– Neha Malu, Senior Executive | Corplaw@vinodkothari.com
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– Sharon Pinto, Senior Manager & Palak Jaiswani, Asst. Manager | corplaw@vinodkothari.com
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देख मत मुड़कर परिन्दे
सामने आकाश का विस्तार है
लोग मापेंगे तुम्हारे फासले जो तय किये हैं
हाथ में फीता लिए
किन्तु तुमको फासलों की है नहीं परवाह
क्षितिज तक उड़ना तुम्हारी चाह
सांस सीने में परों में शक्ति है
अनवरत उड़ना तुम्हारी नियति है, संसार है
देख मत मुड़कर परिन्दे
सामने आकाश का विस्तार है
– Shaivi Bhamaria | resolve@vinodkothari.com
When a corporate person undergoes Corporate Insolvency Resolution Process (‘CIRP’) or liquidation process, there is an obvious presumption of precedent financial stress, and hence, all the transactions that have an adverse bearing on the financial health of the distressed corporate person, at the cost of stakeholders, come under the scanner. There is a look-back period, which, based on global equivalents, has been fixed at 2 years prior to commencement of CIRP in case of transactions with related persons, and 1 year prior to commencement of CIRP in other cases. The Insolvency and Bankruptcy Code, 2016 (‘the Code’) has titled such transactions as ‘avoidance transactions’. Such avoidance transactions are classified into 4 categories in the Code, viz- (a) preferential transactions (b) undervalued transactions (c) transactions defrauding the creditors and (d) fraudulent transactions. The provisions with respect to avoidance transactions are inspired by the UK Insolvency Act.
Read more →Abhirup Ghosh, Qasim Saif & Aanchal Kaur Nagpal | finserv@vinodkothari.com
Levying of penal charges or late payment charges are claimed as ‘just’, owing to the underlying breach of contract under the Contract Act, 1972. A breach or a non-performance by one party entitles the other party to receive compensation for any loss or damage suffered due to such breach. Penalties may not only be compensatory; they also have a deterrent element.
In order to ensure compliant behaviour, lenders charge penalties to their borrowers for various ‘events of default’; the predominant ones being penalty for delayed payments (in the form of charges or interest) and prepayment penalties. However, such charges stopped being ‘just’ and ‘reasonable’ when lenders started maneuvering such penalties as revenue enhancement tools, rather than as a deterrent measure and compensation for a breach. Such unreasonable penalties coupled with non-disclosures, compounding of penal interest, etc. were highly prejudicial to consumer interest and accordingly, caught the eye of the regulator.
The RBI introduced guidelines to the lenders to ensure reasonableness and transparency in the disclosure of penal interest vide its Circular on ‘Fair Lending Practice – Penal Charges in Loan Accounts’(RBI Guidelines on penal charges’) dated August 18, 2023. Our article and FAQs[1] on the same may be read here[2].Our YouTube video discussing the guidelines may be viewed here.
However, charging penal interest also raises several practical questions for lenders, mainly indirect taxation and accounting of penal charges, which will be discussed in detail in this article.
Read more →Our resources on the topic:
Click here to view our firm profile – https://vinodkothari.com/2021/09/vkcpl-team-profile/
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Watch the Panel discussion here: https://www.youtube.com/watch?v=Ba31bj8u3z4
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Our Resource Center on CSR can be accessed here
– Team Finserv | finserv@vinodkothari.com
Updated as on 22nd December 2024
| The Circular is applicable from April 01, 2024. Please feel free to drop your queries in the comment box below and we will try our best to reply at the earliest. |
RBI on August 18, 2023 came up with the circular Fair Lending practice – Penal charges in Loan accounts (‘Circular’). The Circular restricts entities from charging penal interest on loan accounts, instead they should levy penalty or penal charges..
We have developed a set of FAQs on the press release and updated the same based on this Circular read along with the RBI Notification on Fair Lending Practice – Penal Charges in Loan Accounts: Extension of Timeline for Implementation of Instructions dated December 29, 2023 and FAQs released by RBI where we intend to answer some of the critical questions relating to the penal charges in loan accounts.
Our write-up on the topic can be read here – Penal charges not a cash-cow for lenders
Read more →– Ankit Singh Mehar | Executive | corplaw@vinodkothari.com
Online Dispute Resolution (ODR) in Indian Securities Market has been introduced by SEBI vide its circular dated July 31, 2023 read with corrigendum-cum-amendment circular dated August 4, 2023. In addition to SCORES, Investors/clients and Market Participants (MPs) now have an additional mechanism available for dispute resolution. This snippet summarises ODR process and the actionable for listed entities and other MPs, arising out of the said circulars.
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-Mahak Agarwal | corplaw@vinodkothari.com
Diversity in the Boardroom, specifically gender diversity is in the limelight owing to the general awareness for breaking gender stereotypes and adopting a gender neutral board structure. While the Companies Act, 2013 and SEBI LODR Regulations have already taken their first steps towards implementing the same, considering the progress in global perspective, India still has a long way to go in increasing women participation in corporate boards . This article discusses the concept of Board diversity, specifically gender diversity, and the ways in which Indian corporate laws could take their next step in achieving a gender-diversified Board.
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