We are pleased to share our bi-monthly newsletter on the latest GST and Customs Developments. The newsletter covers recent judgments and regulatory updates in the GST and Customs space in India.
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Mr. Shammi Kapoor
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Associate Partner
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In the May edition of our monthly newsletter “Legalaxy“, our team analyses some of the key developments in securities market, banking and finance, foreign direct investment, food safety and employment.
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Section 12AB was inserted by the Finance Act 2020, prescribing a new procedure of obtaining fresh registration by all existing and new charitable trusts/ institutions under section 12A of the Income Tax Act, 1961 (‘the Act’), effective from 1st June 2020, which was later deferred to 1st October 2020. The section replaced the erstwhile registration process, which granted perpetual approvals to charitable trusts and institutions. Similar amendments were made in the registration process of entities under section 10(23C)/80G of the Act. The implementation of the revised procedure was postponed to 1st April 2021, vide The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (‘TOLA’).
To read in details about the provisions relating to new registration process, please click on the DOWNLOAD NEWSLETTER below.
Securities Exchange Board of India (“SEBI”), vide its circular dated April 29, 2024, based on the feedback received from the market participants has relaxed the requirement of intimating changes in the terms of the Private Placement Memorandum (“PPM”) of AIFs through merchant bankers and SEBI has identified that certain changes in the terms of the PPM may be filed directly with SEBI rather than through a merchant banker, thereby facilitating ease of doing business and rationalising the cost of compliance for AIFs. Para 2.5.3 of the Master Circular for AIFs mandated the intimation with respect to any change in the terms of PPM to be submitted to SEBI through a merchant banker, along with a due diligence certificate from the merchant banker in the format specified by SEBI.
The said circular lists out in Annexure A thereto, the changes in the terms of the PPM that are to be filed directly with SEBI. Further, as per the circular, Large Value Fund for Accredited Investors (“LVFs”) are exempted from the requirement of intimating any changes in the terms of PPM through a merchant banker. LVFs may directly file any changes in the terms of the PPM with SEBI, along with a duly signed and stamped undertaking by the chief executive officer of the manager of AIFs (or the person holding equivalent role or position depending on the legal structure of the manager) and compliance officer of the manager of AIFs (in the format set out in Annexure B to the circular).
To read the circular click here
For any clarification, please write to:
Mr. Yatin Narang
Partner
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The Supreme Court, vide its judgement dated March 12, 2024, in the case of Mahanadi Coalfields Limited v. Brajrajnagar Coal Mines Workers’ Union [Civil Appeal No(s). 4092-4093/2024], has held that the workers who are engaged in the performance of work which is perennial or permanent in nature would not be classified as contractual workers.
Facts
Mahanadi Coalfields Limited (“Appellant”), a subsidiary of Coal India Limited, floated a tender for the transportation of crushed coal and selected a successful contractor for performance of the National Coal Wage Agreement-IV (“Agreement”) for the period of 1984-94. The contractor engaged 32 workmen for the execution of the Agreement. The Brajrajnagar Coal Mines Workers’ Union (“Respondent”) sought permanent status for the workmen engaged by the contractor and reliance was placed on clauses 11.5.1 and 11.5.2 of the Agreement, wherein it was agreed that contract labour should not be engaged by the employer with respect to those jobs which are permanent and perennial in nature. The Agreement also provided that such permanent and perennial jobs should be executed through regular employees. Following the representation of the Respondent, a notice was sent to the Appellant by the Assistant Labour Commissioner for conciliation. The conciliation process eventually culminated in a settlement dated April 5, 1997, under Rule 58 (Memorandum of settlement) of the Industrial Disputes (Central) Rules, 1957, wherein regularisation for 19 workers took place as their nature of work was held to be permanent and perennial in nature since they were engaged in bunker for operating chutes. 13 workers remained unregularized as the nature of their work was considered as purely casual which was not prohibited under Contract Labour (Regulation & Abolition) Act, 1970.
In view of the fact that the settlement is limited to only 19 workmen, the entire dispute was referred by the Central Government to the Industrial Tribunal, Rourkela, Odisha (“Industrial Tribunal”), under Sections 10 (Reference of disputes to Boards, Courts, or Tribunals) and (2A)(1)(d) (Dismissal, etc., of an individual workman to be deemed to be an industrial dispute) of the Industrial Disputes Act, 1947 (“Industrial Disputes Act”). The industrial dispute was allowed by the Industrial Tribunal, order dated May 23, 2002 which directed the regularization of the remaining 13 workmen and held that the work of removing spillages in the railway siding, below the bunker and operation of chutes in the bunker are regular and perennial in nature.
Aggrieved by the judgement of the Industrial Tribunal, the Appellant filed a writ petition before the Orissa High Court. Orissa High Court dismissed the writ petition and upheld the decision of the Industrial Tribunal by taking into consideration the nature of work performed by the workers. Additionally, the Orissa High Court also dismissed the review petition filed by the management. Therefore, being aggrieved by the order of the Orissa High Court, the Appellant filed the present appeal before the Supreme Court.
Issue
Whether the workers working in a perennial or permanent nature of work would be treated as contractual workers.
Arguments
Contentions of the Appellant:
It was contended by the Appellant that the award passed by the Industrial Tribunal is bad in law and the settlement was binding on the parties due to Section 18(1) (Persons on whom settlements and awards are binding) read with Section 36 (Representation of parties) of the Industrial Disputes Act and it also continues to be binding on the parties by virtue of Section 19(2) (Period of operation of settlements and awards) of the Industrial Disputes Act, since the said settlement was never terminated.
The Appellant submitted that the nature of works being performed by the workers was verified before reaching to the settlement. It was found that 19 workers were performing perennial and permanent work and the work of the remaining 13 workers was ‘casual’ in nature.
It was contended by the Appellant that the only provision under which regularization could be claimed would be Section 25F (Conditions precedent to retrenchment of workmen) of the Industrial Disputes Act, which would have no application in the present case since the workmen worked under the supervision of a contractor and not the Appellant.
It was also contended by the Appellant that the Industrial Tribunal had wrongly directed the Appellant to disburse back-wages to the 13 workers as it is contrary to the settled principle which states that the grant of back-wages can never be automatic or a natural consequence of regularization. The Appellant relied on the judgement in the case of J.K. Synthetics Limited v. K.P. Agrawal and Another [(2007) 2 SCC 433] to support its contention that the workers who are seeking regularization and back-wages had an onus to prove that they were not gainfully employed.
Contentions of the Respondent:
It was contended by the Respondent that all 32 workers were engaged in works which were similar in nature and the workers were arbitrarily deprived of regularization, wherein certain workers from the bunker and the plant were left out of the settlement without any reason. Additionally, it was also argued that the work which was performed by the workers in the railway siding was perennial and regular in nature and similar to the work performed in the bunker.
The Respondent also relied on the evidence of the personal manager and the project officer in the Appellant company who admitted that the removal of spilled coal from the railway siding, the bunker and the coal handling plant was regular and perennial in nature. Therefore, the 13 workers who were not regularised also actively participated in tasks deemed regular and perennial.
The Respondent submitted that since there was no resolution of the claim of regularization of similarly placed workers, they have the right to pursue the remedy under the Industrial Disputes Act. It is submitted that Rule 58 of the Industrial Disputes (Central) Rules, 1957, under which the settlement occurred, nowhere posed a legal obstruction to the remedy.
The Respondent also submitted that the 13 workmen who were not regularised suffered without any fault of theirs and therefore an order of regularisation must naturally lead to grant of consequential back-wages.
Observations of the Supreme Court
The Supreme Court observed that the regularised employees and the remaining workers stand on the same footing, and the non-regularised workers were wrongly not made part of the settlement. Further, it was observed by the Supreme Court that there existed no grounds for the artificial distinction between the 19 workers who were regularized and the 13 workers who were left out. The Supreme Court noted that out of the 19 workers who were regularized, 16 worked in the bunker, and 3 worked in the coal handling plant. However, 3 workers from the same bunker and 3 workers from the same coal handling plant were not regularised. The Appellant failed to establish any distinction between the two sets of workers. Therefore, the Industrial Tribunal was justified in holding that the nature of the duties performed by the remaining 13 workmen is also perennial and regular in nature.
It was observed by the Supreme Court that even if a settlement was arrived at with respect to some of the workmen, the Industrial Tribunal was tasked to examine the entire reference and give independent findings on the dispute. Hence, the Industrial Tribunal was justified in giving its award on the reference made by the Central Government. This answers the objection raised by the Appellant about the jurisdiction of the Industrial Tribunal.
It was also observed by the Supreme Court that in the present case, the denial of regularisation of the 13 workers was wrongful and the workmen had no fault in it. The Supreme Court upheld the order of the Industrial Tribunal for regularizing the workmen and observed that said workmen are entitled to back-wages with a modification to the order of the Industrial Tribunal and confining the calculation of the back-wages from May 23, 2002, that is, the date of the order of the Industrial Tribunal as the Supreme Court took into consideration the public interest as well the litigation between the parties which has been pending since a long period of time, thereby causing an adverse impact on the Appellant as well as the workmen.
Decision of the Supreme Court
The Supreme Court, while dismissing the appeals, upheld the decision of the Industrial Tribunal and regularised the remaining 13 workers. The Supreme Court also ordered that there would be no order restricting the wages of the said workers. Further, the Supreme Court ordered the calculation of backwages for the workers from May 23, 2002, that is, from the date of the order of the Industrial Tribunal.
VA View:
The Supreme Court has rightly held that the workers who perform any work which
is permanent or perennial in nature would not be considered as a contract worker and therefore, ordered the regularization of the said workers.The decision of the Supreme Court has provided relief to the workers who are arbitrarily considered as contractual labourers in spite of being engaged in work of permanent or perennial nature. The observation of the Supreme Court emphasizes that such workers should not be deprived of the opportunity of job regularization. By way of this judgment, the Supreme Court has protected and uplifted the spirit of the labour legislations which are regarded as welfare legislations, by ensuring that the workers are not discriminated and deprived of their statutory rights.
For any query, please write to Mr. Bomi Daruwala at [email protected]
Securities Exchange Board of India (“SEBI”), vide its notification dated April 25, 2024, has notified the SEBI (Alternative Investment Funds) (Second Amendment) Regulations, 2024 (“AIF Amended Regulations”), thereby amending the SEBI (Alternative Investment Funds) Regulations, 2012 (“AIF Regulations”), with an aim to provide: (a) ease of doing business and flexibility to Category I and II Alternative Investment Funds (“AIFs”) to create encumbrance on their equity holdings in investee companies to facilitate raising of debt by such investee companies; and (b) additional flexibility to AIFs and their investors to deal with unliquidated investments of their schemes.
(a) Framework for Category I and II AIFs for creating encumbrance on equity holdings in investee companies:
Through the AIF Amended Regulations, provisos to Regulations 16(1)(c) and 17(c) of the AIF Regulations have been inserted. These provisos state that Category I and II AIFs may create encumbrances on the equity of their investee companies, which are engaged in the business of development, operation, or management of projects in any of the infrastructure sub-sectors listed in the Harmonised Master List of Infrastructure issued by the Central Government. However, the creation of encumbrances is allowed only for the purpose of borrowing by such investee company and subject to such conditions as may be specified by SEBI from time to time.
In this regard, SEBI, vide its circular dated April 26, 2024 (“AIF Encumbrance on Equity Holdings Circular”), has laid down the following framework for creation of encumbrance on equity holdings in investee companies:
Managers of AIFs are to adopt and adhere to the implementation standards formulated by the Standard Setting Forum (“SFA”), and the trustee/ sponsor of AIFs, as the case may be, are required to ensure that the ‘Compliance Test Report’ prepared by the manager in terms of the Master Circular for AIFs dated July 31, 2023 (“Master Circular for AIFs”), includes compliance with the provisions of AIF Encumbrance on Equity Holdings Circular.
(b) Enhanced flexibility to AIFs and their investors in managing unliquidated investments:
Regulation 29(9) of the AIF Regulations provides that during the liquidation period of a scheme, AIFs may distribute investments of a scheme which are not sold due to lack of liquidity, in-specie to the investors or enter into the dissolution period, after obtaining approval of at least 75% percent of the investors by value of their investment in the AIF scheme, in the manner and subject to conditions specified by SEBI from time to time. In the absence of consent of unit holders for exercising the options set out above during the liquidation period, such investments of the AIF scheme are to be dealt with in the manner specified by SEBI from time to time.
SEBI, vide its circular dated April 26, 2024 (“AIF Unliquidated Investments Circular”), has now laid down the following conditions in this regard:
To read the notification click here, to read the AIF Encumbrance on Equity Holdings Circular click here & to read the AIF Unliquidated Investments Circular click here
For any clarification, please write to:
Mr. Yatin Narang
Partner
[email protected]
