• CRAs undertake ratings of various financial instruments under the guidelines of different financial sector regulators. New standardized symbols and their definitions have been devised for issuer rating or corporate credit rating.

• Standard descriptors are to be used when an issuer/security is placed on “Rating Watch” which would include Rating Watch with positive implications, Rating Watch with developing implications and Rating Watch with negative implications. The circular mandates each credit rating firm to assign a rating outlook and disclose this in a press release.

• Rating scales i.e. symbols and definitions for structured finance instruments would need to have CRAs first name as prefix along with its implications such as issuers with ‘AAA’ rating symbols have the highest degree of safety on timely servicing of debt obligations.

• With the new norms expected to come into effect from January 01, 2023, CRAs will have to report on their compliance as ratified by their respective board of directors to SEBI within one quarter from the date of applicability of the circular.

• The monitoring of the implementation of these norms will be carried out through half-yearly internal audits for CRAs mandated under SEBI’s (Credit Rating Agencies) Regulations.

Registration and regulatory framework for Online Bond Platform Providers (OBPPs)

• To streamline the operations, a framework has been prescribed for entities operating/desirous of operating as OBPPs under regulation 51A of the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 (NCS Regulations).
• With the new framework, OBPPs would be companies incorporated in India and they should register themselves as stockbrokers in the debt segment of stock exchange.
• An entity acting as an OBPP prior to the new rules coming into force, shall cease to offer products or services or securities on its OBP other than listed debt securities and debt securities proposed to be listed through a public offering.
• With the significant increase in the number of registered users who have transacted through such OBPs and with the bond market offering tremendous scope for development, there is a need to place checks and balances in the form of transparency in operations and disclosures to the investors deals with such OBPs.

Applicability of GST on fees remitted to SEBI – Revision in Chapter – XX of Operational   Circular for issue and listing of Non – convertible Securities, Securitised Debt Instruments, Security Receipts, Municipal Debt Securities and Commercial Paper

• Chapter XX of the Operational Circular dated August 10, 2021 regarding ‘Bank account details for payment of fees’, provides the procedure to be followed for payment of fees, as applicable, under the SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 and the SEBI (Issue and Listing of Securitised Debt Instruments and Security Receipts) Regulations, 2008.
• SEBI vide circular dated July 18, 2022, with respect to Levy of Goods & Services Tax (GST) on the fees payable to SEBI, informed Market Infrastructure Institutions (MIIs), intermediaries registered with SEBI and companies which have listed/ are intending to list their securities on the Stock Exchange(s) and persons who are dealing in the securities market, that the fees and other charges payable to SEBI shall become subject to GST at the rate of 18% w.e.f. July 18, 2022.
• Accordingly, the following amendment is being made regarding bank account details for payment feed of the NSC operational circular which would come into force with immediate effect:
• Paragraph b of the XX chapter shall be replaced with the new one.
• In the set format, provide the remittance particulars by email immediately after the remittance is made.

RBI commences the first pilot launch of digital rupee

• The Reserve Bank of India (RBI) vide press release dated October 31, 2022, announced the commencement of the first pilot launch of the digital rupee.
• This announcement has been notified pursuant to the RBI’s press release and concept note on Central Bank Digital Currency (CBDC) dated October 7, 2022, wherein RBI indicated that it would soon commence pilot launches of the digital rupee. 
• The recent press release by RBI particularly marks the commencement of the first pilot launch in digital rupee in the Wholesale segment (e₹-W) from November 1, 2022.
• The aim of this pilot launch is to test the application of the digital rupee for the settlement of secondary market transaction in government securities.
• The digital rupee is indicated by the insignia ‘e₹’. 
• RBI has delegated participation in the e₹-W pilot launch to nine banks namely State Bank of India, Bank of Baroda, Union Bank of India, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Yes Bank, IDFC First Bank and HSBC.

New guidelines for Asset Reconstruction Companies (ARCs)

• RBI recently pushed forward new regulatory guidelines for ARCs through a report that could affect the settlement of stressed retail loans.
• The new guidelines aimed at preventing ARCs from cutting deals with defaulting business does not distinguish between corporate and retail loans making it tougher for lenders to offload retail bad loans.
• ARCs typically buy bad loans from lenders at a discount and try to make a profit by recovering a large amount. With the new guidelines, the settlement of dues with the borrower will be done after the proposal is examined by an Independent Advisory Committee (IAC) which also brings down ARCs contribution to acquire a stressed asset on an all-cash basis to 2.5% from 15%.
• After assessing the borrower’s financial position, time frame available for recovery of dues, projected earnings and cash flows of the borrowers and other relevant aspects, IAC shall give its recommendations to the ARC regarding the settlement of dues with the borrower.
• The new norms allows large ARCs to bid for companies as resolution applicants in the insolvency process.

Review of Regulations by Insolvency and Bankruptcy Board of India

• The Board had issued few circulars, from time to time to facilitate Insolvency Professionals to carry out processes under the Code.
• After conducting an exercise of review of regulations, circulars based on experience gained, the Board observed that certain circulars are no longer required on account of being already provided in the Insolvency and Bankruptcy Board of India (Insolvency Professionals) Regulations, 2016 (IP Regulation) or the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 (Model Bye-Laws Regulations) or the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017 (IU Regulations).
• Accordingly, it has been decided to rescind circulars listed below, with immediate effect.

Amendment to the Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016

• The Insolvency and Bankruptcy Board of India (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 (Model Bye laws Regulations) lay down the governance structure and provides for model bye laws of the Insolvency Professional Agencies (IPA).

Insolvency and Insolvency and Bankruptcy Board of India (IBBI) has amended the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) Regulations, 2016 (Model Bye-laws Regulations) for a second time vide Gazette notification dated October 31, 2022.

• The IBBI had issued three circulars, namely, (i) Circular No. IP/005/2018 dated 16.01.2018 specifying the format for disclosure of relationship by the insolvency professional; (ii) Circular no. IPA/009/2018 dated 19.04.2018 mandating IPAs to submit Annual Compliance Certificate in the format given in the circular; and (iii) Circular No. IBBI/IPA/43/2021 dated 28.07.2021 specifying the list of contraventions by IP and the amount of penalty to be imposed by IPAs.
• The second amendment incorporates the aforesaid circulars in the Model Bye Laws Regulations and the said circulars stand rescinded. By the said amendment, no change in the list of contraventions by the IP and the amount of monetary penalties, has been introduced, as contained in the circular no. IBBI/IPA/43/2021, dated July 28, 2021.

New definition of Small Companies

• According to the latest amendment, the definition of ‘Small Companies’ has further been updated by increasing the thresholds for paid-up Capital from “not exceeding Rs 2 crore” to “not exceeding Rs 4 crore”. Furthermore, the turnover has been revised from “not exceeding Rs 20 crore” to “not exceeding Rs 40 crore”.
• Small businesses are companies, partnerships, or sole proprietorships which have fewer employees and/or less annual revenue than a regular-sized business or corporation. The Act defines the rules and provisions regarding a Small Company. Such Companies enjoy various advantages over other companies in terms of compliance requirements.
• This latest alteration in the definition of small Companies will further facilitate ease of doing business and reduce the compliance burden on small companies.

Directions for computation of limitation in filing of appeals

• The National Company Law Appellate Tribunal (NCLAT) vide order dated October 21, 2022 has issued directions for computation of limitation for filing of appeals before NCLAT.

• The period of limitation shall be computed from the date of presentation of Appeal as per Rule 22 of the NCLT Rules, 2016. The directions shall be effective from November 1, 2022.

• The Rule 22 of the NCLAT Rules, 2016 provides for “Presentation of appeal”, which is to be made at the filing counter of the NCLAT. As per Rule 103 of the NCLAT Rules, 2016, NCLAT has also permitted filing of the Appeal or proceedings through electronic mode (e-filing). Standard Operating Procedure (SOP) dated January 3, 2021 regarding e-filing provides:

“It may be noted that it is mandatory that Ld. Advocates/Authorised Representatives/Parties-in-Person shall file the Appeal/Interlocutory Application Reply/Rejoinder etc. in hard copy also as per the procedure prescribed in NCLAT Rules, 2016 along with the e-filing receipt. he online filing & hard copies must match with proper pagination. The Court Fee shall be paid through Bharat Kosh (https://bharatkosh.gov.in) and the and the payment receipt should be attached.”

• However, The SOPs and directions issued by the Appellate Tribunal do not contain any direction with regard to computation of limitation as to whether limitation is to be computed from the date of e-filing of the Appeals or from the date when Appeals are presented before the Appellate Tribunal as per – 2 – Rule 22 of the NCLAT Rules, 2016.

• In exercise of powers under Rule 104 of NCLAT Rules, the competent authority has decided to issue the following directions for computation of limitation while filling an appeal:

1. The period of limitation shall be computed from the date of presentation of appeal as per Rule 22 of the NCLAT Rules, 2016.
2. The requirement of filing Appeals by electronic mode shall continue along with mandatory filing of the Appeals as per Rule 22 of the NCLAT Rules, 2016.
3. This order will be effective with effect from 1st November 2022. All concerned shall ensure that Appeals are presented as per Rule 22 of the NCLAT Rules, 2016 within the period of limitation at the filing counter.

Ministry of Power issues amendment in charging infrastructure for Electric Vehicles

• Public charging stations shall have the feature of prepaid collection of service charges with the time of the day rates and discount for solar hours.
• A Committee under Central Electricity Authority (CEA) to recommend to the State Government the ceiling limit of service charges to be levied.
• This Committee shall also recommend “time of the day rate ” for service charges as well as the discount to be given for charging during solar hours.

Ministry of Electronics and Information Technology (MeitY) published the Digital Personal Data Protection Bill, 2022 for public comments.

• The draft Digital Personal Data Protection Bill, 2022 refers to and applies only to digitised personal data and removes any reference to non-personal data.
• It takes out the categorization of personal data into sensitive personal data and critical personal data, along with provisions on non-personal data, algorithmic accountability, data portability and a governing framework for hardware/software certification.
• It offers a relatively soft stand on data localisation requirements and permits data transfer to select global destinations which is likely to foster country-to-country trade agreements.
• The bill recognises the data principal’s right to post-mortem privacy (Withdraw Consent) which was missing from the PDP Bill, 2019 but had been recommended by the Joint Parliamentary Committee.
• The 2022 Bill introduces a list of situations where consent may be deemed and need not be explicit, with the aim of providing flexibility in data processing. But it also required the government to notify reasonable purposes, the residuary processing ground.
• The 2022 Bill is much abridged than its predecessors and appears to be in line with the government’s intention to create a simple, comprehensive data protection framework for India.

State Bank of India vs Arvindra Electronics Pvt. Ltd.

Background facts

• Allowing a writ petition filed by a Borrower, the Punjab and Haryana High Court extended time by a further period of six weeks to make the payment of the balance amount which was due and payable under the sanctioned One Time Settlement (OTS) scheme.

• Aggrieved with this order, the State Bank of India approached the Apex Court contending that the High Court under Article 226 of the constitution of India cannot direct rescheduling the payment under the OTS as it amounts to modification of the contract which can be done by mutual consent under Section 62 of the Indian Contract Act. Opposing this appeal, the borrower contended that the High Court had the power to do so.

Order

• The Supreme Court observed that a borrower as a matter of right cannot claim that though it has not made the payment as per the sanctioned OTS scheme, still it be granted further extension as a matter of right. The bench also observed that a High Court cannot invoke writ jurisdiction to extend the time period under the OTS scheme.

Rajiv Chakraborty Resolution Professional of EIEL v Directorate of Enforcement

Background facts

• A petition is filed by the resolution professional of Era Infra Engineering Limited challenging the validity of Enforcement Directorate’s (ED) Provisional Attachment Orders and their confirmation by the Adjudicating Authority.
• IT was argued that once the moratorium under Section 14 of the IBC came into effect, the ED stood denuded of jurisdiction to exercise powers under the Prevention of Money Laundering Act (PMLA).
• Order
• The Delhi High Court held that the ED’s power to attach properties under the PMLA will not be affected by the moratorium which comes into effect in terms of Section 14 of the Insolvency and Bankruptcy Code, 2016.
• Bank of Rajasthan Ltd. Vs. VCK Shares & Stock Broking Services Ltd.
• Background facts
• Bank of Rajasthan filed an application for recovery of the amounts due from VCK Shares & Stock Broking Services Ltd. (Borrower) before the Debts Recovery Tribunal, Kolkata (DRT).
• The borrower entered appearance to defend the proceedings before DRT but simultaneously filed a civil suit before the Calcutta High Court and claimed a decree for sale of the pledged shares, recovery of sale proceeds and an inquiry into the losses suffered by it along with a decree for payment of money.
• Order
• The Supreme Court observed that an independent suit filed by the borrower against the bank or financial institution cannot be transferred to be tried along with application under the Recovery of Debts Due to Banks and Financial Institutions Act, 1193. The Apex Court held that a Civil Court has jurisdiction to try a suit filed by a borrower against a Bank or Financial Institution.
• Axis Trusteeship Services Limited v. Brij Bhushan Singhal & Anr.
• Background facts
• Two summary suits were filed by the creditors of Bhushan Steel Limited against the ex-promoters of Bhushan Steel for recovery of money before the Delhi High Court.
• The applications were opposed by the Plaintiff’s on the ground that by virtue of Section 78 & 79 of IBC, the adjudicating authority for personal guarantors in Debt Recovery Tribunal and therefore, an application under Section 95 of IBC cannot be filed before NCLT as it has no jurisdiction to entertain the same and the very same objection by the Defendants before NCLT. It was further contended by the Defendants that interim moratorium would only apply against all debts of a particular co-debtor and not any other person or co-guarantor.
• Order
• The Court held that interim moratorium under section 96 of IBC is specific to all debts of a particular debtor and will not be applicable to the other personal co-guarantor. The court further held that interim moratorium against one of the co-guarantors will not protect the other co-guarantor even though the liability of both the co-guarantors arises from the same debt.
• Varimadugu Obi Reddy Vs. B. Sreenivasulu
• Background facts
• The Telangana High Court had set aside the e-auction sale held by the Bank (secured creditor) under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFESI) on the grounds that there was an error in the description of the scheduled property in e-auction sale notice and since the auction purchase failed to deposit balance 75% of the bid amount within the stipulated time of 15 days which is in clear breach of Rule 9(4) of the Rules, 2022.
• Before the Apex Court, it was contended by the Bank that there was no reasonable justification tendered by the borrowers in approaching the High Court and filing writ application assailing the order of the Tribunal without exhausting the statutory right of appeal available at its command.
• Order The Supreme Court deprecated the practice of entertaining writ petitions filed in SARFESI matters without exhausting the alternative statutory remedy. The court agreed with the contentions of the Bank and held that a
• mere typographical error due to inadvertence which has not caused any prejudice to the borrowers could not be considered to be a ground to annul the process held by the secured creditor. Also, the delay in depositing 75% of the bid amount clearly reflects that the intention of the borrowers was only to frustrate the auction sale by one reason or the other.
• Amit Jain Vs. Canara Bank & Ors.
• Background facts
• It was contended on behalf of the plaintiff that the defendant bank has failed to give reasonable notice to the plaintiff for the sale of pledged shares, as required under Section 176 of the Indian Contract Act, 1872.
• Order
• The Hon’ble High Court held that the intimation of invocation was duly received by the plaintiff which was in fact challenged by the plaintiff by way of a writ petition. It was only thereafter that the notice was issued by the defendant bank giving sever days to the plaintiff to clear the outstanding dues, failing which the defendant bank would sell the pledged shares.