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J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
CS NEWS INSIDE! Governance is a matter of opinion – Sundharesan Jayamoorthi, life coach for directors & compliance guru Corporate Development Judicial –  U.P. State Industrial Devlopment Corporation Ltd v. Monsanto Mfg. (P) Ltd. & ANR [SC]  Rajender Singh v. State Bank of India [DEL] From The Government –  Extension of time for filing of Notice of appointment of the Cost Auditor in Form CRA‐2  Foreign Exchange Management Act, 1999 ‐ Import of Goods into India Save our Earth  95 industrial units in Bengal shut down on NGT's orders Monthly Compliance  Don’t miss it   Did you miss it  J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
Governance is a matter of opinion Matter of Opinion would mean an indefinite term where something is not capable of proving either way. In a way, Governance is also a matter of opinion as companies that may be considered to be a performer which has huge profits or a great market price need not necessarily be a governed company. There are many instances that point towards this theory, one of them relates to the most admired company for governance that was found hoarding cash surplus, which may have been done good for the company but was proving otherwise for shareholders, as this accumulated cash was not distributed to shareholders and was kept idle earning some meagre interest and this concept of excess cash seemed to work against the principles of sound governance. The governance practices, which may be good for one, need not always be good for another. A most admired company for governance used to publish its financials in various international languages; the same document was ridiculed for giving more and irrelevant information than what was required. Fairness, Accounting & Transparency (FAT) is good but not at the cost of throwing the weight of the information to a very thin population of shareholders who would not stand benefitted with the excess information. The Company was in fact ridiculed for spending shareholder money in printing expensive annual reports. Governance as a matter of opinion is based on the tick‐the‐box exercise for most companies, how good the company is, depends on the number of ticks in the box that is mandated by law. The regulators seem to be very contended to see all the boxes ticked on a quarterly basis and seem to form an opinion of the governance standards of these companies. The Company that landed in the largest fraud case was found to be perfect in terms of governance that was evident with this tick the box opinion checklist, till the fraud was confessed by the promoter and the opinion about governance standards for the Company changed. Who finally decides whether a company is a well‐governed company is a matter of opinion; it may be the opinion of a few trade bodies that conferred an award on an annual basis or the opinion of an analyst who dissect number in the company and not the intent. The companies or promoters that were identified and awarded corporate governance award, unfortunately turned out to be scamster or in other cases the companies were unsuccessful in retaining the tag of “governed company”. It is easy to form an opinion on Governance when things are fine and the going gets good, and not otherwise; hence Governance is a matter of opinion. J SUNDHARESAN & ASSOCIATES
CASE LAW CS NEWS – APRIL 2015
Corporate Development Judicial
U.P. State Industrial Devlopment Corporation Ltd v. Monsanto Mfg. (P) Ltd. & ANR [SC] DECIDED ON January 29,2015 LEGISLATION Corporate Laws BRIEF FACTS Lease agreement – industrial plots – transfer of shares by promoter group of the lessee company – whether results in the alteration/change of MoA and AoA –
whether results in transfer of lease – whether liable to pay the transfer fee – Held, Yes. Facts: Monsanto Manufactures Private Ltd (respondent – Company) applied to appellant – Corporation for grant of lease of plot of land bearing No. 38/1‐A situated in Sahibabad Industrial Area, Site No. 4 of Tehsil and District Ghaziabad admeasuring 14,533 square yards for the purpose of constructing an industrial unit. The appellant – Corporation after receiving part premium of the plot land executed an agreement for licence and the possession of the land was given on 12th June, 1978. After construction of the building of the factory, the respondent –Company and the appellant – Corporation executed a deed of lease on 5th September, 1979 for a period of 90 years. Later, the appellant – Corporation vide letter dated 12th April, 1994 asked the respondent –Company to provide the list of its Directors and shareholders duly certified by the Chartered Accountant. The same was furnished by the respondent –
Company to the appellant – Corporation on 7th May, 1994. According to the appellant – Corporation the respondent – Company changed the Directors and shareholders without prior permission and consent of the appellant – Corporation. The appellant – Corporation by letter dated 27th May, 1994 asked for details in order to take necessary action in accordance with the terms of the lease deed. The respondent‐Company categorically denied the allegations levelled by the appellant – Corporation by their letter dated 27th September, 1994. By letter dated 1st October, 1999 the appellant – Corporation demanded Rs. 25,51,781/‐ from respondent – Company towards transfer levy charges as the original shareholders of the respondent – Company transferred their entire shareholding and interest to the new shareholders and there was change in the Directors of the respondent – Company. According to the appellant such change makes the shifting of the controlling interest of the respondent – Company and transfer levy for the same was demanded from the respondent – Company as per the rules of the Corporation. The Company submitted its reply vide letter dated 8th December, 1999 and reiterated its earlier stand to the effect that there is no breach of any terms of the lease deed as no transfer or assignment or sale of premises in question has been made. However, it was not accepted by the Corporation, who sent another reminder J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
dated 13th January, 2000 asking the Company to pay a sum of Rs. 25,51,781/‐ towards transfer levy charges. The aforesaid demand notice was challenged by the respondent – Company before the High Court of Allahabad which by impugned judgment dated 11th May, 2004 allowed the writ petition. Decision: Appeal allowed. Reason: For deciding the issue involved in the present case it was necessary to refer certain clauses of licence agreement, lease deed and guidelines issued by the appellant – Corporation. Clause 4(h) of the licence agreement prohibited licensee's acts to directly or indirectly transfer, assignment, sale, encumber or part with its interest under the benefit of the said Agreement without previous consent in writing of the Grantor. Sub‐Clause (p) of Clause 3 of lease deed also prohibited any alteration in the Memorandum and Articles of Association or in its capital structure without the written consent of the Lessor. In the present case the entire shareholding of Goyal family headed by Mr. Amar Nath Goyal in the said company was transferred to the Mehta – Lamba Family. The entire list of shareholders, Managing Director and Board of Directors was provided by Monsanto to the appellant – Corporation vide letter dated 7.5.1994. The record showed that the original subscribers of shares were members of Goyal family and the entire shareholding was transferred to Mehta – Lamba family. Therefore, the original subscribers of shares of respondent – Company were totally changed. The "Memorandum of Association" of a company limited by shares mandatorily prescribes in "Table‐B" of the Companies Act, 1956 mandatorily prescribed that the names, addresses, description and occupation of subscribers shall be given in Memorandum of Association. In this case as the original subscribers of shares were changed in 1994, there was material alteration in the "Memorandum of Association" of respondent – Company. It was also contended that there was an alteration in "Articles of Association" of respondent – Company as well. The last column of "Articles of Association" also mandatorily provides forgiving names, addresses and description of subscribers. In this case, the subscribers of shares have been completely changed from the Goyal Family to Mehta – Lamba Family and hence there was material alteration of "Articles of Association" of the respondent – Company. In this case, the ownership of a huge Industrial plot measuring 14,533 sq. ft. in the economically affluent area of Sahibabad had been transferred from Goyal family to the Mehta‐ Lamba family for material financial gains, by adopting clever means that too without taking written consent of the Lessor i.e. appellant – Corporation. This adversely affected the aims and objectives of appellant – Corporation i.e. the planned development of industrial areas in the State of Uttar Pradesh. The Hon'ble High Court ought not to have interfered in the matter looking into the public interest involved and Clause 3(p) of the lease deed. J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
CASE LAW Rajender Singh v. State Bank of India [DEL] DECIDED ON February 18, 2015 LEGISLATION Industrial and Labour Laws BRIEF FACTS Employee misbehaved with lady staff – dismissed after domestic inquiry – whether the punishment of dismissal is tenable – Held, Yes. Facts: The petitioner had filed the petition impugning an order dated 12.03.2010 (hereafter the 'impugned award') whereby the Central Government Industrial Tribunal (hereafter the 'Tribunal') held that the charges of misconduct i.e. misbehaviour with alady staff were proved against the petitioner and imposed the punishment of dismissal of the petitioner from the services of the respondent bank. By the impugned award, the Tribunal relied on the sole testimony of Ms. Sunita Jain and held that the charges of misconduct, within the meaning of paragraph 19.5(c) and (j) of the Bipartite Settlement dated 19.10.1966, were proved against the petitioner and awarded the punishment of dismissal. This award was challenged by the petitioner. Decision: Petition Dismissed. Reason: The issue to be considered was whether the Tribunal had considered the facts in correct perspective. According to the petitioner, the Tribunal had segregated the issue of sexual molestation from other controversies pointed out by the petitioner. It was argued that the Tribunal had failed to view the factual matrix and had merely focused its attention on the allegations made by Ms. Sunita Jain. The Tribunal also considered the petitioner's contention that the Regional Manager had conspired with Ms. Sunita Jain to remove the petitioner from the services of the respondent bank. The petitioner contended that the Regional Manager wanted to accommodate another person in the Delhi Branch and a conspiracy was hatched to conjure up a false case against him. The Tribunal rejected the said contention as it found no evidence of conspiracy as claimed by the petitioner. The Tribunal also examined the petitioner's appointment letter and the letters sent by Mr. Raheja and concluded that the same did not indicate any conspiracy. The Tribunal further reasoned that if there was a conspiracy to not post the petitioner at the Chandni Chowk Branch, the same would not have been offered to him. As far as the deduction of amount for subscription from petitioner's salary is concerned, the Tribunal considered the testimony of Ms. Sunita Jain and also held that it was done in a routine manner and the same did not benefit Ms. Sunita Jain in any manner. In the aforesaid circumstances, the contention that the Tribunal had not considered the facts in the entirety but had only focused its attention on the allegations levelled by Ms. Sunita Jain was bereft of any merit. J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
In this case, the Tribunal had considered the conspiracy theory, advanced by the petitioner, and had found no material to support the same. Hence, the said decision of the Tribunal cannot be faulted. There was no evidence of any deep enmity between the petitioner and Ms. Sunita Jain or any other official of the respondent bank. The fact that Ms. Sunita Jain had been preparing the salary bill of the petitioner along with other employees and had been deducting union subscription which was objected to by the petitioner, cannot possibly lead to the conclusion that there was any deep enmity between the petitioner and Ms. Sunita Jain. The Tribunal had found that there was no evidence that Mr P.C. Joshi (Regional Manager, Bhopal) was conspiring with Ms. Sunita Jain against the petitioner. It was, in this context, that the Tribunal noted that there was no record that Mr. P.C. Joshi had come to Delhi at the material time. The learned counsel for the petitioner was correct in her submission that physical presence of a conspirator is not essential; however, in this case, there was no material or evidence that could reasonably lead to the conclusion that there was any conspiracy. Thus, the conclusion of the Tribunal cannot be faulted. In cases where no domestic enquiry is held or if so held has been held to be vitiated, it is necessary that the Tribunal evaluates the evidence adduced before it. The Tribunal has to rule out the possibility that the allegations have been levelled against the workman with ulterior motives or are mala fide. In the said case, the Tribunal had appreciated the evidence and arrived at a conclusion. It is well established that this court, while exercising its powers under Article 226 of the Constitution of India, would not interfere with the findings of fact unless the same are perverse or based on no evidence at all. Accordingly, the present petition is dismissed. No order as to costs. J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
From The Government
Extension of time for filing of Notice of appointment of the Cost Auditor in Form CRA – 2 [Issued by the Ministry of Corporate Affairs vide general circular No. 2/2015, dated 11.02.2015.] In continuation to the General Circular No. 42/2014, the last date of filing of Form CRA‐2 without any penalty/late fee is hereby extended upto 31st March, 2015. 2. This issues with the approval of competent authority. JSA Take: Every day there is a new activity from MCA, keeping stakeholders at tender hooks. Foreign Exchange Management Act, 1999 – Import of goods into India [Issued by the Reserve Bank of India vide RBI/2014‐15/467 A. P. (DIR Series) Circular No. 76, dated 12.02.2015] Attention of Authorised Dealer Category ‐ I (AD Category ‐ I) banks is invited to the A.P. (DIR Series) Circular No. 82 dated February 21, 2012 in terms of which applications by persons, firms and companies for making payments, exceeding USD 5,000 or its equivalent towards imports into India must be made in Form A‐1. 2. To further liberalise and simplify the procedure, it has been decided to dispense with the requirement of submitting request in Form A‐1 to the AD Category ‐I Banks for making payments towards imports into India. AD Category ‐I may however, need to obtain all the requisite details from the importers and satisfy itself about the bonafides of the transactions before affecting the remittance. 3. AD Category ‐ I banks may bring the contents of this circular to the notice of their constituents and customers concerned. 4. The directions contained in this circular have been issued under Section 10 (4) and Section 11 (1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law. JSA Take: Bring in India to Make in India – one more procedure relaxed. J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
SAVE OUR ENVIRONMENT
95 industrial units in Bengal shut down on NGT's orders KOLKATA: The West Bengal Pollution Control Board (WBPCB) has shut down 95 industrial units in the state in accordance with a National Green Tribunal judgement. "The National Green Tribunal in November last year had said in its judgement that industries operating without the consent of the board and having no effluent treatment plant should be closed down immediately. As many as 95 units were closed down," WBPCB chairman Kalyan Rudra said at a seminar on the eve of World Water Day (March 22). He also highlighted the issue of depletion of ground water in the state. "Out of the 341 blocks in Bengal, 174 blocks had registered annual depletion of ground water of 20 cm," Rudra said, stressing on "less dependence on ground water and increased use of surface water". He had earlier revealed that in Bengal, ground water in 81 blocks is contaminated with arsenic and in 49 blocks with fluoride. J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
Comply or Explain
DON’T MISS IT Compliance Calender for the month of April 2015 DIRECT AND INDIRECT TAX 5th Excise Duty for all other units other than SSI units 6th Excise Duty for all other units other than SSI units through Internet Banking 15th Excise Duty for SSI units ‐ Monthly for other mode 16th Excise Duty for SSI units ‐ Monthly for electronic mode 15th Advance Tax Payment (Quarterly) 5th Service Tax Return for the month of February 2015 6th Service Tax Return for the month of February 2015 through internet banking 7th Payment of TDS 10th Monthly Excise return by all assesses(except SSIs &EOUs) coming under CAE in form ER‐1 10th Monthly Excise return by EOU assesses coming under CEA in Form ER‐2 10th Monthly Excise return by SSI coming under CEA in Form ER‐3 20th VAT payment ‐ Monthly Cases 21st VAT ‐ Monthly Returns (Electronically) 20th CST Payment ‐ Monthly 21st CST ‐ Monthly Returns (Electronically) 20th Payment of Professional Tax for employees of the company 30th Payment of Service Tax (Quarterly) 30th Advance Tax Payment (Yearly) FEMA 7th Monthly return in Form ECB‐2 for companies availing External Commercial Borrowings under FEMA Regulations J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
LABOUR LAW COMPLIANCES 15th Monthly Declaration and filing of form (for the employees joined during the previous month) under ESI Act, 1948 15th Monthly Return of Employees qualifying for the first time under EPF & MP Act, 1952 in Form 5 15th Payment of contribution under EPF & MP Act, 1952 15th Nomination Forms to be submitted by new Joinees for the month under EPF & MP Act, 1952 in Form 2 15th Monthly Return on Employees leaving Organisation under EPF & MP Act, 1952 in Form 10 15th Monthly Declaration and filing of Form (for the Employees joined during the previous month) under EPF &MP Act, 1952 21st Payment of contribution under ESI Act, 1948 21st Monthly Return of Contribution under EPF & MP Act, 1952 in Form 12A 29th Quarterly Returns in Form ER‐1 of Employment Exchanges (Compulsory Notification of Vacancies)Act, 1959 J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
DIDYOU MISS IT Compliance Calender for the month of March 2015 DIRECT AND INDIRECT TAX 5th Excise Duty for all other units other than SSI units 6th Excise Duty for all other units other than SSI units through Internet Banking 15th Excise Duty for SSI units ‐ Monthly for other mode 16th Excise Duty for SSI units ‐ Monthly for electronic mode 15th Advance Tax Payment (Quarterly) 5th Service Tax Return for the month of February 2015 6th Service Tax Return for the month of February 2015 through internet banking 7th Payment of TDS 10th Monthly Excise return by all assesses(except SSIs &EOUs) coming under CAE in form ER‐1 10th Monthly Excise return by EOU assesses coming under CEA in Form ER‐2 10th Monthly Excise return by SSI coming under CEA in Form ER‐6 20th VAT payment ‐ Monthly Cases 21st VAT ‐ Monthly Returns (Electronically) 20th CST Payment ‐ Monthly 21st CST ‐ Monthly Returns (Electronically) 20th Payment of Professional Tax for employees of the company 31st Payment of Service Tax (Quarterly) 31st Advance Tax Payment (Yearly) FEMA 7th Monthly return in Form ECB‐2 for companies availing External Commercial Borrowings under FEMA Regulations LABOUR LAW COMPLIANCES 15th Monthly Declaration and filing of form (for the employees joined during the previous month) J SUNDHARESAN & ASSOCIATES
CS NEWS – APRIL 2015
under ESI Act, 1948 15th Monthly Return of Employees qualifying for the first time under EPF & MP Act, 1952 in Form 5 15th Payment of contribution under EPF & MP Act, 1952 15th Nomination Forms to be submitted by new Joinees for the month under EPF & MP Act, 1952 in Form 2 15th Monthly Return on Employees leaving Organisation under EPF & MP Act, 1952 in Form 10 15th Monthly Declaration and filing of Form (for the Employees joined during the previous month) under EPF &MP Act, 1952 21st Payment of contribution under ESI Act, 1948 25th Monthly Return of Contribution under EPF & MP Act, 1952 in Form 12A 29th Quarterly Returns in Form ER‐1 of Employment Exchanges (Compulsory Notification of Vacancies)Act, 1959 Disclaimer: Views and other contents expressed or provided by the contributors are their own and the firm does not accept any responsibility. The firm is not in any way responsible for the result of any action taken on the basis of the contents published in this newsletter. All rights are reserved. For Private circulation only.© 2015 J Sundharesan