Practice Areas

Real Estate (Regulation and Development) Act, 2016 – [RERA]:

The much awaited and widely acclaimed Real Estate Regulation and Development Act, 2016 comes into force from May 1, 2017.

The Act seeks to regulate transactions between buyers and promoters of residential/commercial real estate projects to ensure: (a) Consumer protection and (b) Standardization of business practices in the sector. It does so through establishment of Real Estate Regulatory Authority for regulation and promotion of the real estate sector.

The entire aim & objective of the Act is to protect the interest of the consumers in the Real Estate Sector by creating transparent and efficient forum and to establish an adjudicating mechanism for speedy disputer redressal.

Key Points Addressed:

  • The Act makes registration of Real Estate projects and real estate agents with the authority mandatory.
  • It mandates that 70% of the amount collected from the buyers of the project be used only for the construction of that project. The provision seeks to address the practice of builders using money from an existing project for other project, resulting in delays in completion.
  • Promoters are barred from changing plans and design without consent of consumers.
  • The promoter shall not accept more than 10% of the total cost of the property as an advance payment without entering into a written agreement.
  • The Act also ensures that the promoter will have to pay up to 10% of the project cost as penalty if he does not register his property.
  • Establish fast track dispute resolution mechanisms for settlement of disputes through adjudicating officers and Appellate Tribunal. The bill bars civil courts from taking up matters defined in it.

Cross Border Mergers: A Reality:

Notification of Section 234 of the Companies Act, 2013 and Rule 25A of Compromise, Arrangement and Amalgamations, Amendment Rules, 2017 as notified on 13.04.2017 has paved way for long awaited Cross Border Merger provisions to be a legally recognized in India. Pursuant to this, a Foreign Company based outside India can merge or amalgamate with an Indian Company. Further, this amendment shall also enable Indian Company to merge with Foreign Company subject to conditions specified in the said Notification. The Companies have to take prior approval from Reserve Bank of India and comply with all regulations as specified in Section 230 to 232 of the Companies Act 2013. The valuation of such schemes is required to be done by professional valuation bodies in the jurisdiction of the transfer Company and should be in accordance with International Accounting Standards. The Act also provides that the merging Company may make payments in Cash or Depository Receipts or partially in Cash and partially in Depository Receipts to the Shareholders of the merging Company.

Employees Compensation (Amendment) Act 2017:

The Employee Compensation Act, 1923 has been amended and notified as on 12.04.2017. Amending the following provisions:

Section 17: The Employer shall at the time of commencement of the employment inform the Employee of his rights to compensation under this Act in writing and through electronic means in English or Hindi or any other official language of the area of employment.

The penalty is increased from Rs. 5,000 and is extended to a definitive amount of Rs 50,000/- which may extend to Rs 1,00,000/-.

Section 30: The minimum amount for which an appeal can be filed before the Appropriate High Court has been increased from Rs. 300/- to Rs 3000/- or any such higher amount as the Central Government may notify.

Omission of Section 30 A: As per the erstwhile Section 30A If any Employee appeals before the Hon’ble High Court against the order of the Commissioner, the Commissioner had power to hold the payment of such Employee until the matter was disposed. However, by way of the Amendment this provision is removed giving much relief to Employees.

Power Giants In Dismay As Supreme Court Order On Tariff Reversed:

Power giants, TATA and Adani group had approached the Regulators in the year 2010 when the Indonesian Coal prices increased, due to which the power giants were forced to produce electricity at the same rate as earlier which caused much inconvenience and heavy monetary losses to the Companies. In the year 2013 CERC passed order in favour of the Power Companies stating that the increase in the price of the Indonesian Coal is an event of Force Majeure and further allowed the said Companies to hike the power charges in order to compensate against the losses caused to them.

However, The Hon’ble Supreme Court while over-ruling the said CERC Order, stated that the Company would have been entitled to increase in tariff only if the Force Majeure event would have occurred in India, any event that took place outside India cannot be considered a Force Majeure.

Sale of a Running Business with all Assets and Liabilities is a Slump Sale, would not attract Section 50(2) of  Income Tax Act

In CIT v. Equinox Solution Pvt. Ltd, the two-judge bench of the Hon’ble Supreme Court held that the Sale of a running business with all its Assets And Liabilities would not be covered by Section 50(2) of the Income Tax Act since such transactions are Slump Sale of a “Long Term Capital Asset” within the ambit of Section 48(2) of the Income Tax Act.

The Assessee-Company sold its entire business as a running concern to another Company and filed return claiming deduction under Section 48 of the Income Tax Act stating that the Sale is in the nature of “Slump Sale” of the going concern being in the nature of Long Term Capital Gain in the hands of the Assessee. The Assessing Officer rejected the contention considering the said transaction as Short Term Capital Gain as specified in Section 50 (2) of the Act.

Assessee successfully appealed the impugned order before the First Appellate Authority. Dissatisfied by the orders of the Appellate Authorities and the Hon’ble High Court, the Revenue Department carried the matter before the Hon’ble Supreme Court. The Supreme Court held that the transaction was rightly treated as Slump Sale of the going concern being “Long Term Capital Asset” under Section 48 as the entire running business with all assets and liabilities having been sold in one go by the assessee-Company.

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