Part 6 - Allied Laws

Insolvency and Bankruptcy Code, 2016 6.47 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication applicants that have not submitted resolution plans as on date of coming into force of the said amendment; • It has been recommended that home buyers should be treated as financial creditors owing to the unique nature of financing in real estate projects and the treatment of home buyers by the Hon’ble Supreme Court in ongoing cases. • To clear the confusion regarding treatment of assets of guarantors of the corporate debtor vis-à-vis the moratorium on the assets of the corporate debtor, it has been recommended to clarify by way of an explanation that all assets of such guarantors to the corporate debtor shall be outside scope of moratorium imposed under the Code; • In order to fulfill the stated objective of the Code i.e. to promote resolution, it has been recommended to re-calibrate voting threshold for various decisions of the Committee of Creditors; • In order to enable the corporate debtor to continue as a going concern while undergoing Corporate Insolvency Resolution Process (CIRP) it has been recommended to empower the NCLT on the application of IP to allow expansion of the scope of essential goods and services beyond what is specified in CIRP Regulations; • In order to cater to exceptional circumstances warranting withdrawal of an application for CIRP post-admission, it has been recommended to allow such exit provided the Committee of Creditors approves such action by ninety per cent of voting share; • In order to prevent misuse of section 10 of the Code, which permits initiation of CIRP by Corporate Applicant, it has been recommended to provide for the requirement of special resolution passed by the shareholders of the Corporate debtor or resolution passed by at least three-fourths of the total number of partners of the corporate debtor as the case may be; • In order to facilitate successful implementation of the resolution plan by the successful bidder, it has been proposed to allow one year time to obtain necessary statutory clearances from Central, State and other authorities or such time as specified in the relevant law, whichever is later. • Recommendations for cases of cross border insolvency will be provided separately by the Committee. (8) How to be an Insolvency Professional Chartered Accountants with 10 years plus experience are eligible to be Insolvency Professional (IP). One need to Pass Limited Insolvency Exam conducted by National Institute of Securities Market (NISM). (9) Web sites for further information Insolvency and Bankruptcy Board of India www.ibbi.gov.in Indian Institute of Insolvency Professionals of ICAI www.iiipicai.in National Institute of Securities Market (NISM) www.nism.ac.in Insolvency and Bankruptcy Code Laws www.ibclaws.in (10) Insolvency and Bankruptcy Code (Amendment) Ordinance, 2019 The amendments • Prescribe threshold for certain categories of financial creditors : Financial Creditors who are allottees under real estate project and financial creditors falling in category of creditor referred in clause (a) and (b) of sub-section (6A) of section 21, may initiate CIRP against the corporate debtor before the adjudicating authority by filing a joint application comprising of not less than 100 allottees or not less than 10% of the total number of allottees, whichever is less. Further if any application already filed by the

Allied Laws 6.48 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication aforesaid categories has not been admitted by the adjudicating authority before the commencement of the Ordinance, then such an application will be required to be modified to comply with the Ordinance within 30 days of its commencement, failing which the application shall be deemed to be withdrawn before its admission. • Clarification on persons not entitled to make application: Corporate debtor will now be permitted to initiate CIRP against other corporate debtors. • No suspension or termination of a license, permit, registration, etc. given by the government under the moratorium period : License, permit, registration, quota, concession, clearances or a similar grant or right given by the central government, state government, local authority, sectoral regulator or any other law for the time being in force shall not be suspended or terminated on the grounds of insolvency. However, ensure that there should not be any default in payment of the current dues arising in relation to the use or continuation of such license, permits, etc. during the moratorium period. • Continuance of supply of goods and services critical for the Corporate Debtor : Supply of the goods and services critical to protect and preserve the value of the Corporate Debtor and for the purposes to manage its operations as a going concern, which may be deemed fit as per the interim resolution professional or resolution professional, as the case may be during the moratorium period. This provision will not apply if the corporate debtor has failed to pay the suppliers during the moratorium period or other specified circumstances. • Time limit for the appointment of the interim resolution professional (IRP): Time limit for appointment of the IRP has now been changed from a period of 14 days from the insolvency commencement date to the date on which the insolvency is commenced. • Liability for offences committed prior to the commencement of the CIRP: Corporate debtor will not be liable for an offence committed prior to the commencement of the CIRP and CD shall not be prosecuted for such an offence from the date the resolution plan is approved by the adjudicating authority. • Filing of Forms after due date of submission shall be accompanied by fee of ` 500 per form each month after 01.04.2020 [Insolvency and Bankruptcy Board of India (Amendment) Regulations, 2020] (11) Forms filed under Insolvency and Bankruptcy Code Form AA Consent to act as Resolution Professional Form 1 Application by Financial Creditor to initiate CIRP Form 5 Application by Operational Creditor to initiate CIRP Form 6 Application by Corporate Applicant to initiate CIRP Form FA Application for withdrawal of CIRP (12) Introduction of Pre-packaged Insolvency Resolution Process (“PPIRP”) Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021 on 4th April 2021. The Cabinet had approved on 31st March 2021 the proposal to make amendments in the Insolvency and Bankruptcy Code, 2016(Code), through the Insolvency and Bankruptcy Code (Amendment) Ordinance, 2021. • The amendments aim to provide an efficient alternative insolvency resolution framework for corporate persons classified as micro, small and medium enterprises (MSMEs) under the Code, for ensuring quicker, costeffective and value maximizing outcomes for

Insolvency and Bankruptcy Code, 2016 6.49 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication all the stakeholders, in a manner which is least disruptive to the continuity of MSMEs businesses thereby ensuring positive signal to debt market, employment preservation, ease of doing business and preservation of enterprise capital. • The application shall be made by the corporate debtor itself with requisite declarations thereafter, the corporate debtor submits a base resolution plan itself. In the event the Committee of Creditors opts for better resolution, it invites competitive resolution plans based on a Swiss Exchange Mechanism. The final resolution plan is approved by the Committee of Creditors with 66% of majority. The whole process requires a timeline of 90 days with an extension of further 30 days, which is faster than CIRP. • The PPIRP aims at faster resolution as a speedy alternate to CIRP for MSMEs. The initiative is based on a trust model and the amendments honor the honest MSME owners by trying to ensure that the resolution happens, and the company remains with them. (13) Few Judgments under IBC • Pr. Commissioner of Income Tax vs. Monnet Ispat and Energy Ltd dt. 10.08.2018 It was held that Income tax dues being in nature of crown debts, do not take precedence over secured creditors who are private person. • State Bank of India vs. V. Ramakrishnan & Anr dt. 14.08.2018 Section 14 of the Insolvency and Bankruptcy Code, 2016, which provides for a moratorium for the limited period mentioned in the Code, on admission of an insolvency petition, will not apply to a personal guarantor of a corporate debtor. • K Sashidhar vs. Indian Overseas Bank & Ors dt. 05.02.2019 Resolution plan of the concerned corporate debtor not being approved by requisite percent of voting share of the financial creditors; and in absence of any alternative resolution plan presented within the statutory period of 270 days, the inevitable sequel is to initiate liquidation process under Section 33 of the Code. • State Bank of India vs. SKC Retails Ltd. Through IRP & anr NCLAT held that as per Regulation 33, Applicant is required to fix the fees paid to Interim Resolution Professional. However, NCLT is required to fix expense where applicant fails. Thus, Applicant is required to bear the expense which is reimbursed by Committee of Creditors to the extent Committee ratifies. The MCA vide notification No. S.O. 1205 (E) dated 24.03.2020 increased the threshold for initiation of insolvency process under the IBC from ` 1 lakh to ` 1 crore. This was made due to the pandemic situation of COVID-19.

Allied Laws 6.50 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication (14) Distinction between CIRP and PPIRP Corporate Insolvency Resolution Process (CIRP) Pre-Packaged Insolvency Resolution Process (PPIRP) Applicable to any Corporate Debtor Applicable only to Corporate Debtor which is MSME Priority to CIRP only if CIRP already commenced – [section 11A(3) and 11A(4)] PPIRP gets priority if application filed before CIRP or filed within 14 days of filing of CIRP [section 11A(1) and 11A(2)] Minimum default – ` one crore [Notification No. S.O. 1205(E) dated 24-3-2020 under section 4] Minimum default – ` ten lakhs [Notification No. S.O. 1543(E) dated 9-4-2021 under section 4] No preliminary work before filing application to NCLT by financial creditor or operational creditor. Corporate debtor has to only pass special resolution(SR) Preliminary work before filing application to AA (NCLT) – (a) Special Resolution (b) Approval of at least 66% Financial Creditors (c) Name of Resolution Professional (d) Base Resolution Plan by Corporate Debtor (e) Other prescribed information (f) Report by Resolution Professional- section 54A and section 54B Following persons can initiate CIRP – (a) a financial creditor (section 7) (b) an operational creditor (section 8) or (c) the corporate debtor itself or its promoters (section 10) Only corporate applicant (normally corporate debtor itself or its promoters/directors) can initiate PPIRP [section 54C(1)] Admission or rejection of application by AA [section 7, 8 or 10] Admission or rejection of application by AA [section 54C] Time limit for completion of CIRP – 180 days (maximum 330 days) [section 12] Time limit for completion of PPIRP 120 days [section 54D] Moratorium, appointment of Interim Resolution Professional (IRP), public announcement after admission of application [sections 13(1) and 14] Moratorium, appointment of RP and public announcement after admission of application [section 54E] Provision for appointment of IRP [section 16(1)] Direct appointment of RP [section 54E] Management of corporate debtor vests with IRP on insolvency commencement date [section 17(1)] Management of corporate debtor continues with Corporate Debtor unless fraud involved [section 54H] CoC can resolve to vest management with IRP [section 54J] Claims and proof of claims to be submitted to IRP [section 35(1)(j)] Claims and proof of claims to be submitted to RP [section 54G]

Insolvency and Bankruptcy Code, 2016 6.51 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Corporate Insolvency Resolution Process (CIRP) Pre-Packaged Insolvency Resolution Process (PPIRP) Constitution of Committee of Creditors within 30 days [section 21(1)] Constitution of Committee of Creditors within seven days [section 54F(2)] Resolution Professional appointed in first meeting of CoC [section 22(1)] Resolution Professional already appointed under section 54A before making application to AA, which is to be only confirmed by AA under section 54E Filing of Application for avoidance of transactions [section 25(2)(j)] Filing of Application for avoidance of transactions [section 54F(2)(h)] Preparation of information memorandum by resolution professional [section 29(1)] Preparation of information memorandum by corporate debtor and finalisation by RP [section 54G] No provision for Base Resolution Plan by Corporate Debtor Corporate debtor may improve Base Resolution Plan and CoC may approve the same (may be with improvements), if it does not impair operational creditors [section 54K(4)] Invitation to resolution applicants as per criteria approved by CoC to submit resolution plan [section 25(2)(h)] and submission of resolution plan by resolution applicant [section 30(1)] Invitation of Resolution Plan with criteria approved by CoC [section 54K(5)] and submission of resolution plan by resolution applicant [section 54K(5)] Resolution plan to meet requirements specified in section 30(2) Resolution plan to meet requirements specified in section 30(2) and Regulation 45 of IBBI (PPIRP) Regulations, 2021 Submission of resolution plan approved by CoC to AA (NCLT) – section 30(4) Submission of resolution plan approved by CoC to AA (NCLT) – section 54K(15) “Evaluation matrix” as approved by the committee, for consideration of resolution plans for its approval – Regulation 2(1)(ha) Scoring and improvement of resolution plans will be done as per Regulation 42 No specific provision for Swiss challenge though no prohibition either Introduction of concept of Swiss Challenge to get best possible resolution plan Approval of Resolution Plan by AA [section 31(1)] Approval of Resolution Plan by AA [section 54L(1)] Liquidation to commence if Resolution plan rejected [section 33(1)] AA can order liquidation [section 54N(4)] Appeal can be filed before NCLAT against order of AA [section 61(3)] Appeal can be filed before NCLAT against order of AA [section 61(3)]

Allied Laws 6.52 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication III. Maharashtra Public Trusts Act, 1950 as amended by Maharashtra Public Trusts (Second Amendment) Act, 2017 Documents to be filed Period Prescribed Form Procedures Register of Public Trust (vide Rule 5) On registration Schedule I Application format for Trust User ID and password is issued by the Office of the Charity Commissioner on 4th January, 2023, all the registered trusts are required to fill the same and email at occsupport.mum-mh@ gov.in. Below information to be updated in Schedule I (1) Name of the Trust (2) Names of the Trustees and Managers with their addresses (3) Mode of succession to Trusteeship & Managership (4) Objects of the Trust (5) Particulars of documents creating Trust (6) Particulars other than documents about the origin or creation of Trust (7) Movable Property (8) Immovable Property (9) Average Annual Income (10) Average Annual Expenditure (11) Particulars of Scheme if any, relating to the Trust (12) Particulars of encumbrances on Trust property (13) Particulars of title deeds pertaining to Trusts property & trustees in possession thereof (14) Remarks Application for registration of the Trust (Sec. 18, Rule 6) Within 3 months of creation of the Trust Schedule II (a) Application in the prescribed form; (b) Instrument (Trust Deed); (c) Affidavit; (d) Consent letter; (e) No objection for use of address and address proof; (f) Notice in Newspaper; (g) List of all the Trustees and their identity proof Application for registration of the Society under the Societies Registration Act, 1860 and Maharashtra Public Trust Act, 1950 Within 6 months of creation of the Trust Schedule II UNDER THE SOCIETY REGISTRATION ACT, 1860: (1) Memorandum of Association and Rules & Regulations; (2) Resolution of all the members. (3) Consent Letter of members; (4) Authority letter; (5) NOC of the Owner of the premises to use the same as the registered address of the captioned Society; (6) Affidavit; (7) Schedule I; (8) Schedule II; (9) Schedule VI; (10) List of Managing Committee members with their ID and Address proof. UNDER THE MAHARASHTRA PUBLIC TRUSTS ACT, 1950: (1) Schedule II; (2) Memorandum of Association and Rules & Regulations; (3) Consent Letter;

Maharashtra Public Trusts Act, 1950 as amended by Maharashtra Public Trusts 6.53 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Documents to be filed Period Prescribed Form Procedures (4) Authority Letter; (5) Letter of exemption from publication; (6) Resolution of all members; (7) NOC of the Owner of the premises to use the same as the registered address of the captioned Society; (8) Affidavit; (9) List of Managing Committee members with their ID and address proof. Application for registration of a trust created by will (Sec. 29) Within 1 month of granting of probate/within 6 months of testator’s death, whichever is earlier. Schedule II Application must be signed and affirmed by the applicant, and to be accompanied by a true copy of the Will and above procedures must be followed Memorandum of particulars of immovable properties [Sec. 18(7), Rule 6(7)] Within 3 months of creation of the trust Schedule II-A Memorandum to be signed and affirmed by a trustee Change (Sec. 22 and Rule 13) Within 90 days of the occurrence of change Schedule III To be signed and affirmed by a trustee. It must be ensured that changes are communicated within 90 days and thereafter it is the responsibility of the trustee to follow-up and get the order of the changes. Changes for the appointment of the new trustees will be filed along with the notice of meeting, resolution, attendance sheet for the meeting, invitation letter, consent letter and affidavit as well as for deletion of name of trustee to be filed with letter of resignation, death certificate, affidavit, no objection letter and other relevant documentary evidence. Please note that the change report to be filed is to be approved by the Superintendent and only thereafter the change report can be filed New change report application guidelines are issued on 7th January, 2023 for submission of online change reports and accordingly online change report are to be filled by the Trust after creating the Login. Change (Section 22(1A), Rule 13(1A)) relating to immovable property Within 90 days of the occurrence of change Schedule III-A Change schedule to be signed and affirmed by a trustee along with relevant documents of the property, how the property has come to the trust, name and address of previous owner, publication in newspaper, Copy of 7/12 of the property, evidence affidavit and audited accounts for last three years New change report application guidelines are issued on 7th January, 2023 for submission of online change reports and accordingly online change report are to be filled by the Trust after creating the Login Budget (Sec. 31A, Rule 16A) At least 1 month before commencement of each accounting year Schedule VII-A If annual income exceeds ` 5,000/- for public religious trusts and ` 10,000/- for other trusts, then to file budget by making adequate provisions for carrying out the objects of the trust, and for the maintenance and preservation of the trust property

Allied Laws 6.54 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Documents to be filed Period Prescribed Form Procedures Accounts and Audit (Secs. 32, 33(2), 33(4), 34, Rules 17, 21) Accounts to be audited within 6 months from close of accounting year Schedule VIII for Balance Sheet and Schedule IX for Income & Expenditure S c h e d u l e IX-C for Statement of Contribution Trust exempted from requirements of audit is required to file accounts in Schedules IX-A & IX-B. It is auditors duty to prepare Balance Sheet and Income & Expenditure A/c and forward the same along with a copy of his report to the trustee who in turn will forward the full set of audited accounts to the Office of Charity Commissioner within the fortnight of completion of audit. The trust having an annual income of ` 25,000/- or less is exempt from audit Power of Assistant or Deputy Charity Commissioner to frame the scheme for proper management or administration (S. 50A(1)) • Application u/s. 50A of the MPT Act, 1950 • Notice of the meeting, certified by the trustee • Minutes of the meeting, certified by the trustee • Copy of the scheme • Comparative statement • Audited accounts of last three years The online filing of Charitable Trusts forms including filing of Annual Accounts is to be done on the Portal www.charity.maharashtra.gov.in Investments (Section 35) Public trust can invest its funds in any of the following modes : • Scheduled Bank as defined in Reserve Bank of India Act, 1934. • Postal Savings Bank. • Co-operative bank approved by the State Government. • Public Securities (Sec. 2(12)) (Units issued by the Unit Trust of India are declared as Public Securities). • First mortgage of immovable property situated in India provided the property is not leased for a term of years that is lease for 50 or 99 or 999, it must be in perpetuity and for an indefinite period. • Any other investments permitted by CC by a special or general order. CC is bound to decide on the application within 3 months from date of receipt of such application or record reasons for not doing so. CC circular provides that investment made pursuant to such order should not exceed 50% of total investments. • Any public trust has made the application to the Charity Commissioner for seeking the order granting the permission for investing the money in any other manner under the second proviso, the Charity Commissioner shall decide such application within three months from the date of receipt of such application and where it is not practicable so to do, the Charity Commissioner shall record the reasons for the same. Immovable Property (Section 36) Investment in immovable property requires CC’s permission. No permission is necessary for development of immovable property to fulfil

Maharashtra Public Trusts Act, 1950 as amended by Maharashtra Public Trusts 6.55 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication objects of the trust; e.g., construction of school building, library, etc. However, the trustee needs to file change report for addition of building u/s. 22 of the Maharashtra Public Trusts Act, 1950. Sale, exchange, lease or gift of any immovable property of a public trust is invalid unless previously approved by the CC. Lease exceeding a period of 3 years requires prior permission of the Charity Commissioner. CC shall not sanction any lease for a period of more than 30 years. Memorandum of Understanding/Sale Deed in case of sale and Lease Deed in case of lease has to be enclosed, as the case may be. No sanction shall be revoked after conveyance, unless the same was obtained after fraud. CC may grant a post facto sanction in respect of property in extra ordinary situations where a prior sanction results in hardship to the trust, a large body of persons or a bona fide purchaser for value, provided he is satisfied that: • there was an emergent situation which warranted such transfer, • there was compelling necessity for the said transfer, • the transfer was necessary in the interest of trust, • the property was transferred for consideration which was not less than prevalent market value of the property so transferred, to be certified by the expert, • there was reasonable effort on the part of trustees to secure the best price, • the trustees actions, during the course of the entire transaction, were bona fide and they have not derived any benefit, either pecuniary or otherwise, out of the said transaction, and • the transfer was effected by executing a registered instrument, if a document is required to be registered under the law for the time being force Contribution (Section 58, Rules 32 & 33) Every public trust not exempt having gross annual income exceeding ` 25,000/- has to pay contribution to Public Trust Administration Fund at rates notified by State Government from time-totime. For last 21 years, the rate notified has been 2%. Stay has been granted by Hon’ble Bombay High Court in CA No. 1 of 2009 and PIL Nos. 40, 1780 and 1864 of 2007, order dtd. 25-9-2009. Gross annual income means gross income from all sources including donations and offerings, but excluding corpus donations. Contribution is payable at the prescribed rate on the gross annual income after making deductions prescribed in Rule 32. The following trusts are exempt from payment of contribution. • Small trusts having annual income of ` 25,000/- or less. • Public trusts exclusively for advancement/ propagation of *education/medical relief/ veterinary treatment. *(till 5th August, 1997 the law provided deduction for secular education.) • Recognised Public Libraries and Reading Rooms. • Public Trusts exclusively for the purpose of relief of distress caused by scarcity, drought, flood, fire, or other natural calamity. Recently Bombay High Court has, by an interim order stayed the payment of contribution in response to a PIL. The office of the Charity Commissioner is accepting the accounts from the year 2009 without payment of contribution subject to the final order. Borrowing Powers of Trustees (Section 36A) No trustee shall borrow moneys (whether by way of mortgage or otherwise), even from banks, for purpose of or on behalf of the trust except with the previous sanction of the Charity Commissioner and subject to such conditions

Allied Laws 6.56 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication and limitations as may be imposed by him in the interest or protection of the trust. The trust has to give the names of the prospective lenders and their consent letter along with the application. CC may grant an ex post facto sanction to borrow money from a nationalized bank or scheduled bank by the trustee under exceptional and extraordinary situations where obtaining the previous sanction results in hardship to the trust, beneficiary or bona fide third party. CYPRESS (as amended on 1-9-2017) (Section 55) Assistant or Deputy Charity Commissioner suo motu or upon an application made to them shall pass appropriate orders and make a report to CC (who may direct that the property or income of the public trust or any portion thereof to be applied cypress to any other charitable or religious objects) if they are of the opinion that: • the original object for which the public trust was created has failed; • the income or any surplus balance of any public trust has not been utilized or is not likely to be utilized; • in the case of a public trust other than a trust for a religious purpose, it is not in public interest expedient, practicable, desirable, necessary or proper to carry out wholly or partially the original intention of the author of the public trust or the object for which the public trust was created and that the property or the income of the public trust or any portion thereof should be applied to any other charitable or religious object; or • in any of the cases mentioned in sections 10 to 13 or in regard to the appropriation of the dharmada sums held in trust under section 54, the directions of the Charity Commissioner are necessary CC may give directions and in giving such directions, he shall give effect to original intention of the author of the public trust or purpose or object for which such trust was created. In doing so, it shall be lawful for the CC to alter any scheme already settled or to vary the terms of any decree or order already passed in respect of the public trust or the conditions contained in the instrument of the public trust. An appeal against such an order may be made within 60 days from date of receipt of the order. It is pertinent to note that there is no provision to afford an opportunity of being heard to the trust or the trustee before passing such an order. However, section 69(n) provides power to CC to give a notice to the trustees for cypress application of trust money. Penalties (as amended on 18-5-2009) (Section 66) Section Subject Fine which may be imposed (`) Ss. 18(1), 18(4) Duty of trustees to apply to Deputy/ Assistant CC for registration of Public Trust within time 10,000/- S. 18(7) Duty of trustee to send memoranda of immovable property to certain officers/ authorities within time 10,000/- S. 22 Failure to report a change 10,000/- S. 22B Failure to make an application within the time provided for 10,000/- S. 22C Failure to send memoranda within the time provided for 10,000/- S. 29 Duty of an executor to apply for registration of a public trust within the time provided for 10,000/- S. 32 Duty to keep regular accounts 10,000/-

Maharashtra Public Trusts Act, 1950 as amended by Maharashtra Public Trusts 6.57 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Section Subject Fine which may be imposed (`) S. 35 Failure or omission to invest money in public securities 10,000/- S. 59 Failure to pay contribution u/s. 58 by a trustee or by a person charging or collecting dharmada 10,000/- Section 66A: Whoever alienates or attempts to alienate immovable property in contravention of Section 36 shall be punishable with imprisonment up to 6 months or with fine of ` 25,000/- or with both. Section 66B: Whoever fails to comply with direction u/s. 41AA as regards medical centres shall be punishable with imprisonment up to 3 months or with fine up to ` 20,000 or with both.

Allied Laws 5.58 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 1. Applicability The Maharashtra Stamp Act, 1958 applies to the entire State of Maharashtra. Only the instruments specified in the Schedule I to the Act are covered by this Act. All other instruments are either chargeable under the Indian Stamp Act (e.g., transfer of shares) or are not chargeable at all (i.e., if they are not specified under the Act as well as under the Indian Stamp Act). 2. Charge of Stamp Duty 2.1 It is very important to note that stamp duty is on an instrument and not on a transaction. 2.2 S. 3 of the Act levies stamp duty at the rate provided in Schedule I on any instrument executed in the State. Even instruments executed outside the State are liable to duty only on their receipt in the State, provided it relates to a property situated in the State or a matter or thing to be done in the State. 2.3 An instrument covering or relating to several distinct matters is chargeable with the aggregate amount of duty with which each separate instrument would have been chargeable. 2.4 In case an instrument is so drafted that it is covered within the ambit of more than one Article under Schedule I, then it shall be taxed by that Article which levies the highest amount of stamp duty. 2.5 The term “Instrument” has been defined to include every document by which any right or liability is or purports to be created, transferred, limited, extended, extinguished or recorded. However, it does not include a bill of exchange, cheque, promissory note, bill of lading, letter of credit, policy of insurance, transfer of share, debenture, proxy and receipt. Some instruments narrated are governed by Indian Stamp Act, 1899. 3. Certain Definitions 3.1 “Conveyance” has been defined to include: a. A conveyance on sale, IV. Maharashtra Stamp Act, 1958 b. Every instrument, c. Every decree or final order of any Civil Court, d. Every order made by the High Court under section 394 of the Companies Act, 1956 or every order made by the National Company Law Tribunal under sections 230 to 234 of the Companies Act, 2013 or every confirmation issued by the Central Government under sub-section (3) of section 233 of the Companies Act, 2013, in respect of the amalgamation, merger, demerger, arrangement or reconstruction of companies (including subsidiaries of parent company); and every order of the Reserve Bank of India under section 44A of the Banking Regulation Act, 1949, in respect of amalgamation or reconstruction of Banking Companies; by which property, whether movable or immovable or any estate or interest in any property is transferred to, or vested in any other person inter vivos and which is not otherwise specifically provided for by Schedule I. The Explanation to the definition provides that any instrument by which one co-owner transfers his property to another co-owner would be deemed to be a conveyance provided that it is not an instrument of partition. 3.2 “Instrument of gift” has been defined to include, in case of an oral gift, any instrument recording its making or acceptance, whether by way of declaration or otherwise. 3.3 “Instrument of partition” means any instrument whereby co-owners of any property divide or agree to divide such property and includes: a. Any final order for effecting a partition passed by any revenue authority or any civil court,

Maharashtra Stamp Act, 1958 5.59 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication b. An award by an arbitration directing a partition, and c. When any partition is effected without executing any such instrument, any instrument or instruments signed by the coowners and recording, whether by way of declaration of such partition or otherwise, the terms of such partition amongst the coowners. The expression ‘co-owners’ includes all kinds of co-ownership such as joint tenancy, tenancy in common, coparcenary, membership of HUF, etc. and the partnership. 3.4 “Immovable Property” includes land, benefits to arise out of land and things attached to the earth or permanently fastened to anything attached to the earth. The two leading decisions on this definition are those of the Supreme Court in the case of Sirpur Paper Mills (1998) 1 SCC 400 and the case of Duncan’s Industries (2000) 1 SCC 633. 3.5 “Lease” means a lease of immovable [or movable (or both)] property, and includes also,— (i) a Patta; (ii) a Kabulayat, or other undertaking in writing not being a counterpart of a lease to cultivate, occupy or pay or deliver rent for immovable property; (iii) any instrument by which tolls of any description are let; (iv) any writing on an application for a lease intended to signify that the application is granted; (v) a decree or final order of any Civil Court in respect of a lease. 3.6 “mortgage deed” includes every instrument whereby, for the purpose of securing money advanced, or to be advanced, by way of loan, or an existing or future debt, or the performance of an engagement, one person transfers or creates to, or in favour of, another, a right over or in respect of specified property; 3.7 ‘movable property’ includes standing timber, growing crops and grass, fruit upon and juice in trees and property of every other description, except immovable property, by which any right or liability is or is purported to be created, transferred, limited, extended, extinguished or recorded; 4. Payment of Stamp Duty 4.1 Section 17 of the Act provides that all instruments chargeable with duty and executed in Maharashtra should be stamped before or at the time of execution or immediately thereafter or on the next working day following the date of execution. 4.2 Instrument executed only out of Maharashtra may be stamped within three months after it is first received in State. 4.3 Duty can be paid by way of adhesive or impressed stamps on the instruments. Adhesive Stamps affixed should be cancelled at the time of execution so that they are not available for reuse. 4.4 Further, S.14 prohibits writing of a second instrument chargeable with duty on a stamp paper on which an instrument chargeable with duty has already been written. 4.5 The stamp papers must be in the name of one of the parties to the transaction. They cannot be in the name of the relative, Chartered Accountant or Lawyer of the parties. 4.6 The date of the stamp paper must not be more than 6 months older than the date of the transaction. 4.7 Who bears and pays the stamp duty is a matter of agreement between the parties. In the absence of any such agreement, the Act provides that in the case of a Conveyance, duty is to be paid by a buyer and by the lessee in case of a lease. In cases of Bonds, Release, Settlement, it is to be paid by the person making or drawing the instrument. In case of exchange, it is to be paid by the parties in equal shares and in case of partition, by the parties in proportion to their respective shares. In all other cases, it is to be

Allied Laws 5.60 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication paid by the person executing the instrument. 4.8 Stamp duty is payable at rates mentioned in Schedule I. Depending upon the Instrument, it may be based upon the market value, area, or various other criteria. In case of instruments which are based upon market value of the property, the term in relation to any property which is the subject matter of an instrument, means the price which such property would have fetched if sold in open market on date of execution of such instrument or consideration stated in the instrument, whichever is higher. The stamp office determines the market value of the property by referring to an Annual Statement of Rates (commonly known as Stamp Duty Ready Reckoner) which gave the Market Values of various immovable properties in Maharashtra. The Reckoner divides the immovable property into various categories such as developed land, undeveloped land, residential units, industrial units/office, shops, etc., and fixes their market value accordingly. 4.9 Any person can apply to the Collector of Stamps for adjudication of the stamp duty payable on the instrument who shall determine the duty, if any, with which the instrument shall be chargeable. It may be noted that now adjudication is compulsory in all cases where an instrument requires registration as the Registrar of SubAssurance insists upon the same. The instrument should be brought to the Collector within 1 month of execution of such instrument in the State and within 3 months from date of receipt of such instrument in the State. When Registrar or subregistrar Assurance determine proper value, there is no need for adjudication. 5. Under stamped Document 5.1 Under S. 34 of the Act, any instrument which is inadequately/not stamped, then it shall be inadmissible in evidence for any purpose, e.g., in a Civil Court. Such instruments can be admissible in evidence on payment of the requisite amount of duty and a penalty @ 2% per month on the deficient amount of duty calculated from the date of execution. However, the maximum penalty cannot exceed four times the amount of duty involved. 5.2 Further, any public officer can impound such improperly stamped instruments if it comes to his notice. Such impounded instruments must be sent to the Collector who would then determine the amount of duty and penalty, if any, payable on the same. Any party to an instrument can also suo moto submit an instrument for adjudication by the Collector u/s. 31. There is separate set of procedure for a jurisdiction. 5.3 A person can be punished with rigorous imprisonment for up to 6 months (not less than 1 month) and with fine up to ` 5,000, if it is proved that the instrument was undervalued or short payment of duty was made with an intention to evade duty.

Maharashtra Stamp Act, 1958 5.61 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication SCHEDULE I RATES (IMPORTANT ARTICLES) MAHARASHTRA [As updated by Maharashtra Stamp (Second Amendment) Act, 2017] Article Description of Instrument Stamp Duty 4 Affidavit (Exemption: for use in the Court or Tribunal), as a condition of enrolments under the Air Force Act 1950 or Navy Act 1957 ` 100 5 Agreement (c) (e) (g-a)(i) (g-a)(ii) Relating to purchase/sale of shares & securities Relating to purchase or sale of bullion/species Development Rights Agreement Relating to purchase of units in any scheme by an investor from a developer – when the investor sells the unit a set-off of the duty paid would be allowed against duty on Conveyance under Article 25 0.005% of the value of security 0.005% of the value of gold / silver Same as in the case of a Conveyance as on the market value Same as in the case of a Conveyance as on the market value (g-d) Relating to transfer of tenancy rights in: For non-residential use of any size; or For residential use with an area more than 300 sq. feet 5% of the market value of the property depending upon the location of the property For residential use with an area up to 300 sq. feet ` 200 per sq. meter (g-e) Relating to hire purchase Same duty as on a Lease (Article 36) (h) (i) Relating to certain advertising contracts 0.25% if the amount agreed is up to ` 10 lakh and 0.5% if the amount exceeds ` 10 lakh NIL (ii) Relating to contracts for exclusive broadcasting / exhibition rights of a film (iii) Relating to specific performance by a person where contract < ` 100,000 (iv) a) Amount does not exceed ` 100,000 b) In other cases 0.25% minimum ` 100 0.5% if the amount exceeds ` 1 lakh ((A)(iv) Stamp duty on Guarantee Agreement in Maharashtra If the loan amount is less than Rupees Ten Lakh – 0.1% of the amount stipulated in the contract, with a minimum of rupees 100. If the amount exceeds Rupees Ten Lakh – 0.2% of the amount agreed in the contract. (v) Relating to assignment of Copyrights 0.25% of amount agreed up to ` 10 lakh other case 0.2% of amount agreed (vi) Relating to creation of any obligation, right or interest and having monetary value 0.10% if the amount agree is up to ` 10 lakh and 0.20% if the amount exceeds ` 10 lakh

Allied Laws 5.62 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Article Description of Instrument Stamp Duty General (not otherwise provided for) ` 100 6 Agreement for Deposit of Title Deeds, Pawn, Pledge or Hypothecation Deposit of title deeds securing amount of loan or for pawn, pledge or hypothecation securing amount of loan ` 1 for every ` 1,000 (approx. 0.1%) or part thereof of the amount secured by the deed if the amount secured is up to ` 5,00,000 and ` 2 for every ` 1,000 (approx 0.2%) in all other cases. The maximum duty is ` 20 lakh (1)(b) Agreements evidencing deposit of title deeds to secure repayment of debt exceeding INR 5 lakh. 0.3% of the amount secured by such deed subject to a maximum of INR 20 lakh. (2)(b) Agreements evidencing pawn, pledge, or hypothecation of movable property to secure repayment of debt exceeding INR 5 lakh. 0.3% of the amount secured by such deed subject to a maximum of INR 50 lakh. 3 Instrument falling under this article when executed as a collateral or auxiliary or additional security and where the proper duty has been paid on the principal or primary security under this article. INR 500 10 Articles of Association of a Company On the share capital, thereof subject to a nominal capital or increased share capital (Exemption S. 8 companies) 0.2% subject to a maximum of ` 50,00,000 12 Award by an Arbitrator or Umpire (not being an Award directing a Partition) ` 500 15 Cancellation (Exemption: Revocation of will) ` 500 17 Certificate or Other Document (Shares, Scrip, Stock, etc. on face value and premium) ` 1 for every ` 1,000 or part thereof (approx. 0.1%) 24 Composition Deed ` 500 25(a) Conveyance (on the true market value) Movable Property ` 15 for every ` 500 or part thereof (approx. 3%) (b) (A) Immovable Property - Reduced Rate by 1% for woman property owner Duty on every ` 500 of Market Value Within the Municipal limits of any urban area 5% of market value of property Within the limits of any Municipal Council / Panchayat /Cantonment of any area within MMRDA 4% of market value of property Within the limits of any Gram Panchayat 3% of market value of property

Maharashtra Stamp Act, 1958 5.63 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Article Description of Instrument Stamp Duty (c) High Court order u/s. 232 of the Companies Act, in respect of amalgamation or reconstruction of companies 10% of market value of shares allotted in exchange and consideration if any paid but not exceeding the higher of: i) 5% of market value of the immovable property located in Maharashtra or the transferor company, or ii) 0.7% of market value of shares allotted in exchange and consideration if any paid whichever is higher. Special Points for Conveyance: 1. An agreement for sale providing for transfer of possession shall be deemed to be a ‘Conveyance’ and will be stamped accordingly. However, a set off of the duty paid will be given at the time of execution of the conveyance in favour of owner/society. 2. Assignment of copyrights is exempt from stamp duty. 3. In case of amalgamation/reconstruction of companies, the market value of the shares of transferee company is the value of shares on stock exchange on the “appointed day” mentioned in the scheme or else the date of the court’s order. If the shares are not listed or not quoted, the market value means the value of shares to the transferor company or the value as determined by the Collector. Amendment as modified up to 5th December, 2018 Notwithstanding anything contained in any judgment, decree or order of any court validation to the contrary or in the principal Act, stamp duty assessed, levied and collected, including any action taken in pursuance of such assessment, levy and collection by the authorities under the said Act, acting or purporting to act under the provisions of article 25 in the Schedule I to the principal Act shall be deemed to have been validly levied and collected in accordance with law as if the provisions of the said article 25, as amended by the Maharashtra Stamp (Amendment and Validation) Act, 2017 (hereinafter in this section referred to as “ the Amendment Act ”) had been continuously in force at all material time and accordingly,— (a) all actions, proceedings or things done or taken by the authorities under the principal Act in connection with the levy and collection of the stamp duty shall for all purposes, be deemed to have been done or taken in accordance with the provisions of the said Act; (b) no suit or other proceedings shall be maintainable or continued in any court, against the said authorities for the refund of the stamp duty so levied and collected; (c) no court or any other authority shall enforce any decree or order directing the refund of the stamp duty so levied or collected.

Allied Laws 5.64 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Article Description of Instrument Stamp Duty (2) For the removal of doubt, it is hereby declared that nothing in sub-section (1) shall be construed as preventing a person,— (a) from questioning in accordance with the provisions of the principal Act as amended by the Amendment Act, any assessment, reassessment, levy or collection of stamp duty referred to in sub-section (1), or (b) from claiming refund of any stamp duty paid by him under the principal Act, in excess of the amount due from him by way of stamp duty under the principal Act, as amended by the Amendment Act. 26 Copy of exchange ` 10 27 Counterpart/Duplicate Maximum ` 100 28 Customs / Excise Bond in respect of duties payable/ pursuant to Order of any Excise/Customs Officer ` 500 30 Divorce ` 100 32 Exchange Same duty as on conveyance but on the market value of that property which has the greater value 34 Gift (other than a settlement, will or transfer) Same duty as on conveyance. In case of a gift to spouse, brother, sister, lineal ascendants or descendants @ 3% of market value Gift of residential/agricultural property to spouse, children or grand-children or wife of deceased son ` 200 35 Indemnity Bond ` 500 36 Lease including sub-lease: a) Where lease period is i) Up to 5 years ii) 5 years to 10 years with a renewal clause iii) 10 years to 29 years with a renewal clause iv) Exceeding 29 years or for indefinite period or for perpetuity Same Duty as on conveyance on the following values: i) 10% of market value ii) 25% of market value iii) 50% of market value iv) 90% of market value Special Points for Lease: 1. Consideration such as premium, security deposit, advance, will, for market value, be treated as consideration passed on. If renewal period is specifically mentioned, it will be treated as part of current lease. 2. An agreement for lease will not be treated as lease if there is no immediate demise – Atur India P Ltd., (1994) 2 SCC 497

Maharashtra Stamp Act, 1958 5.65 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Article Description of Instrument Stamp Duty 36A Leave & Licence For a term not exceeding 60 months with or without a renewal clause 0.25% of the total sum of following: • License fees/Rent • Non-refundable deposit or premium; plus • Interest @ 10% p.a. on the refundable security deposit or money advanced/to be advanced 37 Letter of Allotment of Shares ` 1 39 Memorandum of Association of a Company (Exemption u/s. 8 companies) a) if accompanied with Articles of Association b) if not so accompanied ` 1,000 Same duty as on Articles of Association under Article 10 ` 1,000 2% subject to maximum of ` 50,00,000 40 Mortgage Deed a) Where possession is given Same duty as on conveyance on the amount secured by the deed b) Where possession is not given agreed to be given by the mortgager. (i) if the amount secured by such deed does not exceed INR 5 lakh – 0.1% of the amount secured by such deed, subject to a minimum of INR 100; and (ii) in any other cases, 0.3% of the amount secured by such deed, subject to a maximum of INR 20 lakh. 42 Notary (attestation, etc., by Notary Public) ` 25 46 Partition Special Points : 1. The value of largest share remaining after the partition will be excluded for duty on equal share than duty is any one of share 2. In case of order of partition by a Civil Court rebate will be given to the extent of the Court Fees paid 3. ` 100 in case of agricultural land ` 10 for every ` 500 or part thereof (approx. 2%) of the market value of the separated share or shares of property. 47 Partnership including an LLP, Joint Venture to run a business, earn profits and to share profits, whether in cash or in kind (a) No contribution or cash contribution < ` 50,000 ` 500

Allied Laws 5.66 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Article Description of Instrument Stamp Duty (b) Cash Contribution > ` 50,000 1% subject to a maximum of ` 15,000 (c) Contribution by way of property (not cash) Same as on a conveyance on the market value of property (d) Dissolution or Retirement i) Where any property is transferred to a partner other than the one who brought it ii) In any other case Same as on a conveyance on the market value subject to a minimum of ` 100 ` 500 (w.e.f. 24-4-2015) 48 Power of Attorney a. For sole purpose of registration b. For suits in small causes court c. For acting in a single transaction to one or more person [other than stated in 48(4)] d. For acting in more than one transaction or generally to one person e. For acting in one or more transactions or generally to one or more persons f. (i) For or without consideration and authorising to sell an immovable property (ii) For authorising to sell immovable property without consideration and given to parents, siblings, spouse, children, grand children, fatherin-law, mother-in-law and siblings of the spouse g. For construction, development, sale etc. to a developer or promoter h. In any other case ` 500 ` 500 ` 500 ` 500 ` 500 Same as on a conveyance on the market value ` 500 See special points below: ` 500 ` 500 Special Points: 1. In case of (f), set off of duty paid will be given on execution of the conveyance 2. Duty payable under (g) will be ` 500 only if duty is already paid under Article 5(g-a) on Development Rights’ Agreement 52 Release whereby a person renounces a claim upon other person or property If the release is of an ancestral property in favour of certain specified relatives without any consideration Every other Case ` 200 Same duty as on a conveyance as on the market value of the share, interest or part renounced

Maharashtra Stamp Act, 1958 5.67 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Article Description of Instrument Stamp Duty 54 Security Bond or mortgage deed ‘0.1% of the amount of secured by such deed, subject to the minimum of INR 100, if the amount secured by such deed does not exceed INR 5 lakhs 0.3% of the amount secured by such deed, subject to cap of INR 20 lakhs, where the amount secured exceeds INR 5 lakhs’. 58 Surrender of Lease i) Without consideration ii) With consideration ` 200 Same duty as on a Conveyance on amount of consideration 59 Transfer of marketable debentures Re. 0.50 for every ` 100 (approx. 0.05%) of the consideration amount of debentures 60 Transfer of lease by way of assignment (See article 36) Same duty as leviable on a lease deed for the balance tenure of the lease. 61 Trust a) Where there is disposition of property i) For charitable or religious purpose 2% of the sum settled or market value of the property ii) In any other case where there is disposition of property Same as on a conveyance on the amount settled or market value of the property b) Where there is no disposition of property In any other case ` 500 (Same duty as bond (Article 13)) 63 Works Contract for material and labour involving a transfer of property in goods Where the contract value does not exceed ` 10 lakh ` 500 Where the contract value exceeds ` 10 lakh ` 500 + 0.5% of the contract value above ` 10 lakh. The maximum duty is ` 25 lakh SOME IMPORTANT INSTRUMENTS UNDER INDIAN STAMP ACT 62 Transfer of shares in incorporated company or other body corporate 25 paise for every ` 100 or part thereof (approx. 0.25%) of value of shares 14 Bill of lading ` 1 15 Receipt Value or amount which exceeds ` 5,000 with payment for collection ` 1

Allied Laws 5.68 6 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication AD VALOREM COURT FEES PAYABLE UNDER THE BOMBAY COURT FEES ACT, 1959 [As amended by Maharashtra Court-fees (Amendment) Act, 2017] (Wherever Applicable) Amount or Value of Subject Matter (All slabs are not given) Court Fees ` 10,000 ` 1,505 ` 25,000 ` 3,530 ` 50,000 ` 5,130 ` 75,000 ` 6,130 ` 1,00,000 ` 7,330 Over ` 1,00,000 and up to ` 10,00,000 ` 7,330 + ` 400 for every ` 10,000 or part thereof (approx. 4%) ` 10,00,000 ` 42,930 Over ` 10,00,000 and up to ` 25,00,000 ` 42,930 + ` 4,500 for every ` 1,00,000 or part thereof (approx. 4.5%) ` 25,00,000 ` 1,10,430 Over ` 25,00,000 ` 1,10,430 + ` 5,000 for every ` 1,00,000 or part thereof (approx. 5%) up to a maximum of ` 10,00,000 (maximum fees) Stamp Duty Rates in Maharashtra There are various factors that decide the stamp rate duty on property in the state of Maharashtra (or any state). Naming a few of these factors – the locality of the property – urban or rural, the total cost of the transaction, etc. The Maharashtra stamp duty Act 2020, reduced the stamp duty on properties for the next two years. This is only applicable in the areas falling under the Mumbai Metropolitan Region Development Authority (MMRDA) and municipal corporations of Pune, Pimpri-Chinchwad, and Nagpur This means that stamp duty on properties in Mumbai, Pune, and Nagpur, was charged at 5% (4% stamp duty + 1% metro cess) Cities Stamp duty rates (w.e.f April 1, 2022) Stamp duty rates (w.e.f. April 1, 2021) Mumbai 6% (includes 1% metro cess) 5% (includes 1% metro cess) Pune, Thane Navi Mumbai, PimpriChinchwad, Nagpur 6% (includes 1% metro cess) 6% (includes transport surcharge and local body tax) 2

The Maharashtra E-Payment of Stamp Duty and Refund Rules, 2013 6.69 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Notification No. Mudrank-20.12/30/C.R. 18/M-1, dated 24th July, 2013 In exercise of the powers conferred by subclause (g) of clause (2) and proviso to clause (3) of section 69 of the Maharashtra Stamp Act (LX of 1958), the Government of Maharashtra being satisfied that, circumstances exist to take immediate action and to dispense with the condition of previous publication of these rules, hereby prescribes following rules for payment of stamp duty and refund thereof, by e-payment: 1. Definitions (I) In these rules, unless the context otherwise requires, - a) “Act” means The Maharashtra Stamps Act. (LX of 1958); b) “Additional Controller of Stamps” means and includes the officer in charge of the General Stamp Office, Mumbai and any other officer who has been assigned the work of officer in charge of the General Stamp Office, Mumbai. c) e-SBTR means an electronicSecured Bank and Treasury Receipt (e-SBTR), issued by the Officer of the authorized participating bank, on special Government stationery, on payment of Stamp- Duty in Virtual Treasury; d) “Receipt of e Payment” means an e challan consisting of ‘Government Reference Number (GRN)’ and ‘Challan. Indentification Number (CIN)’, disclosing payment of stamp duty in Virtual Treasury, in the name of one of the parties to the instrument in the forms specified in this behalf; e) “Virtual Treasury” means the Government Treasury, as defined The Maharashtra E-Payment of Stamp Duty and Refund Rules, 2013 in clause (n) of rule 2 of the respectively assigned to the in the said Act. 2. Online payment of stamp duty, registration fees and other charges The stamp duty required to be paid under the Registration Act, 1908 and other charges may be paid online into the Virtual Treasury through Government Revenue and Accounting System (GRAS). 3. Mode of obtaining and using Simple Receipt a. Stamp duty payer may obtain a Simple receipt by paying the required Stamp Duty or registration fees and other charges to the Virtual Treasury through the authorised participating bank, either online or at the participating bank counter. b. A simple receipt obtained as above shall only be used in respect of the instruments which are to be compulsorily registered under the Registration Act, 1908. c. A simple receipt containing the “Challan Identification Number (CIN)” issued by the authorised participating bank, the “Government Reference Number (GRN)” issued by the Government Virtual Treasury and the reconciled data regarding the amount paid relating to it together shall be treated as sole proof of payment of Stamp Duty or Registration Fee and other charges. Explanation — No receipt of e-payment shall be treated as a valid proof of payment, unless the details of instrument for which it applies, tally overall with the details provided by the payer while making payment. d. The date of generation of the “Challan Identification Number (CIN)” or the date of generation of the “Government Reference Number (GRN)” whichever is later, shall be treated as the date of purchase of stamps,

Allied Laws 6.70 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication for the purpose of these rules and for all other purposes referred to in the Act. e. The simple receipt generated by the stamp duty payer shall, be signed by himself in token of its authentication. Similarly, the simple receipt generated by the authorised, participating bank shall be signed by the officer or officers of the banks as provided in these rules. f. The holder of the simple receipt mentioned in clause (e) shall get it defaced from the Registering Officer with whom the instrument is to be registered or from the Collector if related with the payment of stamp duty in accordance with relevant sections of the said Act, within six months from the date of purchase of stamps. g. No simple receipt shall be treated as valid unless it is defaced by the registering officer or any other officer authorised to do so within a period of six months from the date of purchase of stamps. h. The Registering Officer or the Collector as the case may be, on receiving the simple receipt shall deface it and attach the defacement e-challan duly signed by him, to the instrument: Provided that, as and when the defacement of the simple receipt is done automatically by the Stamp and Registration Information Technology Administration (SARITA) system, an endorsement of defacement would be sufficient. i. The simple receipt as far as possible should be printed on the first page of the instrument and if it is not possible to print on the first page then it should be affixed on the first page of the instrument. In case of multiple receipts, either they may be printed serially date-wise on the front pages or similarly affixed on the top of the instrument, the defaced e-challan shall be affixed on the backside of the page where the simple receipt has been affixed or printed as the case may be : Provided that, if there is no space to affix the defaced e-challan as provided above, then in that case, it should be annexed at the end of the instrument. j. The simple receipt and the defaced e-challan or endorsement of defacement shall always be treated as the part of instrument and in absence of it, the instrument shall not be treated as duly stamped 4. e-SBTR (Electronic Secure Bank and Treasury Receipt) issued by the authorised participating bank, can be used as a impressed stamp under the said Act, for instruments which are compulsory or optional to be registered under the Registration Act, 1908. Along with Stamp Duty, Registration Fee and other charges may also be paid. However no e-SBTR shall be used when there is no payment of stamp duty. 5. Mode of obtaining and using e-SBTR a. Anyone requiring an e-SBTR, may directly through the authorised participating bank online facility or through the authorised participating bank counter pay the stamp duty to the Government Virtual Treasury. b. On payment of stamp duty as provided in clause (a), the e-SBTR for the actual amount paid shall be issued by the authorised participating bank through which the payment has been made, to the Virtual Treasury. c. It shall be the responsibility of the stamp duty payer to collect and use the e-SBTR from the bank at the earliest and in any case, within the period of six months from the date of payment made in the Virtual Treasury. d. An e-SBTR obtained on payment of Stamp Duty, Registration Fee and other charges online containing the “Challan Identification Number (CIN)” issued by the authorised participating bank, the “Government Reference Number (GRN)” issued by the Virtual Treasury and the reconciled data regarding the amount paid relating to that “Government Reference Number (GRN)” kept

The Maharashtra E-Payment of Stamp Duty and Refund Rules, 2013 6.71 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication by Virtual Treasury together shall be treated as sole proof of payment of Stamp Duty, Registration Fee and other charges. Explanation.— No receipt of e-payment shall be treated as a valid proof of payment towards Stamp Duty Registration Fee and other charges unless the details of the instrument for which it applies, tally overall with the details provided by the payer while making payment. e. Any delay by the stamp duty payer in collection of the e-SBTR shall not be considered for extending the period for its use or otherwise. f. Only the authorised participating bank shall issue e-SBTR. g. The procedure for the authorised participating bank receiving amount from the payer generating “Challan Identification Number (CIN)” getting “Government Reference Number (GRN)” from GRAS and crediting the amount to the account of Virtual Treasury will be decided by Virtual Treasury. h. On having the “Challan Identification Number (CIN)” and the “Government Reference Number (GRN)”, the authorised participating bank shall issue a e-SBTR on the Government pre-printed secure stationery to the stamp duty payer, which shall consist of the details of Stamp Duty, registration fees and other charges if any and also the “Challan Identification Number (CIN)”, and the “Government Reference Number (GRN)”. i. The date of generation of the “Challan Identification Number (CIN)” or the date of generation of the Government Reference Number (GRN) printed on e-SBTR, whichever is later, shall be treated as the date of purchase of stamps, for the purpose of these rules and for all other purposes referred to in the Act. j. The e-SBTR shall always be attached on the top of the instrument, for which the stamp duty is being paid. k. The e-SBTR shall have the status of impressed stamp and all the prevalent provisions of the Act and the rules framed thereunder, for the use of impressed stamps shall be applicable to e-SBTR also. l. The Registering Officer or, as the case may be the Collector on coming across the instrument where the stamp duty has been paid by means of e-SBTR while performing his duties, shall deface the e-SBTR and if possible, the defacement voucher shall be affixed on the backside of the e-SBTR: Provided that if there is no space to affix the defacement voucher as provided above, then in that case defacement voucher can be annexed at the end of the instruments: Provided further that as and when the defacement voucher of e-SBTR is done automatically by the Stamp and Registration Information Technology Administration (SARITA) system an endorsement of defacement would be sufficient. 6. Refund a. The procedure for refund of stamp duty to be adopted by the Collector against Simple receipt or e-SBTR shall be the same as applicable in case of the impressed stamp under the Act. b. The procedure for preparing refund bill shall be as specified by the Finance Department and Directorate of Treasury, from time-to-time. c. The deductions to be made for granting the refund under clause (a) shall be, one per cent of the value of stamp refunded with the minimum of rupees two hundred and maximum of rupees one thousand: Provided that, there shall be no deduction on refund of wrong or excess amount credited to the Government by the authorised participating banker if so certified by Virtual Treasury Office. 2

Allied Laws 6.72 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication (1) Introduction In exercise of the powers conferred by clause (k) of section 69(1) of the Registration Act, 1908 (16 of 1908) (‘the Act’), the Inspector General of Registration, Maharashtra State, with prior approval of the Government of Maharashtra notified The Maharashtra e-Registration and e-Filing Rules, 2013 (‘rules’) vide notification no. Desk 4/C, R. No. 2698/2013 dated 28-3-2013. The rules came into force from April 1, 2013. (2) Rules under e-Filing Rules, 2013 • On completion of the data entry, the document so created will be displayed on the screen. The parties if required may edit the document at the stage of submission. No editing shall be possible after submission. • The registration process will not proceed unless all mandatory information is filled in while registering the specific document. • The online submission can be made 24 x 7 hours, but the time for registration shall be office working hours. • A document may be completed and submitted within 30 days from the next day of first data entry made, if not submitted within 30 days, then fresh data entry must be made. Stamp duty, registration fees and any other charges if already paid, shall be adjusted up to six months from the date of payment. • Every party shall be responsible for crossverification of the identity of the other parties. It shall be always presumed that, the parties appending the signatures are known to each other and have themselves confirmed that, each party has valid authority and right to sign the document. For the purpose of these Rules, it shall always be construed that, appending signature to document shall mean executing, accepting and admitting the document. • For online registration, stamp duty and registration fees shall be paid online to Government of Maharashtra through Government Receipt Accounting System (GRAS) (Virtual Treasury) by electronic transfer of funds or any other mode of payment prescribed by the Government. • While accepting the document for registration the joint Sub-Registrar shall ascertain that, — — The document fulfils the conditions, specified under the Act, Rules and orders framed thereunder; — The stamp duty and registration fees and other charges are duly paid; — The registration of the document is not prohibited by any existing law, order of the Court or order of any Competent Authority. • If on scrutiny of document it is found that, there is no prima facie objection for registration of the document, it shall be registered and made available online for downloading. It may also be forwarded to the e-mail address provided by the parties. If anything, objectionable is found, the objection will be conveyed on the e-mail address provided by the parties, within the next working day after submission. The parties will then have to comply with the objection raised. If the compliance is satisfactory, the document will be registered and conveyed to the parties as provided in the above rules. However, if the parties fail to make a satisfactory compliance within 30 days of raising objection (excluding day on which objection is raised), the e-registration shall be rejected. • For the purpose of e-Filing & e-Registration under these Rules, — The Maharashtra e-Registration and e-Filing Rules, 2013

The Maharashtra e-Registration and e-Filing Rules, 2013 6.73 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication — Appending of electronic signature or biometric thumb print and capture of digital photo through the software module, shall be mandatory for the person filing the notice; — PAN Card Number and Unique Identification Number (Aadhaar) or any other identification or document number regarding each executing party shall be mandatory to prove his identity; — The parties may submit their e-mail IDs and mobile numbers for correspondence and notifications. • The person who has filed the notice under section 89-B online shall be solely responsible to prove the correctness of the contents of the notice. • Any stamp duty or filing fees, if any, shall be paid online only. • The record copies if required shall be available online and may be supplied on request and payment of fees online. • Request for e-search or record copies of e-registration or e-filing shall be made online through the website of the Stamps and Registration Department. The necessary fees required to be paid shall be paid online through the Government Receipt Accounting System (GRAS) (Virtual Treasury) or any other mode of payment prescribed by the Government in this behalf. The search and the copies will be made available online only. • The Sub-Registrar at the end of the day shall create an abstract of the documents registered; the Government receipts and put his electronic signature on it, in token of acknowledgement of the same. • Discrepancies, if any, regarding payment of fees, stamp duty or other charges shall always be subject to recovery by the appropriate authority. • All the provisions of the Act, and of the Maharashtra Stamp Act shall apply to the documents registered under these Rules also. • The Stamp Duty or Registration fees for e-registration or e-filing shall be the same as provided under the Maharashtra Stamp Act and the fee table prescribed under section 78 of the Act, respectively. 2

Allied Laws 6.74 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication V. The Micro, Small and Medium Enterprises Development Act, 2006 1. Purpose of this Act Promotion and development and enhancing the competitiveness of micro, small and medium enterprises and for matters connected therewith or incidental thereto. 2. Effective date 2 October 2006, vide notification No. S.O. 1154(E) dated 18th July 2006 3. Definition of MSME [S.7] e n t e r p r i s e s engaged in manufacture or production of goods pertaining to any industry specified in the First Schedule to IDRA 1951 providing or rendering of services having investment in plant and machinery [excl. cost of pollution control, research and development, industrial safety devices] MSME Classification Criteria Micro Small Medium Investment in Plant & Machinery / Equipments (as applicable) < ` 1 crore < ` 10 crore < ` 50 crore & Annual Turnover < ` 5 crore < ` 50 crore < ` 250 crore and has filed a memorandum u/s 8 of MSME Act (and obtained registration certificate as such). 4. MSME UDYAM Registration MSME Registration Portal: https://udyamregistration.gov.in/ • Any person who intends to establish a micro, small or medium enterprise may file Udyam Registration online in the Udyam Registration portal, based on self-declaration with no requirement to upload documents, papers, certificates or proof. • On registration, an enterprise (referred to as “Udyam” in the Udyam Registration portal) will be assigned a permanent identity number to be known as “‘Udyam Registration Number”. • An e-certificate, namely, “Udyam Registration Certificate” shall be issued on completion of the registration process. • Udyam Registration is optional and at the discretion of the entrepreneur. It is advisable for every business to obtain MSME registration immediately after incorporation to avail the benefits under the MSMWED Act. • Udyam registration process is fully online, paperless and based on self-declaration. No fees are required to be paid for filing Udyam Registration.

The Micro, Small and Medium Enterprises Development Act, 2006 6.75 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • Aadhaar number shall be required for Udyam Registration. The Aadhaar number shall be of the proprietor in the case of a proprietorship firm, of the managing partner in the case of a partnership firm and of a karta in the case of a Hindu Undivided Family (HUF). • In case of a Company or a Limited Liability Partnership or a Cooperative Society or a Society or a Trust, the organisation or its authorised signatory shall provide its GSTIN and PAN along with its Aadhaar number • PAN and GST linked details on investment and turnover of enterprises will be taken automatically by the Udyam Registration portal from Government databases as the Udyam Registration Portal is fully integrated with Income Tax and GSTIN systems. • An e-certificate, namely, Udyam Registration Certificate (‘URC’) shall be issued on completion of the registration process. There will be no need for renewal of registration. • In case an enterprise is duly registered as an Udyam with PAN, any deficiency of information for previous years when it did not have PAN shall be filled up on self-declaration basis • No enterprise shall file more than one Udyam Registration: Provided that any number of activities including manufacturing or service or both may be specified or added in one Udyam Registration • Whoever intentionally misrepresents or attempts to suppress the selfdeclared facts and figures appearing in the Udyam Registration or updation process shall be liable to such penalty as specified under section 27 of the Act. • Those who have Entrepreneurs Memorandum-II or Udyog Aadhaar Memorandum registration or any other registration issued earlier by any authority under the Ministry of MSME, will have to re-register themselves in the Portal. • An enterprise having Udyam Registration Number shall update its information online in the Udyam Registration portal, including the details of the ITR and the GST Return for the previous financial year and such other additional information as may be required, on selfdeclaration basis. 5. Day of acceptance/ deemed date of acceptance (of delivery of goods / services) The Day of the actual delivery of goods / the rendering of services • If any objection is made in writing by the buyer regarding acceptance of goods / services within 15 days from the day of the delivery of goods / the rendering of services the day on which such objection is removed by the (MSME) supplier

Allied Laws 6.76 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 6. Payment protection to MSME supplier [S. 15] Credit period agreed upon in writing Credit period NOT agreed upon in writing Pay on or before the date agreed in writing CANNOT > 45 days from the day of ACCEPTANCE / DEEMED ACCEPTANCE of goods / services Pay within 15 days from the day of ACCEPTANCE / DEEMED ACCEPTANCE of goods / services 7. Amendments which were passed in the Finance Bill, 2023 • Following clause (h) shall be inserted after clause (g) of section 43B by the Finance Act, 2023, w.e.f. 1-4-2024: (h) any sum payable by the assessee to a micro or small enterprise beyond the time limit specified in section 15 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006), shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him. 8. Consequences of failure to make the payment within the prescribed period [S. 16] pay compound interest with monthly rests at 3 times of the bank rate notified by RBI 9. Requirement to specify unpaid amount with interest in the annual statement of accounts [S. 22] – Where buyer is required to get its annual accounts audited under any law for the time being in force furnish additional information in his annual statement of accounts principal amount and the interest due thereon (to be shown separately) remaining unpaid as at the end of each accounting year; amount of interest paid by the buyer u/s 16 of MSME Act, along with the amount of the payment made to the supplier beyond the appointed day during each accounting year amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under MSME Act amount of interest accrued and remaining unpaid at the end of each accounting year; amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure u/s 23

The Micro, Small and Medium Enterprises Development Act, 2006 6.77 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 10. Interest not to be allowed as deduction from income [S. 23] – Notwithstanding anything contained in the Income-tax Act 1961, interest payable or paid by any buyer under MSME Act shall not be allowed as deduction for the purposes of computation of income under Income-tax Act 1961. 11. Overriding effect [S. 24] – Provisions of Ss. 15 to 23 of MSME Act shall have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force 12. Requirement to report to MCA [Direction of MSME ministry dtd 2-Nov-18] All companies:- – availing goods / services from Micro and / or Small enterprises – payment thereof exceed 45 days from the date of acceptance of goods or services, as the case may be to submit half yearly return to MCA (in the prescribed eform) stating the amounts due and the reasons for delay Type of Return Due date of filing ½ yearly for the period: Apr – Sep Oct – Mar 31-Oct 30-Apr 13. Frequently Asked Questions (FAQ’s) – Eligibility & Registration I. Eligibility 1. What should be the date on which the value of Plant & Machinery be calculated for determining classification? The value of Plant & Machinery should be determined at the time of obtaining the registration under Udyam. Any subsequent changes in the value of Plant & Machinery needs to be reviewed on annual basis and the classification changed accordingly. The value shall be the WDV of the assets as at the end of financial year. 2. Are there any exclusions to the investments in Plant & Machinery? The following are excluded while calculating the investment in Plant and Machinery: a) equipments such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores; b) installation expenditure for Plant and Machinery; c) research and development equipment and pollution control equipment d) power generation set and extra transformer installed by the enterprise as per the regulations of the State Electricity Board; e) bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation.

Allied Laws 6.78 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication f) Procurement or installation of cables, wiring, bus bars, electrical control panels (not mounted on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the Plant and Machinery or for safety measures. g) gas producer plants; h) transportation charges (excluding sales-tax or value added tax and excise duty) for indigenous machinery from the place of their manufacture to the site of the enterprise. i) charges paid for technical know-how for erection of Plant and Machinery j) such storage tanks which store raw materials and finished products only and are not linked with the manufacturing process, and k) fire fighting equipment. 3. Whether there are any exclusions to the value of turnover for purpose of classification? Exports of goods or services or both, shall be excluded while calculating the turnover of any enterprise whether micro, small or medium, for the purposes of classification. 4. Whether any evidence / proofs are to be provided for determining the ceiling limits? The calculation of investment in plant and machinery or equipment will be linked to the Income Tax Return (ITR) of the previous years filed under the Income Tax Act, 1961. In case of a new enterprise, where no prior ITR is available, the investment will be based on self-declaration of the promoter of the enterprise and such relaxation shall end after the 31st March of the financial year in which it files its first ITR. Information as regards turnover and exports turnover for an enterprise shall be linked to the Income Tax Act or the Central Goods and Services Act (CGST Act) and the GSTIN. The turnover related figures of such enterprise which do not have PAN will be considered on self-declaration basis for a period up to 31st March, 2021 and thereafter, PAN and GSTIN shall be mandatory. 5. What are the implications if an entity crosses the ceiling limits of investment in Plant & Machinery or turnover? If an enterprise crosses the ceiling limits specified for its present category in either of the two criteria of investment or turnover, it will cease to exist in that category and be placed in the next higher category but no enterprise shall be placed in the lower category unless it goes below the ceiling limits specified for its present category in both the criteria of investment as well as turnover.

The Micro, Small and Medium Enterprises Development Act, 2006 6.79 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 6. Whether separate GSTIN’s of a single entity (under same PAN) to be treated separately for determining the ceiling limits of MSME? All units with Goods and Services Tax Identification Number (GSTIN) listed against the same Permanent Account Number (PAN) shall be collectively treated as one enterprise and the turnover and investment figures for all of such entities shall be seen together and only the aggregate values will be considered for deciding the category as micro, small or medium enterprise. 7. Are pure trading entities allowed to be registered under Udyam Registration Trading entities are entitled for Udyam registration but benefits to retail and wholesale trade MSMEs are to be restricted to priority sector lending only. 8. Can professionals like Chartered Accountants, Lawyers and Company Secretaries register as MSME? Professionals like CA’s, Lawyers & CS’s can register as MSME as per the eligibility criteria applicable to service entities. II Registration 1. What are the information required to be entered while filing the Udyam Registration • Aadhar card of partner/director/proprietor along with registered mobile number • PAN of company/firm/individual • Enterprise Name • Detailed Address of Enterprise • Date of incorporation /registration of enterprise • Date of commencement of production/business • Bank details of company/firm/individual along with IFSC code • Number of employees (Male & Female separately) • Investment in Plant & Machinery (For Manufacturer) or in Equipment (For Service Provider) in Rs. lacs • Mobile number & email id of company/firm/Individual (i.e. contact details of company) • Nature of manufacturing/services provided (all the activities of company/firm/Individual) • GST Registration Number of Enterprise

Allied Laws 6.80 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 2. Whether PAN and GSTIN are compulsorily required to be linked with the Udyam Registration? PAN and GSTIN are mandatory for Udyam Registration from 01.04.2021. PAN & GSTIN (As per applicability of CGST Act 2017) is required w.e.f. 1-4-2021 3. In case of changes in the value of Plant & Machinery or Turnover impacting the classification of MSME what shall be the transition period (date from which the change will take effect)? • Based on the information furnished or gathered from Government’s sources including ITR or GST return, the classification of the enterprise will be updated. • In case of graduation (from a lower to a higher category) or reversegraduation (sliding down to lower category) of an enterprise, a communication will be sent to the enterprise about the change in the status. • In case of an upward change in terms of investment in plant and machinery or equipment or turnover or both, and consequent reclassification, an enterprise will maintain its prevailing status till expiry of one year from the close of the year of registration. • In case of reverse-graduation of an enterprise, whether as a result of re-classification or due to actual changes in investment in plant and machinery or equipment or turnover or both, and whether the enterprise is registered under the Act or not, the enterprise will continue in its present category till the closure of the financial year and it will be given the benefit of the changed status only with effect from 1st April of the financial year following the year in which such change took place. 14. IMPORTANT SCHEMES FOR MSME A brief summary of various schemes announced by the Ministry of Micro, Small and Medium Enterprises as listed on the website www.msme.gov.in. SCHEME NAME AND THEIR KEY BENEFITS 1 Prime Ministers Employment Generation Programme and Credit Support Scheme 1.1 Prime Minister Employment Generation Programme (PMEGP) • Bank-financed subsidy program for setting up new microenterprises in non-farm sector. • Margin Money subsidy on Bank Loan ranges from 15% to 35% for projects up to INR 25 Lakh in manufacturing and INR 10 Lakh in the service sector. • For beneficiaries belonging to special categories such as SC/ST/ Women/PH/Minorities/Ex-Servicemen/NER, the margin money subsidy is 35% in rural areas and 25% in urban areas. • Website: https://www.kviconline.gov.in/pmegpeportal/

The Micro, Small and Medium Enterprises Development Act, 2006 6.81 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 1.2 2nd Loan for upgradation of the existing PMEGP/ MUDRA units • Further financial assistance scheme for expansion/ upgrade the existing PMEGP/MUDRA units for manufacturing and Service/ Trading units from the year 2018-19 • The maximum cost of the project under manufacturing sector for upgradation is ` 1 crore and ` 25 lakh under Service/ Trading sector. • Maximum subsidy would be 15% of the project cost (20%) for NER and Hill States) i.e. ` 15.00 lakh in Non-NER and ` 20.00 Lakh for NER and Hill States. The balance amount of the total project cost shall be provided by Banks as term loan. • Website: https://www.kviconline.gov.in/pmegpeportal/ 1.3 Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE) • Credit guarantee for loans up to ` 2 crores, without collateral and third-party guarantee. • Guarantee coverage ranges from 85% (Micro Enterprise up to Rs 5 lakh) to 75% (others). • 50% coverage is for retail activity • https://www.cgtmse.in/ 1.4 Interest Subsidy Eligibility Certificate (ISEC) • Credit at the concessional rate of interest is made available as per the requirement of the Khadi Institutions (KI) to mobilize additional requirements of fund from the Financial Institutions / Banks. • The KI is required to pay only 4% interest rate. The difference between the actual Interest charged by the Bank and 4% is borne by the KVIC as “Interest Subsidy”. • http://www.kviconline.gov.in/kieportal/jsp/index 1.5 Credit Linked Capital Subsidy Component (CLCS & TU Scheme) • Induction of established and improved technologies. • 15% Subsidy on institutional credit up to Rs 1.00 crore with a subsidy cap of INR 15.00 lakh • https://clcss.dcmsme.gov.in/ 2 Development of Khadi, Village and Coir Industries 2.1 Market Promotion & Development Scheme (MPDA) • MPDA is a unified scheme for publicity, marketing, market promotion and marketing development assistance 2.2 Revamped Scheme Of Fund for Regeneration Of Traditional Industries (SFURTI) • Support traditional artisans to provide sustainable employment, skill development, market promotion initiatives, etc. • Government of India support up to ` 2.5 cr. up to 500 artisans and ` 5 cr. for more than 500 artisans • Set up physical infrastructure with CFCs, latest machines, training, etc. in clusters.

Allied Laws 6.82 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 2.3 Coir Vikas Yojana (CVY) 2.3.1 Coir Industry Technology Upgradation Scheme (CITUS) • To establish new state of the art coir processing units • To provide modern infrastructure facilities to the production units. • Upper ceiling of Financial assistance will be ` 2.5 crores. • http://coirboard.gov.in/ 2.3.2 Science and Technology (S&T) for Coir • The component envisages extension of the outcomes of research at the laboratory level for application at the field level and extension of testing and service facility. 2.3.3 Skill Upgradation & Mahila Coir Yojana (MCY) • Training to personnel in the cadres of supervisors/ instructors/ artisans in coir industry. • EDPs/Workshops/Seminars on development of coir industry. • http://coirboard.gov.in/ 2.3.4 Work-Shed Scheme for Khadi Artisans • To provide better ambience by providing a better workplace to artisans to enable them to carry out their spinning and weaving work efficiently. • To provide more storing and working space for housing slivers, raw material, implements etc. • To help in improving the efficiency and thereby the production, productivity of spinners, weavers and also to increase their earnings • Khadi and Village Industries Commission (kvic.gov.in) 2.3.5 Rojgar Yukt Gaon • To transform socio-economically distressed villages into sustainable and self-reliant Khadi based enterprises. • To give further motivation to Khadi Sector it is proposed to introduce RYG scheme with enterprise-led business model for strengthening Khadi Institutions (KIs). 2.3.6 Mahatma Gandhi Institute for Rural Industrialization (MGIRI) • Science and technology Intervention & Innovations for Rural Industries • Networking and National/ International Collaboration on R&D and Technology Transfer related to KVI Sector • Skill/ Entrepreneurship Development Training for Enterprise development in KVI secto • http://www.mgiri.org/ 3 Technology Upgradation and Quality Certification 3.1 Financial Support to MSMEs in ZED Certification Scheme • Promote adaptation of Quality tools/ systems and Energy Efficient manufacturing. • Financial assistance will be provided to the MSMEs in obtaining a ZED certification. • https://msme.gov.in/zero-defect-zero-effect

The Micro, Small and Medium Enterprises Development Act, 2006 6.83 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 3.2 A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE) • Set up Livelihood Business Incubators (LBIs) and Technology Business Incubators (TBIs) to skill youths for own enterprises and incubation of innovative ideas • Maximum ` 1 cr. to Government agencies and maximum ` 50 Lakh to private agencies for procuring plant and machinery • Maximum ` 1 cr. given to new TBIs and maximum ` 30 Lakh to existing TBIs for procurement of plants and machinery • https://aspire.msme.gov.in/ASPIRE/AFHome.aspx 3.3 National Manufacturing Competitiveness Programme (NMCP) 3.3.1 Lean Manufacturing Competitiveness for MSMEs • Financial assistance is provided for implementation of lean manufacturing techniques, primarily the cost of lean manufacturing consultant (80% by GoI and 20% by beneficiaries) • https://msme.gov.in/lean-manufacturing 3.3.2 Design Clinic for Design Expertise to MSMEs • Financial assistance to the MSMEs for engagement of design consultants for design intervention (GoI contribution @ 75% for micro, 60% for SMEs for the project range up to ` 40 lakh). • The Design Scheme shall support design work by reimbursing 75% of expenses incurred up to ` 1.5 lakh for final year student project done for MSME • https://msme.gov.in/design-clinic 3.3.3 Technology and Quality Upgradation Support to MSMEs • The scheme advocates the use of Energy Efficient Technologies (EETs) in manufacturing units so as to reduce the cost of production and adopt clean development mechanism. • www.dcmsme.gov.in/schemes/TEQUPDetail.htm 3.3.4 Entrepreneurial and Managerial Development of SMEs through Incubators • Funding support up to ` 15 Lakh for development of innovative ideas into commercial products. • Seed funding support up to ` 100 Lakh for setting up new units for commercialization of successful innovative ideas • http://www.dcmsme.gov.in/schemes/Institutions_Detail.pdf 3.3.5 Enabling Manufacturing Sector to be Competitive through QMS&QTT • The scheme endeavours to sensitize and encourage MSEs to understand and adopt latest Quality Management Standards (QMS) and Quality Technology Tools (QTT). • www.dcmsme.gov.in/schemes/QmsQtt.htm

Allied Laws 6.84 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 3.3.6 Building Awareness on Intellectual Property Rights (IPR) • Reimbursement of Patent/Trademark/GI • Patent: • Indian Patent up to ` 1.00 Lakh • Foreign Patent up to ` 5.00 Lakh • Trademark up to ` 0.10 Lakh • GI Registration ` 2.00 Lakh • Assistance for setting up IP Facilitation Centre up to ` 1.00 cr. for period of 5 years • https://msme.gov.in/nmcp/building-awareness-intellectual-propertyrights-ipr-msme 4 Marketing Promotion Schemes 4.1 International Cooperation • Reimbursement for participation/visit in international exhibitions/fairs • Reimbursement for holding international conferences and seminars by industry associations/Govt. organizations. • https://ic.msme.gov.in/IC_APP/IC_Welcome.aspx 4.2 Procurement and Marketing Support Scheme (P&MS) • Participation of Individual MSEs in domestic Trade Fair/ Exhibition • Capacity building of MSMEs in Modern Packaging Technique / Development of Marketing Haats. • Organizing Domestic Trade Fair& Exhibition/ Vendor Development Programs/ National & International Workshops & Seminars/ Awareness programs • https://msme.gov.in/sites/default/files/Office_memorandum_PandMS. pdf 5 Entrepreneurship and skill Development Programme 5.1 Entrepreneurship Skill Development Programme (ESDP) • Widen the base of entrepreneurship by development, achievement, motivation and entrepreneurial skill to the different sections of the society • https://msme.gov.in/entrepreneurship-and-skill-development-programs 5.2 Assistance to Training Institutions (ATI) • Support for infrastructure and capacity building of training institutions of Ministry of MSME and existing State level EDIs. • Support for skill development programmes by training institutions of the Ministry of MSME 6 Infrastructure Development Programme 6.1 Micro & Small Enterprises Cluster Development (MSE-CDP) • Creation of Common Facility Centers including Plug & Play Facilities. • Support for Infrastructure Development Projects including Flatted Factory Complexes • https://cluster.dcmsme.gov.in/

The Micro, Small and Medium Enterprises Development Act, 2006 6.85 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 7 MSME Sambandh • The Public Procurement Policy for Micro and Small Enterprises (MSME) order 2012 has mandated Every Central Ministry/ Department/PSU shall set an annual goal for procurement from the MSE sector at the beginning of the year, with the objective of achieving an overall procurement goal of minimum 25 per cent of the total annual purchases from the products or services produced or rendered by MSEs. • Out of 25% target of annual procurement 4% is exclusively reserved for MSEs owned by SC/ST and 3% for MSEs owned by Women entrepreneurs. 8 MSME Sampark • A job portal called “MSME SAMPARK” is a digital platform wherein jobseekers (i.e. passed out trainees / students of MSME Technology Centres) and recruiters can register themselves for mutually beneficial interaction. • sampark.msme.gov.in 9 National SC-ST Hub • To achieve 4% Public Procurement target from SC-ST entrepreneurs • Facilitating SC/ST Entrepreneurs to be part of vendor development programs and mentoring support • Collection, collation and dissemination of information regarding SC/ ST enterprises and entrepreneurs • Distribution of trade specific tool kits to trained candidates • https://www.scsthub.in/ 15. Credit and Financial Support related initiatives / schemes and key benefits 1 Priority Sector Lending Status for MSME • As per Master Direction – Priority Sector Lending – Targets and Classification, domestic Scheduled Commercial Banks (SCBs) as well as foreign banks are required to extend 40% of their Adjusted Net Bank Credit (ANBC) as loans to priority sectors. These priority sectors include MSME among others. • Further, domestic SCBs and foreign banks with 20 branches and above are specifically required to lend to Micro enterprises, a minimum of 7.5% of their ANBC or Credit Equivalent Amount of OffBalance Sheet Exposure, whichever is higher as part of the PSL targets. This limit of 7.5% shall be inclusive of loans to Khadi and Village Industries Sector.

Allied Laws 6.86 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 2 Subordinate Debt Scheme • This Scheme seeks to extend support to the promoter(s) of the operational MSMEs which are stressed and have become NPA as on 30th April, 2020. Promoter(s) in turn will infuse this amount in the MSME unit as equity and thereby enhance the liquidity and maintain debt-equity ratio. • Promoter(s) of the MSMEs will be given credit equal to 15% of their stake (equity plus debt) or ` 75 lakh whichever is lower • https://subdebt.cgtmse.in/SUBDEBT/jsp/Home.jsp 3 Fund of Funds (Atmanirbhar Bharat Package) • The Fund of Funds will provide equity funding for MSMEs with growth potential and viability with the ultimate aim of encouraging MSMEs to grow and get listed on stock exchanges. • GOI will support VC/PE firms in investing in commercially viable MSMEs in meeting their growth requirements. The proposed fund of funds will encourage private sector investments in the MSME sector and leverage ` 50,000 crore. The actual investment may be even higher. • www.champions.gov.in 4 TReDS Platform • The initiative of Trade Receivables Discounting System (‘TReDS’). TReDS is aimed at ‘facilitating the discounting of both invoices as well as bills of exchange’. TReDS is a common platform that connects MSME sellers, corporate buyers, and financiers (banks and NBFCs). • After approval from both the seller and the buyer, the financiers would bid on invoices and make the payment to the seller. And the transactions processed under TReDS would be without recourse to MSMEs, meaning that MSME vendors need not be responsible for non-payment of the trade receivables amount (from buyers). • Presently, three entities viz., Receivables Exchange of India Ltd. (RXIL), A. TREDS, and Mynd Solutions licensed by RBI are operating the platform for more than two years. • https://www.rxil.in/ • https://www.invoicemart.com/ • https://www.m1xchange.com/treds.php 16. MSME SAMADHAAN • Delayed Payments to Micro and Small Enterprises under Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 • https://samadhaan.msme.gov.in/ 1. Related Provision • The Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 contains provisions of Delayed Payment to Micro and Small Enterprise (MSEs). (Section 15- 24). State Governments to establish Micro and Small Enterprise Facilitation Council (MSEFC) for settlement of disputes on getting references/filing on Delayed payments. (Section 20 and 21)

The Micro, Small and Medium Enterprises Development Act, 2006 6.87 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 2. Nature of assistance • MSEFC of the State after examining the case filed by MSE unit will issue directions to the buyer unit for payment of due amount along with interest as per the provisions under the MSMED Act 2006. 3. Who can apply • Any Micro or small enterprise having valid Udyog Aadhar (UAM) can apply 4. Salient Features • The buyer is liable to pay compound interest with the monthly rests to the supplier on the amount at the three times of the bank rate notified by RBI in case he does not make payment to the supplier for his supplies of goods or services within 45 days of the acceptance of the goods/service rendered. (Section 16) • State Governments to notify (i) Authority for filing Entrepreneur Memorandum (ii) Rules of MSEFC and (iii) Constitution of MSEFC. • All States/UTs have notified Authority for Filing Entrepreneur’s Memorandum, 33 States/UTs (i.e. except Arunachal Pradesh, Assam and Manipur) have Notified rules of MSEFC and all the 36 States/UTs have constituted MSEFCs, as per provisions laid down under MSMED Act 2006. • Every reference made to MSEFC shall be decided within a period of ninety days from the date of making such a reference as per provisions laid in the Act. • If the Appellant (not being the supplier) wants to file an appeal, no application for setting aside any decree or award by the MSEFC shall be entertained by any court unless the appellant (not being supplier) has deposited with it, the 75% of the award amount. (Section 19) 5. Implementation • The provisions under the Act are implemented by MSEFC chaired by Director of Industries of the State /UT having administrative control of the MSE units. State Government/UTs are requested to ensure that the MSE Facilitation Council hold meetings regularly and delayed payment cases are decided by the Councils within a period of 90 days as stipulated in the MSMED Act, 2006. 6. MSME Samadhaan Portal - Ease of filing application under MSEFC, an Initiative from Ministry of MSME, Govt. of India • Ministry of MSME has taken an initiative for filing online application by the supplier MSE unit against the buyer of goods/services before the concerned MSEFC of his/her State/UT. These will be viewed by MSEFC Council for their actions. These will be also visible to Concerned Central Ministries, Departments, CPSEs, State Government, etc for pro-active actions.

Allied Laws 6.88 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication 17. Disclosure in Annual Statement of Accounts: Where any buyer is required to get his annual accounts audited under any law for the time being in force, such buyer shall furnish the following a d d i t i o n a l i n f o r m a t i o n in his annual s t a t e m e n t of accounts, namely:-- (i) the principal amount and the interest due thereon (to be shown separately) remaining unpaid to any supplier as at the end of each accounting year; (ii) the amount of interest paid by the buyer, along with the amounts of the payment made to the supplier beyond the appointed day during each accounting year; (iii) the amount of interest due and payable for the period of delay in making payment (which have been paid but beyond the appointed day during the year) but without adding the interest specified under this Act; (iv) the amount of interest accrued and remaining unpaid at the end of each accounting year; and (v) the amount of further interest remaining due and payable even in the succeeding years, until such date when the interest dues as above are actually paid to the small enterprise, for the purpose of disallowance as a deductible expenditure. (Section 22). The amount of interest payable or paid by any buyer, under or in accordance with the provisions of this Act, shall not, for the purposes of computation of income under the Income-tax Act, 1961, be allowed as deduction. 2

NBFC Regulation 6.89 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication VI. NBFC Regulations (1) Important Directions applicable to NBFCs notified by RBI Currently the regulations regarding NBFCs are split in to two major structures : • Scale Based Regulation (SBR): A Revised Regulatory Framework for NBFCs effective from October 01, 2022 : As the SBR framework encompasses different facets of regulation of NBFCs covering capital requirements, governance standards, prudential regulation, etc., it has been decided to first issue an integrated regulatory framework for NBFCs under SBR providing a holistic view of the SBR structure, set of fresh regulations being introduced and respective timelines. Detailed guidelines under the SBR are still in process and may be introduced by another set of regulations or amending the existing master directions. Definitions and terms not defined in the SBR are to be referred to the relevant Master Directions. • Existing Master Directions encompassing the current rules and regulations: — Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 issued on August 25, 2016 (Updated as on February 22, 2019) — Master Direction - Non-Banking Financial Companies Auditor’s Report (Reserve Bank) Directions, 2016 — Master Direction - Core Investment Companies (Reserve Bank) Directions, 2016 (Updated as on October 05, 2021) — Master Direction- Non-Banking Financial Company Returns (Reserve Bank) Directions, 2016 — Master Direction - Non-Banking Financial Company - Systemically Important Non-Deposit taking Company and Deposit taking Company (Reserve Bank) Directions, 2016 (Updated as on April 01, 2022) — Master Direction - Non-Banking Financial Company – Non-Systemically Important Non-Deposit taking Company (Reserve Bank) Directions, 2016 (Updated as on April 01, 2022) (2) Classification as an NBFC By definition a Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 engaged in the business of loans and advances, acquisition of shares/ stocks/bonds/debentures/securities issued by Government or local authority or other marketable securities of a like nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, purchase or sale of any goods (other than securities) or providing any services and sale/ purchase/construction of immovable property. The 50:50 test : The Reserve Bank of India has clarified that for a company to be classified as an NBFC, to decide on its principal business, it will have to satisfy the two tests of assets and income. The financial assets should be more than 50% of the total assets (netted off by intangible assets) and the income from financial assets should be more than 50% of the gross income. Both these tests need to be satisfied for a company to be regarded as an NBFC. (3) Categories of NBFC Under the existing regulations NBFCs are categorized – • in terms of the type of liabilities - Deposit and Non-Deposit accepting NBFCs;

Allied Laws 6.90 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • non deposit taking NBFCs by their size - systemically important and non-systemically important and • by the kind of activity they conduct. Within this categorization, types of NBFC are as follows: • Non-Banking Financial Company not accepting/ holding public deposits which is not systemically important – (NBFC-ND-NSI) • Systemically Important Non-Deposit taking Non-Banking Financial Company (NBFC-NDSI) • Deposit taking Non-Banking Financial Company (NBFC-D) • Non-Banking Financial Company – Factor (NBFC-Factor) • Non-Banking Financial Company– Micro Finance Institution (NBFC-MFI) • Non-Banking Financial Company - Infrastructure Finance Company (NBFC-IFC) • Infrastructure Debt Fund – Non-Banking Finance Company (IDF-NBFC) • Non-Banking Financial Company- Investment and Credit Company - (NBFC-ICC) • NBFC- Non-Operative Financial Holding Company (NOFHC) The Reserve Bank of India has clarified that over a period of time, evolution of NBFC sector has resulted in category focused on specific Sector / Asset Classes. It has been decided to provide NBFC with greater operational flexibility, harmonization into fewer ones based on the new SBR framework. Classification under the new SBR framework NBFCs in the lowest layer shall be known as NBFC - Base Layer (NBFC-BL). NBFCs in middle layer and upper layer shall be known as NBFC - Middle Layer (NBFC-ML) and NBFC - Upper Layer (NBFC-UL) respectively. The Top Layer is ideally expected to be empty and will be known as NBFC - Top Layer (NBFC-TL). Base Layer The Base Layer shall comprise of (a) non-deposit taking NBFCs below the asset size of ` 1000 crore and (b) NBFCs undertaking the following activities- (i) NBFC-Peer to Peer Lending Platform (NBFC-P2P), (ii) NBFC-Account Aggregator (NBFC-AA), (iii) Non-Operative Financial Holding Company (NOFHC) and (iv) NBFCs not availing public funds and not having any customer interface1. Middle Layer The Middle Layer shall consist of (a) all deposit taking NBFCs (NBFC-Ds), irrespective of asset size, (b) non-deposit taking NBFCs with asset size of ` 1000 crore and above and (c) NBFCs undertaking the following activities (i) Standalone Primary Dealers (SPDs), (ii) Infrastructure Debt Fund - Non-Banking Financial Companies (IDFNBFCs), (iii) Core Investment Companies (CICs), (iv) Housing Finance Companies (HFCs) and (v) Infrastructure Finance Companies (NBFC-IFCs). Upper Layer The Upper Layer shall comprise of those NBFCs which are specifically identified by the Reserve Bank as warranting enhanced regulatory requirement based on a set of parameters and scoring methodology as provided in the Appendix to this circular. The top ten eligible NBFCs in terms of their asset size shall always reside in the upper layer, irrespective of any other factor. Top Layer The Top Layer will ideally remain empty. This layer can get populated if the Reserve Bank is of the opinion that there is a substantial increase in the potential systemic risk from specific NBFCs in the Upper Layer. Such NBFCs shall move to the Top Layer from the Upper Layer. (4) Registration Requirement Any company that is fulfilling the 50:50 test or wishes to commence/carry on a NBFC business, it shall apply for a certificate of registration from the RBI. While applying for a registration following are the two things’ prerequisites :

NBFC Regulation 6.91 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • Net Owned Fund (NOF)- To apply for the certificate the current minimum NOF is atleast 200 lakhs (2 Crores). The quantum of NOF is under- going a change with certain types of NBFCs requiring a higher amount of 5 Crs or 10 Crs. The Master Directions have specific sub-regulations dealing with these different type of NBFCs and their NOF Requirement. Further details on NOF are mentioned in point 6 hereunder. • Shareholding from FATF non-compliant jurisdictions: new investors from or through non-compliant FATF jurisdictions, whether in existing NBFCs or in companies seeking Certification of Registration (COR), should not be allowed to directly or indirectly acquire ‘significant influence’ in the company, as defined in the applicable accounting standards. In other words, fresh investors (directly or indirectly) from such jurisdictions in aggregate should be less than the threshold of 20 per cent of the voting power (including potential voting power) of the NBFC. (5) Definition of “Public Deposits” Considering that a major classification of a NBFC is whether it is taking deposits or not, the definition of “Public Deposits” has immense importance. The term “Public Deposit” has been defined under Master Direction - Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 2016 and under section 45-I(bb) of the Reserve Bank of India Act, 1934 (2 of 1934) as : “Deposit” includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form, but does not include: • amounts received in the ordinary course of business, by way of: — security deposit, — dealership deposit, — earnest money, — advance against orders for goods, properties or services • amounts raised by way of share capital or amounts contributed as capital by partners of a firm, or towards subscription to any securities, including share application money or advance towards allotment of securities pending allotment • amounts received from certain institutions such as : — a scheduled bank or a co-operative bank or any other banking company — the Central Government or a State Government — institutions such as the Industrial Development Bank of India, or the Life Insurance Corporation of India or the General Insurance Corporation of India or the Small Industries Development Bank of India or the Unit Trust of India, or National Bank for Agriculture and Rural Development, SEBI registered Mutual Funds etc. — by way of subscriptions in respect of a chit. • any amount received by a company from any other company • any amount received from directors, shareholders or from a relative of a director of the NBFC • any amount received by issuance of: — bonds or debentures secured by the mortgage of any immovable property of the company; or by any other asset or which would be compulsorily convertible into equity in the company — non-convertible debentures with a maturity more than one year and having the minimum subscription per investor at Rs.1 crore and above

Allied Laws 6.92 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication — a hybrid debt or subordinated debt the minimum maturity period of which is not less than sixty months provided there is no option for recall by the issuer within the period — commercial paper — perpetual debt instruments — infrastructure bonds by an Infrastructure Finance Company (6) Net Owned Fund (NOF) is defined in S. 45-IA of the Reserve Bank of India Act, 1934 and includes • Definition of NOF : ‘Owned Fund’ means aggregate of the paid-up equity capital, preference shares which are compulsorily convertible into equity, free reserves, balance in share premium account and capital reserves representing surplus arising out of sale proceeds of asset, excluding reserves created by revaluation of asset, after deducting therefrom accumulated balance of loss, deferred revenue expenditure and other intangible assets. ‘Net Owned Fund’ is the amount as arrived at above, minus the amount of investments of such company in shares of its subsidiaries, companies in the same group and all other NBFCs and the book value of debentures, bonds, outstanding loans and advances including hire purchase and lease finance made to and deposits with subsidiaries and companies in the same group, to the extent it exceeds 10% of the owned fund • Minimum Amount of NOF — For NBFC-Factor, NBFC-MFI, NBFCICC : 10 Crs to commence or carry on the business of non-banking financial institution from October 01, 2022. Provided that the above categories of existing non-banking financial companies holding a certificate of registration as on October 22, 2021 issued by the Reserve Bank of India and having net owned fund of less than ` 10 Crs, shall achieve the NOF of ` 10 crore as per the glide path requiring them to reach a NOF of ` 10 Crs by March 2027 and an interim NOF of ` 5 Crs or ` 7 Crs by March 2025. — For NBFC IFC and NBFC IDF : ` 300 Crs — For all other types of NBFCs with no public funds or customer interface : ` 2 Crs (7) Forms to be submitted by NBFC • Forms for Deposit taking NBFCs (NBFC-D) Sr. Name of the Return Periodicity Reference Date Reporting Time Due on 1 NBS1 Quarterly 31st March/ 30th June/ 30th Sept./ 31st Dec. 15 days 15th April/ 15th July/ 15th Oct./ 15th Jan. 2 NBS2 Quarterly 31st March/ 30th June/ 30th Sept./ 31st Dec. 15 days 15th April/ 15th July/ 15th Oct./ 15th Jan. 3 NBS3 Quarterly 31st March/ 30th June/ 30th Sept./ 31st Dec. 15 days 15th April/ 15th July/ 15th Oct./ 15th Jan. 4 ALM (NBFC-D) Half yearly 31st March/30th Sept. 30 days 30th April/30th Oct. 5 Branch Information return Quarterly 31st March/ 30th June/ 30th Sept./ 31st Dec. 15 days 15th April/ 15th July/ 15th Oct./ 15th Jan.

NBFC Regulation 6.93 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Sr. Name of the Return Periodicity Reference Date Reporting Time Due on 6 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December 7 Reporting to Central Repository of Information on Large Credits (CRILC) Quarterly 31st March/ 30th June/ 30th Sept./ 31st Dec. 21 days 21st April/ 21st July/ 21st Oct/ 21st Jan 8 Reporting of Special Mention Account status (SMA-2 return) Weekly On Every Friday • Details of returns to be submitted by NBFC-ND-SI Sr. Name of the Return Periodicity Reference Date Reporting Time Due on 1 NBS7 Quarterly 31st March/ 30th June/ 30th Sept/ 31st Dec. 15 days 15th April/ 15th July/ 15th Oct./ 15th Jan. 2 NBFCs-ND-SI 500cr Quarterly 31st March/ 30th June/ 30th Sept./ 31st Dec. 15 days 15th April/ 15th July/ 15th Oct./ 15th Jan. 3 ALM-1 Quarterly 31st March/ 30th June/ 30th Sept./ 31st Dec. 15 days 15th April/ 15th July/ 15th Oct./ 15th Jan. 4 ALM-2 & 3 Half yearly 31st March/ 30th Sept. 30 days 30th April/ 30th Oct. 5 ALM-(NBFC-ND-SI) Annual 31st March 15 days 15th April 6 Branch Info return Quarterly 31st March/ 30th June/ 30th Sept./ 31st Dec. 15 days 15th April/ 15th July/ 15th Oct./ 15th Jan. 7 Reporting to Central Repository of Information on Large Credits (CRILC) Quarterly 31st March/ 30th June/ 30th Sept./ 31st Dec. 21 days 21st April/ 21st July/ 21st Oct/ 21st Jan 8 Reporting of Special Mention Account status (SMA-2 return) Weekly On Every Friday 9 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December.

Allied Laws 6.94 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication • Details of returns to be submitted by NBFC-ND Sr. Name of the Return Periodicity Reference Date Reporting Time Due on 1 Statutory Auditor Certificate Annual 31st March One month from the date of finalisation of Balance Sheet. Not later than 31st December 2 NBS-8 (For having asset size of ` 100 crore - ` 500 crore) Annual 31st March 60 days 30thMay 3 NBS-9 (For having asset size below ` 100crore) Annual 31st March 60 days 30thMay (8) Asset Classification &Provisioning norms Asset Classification Following are the asset classification applicable to most NBFCs. Each NBFC shall, after taking into account the degree of well-defined credit weaknesses and extent of dependence on collateral security for realisation, classify its lease/hire purchase assets, loans and advances and any other forms of credit into the following classes, namely: • Standard assets: no default in repayment of principal or payment of interest is perceived • Sub-standard assets shall mean: — an asset which has been classified as non-performing asset for a period not exceeding 12 months. — an asset where the terms of the agreement regarding interest and/ or principal have been renegotiated or rescheduled or restructured after commencement of operations • Doubtful assets shall mean the assets when which remains a sub-standard asset for a period exceeding 12 months: — a term loan, or — a lease asset, or — a hire purchase asset, or — any other asset, • Loss assets shall mean: — an asset which has been identified as loss asset by the applicable NBFC or its internal or external auditor or by the RBI during the inspection of the applicable NBFC, to the extent it is not written off by the applicable NBFC; and — an asset which is adversely affected by a potential threat of non-recoverability due to either erosion in the value of security or non-availability of security or due to any fraudulent act or omission on the part of the borrower • Non-Performing Asset (NPA) shall mean: — an asset, in respect of which, interest has remained overdue for a period of three months or more; — a term loan inclusive of unpaid interest, when the instalment is overdue for a period of three months or more or on which interest amount remained overdue for a period of three months or more — a demand or call loan, which remained overdue for a period of three months or more from the date of demand or call or on which interest amount remained overdue for a period of three months or more;

NBFC Regulation 6.95 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication — a bill which remains overdue for a period of three months or more; — the interest in respect of a debt or the income on receivables under the head ‘other current assets’ in the nature of short term loans/ advances, which facility remained overdue for a period of three months or more; — any dues on account of sale of assets or services rendered or reimbursement of expenses incurred, which remained overdue for a period of three months or more; — the lease rental and hire purchase instalment, which has become overdue for a period of three months or more; — in respect of loans, advances and other credit facilities (including bills purchased and discounted), the balance outstanding under the credit facilities (including accrued interest) made available to the same borrower/ beneficiary when any of the above credit facilities becomes non-performing asset. After SBR is effective the extant NPA classification norm stands changed to the overdue period of more than 90 days for all categories of NBFCs Provisioning Norms Every applicable NBFC shall, after taking into account the time lag between an account becoming non-performing, its recognition as such, the realisation of the security and the erosion over time in the value of security charged, make provision against sub-standard assets, doubtful assets and loss assets as provided hereunder: — Loss assets :Loss assets should be written off. If loss assets are permitted to remain in the books for any reason, 100 percent of the outstanding should be provided for. — Doubtful assets: 100 percent of the extent to which the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis. In regard to the secured portion, provision may be made on the following basis, at the rates ranging from 25 percent to 100 percent of the secured portion depending upon the period for which the asset has remained doubtful: Period for which the advance has remained in ‘doubtful’ category Provisioning requirement (%) Up to one year 25 One to three years 40 More than three years 100 — Substandard assets : A general provision of 15 percent on total outstanding should be made without making any allowance for ECGC guarantee cover and securities available. — Standard Asset provisioning : 0.25 per cent of the outstanding for NBFC ND NSI and 0.40 per cent for NBFC ND SI , which shall not be reckoned for arriving at net NPAs. The provision towards standard assets need not be netted from gross advances but shall be shown separately as ‘Contingent Provisions against Standard Assets’ in the balance sheet. (9) Guidelines on Liquidity Risk Management Framework All NBFCs accepting deposits or having an asset size of ₹100 crore and above, as per their last audited balance sheet, shall adhere to the set of liquidity risk management guidelines as detailed in the respective Master Directions. However, these requirement will not apply to Type I NBFC-NDs (NBFCs not accepting public funds/ not intending to accept public funds in the future and not having customer interface/ not intending to have customer interface in the future), Non-

Allied Laws 6.96 R7ima5ine Celebrating 1949 - 2023 BCAS REFERENCER 2023-24 61 Years of Continuous Publication Operating Financial Holding Companies and Standalone Primary Dealers. It will be the responsibility of the Board of each NBFC to ensure that the guidelines are adhered to. The internal controls required to be put in place by NBFCs as per these guidelines shall be subject to supervisory review. Further, as a matter of prudence, all other NBFCs are also encouraged to adopt these guidelines on liquidity risk management on voluntary basis The framework covers various areas and requirements such as : • Liquidity Risk Management Policy, Strategies and Practices • Management Information System (MIS) • Internal Controls • Maturity profiling • Liquidity Risk Measurement – Stock Approach • Currency Risk • Managing Interest Rate Risk • Liquidity Risk Monitoring Tools (10) Prior Approval for Acquisition / Transfer of Control of NBFCs A NBFC, shall require prior written permission of the RBI for the following: • any takeover or acquisition of control of the applicable NBFC, which may or may not result in change of management; • any change in the shareholding of the applicable NBFCs, including progressive increases over time, which would result in acquisition / transfer of shareholding of 26 per cent or more of the paid-up equity capital of the applicable NBFC. Provided that, prior approval would not be required in case of any shareholding going beyond 26 per cent due to buyback of shares/ reduction in capital where it has approval of a competent Court. The same is to be reported to the RBI not later than one month from its occurrence; • any change in the management of the applicable NBFC which would result in change in more than 30 per cent of the directors, excluding independent directors. (11) Policies required by each NBFC Depending on the type of NBFC and the various activity it undertakes the following are the list of policies that each NBFC should have : • Investment Policy • Demand/Call Loan Policy • Liquidity Risk Management Policy • Remuneration Policy • Outsourcing Policy • Related Party Transactions • Fit and Proper Criteria • IT Policy • KYC & AML • Policy on Resource Planning • Credit Information Policy • Policy for Exposures to a single party / a single group of parties • Internal Guidelines on Corporate Governance • Policy on restructuring of assets • Management Information System (MIS) • Fair Practices Code for NBFC having customer interface • Board approved Code of conduct for DSA/ DMA/Recovery Agents (12) Registration with other institutions • Membership of CICs : As per RBI Circular No. RBI/2014-2015/458 dated February 6th, 2015, It has been decided that NBFCs shall mandatorily