Part 6 - Allied Laws

NBFC Regulation 6.97 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication be members of all the Credit Information Companies (CICs): — Credit Information Bureau (India) Limited (CIBIL) — Equifax Credit Information Services Private Limited, — Experian Credit Information Company of India Private Limited — CRIF High Mark • Registration with Financial Intelligence Unit – India (FIU-IND) under Prevention of Money Laundering Act • Registration with Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) under the provisions of the SARFAESI Act (13) Capital Adequacy • Existing Capital Adequacy Ratio : Every NBFC (ND-SI) and a NBFC- (ND-NSI-MFI) is required to maintain a minimum capital ratio consisting of Tier I and Tier II capital which is not less than adequacy 15% of its aggregate risk weighted assets on balance sheet and of risk adjusted value of off-balance sheet items. • Requirements under SBR framework: Internal Capital Adequacy Assessment Process (ICAAP) - NBFCs are required to make a thorough internal assessment of the need for capital, commensurate with the risks in their business. This internal assessment shall be on similar lines as ICAAP prescribed for commercial banks under Pillar 2 (Master Circular – Basel III Capital Regulations dated July 01, 2015). While Pillar 2 capital will not be insisted upon, NBFCs are required to make a realistic assessment of risks. Internal capital assessment shall factor in credit risk, market risk, operational risk and all other residual risks as per methodology to be determined internally (14) Concentration of Credit/Investment Every deposit taking NBFC and every systemically important non-deposit taking NBFC cannot • Lend to (a) Any single borrower exceeding 15% of its owned fund; and (b) Any single group of borrowers exceeding 25% of its owned fund; • Invest in (a) The shares of another company exceeding 15% of its owned fund; and (b) The shares of a single group of companies exceeding 25% of its owned fund; • lend and invest (loans/investments taken together) exceeding (a) 25% of its owned fund to a single party; and (b) 40% of its owned fund to a single group of parties. Provided further that an applicable NBFC may exceed the concentration of credit/ investment norms, by 5 per cent for any single party and by 10 per cent for a single group of parties, if the additional exposure is on account of infrastructure loan and/or investment. (15) Committees and Statutory Auditor Appointment Under the various Master Directions there are requirements for forming of various committees as well as guidelines with respect to evaluation of Board Directors. A NBFC(ND-SI) and a deposit taking NBFC shall have the following committee: • Audit Committee - consisting of not less than three members of its Board of Directors. • Nomination Committee - to ensure ‘fit and proper’ status of proposed/ existing directors. • Risk Management Committee - To manage the integrated risk

Allied Laws 6.98 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • Asset Liability Management Committee - The ALCO consisting of the NBFC’s top management shall be responsible for ensuring adherence to the risk tolerance/ limits set by the Board as well as implementing the liquidity risk management strategy of the NBFC • Asset Liability Management (ALM) Support Group - The ALM Support Group consisting of the operating staff shall be responsible for analysing, monitoring and reporting the liquidity risk profile to the ALCO. • IT Strategy Committee - to ensure that as part of the Corporate Governance initiatives, IT Governance is also addressed A NBFC (ND-SI) shall rotate the partner/s of the Chartered Accountant firm conducting the audit, every three years so that same partner shall not conduct audit of the company continuously for more than a period of three years. However, the partner so rotated shall be eligible for conducting the audit of the applicable NBFC after an interval of three years, if the applicable NBFC, so decides. The applicable NBFC shall incorporate appropriate terms in the letter of appointment of the firm of auditors and ensure its compliance. Further under the “Guidelines for Appointment of Statutory Central Auditors (SCAs)/Statutory Auditors (SAs) of Commercial Banks (excluding RRBs), UCBs and NBFCs (including HFCs)” : For Entities with asset size of ₹15,000 crore and above as at the end of previous year, the statutory audit should be conducted under joint audit of a minimum of two audit firms. All other Entities should appoint a minimum of one audit firm (Partnership firm/LLPs) for conducting statutory audit. It shall be ensured that joint auditors of the Entity do not have any common partners and they are not under the same network of audit firms. Further, the Entity may finalise the work allocation among SCAs/SAs, before the commencement of the statutory audit, in consultation with their SCAs/SAs. (16) Fit & Proper Criteria All NBFC (ND-SI) shall • ensure that a policy is put in place with the approval of the Board of Directors for ascertaining the fit and proper criteria of the directors at the time of appointment and on a continuing basis. The policy on the fit and proper criteria shall be on the lines of the Guidelines contained in relevant Master Direction; • obtain a declaration and undertaking from the directors giving additional information on the directors. The declaration and undertaking shall be on the lines of the format given in the relevant Master Direction; • obtain a Deed of Covenant signed by the directors, which shall be in the format as given in the relevant Master Direction; • furnish to the RBI a quarterly statement on change of directors, and a certificate from the Managing Director of the applicable NBFC that fit and proper criteria in selection of the directors has been followed. The statement must reach the Regional Office of the Department of Supervision of the Bank where the company is registered, within 15 days of the close of the respective quarter. The statement submitted by applicable NBFC for the quarter ending March 31, shall be certified by the auditors. Provided that the RBI, if it deems fit and in public interest, reserves the right to examine the fit and proper criteria of directors of any NBFC irrespective of the asset size of such NBFC. (17) Balance Sheet • Accounting year : Every NBFC shall prepare its balance sheet and profit and loss account as on March 31 every year. Whenever an applicable NBFC intends to extend the date of its balance

NBFC Regulation 6.99 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication sheet as per provisions of the Companies Act, it shall take prior approval of the Bank before approaching the Registrar of Companies for this purpose Even in cases where the Bank and the Registrar of Companies grant extension of time, the applicable NBFC shall furnish to the Bank a proforma balance sheet (unaudited) as on March 31 of the year and the statutory returns due on the said date. Every applicable NBFC shall finalise its balance sheet within a period of 3 months from the date to which it pertains. • Disclosure in the balance sheet — Every NBFC shall separately disclose in its balance sheet the provisions made as per these Directions without netting them from the income or against the value of assets. — The provisions shall be distinctly indicated under separate heads of account as under:- (i) provisions for bad and doubtful debts; and (ii) provisions for depreciation in investments. — Such provisions shall not be appropriated from the general provisions and loss reserves held, if any, by the applicable NBFC. — Such provisions for each year shall be debited to the profit and loss account. The excess of provisions, if any, held under the heads general provisions and loss reserves shall be written back without making adjustment against them. — In addition, every NBFC(ND-SI) shall disclose the following particulars in its Balance Sheet: Capital to Risk Assets Ratio (CRAR); Exposure to real estate sector, both direct and indirect; and Maturity pattern of assets and liabilities. • Schedule to the balance sheet : Every applicable NBFC shall append to its balance sheet prescribed under the Companies Act, 2013, the particulars in the schedule as set out in relevant Master Direction. 18. Audit directions The RBI has issued Master Direction DNBS. PPD.03/66.15.001/2016-17 dated September 29, 2016, titled Master Direction - NonBanking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016. These are in in supersession of the Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2008 are applicable to every auditor of every non-banking financial companies. • Additional Report : Auditors to submit additional report to the Board of Directors on various matters specified in paras 3 and 4 of the said directions. — Para 3 contains a range of checks ranging from NOF requirements to compliance with prudential norms — Para 4 is with reference to reasons to be stated for unfavourable or qualified statements • Obligation of auditor to submit an exception report to the Bank Where there is an unfavourable or qualified statements with regards para 3 or in the opinion of the auditor the company has not complied with: — the provisions of Chapter III B of RBI Act (Act 2 of 1934); or — Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016; or

Allied Laws 6.100 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication — Non-Banking Financial Company – Non-Systemically Important NonDeposit taking Company (Reserve Bank) Directions, 2016 and NonBanking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 It shall be the obligation of the auditor to make a report containing the details of such unfavourable or qualified statements and/or about the noncompliance, as the case may be, in respect of the company to the concerned Regional Office of the Department of Non-Banking Supervision of the Bank under whose jurisdiction the registered office of the company is located as per first Schedule to the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016. The duty of the Auditor under above paragraph shall be to report only the contraventions of the provisions of RBI Act, 1934, and Directions, Guidelines, instructions referred to in subparagraph (1) and such report shall not contain any statement with respect to compliance of any of those provisions. 2

Partnership Firms – Procedures (Maharashtra) 6.101 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication VII. Partnership Firms – Procedures (Maharashtra) Sr. No. Subject Form No. Time Limit Sec. Enclosures Filing Fees ` Other Charges ` Penalties Documents and Stamp Duty Amt. Sec. Amt. 1 Appeal against refusal by Registrar to register the firm under a particular name Plain paper 30 days 58(4) 1. Copy of order appealed against 2. Copy of receipt 1600 — — — — 2 Registration A 1 year 58(1) & (1A) 1. Forwarding letter with ` 5 court fee stamp 2. ` 10 Non-judicial stamp paper 3. Copy of partnership deed certified by CA/HC Advocate/any other officer 4. Marathi translation of Partnership deed duly certified by CA or Advocate 1500 100 59A1 ` 1000/- per year or part thereof Instrument of Partnership w.e.f. 24-4- 2015 1. ` 500 for no share capital contribution or share capital contribution in cash up to ` 50,000 and 2. Where such share capital contribution brought in by way of cash is in excess of ` 50,000 then ` 500 plus one per cent of the amount of share capital contribution in excess of ` 50,000 subject to a maximum of ` 15,000 3. For share of capital contribution brought in by way of property (excluding cash, — same duty will be leviable as on conveyance on the market value of the property) 3 Change in principal place/ nature of business/firm name B 90 days 60(1) As per enclosures 1 & 2 mentioned under Sr. No. 2 1000 200 69A ` 2000/- year or part With effect from 24-4-2015, Supplementary Deed on the Stamp Paper of ` 500 is required to be executed stating the facts as mentioned in Form B as concrete evidence. An attested copy of such deed is required to be submitted along with the notarised Form B. Proof for date of change in Principal Place of Business as required can be Certified Copy of Possession Letter, Sale Deed, Leave License Agreement or copy of Supplementary

Allied Laws 6.102 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Sr. No. Subject Form No. Time Limit Sec. Enclosures Filing Fees ` Other Charges ` Penalties Documents and Stamp Duty Amt. Deed. Proof as required for date of change in Nature of Business / Firm Name can be Copy of Supplementary Deed which is required to be submitted. 4 Opening and closing of branches C 90 days 61 As per enclosures 1 & 2 mentioned under Sr. No. 2 1000 200 69A ` 2000/- year or part thereof With effect from 24-4-2015, Supplementary Deed on the Stamp Paper of ` 500 is required to be executed stating the facts as mentioned in Form C as concrete evidence. An attested copy of such deed is required to be submitted along with the notarised Form C. Proof for date of change as required can be Certified Copy of Possession Letter, Sale Deed, Leave License Agreement or Copy of Supplementary Deed 5 Change in the Name and Address of the Partner D 90 days 62 As per enclosures 1 & 2 mentioned under Sr. No. 2 1000 200 69A ` 2000/- year or part thereof With effect from 24-4-2015, Supplementary Deed on the Stamp Paper of ` 500 is required to be executed stating the facts as mentioned in Form D as concrete evidence. An attested copy of such deed is required to be submitted along with the notarised Form D. 6 Change in Constitution — Admission/ Retirement/ Dissolution/Death of Partner E 90 days 63 As per enclosures 1 & 2 mentioned under Sr. No. 2 1000 200 69A ` 2000/- year or part thereof (a) Instrument of Partnership on reconstitution of the firm: Stamp duty as under Sr. No. 1 or 2 above (b) Instrument of Dissolution/Retirement 1. Where immovable property is given to a partner other than the partner who brought in that property stamp duty will be leviable on a conveyance on the market value of such property subject to a minimum of ` 100. 2. Any other case — ` 500 w.e.f. 24- 4-2015

Partnership Firms – Procedures (Maharashtra) 6.103 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Sr. No. Subject Form No. Time Limit Sec. Enclosures Filing Fees ` Other Charges ` Penalties Documents and Stamp Duty Amt. 7 Minor attaining majority and elects to become/ not to become a Partner F 90 days 63(2) 1. As per enclosures 1 & 2 mentioned under Sr. No. 2 2. Copy of Advertisement published in one vernacular local newspaper 1000 200 69A ` 2000/- year or part thereof In case he elects to become partner and brings in share contribution, same as Sr. No. 2. In case he does not become partner, same as Sr. No. 6. Supplementary Deed required for change in Profit Sharing Ratio only. 8 Change in Profit/ Salary/Interest — — — Not required to be submitted to ROF — — — — Supplementary Deed ` 500 W.e.f. 24- 4-2015 No need to submit to “The Registrar of Firms” 9 Rectification of Mistakes — — 64(2) An application for certification 1000 200 — — Documentary proof of Rectification with enclosure 2 mentioned under Sr. No. 2 10 Inspection of Register — — 66(1) 1. An application for Inspection 2. Copy of Receipt 100 — — — — 11 Inspection of documents — — 66(2) 1. An application for Inspection 2. Copy of Receipt 100 — — — — 12 Certified copy — — 67 1. An application for certified copy 2. Non-judicial Stamp Paper of ` 10 ` 100 Per 100 words or part thereof — — — — 13 Intentional furnishing inaccurate/false particulars — — — — — — 70 Fine/ imprisonment for a term which may extend to one year or both — 1. Forms A, B, E should be signed by all the partners (including the retiring partner). Forms C and D by any one partner and Form F by partner attaining the age of majority. All the forms must be signed before Notary/Magistrate. The Marathi Translation which is required to be filed at the time of registration of firm is required to be certified by Chartered Accountant, Advocate or Notary. Marathi Translation should not be in the form of using English words in Marathi Script. For example, construction should not be written in Marathi as keÀvmì^keÌMeve but yeebOekeÀece. In cases of retirement, Form E should be signed by both Incoming and Outgoing Partner/s or two separate E forms duly signed each for admission and retirement respectively are required to be submitted along with the Instrument of Partnership and Retirement Deed. 2. Fees include copying charges, where applicable. 3. The above rates have been revised and applicable w.e.f. 12th February, 2014. 4. New rates for penalty are applicable w.e.f. 30th January, 2018 for penalty of various forms as above.

Allied Laws 6.104 R 7ima 5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Tips to avoid objections from Registrar of Firms (ROF) in respect of forms filed. 1. Stamp paper must be in the name of firm or partners. 2. If change in constitution is simultaneous with change in address, both Forms E and B or D are required to be filed. Even if the changed address is mentioned in partnership deed, it cannot be considered as notice of change unless Form B or D is filed. 3. Change in Karta of HUF is required to be intimated to ROF. If the change of Karta is due to the death of Karta, then the change can be intimated by filing Form ‘E’ within 90 days of death along with copy of Death Certificate of Karta duly attested. No Supplementary deed is required. 4. Date of filing of documents must be within one month of such notarisation. 5. Always check date of stamp paper, date of execution of deed and effective date of partnership deed. 6. In respect of change of name and address of a lady partner due to her marriage, Form D should be filed in 90 days. The submission should include attested copy of marriage certificate containing changed name and address. A Supplementary deed is not necessary. 7. Always match the deed with the information being filled in the form and compare it with last entry on record. 8. In case of notarized document rubber stamp “BEFORE ME” is required above the signature of Notary and serial number in the register in which notarized document is recorded is to be mentioned on the document along with the date. Notary appointed by Government of Maharashtra is required to use Red Ink to affix his/her seal. 9. In case of rectification application filed under section 64, requesting correction of error on account of spelling mistake or omission of any submission, etc. signature of all existing partners is necessary on the said application. However, letter of authority to appear before the Registrar of Firms for personal hearing can be signed by any one of the existing partners. 10. After a personal hearing, you are required to make an application in writing to obtain a copy of order which states the amount of fine payable due to delayed submissions. After you receive the said order, you can pay fine and then receive entry on record on a stamp paper of Rs. 10 supplied by you along with the submissions 11. In case of Partnership Firm of Chartered Accountants, Partnership Deed of the said firm must be attested by an Advocate or Chartered Accountant other than the partner of the said firm 12. The stamp paper which is used for execution of Deed of Partnership should be dated within 6 months of the date of issue of such stamp paper. (w.e.f. 1-12-1989). 13. The object Clause of certain firms may state that specific permission / registration / legal compliance is required to do any business. In case such permission etc. is not available at the time of registration of firm, then a notarised declaration in the form of Affidavit is required on the stamp paper of ` 100/-, signed by all partners is required to be submitted in original along with Form A. (e.g., IEC Number in case of Import/Export Business or Liquor Licence in case of Wine Shop). (w.e.f. 31-8-2005) 14. Any person representing a firm to collect any document or discuss any matter with the ROF should submit /produce a letter of authority signed by all partners. (Circular dated 20-1-2007) 15. It should be noted that in present system of online submission of forms in addition to Form A which is required to be filed at the time of Registration, only one form in each of the other changes i.e. Form B, C, D, E, F can be filed. The present software does not allow to upload two or more forms for changes in case of Form B, C, D, E & F. For example, after registration if there are two or more changes in constitution or nature of business, only one necessary Form E or B as the case may be can be uploaded and after recording of the effect of such form, second such form can be uploaded. This is applicable only to those firms who are registered online. Changes in procedure for ROF. W.e.f. 20th February, 2013 a firm can be registered only online by way of following certain procedures. Refer website of ROF, Maharashtra, where general instructions to fill up Form “A” for New Registration have been mentioned. It is necessary to note that subsequent changes, if any, in case of firms registered online are supposed to be intimated only online by way of uploading Forms B, C, D, E or F as the case may be within prescribed time. Non-filing of any forms in time (A to F) shall attract penalty as applicable. (https://rof.mahaonline.gov.in/). Registration status of firms registered online shall be checked periodically online only. Personal visits to ROF office to inquire are time consuming. Please use user ID/ password created to upload the concerned form to check present status. Always use ledger paper (green paper) to take printouts of forms submitted online and for execution of Partnership Deed. If the printout of the forms submitted online is running into more than one page (back to back) take signatures of all signatories to that form on all pages. This instruction should be followed particularly in case of Form A filed online which consists of four to five pages. Payments At present payment of fees which includes Filling Fees for Registration, Changes, Inspection, True Copy, True Extract and Fine are required to be paid online and payment of fees by cash, Demand Draft, Pay Order etc. is no more available. For payment https://rof.mahaonline.gov.in 2

Period of preservation of Accounts/Records under different laws 6.105 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication VIII. Period of Preservation of Accounts/Records under different laws Sr. No. Applicable Law Information required to be maintained Period of maintaining the information 1. Companies Act, 2013 Memorandum & Articles of Association Certificate of Incorporation Certificate for Commencement of Business Register and Index of Members Agreements made by the Company with Stock Exchanges, Depositories, etc Minutes Book of Board Meetings and General Meetings Statutory Registers like - Charges, Contract, Investment, etc Permanently Books of accounts and vouchers 8 years immediately preceding the current year Books and papers of Amalgamated or Transferor Company It can be disposed only after obtaining prior approval of Central Government Books and papers of a Company which is wound up and its liquidator 5 years from the date of its dissolution. [May be destroyed earlier with prior Central Government permission] Register of deposits [Applicable to companies which are not NBFCs but which accept public deposits] 8 calendar years from the financial year in which the latest entry is made in the Register Register and Index of Debenture holders 15 years from date of redemption of debentures Copies of Annual Returns, Certificates and documents annexed thereto 8 years from the date of their filing with ROC

Allied Laws 6.106 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Sr. No. Applicable Law Information required to be maintained Period of maintaining the information 2. Income-tax Act, 1961 Specified records 6 years from the end of the relevant assessment year, i.e., for a total period of 8 previous years. [Period of six years gets extended if the assessment is reopened u/s. 147, till the time assessment is completed.] Transfer Pricing documents and information specified under Rule 10D 8 years from the end of the relevant assessment year, i.e., for a total period of 10 previous years. Necessary records and information of any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax has escaped assessment for any assessment year 16 years from the end of relevant assessment year 3. Goods and Services Tax Books and records 6 years from the last date of filing of the annual return (31st December) for that year, or 1 year after final disposal of such appeal or revision or proceedings or investigation. 4. ICAI – Council’s decision of 1957 Records relating to audit and other work done by Chartered Accountants, routine correspondence and other papers 10 years 5. Limited Liability Partnership Appropriate books of accounts and accounting records which are sufficient to show and explain its transactions 8 years from the date in respect of which records pertain 6. NBFC Directions Register of deposits for each branch and a consolidated Register 8 calendar years following the financial year in which the latest repayment/renewal entry is made in the Register. Necessary records of transactions 10 years from the date of cessation of transaction between the NBFCs and the client 7. Central Excise Books of accounts, source documents and data in any electronic media 5 years immediately after the financial year to which such records pertain

Period of preservation of Accounts/Records under different laws 6.107 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Sr. No. Applicable Law Information required to be maintained Period of maintaining the information 8. Service Tax Books of accounts, source documents and data in any electronic media 5 years immediately after the financial year to which such records pertain 9. Maharashtra Value Added Tax All books of account, registers and other documents pertaining to stocks, purchases, dispatches and deliveries of goods, payment made and receipts towards sale or purchase of goods 8 years from the expiry of the year to which they relate [Where any proceedings have been initiated, the books shall be preserved till a final order is passed in respect of the said proceedings.] 10. SEBI Regulations Records prescribed by SEBI under relevant Regulations 5 years [In case of any investigation by CBI or police, books and records to be maintained up to settlement of case (see circular dated 4-8-2005)] Records prescribed by SEBI under relevant Regulations for Venture Capital Funds and Mutual Funds 8 years Records prescribed by SEBI under relevant Regulations for Registrar & Transfer Agents and Bankers to an Issue 3 years 11. Prevention of Money Laundering Act Records of Transaction between Reporting Entities and the client 10 years from the date of transaction 12. Bombay Public Trust Act Cash Book, Bank Book, Journals, Vouchers, List of Movable Properties 12 years Inwards and Outward Register, Records of Meetings and Agenda 7 years 13. Real Estate Regulatory Authority Books of Accounts, Records and Documents 6 years 14. Co-operative Housing Society Books of Accounts and Records 10 years 15. Insolvency and Bankruptcy Code, 2016 Specified Register and Books of Accounts 8 years from the date of dissolution 2

Allied Laws 6.108 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication IX. Prevention of Money Laundering Act, 2002 (1) Introduction Money generated from criminal activities in trade like narcotics, terrorism, smuggling, corruption, counterfeit currency, gambling, and other illicit activities is covered by this Act. The Prevention of Money Laundering Act, 2002 (‘PMLA’) was passed on January 1, 2003 and was notified & made effective from July 1, 2005. A part of this legislation i.e. PMLA with respect to collecting and processing financial intelligence is administered by the Directorate of Financial Intelligence Unit, India (FIU-IND) under the Ministry of Finance. (2) Applicability: Section 3 Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property shall be guilty of offence of moneylaundering. Section 2(1) (u) : proceeds of crime means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property or where such property is taken or held outside the country, then the property equivalent in value held within the country or abroad. Section 2(1)(y) : scheduled offence means the offences specified under Part A, Part B and Part C of the Schedule. (3) Punishment for Offense of Money Laundering Seizure/freezing of property and records and attachment of property obtained with the proceeds of crime. Any person who commits the offence of money laundering shall be punishable with – • Rigorous imprisonment for a minimum term of three years and this may extend up to seven years. • Fine (without any limit). If the proceeds of crime involved in money laundering related to Part A (offence specified under the Narcotic Drugs and Psychotropic Substances Act, 1985, then the punishment shall be – • Rigorous imprisonment for a term which shall not be less than three years but which may extend up to 10 years. • Fine (without any limit). (4) Adjudication under PMLA A representation of the adjudication process is as under: As per Sections 48 & 49 of the PMLA, the officers of the Directorate of Enforcement have been given powers to investigate cases of Money Laundering. The officers have also been authorised to initiate proceedings for attachment of property and to launch prosecution in the designated Special Court for the offence of money laundering. The property / record may, if seized be retained or if frozen, may continue to remain frozen for a period not exceeding 180 days from the day on which such property or record were seized or frozen, unless the Adjudicating Authority under PMLA permits retention of such record or property beyond the period of 180 days [Sections 20 & 21]. Where on conclusion of a trial of an offence under this Act, the Special Court finds that the offence of money-laundering has been committed, it shall order that such property involved in the money-laundering or which has been used for commission of the offence of moneylaundering shall stand confiscated to the Central Government. Where on conclusion of a trial under this Act, the Special Court finds that the offence

Prevention of Money Laundering Act, 2002 6.109 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication of money-laundering has not taken place or the properties not involved in money-laundering, it may order release of such property to the person entitled to receive it. Where the trial under this Act cannot be conducted, by reason of the death of the accused or the accused having been declared a proclaimed offender or for any other reason or having commenced but could not be concluded, the Special Court, on an application moved by the Director or a person claiming to be entitled to possession of a property in respect of which an order has been issued by the Adjudicating Authority confirming the provisional attachment of the property, pass appropriate orders regarding confiscation or release of the property, as the case may be, after having regard to the material before it [Sub-sections (5) (6) & (7) of Section 8]. After an order of confiscation, all the rights and title in such property shall vest absolutely in the Central Government free from all encumbrances [Section 9]. The Director or any person aggrieved by an order made by the Adjudicating Authority under this Act, may prefer an appeal to the Appellate Tribunal. Appeal has to be filed within a period of forty-five days from the date of receipt of a copy of the order made by the Adjudicating Authority. Appellate Tribunal may entertain an appeal after the expiry of the period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period [Section 26]. Any person aggrieved by any decision or order of the Appellate Tribunal may file an appeal to the High Court within sixty days from the date of communication of the decision or order of the Appellate Tribunal to him on any question of law or fact arising out of such order. Thus appeal can be filed before High Court on any question of law or fact. High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding sixty days [Section 42]. On May 3, 2023, the government made further revisions to the PMLA, 2002. The changes broaden the money laundering law’s application to include practicing chartered accountants (CA), company secretaries (CS), and cost and works accountants (CWA) who conduct financial transactions on behalf of their clients. 2

Allied Laws 6.110 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication X. Real Estate (Regulation & Development) Act, 2016 The Real Estate Sector in India is the second highest contributor to the Nation’s GDP and a very important employment provider. Yet, it has traditionally been plagued with numerous issues, mainly with opaque practices and information asymmetry. Real Estate Transactions have usually been lopsided and heavily in favour of developers. Delays in completion of Real Estate Projects have been rampant and homebuyers, who have been at the receiving side, did not have a reliable forum to get their grievances redressed promptly. The new RERA guidelines place a strong emphasis on the consumer’s interests. States and Union Territories are expected to have their own local legislation that conforms with the RERA Act standards, which are accessible via a state/UT RERA website. (1) Issues which were adversely impacting the sector: 1. Information Asymmetry 2. Grievance Redressal 3. Lopsided Transactions 4. Sundry Abuses and Malpractices 5. Delays in Completion After a lot of opposition, deliberation and several amendments, the Government has, on 10th March 2016, approved the Real Estate (Regulation and Development) Act, 2016. The Act largely seeks to protect the interest of the allottees/purchasers by promoting transparency, accountability and efficiency in the construction and execution of real estate projects by promoters. It also holds the promoters accountable for not registering their projects with the Real Estate Regulatory Authority (Regulatory Authority) or for providing insufficient information regarding their project. In addition to the promoter and allottees, the Act also brings real estate brokers who facilitate the sale and purchase of units in a project within its ambit. (2) Salient Features The salient features of the Act are the following: • Real Estate Regulatory Authority — Under the Act, instead of a regular forum of consumers, the purchasers of real estate units from a developer would have a specialized statewise forum called the “Real Estate Regulatory Authority”. MahaRERA In March, 2017, Government of Maharashtra notified MahaRERA [www.maharera. mahaonline.gov.in]. The Maharashtra Housing (Regulation and Development) Act 2012 has been repealed by the Central Government • Registration with the Regulatory Authority — The promoter has to register their project (residential as well as commercial) with the Regulatory Authority before booking, selling or offering apartments for sale in such projects. In case a project is to be promoted in phases, then each phase shall be considered as a standalone project, and the promoter shall obtain registration for each phase. — Further, in case of ongoing projects on the date of commencement of the Act which have not received a completion certificate, the promoter of such project shall make an application to the Regulatory Authority for registration of their project within a period of three months of the commencement of the Act. — The following types of projects shall not be required to be registered before the Regulatory Authority: Where the area of land proposed to be promoted does not exceed

RERA 2016 6.111 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 500 square meters or the number of apartments to be constructed in the project does not exceed eight apartments. However, the appropriate Government (Central and State Government) may, if it considers appropriate, reduce the threshold limit; Projects where the completion certificate has been received prior to the commencement of the Act; Projects for the purpose of renovation or repair or redevelopment which does not involve marketing, advertising, selling and new allotment of any apartment plot or building. — The application for registration must disclose the following information: Details of the promoter Detail of the projects launched by the promoter in the past five years completed or being developed, current status of the projects, any delay, pending cases, pending payments. An authenticated copy of the approval and commencement certificate received from the competent authority and an authenticated copy of the approval and commencement certificate of each of such phases for project to be completed in phases; The sanctioned plan, layout plan and specifications of the project, plan of development works to be executed in the proposed project and the proposed facilities to be provided thereof and the vocational details of the project; Proforma of the allotment letter, agreement for sale and conveyance deed Number, type and carpet area of the apartments and garages for sale in the project The names and addresses of real estate agents, contractors, architects, structural engineers affiliated with the project A declaration by the promoter supported by an affidavit stating that: a. He has a legal title to the land, free from all encumbrances, details of encumbrances, if any, in the land including any right, title, interest or name of any party in or over such land along with the details; b. The time period to complete the project or the phase c. 70% of the amounts realised for the real estate project from the allottees, shall be deposited in a separate bank account to cover the cost of construction and land and shall be used only for that purpose. — Carpet Area Under the Act, developers can sell units only on carpet area, which means the net usable floor area of an apartment. This excludes the area covered by the external walls, areas under service shafts, exclusive balcony or verandah area and exclusive open terrace area, but includes the area covered by the internal partition walls of the apartment. — 70% of realisation from allottees in a separate bank account Promoter shall deposit 70% of the amount realised from the allottees, from time-to-time, in a separate

Allied Laws 6.112 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication account to be maintained in a scheduled bank to cover the cost of construction and land. The amount deposited shall be used only for the concerned project. The promoter can withdraw the amounts from the separate account, in proportion to the percentage of completion of the project. However, such withdrawal can only be made after it is certified by an engineer, an architect and chartered accountant in practice that the withdrawal is in proportion to the percentage of completion of the project. Accounts to be audited within six months after the end of every financial year by a practicing chartered accountant. Further, he is required to produce a statement of account duly certified and signed by such chartered accountant, and it shall be verified during the audit that (i) the amounts collected for a particular project have been utilized for the project; and (ii) the withdrawal has been in compliance with the proportion to the percentage of completion of the project. — At the time of application for registration, the promoter shall pay a registration fee, calculated on the area of the land proposed to be developed at the rate of, rupees ten per square meter, subject to a minimum of rupees ten thousand only and a maximum of rupees ten lakhs [MahaRERA] • Acceptance or refusal of registration — Upon receipt of an application by the promoter, the Regulatory Authority shall within a period of 30 days, grant or reject the registration. — Upon granting of registration, the promoter will be provided with a registration number, including a login ID and password for accessing the website of the Regulatory Authority and to create his web page and to fill in the details of the proposed project. — If the Regulatory Authority fails to grant or reject the application of the promoter within the period of 30 days, then the project shall be deemed to have been registered. — The registration will be valid till the period of completion of the project as committed. This period shall be extended by the Regulatory Authority for a period not exceeding one year in aggregate, only due to force majeure and on payment of such fee as may be specified by regulations made by the Regulatory Authority. • Revocation or lease of registration — The Regulatory Authority may revoke the registration granted on receipt of a complaint or suo motu or on the recommendation of the competent authority in case: The promoter makes a default in doing anything required under the Act or the rules or regulations made there under; The promoter violates any terms of the approvals granted for the project; and The promoter is involved in any kind of unfair practice or irregularities. — When registration is revoked or lapses, the Regulatory Authority shall: Debar the promoter from accessing the website in relation to the project, specify his name in the list of defaulters on its website

RERA 2016 6.113 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication and also inform other Regulatory Authorities in other States and Union Territories about such cancellation; Facilitate the remaining development works to be carried out by competent authority or the association of allottees or in any other manner as may be determined by the Regulatory Authority. However, the association of allottees shall have a first right of refusal for carrying out the remaining development works; or Direct the scheduled bank holding the project bank account, to freeze the account and thereafter take such further necessary actions, including consequent defreezing of the account, for facilitating the remaining development work. • Website of the Regulatory Authority — The promoters webpage should include: Details of the registration granted by the Regulatory Authority; Quarterly up-to-date list of the number and types of apartments or plots or garages, booked, status of the project, list of approvals obtained and approvals pending and Such other information and documents as may be specified Advertisement or prospectus issued by the promoter: a. The advertisement or prospectus issued or published by the promoter should prominently mention the website address of the Regulatory Authority b. Where any person makes an advance or a deposit on the basis of the information contained in the notice, advertisement or prospectus and sustains any loss or damage because of any incorrect, false statement included in these, he shall be compensated by the promoter as provided under the Act. Also, if the person so affected intends to withdraw from the proposed project, his entire investment (along with interest at such rate as may be prescribed and compensation in the manner provided under the Act), will be returned to him. (3) Limit on receipt of advance payment A promoter shall not accept a sum more than 10% of the cost of the apartment, plot, or building, as the case may be, as an advance payment or an application fee, without first entering into a written agreement of sale and register the said agreement of sale, under any law for the time being in force. (4) Restriction on addition and alteration in the plans The promoter cannot make any addition or alteration in the approved and sanctioned plans, structural designs, specifications and amenities of the apartment, plot or building without the previous consent of the allottee or without the previous written consent of at least two-thirds of the allottees, other than the promoter, who have agreed to take apartments in such a building. (5) Structural defect In case any structural defect or any other defect in the workmanship, quality or provision of services or any other obligations of the promoters is brought to the notice of the promoter within a period of five years, by the allottee, from the date

Allied Laws 6.114 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication of handing over possession, the promoter shall rectify such defect without any further charge, within thirty days. If the promoter fails to rectify such defect within such time, the aggrieved allottee shall be entitled to receive appropriate compensation in the manner as provided in the Act. (6) Restriction on transfer and assignment The promoter shall not transfer or assign his majority rights and liabilities in respect of a project to a third party without obtaining prior written consent from two-thirds of the allottees, except the promoter, and without the prior written approval of the Regulatory Authority. The allottee, irrespective of the number of apartments or plots booked by him or by his family; and in the case of companies/firms/and association of individuals, booked in its name or booked in the name of its associated entities/related enterprises shall be considered as one allottee only. (7) RERA Rules for Possession The RERA new regulations 2022 are based on the 2016 Act as implemented by the relevant states and union territories. Some excerpts from the central Real Estate Regulatory Authority (RERA) guidelines regarding possession are provided below: • If the builder fails to give over control of the project in accordance with the terms of the agreement to sell, purchasers are entitled to a refund plus interest (the amount of which is determined by the applicable new RERA laws of such state/UT). • If the homebuyers do not wish to back out, they may request an interest rate increase for each month of delay. • Even if the absence of possession is due to a builder’s suspension or revocation of RERA registration, purchasers are entitled to reimbursement with interest. • Once the homebuyers have the occupancy certificate, they are entitled to possession within two months. • Allottees/homebuyers have the right to bring any essential paperwork with them once they have physical ownership of the property. Within 30 days of receiving the completion certificate, the promoters/builders must give over the title papers pertaining to common areas to the appropriate authorities or house buyer associations, as the case may be. Refund of amount in case of delay in handing over possession In case the promoter is unable to hand over possession of the apartment, plot or building to the allottee (i) in accordance with the terms of the agreement of sale; or (ii) due to discontinuance of his business as a promoter on account of suspension; or (iii) revocation of his registration or for any other reason, then the promoter shall be liable, on demand being made by the allottee, to return the amount received by him from the allottee with interest and compensation at the rate and manner as provided under the Act. This relief will be available without prejudice to any other remedy available to the allottee. However, where an allottee does not intend to withdraw from the project, he shall be paid interest by the promoter for every month of delay, till the handing over of the possession, at a prescribed rate. (8) Other relevant provisions • The same rate of interest will be payable by the allottee and the promoter in the event of their respective defaults. • In the absence of any local laws, an association or society or co-operative society, as the case may be, of the allottees, shall be formed within a period of three months of the majority of allottees who have booked their plot or apartment or building, as the case may be, in the project. • After the promoter executes an agreement for sale for any apartment, plot or building, no mortgage or charge can be created by the promoter on such apartment, plot or

RERA 2016 6.115 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication building. If any such mortgage or charge is created, then notwithstanding anything contained in any other law for the time being in force, it shall not affect the right and interest of the allottee who has taken or agreed to take such apartment’ plot or building. • The promoter may cancel the allotment only in terms of the agreement for sale. However, the allottee may approach the Regulatory Authority for relief, if he is aggrieved by such cancellation and such cancellation is not in accordance with the terms of the agreement for sale, is unilateral and without any sufficient cause. • The promoter shall obtain insurance as may be notified by the appropriate Government, including but not limited to the title of the land and building and construction of the project. The promoter shall also be liable to pay the premium and charges in respect of the insurance. • The promoter shall execute a registered conveyance deed in favour of the — Allottee in respect of the apartment, plot or building; and — Association of allottees of competent authority in respect of the undivided proportionate title in the common areas, and hand over possession of the same within the period as specified under the local laws. In the absence of any local law, such conveyance deed shall be carried out by the promoter within three months from date of issue of the occupancy certificate. • The promoter shall compensate the allottees in case of any loss caused to him due to defective title of the land in the manner as provided under the Act, and such claim for compensation shall not be barred by limitation provided under any law for the time being in force. • Every allottee shall take physical possession of the apartment, plot or building, within a period of two months of the occupancy certificate issued for the said apartment, plot or buildings. • The Regulatory Authority shall make a recommendation to the appropriate Government on (i) creation of a single window system for ensuring time-bound project approvals and clearances for timely completion of the project; and (ii) creation of a transparent and robust grievance redressal mechanism against acts of omission and commission of competent authorities and their officials. • Any aggrieved person may file a complaint with the Real Estate Regulatory Authority or the adjudicating Officer, for any violation or contravention of the provisions of this Act or the rules and regulations made thereunder against any promoter, allottee or real estate agent. Any person aggrieved by any direction or order or decision of the Authority or the adjudicating officer may prefer an appeal to the Appellate Tribunal within 60 days or such reasonable time as may be accorded by the Tribunal, of such order or decision. Where a promoter files an appeal with the Appellate Tribunal, he shall deposit with the Appellate Tribunal atleast 30% of the penalty, or such higher percentage as may be determined by the Appellate Tribunal, or the total amount to be paid to the allottee including interest and compensation imposed on him, if any, or with both, as the case may be, before the said appeal is heard. (9) Real Estate Appellate Tribunal • Any person aggrieved by any direction or decision made by the Regulatory Authority or by an adjudicating officer, may make an appeal before the Appellate Tribunal within a period of 60 days from the date of receipt of a copy of the order or direction.

Allied Laws 6.116 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • The Appellate Tribunal shall dispose of the appeal within a period of sixty days from the date of receipt of appeal. • The Appellate Tribunal shall have same powers and shall be deemed as a civil court and an appeal against the order of the Appellate Tribunal may be filed before the jurisdictional High Court within a period of sixty days from the date of communication of the decision or order of the Appellate Tribunal. (10) Rate of interest payable by the promoter and the allottee The rate of interest payable by the promoters to the allottees or by the allottees to the promoters, as the case may be, shall be the State Bank of India highest Marginal Cost of Lending Rate plus two percent (11) Timelines for refund The refund of any amount which is payable by the promoters to allottees along with the applicable interest and compensation, if any, under the Act or the Rules and Regulations, shall be made by the Promoter to the allottee within thirty days from the date on which such refund along with applicable Interest and Compensation, becomes due and payable to the allottee. (12) The Project Completion Deadlines Have Been Extended By Maha RERA and Goa RERA (Amendments) On 10th August 2021, it was announced that the Maharashtra Real Estate Regulatory Authority (MahaRERA) had extended the deadline for projects with completion deadlines on or after 15th April 2021 by 6 months. This was primarily done to assist the builders in the state who had been significantly impacted by the second wave of the Coronavirus. It proved to be a profitable choice for the builders. Even Goa’s department of urban development had issued guidelines for extending completion dates for home projects registered with Goa RERA. The builders had been given an additional year to finish their outstanding work. (13) Complaints against the Unregistered Projects Will Also Be Considered According to one of the orders issued by the Bombay High Court, the Maha RERA will now allow homebuyers to file complaints even against unregistered builders and projects, despite the fact that this provision is contrary to the central legislation of the RERA Act 2016, but the Bombay High Court has decided otherwise. The Maha RERA has posted a form under the “Source information” category, and customers must pay ` 5000 to submit a complaint against such unregistered projects. (14) Offences and Penalty Offence Penalty If promoter does not register its project with the Regulatory Authority up to 10% of the estimated cost of the project If promoter does not comply with the aforesaid order of the Regulatory Authority imprisonment of up to three years and a further penalty of up to 10% of the estimated cost, or both If promoter provides any false information while making an application to the Regulatory Authority or contravenes any other provision of the Act up to 5% of the estimated cost of the project or construction If any promotor fails to comply with, or contravenes any of the orders, decisions or directions of the Regularity Authority penalty for every day during which such default continues, which may cumulatively extend up to 5% of the cost of real estate project

RERA 2016 6.117 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Offence Penalty if any promotor fails to comply with, or contravenes any of the orders or directions of the Appellate Tribunal imprisonment up to three years or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the cost of the real estate project, If any allotee fails to comply with, or contravenes any of the orders, decisions or directions of the Regularity Authority penalty for a period during which such default continues, which may cumulatively extend up to 5% of the cost of plot, apartment or building if any allotee fails to comply with, or contravenes any of the orders or directions of the Appellate Tribunal imprisonment up to one year or with fine for every day during which such default continues, which may cumulatively extend up to 10% of the cost of the plot, apartment or building If any real estate agent fails to comply with Section 9 and 10 of the Act. Amount of ` 10000 every day during which such default continues. It may extend up to 5% of the estimated cost of the real estate project. 15. The provisions of this Act shall have an overriding effect in case there is any inconsistency between the provisions contained in this Act and in any other law (including a state law) for the time being in force. FAQ on MahaRERA https://maharerait.mahaonline.gov.in/PDF/FAQMergedPDF.pdf MahaRERA Manual https://maharerait.mahaonline.gov.in/PDF/RERAMANUAL.pdf 2

Allied Laws 6.118 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XI. Related Party Transactions under various Laws The Indian regulatory regime has been constantly adapting itself to address the corporate governance issues especially those with respect to Related Party Transactions (RPTs). Transactions with related parties raise important concerns and hence transparency in such transactions is essential. The Government, from time to time, has attempted to increase transparency and accountability of companies to its stakeholders. And thus, various regulatory legislatures have been enacted which require certain specific compliances with respect to the related Party transactions. A. Companies Act Definition of Related Party [S. 2(76)] under the Co Act “related party”, with reference to a Co, means— • a director/his relative; • a KMP/his 1relative; • a firm, in which a director, manager or his 1relative is a partner; • a private co in which a director/manager/his 1relative is a member or director; • a public co in which a director/manager is a director and holds along with his relatives, > 2% of its paid-up share capital; • any body corporate whose BoD, MD or manager is accustomed to act in accordance with the #advice, directions or instructions of a director or manager; • any person on whose # advice, directions or instructions a director or manager is accustomed to act: # Not applicable to the advice, directions or instructions given in a professional capacity • any body corporate which is— — a Hold Co/Sub Co/Asct Co of such Co; or — a Sub Co of a Hold Co to which it is also a Sub Co i.e. sister concern; or — an investing Co/the venturer of the Co - i.e., a body corporate whose investment in the Co would result in the Co becoming an Asct Co of the body corporate • such other person as may be prescribed Related Party [Reg. 2(1) (zb)] means a related party as defined u/s 2(76) of the Companies Act, 2013 or under the applicable accounting standards: – any person or entity belonging to the promoter / promoter group of the listed entity, or – any person holding ≥ 10% of the listed entity’s equity shareholding whether directly or as a beneficial owner under the Co Act – shall not be applicable for the units issued by mutual funds listed on a recognised stock exchange(s)

Related Party Transactions under various Laws 6.119 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Related Party with reference to Company Director/ KMP or their relative Director/ KMP of Holding Company or their relative Holding Company Subsidiary Company Subsidiary Company Associates Firm of which Director, Manager or Relative is a Partner where Director or Manager is a Director or Member where Director or Manager is a Director and holds alongwith relatives more than 2% of paid-up share capital Private Company Public Company Any body corporate whose Board of Directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a director or manager Any person whose advice, direction or instruction director or manager is accustomed to act Chart representation for Section 2(76) Section 2(77) of the Companies Act , 2013 defines a ‘relative’ with reference to any person, means anyone who is related to another, if— (i) they are members of a Hindu Undivided Family; (ii) they are husband and wife; or (iii) one person is related to the other in such manner as may be prescribed; Rule 4 of Companies (Specification of Definition Details) Rules 2014 prescribes following relationship – A person shall be deemed to be the relative of another, if he or she is related to another in the following manner, namely:- (1) Father: Provided that the term “Father” includes step-father. (2) Mother: Provided that the term “Mother” includes the step-mother. (3) Son: Provided that the term “Son” includes the step-son. (4) Son’s wife. (5) Daughter. (6) Daughter’s husband. (7) Brother: Provided that the term “Brother” includes the step-brother; (8) Sister: Provided that the term “Sister” includes the step-sister.

Allied Laws 6.120 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Father (incl. Step Father) Mother (incl. Step Mother) Son (incl. Step Son) Son's wife Daughter Daughter's husband Brother (incl. Step Brother) Sister (incl. Step Sister) 'Relative' with reference to any person means anyone who is related to another if They are members of HUF They are Husband and Wife If the person is - Chart representation for Section 2(77) B. Ind AS -24 Related Party Disclosures, as notified under section 133 of the Companies Act 2013 - ‘Related Party’ as per Ind AS 24 means – 1) A person or a close member of that person’s family is related party if that person: (i) has control or joint control of the reporting entity; (ii) has significant influence over the reporting entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. 2) An entity is a related party of a company if: (i) Such entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). (ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or a related entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity. (vi) The entity is controlled or jointly controlled by a person identified in (i).

Related Party Transactions under various Laws 6.121 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication (vii) A person identified in (i)(a) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). (viii) The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity. Close members of the family of a person are those family members who may be expected to influence, or be influenced by, that person in their dealings with the entity including: (a) that person’s children, spouse or domestic partner, brother, sister, father and mother; (b) children of that person’s spouse or domestic partner; and (c) dependents of that person or that person’s spouse or domestic partner. INDIVIDUAL Father and Mother Brother and Sister Spouse/ Domestic Partner Children Dependents Children & dependents C. AS 18 – Related Party Disclosures, as notified under section 133 of the Companies Act 2013 - For the purpose of this Standard, the following terms are used with the meanings specified: “Related party” - parties are considered to be related if at any time during the reporting period one party has the ability to control the other party or exercise significant influence over the other party in making financial and/or operating decisions. “Relative” – in relation to an individual, means the spouse, son, daughter, brother, sister, father and mother who may be expected to influence, or be influenced by, that individual in his/her dealings with the reporting enterprise. This Standard deals only with related party relationships described in (a) to (e) below: a) enterprises that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the reporting enterprise (this includes holding companies, subsidiaries and fellow subsidiaries); b) associates and joint ventures of the reporting enterprise and the investing party or venturer in respect of which the reporting enterprise is an associate or a joint venture; c) individuals owning, directly or indirectly, an interest in the voting power of the reporting enterprise that gives them control or significant influence over the enterprise, and relatives of any such individual; d) key management personnel and relatives of such personnel; and [Explanation - Key management personnel are those persons who have the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise. For example, in the case of a company, the managing director(s), whole time director(s), manager

Allied Laws 6.122 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication and any person in accordance with whose directions or instructions the board of directors of the company is accustomed to act, are usually considered key management personnel. A nonexecutive director of a company is not considered as a key management person under this Standard] e) enterprises over which any person described in (c) or (d) is able to exercise significant influence. This includes enterprises owned by directors or major shareholders of the reporting enterprise and enterprises that have a member of key management in common with the reporting enterprise. D. SEBI (Listing Obligations and Disclosures) Regulations, 2015 (LODR) Under Regulation 2(zb) of the Listing Regulations, any person is a related party of a listed entity if it is: (ix) a related party under the Companies Act or (ii) a related party as per the applicable accounting standards; or (iii) any promoter or member of the promoter group of the listed entity irrespective of its shareholding; or (iv) any person holding 10% or more (w.e.f April 1, 2023) of the listed entity’s equity shareholding whether directly or as a beneficial owner under the Companies Act. provided this definition shall not be applicable for the units issued by mutual fund which are listed on a recognised stock exchange(s). E. Income Tax Law The Income Tax Act, 1961 includes specific definition for the term ‘relative’ for specific sections/ clauses. However, the general definition for the term ‘relative’ as given under Section 2(41) of the Act is as follows - “relative”, in relation to an individual, means the husband, wife, brother or sister or any lineal ascendant or descendant of that individual. INDIVIDUAL Husband Wife Brother & Sister Lineal Ascendant Lineal Descendant For the purposes of Section 13 (2), specifically, “relative”, in relation to an individual, means – (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of the individual; (iv) any lineal ascendant or descendant of the individual; (v) any lineal ascendant or descendant of the spouse of the individual; (vi) spouse of a person referred to in sub-clause (ii) to (v); (vii) any lineal descendant of a brother or sister of either the individual or of the spouse of the individual.

Related Party Transactions under various Laws 6.123 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication INDIVIDUAL Spouse Brother or Sister, their spouses and lineal descendants Lineal Ascendant or Descendant and their spouses Brother or Sister, their spouses and lineal descendants Lineal Ascendant or Descendant and their spouses For the purposes of Section 56 (2), specifically, “relative” means – (i) spouse of the individual; (ii) brother or sister of the individual; (iii) brother or sister of the spouse of the individual; (iv) brother or sister of either of the parents of the individual; (v) any lineal ascendant or descendant of the individual; (vi) any lineal ascendant or descendant of the spouse of the individual; (vii) spouse of the person referred to in clauses (ii) to (vi); INDIVIDUAL Spouse Brother or Sister and their spouses Brother or sister of either of the parents of the Individual and their spouses Lineal Ascendant or Descendant and their spouses Brother or Sister and their spouses Lineal Ascendant or Descendant and their spouses

Allied Laws 6.124 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication F. GST Law As per the explanation provided under Section 15 of the Central Goods and Services Tax Act, 2017 for the purposes of this Act – a) persons shall be deemed to be “related persons” if- (i) such persons are officers or directors of one another’s businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; (iv) any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) together they directly or indirectly control a third person; or (viii) they are members of the same family; b) the term “person” also includes legal persons; c) persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other, shall be deemed to be related. Points to be noted for analysing Related Parties under various legislations. • Under the Companies Act 2013, a shareholder (irrespective of his shareholding) is not a related party, unless he is also a director. • Relatives of “Major Shareholders” are not related parties. • A non-executive Director or a Director simpliciter and their relatives are not “Related Party” under AS-18. • Under the Companies Act, Son’s wife and Daughter’s husband are also Relatives. 2

RTI, 2005 6.125 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XII. Right to Information Act, 2005 (1) Salient Features Right to Information Act (RTI) is an act of the Parliament of India which sets out the rules and procedures regarding citizens’ right to information. It provides for an independent machinery for enabling the citizens to obtain information about the functioning of various Government bodies The basic objective is to empower the citizens, promote transparency and accountability in the working of the Government, control corruption and make democracy work for the people in real sense. The same is achieved through setting the easy and inexpensive procedure by way of which one can apply for the required information and receive it in a time bound frame. It is codification of citizen’s right to information, which existed since the time India became a republic, but was difficult to enforce without going to the Court. With a separate Act and Rules made thereunder, the same is now a reality. The Act lays down the contents of the obligation to furnish information as also has made distinction as to the matters to which the obligation is not attached. It also lists down the matters which are exempted for being furnished as and by way of information to the applicant. The Act bars jurisdiction of Civil Courts. (2) Main Points When the Act became applicable and to whom the same is applicable? • RTI Act came into force on the 12th October, 2005. • The Act extends to the whole of India including the State of Jammu and Kashmir, post revocation of Article 370. • Only citizens of India are entitled for right to information. An NRI is eligible to apply if he is holding Indian passport, but not otherwise. Bodies like companies, trusts, firms, etc. have no right to information. However, CIC in some cases have allowed application from such entities. Who are covered under the RTI Act, 2005? • All public authorities are covered under the RTI Act, 2005. A public authority (PA) is any authority or body or institution of selfgovernment established or constituted: — by or under the Constitution — by any other law made by Parliament — by any other law made by State Legislature — by notification issued or order made by the appropriate Government and includes any— Body owned, controlled or substantially financed. Any non-government organisation substantially financed directly or indirectly by the appropriate Government. The RTI Act, 2005 covers a wide spectrum of bodies, institutions etc. of the Central Government and the State Governments, Panchayat Raj institutions, Local Bodies and also all bodies, and NGOs that are owned, controlled or substantially financed by the Government, directly or indirectly. Who are exempted from the application of the RTI Act, 2005? • A total of 25 Central Intelligence and Security agencies as specified in the Second Schedule have been excluded from the application of this Act. The list includes Directorate of Revenue Intelligence, Intelligence Bureau, Directorate General of Income-tax (Investigation), Central Bureau of Investigation and Agencies specified by the State Governments through exemption notification. The exclusion, however, is not absolute and these organisations have an obligation to provide information pertaining to allegations of corruption and human rights violations.

Allied Laws 6.126 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication What is the implementing structure of the RTI Act? • The Public Information Officer (PIO) is at the first rung. • The officer who is senior in rank in the same Public Authority, is the First Appellate Authority (FAA). • Central Information Commission (CIC) or State Information Commission (SIC) as the case maybe, is the second Appellate Authority. Who are Public Information Officers (PIOs)? The PIO is an officer designated by a public authority in each of its administrative units or offices to provide information to the citizens requesting for information under the Act. Any officer, whose assistance has been sought by the PIO for the proper discharge of his duties, shall render all assistance and for the purpose of contraventions of the provisions of this Act, such other officer shall be treated as a PIO. What does Right to Information mean? It means the right to information accessible under the Act which is held by or under the control of any public authority and includes the right to - • inspect works, documents, records. • take notes, extracts or certified copies of documents or records. • take certified samples of material, • obtain information in form of printouts or in any other electronic mode such as video, tapes etc. What does information mean under the Act? Information means any material already available with the public authority in physical or electronic form and also includes information relating to any private body which can be accessed by a public authority under any other law for the time being in force. Information may be in any form including records, documents, memos, e-mails, opinions, advices, press releases, circulars, orders, logbooks, contracts, reports, papers, samples, models, data material etc. The PIO is not required to generate/create information. The PIO is not expected to give any explanation or interpretation of the available data. Can information be denied? The PIO can deny information if there is some error in the application process or if the fees have not been paid, or if the information being sought is not held, or if the authority to which the application is made is not a ‘public authority’. The RTI Act overrides all other Acts and Rules so the PIO cannot withhold information citing another Act. What kind of information is not open to disclosure? The following information is exempt from disclosure • information, disclosure of which would prejudicially affect the sovereignty and integrity of India, the security, strategic, scientific or economic interests of the State, relation with foreign State or lead to incitement of an offence; • information which has been expressly forbidden to be published by any Court of law or Tribunal or the disclosure of which may constitute contempt of Court; • information, the disclosure of which would cause a breach of privilege of Parliament or the State Legislature; • information including commercial confidential trade secrets or intellectual property, the disclosure of which would harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information; • information available to a person in his fiduciary relationship, unless the competent authority is satisfied that the larger public interest warrants the disclosure of such information;

RTI, 2005 6.127 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • information received in confidence from foreign Government; • information, the disclosure of which would endanger the life or physical safety of any person or identify the source of information or assistance given in confidence for law enforcement or security purposes; • information which would impede the process of investigation or apprehension or prosecution of offenders; • cabinet papers including records of deliberations of the Council of Ministers, Secretaries and other officers; • information which relates to personal information the disclosure of which has no relationship to any public activity or interest, or which would cause unwarranted invasion of the privacy of the individual. Notwithstanding anything in the Official Secrets Act, 1923 nor any of the exemptions permissible in accordance with sub- section (1) a public authority may allow access to information, if public interest in disclosure outweighs the harm to the protected interests. Subject to the provisions of clauses (a), (c) and (i) as stated above, any information relating to any occurrence, event or matter which has taken place, occurred or happened twenty years before the date on which any request is made shall be provided to any person making a request under that section: A PIO may reject a request for information where such a request for providing access would involve an infringement of copyright subsisting in a person other than the State. Is partial disclosure of information allowed? Only that part of the record which does not contain any information which is exempt from disclosure and which can reasonably be severed from any part that contains exempt information, may be provided. When do you file an RTI? An RTI may be filed when: • One needs information on some activity of the Government, or reasons recorded (if any) for certain decisions. • One knows or suspects corruption or wrong doing in some department or activity. • When bribes are sought by Government official for performing his duties, such as issue of ration card or water connection or an authority refuses to act on a complaint or a FIR. • One feels one could suggest improvements, if one has the information. What is the application procedure for requesting information? A RTI application needs clarity of the issue, a single sheet of paper and payment of prescribed RTI fees (` 10 for State of Maharashtra). A RTI application can be made online and offline mode. A step-by-step process for filing an offline RTI application can be as follows: • Gather facts for which information is sought. • Draft the RTI application. • Locate your “Public Information Officer” (PIO). • File the application • Pay the prescribed fees (BPL exempted from such payment) • Receive the acknowledgement Online RTI application process is as follows: Application can be filed on www.rtionline.gov.in ; On the portal “Submit Request” tab can be used for filing the RTI. Thereafter the details of the Applicant & the Public Department from whom the applicant wants to seek details has to be entered and the Request application text to be mention (upto 3000 characters) alongwith supporting documents, if any. If the matter is above 3000 characters, then the same can be attached in the application.

Allied Laws 6.128 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication The applicant should put correct mobile number to receive SMS alerts and know the status of the application. After making the payment of the requisite fees, the Acknowledgement would be generated which can be used for further reference and to check the status of the RTI. What is the process of RTI application to PA in Central Government? For application and for filing an appeal to any PA in Central Government departments, the Department of Posts has designated 629 postal office at the national level. The designated offices in these post offices work as Assistant PIOs and collect the application to forward to the concerned PIO. Same is done without charging you the cost of forwarding. A list is available on http://www. indiapost.gov.in/rticontents.html. What is the time limit for you to get the information? The information should be received • 30 days from the receipt of the request. • 48 hours if the information is concerning the life and liberty of a person. • 5 days shall be added to the above response time, in case the application for information is given to Assistant Public Information Officer. • If the interests of a third party are involved then time limit will be 40 days. 10 days are added to the 30 days for the third party to make representation. What happens if the information asked is denied by the PIO giving reasons mentioned in the exclusion clauses? If no answer is received within prescribed time, it is ‘deemed refusal’. If there is a justifiable reason for withholding the information, one will not get the information. If one feels the reason is unjustified, one can appeal to a higher officer in the relevant PA. What is the system of appeal? If the application has not been answered, or the information is incomplete, or incorrect, one can appeal against the PIO to the First Appellate Authority (FAA). If the PIO rejects the application for information, he has to inform the applicant the particulars of the Appellate Authority and the reasons for rejection. If no reply is received, or the PIO has not mentioned the name of the Appellate Authority, one can address the appeal to the Head of the Office/PIO. While filing the appeal, it is recommended that all relevant documents be attached. FAA shall dispose of the application within 30 days of the receipt of the appeal or within such extended period not exceeding a total of 45 days from the date thereof, as the case may be, for reasons to be recorded in writing. The Appellate Authority though belonging to the same department as the PIO is actually conducting a quasi-judicial proceeding and expected to give a fair and unbiased order based on your submissions in the appeal. The actual outcome may be: • One gets an order directing the PIO to give the information (reasonable chance); • One may get an order rejecting the appeal and refusing to give the information; • One may get no reply at all. This is deemed rejection, once the period of 30/45 days is over. If one is not satisfied with the outcome, one can file Second Appeal with the Information Commission within 90 days. There are separate Information Commissions for the State and for Central Government organisations. The power to penalise PIOs is only with the Information Commission. Can a penalty be imposed on the PIO? When is it imposed on the PIO? RTI is one Act in India which imposes penalty on bureaucrats named as PIO in the Act.

RTI, 2005 6.129 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication A penalty is imposed when a PIO commits any of the following defaults without any reasonable cause: • has refused without any reasonable cause to receive an application for information, • has not furnished information within the time specified under s. 7(1); • malafidely denied the request for information; • knowingly given incorrect, incomplete or misleading information; • destroyed information which was the subject of the request; • obstructed in any manner in furnishing the information. The Act provides penalty on PIO at ` 250 per day for the period of delay i.e., until he gives the information, subject to maximum of ` 25,000. This penalty is payable by the PIO from his salary and he is also liable for disciplinary action. The penal provisions on PIO are the real teeth of the Act. It ensures that PIO does not take citizen’s right to demand information in a casual manner. (3) Developments in RTI Focus on the Centre, Maharashtra and Gujarat In 2012, some amendments in the Rules of the Central Government and Maharashtra Government were made to limit the number of words in the application and restricting application to one subject only. Similar amendments have been made in the Rules of Karnataka, Bihar and Chhattisgarh, same can be viewed on the relevant State’s website as provided in Chapter 11. RTI Online Department of Personnel & Training has launched a web portal on 21st August, 2013, namely RTI online with URL www.rtionline.gov.in for all Central Ministries/Departments. This is a facility for the Indian citizens to file RTI applications and First Appeals online to all Central Ministries/ Departments. The prescribed RTI fees can also be paid online. Reply to the RTI applications and First Appeals received online can also be given online by the respective PIOs/FAAs. The year 2015 brought cheers to the RTI applicants of Maharashtra as the State Government has decided to permit online filing of RTI applications. All the departments of the State Government have started receiving online RTI application since April 1, 2015. However, RTI Amendment Act 2019 passed on July 25 2019 modified the terms and conditions of service of the CIC and Information Commissioners at the Centre and in States. 2

Allied Laws 6.130 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XIII. Startup Regulation Framework in India India is home to the 3rd largest eco-system for startups in the world. The moment for our startups to shine and turn this time into an opportunity can be the best outcome for our startups. Business is gaining buoyancy and with increasing aatma-nirbhar markets, the Indian Startups should be equipped with an accommodative, flexible and easy tax and regulatory landscape to take on this new challenge and deliver for India in its next “tech-ade”. Here’s a referencer on Startup Regulation Framework in India 1. Recognition as “Eligible Startup” (Pillar I) (Notification No. G.S.R. 127 (E) dated 19.02.2019 issued by Department for Promotion of Industry and Internal Trade (DPIIT) Read with Guidelines for Recognition of Startups dated 5th July 2021 Eligible Entity Type : i. Private Limited Company ii. LLP iii. Registered Partnership Firm iv. One Person Company Satisfying the following 3 conditions : (a) Less than 10 years from the date of its incorporation/ registration (b) Turnover of the Entity for any of the financial years since incorporation/ registration has not exceeded INR 100 Crore (c) Entity is working towards innovation, development or improvement of products or processes or services, or if it is a scalable business model with a high potential of employment generation or wealth creation Note: A startup ceases to be an Eligible Startup if does not fulfill the above the criteria or the startup is an entity formed by splitting up or reconstruction of a business already in existence Note : Further guidelines have been issued for recognition of startups on 5th July 2021. Please refer to these guidelines in addition to the above. 2. How to become an “Eligible Startup” • Register on www.startupindia.gov.in (“portal”) as “Startup” • Initiate an application for recognition as an “Eligible Startup” on the portal and complete the online questionnaire and submit the information requested. 3. Obtaining “Angel Tax Exemption” (Pillar II) ( N o t i f i c a t i o n No. G.S.R. 127 (E) dated 19.02.2019 issued by Department for Promotion of Industry and Internal Trade (DPIIT) Eligible Entity Type : i. Private Limited Company • “Angel Tax” is a term coined for tax proposed to be levied on consideration received by privately held companies (including startups in particular) towards issue of shares for a value that exceeds the face value of such shares (called “Securities Premium” or “Premium”) and where such value i.e. essentially the premium on the shares cannot be justified. • The Central Board of Direct Taxes (CBDT) via intimation over email provides for exemption from the provisions of clause 56(2)(viib) upto the following amount :

Startup Regulation Framework in India 6.131 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication “aggregate amount of paid up share capital and share premium of the Eligible Startup after issue or proposed issue of share, if any, does not exceed, ` 25 Crores”. In computing the aggregate amount of ` 25 Crore shares issued to following persons shall not be included: a) non-resident or b) venture capital company or a venture capital fund or c) “specified company” specified company means a company whose shares are frequently traded and i. whose net worth on the last date of financial year preceding the year in which shares are issued exceeds INR 100 Crores or ii. turnover for the financial year preceding the year in which shares are issued exceeds ` 250 Crores. 4. How to obtain Angel Tax exemption for your Eligible Startup ? • Complete Point (2) above • Initiate an application in Form-2 on the portal and submit the selfdeclaration online 5. Obtaining Section 80-IAC Exemption Or Inter-Ministerial Board (IMB) Exemption (Pillar III) (Section 80-IAC of Income Tax Act) Eligible Entity Type : i. Private Limited Company ii. LLP should be incorporated on or after 01.04.2016 but before 01.04.2024 “Eligible Business” means business involving innovation development, deployment or commercialization of new products, processes or services driven by technology or intellectual property and with a high potential of employment generation or wealth creation. Eligible Startups can claim deduction of 100% of the profits and gains derived by it from Eligible Business for any three (3) consecutive years out of a period of ten (10) years (ten years beginning from the year in which the Eligible Start-up is incorporated) at the option of the start up. 6. How to obtain Section 80-IAC exemption for your Eligible Startup ? • Complete Point (2) above • Initiate an application in Form-1 on the portal and submit the application online alongwith the documents required • Refer guidelines for Pitch Deck and guidelines for Video provided by DPIIT on the portal

Allied Laws 6.132 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 7. Further Income Tax exemptions for Eligible Startups that have received Section 80-IAC exemption Further below Income Tax exemptions for only for Eligible Startups that have received Section 80-IAC exemption as detailed in Point 5 and 6 above : Set-Off & Carry Forward of Losses (Section 79) the unabsorbed loss incurred in any year prior to the previous year shall be carried forward and set off against the income of the previous year, if all shareholders of such Company who held shares carrying voting power on the last day of the year or years in which the loss was incurred i. Continue to hold those shares on the last day of the previous year; and ii. Such loss has been incurred during the period of seven years beginning from the year in which such Company is incorporated Capital Gain E x e m p t i o n (Section 54GB) Exemption on long-term capital gains if invested in Eligible Startup subject to lock-in of 5 years Deferment of Tax Liability on ESOPs [Sections 156, 191 and 192] The tax liability of ESOP’s at the time of exercise shall be deferred to the any of the following events, whichever is the earliest: i. after the expiry of 48 months from the end of the relevant assessment year; or ii. from the date of the sale of such ESOP shares by the assessee; or iii. from the date of the taxpayer ceasing to be an employee of the ESOP allotting Company Capital Gains E x e m p t i o n (Section 54EE) Exemption on capital gain if long term capital gains are invested in units of notified funds (up to ` 50 lakh); Notification of list of such funds awaited Further regulatory relaxation for all “Eligible Startups” that have received Eligible Startup recognition as detailed in Point 2 above 8. Companies Act 2013 1. Exemption from preparation of Cash Flow Statement Eligible Startup is exempted from preparation of Cash Flow Statement and hence they will no longer be required to include cash flow statements as part of their financial statements. G.S.R. 583(E) dated June 13, 2017

Startup Regulation Framework in India 6.133 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 2. Board Meetings per year Eligible Startup is exempted from holding quarterly board Meetings every year. They are deemed to have complied with the provisions of Companies Act provisions if at least one meeting of the board of directors has been conducted in each half of a calendar year , provided the gap between two board meetings is not less than 90 days. G.S.R. 583(E) dated June 13, 2017 3. Acceptance of Deposits “Eligible Startups” can accept deposits from its members without having to comply with certain stringent conditionalities, thereby permitting such companies to raise funds more easily. G.S.R. 639(E) dated June 29, 2016 4. Sweat Equity Shares Eligible Startups can issue sweat equity shares not exceeding 50% of its paid up capital up to 10 years from the date of its incorporation or registration while the other companies are allowed to issue Sweat Equity upto 25% of paid up equity capital. G.S.R. 704(E) dated July 19, 2016 read with Rule 8(4) of the Companies (Share Capital and Debenture) Rules 2014, 5. Employee Stock Option Plan (ESOP) Startups can issue equity under ESOP to their promoters/Promoter group and to directors who hold more than 10% of the existing paid up capital of the Company either directly or indirectly during the first 10 years from the date of their incorporation, while the other Companies are not allowed to issue ESOP to above mentioned categories. G.S.R. 704(E) dated July 19, 2016 to be read with G.S.R_ (E) dated 16th August 2019 6. Certification of MGT- 7 (Annual Return) by Practicing Company Secretary Eligible Startup need not get their Annual Return (MGT -7) certified by Practicing Company Secretary. Signature by Directors will be enough for compliance under section 92 of Companies Act 2013. G.S.R. 583(E) dated June 13, 2017

Allied Laws 6.134 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 9. FEMA Regulations 1. Relaxed External Commercial Borrowing Guidelines (ECB’s) • Eligible Startups have been given multiple relaxations with respect to External Commercial Borrowings. Unlike other Companies, Eligible Startups have no restriction on all in cost ceiling. It has to be mutually agreed between parties. This allows startups to raise funds easily. • Eligible Startups are allowed to raise funds through External Commercial Borrowing without any restrictions on the end-use of such funds raise. • Minimum Average Maturity period for Loan has to be 3 years irrespective of the purpose for which ECB is raised. • Eligible Startup is allowed to borrow from anyone, provided the lender is FATF Compliant Country. • Restrictions with respect to availing ECB only from Foreign Equity Holder for specific usage and maintaining Debt – Equity Ratio have also been removed for Startups. RBI/2016-17/103 A.P. (DIR Series) Circular No. 13 dated October 27, 2016 2. Relaxation on opening of foreign Bank Account Eligible Startup, having an overseas subsidiary, may open a foreign currency account with a bank outside India for the purpose of crediting to the account the foreign exchange earnings out of exports/sales made by the startup or its overseas subsidiary. RBI/2015-16/430 : A.P. (DIR Series) Circular No. 77 [(2)/10(R)] dated June 23, 2016 10. SEBI Regulations 1. Investment by a Foreign Venture Capital Investor (FVCI) registered under SEBI (FVCI) Regulations, 2000 Eligible Startups are allowed to receive funding from Foreign Venture Capital Investors (FVCI) regardless of the sector that the startup would fall under. RBI/2016-17/89 A.P. (DIR Series) Circular No. 7 dated October 20, 2016 2. Differential Voting Rights SEBI has approved a framework of shares with differential voting rights for tech startups which will allow startup founders to have a greater control over their ventures.

Startup Regulation Framework in India 6.135 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication An issuer company having superior voting rights shares (SR shares) would be permitted to do an initial public offering (IPO) of only ordinary shares to be listed on the Main Board, subject to fulfilment of eligibility requirements of the SEBI (Issue of Capital and Disclosure Requirements) Regulations and other Specified Conditions. The total voting rights of SR shareholders (including ordinary shares), post listing, shall not exceed 74%. 11. Insolvency and Bankruptcy Code Fast Track Process under IBC Code shall apply to Eligible Startups. For Eligible Startups, Insolvency Resolution process be completed within 90 days as against 180 days for other companies. 12. Intellectual Property Eligible Startups shall have the following benefits: (i) Fast Tracking of Startup Patent Application (ii) Central Government shall bear the entire fees of the facilitators for patents, trademarks or designs that a Startup may file and the Startups shall bear the cost of only the statutory fees payable. (iii) Startups shall be provided an 80% rebate in filing of patents vis-avis other companies bringing down the cost from INR 8,000 to INR 1,600 (iv) 50% rebate is also provided in filing of Trademarks vis-a-vis other companies decreasing the cost from INR 10,000 to INR 5,000 (v) panel of facilitators to help in filing of IP applications 13. Labour Laws Startups are allowed to submit self-certified returns from second year onwards upto five years from setting up the entity on the Shram Suvidha Portal https://shramsuvidha.gov.in/startUpaction# 14. General Financial Benefits Easier Public Procurement Norms “Public procurement” refers to the process by which governments and state-owned enterprises purchase goods and services from the private sector. Helping Eligible Startups to participate in the public procurement process and allow them to access another potential market for their products. (i) Opportunity to list product on Government e-Marketplace Government e Marketplace (GeM) is an online procurement platform and the largest marketplace for Government Departments to procure products and services. Eligible Startups can register on GeM as sellers and sell their products and services directly to Government entities.

Allied Laws 6.136 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication (ii) EMD Exemption Eligible Startups have been exempted from submitting Earnest Money Deposit (EMD) or bid security while filling government tenders. Office Memorandum, Ministry of Finance, Department of Expenditure Procurement Policy Division, Amendment to Rule 170(i) of General Financial Rules 2017; No.F.20/2/2014-PPD(Pt.) dated July 25, 2017 (iii) Exemption from Prior Experience/Turnover In order to promote startups, the Government shall exempt Eligible Startups in the manufacturing sector from the criteria of “prior experience/ turnover” without any compromise on the stated quality standards or technical parameters. The Eligible Startups will also have to demonstrate requisite capability to execute the project as per the requirements and should have their own manufacturing facility in India. Office Memorandum, Ministry of Heavy Industries and Public Enterprises, Department of Public Enterprises; No.DPE/7(4)/2007- Fin dated November 8, 2016 15. Convertible Notes and Startups (Section 2 (c)(xvii) of Companies (Acceptance of Deposit Rules) 2014) And G.S.R. 3732(E) dated October 17, 2019; Earlier FEMA 20(R) dated November 7, 2017 What is a Convertible Note ? “Convertible note” means an instrument evidencing receipt of money initially as a debt, which is repayable at the option of the holder, or which is convertible into such number of equity shares of the start-up company upon occurrence of specified events and as per the other terms and conditions agreed to and indicated in the instrument Why Convertible Notes ? • One of the primary advantage of issuing Convertible Note, it does not require valuation of the company for issuance of Convertible Note and thus allows more flexibility in issue price. • Defers giving investors any control / ownership in the Company till valuation is discovered • Gives investor the flexibility to exit any time by redemption or transfer. Companies Act 2013 and Convertible Note Any Convertible Note issued by Eligible Startup will not be considered as Deposit provided, a minimum of INR 25,00,000 is received from a Single Person in Single Tranche and it is either converted or repaid within the period of 10 years.

Startup Regulation Framework in India 6.137 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication FEMA and Convertible Notes • As per Foreign Exchange Management (Non-debt Instruments) Rules, 2019, an Eligible Startup can raise funds by issuing Optionally Convertible Notes for an amount of Twenty-Five Lakhs or more in Single Tranche, which will be repayable/converted within period of 10 years. • While there are no pricing guidelines applicable at the time of issuance of a convertible note, the conversion of a note into equity must be in accordance with the pricing guidelines applicable to capital instruments. • The convertible note may be transferred by way of sale to a person resident in or outside India, provided the transfer takes place in accordance with the entry routes and pricing guidelines as prescribed for capital instruments 16. Credit Guarantee Scheme for Startups (CGSS) In an eco-system boost, the DPIIT has notified the Credit Guarantee Scheme for Startups (CGSS) on 6 October 2022 (“Scheme”) which has enabled the following : • Financial Institutions like Banks, Venture Debt AIFs, NBFC (networth > INR 100 crores) can now lend to startups recognised by the DPIIT • The financial institutions have their loans guaranteed by the National Credit Guarantee Trustee Company Limited (setup by Govt. of India) • Guarantee by the Govt. capped to ` 10 Crore per startup or actual losses, with detailed terms attached • Guarantee by the Govt. capped to 5% of Pooled Investment Amount in case of Venture Debt AIFs, with detailed terms attached • Startups with stable revenue streams over a 12 month period can apply

Allied Laws 6.138 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XIV. Succession and Wills 1. Succession 1.1 Many societies have recognised the right of an individual to acquire, hold and dispose of property. This right of disposal includes the right to dispose properties in a manner so as to take effect after the death of a person. Such a right can be exercised by making an instrument known as Will, during the lifetime of a person. The manner of distribution of a person’s property after his death is then determined by his Will. Person making a Will is known as ‘testator’ and distribution taking place after his death as per his Will is known as ‘Testamentary’ succession. 1.2 In case of a person who dies without making a Will, the property passes by inheritance as per the personal law of the deceased. Devolution of property of such a person after his death is known as ‘Intestate’ succession. The laws governing such intestate succession are inter alia the Indian Succession Act, 1925 (I.S. Act), Hindu Succession Act, 1956, Parsi Marriage and Divorce Act, 1936 and Mohammedan Law. These laws provide for the manner of devolution of such properties, amongst the legal heirs of the deceased. They prescribe rules as to who are the persons entitled to receive the estate of the deceased, in what proportion and manner of administration of the estate 1.3 Relevance of domicile/location of a property Domicile is relevant for movable properties while location is relevant for immovable property. In case of an immovable property located in India, the laws of succession prevailing in India would determine the successors of such property. In case of movable properties, the laws governing the country of domicile of the deceased would determine the successors of the property. 1.4 Intestate succession as per personal laws 1.4.1 Hindus/Jains/Buddhists/Sikhs Hindu Succession Act, 1956, applies to persons following the above faiths. A distinction is made between a male and a female for the purposes of deciding the manner of distribution of their estates. S. 21 of the Special Marriage Act, 1954 provides that any person whose marriage is solemnised under the Special Marriage Act, 1954, succession of property of such person shall be regulated by the provisions of the I.S. Act. However, in case of the marriage of a Hindu, Buddhist, Sikh or Jain solemnised with another Hindu, Buddhist, Sikh or Jain under the Special Marriage Act, such person’s succession will be governed by the Hindu Succession Act, 1956 and not by the I.S. Act. Male : His property devolves upon his widow, children (including heirs of a predeceased child through such child) and mother in equal parts. In case where none of them are present, the property will pass to his father if he is alive and failing which to his brother, sister and other relatives. Female : Her property devolves upon her husband and children (including children of a predeceased child through such child) in equal parts. In case where none of them are present, property will pass to heirs of her husband and failing them to her mother and father. A distinction is made in such a case between the properties received from the parents of the female and properties received from the husband and the father-in-law. The latter property will pass to heirs of her husband while the former will pass upon the heirs of her father. 1.4.2 Mohammedans – Property of a Mohammedan devolves on his or her successors as per his or her personal law. However, estate of persons married under the Special Marriage Act, 1954, shall devolve as per the provisions of the Indian Succession Act. 1.4.3 Others – Properties of persons following any faith other than the Hindus, Jains, Sikhs, Buddhists and Mohammedans and Parsis shall devolve as per the provisions of the Indian Succession Act.

Succession and Wills 6.139 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 2. WILL 2.1 What is it ? 2.1.1 S. 2(h) of the I.S. Act defines a ‘Will’ as a legal declaration of the intention of the testator with respect to his property which he desires to be carried into effect after his death. A Will made during the lifetime of a person becomes effective only on his death. Thus, a Will can be revoked at any time during the life of the testator. 2.1.2 The procedure governing the Wills in India is laid down by the I.S. Act. The Act provides the procedure for making, execution and administration of a Will. It applies to all the persons of any faith (except Mohammedans). The following sections of the I.S. Act are not applicable to Wills executed by Hindus/Jains/ Buddhists and Sikhs. S. 60 Testamentary guardian Ss. 65 & 66 Execution of privileged Wills S. 67 Effect of gift to attesting witness S. 69 Revocation of Will by testator’s marriage S. 72 Revocation of privileged Will or codicil S. 91 Power of appointment executed by general bequest S. 92 Implied gift to objects of power in default of appointment S. 93 Bequests to heirs, etc. of particular person without qualifying terms S. 94 Bequest to representatives, etc. of particular person S. 97 Effect of words describing a class added to bequest to person S. 99 Construction of terms S. 100 Words expressing relationship denote only legitimate relatives or failing such relatives reputed legitimate S. 118 Bequest to religious or charitable uses 2.1.3 Section 57 of the I.S. Act provides that sections listed in Schedule III to the I.S. Act shall apply – a. To all Wills and codicils made by any Hindu, Buddhist, Sikh or Jain within the territories which at the said date were subject to the Lieutenant Governor of Bengal or within the local limits of the ordinary original civil jurisdiction of the High Courts of Judicature at Chennai and Mumbai; and b. To all such Wills and codicils made outside those territories and limits so far as relates to immovable property situate within those territories or limits; and c. To all Wills and codicils made by any Hindu, Buddhist, Sikh or Jain on or after the first day of January, 1927, to which these provisions are not applied by clauses (a) and (b); Provided that marriage shall not revoke any such Will or codicil. 2.2 Commonly used Terms a. ‘Testator’: A person making a Will. b. Legatee or beneficiary : A person to whom property is given under the Will. c. Legacy : A benefit under the Will. d. Executor : A person appointed by the testator to execute the Will as per the provisions of the Will. e. Attestation : An act of witnessing the execution of the Will. f. Administrator : A person appointed by a competent authority to administer the estate when no executor is appointed or an executor appointed refuses to act as an executor. g. Probate : A copy of a Will certified under the seal of a Court of competent jurisdiction with a grant of administration to the estate. h. Codicil : A document which modifies or alters the provisions of the original Will and forms part of it.

Allied Laws 6.140 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication i. Letter of Administration : A letter of the court appointing an administrator to the estate. j. Succession Certificate : As issued by a Civil Court of competent jurisdiction in respect of the property of a person who has died intestate, that is without making a Will and where letter of administration or probate is not compulsory. 2.3 Who can make it — S. 59 of I.S. Act provides that every person of sound mind, not being a minor, may dispose of his property by a Will. Persons who are deaf, dumb, blind and even an insane person during his sanity can make a Will. However, any person in an improper state of mind due to intoxication, illness, etc. cannot make a Will where he does not know what he is doing. Subsequent incapacity will not invalidate a Will. 2.4 Form — Except in cases of Mohammedans, a Will has to be in writing and oral dispositions are not recognised. However, a soldier on a war front can make an oral Will known as a Privileged Will. No specific form is prescribed under Indian Succession Act nor any specific language insisted upon. It can be handwritten or typed. It can be made on a plain paper. 2.5 Execution — A Will should be executed by the testator by signing or putting his mark on Will in a manner so as to clarify his intent. The act of execution by the testator should be witnessed by at least two persons acting as attesting witnesses, who must sign or put their marks in the presence of the testator. It is preferable that the signature is placed at the end of the Will and every page is initialled by the testator. I.S. Act only provides that the Will should be made by a competent person, should be in writing, executed by testator and attested by minimum two witnesses. 2.6 Who can be legatees — A testator can give his estate or part thereof to any person, whether born or unborn (subject to rule against perpetuity where ultimate legatee is preceded by a vesting in a living person), of his choice. Estate can be given under a Will to trusts, organisations, etc. also. An executor appointed for administration can also be a beneficiary under a Will. A bequest to a non-existent person fails. However, where it was made in favour of a person who is dead at the time of the death of the testator, estate will devolve on the legal heirs of dead person. 2.7 What can be Willed — Properties which are self-acquired can be disposed of under a Will. Properties acquired by inheritance or gift, etc. and held exclusively can also be subject matter of Will. It is also possible for a member of a HUF to transfer his share in the properties of HUF under Will. Tenancy rights not being transferable should not be made a subject matter of Will. A Mohammedan under Will can bequeath only 1/3rd of his property, the remaining 2/3rds part shall devolve on legal heirs as per the Mohammedan Law. Notwithstanding this rule, a Mohammedan may bequeath his entire property under a Will provided his legal heirs otherwise entitled to his estate consent to such a disposition after his death — their consent before death is not valid. 2.8 Executor/s — He is a person entrusted with the duty to carry out instructions of the testator and has the power to collect, realise and distribute the estate of the deceased. There is no restriction on the number of executors but their number should be restricted to four considering the court practice. Unless otherwise empowered an executor has to invest the realised estate as per the provisions of Indian Trust Act and is also not entitled to any remuneration. On refusal of the appointed person to act as an executor, the competent court is authorised to appoint an appropriate person. 2.9 Common Clauses — Though no form is prescribed following clauses are commonly found in a Will. a) Name, age, address, religion b) Revocation of earlier Will c) List of relatives d) Appointment of executor e) Discharge of obligations f) Legacies and bequests to persons g) Residual estate h) Testimonium

Succession and Wills 6.141 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication i) Execution j) Witness k) Safe custody 2.10 Revocation/Alteration — A Will can be revoked at any time by the testator during his life. A Will as per S. 69 of I.S. Act is revoked on marriage of the testator. This rule however, does not apply to a Will made by a Hindu or a Muslim. It is possible to alter a Will by a codicil as explained above or by correcting the original Will itself as per S. 71 of the I.S. Act which takes effect only if alterations were executed in the same manner as a Will was executed. 2.11 Codicil — A Will can be changed by the testator during his life time either by making a new Will after revoking an old Will or by amending the old Will by separate instrument made with the intention to make such an instrument a part of it. This new instrument is known as Codicil. S. 2(d) defines it as an instrument made in relation to a Will and explaining, altering or adding to its dispositions which shall be deemed to form part of the Will 2.12 Stamp duty — No stamp duty is payable on execution of a Will. A Will can be made on a plain paper. 2.13 Registration — Registration of a Will is optional. If desired it can be registered with the Sub-Registrar of Assurance’s office as per the provisions of S. 40 of the Indian Registration Act. A revocation of a registered Will should be registered. It is preferable to register Wills made subsequent to a registered Will. Registration grants protection and secrecy to a Will. 2.14 Deposit — Will can be deposited at the option of the testator with any person of his choice including Sub-Registrar of Assurances as per the provisions of S. 42 of Indian Registration Act. 2.15 Probate — A probate is the grant of administration of the estate by the court of competent jurisdiction on the basis of Will. A probate provides the conclusive evidence (i) of the execution of a Will (ii) of the legacies and (iii) of the legal character of legatees by confirming validity of a Will. It can be granted only to an executor. Obtaining a probate is not compulsory in cases of a Hindu and a Mohammedan unless :— a. The estate consists of an immovable property situated in the cities of Mumbai, Chennai and Kolkata. b. Will is executed in the cities of Mumbai and/ or Chennai and/or Kolkata and deals with an immovable property wherever located. A maximum court fee of ` 75,000 is payable in the State of Maharashtra for obtaining a probate. No time limit is prescribed for filing an application for probate. However, delay is required to be explained where filed beyond a period of three years of death. 2.16 Letter of Administration — A letter of administration can be obtained from the court of competent jurisdiction in cases where the testator had failed to appoint an executor under a Will or where the executor appointed under a Will refuses to act or where he has died before or after proving the Will but before administration of the estate. When the execution of a will asserted by one party is denied by the other party, then the burden is on the party who relies on the will to prove its execution. But when the execution of the will is not denied then no burden is cast on the party who relies on a will to prove its execution. Balathandayutham and Another vs. Ezilarasan [(2010) 5 SCC 770] 2.17 Section 58 of IS Act provides that the testamentary succession amongst the Hindus is to be governed by the general Hindu law modified by what has been provided for in section 57 and Schedule III of the Indian Succession Act.

Allied Laws 6.142 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Comparative Chart Indian Succession Act Hindu Succession Act To whom applicable The I.S. Act, 1925, is applicable to all Indians other than Muslims. However certain provisions apply only to nonHindus such as Christians, Parsis and Jews. Intestate succession to properties of any person other than Hindu, Mohammedan, Buddhist, Sikh or Jain is governed by Part V (i.e., Intestate Succession) Rules for Parsis are contained in sections 50 to 56 The Hindu Succession Act, 1956, applies to any person who is a Hindu, Buddhist, Sikh, Jain and to any other person who is not a Muslim, Christian, Parsi or Jew by religion. Clause (i) of section 5 provides that the said Act does not apply to any property, succession of which is regulated by the I.S. Act by reason of the provisions contained in section 21 of the Special Marriage Act, 1954. Sec. 21 of the Special Marriage Act, 1954, reads as under: “Notwithstanding any restrictions contained in the I.S. Act, 1925, with respect to its application to members of certain communities, succession to the property of any person whose marriage is solemnised under this Act and to the property of the issue of such marriage shall be regulated by the provisions of the said Act and for the purposes of this section that Act shall have effect as if Chapter III of Part V (Special Rules for Parsi Intestates) had been omitted therefrom.” Attesting witness to a Will In case of Wills executed by Christians, Jews and Parsis a person named as executor in the Will can be an attesting witness. Attestation by a legatee under the Will is a good attestation. But the bequest in favour of such a legatee or his spouse becomes void. A gift to an attesting witness is void though there may be a sufficient number of attesting witnesses without him, and the undisposed portion of the devised property will devolve according to the law of inheritance. (Section 67 of I.S. Act) In case of Wills executed by Hindus, Buddhists, Sikhs and Jains, the bequest in favour of a legatee is valid though he has attested the said Will. So a legatee under the Will of a Hindu will not lose his legacy by attesting the Will.

Succession and Wills 6.143 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Indian Succession Act Hindu Succession Act Probate In the case of Wills made by Christians and Jews and by Hindus, Buddhists, Sikhs and Jains [as provided in clauses (a) and (b) of section 57] no right as an executor or a legatee can be established in a Court of Justice unless Probate is granted by a Court of competent jurisdiction u/s. 213. Wills executed outside the cities of Kolkata, Chennai and Mumbai in respect of immovable properties situate outside these cities are not subject to the condition of obtaining probate before getting advantage of any such Will. No probate is required to establish right as an executor or a legatee in case of Wills made by Hindus, Buddhists, Sikhs and Jains. The exception to the above rule is provided in clauses (a) and (b) of section 57 of the I.S. Act which is to the following effect: (i) All Wills and codicils made by Hindus, Buddhists, Sikhs and Jains within the territories of the Lieutenant Governor of Bengal and within the local limits of the ordinary original civil jurisdiction of the High Courts at Chennai and Mumbai have to be probated. (ii) All Wills and codicils made outside the territories or limits mentioned in clause (i) above so far as relates to immovable property situate within those territories or limits have to be probated. Letter of Administration Where a person dies intestate who was governed by the I.S. Act, it is obligatory for the executors or legatee to obtain a Letter of Administration. Where a Hindu dies intestate it is not necessary in every case to obtain a Letter of administration to the estate of the deceased to establish a right to any part of the property of the deceased. Revocation of Will by testator’s marriage Every Will shall be revoked on the marriage by the maker u/s. 69. Revocation results not only from first marriage but any subsequent marriage also. The exception to this rule is that a Will made in exercise of a power of appointment, when the property over which the power of appointment is exercised would not, in default of such appointment, pass to his or her executor or administrator or to the person entitled in case of intestacy. This provision does not apply to Hindus, Buddhists, Sikhs and Jains who are governed by the Hindu Succession Act. The statement of objects and reasons of the Hindu Wills Act, 1870 (now repealed) brings out the reasons for a marriage amongst the Hindus, Buddhists, Sikhs or Jains not having the effect of revoking a Will as the marriage does not create such a change in the testator’s condition as to raise a presumption that he would not adhere to a Will made previously. This presumption is based upon the principle of monogamous marriage (the practice of having only one husband or wife at any one time) in England.

Allied Laws 6.144 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Indian Succession Act Hindu Succession Act Revocation of Privileged Will or Codicil Under section 72, a privileged Will or codicil may be revoked by the testator by an unprivileged Will or codicil, or by any act expressing an intention to revoke it and accompanied by such formalities as would be sufficient to give validity to a privileged Will or by the burning, tearing or destroying the same with the intention of revoking the same. No such condition are required under Hindu Succession Act Construction of terms/ definitions and interpretation Section 97 of I.S. Act lays down the general principles of interpretation of Wills. Though this section is not applicable to Hindus, it can still be equally applied to a Will by a Hindu, if the clear intention of the testator cannot be gathered from such Will. It may, however, be noted that the principle of interpretation enacted by this section, in terms, is applicable to testamentary dispositions and not to gifts or settlement. Under Hindu Succession Act, 1956 following words are defined and interpreted u/s. 3 of the Act: (a) Agnate (b) Aliyasantana law (c) Cognate (d) Custom and usage (e) Full blood, half blood (f) Heir and uterine blood (g) Intestate (h) Marumakkattayam law (i) Nambudri law (j) Related Bequest to religious or charitable use Section 118 of I.S. Act provides that no person having nephew or niece or any nearer relation, shall have power to bequeath any property to religious or charitable uses except the following two conditions are satisfied: (a) A Will by which the testator bequeathed his property to religious or charitable uses was executed not less than twelve months before the death of the testator, and (b) Such Will was deposited within six months from its execution in some place provided by law for the safe custody. No such condition are required under Hindu Succession Act Words expressing relationship Section 100 of the I.S. Act provides that in absence of any intimation to the contrary in a Will the word child, son or daughter would mean legitimate child, son or daughter. The principles laid down in this section is that a testator must be presumed to intend his legitimate relations unless the Will itself contains an intimation to the contrary. The word son, daughter or child means legitimate as well as illegitimate child. The illegitimate son of a male Hindu of any caste is entitled to claim maintenance from the father and in case of death of the father from his heirs out of his estate inherited by them so long as the illegitimate son remains a minor and does not cease to be a Hindu. 2

The Banning of Unregulated Deposit Schemes Act, 2019 6.145 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication XV. The Banning of Unregulated Deposit Schemes Act, 2019 The Act seeks to provide for a comprehensive mechanism to ban unregulated deposit schemes and to protect the interest of the depositors and to provide for matters connected therewith. It aims to prevent unregulated deposit schemes or arrangements at their inception and at the same time makes soliciting, inviting or accepting deposits pursuant to an unregulated deposits scheme a punishable offence. Unregulated Deposit Scheme: Section 2(17) of the Act defines a scheme as unregulated where deposits are accepted or solicited by any deposit taker by way of business and which is not registered with the regulators listed in the Act. Section 6 of the Act states that a Prize Chit or Money Circulation Scheme which is banned under the provisions of the Prize Chits and Money Circulation Scheme (Banning) Act, 1978, shall be deemed to be an Unregulated Deposit Scheme. Regulated Deposit Scheme: Section 2(14) of the Act defines a scheme as regulated if it is specified in the first schedule of the Act which specifies the regulator and regulated scheme. Currently, nine regulators oversee and regulate various deposit-taking schemes including IRDA, RBI, SEBI, MCA, NHB, PFRDA, EPFO, Central Registrar- Multi state Cooperative societies, State and Union territory governments etc. For example, RBI regulates deposits accepted by non-banking financial companies, SEBI regulates mutual funds and issue of other securities, State and Union territory governments regulate chit funds, among others. All deposit-taking schemes are required to be registered with the relevant regulator. Further, Central Government, has power to notify any other scheme as a regulated deposit scheme. Deposit: Section 2(4) defines a ‘Deposit’ as an amount of money received through an advance, a loan, or in any other form, with a promise to be returned with or without interest. Such deposit may be returned either in cash or as a service, and the time of return may or may not be specified. However, following are excluded from the definition of ‘Deposit’. • Loans received from banks; • Loans/ financial assistance from private finance institutions (PFIs) or any registered NBFCs, regional financial institutions and insurance companies; • Amount received from or guaranteed by an appropriate government; • Amount received from a statutory authority; • Amounts received from foreign government/ banks/ authorities or person resident outside India • Capital contributions by partners of a partnership firm or LLP; • Loans received by an individual from his relatives; • Loans received by a firm from relatives of partners; • Any credit given by a seller to a buyer on the sale of any property (whether movable or immovable); • Amounts received by a registered Asset Reconstruction Company (ARC); • Amounts received under Section 34 or Section 29B of the Representation of the People Act, 1951; • Periodic payment by the members of selfhelp groups as per ceiling prescribed by government; • Amount received in the course of, or for the purpose of, business and bearing a genuine connection to such business including; — Payment, advance or part payment for supply/ hire of goods / services; — Advance received in connection with and adjusted towards consideration

Allied Laws 6.146 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication of an immovable property under an agreement or arrangement; — Security deposit; — Advance under long-term projects for supply of capital goods; Provided that if the amounts received under items (i) to (iv) become refundable, such amounts shall be deemed to be deposits on the expiry of fifteen days from the date on which they become due for refund: Deposit taker: Section 2(6) defines ‘deposit taker’ as an individual, a group of individuals, a proprietary concern, a partnership firm, a LLP, a company, an AOP, a trust, a co-operative society or any other arrangement of whatsoever nature, who solicits or receives deposits. Banks and entities incorporated under any other law are not included as deposit takers. Competent Authority, its powers and procedures: The Act provides for the appointment of one or more government officers, not below the rank of Secretary to the State or Central Government, as the Competent Authority. Police officers receiving information about offences committed under the Act will report it to the Competent Authority. Further, police officers (not below the rank of an officer-in-charge of a police station) may enter, search and seize any property believed to be connected with an offence under the Act, with or without a warrant. The Competent Authority may: (i) provisionally attach the property of the deposit taker, as well as all deposits received, (ii) summon and examine any person it considers necessary for the purpose of obtaining evidence, and (iii) order the production of records and evidence. The Competent Authority will have powers similar to those vested in a civil court. Designated Courts, its powers and procedures: The Act provides for the constitution of one or more Designated Courts in specified areas. This Court will be headed by a judge not below the rank of a district and session’s judge, or additional district and session’s judge. After provisional attachment of the deposit taker’s assets, the Competent Authority will approach the Designated Court to: — make the provisional attachment absolute, and — ask for permission to sell the assets. The Competent Authority will have to approach the Court within 30 days (extendable to 60 days). It will also open a bank account to realise and disburse money to depositors under the instructions of the Designated Court. The Designated Court will have the power to: — make the provisional attachment absolute, — vary or cancel the provisional attachment, — finalise the list of depositors and their respective dues, and — direct the Competent Authority to sell the property and equitably distribute the money realised among the depositors. The Court will seek to complete the process within 180 days of being approached by the Competent Authority. Central database: The Act provides for the Central Government to designate an authority to create an online central database for information on deposit takers. All deposit takers will be required to inform the database authority about their business. The Competent Authority will be required to share all information on unregulated deposits with the authority. Offences and penalties: The Act defines different types of offences, and penalties related to them. Broadly, these offences are: (i) running advertising, promoting, operating or accepting money for unregulated deposit schemes, (ii) fraudulently defaulting on regulated deposit schemes, and (iii) wrongfully inducing depositors to invest in unregulated deposit schemes by willingly falsifying facts. For example, accepting unregulated deposits will be punishable with imprisonment between 2 to 7 years, along with a