The tellers of doom would argue that India Inc is staring at the end of a barrel owing to the contagion. In my view, we are at a cusp, where all the fittest would survive. To me, in every adversity, there is an opportunity and likewise in every challenge, there is a winner. If one is indeed patient, and able to think with a cool and calm mind, defenestrating notions to the contrary, tiding over the difficult times, and making the best of every opportunity that presents itself along with the way would become a way of life. In this article, I intend to delve into some of the key relaxations granted which could be considered.
Relaxations by the Ministry of Corporate Affairs
In view of the recent pandemic and with a view to ensuring compliance, the Ministry of Corporate Affairs (“MCA”) has introduced a slew of measures. Some of the key relaxations granted by the MCA are as follows
Insolvency and Bankruptcy Code
In a move to avoid large scale insolvencies, the Government vides Notification No 1205(E) has increased the threshold of the minimum amount of default for maintainability of an application under the Insolvency and Bankruptcy Code, 2016 from INR 100,000 (One Lakh) to INR 1,00,00,000 (One crore). Interestingly, the notification does not indicate any specific date from when the revised threshold would be effective. Hence, there is a ground to contend that the revised limit would also apply to proceedings pending before the NCLT/ NCLAT and not merely to cases that would now be initiated. Furthermore, one could argue on its retrospective to also state that the Court was bound to apply the law as on the date of the judgment (ie, the revised limit of INR 1 crore). This view is supported by the judgment of the Supreme Court in the case of Dahiben Vs VasanjiKevalbhai 1995 Suppl (2) SCC 295.
Goods & Services Tax
Amidst the pandemic, the Government has granted relaxations to taxpayers by way of waiver of late fees for delay in furnishing of returns in Form GSTR 3B for the period February 2020 to April 2020 and Form GSTR1 for the tax periods Mar’20 to May’20 and for the quarter ending 31st March, 2020 vide Notification No.32/2020 – Central Tax and 33/2020 – Central Tax both dated 3-4-2020.
In another key development, the government has also permitted cumulative matching of an input tax credit for the period February 2020 to August 2020, as against a matching to be undertaken on a month-wise basis. The said benefit has been provided through an amendment effected in Rule 36(4) where a proviso has been inserted vide Notification No 30/2020.
Direct taxes
The Government has promulgated an ordinance styled Taxation and other Laws (Relaxation of Certain Provisions) Ordinance, 2020. In my view, the Government has not only moved swiftly in announcing the lockdown but has also taken necessary steps to ease the tax and regulatory compliances in order to give the businesses a breather amidst such difficult times. The route of introducing an ordinance was adopted under Article 123 of the Constitution of India as the Parliament was not in session coupled with the emergency situation that the country is currently facing.
Some of the key benefits under the said ordinance are as follows:
In another key development, the Central Board of Direct Taxes (“CBDT”) vide Circular No 11 of 2020 dated 08.05.2020 has clarified that in determining the residential status of an individual who is a non-resident or not ordinarily resident, the period commencing 22.03.2020 to 31.03.2020 would not be taken into consideration. The CBDT has also clarified that a similar relaxation would also be extended for FY 2020-21, post normalization. The Board has also clarified that there shall be no communication with an assessee, which would have an adverse effect on the assessee until fresh guidelines are issued by the Board.
Provident Fund
In order to prevent disruption in the employment of law wage-earning employees and to support establishments employing up to 100 employees, the entire employees EPF contribution comprising of both the employee and employers contribution (aggregating to 24 percent of the total wages) shall be paid directly by the Central Government in the EPF account of the concerned employees for the period March 2020 to May 2020. The Scheme would apply to those covered establishments having up to 100 employees with 90 percent or more of such employees earning wages less than INR 15,000 per month.
Financing related
The Reserve Bank of India in a notification dated 27 March 2020 has offered a slew of reliefs. For instance, the RBI has notified that in respect of all term loans (including agricultural term loans, retail and crop loans), all commercial banks (including regional rural banks, small finance banks, and local area banks), co-operative banks, all-India Financial Institutions, and NBFCs (including housing finance companies) are permitted to grant a moratorium of three months on payment of all installments falling due between 01 March 2020 and 31 May 2020. The notification states that the repayment schedule for such loans as also the residual tenor will be shifted across the board by three months after the moratorium period. However, interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period.
Further, even in respect of working capital facilities, lending institutions are permitted to defer the recovery of interest applied in respect of such facilities during the period 01 March 2020 to 31 May 2020.
Extension of period of limitation – Arbitration and NI Act
The Hon’ble Supreme Court in its order dated 06.05.2020 in Suo Moto Writ (Civil) No 3 of 2020 has extended the period of limitation under the Arbitration and Conciliation Act, 1996 and under section 138 of the Negotiable Instruments Act, 1881 from 15.03.2020 until further orders. The Hon’ble Supreme Court has also ordered that in case the limitation has expired after 15.03.2020, then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown. This is indeed a welcome move.
Conclusion
In summary, while the days ahead are indeed challenging, the one who thinks innovatively would emerge as the winner without being driven by hubris. This decision on the way we think and act is a decision that each individual would need to make. Our individual action would define the path that India would take.
Adv Sherry Samuel Oommen is an Advocate by profession. He has also qualified the final exams of the Institute of Chartered Accountants of India, Institute of Cost Accountants of India and the Institute of Company Secretaries of India, specializing in tax and corporate laws. He has also completed his Post Graduate Diploma in Business and Corporate Laws from Symbiosis, Pune. The views stated are personal and should not be construed as a legal opinion.
