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The Limited Liability Partnership (Amendment) Act, 2021

August 10, 2021

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The Limited Liability Partnership (Amendment) Bill, 2021 was introduced in Rajya Sabha on July 30, 2021.  The Bill seeks to amend the Limited Liability Partnership Act, 2008.  The Act provides for regulation of limited liability partnerships (LLP).  LLP is an alternative corporate body form to traditional partnership firms.  Under LLP, a partner’s liabilities are limited to their investment in the business.  The Bill converts certain offences into civil defaults and changes the nature of punishment for these offences.  It also defines small LLP, provides for appointment of certain adjudicating officers, and establishment of special courts.  Key features of the Bill include:

Certain offences decriminalised:  The Act specifies the manner of operations of LLPs, and provides that violating these requirements will be punishable with a fine (ranging between two thousand rupees and five lakh rupees).  These requirements include: (i) changes in partners of the LLP, (ii) change of registered office, (iii) filing of statement of account and solvency, and annual return, and (iv) arrangement between an LLP and its creditors or partners, and reconstruction or amalgamation of an LLP.  The Bill decriminalises these provisions and imposes a monetary penalty.

Change of name of LLP:  The Act states that the central government may direct an LLP to change its name on certain grounds (such as the name being undesirable or identical to a trademark pending registration).  Failing to comply with such direction is punishable with a fine ranging from Rs 10,000 to five lakh rupees.  The Bill removes some of these grounds, and empowers the central government to allot a new name to such an LLP instead of levying a fine.

Punishment for fraud: Under the Act, if an LLP or its partners carry out an activity to defraud their creditors, or for any other fraudulent purpose, every person party to it knowingly is punishable with imprisonment of up to two years and a fine between Rs 50,000 and five lakh rupees.  The Bill increases the maximum term of imprisonment from two years to five years.

Non-compliance of orders of Tribunal: Under the Act, non-compliance with an order of the National Company Law Tribunal (NCLT) is punishable with imprisonment up to six months and fine up to Rs 50,000.  The Bill removes this offence.

Compounding of offences:  Under the Act, the central government may compound any offence under the Act which is punishable only with a fine.  The amount imposed may be up to the maximum fine prescribed for the offence.  The Bill amends this to provide that a regional director (or any officer above his rank), appointed by the central government, may compound such offences.  The amount imposed must be within the minimum and maximum fine for the offence.  If an offence by an LLP or its partners was compounded, then a similar offence cannot be compounded within a three-year period.

Adjudicating Officers:  Under the Bill, the central government may appoint adjudicating officers for awarding penalties under the Act.  These will be central government officers not below the rank of Registrar.  Appeals against orders of the Adjudicating Officers will lie with the Regional Director.

Special courts:  The Bill allows the central government to establish special courts for ensuring speedy trial of offences under the Act.  The special court will consist of: (i) a Sessions Judge or an Additional Sessions Judge, for offences punishable with imprisonment of three years or more; and (ii) a Metropolitan Magistrate or a Judicial Magistrate, for other offences.  They will be appointed with the concurrence of the Chief Justice of the High Court.  Appeals against orders of these special courts will lie with High Courts.

Appeals to Appellate Tribunal:  Under the Act, appeals against orders of the NCLT lie with the National Company Law Appellate Tribunal (NCLAT).  The Bill adds that appeals cannot be made against an orders that have been passed with the consent of the parties.  Appeals must be filed within 60 days (extendable by another 60 days) of the order. 

Small LLP:  The Bill provides for formation of a small LLP where: (i) the contribution from partners is up to Rs 25 lakh (may be increased up to five crore rupees), (ii) turnover for the preceding financial year is up to Rs 40 lakh (may be increased up to Rs 50 crore).  The central government may also notify certain LLPs as start-up LLPs (as recognised through notifications). Standards of accounting:  Under the Bill, the central government may prescribe the standards of accounting and auditing for classes of LLPs, in consultation with the National Financial Reporting Authority.

Tribunals Reforms Bill, 2021

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Tulip Kanth

August 20, 2021: Proposing to abolish certain key Tribunals and Authorities and to provide for a mechanism to file Appeal directly to the Commercial Court or the High Court, the Tribunal Reforms Bill was introduced in the Lok Sabha by the Finance Minister, Nirmala Sitharaman, on August 2, 2021. It was passed by the Lok Sabha on August 3, 2021 and by the Rajya Sabha on August 9,2021.

This Bill replaces the Tribunals Reforms (Rationalisation and Conditions of Service) Ordinance, 2021.

The highlight of this Bill is to amend various Central Acts in order to abolish certain Tribunals, namely, Film Certification Appellate Tribunal, Airports Appellate Tribunal, Authority for Advance Rulings, Intellectual Property Appellate Board and the Plant Varieties Protection Appellate Tribunal. 

The Appellate Tribunals, under the Cinematograph Act, 1952, Copyright Act, 1957, Customs Act, 1962, Patents Act, 1970, Airports Authority of India Act, 1994, Trade Marks Act, 1999, Geographical Indications of Goods (Registration and Protection) Act, 1999, and Control of National Highways (Land and Traffic) Act, 2002, have been replaced by the Commercial Court or the High Court.

In the Transitional provision, the Bill has clarified that any person appointed as the Chairperson or Chairman or President or Presiding Officer or Vice-Chairperson or Vice-Chairman or Vice-President or Member of the Tribunal, Appellate Tribunal, or, other Authorities specified in the Second Schedule and holding office as such immediately before the notified date, will cease to hold such office on and from the notified date.

Such office holders will be entitled to claim compensation not exceeding three months’ pay and allowances for the premature termination of term of his/her office or of any contract of service.

The Bill has also laid out uniform terms and conditions of service for Chairperson and Members of various tribunals, including the Search-cum-Selection Committee .This Committee, introduced by the Bill, will be giving recommendations to the Central Government regarding the appointment of  the Chairperson and the Member of a Tribunal. For State administrative Tribunals, there will be separate Search-cum-Selection Committees.

The Central Government on the recommendation of the Committee, can also remove from office, any Chairperson or a Member. The Bill further adds that the Chairperson of a Tribunal shall hold office for a term of four years or till he attains the age of seventy years, whichever is earlier; and the Member of a Tribunal shall hold office for a term of four years or till he attains the age of sixty-seven years, whichever is earlier.

Provisions have also been made for re-appointment. As far as salary and allowances are concerned, the Central Government has been vested with the power to make rules to provide for the salary of the Chairperson and Member of a Tribunal.

The Central government has also been empowered to make rules to provide for the qualifications, appointment, resignation, removal and other conditions of service of tribunal members.

Regarding the issue of pending cases, the Bill postulates that any appeal, application or proceeding pending before the Tribunal, Appellate Tribunal or other Authorities, other than those pending before the Authority for Advance Rulings under the Income-Tax Act, 1961, before the notified date, will stand transferred to the Court before which it would have been filed had this Act been in force on the date of filing of such appeal or application or initiation of the proceeding, and the Court may proceed to deal with such cases from the stage at which it stood before such transfer, or from any earlier stage, or de novo, as the Court may deem fit.

This Bill comes at a time when the Apex Court had struck down certain provisions of the Tribunal Reforms (Rationalisation and Conditions of Service) Ordinance, 2021 regarding conditions of service and tenure of Tribunal Members and Chairperson, in the judgment of Madras Bar Association v. Union of India & Another

Now, challenging the constitutional validity of the Tribunals Reforms Act 2021, proposed by the Bill, Member of Parliament, Jairam Ramesh, has moved the Supreme Court. 

Recently, the Top Court has also granted 10 days time to the Centre for making appointments to various Tribunals. The Apex Court questioned the fact that even though recommendations were given by the Selection Committee still the appointments were not made, and also expressed its critical views on the passage of  the Tribunals Reforms Bill, 2021.

Constitution (127th Amendment) Bill, 2021

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Tulip Kanth

August 10, 2021 : With a view to maintain the Federal structure of the country, the Constitution (One Hundred and Twenty-seventh Amendment) Bill, 2021, was introduced in the Lok Sabha by Social Justice and Empowerment Minister Virendra Kumar on August 9, 2021.

The Bill clarifies that the State Government and Union Territories are empowered to prepare and maintain their own State List/ Union territory List of socially and educationally backward classes (SEBCs). It proposes to amend Articles 342A, 366 (26c) and 338B (9) of the Constitution of India.

With reference to the Constitution (One Hundred and Second Amendment) Act, 2018, the Bill has clarified that the said amendments to the Constitution mandate for a single Central List of SEBCs specifying the SEBCs for each State, thereby taking away the powers of the State to prepare and maintain a separate State List of SEBCs.

Earlier, the Constitution (One Hundred and Second Amendment) Act, 2018 had inserted three new articles, that is, 342A, 366(26C) and 338B in the Constitution. Article 338B constituted the National Commission for Backward Classes, Article 342A dealt with the Central List of the socially and educationally backward classes (commonly known as the Other Backward Classes) and Article 366 (26C) defined the socially and educationally backward classes.

This Bill comes after a decision rendered recently by the Supreme Court with a 3:2 majority in Dr. Jaishri Laxmanrao Patil & Ors v. The Chief Minister & Ors, popularly known as the Maratha Reservation case. The Constitution Bench comprised of Justices Ashok Bhushan, L.Nageswara Rao, S. Abdul Nazeer, Hemant Gupta and S.Ravindra Bhat.

Justice S.Ravindra Bhat opined that by the introduction of Articles 366 (26C) and 342A through the 102nd Amendment, the President alone, to the exclusion of all other authorities, is empowered to identify SEBCs and include them in a list to be published under Article 342A (1), which shall be deemed to include SEBCs in relation to each State and Union Territory for the purposes of the Constitution.

It was also noted that the states can, through their existing mechanisms or even statutory commissions, only make suggestions to the President or the Commission under Article 338B, for inclusion, exclusion or modification of castes or communities, in the list to be published under Article 342A (1).

The Bill has indeed circumvented this May, 2021 Supreme Court Judgment as it seeks to reinstate the power of the State Government and Union Territories to prepare and maintain their own List of SEBCs. 



Pankaj Bajpai

New Delhi, August 7, 2021: In a path-breaking move, the Central government has proposed to dilute the impact of the 2012 retrospective tax amendments by introducing the Taxation Laws (Amendment) Bill, 2021 in the Lok Sabha on August 5. 

Owing to the voluminous tax litigation and investment arbitration that had taken place due to the retrospective amendments of the Finance Act, 2012, the Government unexpectedly took a bold step in attempting to re-write India’s story as an investment destination. 

The Bill seeks to prevent the taxation of indirect transfers of money/assets that took place before May 28, 2012, with a provision of refunding the tax but without interest.

The executive’s action is likely to help settle disputes with Cairn Energy Plc, Vodafone Group Plc and many other companies over retrospective tax demands by the government.

It proposes to eclipse Explanation 5 to Section 9(1)(i) of the Income Tax Act, 1961 and Section 119 of Finance Act, 2012 on fulfillment of certain peculiar conditions such as withdrawal or furnishing of undertaking for withdrawal of pending litigation and furnishing of an undertaking that no claim for cost, damages, interest, etc., shall be filed.

As far as delegated legislation is concerned, Section 9 of the Income Tax Act, 1961 relating to deemed accrual or arise of income in India, is amended empowering the Central Board of Direct Taxes (CBDT) to make rules to provide for the form and manner in which an undertaking shall be submitted. 

Further, Section 119 of the Finance Act, 2012 relating to validation of demands under Income Tax Act has also been amended empowering the CBDT to make rules to provide for the form and manner in which an undertaking shall be submitted. 

The Bill also clarified that an asset or a capital asset being any share or interest in a company or entity registered or incorporated outside India shall be deemed to be and shall always be deemed to have been situated in India, if the share or interest derives, directly or indirectly, its value substantially from the assets located in India. 

However, the Bill provided relaxation on deemed accrual of income comprising of an asset or capital asset, which is held by a non-resident by way of investment, directly or indirectly, in a Foreign Institutional Investor (FII) for an assessment year commencing on or after April 01, 2012 but before April 01, 2015. 

The Bill also exempts capital assets held by a non-resident by way of investment, directly or indirectly, in Category-I or Category-II foreign portfolio investor under the SEBI Regulations, 2014 from the embargo of Section 9(1) of Income tax Act.

The Finance Act, 2012, amended various provisions of the Income Tax Act, 1961 with retrospective effect. The amendments were introduced by then Finance Minister Pranab Mukherjee.

Deposit Insurance Credit Guarantee Corporation (Amendment) Bill, 2021

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July 29, 2021

The Union Cabinet on July 28 cleared amendments to the Deposit Insurance Credit Guarantee Corporation or DICGC Act.

As per the fresh amendments to the act, depositors in stressed banks that have faced regulatory action must receive insurance on their bank deposits — to the tune of Rs 5 lakh — within 90 days. The new rule will be applicable to all commercial banks and branches of foreign banks operating in India.

The 90-day period will be divided into two periods of 45 days. “The stressed bank is expected to collate all information regarding the number of claimants and claim amount and inform DICGC about it within the first 45 days. Within the next 45 days, DICGC is mandated to process the claim and make payment to each eligible depositor,” Finance Minister Nirmala Sitharaman said during a cabinet briefing on July 28.

This rule will be applicable to stressed banks that have been placed under a moratorium by the Reserve Bank of India, Sitharaman said.

“Under DICGC Bill 2021, 98.3 per cent of all deposits will get covered and in terms of deposit value, 50.9 per cent deposit value will be covered. Global deposit value is only 80 per cent of all deposit accounts. It only covers 20-30 per cent of the deposit value,” she said.

The finance minister also stressed on the fact that the deposit insurance coverage apply to banks that will be put under moratorium in future as well as those that are already under moratorium.

“We are not going retrospective. But banks that are presently under moratorium will come under this. And this will be the future process,” she said.

The DICGC is a subsidiary of the Reserve Bank of India (RBI) and provides insurance cover on bank deposits. The act covers all public, private, cooperative and foreign banks in India, barring some specific deposits.

The Inland Vessels Bill, 2021

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July 23, 2021

The Central government on July 22, 2021 introduced the Inland Vessels Bill, 2021, in the Lok Sabha during the Monsoon Session of Parliament.

According to the government, the Bill aims to promote economical and safe transportation and trade through inland waters, and bring uniformity in the application of the law relating to inland waterways and navigation within the country.

Introducing the Inland Vessels Bill, 2021, newly appointed Ports, Shipping and Waterways Minister Sarbananda Sonowal said the bill seeks to provide safety of navigation, protection of life and cargo and prevention of pollution that may be caused.

The Bill provides for a central database for recording the details of the vessels and their crew on an electronic portal.

One of the key features of the Bill is unified law for the country, instead of separate rules framed by the States. The certificate of registration granted under the proposed law will be deemed to be valid in all States and Union territories, and there will be no need to seek separate permissions from States.

Currently, 4,000 kms of inland waterways are operational in the country, according to government data.

Draft Drone Rules, 2021

July 16, 2021

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The Ministry of Civil Aviation (MoCA) on July 15 released the updated draft Drone Rules, 2021 for public consultation. 

The new Rules will soon replace the Unmanned Aircraft System (UAS) Rules, 2021 that were released on March 12, 2021.

The last date for receipt of public comment is August 5, the MoCA said in a statement.

The Ministry, in the statement, said the new simplified drone rules will abolish the need for a large number of approvals. The number of forms to be filled to seek authorisation before operating a drone has been reduced from 25 to six, it said.

According to the draft Drone Rules 2021, operating drones without a unique identification number will not be allowed, unless exempted. Drone operators will have to generate a unique identification number of a drone by providing requisite details on the Digital Sky Platform.

The Digital Sky Platform is an initiative by MoCA to provide a secure and scalable platform that supports drone technology frameworks, such as NPNT (no permission, no take-off), designed to enable flight permission digitally and managing unmanned aircraft operations and traffic efficiently.

The Digital Sky Platform will also be developed as a business-friendly single-window online system with minimal human interference and most permissions will be self-generated.

The draft Drone Rules, 2021 also have safety features such real-time tracking beacon, and geo-fencing, which are expected to be notified in future and a six-month lead time will be provided for compliance.

The draft Drone Rules, 2021 also state that an interactive airspace map with green, yellow, and red zones will be displayed on the digital sky platform. While yellow zone has been reduced from 45 km to 12 km from nearby airport perimeter, no flight permission is required up to 400 feet in green zones and up to 200 feet in the area between 8 and 12 km from the airport perimeter.

No pilot licence will be required for micro drones used for non-commercial use, nano drones and for research and development (R&D) organizations operating such drones.

Unlike the previous rules, which required drone operators to have a principal place of business within India, and the chairman and at least two-thirds of its directors were required to be citizens of India, in the new proposed rules there are no such restrictions for foreign-owned companies registered in India.

However, import of drones and drone components will be regulated by the Directorate General of Foreign Trade.

Drones will also not need security clearance before registration or licence issuance.

“There will be no restriction on drone operations by foreign-owned companies registered in India; import of drones and drone components will be regulated by DGFT; security clearance will not be required before any registration or licence issuance; and that there will be no requirement of certificate of airworthiness, unique identification number, prior permission and remote pilot licence for R&D entities,” the new Rules further state.

The MoCA will also facilitate development of drone corridors for cargo deliveries and a drone promotion council will be set up to facilitate a business-friendly regulatory regime, the ministry said in the statement.

The Essential Defence Services Ordinance, 2021

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July 1, 2021

The Law Ministry has notified an Ordinance that prohibits employees engaged in essential defence services from taking part in any agitation or strike.

The Essential Defence Services Ordinance 2021 comes in the backdrop of major federations affiliated with the 76,000 employees of the Ordnance Factory Board (OFB) making an announcement that they would go on indefinite strike from July 26 in protest against the government’s decision to corporatise the OFB.

The notification stated that President Ram Nath Kovind “is satisfied that circumstance exists for the Ordinance as Parliament is not in session”.

“Any person, who commences a strike which is illegal under this Ordinance or goes or remains on, or otherwise takes part in, any such strike, shall be punishable with imprisonment for a term which may extend to one year or with fine which may extend to ₹10,000 or both,” the Law Ministry notification said.

The notification added that anyone instigating or inciting others to take part in a strike declared illegal under the Ordinance shall also be punishable with imprisonment for a term that may extend up to two years, apart from having to pay fines.

The gazette notification said employees involved in the production of defence equipment, services and operation, or maintenance of any industrial establishment connected with the military, as well as those employed in repair and maintenance of defence products, will come under the purview of the Ordinance.

Following the Cabinet decision, Defence Minister Rajnath Singh said there would be no change in the service conditions of employees of the OFB, and the decision was aimed at boosting India’s defence manufacturing sector.

On June 16, the Union Cabinet approved a long-pending proposal to restructure the nearly 200-year-old Ordnance Factory Board — operating 41 ammunition and military equipment production facilities — into seven state-owned corporations to improve its accountability, efficiency and competitiveness.

The Model Tenancy Act, 2021

June 3, 2021

The Central government on June 2, 2021 gave acceptance to the Model Tenancy Act, a move that is likely to overhaul the legal framework concerning rental housing across the country.

Hardeep Singh Puri, the Minister of Housing and Urban Affairs, said the Act will promote rental housing in the country, adding that “1.1 crore vacant houses available on rent will compliment PM’s vision of ‘Housing for All’ by 2022”.

The government had first released the draft of the MTA in 2019. The Act aims to bridge the trust deficit between tenants and landlords by clearly delineating their obligations.

Besides, The Act is expected to give a fillip to private participation in rental housing as a business model for addressing the huge housing shortage, the Ministry of Housing said.

Here are the key features of the Model Tenancy Act:

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The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021

May 27, 2021

The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 were notified on February 25, 2021. The Rules have been notified under the Information Technology Act, 2000.  The Act provides for the regulation of electronic transactions and cybercrime.  The 2021 Rules replace the Information Technology (Intermediaries Guidelines) Rules, 2011. 

The Rules came into effect on May 26.

The rules apply to various categories of online content providers such as social media platforms, OTT streaming services and online news providers. 

Some of the key points relate to the setting up of grievance redressal systems and having local personnel to ensure compliance with rules. One requirement for large social media providers is that under certain conditions, they will have to trace the originator of a message. 

The Rules require due diligence by intermediaries, who are “entities that store or transmit data on behalf of other persons”. According to the Rules, intermediaries include internet or telecom service providers, online marketplaces, and social media platforms.

There is also Code of Ethics for digital media publishers.

The Rules require the intermediaries and digital media publishers to provide for a grievance redressal mechanism. The intermediaries are required to designate a grievance officer to address complaints against violation of the Rules. Complaints must be acknowledged within 24 hours and disposed of within 15 days.

The Rules also say that in case of emergencies, the authorised officers may examine digital media content and the Secretary, MIB may pass an interim direction for blocking of such content. 

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The Juvenile Justice (Care and Protection of Children) Amendment Act, 2021

March 25, 2021

The Lok Sabha on March 24, 2021 passed the Juvenile Justice (Care and Protection of Children) Amendment Bill, 2021 that has widened the ambit of ‘serious offences’ that a juvenile can be charged with.

According to the Juvenile Justice (Care and Protection of Children) Act, 2015, which this new bill amends, juvenile offences can be categorised as petty, serious and heinous.

With this bill, the government has brought offences that can garner a maximum punishment of more than seven years and a minimum punishment that is not prescribed or is of less than seven years under the ambit of ‘serious offences’.

It also makes offences with punishments ranging from three to seven years as cognisable from non-cognisable. This means that a juvenile accused of such offences can be arrested without a warrant.

The new bill also empowers district magistrates (DMs) and additional DMs to issue adoption orders, in a bid to strengthen the child care system and adoption processes.

It also changes the criteria for appointments to child welfare committees (CWC) and makes it mandatory for the personnel to either have a background in or be a practicing professional in health, education or children’s welfare.

The bill was passed unanimously in the Lok Sabha.

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