs, and before DRT for individual insolvency and insolvency of unlimited partnership firms.

IMPORTANCE OF THE CODE

IBC Considered as second most important piece of legislature, next only to the goods and services tax (GST) bill. Even though the impact of the new rules may not be visible immediately, they will have long-term implications. There was a systematic vacuum in the entrepreneurial and business eco-system that needed to be plugged. The move will also deepen the bond market in the country besides giving confidence to the creditors and investors in India and abroad.

Conclusion

Bankruptcy and Liquidation are the worst scenario which could happen to any company or Individual. However, the IBC aims to offer an alternate and timely solution is for both the debtors and creditors. It envisages a complete shift of existing ‘Debtor in possession’ to a ‘Creditor in control’ regime.  Overall, the IBC 2016 is a commendable step aimed to promote ease of doing business in India and it would definitely boost the confidence of lenders, creditors, foreign companies and at large.

Source: https://www.unimarkslegal.com/blog/property-law/insolvency-professional-lawyers/

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Lawyers in Chennai | Have you got your contracts right?

Have you got your contracts right?
Bad contracts could be detrimental to any business. Not to mention “enforcing contracts” in India is an uphill fruitless endeavor. It’s even getting worse for the small startups in the growth phase have little resources to fight legal cases when the contract goes wrong. Considering the current legal scenario which takes it own phase in delivering the justice, the start-ups can at least do is to create and govern contracts in a more deterministic manner.

Have you got your contracts right?

Bad contracts could be detrimental to any business. Not to mention “enforcing contracts” in India is an uphill fruitless endeavor. It’s even getting worse for the small startups in the growth phase have little resources to fight legal cases when the contract goes wrong. Considering the current legal scenario which takes it own phase in delivering the justice, the start-ups can at least do is to create and govern contracts in a more deterministic manner.

What would go wrong?

Any error in a contract could undermine its legality and affect the abilities of parties while enforcing it before the Court of Law or before Arbitration. The affected party by such mistake will have not option but seeks to repeal or cancel the contract. In all parts, you may end up in facing ordeal and consequently facing business delays and waste of resources.

Why Oral Contracts are cardinal sin?

Promises are part and parcel of the business cycle but it seen broken easily by the parties who swears it. Building your business takes superhuman effort and you cannot afford to believe that your business is protected based on oral assurance by your co-founders, employees, suppliers and partners. Failed promises can wind-up your business. Law strictly recognizes oral contracts and nothing else, of-course in exceptional cases court considered oral contract but you cannot afford to take that chance if you take your business seriously. Also, writing contracts with the consultation of lawyer will make you to think through issues that did not come to your mind during the initial phase.

How things could go wrong?

Imagine, as a founder you are working day and night along with your partners. Co-founders or freelancers to create your product or service visible on the market and it did not strike your mind to have a contract to protect the know-how, trademark, inventions and etc., of the products/services developed during the initial stage. Soon one of the founder or partner flips about the success of business or dispute your ownership as he gets into some other idea or misconceived thoughts. When he or she chooses to leave the venture but refuses to assign the rights of his part in the work then you will end up in losing both the Intellectual property and immovable property of your business. This scenario is very often and we have seen many start-ups dies in womb or end up in an endless legal battle. So, having no written agreement/contract, you will have no space for negotiation, ground or legal recourse and no remedy.

Negotiation and Contract – What you should watch out?

Negotiation is imperative and is a combination of proposals, counter proposal and discussions before arriving to final conclusion which finally written as a part of contract. So, watch out for these three things when you negotiate a contract:

  1. Is there is lack of clarity or ambiguous point made during the discussion hoping that it would vanish sooner or later?
  2. Is there any undisclosed term or improper data in the earlier stage of proposal which was not altered or modified before signing the contract.
  3. Is there any orally agreed terms earlier but not written in the concluded contract.

The above might sound “minor” but indeed not as such imprudence could cause major loss when a contract dispute to be decided before the Court of Law.

So, have in mind it is near to impossible to substantiate oral agreements in the absence of tangible proof. Also, if some essential term is missing in your contract then the interpretation of court might be very different from what it was actually intended in the contract. If you contract does not envisage what is failure of performance, how it attributes the breach of contract, the form of remedy, forum of dispute resolution and option to terminate if things goes wrong then you must rethink about writing one in the first place.

Making contract before shaking hands- How do you do it?

Drafting business contracts could be risky when you are not well-versed in the legal issues and laws of the land. Admittedly, law is complex and it is difficult to learn or understand as it is made of multiple statutes legislated and layered with precedents of judicial system. Therefore, it is sensible to have a competent lawyer on board to create legally enforceable contracts instead of relying the free templates of agreements.

source:http://rightsandlegal.blogspot.com/2016/06/adoption-in-hindus-adoption-hindus.html

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How to get divorce in 30 days


Divorce Law Procedures in India



How to get divorce in 30 days?

Yes! you heard it right… How to get divorce in 30 days? This is the most frequently asked question by most of the client clients to their lawyers practicing Family Law. The question is pretty much like “Sir, whatever it takes I want my divorce forthwith… Can you do it?”

So what the lawyers can say?

I will get back onto this later but let’s just have a glimpse on the divorce law in India. Divorce cases are one of Family law proceedings based on a personal law which takes into considerations of the customs, beliefs and tenets of the religion of the parties. Though the procedures of divorce varies religion to religion, the courts in India keep the litigants on the same queue no matter of their religion.

Remember… I am talking about the contested divorce case but not mutual divorce which has a standard procedures. Say, if you want to end your matrimonial life and there are list of grounds listed by law which you can choose from to file a divorce and again I am not getting into those details. You will find plethora of articles written on the grounds of divorce. Lets just assume, you have one of the grounds which you strongly hold to and you say to your lawyer with a brave face “Sir… “let’s fight it in court” expecting it handed over to you in silver plate but in fact a long-drawn battle awaits when your spouse decides to contest the case tooth and nail.

What happens in Court?

Usually, the divorce petitions are spiced up its with melancholic statements depicting awful life of the poor petitioner against the villainous spouse who ought to be motivated or manipulated or both by his/her in-laws and relatives. So, this what usually happens in family courts when you have your day in Court if with “incompetent” counsel (if you are really unlucky)

  1. Petition for divorce drafted and filed in court and gets document number after due scrutinization which would take at least 5 to 7 days.
  2. Summon issued to the other party for appearance (usually after 45 days from the date of filing of the petition) before the court to submit the response to the divorce petition.
  3. Court day 1 – Parties are called to appear before the judge.

THE JUDGE: Both Present?… okay go for mediation.

YOU: But Sir…I want the divorce imm…

YOUR LAWYER: Hushhhh…. You cannot address the judge directly… Come outside let’s talk… Outside the hall…

YOU: (with embarrassment) Sir… what is this.. Why should I need mediation when I am not even interested… and blah.. blah.. blah….

YOUR LAWYER: Hushhhh…. it is usual and mandate procedures which you must comply.. Just go inside and tell them you are not interested in mediation and by the way the lawyers are not allowed inside the mediation room and I also have an another case to handle in the adjacent court. I will be right back in a moment… You are with the pathetic face at the waiting hall sitting/standing before your spouse and in-laws who might be staring/laughing/mocking at you and they may also want to rip you into pieces if they could get a chance…

MEDIATION ROOM: Two sexagenarians (male and female) greeting you with smile/no smile and peeks into your papers and starts with their boilerplate template “So… Children what happened and why do you…) 30 minutes later you are coming out of the room finding your lawyer not there and you tried to reach him through few calls, sms, whats app messages (blue ticked but no response) and finally find him in facebook messenger (oh.. there he is…). He finally comes and

YOU: Sir… why they gave an another day for mediation that too after 45 days and you know what happened inside…

LAWYER: Hushhhh.. I know.. I know… Just leave it to me… I will do what I can.… by the way did you pay your hearing fees…

YOU: Palm face.

This is just a day one and a tip of the iceberg awaiting for more to come. What happens later is altogether a different story for which I might need to write a book. But in a nutshell.. This is what usually happens.. If you you still persist on divorce during the second day of mediation then the matter will be referred back to the court for trial and your spouse should file their version of defense against your petition and the trial commences for deposition, cross examination of both the parties and their witnesses and the final arguments in the midst of miscellaneous petitions, adjournments, court boycotts, absence of lawyers, absence of judges court holidays and etc., etc., etc., the case will gets over in 2 to 3 years in minimum assuming there is “no” transfer of cases, ex-parte orders. set-aside ex-parte petitions and orders, dismissed for default, restoration of cases, miscellaneous petitions and appeal against the miscellaneous petitions if the above all happens, then you might see the verdict in 5 to 7 years.. And, there is always an appeal before the High Court and Supreme Court and in case of facing these appeals you have the best chance of staring at your 50’s on the day your case gets over.

So, coming back to the question “How to get divorce in 30 days?”

ME: You still ask me that…

source: https://www.unimarkslegal.com/blog/family-law/how-to-get-divorce-in-30-days/

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