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2015
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2015
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- “The
e year of Gov
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T be Morall or Amoral
Initiative
e by J Sundha
aresan
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
CS NEWS INSIDE!
Governance rots from the head –
Sundharesan Jayamoorthi, life coach for directors & compliance guru
Corporate Development Judicial –
Jyoti Ltd &Ors V. Bharat J. Patel &Ors [SC]
D.K. Sood & ANR v. Punjab National Bank [DEL]
From The Government –
Companies (Meetings of Board and its Powers) Amendment Rules, 2015
Clarification relating to filing of e form DIR 11 & DIR 12 under the Companies Act,
2013 regarding
Clarification with regard to section 185 and 186 of the Companies Act, 2013 loans
and advances to employees reg.
Save our Earth
India being watched for its contribution to climate change
Monthly Compliance
Don’t miss it
Did you miss it
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
Governance Rots From The Head
There is a popular Chinese saying “A fish rots from the head” and this principle may apply to the theory
of corporate governance, and can read “Governance rots from the head”. Head for any corporate is the
CEO who is in charge of running an organisation. Ask an entrepreneur the question “are you a good man
or a bad man”, this person will think twice before giving an answer and the reply will invariably be “I do
not know”. It is always a dilemma for any entrepreneur while chasing his dreams and in trying to make
good, in pursuit of his needs in making some money, name, fame, power and position, sometimes gets
engaged in some wrong actions as greed for satisfying his needs becomes a need for satisfying his
greed. While making good for himself he tries to do lot of good by creating jobs to people and providing
economic independence and in this process of doing good, sometimes he falters and fumbles and does a
wrong. This process is what leads Governance to rot from the head.
One wrong can lead to multiple wrongs and all decision that were wrong suddenly becomes right in the
pursuit of unimaginable goals by the entrepreneur. This principle Governance rots from the head is
morefully depicted in the classic story of the icon in corporate world, Ramalinga Raju, ex CEO of Satyam.
The CEO who was heading the company and whose head started to rot on account of greed and was
found to falsify accounts over a period of time and with it collapsed the entire system of governance.
The success of Raju was a perfect fairy tale story and in whom the IT industry identified a legend in the
making. Unfortunately in the process of wanting to do good he had to make good, the greed of making
good beyond what he could perform literally destroyed his empire. Along with him the entire system
failed and in turn the Company failed.
If customer is at the bottom of the pyramid; the CEO is at the top of the pyramid and if fortune is at the
bottom of the pyramid, governance is at the top of the pyramid. Governance rots from the head, and it
rots only on account of the CEO, as the turks have interpreted the meaning, that if the servant is
disorderly, it is because the master is so.
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
Corporate Development Judicial
CASE LAW
Jyoti Ltd & Ors V. Bharat J. Patel & Ors [SC]
DECIDED ON
March 17,2015
LEGISLATION
Companies Act, 1956
BRIEF FACTS
Section 186 of the Companies Act 1956 read with section 9 of Civil Procedure
Code,1908 – disputes in holding general meeting – civil court admitted the suit filed
by respondent – appellants contested that the issue should go before CLB –
whether the civil court was right in admitting the suit – Held, No.
Facts: The respondents herein had filed a civil suit against the appellant company and sought certain
interim reliefs for restraining from holding any meetings etc., Appellants contested that the suit is not
maintainable as the proper remedy available is to approach the CLB under section 186. However, the
suit was held to be maintainable and certain interim directions were also given. Hence, these appeals by
special leave.
Decision: Appeals allowed.
Reason: The maintainability of a suit is question of law. Though, by virtue of declaration under Section 9
of the Code of Civil Procedure, 1908, all suits of civil nature are maintainable unless barred either by an
express provision or by implication of law. In the case on hand, when a specific stand was taken that in
view of the provisions of Companies Act the suit was not maintainable, "the chequered history between
the contesting parties and the chronology of the actions taken by the respondents" do not decide the
maintainability of the suit. The conclusion recorded by the High Court was highly unsatisfactory.
The High Court held that in view of the fact that from 31.12.2014 orders of status quo existed, the same
was directed to be continued to be considered on the next date of hearing, i.e. 16.03.2015. In the
interregnum, the High Court directed the appellants herein as follows:
"The respondent Company (original defendant No. 1), were directed to consider the requisition notice in
question dated 18.12.2014 given by the plaintiffs and comply with the provisions of Rule 17(7) of the
Companies (Management and Administration) Rules, 2014, within a period of one week. On receipt of
such list of members as per rules, from the company, it would be open to the appellants, to take further
actions in accordance with law, to convene the Extraordinary General Meeting of the Company, within
the time stipulated under law. For this purpose, the time taken by the respondents in supplying the list
of the members, as required under law, to the requisitionist (the plaintiffs), beyond what is permissible
under Rule 17(7) of the Rules, shall not count against the plaintiffs.
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
It was directed that, any decision that may be taken, or the resolution that may be passed in the said
Extraordinary General Meeting, shall not be given effect to, without prior permission of this Court, and
further that, any business transacted at the said meeting and/ or any outcome thereof shall be subject
to further orders that may be passed by this Court."
The Court was of the opinion that the directions in the above paragraphs were inconsistent with the
directions passed later. Apart from that, the fact that the orders of status quo were granted by the
Chamber Judge during vacation, which have been continued from time to time without further
consideration regarding the tenability of such orders, was no ground for continuing such orders. In the
circumstances, the Court deems it appropriate to set aside the impugned order. Having regard to the
various contentions raised by the parties, it is better that the appeal before the High Court itself is
disposed of on merits expeditiously. Appeals are, accordingly, allowed.
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
CASE LAW
D.K. Sood & ANR v. Punjab National Bank [DEL]
DECIDED ON
March 18, 2015
LEGISLATION
Industrial and Labour Laws
BRIEF FACTS
Change in policy decision by the bank – whether court can review the same and
issue direction – Held, No.
Facts: Petitioners, who are employees working in the clerical cadre/ Junior Management Grade (JMG)
Scale I of the employer/Punjab National Bank, question the action of the employer/Bank in firstly
notifying a policy dated 22.7.2014 that on promotion to JMG Scale I, people above 57 years will not be
transferred, but that policy was subsequently changed and replaced by a new policy dated 02.8.2014
which did away with this clause i.e. the effect was that employees above the age of 57 years on
promotion were liable to be transferred.
The grievance of the petitioners was that the employer/Bank had suddenly changed the requirement
that the people above 57 years of age will be transferred only because of pressure put by an association
of employees of the respondent/Bank. It was also argued that there cannot be sudden changes once an
option is exercised by an employee in terms of the earlier policy dated 22.7.2014 i.e. since an employee
is above 57 years he hence cannot be transferred since such an employee has already exercised an
option in terms of the earlier policy dated 22.7.2014 to not get transferred.
Decision: Petition Dismissed.
Reason: In the Court’s opinion, the arguments urged on behalf of the petitioner totally lack substance
because this Court cannot substitute itself for the employer for taking an administrative decision as to
how the affairs of a Bank have to/can be run, especially as regards a Bank which has branches and
administration all over the India. Courts cannot step in with respect to the policy decisions with respect
to administration of an organization, and even for the sake of argument, if it was presumed that the
respondent/Bank had changed the policy for transfer of employees over 57 years of age on account of
the pressure put by an association of employees, yet, in spite of that it cannot be doubted that for
maintaining industrial relations, the employer can first make a policy and thereafter even change that
policy. The powers of the employer to re frame a policy guideline or change the policy cannot be
doubted and there is no law that an employer must function only under a particular policy and it cannot
carry out administration by transferring its employees, that too only because certain employees so
want.
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
From The Government
Companies (Meetings of Board and its powers) Amendment Rules, 2015
[Issued by the Ministry of Corporate Affairs vide F.No. 1/32/2013 CL V Part, dated 18.03.2015. To be
published in the Gazette of India, Extraordinary, Part lI Section 3, Sub section (i).]
In exercise of the powers conferred under sections 173, 175, 177, 178, 179, 184, 185,186,187, 188, 189
and section 191 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government
hereby makes the following rules further to amend the Companies (Meetings of Board and its Powers)
Rules, 2014, namely:—
1. (1) These rules may be called the Companies (Meetings of Board and its Powers) Amendment Rules,
2015.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Companies (Meetings of Board and its Powers) Rules, 2014,
(a) in rule 8,
(i) item numbers (3), (5), (6), (7), (8) and (9) and the entries relating thereto shall be omitted;
(3) to take note of appointment(s) or removal(s) of one level below the Key Management
Personnel
(5) to take note of the disclosures of Director’s interest and shareholding
(6) to buy, sell investments held by the Company (other than trade investments), constituting
5% or more of the paid up share capital and free reserves of the investee Company
(7) to invite or accept or renew public deposits and related matters
(8) to review or change the terms and conditions of public deposit
(9) to approve quarterly, half yearly and annual financial statements or financial results as the
case may be
(b) in rule 10, in the proviso, for the word "principle" the word "principal" shall be substituted.
JSA Take: MGT 14 is not required to be filed for some actions, MCA has relaxed filings – what a relief
from section 117(2) of the Act.
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
Clarification relating to filing of e – form DIR – 11 & DIR – 12 under the Companies Act, 2013
[Issued by the Ministry of Corporate Affairs vide General Circular No.03/2015, dated 03.03.2015.]
This Ministry has received several representations about the difficulties faced by stakeholders due to
deactivation of Digital Signature Certificate (DSC) following en masse resignation of all the directors of
a company before appointment of new directors in their places. The difficulty arises because of
automatic deactivation of DSC on filing of DIR 11 (Notice of resignation of a director to the Registrar) by
the resigned/resigning Director(s), and none of the new Director's details having been filed. As a result,
form DIR 12 (Particulars of appointment of directors and the key managerial personnel and the changes
among them) cannot be filed by a company due to lack of an authorized signatory Director.
2. In order to enable the filing of such e forms and till an alternative mechanism is put in place in MCA21
system, it is clarified that the Registrar of Companies within their respective jurisdictions are authorized,
on request from the stakeholders, and after due examination, to allow any one of the resigned director
who was an authorized signatory Director for the purpose of filing DIR 12 only along with additional
fees, as applicable and subject to compliance of other provisions of Companies Act, 2013.
3. This issues with the approval of Secretary, MCA.
JSA Take: Form DIR 11 was to facilitate easy exit for a director, the provision for filing forms DIR 11 &
DIR 12 itself seems to be complicated – the clarification lacks clarity.
Clarification with regard to section 185 and 186 of the Companies Act, 2013 – loans and advances to
employees – reg
[Issued by the Ministry of Corporate Affairs vide General Circular No. 04/2015, dated 10.03.2015.]
This Ministry has received a number of references seeking clarification on the applicability of provisions
of section 186 of the Companies Act, 2013 relating to grant of loans and advances by Companies to their
employees.
2. The issue has been examined and it is hereby clarified that loans and/or advances made by the
companies to their employees, other than the managing or whole time directors (which is governed by
section 185) are not governed by the requirements of section 186 of the Companies Act, 2013. This
clarification will, however, be applicable if such loans/advances to employees are in accordance with the
conditions of service applicable to employees and are also in accordance with the remuneration policy,
in cases where such policy is required to be formulated,
3. This issues with the approval of the Secretary.
JSA Take: Ease of giving loans to employees, clarified – employees get the much required relief to take
personal loans from the company.
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
SAVE OUR ENVIRONMENT
India being watched for its contribution to climate
change
Contrary to Prime Minister Narendra Modi's recent observation that India was under "no pressure" for
climate commitments, a US envoy said that India is being "closely watched" for its contribution to
climate change. US envoy Richard Verma said the country was being "closely watched" for its intended
contribution towards the global response to climate change.
In January, at a bilateral engagement with US President Barack Obama during his state visit to India,
Modi had said that India was under "no pressure" to announce a peak year for cutting its own emission
like the US and China.
India is the world's third largest emitter of greenhouse gases.
Speaking at a Confederation of Indian Industry (CII) event here Verma, however, noted that "India's size,
economic growth projections and already significant greenhouse gas emissions means there is
tremendous interest around the world" on its proposed contribution to mitigating climate change. "I
don't think it's an understatement to say the world is watching very closely what India will do," he said.
Ahead of the crucial climate change negotiations at Paris 2015 in December, global emitters will submit
their "Intended Nationally Determined Contributions" (INDCs). The INDCs will be the announcement of
their commitment to adopt measures for clean energy and produce green house gas emissions.
Dismissing the perception that the world is divided in two camps "the countries with historical
responsibility as early industrializers and the ones that are now embarking on the path of development",
Verma said: "We (India and the US) are not in two camps anymore. We are in the same camp. We have
to move forward (to address the scourge of climate change) taking into account our national
circumstance."Impressing on Obama's interest in being India's "best partner", Verma said the US would
like to extend cooperation not just in the field of defence and trade but also strengthen understanding
in the global response to the "toughest issue on the planet ... climate change". We are working closely
with India to find ways to promote the transition to a low carbon, clean energy future. We hope our
recent breakthrough understanding in the civil nuclear sector will ultimately allow us to build low
carbon base load nuclear power plants together," he remarked. Drawing on the potential "countless
opportunities" offered by programmes like Smart Cities, Make in India, and Swachh Bharat campaigns as
well as the government's commitment to 175 Gig watts of clean, renewable energy by 2022, Verma
urged the business community in India to lead the way on climate change. These programmes, Verma
said, would have "countless opportunities to utilize cleaner technologies that are more energy and cost
efficient", adding that "the economic benefits of action and moving to a low carbon future are
enormous". The US envoy to India was speaking at the launch of a global engagement initiated by the US
to highlight the economic opportunities associated with climate action.
Source: timesofindia.indiatimes.com
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
Comply or Explain
DON’T MISS IT
Compliance Calender for the month of May 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 April 2015
6th
Service Tax Return for the month of April 2015 through internet banking
7th
Payment of TDS
11th
Monthly Excise return by all assesses(except SSIs &EOUs) coming under CAE in form ER 1
11th
Monthly Excise return by EOU assesses coming under CEA in Form ER 2
11th
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)
15th
Advance Tax Payment (Quarterly)
FEMA
7th
Monthly return in Form ECB 2 for companies availing External Commercial Borrowings under
FEMA Regulations
LABOUR LAW COMPLIANCES
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
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
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
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
DIDYOU 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 March 2015
6th
Service Tax Return for the month of March 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
LABOUR LAW COMPLIANCES
15th
Monthly Declaration and filing of form (for the employees joined during the previous month)
under ESI Act,1948
J SUNDHARESAN & ASSOCIATES
CS NEWS – MAY 2015
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
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published in this newsletter. All rights are reserved. For Private circulation only.© 2015 J Sundharesan
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