The emerging laws and regulations in the backdrop of COVID-19 and the India stimulus program

APAS Monthly – Volume 6 – June 2020

In India, various High Courts and the Supreme Court have acted in several matters by exercising suo moto jurisdictions on various fronts. The Latin maxim “Salus populi suprema lex esto” (the health / safety of the people should be supreme law) has been heavily relied upon. The government and the judiciary have actively put to use the laws like, “Disaster Management Act, 2005”, Indian Epidemics Act, 1897. By declaring Covid as a “notified disaster”, the States are expected to have access to the “State Disaster Relief Fund”. The Essential Commodities Act, 1955, has been invoked. 

This article touches upon and highlights the various new laws, enactments, rules and regulations which relate to Covid period and which are mentioned below: 

1. Government actions on Force Majeure: 

  • Ministry of Finance, Department of Expenditure Procurement Policy Division, Government of India (“MOF”) on February 19, 2020 has clarified that the disruption of the supply chains due to spread of coronavirus in China or any other country should be considered as a case of natural calamity and Force Majeure Clause may be invoked, wherever considered appropriate, following the due procedure. Subsequently, various ministries including Ministry of New and Renewable Energy, Ministry of Shipping, Ministry of Railways, Ministry of Environment, Forest & Climate Change, Ministry of Road Transport and Highways had granted appropriate time-extension, or provided exemptions/remission of charges for any delay caused due to COVID-19 pandemic, or has issued general directions as to how the same was to be treated contractually in public sector contracts. 
  • Even the Foreign Trade Policy 2015-2020 has been extended by the Ministry of Commerce and Industry up to March 31, 2021. Further, Ministry of Housing & Urban Affairs issued advisory for extension of registration of real estate projects due to ‘Force Majeure’ under the provisions of Real Estate (Regulation and Development) Act, 2016. 
  • Finance Ministry has announced relaxations on the due dates for payment of Income Tax, payment of TDS, reductions in TDS etc to partially address the stress. 
  • By means of Ordinance dated June 5, 2020 GOI has suspended Sections 7, 9 and 10 of the IBC for six months.

Actions By Regulators: 

a) Reserve Bank of India (‘RBI’) vide several notifications:
i) Issued detailed instructions to ensure the continuity of viable businesses, such as: 

a) Moratorium / Deferment for term loans and working capital loans extended till August 31, 2020 

b) Easing of Working Capital Financing; and 

c) Asset Classification as NPA and SMA and Revised Resolution Timelines. 

ii) Reviewed resolution timelines under the Prudential Framework on Resolution of Stressed Assets specified in the circular dated June 7, 2019. 

iii) Reviewed the asset classification and provisioning under Prudential Norms on Income Recognition, Asset Classification. 

b) Ministry of Corporate Affairs (‘MCA’) vide several notifications:
i) Allowed companies to hold board meetings through video conferencing till June 2020. 

ii) Certain provisions of the Companies Act,2013 as well as the Limited Liability Partnership Act, 2008 have been relaxed- 

a) independent director’s unable to hold one meeting in FY19-20 in compliance with Schedule 4 of the Companies Act will not be held in violation 

b) the Companies (Auditor’s Report) Order, 2020 will be applicable from FY20-21 

c) no additional fees for late filing during April 1 to September 30, 2020, etc. 

iii) Specified Rs. 1 crore as the new minimum amount of default under Insolvency and Bankruptcy Code, 2016. 

iv) If the companies whose financial year has ended on 31st December, 2019, hold their AGM for such financial year within a period of nine months from the closure of the financial year (i.e. by 30th September, 2020), the same will not be viewed as a violation. 

v) Allowed companies to conduct their AGMs through video conferencing; or other audio-visual means, during the calendar year 2020. 

c) Securities Exchange Bureau of India (‘SEBI’) vide Press Release and Circulars: 

i)  has decided to grant certain temporary relaxations from the regulatory provisions related to rights/ public issuances by listed entities in order to further facilitate fund raising from capital markets in the backdrop of COVID-19 pandemic,

ii)  relaxed the timelines for top 100 listed entities by market capitalization whose financial year ended on December 31, 2019 for holding the AGM within a period of nine (9) months from the closure of the financial year.

iii)  relaxed action for non-compliance with minimum public shareholding requirements during the period March 1, 2020 to August 31, 2020.

iv)  issued an advisory on disclosure of material impact of COVID-19 pandemic on listed entities under SEBI.

d)  Insolvency and Bankruptcy Board of India (IBBI) vide several notifications stated that: Period of lockdown to be excluded from timeline under IBC if activity in relation to CIRP could not be completed due to the lockdown.

e)  MOF vide several notifications: 

i)  Amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

ii)  Issued Non – Debt Instrument Rules to curb opportunistic takeovers.

iii)  Introduced the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2020 to implement the changes as announced by MOF.

f)  RERA: Several RERA authorities have extended projects’ completion deadlines and the time limits for all statutory compliances.

2. Self-Reliant India packages 

Key takeaways from the Finance Minister’s announcements on Self-Reliant India: 

(i)  Major Steps for Micro Small and Medium Enterprises (‘MSMEs’) was announced such new definition of MSMEs; Rs. 3 lakh crores collateral free automatic loans for business, including MSME; Rs. 20,000 crores Subordinate Debt for MSMEs; Rs. 50,000 crores equity infusion through MSME Fund of Funds and global tenders to be disallowed upto Rs. 200 crores.

(ii)  Other interventions for MSMEs

(iii)  Rs. 2500 crores EPF support for Businesses and Organised Workers extended by three (3) more months and EPF Contribution to be reduced from 12% to 10% for Employers and Employees for three (3) months

(iv)  Rs. 30,000 crores liquidity facility for NBFC/HCs/MFIs under Special Liquidity Scheme, through RBI

(v)  Rs. 45,000 crores partial credit guarantee scheme 2.0 for NBFC

(vi)  Rs. 90,000 crores liquidity injection for DISCOMs 

(vii)  As a relief to contractors, extension of up to six (6) months (without costs to contractor) to be provided by all Central Agencies

(viii)  Extension of Registration and Completion Date of Real Estate Projects under RERA due to ‘Force Majeure’ event

(ix)  Rs. 50,000 crore liquidity through TDS/TCS reductions

(x)  Other Direct Tax Measures (such as reductions in the existing rates of TDS, extension of due date for filing all IT returns for FY 2019-20 and immediate issue of pending Tax refunds)

(xi)  Reliefs for Farmers, Rural Economy, Migrants, Urban Poor, Small Businesses and Street Vendors

(xii)  Extension of credit linked subsidy scheme for middle income group up to 31st March 2020

(xiii)  Policy reforms to fast track investment; and

(xiv)  Structural reforms in coal, mineral, defence, civil aviation, power, social infrastructure, space and atomic energy sectors.

There has been plethora of laws and regulations which have come up during these challenging times. Unfortunately, it is not clear as to how much benefit has been actually passed on to the people.