TRAI disallows discriminatory tarriffs for data

TELECOM REGULATORY AUTHORITY OF INDIA (TRAI) issued the ‘Prohibition of Discriminatory Tariffs for Data Services Regulations, 2016’ today. This would disallow service providers to offer or charge discriminatory tariffs for data services on the basis of content being accessed by a consumer. 

TRAI had earlier issued a Consultation Paper on ‘Differential Pricing for Data Services’ in December, 2015. This Consultation primarily sought the views of the stakeholders on whether the service providers should be allowed to charge differential tariffs based on the websites/applications/platforms being accessed on the internet. Based on the responses received and the internal deliberations, the Authority has now issued these Regulations. These Regulations, are aimed at ensuring that consumers get an unhindered and non-discriminatory access to the internet. These Regulations intend to make data tariffs for access to the internet non discriminatory on the basis of the content. 

An overwhelming number of detailed and well reasoned responses, representing a diverse set of views were received in the consultation process. There were views suggesting both in support and against ex ante steps for regulating differential tariff for data services based on content. After careful examination of all the comments and feedback, the Authority has decided that ex ante regulation, rather than a case by case tariff intervention regime would be more appropriate as it would give the much needed certainty to industry participants. Such a step is also warranted in view of the high costs of regulation in terms of time and resources that will be required for investigating each case of tariff discrimination. 

The Authority has therefore mandated the following: 

a) No service provider shall offer or charge discriminatory tariffs for data services on the basis of content. 

b) No service provider shall enter into any arrangement, agreement or contract, by whatever name called, with any person, natural or legal, that has the effect of discriminatory tariffs for data services being offered or charged by the service provider for the purpose of evading the prohibition in this regulation. 

c) Reduced tariff for accessing or providing emergency services at times of public emergency has been permitted. 

d) Financial disincentives for contravention of the regulation have also been specified. 

TRAI had issued the Consultation Paper on ‘Differential Pricing for Data Services’ on 9th December, 2015. Opportunity for submitting written comments and counter comments was given to the stakeholders till 7th January, 2016 and 14th January, 2016 respectively. An Open House Discussion was held on 21st January, 2016 and further time to submit additional comments was given up to 25th January, 2016. 

TRAI will keep a close watch on the implementation of the mandate by the service providers and may undertake a review after two years or at an earlier date as it may deem fit. 

Report of the Company Law Committee

Some of the recommendations made by the Company Law Committee to streamline further the company law regime in India.

The Companies Law Committee was constituted in June 2015 for examining and making recommendations on the issues arising out of implementation of the Companies Act, 2013. The Committee submitted its report to the Government today.

2.         The Committee was chaired by Secretary, Ministry of Corporate Affairs and consisted of Shri Bharat Vasani, nominee of the Confederation of Indian Industries (CII), Smt. Reva Khetrapal, Judge (Retd.), Delhi High Court, Shri Y.M. Deosthalee, nominee of the Federation of Indian Chambers of Commerce and Industry (FICCI), Dr. A.S. Durga Prasad, President of the Institute of Cost Accountants of India, Shri Manoj Fadnis, President of the Institute of Chartered Accountants of India, Shri Atul Mehta, President of the Institute of Company Secretaries of India, Shri N.S. Vishwanathan, Executive Director from RBI and Shri P.K. Nagpal, Executive Director from SEBI as co-opted members and Joint Secretary (Policy), Ministry of Corporate Affairs as Member Convener.

3.         The Committee had extensive consultations with stakeholders before making its recommendations. More than 2000 suggestions were received during the consultation process.  The stakeholders consulted included all Industry Chambers, Professional Institutes, law firms, financial sector and other regulators. Six broad based groups were set up to review the suggestions received during the public consultation, each group being convened by a member of the Committee, and consisting of subject-matter experts including industry representatives, lawyers, company secretaries, cost accountants, investors’ representatives and chartered accountants.

4.         The Committee has endeavoured to reconcile the competing interests of the various stakeholders keeping in mind the difficulties and challenges expressed by them, and also being mindful of the Government’s objective of furthering ease of doing business, encouraging start-ups and the need for harmonising various laws.  The Committee also kept in mind the need to bring in greater clarity in the Act and Rules and harmonizing the various provisions thereof while making its recommendations.

5.         After exhaustive deliberations, the Committee has proposed changes in 78 sections of the Companies Act, 2013, which along with consequential changes, would result in about 100 amendments to the Act.  Approximately fifty amendments to the Rules have also been proposed. The recommendations cover significant areas of the Act, including definitions, raising of capital, accounts and audit, corporate governance, managerial remuneration, companies incorporated outside India and offences/ penalties.

6.         Some of the key changes proposed are listed below:

a)             Managerial remuneration to be approved by shareholders. [s. 197, 198]

b)             Modify definition of associate company and subsidiary company to ensure that ‘equity share capital’ is the basis for deciding holding-subsidiary relationship rather than “both equity and preference share capital”. [s. 2]

c)             Private placement process to be substantially simplified, doing away with separate offer letter, making valuation details public, details/record of applicants to be kept by company and to be filed as part of return of allotment only, and reducing number of filings to Registrar. [s. 42]

d)            Incorporation process to be made easier and allow greater flexibility to companies: An unrestricted objects clause to be allowed in the Memorandum of Association dispensing with detailed listing of objects, self-declarations to replace affidavits from subscribers to memorandum and first directors; changes also in various Forms. [s. 4, 7]

e)             Provisions relating to forward dealing and insider trading to be omitted from Companies Act. Listed companies are covered under SEBI Act/Regulations. [s. 194, 195]

f)              Companies may give loans to entities in which directors are interested after passing special resolution and adhering to disclosure requirement. [s. 185]

g)             Restriction on layers of subsidiaries and investment companies to be removed. [s. 2(87), 186(1)]

h)             Change in the definition of term ‘relative’ for determining disqualification of auditor [s. 141]

i)               Rationalize penal provisions with reduced liability for procedural and technical defaults. Penal provisions for small companies to be reduced. [ various sections]

j)               No filing fees if financial statements and annual returns filed within prescribed time. [s. 403]

k)             Auditor to report on internal financial controls with regard to financial statements. [s. 143]

l)               Frauds less than Rs. 10 Lakh to be compoundable offences. Other frauds to be continued to be non-compoundable. [s. 447]

m)           Reducing requirement for maintaining deposit repayment reserve account from 15% each for last two years to 20% during the maturing year.

n)             Foreign companies having insignificant/incidental transactions through electronic mode to be exempted from registering and compliance regime under Companies Act, 2013. [s.  379]

o)             Disclosures in the Directors’ Report to be simplified and duplications with SEBI’s disclosure requirements and financial statements to be removed while retaining the informative content for shareholders. [s. 134, Rules]

p)             Increased threshold for unlisted companies for compliance in context of requirement for Independent Directors (IDs), Audit Committee and Nomination and Remuneration Committee. [s. 149, 177, 178]

q)             Test of materiality to be introduced for pecuniary interest for testing independence of ID; thresholds for relatives’ pecuniary interest to be revised to make it more practical. [s. 149]

r)              Requirement for a managerial person to be resident in India for twelve months prior to appointment to be done away with. [Schedule V]

s)              Disclosures in the prospectus required under the Companies Act and SEBI Regulations to be aligned, with a view to make these simpler, by allowing prescriptions to be as per SEBI Regulations. [s. 26]

t)              ESOPs to be allowed to promoters working as employees/directors [s.62, Rules]

u)             Limit on sweat equity to be raised from 25% of paid up capital to 50% for start-ups. [s.54]

v)             Recognition of the concept of beneficial owner of a company proposed in the Act. Register of beneficial owners to be maintained by a company, and filed with the Registrar. [new section]

w)           Provisions with regard to consolidation of accounts to be reviewed and those with respect to attachment of standalone accounts of foreign subsidiaries to be relaxed in certain cases. [s. 129, 136]

x)             Re-opening of accounts to be limited to 8 years. [s. 130]

y)             Mandatory requirement of taking up some items only through postal ballot to be relaxed in case of a company that is required to provide electronic voting at its General Meetings. [s. 110]

z)             Requirement for annual ratification of appointment/continuance of auditor to be removed. [s. 139]

7.         The report is available on the website of the Ministry of Corporate Affairs, www.mca.gov.in, and public comments on the report are invited online till 15 February 2016 on the facility made available specifically for the purpose at the portal.

New rules for railway bookings

Railway Ministry introduces new checks on booking of e-ticket/i-ticket through IRCTC website with a view to further prevent possible misuse

Under the new provisions a maximum of 6 tickets can be booked online by an individual user in a month on IRCTC website

This new provision will come into effect w.e.f. 15^th February, 2016

The move aims to deter touts and to facilitate genuine users

In order to facilitate genuine users and prevent touting activities, various checks have already been put in place for the booking of e-ticket/i-ticket on IRCTC website including the following existing provision: -

1.      Individuals are allowed only 2 tickets per user-ID in a day (for ARP booking) from 08:00 hours to 10.00 hours.

2.      Individuals are allowed only 2 tickets per user-ID in a day (for Tatkal booking) from 10:00 hours to 12:00 hours.

3.      Quick Book Option is disabled from 08:00 to 12:00 hours

4.      All types of ticketing agents (YTSK, RTSA, IRCTC agents etc.) have been debarred from booking tickets during the first thirty minutes of opening of booking i.e. from 08:00 to 08:30 hours for general bookings, and from 10:00 to 10:30 hours and 11:00 to 11:30 hours for Tatkal booking in AC and non-AC classes respectively.

5.      Booking is not allowed through e-wallet and cash cards from 08:00 to 12:00 hours.

6.      There is only one booking in one user login session except for return/onward journey between 08:00 to 12:00 hours.

To further prevent any possible misuse, Ministry of Railways has now decided that effective from 15^th February, 2016, a maximum of 6 tickets can be booked online by an individual user in a month on IRCTC website. This will replace the existing system under which a maximum of 10 tickets can be booked online through IRCTC website in a month by an individual. However, the existing condition will continue wherein these booking will be subject to a limit of booking 2 opening Tatkal tickets in 10:00- 12:00 hours period in a day and 2 opening Advance Reservation Period (ARP) tickets in 08:00-10:00 hours period in a day. 

This has been done keeping in view the analysis of usage of quota of 10 tickets which indicated that 90% of users are booking upto 6 tickets in a given month and only 10% are making more than 6 tickets. It is suspected that the 10% users might be involved in touting activities. Therefore to deter such touts and to facilitate genuine users, it has been decided that a maximum of 6 tickets can be booked by an individual user in a month.

Fraud reporting

The Ministry of Corporate Affairs has vide its gazette notification dated 14th December, 2015 amended the Rule 13 of the Companies (Audits and Auditors), Rules, 2014 as under.

“13. Reporting of frauds by auditor and other matters:

(1) If an auditor of a company, in the course of the performance of his duties as statutory auditor, has reason to believe that an offence of fraud, which involves or is expected to involve individually an amount of rupees one crore or above, is being or has been committed against the company by its officers or employees, the auditor shall report the matter to the Central Government.

(2) The auditor shall report the matter to the Central Government as under:-
(a) the auditor shall report the matter to the Board or the Audit Committee, as the case may be, immediately but not later than two days of his knowledge of the fraud, seeking their reply or observations within forty-five days;
(b) on receipt of such reply or observations, the auditor shall forward his report and the reply or observations of the Board or the Audit Committee along with his comments (on such reply or observations of the Board or the Audit Committee) to the Central Government within fifteen days from the date of receipt of such reply or observations;
(c) in case the auditor fails to get any reply or observations from the Board or the Audit Committee within the stipulated period of forty-five days, he shall forward his report to the Central Government along with a note containing the details of his report that was earlier forwarded to the Board or the Audit Committee for which he has not received any reply or observations;
(d) the report shall be sent to the Secretary, Ministry of Corporate Affairs in a sealed cover by Registered Post with Acknowledgement Due or by Speed Post followed by an e-mail in confirmation of the same;
(e) the report shall be on the letter-head of the auditor containing postal address, e-mail address and contact telephone number or mobile number and be signed by the auditor with his seal and shall indicate his Membership Number; and
(f) the report shall be in the form of a statement as specified in Form ADT-4.

(3) In case of a fraud involving lesser than the amount specified in sub-rule (1), the auditor shall report the matter to Audit Committee constituted under section 177 or to the Board immediately but not later than two days of his knowledge of the fraud and he shall report the matter specifying the following:-
(a) Nature of Fraud with description;
(b) Approximate amount involved; and
(c) Parties involved.

(4) The following details of each of the fraud reported to the Audit Committee or the Board under sub-rule (3) during the year shall be disclosed in the Board’s Report:-
(a) Nature of Fraud with description;
(b) Approximate Amount involved;
(c) Parties involved, if remedial action not taken; and
(d) Remedial actions taken.

(5) The provision of this rule shall also apply, mutatis mutandis, to a Cost Auditor and a Secretarial Auditor during the performance of his duties under section 148 and section 204 respectively.”; 

Now onerous duties has been cast on the auditors, cost auditors and secretarial auditors to report frauds and the process for reporting auditors has been laid down in the above notification. 

Non compliance with listing regulations - penalties thereof

SEBI has vide its circular no. CIR/CFD/CMD/12/2015 dated 30th November, 2015 laid down certain uniform fine structure for non compliance with listing regulations regarding non submission of certain periodic disclosures and standard operating procedures for suspension and revocation of suspension of trading of specified securities for such non compliances thereof.

Accordingly for non submission of corporate governance compliance report within the period specified in regulation 27(2) of the listing agreements will entail fine of Rs.1000/- per day of non-compliance till the date of compliance. This is in case of first non compliance. For each subsequent non compliances, it is Rs.2000/- per day of non compliance till the date of compliance.

Similarly it is the same for non submission of shareholding pattern u/r 31 with a further condition specified that if the non compliance continues for more than 15 days, additional fine of 0.1% of the paid up capital of the company or Rs.1 crore, whichever is less.

In case of non submission of the financial results u/r 33 thereof, the fines are Rs.5000/- per day for 1st non compliance and Rs.10000 per day for subsequent non compliances and if the non compliance continues for 15 or more days, then fine structure is as described above.

In case of non submission of annual report u/r 34, if the non compliance continues for five more days, then fine of Rs.1000 per day until the date of compliance for 1st non compliance and Rs.2000/- per day for subsequent non compliances.

Paid up capital is taken as at the beginning of the financial year in which the non compliance occurs.

Further standard operating procedures have been laid down for suspension of trading in case the non compliances under the above mentioned regulations continues for two consecutive quarters and in case of annual report for two consecutive financial years.

The SEBI circular can be found at its website. 

Aadhar based e-KYC process

SEBI vide circular dated October 8, 2013, enabled Aadhaar based e-KYC service offered by UIDAI for KYC verification. Intermediaries have sought clarifications from SEBI on certain operational aspects of the same. It is clarified that for accessing the details enabling client identification and authentication from UIDAI based on client authorisation, on voluntary basis, intermediaries who utilize the services of KYC Service Agencies (KSAs) would be registered as KYC User Agencies (KUA) with UIDAI.

1. For entering into account based relationship, the client may provide the following information to the intermediary: i. Name ii. Aadhaar number iii. Permanent Account Number (PAN)

2. The above information can be provided by the client electronically including through any web enabled device.

3. The intermediary shall perform verification of the client with UIDAI through biometric authentication (fingerprint or iris scanning). Mutual Funds can also perform verification of the client with UIDAI through One Time password (OTP) received on client’s mobile number or on e-mail address registered with UIDAI provided, the amount invested by the client does not exceed Rs. 50,000 per financial year per Mutual Fund and payment for the same is made through electronic transfer from the client’s bank account registered with that Mutual Fund.

4. PAN of such client is to be verified from the income tax website.

5. After due validation of Aadhaar number provided by the client, the intermediary (acting as KUA) shall receive the KYC information about the client from UIDAI through KSA.

6. The information downloaded from UIDAI shall be considered as sufficient information for the purpose of KYC verification. The intermediary shall upload this KYC information on the KRA system in terms of KRA Regulations.

7. In case material difference is observed either in the name (as observed in the PAN vis-a-vis Aadhaar) or photograph in Aadhaar is not clear, the intermediary shall carryout additional due diligence and maintain a record of the additional documents sought pursuant to such due diligence.

8. The records of KYC information so received shall be maintained by the intermediary as per the SEBI Act, Regulations and various circulars issued thereunder.  

HUF/ Karta cannot become partner in LLP

MCA has vide its circular no. 2/2016 clarified that Hindu Undivided Family or its Karta cannot become a partner or a designated partner of a Limited Liability Partnership. As per section 5 of the LLP Act, 2008 only an individual or a body corporate can become a partner in LLPs. Since HUFs are not treated as a body corporate it cannot become a partner in a LLP.

MCA circular is available here