Elective Paper 6D Economic Laws Quick Reference

Referencer for Quick
Revision
Final Course Paper-6D:
Economic Laws
A compendium of subject-wise capsules published in the
monthly journal “The Chartered Accountant Student”
Board of Studies
(Academic)
ICAI
INDEX
Page No. Edition of Students’ Journal Topics
1-3 April 2020 Case Study 1
10-12 May 2021 Case Study 1
22-25 December 2021 Case Study 1
Economic Laws
Economic Laws
This capsule on Paper 6D: Economic Laws, Final (New) course is another step of Board of Studies in its
endeavour to provide quality academic inputs to Final course students of Chartered Accountancy course.
As students are aware that this is an open book examination and duration is 4 hours. The question paper
would comprise five case studies of 25 marks each, out of which the student would be required to attempt any
four. Students must divide their four hours between four case studies to be answered meticulously. Once the
case studies have been opted, give them a comprehensively reading while attempting the same. Some of the
illustrative case studies have been provided below for practice purpose. Students are suggested to solve the
same in examination condition and check for the answers only after attempting the case studies.
Case Study 1
Mr. M R Gulati is renowned and influential real estate agent. Mr. prevailing prices of gold in India. Therefore, Mr. O P Gulati apart
M R Gulati has over 30 year of experience in real estate business from purchase of 70 grams of gold ornaments (jewelry) and 20
and enjoys good reputation, also due to standing of his father grams gold in form of gold coins; he also purchased latest gizmo
Late Mr. Rattan Mal Gulati, in education sector. Mr. Rattan Mal device, which is not yet launched in India. On arrival to India,
Gulati was managing trustee of Easy Key Educational Trust, both Mrs. Radha & Mr. O P Gulati, pass through green channel;
along with other family members as stated below; without making any disclosure/declaration to custom authority.
SN Name Relation to Mr. Status Mr. Pandey, a child-hood friend of Mr. M R Gulati approached
Rattan Mal him, and explained about financial crisis in his business and
Gulati make a proposal to Mr. M R Gulati for sale of his ancestral land
1 Mr. Rattan Mal Self Managing
situated in Vikas-Khand (which now declared as an Industrial
Gulati Trustee
2 Mrs. Shashi Kala Wife Member town, with tax holiday) at price below the market prevailed prices
Secretary of similar land. Mr. M R Gulati, with intention to develop elite
3 Mr. M R Gulati Elder Son Member corporate plaza named ‘G Square’ where Board Meetings, Trade
Trustee Conferences, Conventions, Workshops can be held, plans to buy
4 Mr. O P Gulati Younger Son Member
Trustee land from Mr. Pandey. After negotiation, price for land settled
5 Mrs. Rita Gulati Daughter-in-law Member at INRs 4 crore, out of which he paid INRs 1 crore in cash and
(wife of Mr. M R Trustee balance INRs 3 crore in form of account payee cheque. Said cash
Gulati) of INRs 1 crore later deposited in joint personal account of Mrs.
6 Mrs. Radha Gulati Daughter-in-law Member
and Mr. Pandey in parts by Mr. Pandey. Mr. M R Gulati asked Mr.
(wife of Mr. O P Trustee
Gulati) Pandey to register the plot in favour of Mr. Alok, and wish that
7 Mr. Alok Grand-Son (Son Member his son should join his business.
of Mrs. Rita & Trustee To arrange fund for purchase of land situated in Vikas-
Mr. M R Gulati) Khand, Mr. M R Gulati sold one of his earlier acquired property
for INRs 5 Crore. After making payment of INRs 4 crore with
Easy Key Educational Trust runs group of agriculture
residual amount of INRs 1 crore, Mr. M R Gulati start a housing
colleges. Rita and Radha are cousin from Mohanty family with
project named ‘Paradise’ which comprises 6 flats (1 building of 3
political background, which supports the businesses of Gulati
floors with 2 flat at each floor) in 650 Square Meters.
Family, where ever possible.
Advance equal to 25% of estimated (due to escalation clause)
Post to death of Mr. Rattan Mal Gulati last year, Ms. Alka
price collected from customer who booked the flats, and 20% of
admitted as member trustee to Easy Key Education Trust and
these advance amounts used to complete one of already existing
Mr. M R Gulati took charge as managing trustee. Ms. Alka
ongoing project by Mr. M R Gulati and remaining amount kept
is daughter of Mrs. Radha & Mr. O P Gulati; she is studying
in separate bank account. Project Paradise is not registered with
Agriculture Economics and Business Administration in one of
Real Estate Regulatory Authority yet. Looking into the high
dual degree programme of Kansas State University, Manhattan,
demands among buyers, Mr. M R Gulati decided to enlarge
United States. Mr. O P Gulati remitted US $ 260,000 to Ms.
the project by 4 flats, resultantly increase the floors from 3 to
Alka through authorised person for tuition fee and personal
5. Installment also collected as and when become due, and duly
expenditure.
accounted for in books of accounts and acknowledgment is also
On 21st birthday of Ms. Alka, both the parent Mrs. Radha & Mr.
provided to allottees. Mr. Rahman, who is friend to family of Mr.
O P Gulati, decided to visit to Ms. Alka in States, to congratulate
M R Gulati, is also qualified lawyer by qualification but hotelier by
her and on same day there is 25th Wedding Anniversary of Mrs.
profession, told Mr. M R Gulati about registration requirements
Radha & Mr. O P Gulati. While passing by streets in Manhattan
of project under Real Estate (Regulation and Development) Act,
Mrs. Radha, find Jewelry showroom which offers latest design and
2016; and Mr. M R Gulati applied for same. In mean time Mr.
exciting offers. Mr. O P Gulati agrees to buy gold for Mrs. Radha,
M R Gulati using his influence took permission from Municipal
who was fond of jewelry and from investment prospective. Price
Corporation of city for increase of floor.
offered by Gold smith is US$ 45 per gram, which is cheaper than
08 April 2020 The Chartered Accountant Student
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Economic Laws
Mr. Alok who is fickle minded young-star, graduated from 4. In how many days ‘Power Sun Private Limited’ need to
top notch B-School willing to start his business of solar panels, respond demand notice of operational creditor served on
he asked his father to help him with funds in establishing the 15th November 2019
business. Mr. M R Gulati helped the son to establish the business (a) latest by 22nd November 2019
in form of private company with name ‘Power Sun Private (b) latest by 23rd November 2019
Limited’ by allowing him to use the Vikas-Khand land, in order to (c) Latest by 25th November 2019
avail tax benefit. Mr. Alok raised a loan from financial institution (d) latest by 15th December 2019
at relatively high interest rate. Due to his capricious nature, 5. Can Mr. Alok be held as Benamidar under Prohibition of
no experience in business of solar panel and stiff economic Benami Property Transactions Act, 1988?
conditions; business went into losses. Situation of debt trap arises (a) Yes, because consideration paid by Mr. M R Gulati, but
in second year of operation. Liquidity and solvency position of property registered in his name
business of Mr. Alok is this much bad that he is unable to pay- (b) Yes, because he is party to transaction
off trade creditor, despite multiple month long reminders from (c) No, because he is son of Mr. M R Gulati, who paid the
vendors. One of unpaid operational creditor sent the demand consideration
notice under IBC, 2016 to Power Sun Private Limited on 15th (d) No, because he didn’t participate in negotiation of price
November, 2019. and payment there-of.
Ms. Alka came back to India after completing her academic
programme; she joined the governing body of group of Part B- Descriptive Questions
agriculture colleges operated by Easy Key Educational Trust. She 6. Is the act of Mrs. Radha & Mr. O P Gulati, on arrival to
planned for strategic restructuring of the business. She decided India, without making any disclosure and pass through green
to attain dominance in market and beat the competition by channel along with the article purchased from Manhattan,
acquisition of the only another agriculture college operational United States, constitute an offence under the Prevention of
in state. New programmes are also launched which are research Money Laundering Act, 2002. (5 Marks)
based and featuring industry immersion as unique selling point. 7. ‘Power Sun Private Limited’ find it difficult to run the
She ensured that all the group agriculture colleges of group must operations further and it is already defaulting in making
be accredited from ICAR. Down the line having aspiration, payment to both financial and operational creditors. So, if
that these affiliated colleges either must emerge as autonomous ‘Power Sun Private Limited’ wants to initiate insolvency
colleges or become research based universities. Due to monopoly resolution process, examine whether it can initiate the
in agriculture courses, all fees apart from tuitions fee doubled process? (6 Marks)
from upcoming academic year. 8. Ms. Alka is highly passionate about implementing
the strategies, that she learned during her business
Questions administration classes. Is any of her actions or implication of
Part A- Multiple Choice Questions (2 Marks each) strategies adopted by her is in contravention to provisions of
1. What will be amount of penalty, in regard to excess the Competition Act, 2002? Advise (4 Marks)
remittances in USD to United States done by Mr. O P Gulati:
(a) USD 260,000 Answers
(b) USD 200,000 Part A
(c) USD 60,000 1. (d) USD 30,000
(d) USD 30,000 Reason - Amount involved in contravention is USD 10,000
2. If the price of each flat is INRs 50 lakhs, then how much will because amount permissible by Schedule III of Foreign
be maximum amount of advance to book flat Exchange Management (Permissible Current Account
(a) INRs 1,50,000 Transactions) Regulations 2000 is USD 250,000. Hence
(b) INRs 5,00,000 amount of penalty will be USD 30,000 (i.e. 3 times of USD
(c) INRs 6,00,000 10,000) [Section 13 of Foreign Exchange Management Act,
(d) INRs 6,50,000 1999]
3. Out of the following acts of Mr. M R Gulati, which can be held 2. (b) INRs 5,00,000
as offence under Real Estate (Regulation and Development) Reason – Maximum amount of advance to book flat is INRs
Act, 2016 5,00,000 (i.e. 10% of 50,00,000) [Section 13 (1) of Real Estate
i. Not applied for registration of the project at earlier stage (Regulation and Development) Act, 2016]
(prior to extension of floors) 3. (b) Both i and ii
ii. Receive the advance and installments without/prior Reason - Section 3 require prior registration, if area of land
registration of Project. for proposed project is more than 500 square meters or there
iii. Use 20% of Fund for completion of other already on- are more than 8 units; Since area is 650 square meters, hence
going existing project project require prior registration. No amount should be
(a) Only ii received from allottee prior to registration of project. Hence
(b) Both i and ii both i and ii shall be constituted as offence.
(c) Both i and iii Section 4(2) (l) d require 70% of amount realized
(d) Both ii and iii for project from allottee need to be kept in separate bank
The Chartered Accountant Student April 2020 09
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account and will be used for that projects according to initiate insolvency resolution process against itself as per
degree of completion withdrawal from said account can be section 10 of the Code.
made. Here in this case 80% deposited into separate account,
hence not an offence. Initiation of corporate insolvency resolution process
4. (c) Latest by 25th November 2019 ‘Power Sun Private Limited’: Application shall be filed
Reason – Section 8(2) of Insolvency and Bankruptcy Code, in form and manner with such fee as may be prescribed for
2016 provides, that corporate debtor shall, within a period initiating corporate insolvency resolution process with the
of ten days of the receipt of the demand notice, bring to the Adjudicating Authority.
notice of the operational creditor that either the litigation is • Furnish the information relating to its books of account
pending or payment of unpaid operational debt done. and such other documents relating to such period as may
5. (c) No, because he is son of Mr. M R Gulati, who paid the be specified; and the resolution professional proposed to
consideration be appointed as an interim resolution professional.
Reason –By virtue of 2 (9) (A) (iii) - Property registered in • The Adjudicating Authority shall, within a period of
name of child will not be considered as Benami transaction. fourteen days of the receipt of the application, by an order
Hence this property is not a Benami property and Mr. Alok is either admit the application, if it is complete; or reject
not Benamidar. the application, if it is incomplete. Before rejecting an
6. As per section 3 of the Prevention of Money Laundering Act, application, give a notice to the applicant to rectify the
2002, whosoever directly or indirectly attempts to indulge defects in his application within seven days from the date
or knowingly assists or knowingly is a party or is actually of receipt of such notice from the Adjudicating Authority.
involved in any process or activity connected with the • The corporate insolvency resolution process shall
proceeds of crime including its concealment, possession, commence from the date of admission of the application.
acquisition or use and projecting or claiming it as untainted
property, shall be guilty of offence of money-laundering. However, ‘Power Sun Private Limited’ shall not be entitled
Further as per section 2(u) “proceeds of crime” means to make an application to initiate corporate insolvency
any property derived or obtained, directly or indirectly, resolution process in terms of section 11 of the Code under
by any person as a result of criminal activity relating to a any of the following situations:
scheduled offence or the value of any such property or • If already undergoing a corporate insolvency resolution
where such property is taken or held outside the country, process; or completed corporate insolvency resolution
then the property equivalent in value held within the country process twelve months preceding the date of making of
or abroad. the application
Further as per paragraph 12 of part A of schedule to the • If violated any of the terms of resolution plan which was
Prevention of Money Laundering Act 2002, offences under approved twelve months before the date of making of an
the section 135 of Customs Act, 1962 regarding evasion of application
custom duty; and as per part B of schedule to the Prevention • If a liquidation order already has been made.
of Money Laundering Act 2002, offences under the section 8. As per sub-section 1 to section 4 of the Competition Act,
132 of Customs Act, 1962 regarding False declaration, false 2002, no enterprise or group shall abuse its dominant
documents, are considered as scheduled offence under the position.
Prevention of Money Laundering Act, 2002. Further as per explanation (a) to section 4 “dominant
Since baggage item are also subject to duty beyond position” means a position of strength, enjoyed by an
certain limit and gold and jewelry purchased by Mrs. Radha enterprise, in the relevant market, in India, which enables it
& Mr. O P Gulati either not permitted as baggage through to (i) operate independently of competitive forces prevailing
green channel and not filling declaration leads to evasion in the relevant market; or (ii) affect its competitors or
of duty. Hence, if no declaration made to custom officer on consumers or the relevant market in its favour.
arrival at airport will constitute as scheduled offence.
Hence act of Mrs. Radha & Mr. O P Gulati, on arrival Further as per section 4(2)(a)(ii), there shall be an abuse of
to India; without making any disclosure/declaration to custom dominant position if an enterprise or a group, directly or
authority and pass through green channel along with the indirectly, imposes unfair or discriminatory price in purchase or
article purchased from Manhattan, United States, constitute sale of goods or service.
an offence under the Prevention of Money Laundering Act, In given case, decision by Ms. Alka to attain dominance by
2002. acquisition of the another agriculture college operational in state,
7. As per section 6 of the Insolvency and Bankruptcy Code, is not in contravention to provisions of the Competition Act, 2002.
2016, where any corporate debtor commits a default, a But increasing all the fees apart from tuitions fee to double
financial creditor, an operational creditor or the corporate due to monopoly which comes out of dominance over market by
debtor itself may initiate corporate insolvency resolution killing the competition, is in contravention to provisions of the
process in respect of such corporate debtor in the manner Competition Act, 2002.
as provided under the section 7, 9, & 10 of the Code. Hence, [Note – Acquiring dominance is not offence, but abuse of
yes ‘Power Sun Private Limited’ being a corporate debtor can dominance is an offence.]
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Case Study 2
In the year 2001, Keshav and Tanishk formed Ketan Builders and continued unhindered. Further, Aayush learned from certain
Constructions Private Limited (KBCPL) having registered office other home-buyers that no construction activities were in sight
in Karol Bagh, New Delhi. The company provided spacious and at the earmarked plot. He made up his mind to visit the site
plush homes with well-designed landscapes, gymnasiums along personally and found the unthinkable revelations true. Aayush
with multi-tiered security and recreational spaces involving got extremely worried at the changed scenario. He contacted the
more than one lac sq. ft. in Faridabad and Gurugram. officials of the company but received no reply. At a later date,
Their construction business was flourishing day-by-day. when Aayush confronted the company officials, he was informed
‘KBCPL’ was now a brand which could attract persons from all that the possession would be given within the next two years; but
walks of life i.e. professors, advocates, engineers, professionals, the time passed without anything concrete to happen.
businessmen, government employees holding responsible Sensing dark clouds looming large over his head, he discussed
positions, etc. Expanding business required Keshav and Tanishk the worrying matter with his uncle’s lawyer, Vansh Agarwal. His
to appoint Radhika and her husband Ratnesh, both architects by uncle, Rajinder Kumar, was an exporter, exporting readymade
profession, as directors in the company. Radhika was the younger leather bags of various sizes to South Africa, catering to latest
sister of Tanishk. fashion trends.
Time was passing on. It was in the month of July, 2015, Vansh informed Aayush that due to some significant
that the KBCPL launched yet another project in Greater Noida amendments in Insolvency and Bankruptcy Code, 2016 (IBC,
whose completion date was given as June, 2018. This project 2016) home-buyers were also the financial creditors of the builders
involved construction of residential units, office spaces and a and developers. The premise of this amendment was based on an
mall. The modus operandi was to invest around Rs1200 crore important fact that the home-buyers were also a reckoning force
for developing the township at Greater Noida under ‘committed as other financial creditors; but they were being left high and dry
returns plan’. when it came to playing a role in the decision-making process
The ‘committed returns plan’ required the home-buyers to relating to initiation of insolvency resolution process against the
pay 80% percent of the total sale consideration up-front at the defaulting builder/developer. Accordingly, he could also be referred
time of execution of the MOU and the promoters of KBCPL to as a financial creditor and could initiate insolvency proceedings
would undertake to pay 12% of the ‘advance money’ so received against the company as it had failed to pay back monthly ‘committed
each month to the investors as ‘committed returns’ from the date returns’ to him including non-delivery of apartment and office space
of execution of the MOU till the time actual physical possession at the stipulated time. The other investors could also sail in the same
of residential units/office space, etc., was to be handed over boat as they had the similar fate.
to the buyer. The home-buyers also had the option to choose Vansh further clarified that ‘debt’ in this case was disbursed
the construction-linked payment plan and possession-linked against the consideration for ‘time value of money’ which is
payment plan. the main ingredient that is required to be satisfied in order for
In comparison to construction and possession linked an arrangement to qualify as financial debt and for the lender
payment plan, the ‘committed returns plan’ proved to be an to qualify as a financial creditor under the scheme of IBC. This
attractive one for the home-buyers belonging to different strata acted as silver lining for Aayush.
of society. Like many others, Aayush, by profession a computer In the meantime, Aayush came across a public announcement
engineer and working for a reputed MNC engaged in developing through which claims from ‘Financial Creditors’ as well as
customized software, was also interested in this plan and applied other creditors of KBCPL were invited. On further enquiry, he
for a residential unit as well as an office space. Aayush, who gathered that the company had defaulted in repayment of a term
always wanted to be a self-employed person in the long run, kept loan of Rs100 crore which was obtained from National Bank of
some future plans in mind while applying for the office space. India. Accordingly, the Hon’ble National Company Law Tribunal
Under the ‘committed returns plan’, Aayush was required to (NCLT), Delhi, on the application of National Bank of India, had
make a payment of Rs80.00 lacs (i.e. 80% of the cost of Rs1.00 ordered the commencement of Corporate Insolvency Resolution
crore for a 4BHK apartment and an office space in the mall). He Process (CIRP) against KBCPL. As mentioned in the public
discussed the matter with his father Ramashankar who arranged announcement, Aayush submitted his claim along with proof
Rs65.00 lacs by raising loan against his fixed deposits. Remaining thereof in ‘Form C’ through the specified e-mail.
Rs15.00 lacs were arranged by Aayush as gold loan by pledging
the jewelry of his wife Meera. According to the MOU entered by Questions
Aayush with the company, he would be paid Rs80,000 per month Part A - Multiple Choice Questions (2 Marks each)
through NEFT from October, 2015 onwards till the handing over 1. In the given case study, National Bank of India filed an
of the fully constructed property. The difference of Rs20.00 lacs application for corporate insolvency resolution process
(i.e. Rs1.00 crore minus Rs80.00 lacs) would be paid by Aayush (CIRP) with National Company Law Tribunal, Delhi against
when he will be having the possession of the apartment as well KBCPL for default in repayment of term loan. If everything
as office space. was in perfect order, from which date the corporate
Everything seemed to be fine in the first year of launching the insolvency resolution process would have commenced?
project as the KBCPL paid the ‘committed returns’ to the home- (a) From the date of submission of the application.
buyers without any default but stopped the same thereafter (b) From the date of admission of the application.
without assigning any reason. Similar to the others, Aayush also (c) From the date of ascertaining the existence of default by
noticed the default but comforted himself by assuming that the the NCLT.
‘committed returns’ would start soon after sometime. (d) From the date of appointment of Insolvency Resolution
There was, however, no ray of hope and the default Professional (IRP).
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Economic Laws
2. Suppose Radhika had given a loan of Rs15,00,000 to KBCPL KBCPL did not settle his invoice of Rs5,00,000 raised in this
which remained outstanding when Corporate Insolvency respect. Ultimately, Aayush proceeded to file application for
Resolution Process was ordered. As financial creditor initiating Corporate Insolvency Resolution Process (CIRP)
whether she could be a part of Committee of Creditors against KBCPL with the National Company Law Tribunal
(CoC) after she submitted her claim in ‘Form C’. (NCLT), Delhi. What could have been the documents which
(a) Yes, she could be a part of Committee of Creditors (CoC) Aayush might have furnished along with application filed for
as she had given loan to KBCPL which was more than initiating Corporate Insolvency Resolution Process (CIRP)?
Rs5,00,000. (5 Marks)
(b) No, she being a director of KBCPL, could not be a part of
Committee of Creditors (CoC). Answers
(c) Yes, she could be a part of Committee of Creditors (CoC), Part A
if Interim Resolution Professional (IRP) permitted her 1. (b) From the date of admission of the application.
despite the fact that she was a director of KBCPL. Reason: According to Section 7 (6), the corporate insolvency
(d) Yes, she could be a part of Committee of Creditors resolution process shall commence from the date of
(CoC), if Interim Resolution Professional (IRP) sought admission of the application.
permission of minimum 75% of the shareholders of the 2. (b) No, she being a director of KBCPL, could not be a part of
company carrying voting rights. Committee of Creditors (CoC).
3. In the case study, Ketan Builders and Constructions Private Reason: Refer First Proviso to Section 21 (2) which states that
Limited had demanded advance payment of 80% of the a financial creditor, who is a related party of the corporate
project cost from the intending home-buyers. After coming debtor, shall not have any right of participation or voting in a
into force of Real Estate (Regulation and Development), Act, meeting of the Committee of Creditors (CoC). Radhika being
2016 (RERA), maximum how much advance money can be a director of the company was a ‘related party’ in terms of
demanded by a builder. Section 5 (24).
(a) Not more than 5% 3. (b) Not more than 10%
(b) Not more than 10% Reason: Refer Section 13 (1) of the Real Estate (Regulation
(c) Not more than 15% and Development), Act, 2016 which states that a promoter
(d) Not more than 20% shall not accept a sum more than ten per cent of the cost
4. Suppose the application for Corporate Insolvency Resolution of the apartment, plot, or building as the case may be, as
Process against KBCPL filed by National Bank of India with an advance payment or an application fee, from a person
the National Company Law Tribunal, Delhi is adjudged as without first entering into a written agreement for sale with
incomplete in respect of certain matters. It was intimated to such person and register the said agreement for sale, under
National Bank of India through notice issued on 24th October any law for the time being in force.
2018. The said notice was received by National Bank of India 4. (b) latest by 2nd November, 2018
on 26th October, 2018. The time period within which the Reason: According to Proviso to Section 7 (5), any defect in
defects must be rectified by National Bank of India, so that the application needs to be rectified within 7 days of receipt
insolvency process may be started by the National Company of notice from the Adjudicating Authority. As the notice
Law Tribunal, Delhi. of NCLT was received by National Bank of India on 26th
(a) latest by 31st October, 2018 October, 2018, so it needs to be rectified within 7 days of
(b) latest by 2nd November, 2018 receipt of notice i.e latest by 2nd November, 2018
(c) latest by 5th November, 2018 5. (b) Rs1,00,000
(d) latest by 10th November, 2018 Reason: Refer Section 4 (1) which states that the insolvency
5. In the given case study, Aayush, as ‘financial creditor’, could and liquidation in respect of corporate debtors shall be
also move an application for corporate insolvency resolution triggered where the minimum amount of the default is
process because non-payment of debt by KBCPL was much Rs1,00,000.
more than the minimum amount stipulated for triggering a
default against the company. Indicate that minimum amount Part B
by choosing the correct option: 6 (a). In order to categorise the home-buyers as ‘financial
(a) Rs50,000 creditors’, Section 5 (8) of the Insolvency and Bankruptcy
(b) Rs1,00,000 Code, 2016, which defines the term ‘financial debt’, was
(c) Rs10,00,000 amended by the Insolvency and Bankruptcy Code (Second
(d) Rs20,00,000 Amendment) Act, 2018 w.e.f. 06-06-2018. The amendment
involved inserting Explanation (i) in Clause (f ) of Section 5
Part B- Descriptive Questions (8) as under:
6. In this case study Aayush, who is a home-buyer, has been Explanation (i) - ‘any amount raised from an allottee
categorized as a ‘financial creditor’. You are required to under a real estate project shall be deemed to be an amount
answer the following: having the commercial effect of a borrowing’.
(a) Mention the provisions which enable a ‘home-buyer’ to By inserting above-mentioned Explanation (i) in
be considered as a ‘financial creditor’. (5 Marks) Section 5 (8) (f ), the law makes it clear that the ‘financial debt’
(b) ‘Identify when a ‘financial creditor’ can also be categorised includes any amount which is raised from an allottee under a
as an ‘operational creditor’? (5 Marks) real estate project. Further, such amount shall be deemed to
7. In the given case study, suppose Aayush having developed a be an amount having the commercial effect of a borrowing.
customized software for KBCPL. Despite repeated reminders, The phrase ‘commercial effect of a borrowing’ means that the
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borrower has borrowed money for the purpose of business 7. As required by Section 9 (3) of the Insolvency and Bankruptcy
activities. Code, 2016, Aayush by having developed a customized
The payment made by Aayush to KBCPL for purchasing software for KBCPL, provided a service to KBCPL. Thus, he
an apartment and office space is, therefore, a ‘financial debt’ acts as an operational creditor. So, by section 9 of the IBC,
and accordingly, Aayush is a ‘financial creditor’. operational creditor will be regulated for initiation of CIRP
(b). According to Section 5 (20) of the Insolvency and against Corporate Debtor. As per sub-section 9(3), Aayush as
Bankruptcy Code, 2016, the term ‘operational creditor’ an ‘operational creditor’ might have furnished the following
means a person to whom an operational debt is owed and documents along with the application for CIRP:
includes any person to whom such debt has been legally (a) a copy of the invoice demanding payment or demand
assigned or transferred. notice delivered by the operational creditor to the
Further, according to Section 5 (21) the term corporate debtor.
‘operational debt’ means a claim in respect of the provision of (b) an affidavit to the effect that there is no notice given by
goods or services including employment or a debt in respect the corporate debtor relating to a dispute of the unpaid
of the payment of dues arising under any law for the time operational debt.
being in force and payable to the Central Government, any (c) a copy of the certificate from the financial institutions
State Government or any local authority. maintaining accounts of the operational creditor
In order to categorise, Aayush as ‘operational creditor’ confirming that there is no payment of an unpaid
also, in addition to ‘financial creditor’, he should have made operational debt by the corporate debtor, if available.
provision of goods, for example, supply of construction [this requirement under (c) is not mandatory w.e.f. 06-
material to KBCPL and the payment for which remains 06-2018]
unpaid. Or else, he should have made provision of certain (d) a copy of any record with information utility confirming
services but the company, till date, has not honoured the that there is no payment of an unpaid operational debt by
invoice raised by him. Another limb of operational debt is the corporate debtor, if available; and
‘employment dues’ i.e. Aayush was/is in the employment of (e) any other proof confirming that there is no payment of
the company but his employment dues are still pending. an unpaid operational debt by the corporate debtor or
such other information, as may be prescribed.
Case Study 3
Rajath and his two sons, Lokesh and Ramesh are the promoters association, entered into an Understanding for price fixing with
of RAJATH BEVERAGES LTD (RBL). Rajath is the Chief the sole purpose of defeating competition during the time of
Managing Director (CMD) of the Company. scarcity. However, the said Understanding was not in writing and
Lokesh looks after finance and marketing; Ramesh takes care also not intended to be enforced by legal proceedings.
of production and human resources. In due course of time, RBL entered into a joint venture
Production unit is located in Patna, Bihar. The business of agreement with RAMAN PULP PRIVATE LIMITED (RPPL)
the Company is manufacturing and selling of mineral water. of Punjab to ensure continuous supply of mango pulp and some
The company was formed with a small investment of Rs25 Lacs other raw materials to its mango juice manufacturing unit. With
initially as a private limited company, however, later converted this JV and some other continuous supplies arrangements, RBL
into an unlisted Limited Liability Company. The promoters, could gradually reach an advantageous position in Bihar for local
through their hard work and business competence ensured that sales of Mango Juice within the State. Production and sales of
RBL is profitable. RBL increased by more than 10 times within a short period of
Lokesh is an ambitious as well as a shrewd business man. He time.
always tried to beat the competition through flexibility in pricing RBL also entered into various distribution agreements with
of his products. Sometimes he even sold some of the products different retail distributors within the state of Bihar to sell its
at prices below the costs. He always looked for new avenues for products only in the area exclusively identified or allocated to
business development, diversification and expansion, for which each of them. Different agreements relating to prices, quantities,
Ramesh ably assisted him by providing him with the required bids and market sharing with the competitors and other non-
feasibility reports, analysis and technical information. competing entities were also entered into by RBL.
Years passed. Board of Directors of RBL decided to go for RBL enhanced its production efficiency, introduced various
public issue and listing of its Equity Shares, mainly for expansion, cost saving measures, and could substantially increase its market
initially with setting up a new large scale mango juice preparation share in the sale of its products over a period of time. Many
plant. The public offer was a great success and the required shares of the bankers, financial institutions and potential investors
were duly allotted. approached the Company, offering further financial assistance/
A new large scale mango juice manufacturing plant was investment. With all the productive measures, RBL could achieve
established in Patna, location next to the existing mineral water the position of strength in Bihar market to operate independently
unit. First year of operation was just breakeven. However, of competitive forces. RBL soon also diversified into other
unfortunately, the second year of operation turned out to be segments of businesses in Beverages.
negative for the Mango Juice Unit due to bad monsoons and bad However, the continuing business competition also resulted
weather. There was scarcity in supply of mangoes, mango pulp in the Commission receiving formal information from one of the
and some other basic raw materials required for production of Trade Associations in Bihar that there is abuse of dominance by
mango juice during the year 2017 in Bihar. Consequently, all the RBL by contravening various provisions of the relevant law. The
mango juice manufacturing units in Bihar, through their trade Commission initiated an enquiry and was of the opinion that

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Economic Laws
there exists a prima facie case and directed the Director General 4. All the mango juice manufacturing units in Bihar, through
(DG) to cause an investigation to be made into the matter and their trade association, entered into an Understanding for
report the findings to the Commission. price fixing with the sole purpose of defeating competition
After due investigation, the DG submitted his Report to during the time of scarcity. However, the said Understanding
the Commission within the specified period. However, the was not in writing and also not intended to be enforced by
allegations against RBL of the contravention of the law could legal proceedings. The Oral Understanding entered into by
not be substantiated during investigation and were found to be Trade Association of Bihar in the aforesaid case:
mainly because of the business competition. The Report of the (a) Is only an arrangement, not enforceable
DG recommended that there is no contravention, since there is (b) Can be converted into a written Agreement at a later
no appreciable adverse effect on competition. date and can be enforceable only thereafter.
The Commission forwarded copies of the Report to both (c) a valid Agreement
the parties. After due consideration of the objections and (d) a valid Agreement only if all the parties involved therein
suggestions, the Commission agreed with the recommendations confirm it in writing at a later date.
of the DG, closed the matter and passed the appropriate Orders. 5. Lokesh tried to beat the competition sometimes even by
selling some of the products at prices lesser than costs. The
Questions sale of goods or provision of services, at a price below the
Part A- Multiple Choice Questions (2 Marks each) cost, as may be determined by the regulations, of production
1. Board of Directors of RBL decided to go for public issue and of the goods or provision of services, with a view to reduce
listing of its Equity Shares, for business expansion, initially competition or eliminate the competitors is termed as:
with setting up a new large scale mango juice preparation (a) Monopolistic price
plant. The public offer was a great success and the required (b) Minimum Retail Price (MRP)
shares were duly allotted. In the context of above case, which (c) Eliminatory Price
one of the following statement is correct? (d) Predatory Price
(a) Shares cannot be considered as “goods”, since nothing
has to do with manufacturing, processing, or mining. Part B- Descriptive Questions
(b) Shares can be considered as “goods” at the share 6. With all the productive measures, RBL could achieve the
application stage, since application monies are paid for position of strength in Bihar market to operate independently
acquisition of shares. of competitive forces. “An enterprise has the legal right to
(c) Shares can be considered as “goods” only during their grow its business and achieve the position of strength to the
purchase or sale i.e. trading in the Stock market or maximum extent possible, unless such position has been
otherwise. intentionally exploited to gain undue advantages”. Analyze
(d) Shares can be considered as “goods” after allotment. the statement with reference to the provisions of the relevant
2. RBL also entered into a joint venture agreement with law in India, including the factors which the Commission
RAMAN PULP PRIVATE LIMITED (RPPL) of Punjab to will consider to determine the facts. (5 Marks)
ensure continuous supply of mango pulp and some other 7. The Commission initiated an inquiry and was of the opinion
raw materials to its mango juice manufacturing unit. Joint that there exists a prima facie case and directed the Director
Venture agreement between RBL and RPPL: General to cause an investigation to be made into the matter
(a) Is an anti-competitive agreement, since resulted in and report the findings to the Commission.
increased turnover for one company, as against others (a) Instead of any directions by the Commission, is there
(b) Not to be considered anti- competitive, since it enhanced any possibility of a Director General to suo motu
the production efficiency of RBL initiate investigation in the above case under any of the
(c) Is anti- competitive, since RBL could reach advantageous provisions of the relevant Indian law? (1 Mark)
position in Bihar because of this Agreement (b) Imagine in the aforesaid case, the Commission passes
(d) The agreement between RBL and RPPL is void and an Order directing the division of the enterprise, RBL.
inoperative ab- initio since resulted in more sales to one “The Order of the Commission may provide for any or
Company as compared to others in Bihar. all the matters on division of enterprise enjoying position
3. The continuing business competition also resulted in the of strength as stated under the law”. Enumerate the
Commission receiving formal information from one of the provisions of the relevant Law on the matters that may
Trade Associations in Bihar that there is abuse of dominance be provided for in the Order? (3 Marks)
by RBL by contravening various provisions of the relevant (c) The Articles of Association of RBL provides that the
law. The composition of the said Commission, which received Managing Director and the Directors are entitled to
the formal information hereinabove, as per the relevant law claim compensation to the extent mentioned therein, if
shall be: there is division of enterprise for any reasons and in case
(a) Chair Person and not less than 2 and not more than other they cease to hold their office(s) in consequence thereof.
6 members, to be appointed by the State Government. Is Ramesh, one of the directors of RBL, on cessation of
(b) Commissioner and not less than 3 and not more than 5 his office entitled to claim compensation, because of
members, to be appointed by the Central Government the position stated in point (b) above i.e. Commission
(c) Chair Person and not less than 2 and not more than other passing an Order for division of enterprise? (1 Mark)
6 members, to be appointed by the Central Government. 8. In the above case, RBL has entered into various types
(d) Chief Executive officer and not less than 3 and not of agreements with various entities. “Any Agreement at
more than 5 members, to be appointed by the State different stages or levels of the production chain in different
Government markets for trade in goods or provision of services shall be
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Economic Laws
void, if it causes or is likely to cause an appreciable adverse their nature or according to commercial usage have no
effect on competition in India”. Identify and enumerates such connection with the subject of such contracts or
Agreements. (5 Marks) (e) uses its dominant position in one relevant market to
enter into, or protect, other relevant market.
Answers For the purpose of determining whether an enterprise enjoys
Part A dominant position or not under Section 4, the Competition
1. (d) Commission of India (CCI) shall have due regard to all or any of
Reason: Refer to Section 2 (i) (B) of the Competition Act, 2002 the following factors viz,
2. (b) (i) Market Share of the enterprise;
Reason: Refer to Provision to Section 3 (3) of the Competition (ii) Size and Resource of the enterprise;
Act, 2002 (iii) Size and importance of the competitors;
3. (c) (iv) Economic power of the enterprise including commercial
Reason: Refer to Section 8 of the Competition Act, 2002 advantages over competitors;
4. (c) (v) Vertical integration of the enterprises or sale or service
Reason: Refer to Definition in Section 2 (b) of the Competition network of such enterprises;
Act, 2002 (vi) Dependence of consumers on the enterprise;
5. (d) (vii) Monopoly or dominant position whether acquired as a result
Reason: Refer to Explanation (b) to Section 4 of the Competition of any statute or by virtue of being a Government or a public
Act, 2002 sector undertaking or otherwise;
(viii) Entry barriers including barriers such as regulatory barriers,
Part B financial risk, high capital cost entry, marketing entry
6. “An enterprise has the legal right to grow its business and barriers, technical entry barriers, economies of scale, high
achieve the position of strength to the maximum extent cost of substitutable goods or service for consumers;
possible, unless such position has been exploited to gain (ix) Countervailing buying power;
undue advantages”. (x) Market structure and size of market;
It may be noted that attaining the position of strength (xi) Social obligations and social costs;
or “dominant position” is not prohibited; Every enterprise (xii) Relative advantage, by way of the contribution to the
has the freedom and legal right to grow up; but it is only economic development, by the enterprise enjoying a
the “abuse of dominant position” in an area, affecting the dominant position having or likely to have an appreciable
competition and as such prohibited under the Competition adverse effect on competition;
Act, 2002. Mere achieving of the position of strength in Bihar (xiii) Any other factor, which the Commission may consider
market by RBL to operate independently of competitive relevant for the inquiry.
forces does not come under the area of prohibition under any It may be noted that the Commission shall have due regard to
of the Indian laws. the “relevant geographic market” and “relevant product market”
Abuse of dominant position impedes fair competition for determining as to what constitutes a “relevant market”
between firms, exploits consumers and makes it difficult for For determining the “relevant geographic market” the
the other players to compete with the dominant undertaking Commission shall have due regard to all or any of the following
on merit. factors, viz.,
Under Section 4 Explanation (a) of the Competition (i) Regulatory trade barriers;
Act, 2002, “dominant position” means a position of (ii) Local specification requirements;
strength, enjoyed by an enterprise, in the relevant market, in (iii) National procurement policies;
India, which enables it to— (iv) Adequate distribution facilities;
(i) Operate independently of competitive forces prevailing (v) Transport costs;
in the relevant market; or (vi) Language;
(ii) affect its competitors or consumers or the relevant (vii) Consumer preferences;
market in its favor. (viii) Need for secure, regular supplies or rapid after-sales service.
Section 4 (1) of the Competition Act, 2002 expressly prohibits Similarly, while determining “relevant product market”, the
any enterprise or group from abusing its dominant position. Commission shall have due regard to all or any of the following
There shall be “abuse of dominant position” if an enterprise factors viz.,
or group (i) Physical characteristics or end use of goods;
(a) directly or indirectly, imposes unfair or discriminatory- (ii) Price of goods or service;
(i) condition in purchase or sale of goods or services or (iii) Consumer preferences;
(ii) price in purchase or sale (including predatory price) (iv) Exclusion of in-house production;
of goods or services or (v) Existence of specialized producers;
(b) limits or restricts production of goods or provision of (vi) Classification of industrial products.
services or market there for or technical or scientific 7. (a) No. The role of the Director General is actually to
development relating to goods or services to the assist the Competition Commission in the effective
prejudice of consumers or discharge of its duties. The Director General would be
(c) indulges in practice or practices resulting in denial of able to act only if so directed by the CCI, but will not
market access in any manner or have any suo motu powers for initiating investigations.
(d) makes conclusion of contracts subject to acceptance Under Section 16, the Central Government may,
by other parties of supplementary obligations which by by notification, appoint a Director General for the

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Economic Laws
purposes of assisting the Commission in conducting Memorandum or Articles of Association, an officer
inquiry into contravention of any of the provisions of of a Company, who ceases to hold office as such in
the Competition Act, 2002 and for performing such consequence of the division of an enterprise, shall not
other functions as are, or may be, provided by or under be entitled to claim any compensation for such cesser.
the Act. [Section 28 (3) the Competition Act, 2002]. As such,
(b) Section 28 of the Competition Act, 2002 deals with the Ramesh is not entitled to claim any compensation.
provisions relating to division of enterprise enjoying 8. Any agreement amongst enterprises or persons at different
dominant position. stages or levels of the production chain in different
The Commission may, notwithstanding anything contained markets, in respect of production, supply, distribution,
in any other law for the time being in force, by Order in storage, sale or price of, or trade in goods or provision of
writing, direct division of an enterprise enjoying dominant services shall be a void agreement if it causes or is likely
position to ensure that such enterprise or group does not to cause an appreciable adverse effect on competition in
abuse its dominant position. India, including-
The Order of the Commission referred to above may Tie in arrangement: includes any agreement, requiring
provide for all or any of the following matters, viz.,- a purchaser of goods, as a condition of such purchase, to
(i) The transfer or vesting of property, rights, liabilities purchase some other goods;
or obligations; Exclusive supply agreement: includes any agreement
(ii) The adjustment of contracts either by discharge or restricting in any manner the purchaser in the course of his
reduction of any liability or obligation or otherwise; trade from acquiring or otherwise dealing in any goods other
(iii) The creation, allotment, surrender or cancellation of than those of the seller or any other person.
any shares, stocks or securities; Exclusive Distribution agreement: includes any agreement
(iv) The formation or winding up of an enterprise or to limit, restrict or withhold the output or supply of any
the amendment of the memorandum of association goods or allocate any area or market for the disposal or sale
or articles of association or any other instruments of the goods.
regulating the business of any enterprise; Refusal to deal: includes any agreement, which restricts or
(v) The extent to which, and the circumstances in which, is likely to restrict, by any method the persons or classes of
provisions of the Order affecting an enterprise may persons to whom goods are sold or from whom goods are
be altered by the enterprise and the registration bought.
thereof; Resale price maintenance: includes any agreement to sell
(vi) Any other matter, which may be necessary to give goods on condition that the prices to be charged on the
effect to the division of the enterprise or group. resale by the purchaser shall be the prices stipulated by the
(c) Notwithstanding anything contained in any other law seller unless it is clearly stated that prices lower than those
for the time being in force or in any contract or in any prices may be charged.
9
Economic Laws
CA FINAL - PAPER 6D - ECONOMIC LAWS
This capsule on Paper 6D: Economic Laws, Final (New) course is another step of the Board of Studies in its endeavour
to provide quality academic inputs to Final course students of Chartered Accountancy course. As students are aware
that this is an open book examination and the duration is 4 hours. The question paper would comprise of five case
studies of 25 marks each, out of which the student would be required to attempt any four. Students must divide
their four hours between four case studies to be answered meticulously. Once the case studies have been opted, give
them a comprehensively reading while attempting the same. Some of the illustrative case studies have been provided
below for practice purpose. Students are suggested to solve the same in examination condition and check for the
answers only after attempting the case studies.
Case Study 1
Ms. Drishel Patel is a young dynamic IT professional and currently An understanding has been reached among the manufacturers
resides in America. She holds the NRI status. Ms. Drishel works of cement to control the price and supply of cement, but the
for Blip LLC, which has a wholly owned subsidiary Blip India understanding is not in writing and it is also not intended to be
Private Limited (here-in-after referred to as Blip). Blip deals in enforced by legal proceedings.
the mobile operating system. Blips’ operating system ‘Diordna’ is Rock Solid Private Limited (RSPL) is the substantial supplier
widely popular among the mobile phone manufacturers in India. of clay, slate, blast furnace slag, silica sand which are essential
Blip also offers proprietary applications and services (such as Blip raw materials of cement, and a shortage of same observed in
Maps, Blip Internet Explorer, and Blip Tube, etc.). Blips Mobile the market. Mr. Arya on behalf of SCPL has executed a supply
Services (BMS) is a bundled suite of Blips’ applications and agreement with RSPL on 20th October 2020 wherein it is provided
services and such apps and services are not available in isolation. that RSPL will not supply these raw materials to any other cement
In trade parlance, the mobile OS is different from OS designed manufacturer, against this the purchase commitment has been
for desktop as they have additional handheld use features. 80% made from SCPL for all their (RSPL) output at price mentioned
of mobile phone, which are in use has Diordna as an operating in such agreement.
system. Solid Cement Limited (SCL) who is another cement
If a mobile manufacturer wants to manufacture a ‘bare’ manufacturer is not happy with the RSPL, because RSPL has
Diordna mobile, it needs to only pass technical tests and accept not supplied the slate and silica power to SCL against the PO
the Diordna License Agreement; but in bare Diordna mobile (Purchase Order) placed by SCL dated 18th October 2020, hence
manufacturer are not permitted to include any of BMS such as board of directors of SCL is considering taking legal remedy
Blip Maps, Blip Internet Explorer, Blip Tube. If a manufacturer against RSPL in the capacity of the consumer. SCL has borne
wants to manufacture a mobile having Diordna with pre- loss on account of the stock-out situation emerged from the
installed BMS, he has to enter into two additional agreements non-availability of raw material. It was found that only half of
with Blip i.e. Mobile Application Distribution Agreement and the consideration was paid and 30 days credit was available for
Anti Fragmentation Agreement. BMS couldn’t be availed directly making payment of the remaining balance, regarding which
by the end-users, in case it is not pre-installed. payment promise is made by SCL.
Ms. Drishel got married to Mr. Joe Harris around a year back. Mr. Alok who is co-owner in SCPL with Mr. Arya, conducts
The marriage took place in a traditional saptapadi ceremony in the market study and concluded that the RMC (Readymix
the backyard of Harris’ residence where only close relatives were Concrete) segment has favourable opportunities because
present. Marriage was registered six months later due to a widely currently competition is relatively less in RMC and RMC
observed lockdown to prevent the widespread of COVID-19. based block segments. Moreover, RMC based block has wide
Indian traditions have a deep-rooted impact on Harris acceptance as an economical replacement of the brick-based
family because the grandmother of Joe is from India. Joe’s structure. Hence SCPL must diversify into the RMC segment.
grandfather is also influenced by Indian culture, hence willing Mr. Arya expresses his concerns over the availability of funds
to migrate to India along with Joe’s grandmother to spend the for the same. Mr. Anil the third member of SCPL, advices
rest of their life. Considering this in the month of January 2021, both the co-owners to float capital through the capital market.
Drishel and Joe acquired a luxurious apartment in joint name in After numerous rounds of discussions, SCPL decided to go for
India, so that Joe’s grandparent can stay there comfortably. Half public issue and listing of its equity shares, largely for business
of the consideration was paid by Ms. Drishel out of the Non- expansion, initially with setting up a new large scale RMC plant.
Resident Account maintained by her, and the remaining half by Mrs. Patel, the mother of Ms. Drishel, who also resides
Joe through proper banking channel, and that too in the manner with her daughter and son-in-law in States and holds NRI
prescribed. To identify the flat and fulfill the legal requirement status, acquired two immovable properties (one farmhouse for
for registration of the same, Ms. Drishel took the help of her elder residential purposes and another an agricultural land, because
cousin Mr. Arya Patel, who is permanently residing in India. she studied botany during her master and willing to develop
Mr. Arya along with two of his friends owns a cement botanical garden there) in their native place situated near to
manufacturing company in India called ‘Strong Cement Private Rajkot district of Gujarat in India in the year 2020-2021 for total
Limited’ (SCPL). The SCPL supplies cement to various builders consideration equivalent to USD 470,000. She made payment for
and retail consumers through a network of stockist and retailers. the same out of her non-resident account.
06 May 2021 The Chartered Accountant Student
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Economic Laws
Multiple Choice Questions per the provisions of the Foreign Exchange Management
1. Whether the understanding reached among the Act and relevant regulations made thereunder?
manufacturers of cement be termed as an agreement (iii) Can Joe acquire another property which is agricultural
(a) No, because it is not in writing land, in joint ownership with Drishel for investment
(b) No, because it is not intended to be enforced by legal purposes?
proceedings
(c) No, because it is not in writing and also not intended to Answer to MCQs
be enforced by legal proceedings 1. (d): Reason - As per section 2(b) of the Competition Act, 2002
(d) Yes ‘agreement’ includes any arrangement or understanding or
action in concert whether or not, is formal or in writing, or is
2. The agreement is executed among SCPL and RSPL on 20th intended to be enforceable by legal proceedings.
October 2020, can be categorised as In view of the above definition, an understanding reached
(a) Exclusive supply agreement among the cement manufacturers to control the price and
(b) Tie-in arrangement supply of cement will be an ‘agreement’ even though the
(c) Refuse to deal agreement understanding is not in writing and not intended to be
(d) None of these enforceable by legal proceedings.
3. Can SCL assume the position of the consumer for the 2.(c) : Explanation to sub-section 4 of section 3 of the Competition
purpose of competition laws? Act, 2002 describe five prohibited vertical agreements, and
(a) No, because only half of the consideration paid by SCL here relevant among those are;
(b) No, because SCL is not buying slate and silica sand for Tie in arrangement includes any agreement, requiring a
personal use or direct resale purchaser of goods, as a condition of such purchase, to
(c) No, because only an individual can be a consumer purchase some other goods;
(d) Yes Exclusive supply agreement includes any agreement
restricting in any manner the purchaser in the course of his
4. Which of the following statements is correct regarding the trade from acquiring or otherwise dealing in any goods other
acquisition of immovable property in India by Mrs. Patel? than those of the seller or any other person.
(a) Mrs. Patel is not allowed to acquire any sort of immovable Refusal to deal includes any agreement, which restricts or
property in India is likely to restrict, by any method the persons or classes of
(b) Mrs. Patel is not allowed to acquire farmhouse and persons to whom goods are sold or from whom goods are
agricultural land in India bought.
(c) Mrs. Patel may acquire the farmhouse, but not
agricultural land in India 3.(d): The term ‘consumer’ is defined in section 2(f ) of the
(d) Mrs. Patel may acquire both the farmhouse and Competition Act, 2002. Consumer means any person who
agricultural land in India buys any goods for a consideration which has been paid
or promised or partly paid and partly promised, or under
5. SCPL decided to go for public issue and listing of its equity any system of deferred payment and includes any user of
shares, largely for business expansion, initially with setting such goods other than the person who buys such goods
up a new large scale RMC plant. In the context of shares, for consideration paid or promised or partly paid or partly
which one of the following statements is correct under the promised, or under any system of deferred payment when
Competition Act, 2002? such use is made with the approval of such person, whether
(a) Shares can’t be considered as “goods” because nothing such purchase of goods is for resale or for any commercial
has to do with manufacturing, processing or mining. purpose or for personal use.
(b) Shares shall be considered as “goods” only if fully paid-up.
(c) Shares shall be considered as “goods” after the application 4. (b): As per regulation 3 of Foreign Exchange Management
made for shares since application monies are paid for the (Acquisition and Transfer of Immovable Property in India)
acquisition of shares. Regulations, 2018, an NRI may acquire immovable property
(d) Shares shall be considered as “goods” after allotment. in India other than agricultural land/ farmhouse/ plantation
property subject to two conditions;
Descriptive Questions a. Consideration, if any, for transfer, shall be made out of
1. Decide, whether Blip has dominance and does it abused funds received in India through banking channels by
its dominant position? Support your decision with legal way of inward remittance from any place outside India
backing. or funds held in any non-resident account maintained
in accordance with the provisions of the Act, rules, or
2. In the light of the given facts, evaluate the following situations regulations framed thereunder.
in terms of the FEMA, 1999: b. Provided further that no payment for any transfer of
(i) Can Mr. Joe acquire immovable property in India, immovable property shall be made either by traveler’s
independently? cheque or by foreign currency notes or by any other mode
(ii) Is the acquisition of a flat by Drishel and Joe jointly, valid as other than those specifically permitted under this clause.
The Chartered Accountant Student May 2021 07

11
Economic Laws
Since Mrs. Patel holds the status of NRI, hence not allowed to 2. As per regulation 6 of the Foreign Exchange Management
acquire farmhouse and agricultural land in India (Acquisition and Transfer of Immovable Property in India)
Regulations, 2018, a person resident outside India, not being
5.(d): Goods under section 2 (i) of the Competition, Act 2002 a Non-Resident Indian or an Overseas Citizen of India, who
means goods as defined in the Sale of Goods Act, 1930 and is a spouse of a Non-Resident Indian or an Overseas Citizen
includes, products manufactured, processed, or mined; of India may acquire one immovable property (other than
debentures, stocks, and shares after allotment; in relation agricultural land/ farmhouse/ plantation property), jointly
to goods supplied, distributed, or controlled in India, goods with his/ her NRI/ OCI spouse, subject to following conditions
imported into India. (1) The consideration for the transfer, shall be made out of
funds received in India through banking channels by
Answers to Descriptive Questions way of inward remittance from any place outside India
1. Facts in the given case are more or less similar to the case or funds held in any non-resident account maintained
(No. 39 of 2018, Competition Commission of India dated in accordance with the provisions of the Act and the
16.04.2019) of Umar Javeed and Google LLC, wherein legal regulations made by the Reserve Bank;
issue is about dominance and its abuse and also the act of (2) No payment for any transfer of immovable property
Google found in violation of Section 4(2) of the Competition shall be made either by travellers’ cheque or by foreign
Act, 2002. currency notes or by any other mode other than those
In the said case, CCI observed to form a prima facie specifically permitted under this clause;
view about the alleged abusive conduct, it would be first (3) The marriage has been registered and subsisted for a
appropriate to define the relevant market and to determine continuous period of not less than two years immediately
the dominance of accused enterprise therein if any. In the preceding the acquisition of such property;
present case, it is clearly mentioned that mobile OS due (4) The non-resident spouse is not otherwise prohibited
to additional handheld use features are different from OS from such acquisition.
designed for desktop hence all OS for other devices such as Following are the answers in the light of the stated
desktop or laptop shall be excluded from the relevant market. provisions:
Blip appears to be dominant in the relevant market as 80% (i) No, Mr. Joe (a person resident outside India, not
of mobile phones, which are in use have Diordna as the being a Non-Resident Indian or an Overseas Citizen
operating system. of India) can’t acquire immovable property in India,
The signing of the Mobile Application Distribution independently.
Agreement and Anti Fragmentation Agreement is a pre- (ii) No, the acquisition of a flat by Drishel and Joe, jointly
condition for mobile manufacturers to pre-install BMS is not aligned (hence legally invalid, and amount to
(while using Diordna as OS). Further, BMS is also a bundled violation) to the provisions of FEMA and relevant
suite of Blips’ applications and services. In this manner Blip regulations made thereunder, because marriage
reduced the ability of device manufacturers to develop viable has been registered and subsisted for a continuous
alternatives with selected applications and services out of the period of fewer than two years immediately
BMS suite, hence dis-incentivize them. Thereby restricting preceding the acquisition of such property.
technical development to the prejudice of consumers in (iii) No, Joe can’t acquire another property being
violation of Section 4 of the Competition Act, 2002. agricultural land in joint ownership with Drishel for
While reading Section 4 with Section 32 of the Competition investment purposes because;
Act, 2002, it is important to note that the conduct of Blip • The acquisition of agricultural land, farmhouse,
to tie or bundle applications and services is an attempt to and plantation property is specifically prohibited;
eliminate effective competition from the market. There exists and
an element of coercion as the mobile manufacturers are • The time since the marriage took place and
coerced to purchase the BMS suite altogether which results subsisted is less than two years; and
in consumer harm through a reduction in choice of products. • There is a maximum ceiling limit of owning one
property
Case Study 2
Rajeshwari Industries Limited (here-in-after referred to as RIL) it requires more funds. RIL took a term loan of R3.5 crore from
manufactures a wide range of electronic heaters under the brand National Bank (here-in-after referred to as bank). Since the newly
‘Glen’. Glen, which was a popular name among the retailers and developed products, fails to make much impact in the market,
customers till a few years back, has been losing the market share; hence RIL faces a financial crunch and not in a position to serve
the major reason for same is stiff competition from emerging the financial debt.
competitors who are offering a complete range of electronic A pandemic causes another jolt to the financial health of the
products and also offers free delivery at customers address. business, hence on 15th April, 2020 (the due date for payment
To sustain the market share RIL decided to expand the of instalment), RIL conveyed to the bank its inability to repay
product range and improve outbound logistic facilities for which the remaining outstanding loan amount. As of 15th April, 2020,
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the total outstanding amount against RIL is R46 lakh (including Multiple Choice Questions
interest). 1. Can the bank file the insolvency proceedings against RIL?
The officers from the recovery cell and the concerned branch (a) No, the bank can’t take the RIL to insolvency proceedings.
of the bank warns the RIL that default may result in insolvency (b) Yes, the bank can take the RIL to insolvency proceedings
proceedings against the RIL. The RIL pleaded that default is because the default is considered as default, willingness
not wilful, instead, this RIL said it really willing to continue its is irrelevant.
business operations and repay the loan amount as and when (c) Yes, the bank can take the RIL to insolvency proceedings
the business conditions improve. But it seems, it will not be in a because the amount of default exceeds R1 lakh
position to repay the loan at-least in the year to come. (d) No, the bank can’t take the RIL to insolvency proceedings
Mr. Anonymous, an employee in the IT and ERP department because the amount of default is less than the threshold
at RIL uses his workstation to hack the IT server of security limit of R50 lakh.
and intelligence services of the country, such as the research
and analysis wing, and capture the top-secret information. The 2. At what stage, is the laundering process when it reached the
information which he captured, if leaked; can put the defence hands of Mr. Kavir?
and sovereignty of India at severe risk. Mr. Anonymous also (a) Integration
indulge in funding and other arrangements for a terror attack in (b) Layering
the financial capital of India ‘Mumbai’. Indian authorities caught (c) Stratifying
hold of Mr. anonymous while he was transmitting such top- (d) Splitting
secret information through the internet and took him to custody.
One of the executive directors at RIL, Mr. Mohan Bhave 3. What shall be the punishment for the wrongdoing done by
sought some funds into his bank account to acquire any Mr. Anonymous?
immovable property in Mumbai for R 2.5 crore. He has around (a) Fine or rigorous imprisonment for a term which shall not
R1.25 crore in his bank accounts and for the balance amount he be less than three years but which may extend to seven
ask to his friend Mr. Maan in Country M. The friend transferred years.
money to Mr. Ganpat’s Account in Country G. Mr. Ganpat (b) Fine and rigorous imprisonment for a term which shall
transferred the half of funds to Ms. Bhosle in Country B and not be less than three years but which may extend to
remaining half to Ms. Indrani in Country I. Ms. Bhosle and Ms. seven years.
Indrani, in turn, transferred the funds to Mr. Kavir in Country K (c) Fine and rigorous imprisonment for a term which shall
and Ms. Sonam in Country S, respectively. not be less than three years but which may extend to ten
Rocky, the son of Mr. Mohan Bhave is a rock star and singing years.
sensation across the South Asian and European countries. (d) Fine upto R 5 lakh and rigorous imprisonment for a term
Rocky performed numerous successful tours abroad. Rocky has which shall not be less than three years but which may
acquired immovable properties abroad from the consideration extend to seven years.
he accepts from organisers of his shows, he recently buys a
luxurious yacht. 4. Who has the authority to provisionally attach the property of
Rocky accepted said money from Mr. Kavir (in Country K) Mr. Mohan Bhave?
and Ms. Sonam (in Country S) as an advance for his singing i. Director
performance at their functions/parties, with the understanding ii Deputy Director
that on a later date prior to the show date Mr. Kavir and Ms. iii Deputy Director authorised by the Director
Sonam express their inability to arrange functions/parties and iv Judicial Magistrate
request to cancel the performance; and money will be forfeited (a) i, ii, and iv
by Mr. Rocky. In this way, Mr. Mohan Bhave will get money to (b) i, iii, and iv
acquire the immovable property. (c) i and ii
Rocky was arrested by the officers of the Enforcement (d) i and iii
Directorate at Delhi Airport on his return to India for an offence
relating to the possessing and disposal of illegally acquired foreign 5. Within how many days, the authority who provisionally
exchange and taken before the Additional Chief Metropolitan attached the property has to file a complaint with
Magistrate, New Delhi on the very next date. Enforcement Officer Adjudicating Authority?
moved the application to seek ‘judicial remand’ (detention) on (a) Within 14 days from the attachment
the ground that it was necessary to complete the investigation. (b) Within 30 days from the attachment
Office of director conducts an inquiry under section 13 of (c) Within 45 days from the attachment
Prevention of Money-Laundering Act, 2002. Mr. Gulati is an (d) Within 60 days from the attachment
officer of the concerned reporting entity and summoned to
attend the proceeding. Mr. Gulati joined the reporting entity Descriptive Questions
just 3 months back whereas the principle matter of inquiry is 1. Examine the legal position of the stated situations in the light
older than that, hence Mr. Gulati finds the summon unjustified. of the given facts under the Prevention of Money Laundering
Mr. Gulati has to attend a global business conference as a guest Act, 2002, whether Enforcement Directorate is competent
speaker which is falling on same day and date which is mentioned to arrest and take judicial remand of an arrested person?
in summon. Whether the Magistrate before whom a person arrested is

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produced has jurisdiction to authorise the detention of that difficult to detect the origin of the money, thus, it is the stage
person? of layering.
2. Advise the Banks officials who consulted you ‘is the amount of 3.(b): Section 4 of the Prevention of Money Laundering Act
default is significant criteria to invoke application under the 2002 provides for the Punishment for Money-Laundering
Insolvency and Bankruptcy Code for Insolvency Resolution - Whoever commits the offence of money-laundering shall
and Liquidation for Corporate Persons?’ be punishable with rigorous imprisonment for a term which
shall not be less than three years but which may extend to
3. Comment can Mr. Gulati be summoned? Whether a Mr. seven years and shall also be liable to fine.
Gulati is bound to attend the proceeding in person? State the But where the proceeds of crime involved in money-
nature of proceeding taken here under the case study ? laundering relate to any offence specified under paragraph
2 of Part A of the Schedule (i.e. Offences under the Narcotic
Answer to MCQs Drugs and Psychotropic Substances Act, 1985), the maximum
1.(a): A new section 10A inserted (vide Insolvency and Bankruptcy punishment may extend to ten years instead of seven years.
Code (Second Amendment) Act 2020, subsequent to an Since, offence committed by Mr. Anonymous ‘waging or
ordinance dated 5th June 2020) considering the possible attempting to wage war or abetting waging of war, against
adverse impact of the pandemic on businesses, which read the Government of India’, is covered under paragraph 1 of
as notwithstanding anything contained in sections 7, 9, and Part A of the Schedule, hence he will be liable to fine and
10, no application for initiation of corporate insolvency imprisonment for a term which shall not be less than three
resolution process of a corporate debtor shall be filed, for any years but which may extend to seven years.
default arising on or after 25th March 2020 for a period of
six months or such further period, not exceeding one year 4.(d): Section 5(1) of the Prevention of Money Laundering Act
from such date, as may be notified in this behalf. It is also 2002, provides where the Director or any other officer not
provided that no application shall ever be filed for initiation below the rank of Deputy Director authorised by the Director
of corporate insolvency resolution process of a corporate for the purposes of this section, has reason to believe (the
debtor for the said default occurring during the said period. reason for such belief to be recorded in writing), on the basis
Moreover, Ministry of Corporate Affairs vide notification of material in his possession, that
S.O. 1205(E) dated 24th March 2020, in the exercise of the (a) Any person is in possession of any proceeds of crime;
powers conferred by the proviso to section 4 of the Insolvency and
and Bankruptcy Code, 2016, the Central Government hereby (b) Such proceeds of crime are likely to be concealed,
specifies one crore rupees as the minimum amount of default transferred, or dealt with in any manner which may
for the purposes of the said section. result in frustrating any proceedings relating to the
Thus, since the default is taken place after 24th March 2020 confiscation of such proceeds of crime under this
(falling in the specified period under section 10A) and the Chapter,
amount of default of the company is less than R1 crore, hence He may, by order in writing, provisionally attach such
bank can’t drag the RIL for insolvency proceedings. property for a period not exceeding one hundred and eighty
Note- Vide SO 3265 (E) dated 24th Sep 2020 application of days from the date of the order, in such manner as may be
section 10A extended by a further period of 3 months from prescribed.
25th Sep 2020. Further, vide SO 4638 (E) dated 22nd Dec 2020
application of section 10A once again extended by a further 5.(b): Section 5(5) of the Prevention of Money Laundering Act
period of 3 months from 25th Dec 2020 (Hence period 2002 provides that the Director or any other officer who
specified under section 10A ranges from 25th March 2020 to provisionally attaches any property under sub-section (1)
24th March 2021) shall, within a period of thirty days from such attachment,
file a complaint stating the facts of such attachment before
2.(b) : Money laundering is a single process, however; its cycle the Adjudicating Authority.
can be broken down into three distinct stages
• Placement is the first and the initial stage when the crime Answers to Descriptive Questions
money is injected into the formal financial system. 1. The facts given in the case are similar to the case of
• Layering is the second stage, in this money injected Directorate of Enforcement vs. Deepak Mahajan (SC,
into the system is layered and moved or spread over Criminal Appeal No. 537 of 1990 dated 31.01.1994) wherein
various transactions in different accounts and different while disposing of the SLP (Special Leave Petition), the
countries. Thus, it will become difficult to detect the hon’ble apex court answered the important question of
origin of the money. law ‘Whether the Directorate of Enforcement fall within
• Integration is the third and final stage, in this money the definition of ‘Police Officer’ under Section 167 of CrPC
enters the financial system in such a way that original (Criminal Procedure Code) or not?’ The Supreme Court
association with the crime is sought to be obliterated stated that the pre-requisite of arrest that ‘it should have
so that the money can then be used by the offender or been effected only by a police officer and no one else’ and
person receiving as clean money. ‘there must necessarily be records of entries of a case diary’,
Thus, from the above, when funds reached Mr. Kavir, it is may be dispensed to invoke Section 167(1) of CrPC (Criminal
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Procedure Code). Hence the Supreme Court stated that the It is important to note here, that Ministry of Corporate
Enforcement Officer can be termed as ‘police officer’ for the Affairs vide notification S.O. 1205(E) dated 24th March 2020,
purpose of arrest. in the exercise of the powers conferred by the proviso to
Hence in the given case Enforcement Directorate is competent section 4 of the Insolvency and Bankruptcy Code, 2016, the
to arrest and take judicial remand of an arrested person. Central Government hereby specifies one crore rupees as
Further, the Supreme Court held that “sub-sections (1) and the minimum amount of default for the purposes of the said
(2) of Section 167 are squarely applicable with regard to the section.
production and detention of a person arrested under the Prior to 24th March 2020, this threshold limit was one lakh
provisions of Section 35 of FERA (now the corresponding instead of one crore.
provision of FEMA) and Section 104 of Customs Act and
that the Magistrate has jurisdiction under Section 167(2) to 3. Section 50 of the Prevention of Money Laundering Act 2002,
authorise the detention of a person arrested by an authorized deals with the power of authorities, which they can exercise;
officer of the Enforcement under FERA (now the FEMA) and especially while conducting any inquiry or any proceeding.
taken to the Magistrate in compliance of Section 35(2) of As per sub-section 2 of section 50, the Director, Additional
FERA (now the corresponding provision of FEMA). Director, Joint Director, Deputy Director, or Assistant
Hence in a given case, against the application of the Director shall have the power to summon any person
enforcement officer, the Magistrate before whom a person whose attendance he considers necessary whether to give
arrested is produced has jurisdiction to authorise the evidence or to produce any records during the course of
detention of that person. any investigation or proceeding under this Act. Hence, Mr.
Gulati can be summoned.
2. Yes, the minimum amount of default is significant criteria to As per Sub-section 3 to section 50, all the persons so
invoke the application under the Insolvency and Bankruptcy summoned shall be bound to attend in person or through
Code for insolvency resolution and liquidation for corporate authorised agents, as such officer may direct, and shall be
persons. bound to state the truth upon any subject respecting which
Section 4 of the Code read as ‘This Part (PART II dealing they are examined or make statements, and produce such
with insolvency resolution and liquidation for corporate documents as may be required.
persons) shall apply to matters relating to the insolvency Hence, Mr. Gulati is bound to attend the proceeding; but if
and liquidation of corporate debtors where the minimum the office of the director directs or authorises he can attend
amount of the default is one crore rupees. the meeting through authorised agents rather than in person.
There is a proviso to section 4 which read as ‘the Central Further, as per Sub-section 4 of section 50, every proceeding
Government may, by notification, specify the minimum under Sub-section (2) and (3) shall be deemed to be a judicial
amount of default of higher value which shall not be more proceeding within the meaning of section 193 and section
than one crore rupee’ 228 of the Indian Penal Code.
Case Study 3
XYZ Limited (Corporate Debtor) is undergoing the protested the decision of the Resolution Professional, by filing
Corporate Insolvency Resolution Process (CIRP) under the an application before the Adjudicating Authority with a prayer to
Insolvency and Bankruptcy Code, 2016 (Code or IBC) which direct the Resolution Professional to accept the Resolution Plan
was commenced on 17th July, 2019 and is under a moratorium. filed by the Resolution Applicant 1. In reply to the application filed
The Resolution Professional of the Corporate Debtor invited by the Resolution Applicant 1 before the Adjudicating Authority,
expression of interest (EoI) by publishing relevant form in the the Resolution Professional made the following submissions in
newspapers and subsequently received two expressions of his counter-affidavit filed with the Adjudicating Authority:
interest from prospective Resolution Applicants (Resolution - Resolution Applicant 1 meets the following ineligibilities:
Applicant 1 and Resolution Applicant 2). • The directors of one of the subsidiaries of the
One of directors at XYZ Limited who gave a personal Resolution Applicant 1 are declared as wilful
guarantee against the borrowings of XYZ Limited has credence defaulters
that after the declaration of moratorium under section 14 of IBC, • The step-down subsidiary of the RA has been
legal action against him is barred too. declared as Non-Performing Asset and it remained as
Pursuant to the regulations, the Resolution Professional a Non-Performing Asset for more than one year.
had sent an information memorandum, evaluation matrix, and - The Resolution Applicant 1 had filed an affidavit as
request for a resolution plan to both the prospective Resolution required under the Code and the Regulations made
Applicants. thereunder but had failed to disclose the above-
Resolution Applicant 1 had filed its resolution plan on 20th mentioned ineligibilities in the affidavit thereby
October 2019 and the Resolution Professional had rejected that misleading the Resolution Professional.
resolution plan on 1st November 2019 on the ground that it is in - Since Resolution Applicant 1 meets the ineligibility
violation of the provisions of the Code pertaining to ineligibility criteria as stipulated by the Code, the instant application
of the Resolution Applicant. The Resolution Applicant 1 filed by the Resolution Applicant 1 be dismissed.

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In response to the submissions made by the Resolution iii. The ineligibility may be removed if the overdue amounts
Professional, Resolution Applicant 1 stated that as on the date relating to Non-Performing Accounts are paid before
of submission of resolution plan with the resolution professional submission of the resolution plan
it does not meet any of the above-stated ineligibilities and that (a) i only
the Resolution Professional has analysed the position as on (b) ii only
the Insolvency Commencement Date instead of the date of (c) i and iii
submission of the resolution plan and hence his arguments do not (d) ii and iii
hold any water. The matter was pending before the Adjudicating
Authority. 2. Pursuant to the provisions of the Insolvency and Bankruptcy
On the other hand, the resolution plan received from the Code, 2016, what shall be time to obtain the approval of the
other Resolution Applicant, i.e. Resolution Applicant 2 was Competition Commission of India?
forwarded by the Resolution Professional to the Committee (a) After submission of resolution plan but before the
of Creditors for their consideration and evaluation on 1st approval of the same by Committee of Creditors
November 2019. During the evaluation, it was observed that the (b) Before the submission of the resolution plan
resolution plan submitted by Resolution Applicant 2 meets the (c) After approval of Committee of Creditors
criteria prescribed for combinations under the provisions of the (d) After submission of resolution plan but before filing the
Competition Act, 2002. Accordingly, Resolution Applicant 2 filed plan with the Adjudicating Authority
an application before the Competition Commission of India for
its approval of the proposed combination as per the submitted 3. Who among the following can file an application to the
resolution plan. Adjudicating Authority for extension of the period of CIRP?
On 15th November 2019, the Competition Commission (a) Committee of Creditors after passing a resolution with
of India summoned Resolution Applicant 2 for a hearing on more than 66% of voting share in their meeting
the approval of said combination. During the hearing, the (b) Any stakeholder interested in the affairs of the Corporate
Competition Commission of India raised various questions to Debtor
understand if such a combination has any appreciable adverse (c) Resolution Professional upon instructions do so by
effect on relevant product market and relevant geographic resolution passes at the meeting of the Committee of
market in India. Accordingly, Resolution Applicant 2 had filed its Creditors by 66% voting share
reply to the Competition Commission of India both orally during (d) Resolution Professional at its own
the hearing as well as in writing on November 20, 2019. Having
heard the Resolution Applicant 2 and also having gathered 4. Which among the following are the duties of the Resolution
relevant information to understand whether the combination Professional?
causes an appreciable adverse effect on competition in the i. To present to the Committee of Creditors, only those
relevant market in India or not; the competition commission resolution plans which confirm the conditions prescribed
of India had passed its order approving the combination on 3rd under the Code
February, 2020. ii. To present all resolution plans to the Committee of
On 1st January 2020, the committee of creditors negotiated Creditors
with the Resolution Applicant 2 for modifications in the resolution iii. To obtain approval of the Competition Commission of
amount which was duly agreed to by the resolution applicant, India for the resolution plans approved by the Committee
and post-modification of resolution plan, the revised resolution of Creditors
plan of the Resolution Applicant 2 has been evaluated by the (a) i only
members of the committee of creditors. On 10th January, 2020 (b) ii only
the Committee of Creditors decided to vote on the resolution (c) i and iii
plan of Resolution Applicant 2 as one hundred and eighty days (d) ii and iii
from the insolvency commencement date is set to conclude on
13th January, 2020. Accordingly, the committee of creditors had 5. Which of the following shall be considered to ascertain as to
voted on the resolution plan submitted by Resolution Applicant whether the Resolution Applicant and the Corporate Debtor
2 and approved the same with the voting share of 85%. Post meet the definition of combination under the Competition
approval of resolution plan by the Committee of Creditors, the Act, 2002?
Resolution Professional filed the same with the Adjudicating i. Assets
Authority on 13th January, 2020. ii. Net Worth
iii. Turnover
Multiple Choice Questions iv. Control
1. While examining the ineligibility of resolution applicants (a) i, ii, and iv
pursuant to the provisions of the Code, which among the (b) i and iii
following statements are incorrect: (c) ii, iii, and iv
i. The ineligibility shall be as on the date of submission of (d) i, iii, and iv
the Resolution Plan by the Resolution Applicants
ii. The ineligibility shall be as on the insolvency Descriptive Questions
commencement date 1. Clarify how the Competition Commission of India
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investigates combinations (to regulate) before giving its in a gain of control over enterprise by another enterprise
approval under section 31 of the Competition Act, 2002. either individually or in group constituted as a combination.
2. One of the directors at XYZ Limited who gave a personal Extra reference note for students
guarantee against the borrowings of XYZ Limited has It is important to note here that, under section 20 (3) of
credence that after the declaration of moratorium under the Competition Act 2002, the Central Government shall
section 14 of IBC, legal action against him is barred too. Is at the expiry of every two years, in consultation with the
the credence of the director valid? Apart from provisions Commission, by notification, enhance or reduce the value of
from the bare act, support your opinion with settled judicial assets or the value of turnover mentioned above (for purpose
precedent. of section 5 ‘combination’), on the basis of the wholesale price
index or fluctuations in the exchange rate of rupee or foreign
Answer to MCQs currencies. *Vide notification number S.O. 675(E) dated
1. (b) : The opening line of section 29A of the Insolvency and 4th March 2016, in the exercise of the powers conferred by
Bankruptcy Code 2016, and then further of clause ‘c’ in it section 20 (3) the Central Government enhances, the value
clearly states ‘at the time of submission of resolution plan’ of assets and the value of turnover, by hundred percent from
hence point i is correct and point ii is incorrect. the date of publication of this notification in the Official
Further first proviso to section 29A (c), provided that the Gazette. The publication date is also 4th March 2016.
person shall be eligible to submit a resolution plan if such Hence w.e.f. 4th March 2016 above table (threshold under
person makes payment of all overdue amounts with interest section 5) shall be read as;
thereon and charges relating to nonperforming asset Threshold applicable to Enterprises Group Level
accounts before submission of resolution plan hence point iii Level
also correct. In India Joint Assets R2,000 Cr R 8,000 Cr
Joint Turnover R 6,000 Cr R 24,000 Cr
2.(a) : Proviso to section 31 (4) of the Insolvency and Bankruptcy In India Joint Total Assets US$ 1000 US$ 4000
Code 2016, provides where the resolution plan contains a and Million Million
provision for combination, as referred to in section 5 of the Outside Minimum Indian R1000 Cr R 1000 Cr
Competition Act, 2002, the resolution applicant shall obtain Component
the approval of the Competition Commission of India under Joint Total US$ 3000 US$ 12000
that Act prior to the approval of such resolution plan by the Turnover Million Million
committee of creditors. Minimum Indian R3000 Cr R 3000 Cr
Component
3.(c): As per section 12 (2) of the Insolvency and Bankruptcy
Code 2016, the resolution professional shall file an application Answers to Descriptive Questions
to the Adjudicating Authority to extend the period of the 1. Section 6 (1) of the Competition Act 2002, simply prohibits
corporate insolvency resolution process beyond one hundred the person or enterprise from entering into a combination
and eighty days, if instructed to do so by a resolution passed that causes or is likely to cause an appreciable adverse effect
at a meeting of the committee of creditors by a vote of sixty- on competition within the relevant market in India and such
six percent of the voting shares. a combination shall be void.
Further, the review process for a combination under the Act
4.(b) : Section 25 (2) shall be read along with section 30 (3) of involves mandatory notification to the Commission of the
the Insolvency and Bankruptcy Code 2016, the combined proposed combination. To give effect to this section 6 (2)
reading of these signifies that the resolution professional provide, any person or enterprise proposing to enter into a
shall present all resolution plans at the meetings of the combination shall give notice (as prescribed in section 30) to
committee of creditors. the Commission in the specified form disclosing the details
Further as per section 30 (6), the resolution professional shall of the proposed combination within 30 days of the approval
submit the resolution plan as approved by the committee of of the proposal relating to merger or amalgamation by the
creditors to the Adjudicating Authority. board of directors or of the execution of any agreement or
other document in relation to the acquisition, as the case
Extra reference note for students may be.
As per proviso to section 31 (4), where the resolution plan Further, as per section 20 (1), the Commission may, upon
contains a provision for combination, as referred to in section its own knowledge or information relating to acquisition
5 of the Competition Act, 2002, the resolution applicant shall referred to in clause (a) of section 5 or acquiring of
obtain the approval of the Competition Commission of India control referred to in clause (b) of section 5 or merger or
under that Act prior to the approval of such resolution plan amalgamation referred to in clause (c) of that section, inquire
by the committee of creditors. into whether such a combination has caused or is likely to
cause an appreciable adverse effect on competition in India.
5.(d): Section 5 of the Competition Act 2002, provide the Here it worth noting that the Commission shall not initiate
thresholds relating to the value of assets and amount of any inquiry under this subsection after the expiry of one year
turnover, beyond which the merger and acquisition resulting from the date on which such combination has taken effect

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Further section 20 (2) [inquiry in response to notice under Clause (b) section 14 (3) of the Insolvency and Bankruptcy
section 6(2)] read with section 31 (framing of opinion to Code, 2016 (IBC), read as the provisions of sub-section (1) shall
pass an order) and the Competition Commission of India not apply to a surety in a contract of guarantee to a corporate
(Procedure in regard to the transaction of business relating to debtor. It important here to note that sub-section (1) gave
combinations) Regulations, 2011 the Commission shall form power to Adjudicating Authority to declare a moratorium.
firstly prima facie opinion as to whether the combination is The validity of directors’ credence can be denied based on
likely to cause or has caused an appreciable adverse effect on the State Bank of India vs. V. Ramakrishnan (Supreme Court,
competition within the relevant market in India or not. For Civil Appeal No. 3595 of 2018), wherein the facts are largely
this, investigation by director-general can be ordered under similar to the present case.
section 29. The Hon'ble Supreme Court first considers the fact that
Section 20 (4) laid down factors to be considered by the different provisions of the Insolvency and Bankruptcy Code
Commission while evaluating the appreciable adverse effect are applicable to the insolvency of different categories of
of Combinations on competition in the relevant market persons. Section 96 and 101 of the Code provide for separate
include the following: provision for a moratorium for the personal guarantor,
(a) Actual and potential level of competition through whereas section 14 deals with corporates.
imports in the market; Court also observed that different provisions of law brought
(b) Extent of barriers to entry into the market; into effect on different dates and some of the provisions were
(c) Level of concentration in the market; not yet enforced (on the date of the judgment). Provisions
(d) Degree of countervailing power in the market; pertaining to sections 96 and 101 have not been brought into
(e) Likelihood that the combination would result in the force.
parties to the combination being able to significantly Further, the apex court makes observations on relevant
and sustainably increase prices or profit margins; sections. The court observed that Section 14 of the Code
(f ) Extent of effective competition likely to sustain in a authorizes Adjudicating Authority to pass an order of
market; moratorium during which there is the prohibition on the
(g) Extent to which substitutes are available or are likely to institution of suits or continuation of pending suits against
be available in the market; the corporate debtor, transfer of property of the corporate
(h) Market share, in the relevant market, of the persons debtor, or any action to foreclose or enforce any security
or enterprise in a combination, individually and as a interest.
combination; The apex court also consider the following facts importantly
(i) Likelihood that the combination would result in the - Report of Insolvency Law Committee dated 26.03.2018
removal of a vigorous and effective competitor or clarified that the period of moratorium under section
competitors in the market; 14 is not applicable to personal guarantors,
(j) Nature and extent of vertical integration in the market; - Amendment Ordinance dated 6th June 2018, which
(k) Possibility of a failing business; amended the provision of section 14 and proviso
(l) Nature and extent of innovation; clearly states that the moratorium period envisaged in
(m) Relative advantage, by way of the contribution to the section 14 is not applicable to a personal guarantor to a
economic development, by any combination having corporate debtor. (Note – this ordinance later enacted
or likely to have an appreciable adverse effect on as act 26 of 2018 – and enforced w.r.e.f. 6th June 2018)
competition; Hence, as the provisions of section 96 and 101 have not been
(n) Whether the benefits of the combination outweigh the brought into force, the personal guarantor is not entitled to
adverse impact of the combination if any. a moratorium period under the Insolvency and Bankruptcy
Code.
2. The Director of XYZ Limited, hold credence that section 14 Hence, the credence of the Director of XYZ Limited that
of the Insolvency and Bankruptcy Code, 2016 (IBC) would ‘that section 14 of the Insolvency and Bankruptcy Code,
apply to the personal guarantor as well, as a result of which 2016 (IBC) would apply to the personal guarantor as well’ is
proceedings against the personal guarantor and his property not tenable. (Even before 6th June 2018 when sub-section 3 to
would have to stay if moratorium declared. section 14 substituted).
Case Study 4
Mr. Aman Chawla belongs to Delhi based business family and joined an MNC in the role of system engineer after college. But
has ancestral roots in Kharar, a Town in the Sahibzada Ajit Mr. Aman is inspired by constructing the buildings, towers,
Singh Nagar (Mohali) district in the state of Punjab (around 15 landscapes, hence decided to quit the job to pursue his passion.
KMs away from Chandigarh). Chawla family owns the chain of Despite the Chawla family owning a major stake in the
restaurants, snacks points, and Ice-Cream parlours across the business, the business model is unlike to autocratic monarchy.
nation. Few of these are owned properties, but a large number It is managed professionally and listed on the stock exchange.
are leased properties. The holding company is Chawla Snacks and Family members (father, grand-mother and elder brother of Mr.
Refreshment Limited (CSRL). Mr. Aman is an electrical engineer, Aman) are part of the Board of Directors, whereas few other
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Economic Laws
family members are also engaged with CSRL but in form of investor from the States (US) based on showing growth prospect
employment (or in a professional capacity). in his business to his investor. The investor was a good friend
Mr. Aman joined his brother-in-law, Mr Vivek, in his of Mr. Dipan and originally from Mohali named Mr. Tarun and
construction business, Mr. Aman assists Mr. Vivek in ongoing settled in Philadelphia (Pennsylvania, US). Mr. Tarun agreed to
projects, and one among them is Rishi Enclave whose centre of invest US$1 Million in the said real estate project.
attraction is state of art yoga centre which will be one of its type The money got transferred from an overseas branch in
in the world apart from the common area which is turned into Philadelphia of some Indian bank (through banking channel) to
with mesmerising landscapes. The project is located near Jolly the Kharar branch (Mohali, India). The Branch Manager in India
Grant Airport on out-skirt of the holy town of Rishikesh. Rishi is the friend of an elder brother of Mr. Aman and was excited
Enclave (Project) consists of 120 units of 2BHKs, 3BHKs (Flats to get one project in Mohali and thus approved the investment
and Floors), and Independent Houses or Villas in totality. The without any opinion from any Finance Professional.
project is registered under the RERA. All 120 units’ subscribed/ CSRL witnessed the bad jolts (of financial turbulence) as
booked by allottees except 2 Flats kept by Mr. Vivek (promoter). revenue vanished and reserves are socked to meet maintenance
Mr. Tirlochan Negi booked 3 floors one in his own name, another costs of properties & employee cost due to lock-down and
one in the name of his daughter in law and the third one in name of afterword restrictions. The financial cost and lease rentals not
his company. Mr Dabral also booked a flat and a villa (both in his only erode the working capital but also forces the CSRL to land
name). Rest all allottee booked one unit each. Soon allottees form into a debt trap situation wherefrom meeting financial obligations
a residential association. Considering the latest NGT decisions seems near to impossible. The only way left to management is
and amendments in policy about the environment (applicable for restructuring of business hence board decided to shut a few
civil construction in hill or foothill area concerning the height points and parlours (to reduce lease rental obligation, and free-
of the building), certain structural changes relating to the height up one-two owned properties so that sale proceed can be infused
and common area landscape is required in sanctioned plan of the as working capital)
project. Mr. Vivek is of opinion since the alteration in sanctioned One of the properties sold by CSRL, acquired by Ms. Vijeta in
plan enforced by changes in policy matter hence the approval of name of her mother-in-law (as she is a senior citizen female – to
allottees is not required. bear less registration cost in form of stamp duty), consideration
Mr. Aman recently visited Kharar after a long time to meet for which is paid out of the known sources of the Mr. Vijeta.
his friends Mr. Onkar Singh and Mr. Dipan Ahuja of early Despite the best efforts made by management at CSRL,
childhood. They all admitted that the town has developed still, the bottom line is in deep red; resulting in default in
substantially especially the townships and Skyscrapers as tri-city repayment of financial debts and such default continues since
(Mohali, Chandigarh, and Panchkula) turns into metropolitan the 2nd quarter of Fiscal 2020-21. Management gave assurance
and hub of service entities. The lifestyle of people also improves. to financial creditors that soon it will overcome the solvency
Mr. Onkar is settled in Canada and holding a Canadian passport issue and they already took corrective measures. On 19th, March
and citizenship as his family migrate there when he was in school 2021, one of the financial creditors moved an application for
only. In Canada, he own a transport business. Currently, he is initiation of corporate insolvency resolution proceeding (CIRP)
on a visit to India to attend the marriage of a relative. Mr. Dipan whose outstanding claim is of INRs 120 lakh. On 26th March
Ahuja is a supplier of construction materials and planning to 2021, another financial creditor file an application to NCLT for
venture into the solar panel business under make in India drive, initiation of CIRP against CSRL in their case amount of default
considering the enhancing role of solar energy for household and is INRs 35 lakh and such default took place in the 3rd Quarter of
commercial uses. Mr. Dipan believes Mr. Aman (considering his fiscal 2020-21.
electrical engineering background) should join him in his solar
panel venture. Multiple Choice Questions
The ancestral property of Mr. Onkar’ family has been 1. Regarding the state of art yoga centre and common area
unoccupied for a long, hence turned into a mud house. Mr. Onkar situated in Rishi Enclave, which of the following statement is
offered Mr. Aman to develop residential apartments on such correct;
property after the name of his grand-father ‘Satnam Apartments’. (a) Promoter will keep the possession and title both
A chunk of land on the backside of such property is also available (b) Promoter may handover physical possession of these to
for sale at a reasonable price because it has no connectivity. Mr. the association of allottees or competent authority as per
Aman found it a good idea to develop the residential apartments the local laws
as backside land can be acquired at a cheaper rate than prevailing (c) In absence of any local law promoter shall hand over
in the market. Mr. Onkar talked to his father [property inherited, within thirty days after obtaining the occupancy
hence registered in his name in land revenue records after the certificate.
death of grandfather (who was resident in India) of Mr. Onkar] (d) In absence of any local law promoter shall hand over within
and ready to transfer (sale) the property for INRs 2.5 Crore. thirty days after obtaining the completion certificate.
The Father of Mr. Onkar is a resident outside India who never
registered as OCI. Mr. Aman after communicating with Mr. 2. State the legal position of mother-in-law of Ms. Vijeta as
Vivek agreed to deal. benamidar in the case study-
Mr Aman heard about the importance of keeping capital (a Yes, the mother-in-law of Ms. Vijeta is benamidar
low to generate more wealth and attain high ROI (Return on (b) No, the mother-in-law of Ms. Vijeta is not benamidar as
Investment). He decided to borrow money from a private she is covered under the exceptions stated

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Economic Laws
(c) No, mother-in-law of Ms. Vijeta is not benamidar as Answer to MCQs
consideration is paid out of the known source of Ms Vijeta 1. (d) : Reason - As per section 17 (2) of the Real Estate (Regulation
(d) Both b and c above. and Development) Act 2016, it shall be the responsibility of
the promoter to handover the necessary documents and
3. Which of the following statements is correct regarding the plans, including common areas, to the association of the
acquiring, holding, owning and transfer of property, in a case allottees or the competent authority, as the case may be, as
by the father of Mr. Onkar in India- per the local laws:
(a) Being a person resident outside India he can acquire, Provided that, in the absence of any local law, the promoter
hold, own and transfer any immovable property in India, shall hand over the necessary documents and plans,
but with RBI permission only including common areas, to the association of the allottees
(b) Being a person resident outside India he can acquire, hold, or the competent authority, as the case may be, within thirty
own and transfer any immovable property in India, but days after obtaining the completion certificate.
only in joint ownership with any person resident in India
(c) Being a person resident outside India he can acquire, 2.(a): Reason – As per clause (9) to section 2 of the Prevention
hold, own and transfer any immovable property in India, of Benami Property Transaction Act 1988, the transaction is
if inherited by him from the person who was a resident a benami transaction under sub-clause (A) because the same
of India is not covered under exception iv. Since the transaction is
(d) Being a person resident outside India he can acquire, benami hence the property become benami under section 2
hold, own and transfer any immovable property in India, (8), hence benamidar under 2 (10).
if inherited by him when he himself was resident in India
3.(c): Reason – As per section 6(5) of the Foreign Exchange
4. Whether the application moved on 19th March 2021 can be Management Act, 1999 a person resident outside India may
admitted by NCLT to initiate CIRP against CSRL-. hold, own, transfer or invest in any immovable property
(a) Yes, because CSRL made default in repayment of situated in India if such property was acquired, held or
financial debts owned by such person when he was resident in India or
(b) Yes, because the amount of default is more than one crore inherited from a person who was resident in India.
(c) No, because management gave assurance to financial Here is worth noting that regulation 3 and 6 of the Foreign
creditors that soon it will overcome the solvency issue Exchange Management (Acquisition and transfer of
and they already took corrective measures immovable property in India) Regulation 2018 gave the
(d) No, because an application for initiation of CIRP shall right to NRI and OCI (in case of regulation 3) and with
not be filled. the exclusion of other than agriculture land/farmhouse/
plantation property (both in case of regulation 3 and 6)
5. Whether the application moved on 26th March 2021 can be
admitted by NCLT to initiate CIRP against CSRL. 4.(d): Reason – As per section 10A of the Insolvency and
(a) Yes, because CSRL made default in repayment of Bankruptcy Code 2016 notwithstanding anything contained
financial debts in sections 7, 9 and 10, no application for initiation of
(b) Yes, because the application for initiation of CIRP may be corporate insolvency resolution process of a corporate
filled by the financial creditor as a period of suspension debtor shall be filed, for any default arising on or after 25th
of section 7 is over. March 2020 for a period of six months or such further
(c) No, because the amount of default is less than one crore period, not exceeding one year from such date, as may be
(d) No, because default occurred during a period of notified in this behalf.
suspension. On 24th September 2020 vide S.O. 3265(E) the Central
Government hereby notifies a further period of three months
Descriptive Questions from the 25th September 2020 for the purposes of section
1. Mr. Vivek is of opinion since the alteration in sanctioned plan 10A. Hence application can’t be filled under section 7 by the
enforced by changes in policy matter hence the approval of financial creditor till 24th March 2021.
allottees is not required. Are the changes in sectioned plan
minor in nature? Evaluate the opinion of Mr. Vivek in the 5.(d): Reason – As per section 10A of the Insolvency and
context of the provision contained in the RERA 2016? Bankruptcy Code 2016 notwithstanding anything contained
Support your answer with reason and calculation if any. in sections 7, 9 and 10, no application for initiation of
corporate insolvency resolution process of a corporate
2. What would be your opinion related to the repatriation of debtor shall be filed, for any default arising on or after 25th
funds in India as an Investment of US$1 million into the real March 2020 for a period of six months or such further
estate project in Kharar (Mohali, India)? period, not exceeding one year from such date, as may be
notified in this behalf.
3. Can the father of Mr. Onkar repatriate the sale proceed of Further the proviso to said section provided that no
ancestral property inherited by him to Canada from India? application shall ever be filed for initiation of corporate
Elucidate in the light of the relevant provision of applicable insolvency resolution process of a corporate debtor for the
law, the stated legal issue. said default occurring during the said period.
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Economic Laws
On 24th September 2020 vide S.O. 3265(E) the Central booked in its name or booked in the name of its associated
Government hereby notifies a further period of three months entities or related enterprises, shall be considered as one
from the 25th September 2020 for the purposes of section allottee only.
10A. In the given case all 120 units’ subscribed/booked by allottees
Hence application can’t be filled under section 7 by a financial except 2 Flats kept by Mr. Vivek (promoter). Out of 118, Mr.
creditor for the default that occurred till 24th March 2021. Tirlochan Negi booked 3 floors one in his own name, another
Candidates also advised to note the explanation provided to one in the name of his daughter in law and the third one in
section 7(1), for the purposes of subsection (1) to section 7, a name of his company, whereas Mr. Dabral booked a flat and a
default includes a default in respect of a financial debt owed villa (both in his name); rest all allottee booked one unit each.
not only to the applicant financial creditor but to any other Hence the total number of allottee for purpose of section
financial creditor of the corporate debtor. Hence option C is 14(2)(ii) is 115 (118-2-1) considering Mr Tirlochan (3) and
not correct and mind it 10A is an overriding section. Mr Dabral (2) as a single allottee each. At least 2/3 allottee
shall be 77 (2/3rd of 115 – round up to next whole integer),
Answers to descriptive questions whose previous written consent is required; before making
1. The Real Estate (Regulation and Development) Act 2016 changes to sanctioned plan.
(herein-after RERA) under its section 14 provides the Hence the opinion of Mr. Vivek in the context of the provision
adherence to sanctioned plan and project specifications by contained in RERA, 2016 is untenable and incorrect.
the Promoter.
Sub-section 1 provides the proposed project shall be 2. Investments are considered as capital account transactions,
developed and completed by the promoter following the hence governed by section 6 of the Foreign Exchange
sanctioned plans, layout plans and specifications as approved Management Act, 1999 read with The Foreign Exchange
by the competent authorities. Management (Permissible Capital Account Transactions)
Sub-section 2 has an overriding effect and its clause (i) provide Regulations 2000 (herein-after regulations).
the promoter shall not make any additions and alterations in Clause (b) of regulation 4 of such regulations describe the
the sanctioned plans, layout plans and specifications and the prohibitions. Although regulation 4 (b) (iv) provides no
nature of fixtures, fittings and amenities described therein in person resident outside India shall invest in India, in any
respect of the apartment, plot or building, as the case may be, form, in any company or partnership firm or proprietary
which are agreed to be taken, without the previous consent concern or any entity, whether incorporated or not, which
of that person who agrees to take one or more of the said is engaged or proposes to engage in real estate business.
apartment, plot or building, as the case may be. But explanation 1 provides a certain exclusion from real
Here it is worth noting that the promoter may make such minor estate business, explanation read as ‘for this regulation, 'real
additions or alterations as may be required by the allottee, or estate business shall not include development of townships,
such minor changes or alterations as may be necessary due to construction of residential/commercial premises, roads or
architectural and structural reasons duly recommended and bridges and real estate investment trusts (REITs) registered
verified by an authorised Architect or Engineer after proper and regulated under the SEBI (REITs) Regulations, 2014.
declaration and intimation to the allottee. Hence repatriation of funds in India as Investment into the
For this clause, "minor additions or alterations" excludes real estate project (construction of residential apartments)
structural change including an addition to the area or change in Kharar (Mohali, Kharar) can be seen as a permissible
in height, or the removal of part of a building, or any change to capital account transaction under clause (a) to schedule II of
the structure, such as the construction or removal or cutting regulations.
into of any wall or a part of a wall, partition, column, beam,
joist, floor including a mezzanine floor or other support, or a 3. As per clause (a) to regulation 8 of the Foreign Exchange
change to or closing of any required means of access ingress Management (Acquisition and Transfer of Immovable
or egress or a change to the fixtures or equipment, etc. Property in India) Regulations, 2018, a person referred to in
Since in the given case certain structural changes (in the sub-section (5) of Section 6 of the Act, or his successor shall
sanctioned plan of the project) relating to height is required, not, except with the general or specific permission of the
hence the changes in sectioned plan are not minor in nature. Reserve Bank, repatriate outside India the sale proceeds of any
Further clause (ii) of Sub-section 2 provides the promoter immovable property referred to in that sub-section.
shall not make any other alterations or additions in the Whereas section 6(5) of the Foreign Exchange Management
sanctioned plans, layout plans and specifications of the Act, 1999 provides a person resident outside India may hold,
buildings or the common areas within the project without own, transfer or invest in any immovable property situated in
the previous written consent of at least two-thirds of the India if such property was acquired, held or owned by such
allottees, other than the promoter, who have agreed to take person when he was resident in India or inherited from a
apartments in such building. person who was resident in India.
It is worth noting here that for this clause, the allottees, Since in the given case father of Mr. Onkar acquired the
irrespective of the number of apartments or plots, as the case property through inheritance from his father who was resident
may be, booked by him or booked in the name of his family, in India, hence fall within the scope of section 6 (5). Therefore
or in the case of other persons such as companies or firms or with the permission of RBI, he can repatriate the sale proceed
any association of individuals, etc., by whatever name called, of ancestral property inherited by him to Canada from India.

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Economic Laws
Ca final - Paper 6D - Economic Laws
This capsule on Paper 6D: Economic Laws, Final (New) course is another step of the Board of Studies in its endeavour
to provide quality academic inputs to Final course students of Chartered Accountancy course. This is an open book
examination and duration is 4 hours. The question paper would comprise of five case studies of 25 marks each, out
of which the student would be required to attempt any four. Students must divide their four hours between four case
studies to be answered meticulously. Once the case studies have been opted, give them a comprehensive reading
while attempting the same. Some of the illustrative case studies have been provided below for practice purpose.
Students are suggested to solve the same in examination condition and check for the answers only after attempting
the case studies.
Case Study 1
Nadus (P) Ltd. is engaged in the business of real estate since which required the said agents to promote and negotiate deals,
12 years. The company is founded by two friends, Mr. Mayur only, for the units in Suvas and not for any other real estate
Agarwal and Mr. Neerav Sutaria, who are also its directors. Mr. project in Mihan area and for entering into such agreement, a
Urmil Dave, brother in law of Mr. Mayur, is the manager of the lumpsum amount was paid to such agents in cash.
company. Vikrama Builders (P) Ltd.’s business was affected due to such
It had acquired 10% shares of a company in Egypt, named arrangement of Nadus (P) Ltd. and so it filed a complaint with
Belashom LLC which is engaged in the construction of the authority under RERA against such arrangement. The case
commercial premises. Recently, it had received some bonus was assigned to Mr. Sumit Joshi, a RERA member. Mr. Sumit, in
shares from the said company. order to understand the arrangement being made by Nadus (P)
Belashom LLC was looking for a commercial property in Ltd. with the real estate agents, contacted his close friend, Mr.
India for opening its branch office in order to expand its business. Aman who was a real estate agent, and asked him to enter into an
For that purpose, Mr. Franklin, an international real estate agent agreement with Nadus (P) Ltd. as normal and then provide him
in Egypt was contacted by Belashom LLC and he told that one of all the details of such agreement.
his clients in India, a private limited company named Autukya Mr. Aman did the same and provided all the details to Mr.
(P) Ltd., wanted to sale, one of its commercial properties in India. Sumit. Mr. Sumit discussed the matter with the other members
After going through the details of the said property, of the authority under RERA in the meeting of the authority and
Belashom LLC became interested in such property and it was it was decided that such agreements made by Nadus (P) Ltd.
decided to send Mr. James, a director of Belashom LLC to India affected competition in the relevant market and so the case was
to meet the client of Mr. Franklin in India and finalise the deal referred to the Competition Commission of India. However, the
for the property. required quorum was not present throughout the said meeting of
Mr. Neerav who was on a visit to meet his old friend in the authority under RERA.
Bhutan, came to know that Mr. James was going to visit India. So The CCI on receipt of such reference from the authority
he shortened his trip and came to India bringing 30,000 INR in under RERA initiated an inquiry into the matter and formed an
form of currency notes with denominations of R100 and 20,000 opinion on the existence of prima facie case and directed the
INR in form of currency notes with denominations of R500, Director General to cause an investigation into the matter.
respectively, received as a gift from his friend. The Director General, during the investigation, received
Mr. James visited India bringing with him, some amount of certain evidences on affidavit from few employees of Nadus (P)
Egyptian Pounds (EGP) as follows:- Ltd. Certain books and papers of Nadus (P) Ltd. were also called
Particulars EGP for by the Director General which he kept in his custody for 2
Currency Notes 90,000 months.
Bank Notes 30,000 The Director General found that the Company Secretary of
Travelers Cheque 22,500 Nadus (P) Ltd., Mrs. Ridhima Sen, had assisted in drafting the
impugned agreements with the real estate agents. Mr. Urmil,
Mr. Neerav accompanied him. Mr. James met the
the manager, however, pleaded before the Director General, that
representative of Autukya (P) Ltd., Mr. Rajiv and after two
though he knew of such agreements being entered into by Nadus
rounds of discussion between them; the deal for the property was
(P) Ltd., he never gave his consent to such an act of the company.
finalized for R650 lakhs. Autukya (P) Ltd. remitted 4,50,000 EGPs
The copy of the report of investigation was forwarded
to Mr. Franklin as commission amount out of its EEFC account.
by the CCI to Nadus (P) Ltd. and the authority under RERA,
All the expenses incurred by Mr. James in INR on account of his
respectively.
boarding, lodging and travelling in India were paid by Nadus (P)
After making further inquiry, the CCI closed the matter and
Ltd., which was going to be reimbursed later on by Belashom
passed a cease and desist order as well as a penalty order to pay
LLC.
an amount equivalent to 25% of the revenue earned by Nadus (P)
Nadus (P) Ltd. was developing a real estate project in
Ltd. by making such anti-competitive agreements with the real
Mihan area of Nagpur City named ‘Suvas’. It had made certain
estate brokers.
agreements with real estate agents mainly operating in that area
The Chartered Accountant Student December 2021 05
22
Economic Laws
On the basis of the given facts, answer the following questions: but for keeping the books and papers of Nadus (P) Ltd. in
Multiple Choice Questions his custody, prior permission of the CCI was required.
1. Whether Mr. Neerav has validly brought INR currency notes
into India? 5. Which of the following persons would be deemed to be guilty
(a) No, Mr. Neerav has brought in excess R25,000 from the of the contravention committed by Nadus (P) Ltd. of the
prescribed limit. provisions of the Competition Act, 2013?
(b) Yes, as there is no restriction of bringing any amount into (a) Nadus (P) Ltd., Mr. Mayur, Mr. Neerav and Mrs. Ridhima,
India from Nepal or Bhutan. respectively.
(c) No, Mr. Neerav has brought INR currency notes with (b) Nadus (P) Ltd. only.
denominations of R500. (c) Nadus (P) Ltd., Mr. Mayur and Mr. Neerav, respectively.
(d) Yes, if Mr. Neerav has provided declaration in respect of (d) Nadus (P) Ltd., Mr. Mayur, Mr. Neerav, Mr. Urmil and
the same to the Custom Authorities. Mrs. Ridhima, respectively.
2. Whether it was necessary for Mr. James to provide any Descriptive Questions
declaration to the Custom Authorities of India in respect of 6. (i) Whether Nadus (P) Ltd. was having any prohibition on
the Egyptian Pounds brought by him into India, if 1 USD = making investment in Belashom LLC?
15 EGPs? (ii) Whether Nadus (P) Ltd. was required to take any
(a) No, as Mr. James is a person resident outside India permission for receiving bonus shares from Belashom
(b) Yes, as the amount of currency notes exceeded $ 5,000 in LLC?
equivalent
(c) No, as the aggregate of EGPs in all forms did not exceed 7. (i) Whether Nadus (P) Ltd. was permitted to make payment
$ 10,000 in equivalent for meeting expenses of Mr. James in India?
(d) No, as there is no restriction in bringing foreign (ii) Whether Autukya (P) Ltd. was required to have any
exchange, without any limit, in any form in India. permissions for remitting the amount of commission to
Mr. Franklin, if 1 USD = 15 EGPs and 1 USD = R75?
3. Whether it was mandatory for the CCI to forward the copy
of the report of investigation to Nadus (P) Ltd. and the 8. (i) Whether any action can be taken against Mr. Sumit for
authority under RERA, respectively? inducing his friend, Mr. Aman to enter into an agreement
(a) Yes, as based upon such report, Nadus (P) Ltd. would with Nadus (P) Ltd.?
have been able to draft its response to the CCI and (ii) Whether the authority under RERA was having the power
because of reference of the authority under RERA, such to make reference to the Competition Commission of
investigation was caused to be made. India in respect of the case of Nadus (P) Ltd.?
(b) It was optional for the CCI to forward the copy of the report
of investigation to Nadus (P) Ltd. but it was mandatory to ANSWERS TO CASE STUDY 1
forward the same to the authority under RERA.
1. (c) As per Master Direction No. 17 – Import of Goods and
(c) It was optional for the CCI to forward the copy of the
Services:
report of investigation to Nadus (P) Ltd. and in case of
(i) Any person resident in India who had gone out of India
the authority under RERA, report was only required to
on a temporary visit, may bring into India at the time of
be forwarded if it was required by such authority.
his return from any place outside India (other than from
(d) It was mandatory for the CCI to forward the copy of the
Nepal and Bhutan), currency notes of Government of
report of investigation to Nadus (P) Ltd. as it was the
India and Reserve Bank of India notes up to an amount not
party under investigation and in case of the authority
exceeding R25,000 (Rupees twenty five thousand only).
under RERA, report was only required to be forwarded
(ii) A person may bring into India from Nepal or Bhutan,
if it was required by such authority.
currency notes of Government of India and Reserve
Bank of India for any amount in denominations up to
4. Whether the Director General was having the authority to
R100/-.
exercise such powers as were exercised by him during the
Mr. Neerav came to India bringing 30,000 INR in form of
investigation?
currency notes with denominations of R100 and 20,000
(a) He was having the authority to exercise such powers only
INR in form of currency notes with denominations of
if the prior permission of the CCI was obtained in that
R500, respectively, received as a gift from his friend.
regard.
It can be said that Mr. Neerav has not validly brought
(b) He was having the power to receive evidences on
20,000 INR in form of currency notes with denominations
affidavit but was not having the power to keep the books
of R500 into India.
and papers of Nadus (P) Ltd. in his custody.
(c) He was having the power to receive evidences on affidavit
2. (b) As per Master Direction No. 17 – Import of Goods and
as well as to keep the books and papers of Nadus (P) Ltd.
Services:
in his custody, respectively.
Import of Foreign Exchange into India: A person may–
(d) He was having the power to receive evidences on affidavit
06 December 2021 The Chartered Accountant Student
23
Economic Laws
(i) Send into India, without limit, foreign exchange in upon him as well as to keep the books and papers of Nadus
any form (other than currency notes, bank notes and (P) Ltd. in his custody, as he has been vested with the powers
travelers cheques); of an inspector under Section 217 of the Companies Act,
Bring into India from any place outside India, without
(ii) 2013.
limit, foreign exchange (other than unissued notes), Note: As per Section 217(3) of the Companies Act, 2013, the
subject to the condition that such person makes, on inspector shall not keep in his custody any books and papers
arrival in India, a declaration to the Custom Authorities produced under sub-section (1) or sub-section (2) for more
at the Airport in the Currency Declaration Form (CDF) than one hundred and eighty days and return the same to the
annexed to these Regulations; company, body corporate, firm or individual by whom or on
Provided further that it shall not be necessary to make whose behalf the books and papers were produced.
such declaration where the aggregate value of the foreign
exchange in the form of currency notes, bank notes or 5. (d) As per Section 48 of the Competition Act, 2002, where a
travelers cheques brought in by such person at any company committing contravention of any of the provisions
one time does not exceed USD 10,000 (US Dollars ten of this Act or of any rule, regulation, order made or direction
thousand) or its equivalent and/or the aggregate value issued thereunder, then following shall be deemed to be
of foreign currency notes (cash portion) alone brought guilty of the contravention; hence liable to be proceeded
in by such person at any one time does not exceed USD against and punished accordingly;
5,000 (US Dollars five thousand) or its equivalent. Every person who, at the time the contravention was
Here, it is given that 1 USD = 15 EGPs and Mr. James has committed, was in charge of, and was responsible to the
brought with him following Egyptian Pounds (EGP):- company for the conduct of the business of the company, as
well as the company.
Particulars EGP Converted to USD
Any such person who is liable to any punishment, if he
Currency Notes 90,000 6,000 proves that the contravention was committed without his
Bank Notes 30,000 2,000 knowledge or that he had exercised all due diligence to
Travelers Cheque 22,500 1,500 prevent the Commission of such contravention, then he will
Total 1,42,500 9,500 not be punishable.
Where it is proved that the contravention has taken place
Thus, it was necessary for Mr. James to provide
with the consent or connivance of or is attributable to any
declaration to the Custom Authorities of India in respect
neglect on the part of, any director, manager, secretary
of the Egyptian Pounds brought by him into India as the
or other officers of the company, then he also be deemed
amount of currency notes exceeded $ 5,000 in equivalent.
to be guilty of that contravention and shall be liable to be
proceeded against and punished accordingly.
3. (b) As per Section 26 of the Competition Act, 2002, the
For the purposes of this section, company means a body
Commission may forward a copy of the report of the Director
corporate and includes a firm or other association of
General to the parties concerned.
individuals, and director in relation to a firm, means a
The Commission shall forward a copy of the report of the
partner in the firm.
Director General to Central Government or the State
Here, the persons that would be deemed to be guilty of the
Government or the statutory authority if the investigation is
contravention committed by Nadus (P) Ltd. of the provisions
caused to be made based on reference received from them.
of the Competition Act, 2002 would be- Nadus (P) Ltd., Mr.
Thus, it was optional for the CCI to forward the copy of the
Mayur, Mr. Neerav, Mr. Urmil and Mrs. Ridhima, respectively.
report of investigation to Nadus (P) Ltd. but it was mandatory
Mr. Mayur, Mr. Neerav and Mr. Urmil are the persons
to forward the same to the authority under RERA.
responsible to the company for the conduct of the business of
the company. Though Mr. Urmil never gave his consent to such
4. (c) As per Section 41 of the Competition Act, 2002, the
an act of the company, however, he was having the knowledge
Director General shall assist the commission in investigating
of such agreements being entered into by Nadus (P) Ltd.
into any contravention of the provisions of this Act or any
Mrs. Ridhima assisted Nadus (P) Ltd. in drafting the
rules or regulations made thereunder when so directed by
impugned agreements with the real estate agents and so it
the Commission.
can be said that contravention has taken place due to her
The Director General shall have all the powers as are
connivance.
conferred upon the commission under section 36(2) i.e.
6. (i) As per Regulation 5 of the Foreign Exchange
power vested with the civil court.
Management (Transfer or Issue of any Foreign Security)
The power vested with inspector under sections 217
Regulations, 2004-
(Production of documents and evidence) and 220 (Seizure
(a) Indian Parties are prohibited from making investment
of documents by the inspector) of the Companies Act, 2013,
(or financial commitment) in foreign entity engaged in
shall available to Director General while investigating or any
real estate (meaning buying and selling of real estate or
other person investigating under his authority.
trading in Transferable Development Rights (TDRs) but
Thus, the Director General was having the power to receive
does not include development of townships, construction
evidences on affidavit, as powers of a civil court are vested
24
Economic Laws
of residential/commercial premises, roads or bridges) residential flats or commercial plots in India exceeding USD
or banking business, without the prior approval of the 25,000 or five percent of the inward remittance whichever
Reserve Bank. is more, by persons other than individuals shall require
(b) An overseas entity, having direct or indirect equity prior approval of the Reserve Bank of India, irrespective of
participation by an Indian Party, shall not offer financial whether it is made through EEFC account or not.
products linked to Indian Rupee (e.g. non-deliverable In the given case, the deal for the commercial property
trades involving foreign currency, rupee exchange rates, was finalized for R650 lakhs and Autukya (P) Ltd. remitted
stock indices linked to Indian market, etc.) without the 4,50,000 EGPs to Mr. Franklin as commission amount, out of
specific approval of the Reserve Bank. its EEFC account.
Here, in the given case, Nadus (P) Ltd. had made 5% of inward remittance from sale of property = R650
investment i.e. acquired 10% shares of Belashom LLC, an lakhs*5% = R32.5 lakhs which is equivalent to USD
Egyptian company which is engaged in the construction 43,333.33 (R32,50,000/R75) and commission amount
of commercial premises. remitted = 4,50,000 EGPs which is equivalent to USD 30,000
As per the aforesaid provisions, there is prohibition in (4,50,000/15).
investing in real estate company abroad but real estate, Thus, Autukya (P) Ltd. was required to have prior permission
for this purpose, does not include construction of of RBI for remitting the amount of commission to Mr.
residential/commercial premises, etc. Franklin as the amount remitted is more than USD 25,000.
Thus, Nadus (P) Ltd. was not having any prohibition on
making of investment in Belashom LLC. 8. (i) As per Section 90 of the Real Estate (Regulation and
(ii) As per Regulation 4 of the Foreign Exchange Development) Act, 2016, no suit, prosecution or other legal
Management (Transfer or Issue of any Foreign Security) proceedings shall lie against the appropriate Government or
Regulations, 2004- the Authority or any officer of the appropriate Government
General permission has been granted to persons resident in or any member, officer or other employees of the Authority
India for purchase / acquisition of securities in the following for anything which is in good faith done or intended to
manner: be done under this Act or the rules or regulations made
(a) out of the funds held in RFC account; thereunder.
(b) as bonus shares on existing holding of foreign currency Here, complaint was filed with the authority under RERA by
shares; and Vikrama Builders (P) Ltd. against Nadus (P) Ltd. in respect
(c) when not permanently resident in India, out of their of the arrangements being made by it with the real estate
foreign currency resources outside India. agents. The case was assigned to Mr. Sumit Joshi, a RERA
General permission is also available to sell the shares so member and Mr. Sumit, in good faith, in order to understand
purchased or acquired. the arrangements being made by Nadus (P) Ltd. with the real
In the instance case study, Nadus (P) Ltd. had received some estate agents took help of his friend, Mr. Aman.
bonus shares from the Belashom LLC for which general Thus, no action can be taken against Mr. Sumit who induced
permission has been granted. So, Nadus (P) Ltd. was not his friend, Mr. Aman to enter into an agreement with Nadus
required to take any permission for the same. (P) Ltd. as it was done in good faith by Mr. Sumit.
(ii) As per Section 38 of the Real Estate (Regulation and
7. (i) As per Master Direction No. 17 – Import of Goods and Development) Act, 2016, where an issue is raised relating to
Services, a person resident in India may make payment in agreement, action, omission, practice or procedure that—
rupees towards meeting expenses on account of boarding, (a) has an appreciable prevention, restriction or distortion
lodging and services related thereto or travel to and from and of competition in connection with the development of a
within India of a person resident outside India who is on a real estate project; or
visit to India. (b) has effect of market power of monopoly situation being
As per Section 2(v) of the FEMA, 1999, person resident abused for affecting interest of allottees adversely, then
in India, inter-alia, means any person or body corporate the Authority, may suo motu, make reference in respect
registered or incorporated in India. of such issue to the Competition Commission of India.
Here in the case study, all the expenses incurred by Mr. James Here, the issue was related to the arrangements being made
in INR on account of his boarding, lodging and travelling in by Nadus (P) Ltd. with the real estate agents which affected
India were paid by Nadus (P) Ltd. for which it was going to be the competition in the relevant market and thus, the authority
reimbursed later on by Belashom LLC. under RERA was having the power to make reference to the
As per the aforesaid provisions, Nadus (P) Ltd. being a Competition Commission of India in respect of the case of
person resident in India, was given general permission for Nadus (P) Ltd.
incurring such expenses.
(ii) As per Schedule III (Transactions which are
prohibited)-Foreign Exchange Management (Current
Account Transactions) Rules, 2000, remittance of
commission, per transaction, to agents abroad for sale of
25
Economic Laws
Case Study 2
Prahasti Ltd. is an unlisted public company, situated in Chennai,
Financial Turnover of Total amount of
Tamil Nadu, with seven directors on its Board and it has share
Year Sharma & Co. (R) Transactions with
capital of R10 crore with 150 shareholders. It is engaged in the
Tamprabha Ltd.
business of cloth garments manufacturing and wholesaling. Also,
during each F.Y. (R)
it exports outside India.
As part of its export trade policy, it provides trade samples 2016-17 220 lakhs 10 lakhs
free of cost to the prospective customers and if it receives an 2017-18 180 lakhs 8 lakhs
export order of delivering more than 1000 cloth garments, then
2018-19 200 lakhs 9 lakhs
it has to export further 50 cloth garments worth R2 lakhs free of
cost to the customer. 2019-20 190 lakhs 9 lakhs
Recently, in the month of June, it had received an export 2020-21 150 lakhs 8 lakhs
order of delivering 1500 cloth garments to a company in
All the financial creditors of Tamprabha Ltd. were related
Germany for which the full export value declared was R63,00,000
parties and it had 15 operational creditors. Mr. Dev was
(70,000 Euros). However, the said company returned 200 pieces
appointed as the resolution professional (RP) and he sanctioned
of clothes worth R8,40,000 back to Prahasti Ltd. in the month of
a transaction of supply of goods to an associate company of
July. Remaining export value was realized by it and repatriated
Tamprabha Ltd. during the insolvency process for which approval
through the authorised dealer in India.
of the committee of creditors was not obtained by him.
Also, in order to have business security, there is an exclusive
The resolution plan of Tamprabha Ltd. contained a provision
distribution agreement entered into between different exporters
of combination as per Section 5 of the Competition Act, 2002
of cloth garments in Tamil Nadu exporting in Europe whereby and it was approved by the prescribed authorities. As a result
each exporter has been allocated different markets of Europe in of the implementation of the resolution plan, there was change
which they are allowed to do business. in the entire management of Tamprabha Ltd. and its control
One of the directors of Prahasti Ltd., Mr. Karan, had has been handed over to persons who have not been its related
withdrawn 50,000 Euros equivalent to $ 60,000, for the purpose of parties and against whom no legal proceedings are going on
business trip to Germany and Italy, respectively, for which he was under any statue.
going to be reimbursed by Prahasti Ltd. but however due to the Also, Tamprabha Ltd. was liable for an offence committed
reason of Covid-19 pandemic, the trip was cancelled and so after under the provisions of the Companies Act, 2013, prior to the
utilizing 20,000 Euros for studies for her daughter in Germany, commencement of corporate insolvency resolution process.
he returned back the remaining amount to the authorised dealer
within 140 days. In the light of enumerated facts, answer the following:
Prahasti Ltd. was expanding its business for the same
Multiple Choice Questions
purpose, one another corporate office was being searched by
the company in Chennai city only. One of its employees, Mr. 1. On expiry, how many further days from the date of receipt
Raj was searching online for a property and he visited a website, of order of revocation of registration by the promoter, the
named ‘propertylelo.com’, whereby Mr. Raj was asked to enter decision of the authority under RERA for carrying out of the
certain details which were then going to be disclosed with remaining development works should have taken effect?
certain promoters of real estate projects in Chennai for which (a) days
the promoters were charged by the website. Also after taking (b) 60 days
permission of a director by Mr. Raj, on payment of some fees, a (c) 45 days
(d) It shall be immediately effective
virtual 3D tour of a real estate project was arranged by the said
website. The said website portal was not registered as a real estate
2. Is there any contravention of the provisions of the FEMA,
agent.
1999, by Karan?
The company found a property near its location but came to
(a) No, as Mr. Karan has utilized the foreign currency
know later that the registration of such real estate project was
amount for a permissible transaction and within the
revoked by the authority under RERA. The authority under RERA
limits as per the ‘LRS’.
decided to hand over the task of the remaining development
(b) Yes, as Mr. Karan has not utilized the foreign currency
works of the said real estate project to the competent authority
amount for the purpose for which it was acquired.
as the association of allottees had refused to do the same and at
(c) No, as Mr. Karan after utilizing the foreign currency
that time, 45 days had passed from the date of receipt of order of amount for a permissible transaction, has surrendered
revocation of registration by the promoter. the remaining amount with the authorised dealer within
In case of one of the debtors of Prahasti Ltd. named the specified period.
Tamprabha Ltd., corporate insolvency resolution process was (d) No, as Mr. Karan was eligible to utilize the foreign
initiated against it by one of its operational creditor. Mr. Dev currency amount for any other permissible transaction
Sharma, was appointed as the Interim Resolution Professional as the business trip was cancelled due to a genuine
(IRP) who is partner of Sharma & Co., a law consulting firm reason and not because of default on his part.
which had transactions of following amounts with Tamprabha
Ltd. during the last 5 financial years:- 3. Whether Mr. Dev has validly sanctioned the transaction of
supply of goods by Tamprabha Ltd.?
(a) No, he was required to take prior approval of the

26
Economic Laws
committee of creditors before sanctioning such ANSWERS TO CASE STUDY 2
transaction. 1. (a) As per Section 8 of the RERA, 2016, upon lapse of the
(b) No, due to applicability of order of moratorium by the registration or on revocation of the registration under this
Adjudicating Authority, such a transaction should have Act, the Authority, may consult the appropriate Government
not taken place. to take such action as it may deem fit including the carrying
(c) Yes, the IBC, 2016, itself has given authority to the out of the remaining development works by competent
resolution professional to undertake such actions authority or by the association of allottees or in any other
necessary for the continued business operations of the manner, as may be determined by the Authority.
corporate debtor. It is provided that no direction, decision or order of the
(d) Yes, provided the transaction was conducted at arm’s Authority under this section shall take effect until the expiry
length price. of the period of appeal provided under the provisions of this
Act.
4. Which authorities would have approved the resolution plan Time period for filing appeal is 60 days from the date of
of Tamprabha Ltd. and in what sequence? receipt of order by the aggrieved person as per Section 44 of
(a) Committee of Creditors and then Adjudicating the Act.
Authority, respectively. Here, 45 days had passed from the date of receipt of order of
(b) Committee of Creditors, Adjudicating Authority and revocation of registration by the promoter, so, after expiry of
then Competition Commission of India, respectively. further 15 days, the decision of the authority under RERA
(c) Committee of Creditors, Competition Commission of for carrying out of the remaining development works should
India and then Adjudicating Authority, respectively. have taken effect.
(d) Competition Commission of India, Committee of
Creditors and then Adjudicating Authority, respectively. 2. (b) As per the provisions of the FEMA, 1999, if any person,
other than an authorized person, who has acquired or
5. Mr. Dev Sharma would have been ineligible to be appointed purchased foreign exchange for any purpose mentioned in
as the Interim Resolution Professional of Tamprabha Ltd. if:- the declaration made by him to authorized person.
(a) Sharma & Co. would have entered into transaction(s) of • Does not use it for such purpose, or
further amount of R1 lakh or more with Tamprabha Ltd. • Does not surrender it to the authorized person within the
during any of the last 3 financial years. specified period, or
(b) Sharma & Co. would have entered into transaction(s) of • Uses the foreign exchange so acquired or purchased for
further amount of R1 lakh or more during F.Y. 2018-19 any other purpose for which purchase or acquisition of
and transaction(s) of further amount of R50,000 or more foreign exchange is not permissible under the provisions
during F.Y. 2019-20 with Tamprabha Ltd., respectively. of the Act or the rules or regulations or direction or order
(c) Sharma & Co. would have entered into transaction(s) of made there under,
further amount of R3 lakhs or more with Tamprabha Ltd. Such person shall be deemed to have committed
during any of the last 5 financial years. contravention of the provisions of the Act.
(d) Sharma & Co. would have entered into transaction(s) of
further amount of R28 lakhs or more with Tamprabha 3. (a) As per Section 5(24) of the IBC, 2016, an associate
Ltd. during any of the last 3 financial years. company is considered as a related party of the corporate
debtor.
Descriptive Questions According to section 28 of the Code, the resolution
6. (i) Whether Prahasti Ltd. needs to furnish declaration in professional, during the corporate insolvency resolution
case of goods which are exported free of cost as per its process, shall not undertake any related party transaction
trade policy? without the prior approval of the committee of creditors.
(ii) Whether Prahasti Ltd. can be said to have realized full Thus, Mr. Dev has not validly sanctioned the transaction
export value with respect to the export order from the of supply of goods to an associate company of Tamprabha
company in Germany? Ltd. during the insolvency process because approval of the
committee of creditors was required to be obtained by him
7. Whether the agreement made between different exporters of for such transaction as aforesaid.
cloth garments in Tamil Nadu can be considered as an anti-
competitive agreement? 4. (d) As per Section 31 of the IBC, 2016, if the Adjudicating
Authority is satisfied that the resolution plan as approved by
8. Whether the website portal named ‘propertylelo.com’ would the committee of creditors meets the requirements as per
be required to be registered as a real estate agent? (Please section 30(2), it shall by order approve the resolution plan.
support your answer on the basis of a relevant case law) Where the resolution plan contains a provision for
combination, as per section 5 of the Competition Act, 2002,
9. (i) What would have been the constitution of committee of the resolution applicant shall obtain the approval of the
creditors of Tamprabha Ltd.? Competition Commission of India under that Act prior to the
(ii) Whether Tamprabha Ltd. would be prosecuted for approval of such resolution plan by the committee of creditors.
the offence committed under the provisions of the On reading of the aforesaid provisions, the authorities and
Companies Act, 2013, prior to the commencement of the sequence of approval that can be derived is:- Competition
corporate insolvency resolution process? Commission of India, Committee of Creditors and then
Adjudicating Authority, respectively.
27
Economic Laws
5. (a) As per Regulation 3 of the Insolvency and Bankruptcy into India, within the period specified for realisation of the
(Insolvency Resolution process for Corporate Persons) export value, of the exported goods in respect of which a
Regulation, 2016, an insolvency professional shall be eligible declaration was made under Regulation 3, shall be deemed
for appointment as a resolution professional for a corporate to be realisation of full export value of such goods.
insolvency process if he is not an employee or proprietor or As per Regulation 9 of the Foreign Exchange Management
a partner of a legal or consulting firm that has or had any (Export of Goods and Services) Regulations, 2015, the
transaction with the corporate debtor amounting to five per amount representing the full export value of goods /
cent or more of the gross turnover of such firm in the last software/ services exported shall be realised and repatriated
three financial years. to India within nine months or within such period as may
Financial Turnover of Total amount of be specified by the Reserve Bank, in consultation with the
Year Sharma & Co. (R) Transactions with Government, from time to time, from the date of export,
Tamprabha Ltd. provided.
during each F.Y. (R)
Given Case and Analysis: Full export value declared by
2018-19 200 lakhs 9 lakhs Prahasti Ltd. was R63,00,000 in respect to export order from
2019-20 190 lakhs 9 lakhs the company in Germany.
However, Prahasti Ltd. re-imported 200 pieces of clothes
2020-21 150 lakhs 8 lakhs
worth R8,40,000 from the said company in the month of July
Total 540 lakhs 26 lakhs i.e. within the period specified for realisation of the export
value. So, it shall be deemed to be realisation of full export
Here, 5% of R540 lakhs comes to R27 lakhs and Sharma & value of such goods as per explanation to the Regulation 4 as
Co. has already rendered transaction(s) amounting to Rs. aforesaid.
26 lakhs to Tamprabha Ltd. So, Mr. Dev Sharma would have Also, remaining export value had been realized by Prahasti
been ineligible to be appointed as the Interim Resolution Ltd. and repatriated through the authorised dealer in India.
Professional of Tamprabha Ltd. if Sharma & Co. would have Thus, it can be said that Prahasti Ltd. has realized full export
entered into transaction(s) of further amount of R1 lakh or value with respect to the export order from the company in
more with Tamprabha Ltd. during any of the last 3 financial Germany.
years.
Note: Resolution Professional includes an Interim 7. Legal Position: As per Section 3 of the Competition Act,
Resolution Professional as per Section 5(27) of the IBC, 2002, it shall be unlawful for any enterprise or association of
2016. enterprises or person or association of persons to 'enter' into
any agreement in respect of production, supply, storage,
6. (i) Legal Position: As per Regulation 4 of the Foreign distribution, acquisition or control of goods or provision of
Exchange Management (Export of Goods and Services) services, which causes or is likely to cause an appreciable
Regulations, 2015, export of goods / software may be made adverse effect on competition within India; and such
without furnishing the declaration in the following cases, agreements shall be void.
inter-alia, namely: Sub-section 5 to the said section 3 protects the right of
(a) trade samples of goods and publicity material supplied specific persons by restricting the application of section 3 to
free of payment. their rights, hence become exceptions to section 3.
(b) by way of gift of goods accompanied by a declaration by One of such exceptions is:- Any agreement or part there-of
the exporter that they are not more than five lakh rupees in shall not be considered as anti-competitive, hence not void
value. to the extent it is exclusively related to production, supply,
distribution or control of goods or provision of services for
Given Case and Analysis: As part of its export trade policy, purpose of export of goods from India.
Prahasti Ltd. provides trade samples free of cost to the
prospective customers and if it receives an export order of Given Case and Analysis: Here, in the given case, the
delivering more than 1000 cloth garments, then it exports agreement entered into between different exporters of cloth
extra 50 cloth garments worth R2 lakhs free of cost which is garments in Tamil Nadu exporting in Europe is for the
less than value of R5 lakhs as prescribed. purpose of export goods from India and hence cannot be
Thus, Prahasti Ltd. is not required to furnish declaration in considered as an anti-competitive agreement as it has been
case of aforesaid goods which are exported free of cost as per covered by the exception as aforesaid.
its trade policy.
8. Legal Position: The facts in the given case are similar to the
(ii) Legal Position: As per Regulation 4 of the Foreign case law with citation, MahaRera Order in the Suo Moto
Exchange Management (Export of Goods and Services) Enquiry No.17/2018 dated 03.10.2019, where in it was
Regulations, 2015, unless otherwise authorised by the decided that a digital portal needs to be registered as a real
Reserve Bank, the amount representing the full export value estate agent if it carries out the following functions:-
of the goods exported shall be paid through an authorised
dealer in the manner specified in the Foreign Exchange 1. Portals when they collect the details of the viewer and share
Management (Manner of Receipt and Payment) Regulations, them with advertiser/seller and also disclose the information
2000 as amended from time to time. of promoters to buyers, they introduce the parties to the sale
Explanation—For the purpose of this regulation, re-import transaction.

28
Economic Laws
(b) 1 representative elected by all workmen; and
2. If the portal simply provide the information about the real (c) 1 representative elected by all employees.
estate project, its offering for sale to the public at large, then
they are simply the agencies engaged for advertisement and Given Case & Analysis: Here, all the financial creditors of
when an individual is targeted by contacting and persuading Tamprabha Ltd. were related parties and it had 15 operational
him by the portals for sale and purchase of listed properties creditors, so the committee of creditors constituted would
they come under the legal definition of negotiation. have been as follows:
(a) All the 15 operational creditors (as it has less than 18
3. Web Portals introduce the buyer and seller with each other, operational creditors);
they provide the information of the project to the buyer, they (b) 1 representative elected by all workmen; and
arrange virtual tour of the project and also provide other (c) 1 representative elected by all employees.
information useful for taking an informative decision. Hence,
they facilitate the sale of the real estate project. (ii) Legal Position: As per Section 32A(1) of the Insolvency
and Bankruptcy Code, 2016, notwithstanding anything to
4. Once any monetary gain is derived for the purpose of the contrary contained in this Code or any other law for the
performing any act of the real estate agent by whichever time being in force, the liability of a corporate debtor for
name it amounts the receipt of the fees under the RERA. an offence committed prior to the commencement of the
corporate insolvency resolution process shall cease, and the
5. The Parliament has not carved out any exceptions to the corporate debtor shall not be prosecuted for such an offence
applicability of the provisions of RERA, Hence, we hold that from the date the resolution plan has been approved by the
RERA overrides section 79 of the IT Act. Adjudicating Authority under section 31, if the resolution
plan results in the change in the management or control of
Given Case & Analysis: Here, in the website, named the corporate debtor to a person who was not-
‘propertylelo.com’, Mr. Raj was asked to enter certain details (a) a promoter or in the management or control of the
which were then going to be disclosed with certain promoters corporate debtor or a related party of such a person; or
of real estate projects in Chennai for which such promoters (b) a person with regard to whom the relevant investigating
were charged by the website. authority has, on the basis of material in its possession,
Accordingly, Mr. Raj has been introduced to the sale reason to believe that he had abetted or conspired for the
transaction and he would be contacted by such promoters for commission of the offence, and has submitted or filed a
a property deal. Due to this, the website has earned monitory report or a complaint to the relevant statutory authority or
gain for exchange of information of prospective buyers with Court:
the promoters. Provided that if a prosecution had been instituted during
Also, on payment of some fees by Mr. Raj on permission the corporate insolvency resolution process against such
of director, a virtual 3D tour of a real estate project was corporate debtor, it shall stand discharged from the date of
arranged by the said website. This type of facility helps in approval of the resolution plan subject to requirements of
taking an informative decision to the prospective buyer. this sub-section having fulfilled.
Thus, it can be said that the website portal named ‘propertylelo.
com’ would be required to be registered as it carries out the Given Case & Analysis: Here, it is given that, as a result of the
functions of the real estate agent as explained above. resolution plan, there was change in the entire management
of Tamprabha Ltd. and its control has been handed over to
9. (i) Legal Position: As per Regulation 16 of the IBBI persons who have not been its related parties and against
(Insolvency Resolution Process for Corporate Persons) whom no legal proceedings are going on under any statue.
Regulations, 2016, where the corporate debtor has no
financial debt or where all financial creditors are related It appears from the given facts that conditions as
parties of the corporate debtor, the committee shall be set demonstrated in section 32A(1) has been satisfied by
up in accordance with this Regulation. Tamprabha Ltd. and thus, the liability of Tamprabha Ltd.
The committee formed under this Regulation shall consist of for an offence committed under the provisions of the
members as under – Companies Act, 2013, prior to the commencement of the
(a) 18 largest operational creditors by value: corporate insolvency resolution process shall cease, and it
Provided that if the number of operational creditors is less shall not be prosecuted for such an offence from the date
than 18, the committee shall include all such operational the resolution plan has been approved by the Adjudicating
creditors; Authority under section 31.
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Economic Laws
Case Study 3
The Adjudicating authority under the Insolvency and Bankruptcy
Sr. Details Details relating to the Application
Code, 2016, had received different applications during the July
No. of the
month, in respect of certain corporate persons, as follows:-
Applicant
Sr. Details Details relating to the Application 7 TLF (P) TLF (P) Ltd. filed an application for
No. of the Ltd., a realizing the secured asset of Anmoli Ltd.
Applicant secured during the liquidation proceedings for
1 Ukrin Ltd., Ukrin Ltd. submitted a withdrawal creditor of which it faced resistance from Mr. Raj,
operational application on 26th May for consideration Anmoli Ltd. director of Anmoli Ltd. (Note 6)
creditor of by the Committee of Creditors which
Kaptcha was approved by it, by a vote of 92%, on Notes:
Ltd., 1st June and Mr. Tanmay, the Interim 1. Such allottees then filed a complaint against Trees Estate Ltd.
corporate Resolution Professional, then submitted with the Real Estate Regulatory Authority under Section 31
debtor such application to the Adjudicating of the Real Estate (Regulation & Development) Act, 2016.
authority on 5th June on behalf of Ukrin The said authority under RERA passed an order imposing
maximum penalty upon the promoter company, Trees Estate
Ltd.
Ltd. with a direction to compensate the said 30 allottees by
2 Certain 30 allottees out of 310 allottees of Trees returning their cumulative investment amount of R20 crores
allottees Estate Ltd. jointly filed an application for along with total interest of R2 crores. The estimated cost of
of Trees initiating corporate insolvency resolution the real estate project was R200 crores. Trees Estate Ltd. filed
Estate Ltd., process against it, as the said allottees, an appeal with the Appellate Tribunal against the said order
corporate on the basis of model apartment had of Real Estate Regulatory Authority.
debtor purchased the properties in the project
and according to them it was not as 2. It was found by the Adjudicating authority that JLC (P) Ltd.
per model displayed and the promoter had notified vide an e-mail to Turf Enterprise within 10 days
company refused to return the investment of the demand notice, of the dispute that existed, and the said
amount of such allottees. (Note 1) matter was going to be referred for arbitration by JLC (P) Ltd.
and accordingly, the Adjudicating authority passed a penalty
3 Turf Turf Enterprise filed an application along
order with a fine amount of R70,000 against Turf Enterprise,
Enterprise, with the relevant enclosures on 10th after opportunity of being heard, for willful non-disclosure of
an June for initiating corporate insolvency such fact of notice of dispute and also rejected its application.
operational resolution process against JLC (P) Ltd.
creditor of (Note 2) 3. One of such transactions was entered by Saath Ltd. before 19
JLC (P) Ltd.
months preceding the insolvency commencement date with
4 Mr. Ravi, Mr. Ravi filed an application for declaring Janam Ltd. which involved supplying of goods by Saath Ltd.
Resolution two undervalued transactions entered for R4.4 crores which Saath Ltd. would have normally sold
Professional into by Saath Ltd. as void and to reverse for 4.6 crores in its ordinary course of business. Saath Ltd.
of Saath the effect of such transactions. (Note 3) and Janam Ltd. were having two directors in common.
Ltd., The other transaction was entered by Saath Ltd. before 17
corporate months preceding the insolvency commencement date with
debtor Mr. Mahesh which involved sale of property of Saath Ltd.
for R15 crore, the stamp duty value of which was R35 crore.
5 KC & KC & Sons filed an application for
Mr. Mahesh is a house worker of Mr. Sunil, the director of
Sons, an obtaining liquidation order against FAL Saath Ltd. There was a case under the Prohibition of Benami
operational Ltd. on the ground that FAL Ltd. had Property Transactions Act, 1988, going against Mr. Mahesh
creditor of contravened the resolution plan approved and Mr. Sunil, due to acquisition of such property in the
FAL Ltd. by the Adjudicating Authority because as name of Mr. Mahesh and it was held that Mr. Mahesh was
per the said plan, FAL Ltd. had to pay 60% the ‘benamidar’ and Mr. Sunil was the ‘beneficial owner’ and
of pending dues to KC & Sons as a full & the property was ordered to be confiscated and consequently
final settlement amount but it had paid has been disposed off.
only 20% of its pending dues as a full &
final settlement amount. (Note 4) 4. Adjudicating authority passed the liquidation order of FAL
6 Mr. Rohan, Mr. Rohan made an application along Ltd. on the basis of application of KC & Sons. However, KC
Interim with a list of financial creditors for & Sons, afterwards, filed a suit against FAL Ltd. in the City
Civil Court for realizing its dues as per the resolution plan
Resolution appointment of authorised representative
approved by the Adjudicating authority under the Insolvency
Professional to act on behalf of such creditors during
and Bankruptcy Code, 2016.
of Tadan the corporate insolvency resolution
Ltd., process. (Note 5)
5. Mr. Rohan had offered names of three insolvency
corporate professionals to such class of financial creditors to act as its
debtor
30
Economic Laws
authorised representative who belonged to three different 4. Whether the names offered by Mr. Rohan for appointment as
states:- Gujarat, Maharashtra and Rajasthan, respectively. authorised representative can be considered proper and till
The highest number of such creditors of Tadan Ltd. belonged what time the Adjudicating authority should have appointed
to the state of Gujarat. such authorised representative?
(a) Yes, as one name is from Gujarat and other two names
6. The application of TLF (P) Ltd. was approved by the belong to such states which are nearby to Gujarat. The
Adjudicating authority and TLF (P) Ltd. was permitted to Adjudicating authority should have appointed such
realize its security interest in the asset. Accordingly, TLF authorised representative prior to the first meeting of the
(P) Ltd. enforced its security interest and yielded amount of committee of creditors.
R2 crores in excess of its debts due from Anmoli Ltd. (b) No, all the three names offered should have been
Apart from the aforesaid applications received by the from Gujarat. The Adjudicating authority should have
Adjudicating authority during the July month there were few appointed such authorised representative prior to the
other applications received by it in respect of certain corporate first meeting of the committee of creditors.
persons which could not be disposed of within the time periods (c) No, all the three names offered should have been
as specified in the IBC, 2016, for which the reasons were recorded from Gujarat. The Adjudicating authority should have
in writing by the Adjudicating authority. appointed such authorised representative prior to the
formation of the committee of creditors.
Answer the following questions in the light of the given (d) Yes, as at least one name offered should have been
informations: from Gujarat. The Adjudicating authority should have
Multiple Choice Questions appointed such authorised representative prior to the
formation of the committee of creditors.
1. Till what date the Committee of Creditors should have
considered the withdrawal application submitted by Ukrin
5. Who can extend the time period for disposing of the few
Ltd. and till what date, such application should have been
other applications received by the Adjudicating authority
submitted with the Adjudicating authority for approval by
during the July month?
Mr. Tanmay?
(a) The President of the National Company Law Tribunal
(a) 2nd June and 9th June, respectively.
can extend the time periods specified in the Act but not
(b) 31st May and 5th June, respectively.
exceeding ten days.
(c) 9th June and 12th June, respectively.
(b) The Chairperson of the National Company Law Appellate
(d) 2nd June and 4th June, respectively.
Tribunal can extend the time periods specified in the Act
but not exceeding seven days.
2. Whether the application filed by the 30 allottees of Trees
(c) The Chairperson of the National Company Law Tribunal
Estate Ltd. can be considered to be admissible by the
can extend the time periods specified in the Act but not
Adjudicating authority?
exceeding ten days.
(a) No, as an application is already with the authority under
(d) The Chairperson of the National Company Law Appellate
RERA, so simultaneously two proceedings cannot be
Tribunal can extend the time periods specified in the Act
initiated for the same matter.
but not exceeding seven days.
(b) Yes, as the amount of default involved is more than
R1 crore.
Descriptive Questions
(c) No, as the application is filed jointly by lesser number of
6. For contravention of which provisions the penalty would
allottees than prescribed.
have been imposed by the authority under RERA upon the
(d) Yes, such application can be admitted as the RERA Act
promoter company, Trees Estate Ltd. and of what amount?
provides an additional remedy to the homebuyer which
Also, how much amount of pre-deposit would have been made
will not bar other remedies available to the homebuyer.
by it for filing the appeal with the Appellate Tribunal?
3. What minimum fine amount should have been imposed
7. (i) Whether the two transactions entered by Saath Ltd. can
on Turf Enterprise by the Adjudicating authority and what
be said to have entered within the relevant period for
amount of maximum fine it could have imposed on Turf
considering them as undervalued transactions?
Enterprise?
(ii) Whether the two transactions entered into by Saath Ltd., as
(a) Adjudicating authority should have imposed minimum
aforesaid, can be considered as undervalued transactions
fine of R1 lakh on Turf Enterprise and maximum fine of
as contemplated by Mr. Ravi in the application filed with
R3 lakhs could have been imposed by it.
the Adjudicating Authority?
(b) Adjudicating authority should have imposed minimum

fine of R1 lakh on Turf Enterprise and maximum fine
8. Whether KC & Sons should have instituted a suit against
of R1 crore could have been imposed by it. However, it
FAL Ltd. in the City Civil Court and whether such court can
possesses the discretion to impose a lower amount of
entertain such suit?
fine.

(c) Adjudicating authority should have imposed minimum
9. What shall be done by TLF (P) Ltd. with respect to amount
of R2 crores yielded in excess of its debts due from Anmoli
R5 lakhs could have been imposed by it.
Ltd. and before realizing such security interest by TLF (P)
(d) Adjudicating authority should have imposed minimum
Ltd., what kind of verification would have been made by the
liquidator?
R1 crore could have been imposed by it.
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Economic Laws
ANSWERS TO CASE STUDY 3 4. (b) As per section 21(6A) of the IBC, 2016, where a financial
1. (d) Withdrawal of application shall be pursuant to Section debt is owed to a class of creditors other than the creditors
12A of the Code read with Regulation 30A of the IBBI covered above, the IRP shall make an application to the AA
(Insolvency Resolution Process for Corporate Persons) along with the list of all financial creditors, with the name
Regulations, 2016. of an insolvency professional to act as their authorised
Once application is admitted and after Constitution of CoC representative appointed by the Adjudicating Authority
but before issue of Invitation for Expression of Interest prior to the first meeting of the committee of creditors.
(“EoI”):- An application for withdrawal made by the Applicant Authorised Representative from the State or Union
shall be firstly considered by the CoC, within seven days of Territory having highest number of creditors in class
its receipt. Such withdrawal of application shall be approved The Interim Resolution Professional shall offer the names of
by the CoC with ninety percent voting share, upon which three insolvency professionals to be voted upon by the class
the resolution professional shall submit such withdrawal of creditors, who must be from the State or Union Territory,
application along with the approval of the committee, to the which has the highest number of creditors in the class as per
Adjudicating Authority on behalf of the applicant, within records of the corporate debtor.
three days of such approval
Where such State or Union Territory does not have
Ukrin Ltd. submitted a withdrawal application on 26th adequate number of insolvency professionals, the insolvency
May for consideration by the Committee of Creditors. So, professionals having addresses in a nearby State or Union
the Committee of Creditors should have considered such Territory, as the case may be, shall be considered.
application by 2nd June i.e. 7 days from 26th May.
Here, the highest number of such creditors of Tadan Ltd.
The Committee of Creditors approved such application by belonged to the state of Gujarat. So, all the three names
a vote of 92% on 1st June. So, Mr. Tanmay should have been offered should have been from Gujarat by Mr. Rohan.
submitted with the Adjudicating authority for approval by
4th June i.e. 3 days from 1st June. 5. (a) As per Section 64 of the IBC, 2016, where an application
is not disposed of or an order is not passed within the period
2. (c) Section 7 of the IBC, 2016:- specified in this Code, the National Company Law Tribunal
A financial creditor either by itself or jointly with other or the National Company Law Appellate Tribunal, as the
financial creditors, or any other person on behalf of case may be, shall record the reasons for not doing so within
the financial creditor, as may be notified by the Central the period so specified; and the President of the National
Government may file an application for initiating corporate Company Law Tribunal or the Chairperson of the National
insolvency resolution process against a corporate debtor Company Law Appellate Tribunal, as the case may be, may,
before the Adjudicating Authority when a default has after taking into account the reasons so recorded, extend the
occurred. period specified in the Act but not exceeding ten days. No
Provided further that for financial creditors who are allottees injunction shall be granted by any court, tribunal or authority
under a real estate project, an application for initiating in respect of any action taken, or to be taken, in pursuance of
corporate insolvency resolution process against the corporate any power conferred on the National Company Law Tribunal
debtor shall be filed jointly by not less than one hundred or the National Company Law Appellate Tribunal under this
of such allottees under the same real estate project or Code.
not less than ten per cent. of the total number of such
allottees under the same real estate project, whichever is 6. Section 12 of the Real Estate (Regulation & Development) Act,
less. 2016, contains provisions which deal with the obligations of a
promoter regarding veracity of the advertisement or prospectus.
Here, 30 allottees out of 310 allottees of Trees Estate Ltd.
jointly filed an application for initiating corporate insolvency Accordingly, where any person makes an advance or a
resolution process against it. But as the proviso above, 100 deposit on the basis of the information contained in the
allottees or 31 allottees (10% of 310) whichever is less, should notice, advertisement or prospectus, or on the basis of any
have jointly filed such application. model apartment, plot or building, as the case may be, and
sustains any loss or damage by reason of any incorrect, false
So, the application filed by the said 30 allottees of Trees
statement included therein, he shall be compensated by the
Estate Ltd. is not admissible by the Adjudicating authority as
promoter in the manner as provided under this Act.
it is filed jointly by lesser number of allottees than prescribed.
However, if the person affected by such incorrect, false
3. (d) As per Section 76 of the IBC, 2016:- Where an statement contained in the notice, advertisement or
operational creditor has wilfully or knowingly concealed prospectus, or the model apartment, plot or building, as
in an application under section 9 the fact that the corporate the case may be, intends to withdraw from the proposed
debtor had notified him of a dispute in respect of the project, he shall be returned his entire investment along
unpaid operational debt or the full and final payment of the with interest at such rate as may be prescribed and the
unpaid operational debt. compensation in the manner provided under this Act.
Such operational creditor or person, as the case may be, shall In the given case, the 30 allottees on the basis of model
be punishable with imprisonment for a term which shall not apartment had purchased the properties in the project and
be less than one year but may extend to five years or with according to them it was not as per model displayed and the
fine which shall not be less than one lakh rupees but may promoter company refused to return the investment amount
extend to one crore rupees, or with both. of such allottees.

32
Economic Laws
Thus, for contravention of provisions of section 12, as Transaction was entered by Saath Ltd. before 19 months
aforesaid, the promoter company, Trees Estate Ltd. would preceding the insolvency commencement date with Janam
have been penalized. Ltd. and Saath Ltd. and Janam Ltd. were having two directors
As per Section 61 of the Real Estate (Regulation & in common.
Development) Act, 2016, if any promoter contravenes As per Section 5(24) of the IBC, 2016, related party, in
any other provisions of this Act, other than that provided relation to a corporate debtor, inter-alia, means any person
under section 3 or section 4, or the rules or regulations who is associated with the corporate debtor on account of
made thereunder, he shall be liable to a penalty which may having more than two directors in common between the
extend up to five per cent of the estimated cost of the real corporate debtor and such person.
estate project as determined by the Authority. As, Saath Ltd. and Janam Ltd. were having two directors in
Here it is given, that the authority under RERA passed an common, Janam Ltd. would be considered as related party in
order imposing maximum penalty upon the promoter relation to Saath Ltd. and the transaction took place within 2
company, Trees Estate Ltd. and the estimated cost of the years preceding the insolvency commencement date.
real estate project was R200 crores, so the amount of penalty Thus, the said transaction can be said to have entered within
would have been 5% of R200 crores = R10 crores. the relevant period for considering it as an undervalued
As per Section 43 of the Real Estate (Regulation & transaction.
Development) Act, 2016, any person aggrieved by any
direction or decision or order made by the Authority or by an In case of transaction entered by Saath Ltd. with Mr.
adjudicating officer under this Act may prefer an appeal before Mahesh
the Appellate Tribunal having jurisdiction over the matter. Transaction was entered by Saath Ltd. before 17 months
Where a promoter files an appeal with the Appellate preceding the insolvency commencement date with Mr.
Tribunal, it shall not be entertained, without the promoter Mahesh. Mr. Mahesh is a house worker of Mr. Sunil, the
first having deposited with the Appellate Tribunal atleast director of Saath Ltd. There was a case under the Prohibition
thirty per cent. of the penalty, or such higher percentage as of Benami Property Transactions Act, 1988, going against Mr.
may be determined by the Appellate Tribunal, or the total Mahesh and Mr. Sunil, due to acquisition of such property in
amount to be paid to the allottee including interest and the name of Mr. Mahesh and it was held that in the order
compensation imposed on him, if any, or with both, as the passed that Mr. Mahesh was the ‘benamidar’ and Mr. Sunil
case may be, before the said appeal is heard. was the ‘beneficial owner’.
Explanation—For the purpose of this sub-section "person" As per Section 5(24) of the IBC, 2016, Related party, in
shall include the association of allottees or any voluntary relation to a corporate debtor, inter-alia, means — a director
consumer association registered under any law for the time or partner or a relative of a director or partner of the
being in force. corporate debtor
In the given case, the authority under RERA has imposed Now, as per the order passed under the provisions of the
a penalty on Trees Estate Ltd. as well as directed to it Prohibition of Benami Property Transactions Act, 1988, Mr.
to compensate the said 30 allottees by returning their Mahesh was considered as the ‘benamidar’ and Mr. Sunil was
cumulative investment amount of R20 crores along with total considered as the ‘beneficial owner’ and thus, it can be said
interest of R2 crores. that, in substance, the transaction was entered by Saath Ltd.
with Mr. Sunil and not with Mr. Mahesh and Mr. Sunil being
Thus, the amount of pre-deposit that would have been made
a director of Saath Ltd. would be considered as the Related
by Trees Estate Ltd. for filing the appeal with the Appellate
party in relation to Saath Ltd.
Tribunal would be:-
Also, the transaction took place within 2 years preceding the
• 30% of R10 crore = R3 crore or such higher percentage as
insolvency commencement date.
may be determined by the Appellate Tribunal and;
• The total amount to be paid to the allottee including Thus, the said transaction can be said to have entered within
interest and compensation imposed on him i.e. R20 the relevant period for considering it as an undervalued
crores + R2 crores = R22 crores. transaction.
7. (i) As per Section 46 of the IBC, 2016, in an application (ii) As per Section 45 of the IBC, 2016, a transaction shall be
for avoiding a transaction at undervalue, the liquidator or considered undervalued where the corporate debtor —
resolution professional shall determine : (a) makes a gift to a person; or
a) That the transaction was entered within the period of one (b) enters into a transaction with a person which involves
year preceding the insolvency commencement date; or the transfer of one or more assets by the corporate debtor
b) That the transaction was made with a related party for a consideration the value of which is significantly
within a period of two years preceding the insolvency less than the value of the consideration provided by the
commencement date. corporate debtor,
The Adjudicating Authority may require an independent and such transaction has not taken place in the ordinary
expert to assess evidence relating to the value of the course of business of the corporate debtor.
transactions
In case of transaction entered by Saath Ltd. with Janam In case of transaction entered by Saath Ltd. with Janam
Ltd. Ltd.
33
Economic Laws
Though the transaction has not taken place in the ordinary FAL Ltd. in the City Civil Court due to the restrictions as
course of business of the corporate debtor but the mentioned in the aforesaid provision.
consideration for such supply of goods does not appear to As per Section 63 of the IBC, 2016, no civil court or authority
be significantly lesser than the value of the consideration shall have jurisdiction to entertain any suit or proceedings
provided by the corporate debtor as consideration charged in respect of any matter on which National Company Law
by Saath Ltd. was R4.4 crores which it would have normally Tribunal or the National Company Law Appellate Tribunal
sold for 4.6 crores. has jurisdiction under this Code.
Thus, transaction entered by Saath Ltd. with Janam Ltd. Civil court not to have jurisdiction.
cannot be said to be an undervalued transaction even though
Here, in the given case, the Adjudicating authority i.e. the
it has been entered into with a related party within the
NCLT was having the jurisdiction over the matter with respect
relevant period.
to non-payment to KC & Sons as per the resolution plan by
FAL Ltd. and thus, the City Civil court cannot entertain such
In case of transaction entered by Saath Ltd. with Mr. suit as it is not having the jurisdiction to do the same.
Mahesh
Here, Saath Ltd. had sold a property to Mr. Mahesh for R15
crore, the stamp duty value of which was R35 crore. It can be 9. As per Section 52(7) of the IBC, 2016, where the enforcement
said that consideration charged is significantly less than the of the security interest yields an amount by way of proceeds
value of the consideration provided by the corporate debtor, which is in excess of the debts due to the secured creditor, the
Saath Ltd. secured creditor shall—
Further, Mr. Mahesh is a house worker of Mr. Sunil, the (a) account to the liquidator for such surplus; and
director of Saath Ltd. and also an order under the Prohibition (b) tender to the liquidator any surplus funds received from
of Benami Property Transactions Act, 1988 was passed the enforcement of such secured assets.
against them. So, such transaction also does not appear to
Thus, TLF (P) Ltd. should account to the liquidator surplus
take place in the ordinary course of business of the corporate
sum of R2 crores yielded in excess of its debts due from
debtor, Saath Ltd.
Anmoli Ltd. as well as tender the same to the liquidator.
Thus, the transaction entered by Saath Ltd. with Mr. Mahesh
As per Section 52(7) of the IBC, 2016, before any security
can be said to be an undervalued transaction.
interest is realised by the secured creditor, the liquidator
shall verify such security interest and permit the secured
8. As per Section 33(5) of the IBC, 2016, subject to section
creditor to realise only such security interest, the existence
52, when a liquidation order has been passed, no suit or
of which may be proved either—
other legal proceeding shall be instituted by or against the
corporate debtor. (a) by the records of such security interest maintained by an
information utility; or
Provided that a suit or other legal proceeding may be
(b) by such other means as may be specified by the Board.
instituted by the liquidator, on behalf of the corporate debtor,
with the prior approval of the Adjudicating Authority. Thus, before realizing such security interest by TLF (P) Ltd.
the liquidator should have verified the security interest as
Thus, KC & Sons should not have instituted a suit against
aforesaid.
Case Study 4
Mapple Inc. is an American MNC that designs and markets can be broadly classified as smartphones and featured phones.
consumer electronics, computer software and personal While acknowledging that iPhone is a unique product, there
computers, etc. Mapple India is the Indian subsidiary of Mapple are certain smartphones offered by other brands such as Nokia,
Inc. through which it markets and sells its products in India. Blackberry, and Samsung that have advanced features and which
XPhone and Sintel are leading mobile service providers in could be considered as substitutes for the iPhone.
India, jointly having more than 30 crore Indian subscribers that Mapple Inc. and Mapple India entered into some exclusive
account for almost 52% market share in the GSM market. In contracts/agreements with XPhone and Sintel respectively, for
total, there are around 20 service providers in India but none of the sale of iPhones in India, even prior to its launch. XPhone and
them individually holds more than 30% of the total market share. Sintel are both, cellular data and GSM network service providers
Particular models of iPhones – iPhone 3G and iPhone 3GS, functioning in India. As a result of the agreements, XPhone and
were manufactured by Mapple Inc., launched in India during Sintel got exclusive selling rights for an undisclosed number
August 2008 and March 2010, respectively. During the fiscal year, of years. The iPhones sold by XPhone and Sintel came in the
2010, worldwide sales of iPhones were 73.5 million. compulsorily locked form, thereby meaning, that the handset
Mobile services in India can be offered through two competing purchased from either of them shall work only on their respective
technologies i.e. GSM and CDMA and that, SIM cards of each of networks and none other.
these cellular services are compatible only with those handsets Mapple Inc. permitted iPhone users only those applications on
which deploy their respective technologies and thus not able to their iPhones that have been approved by them and available
substitution. iPhones are based on GSM technology. Handsets through their own online application store namely ‘App Store’.
34
Economic Laws
Further, no other third-party applications can be run on iPhone Reply by XPhone to the report of CCI:
unless the same has been approved by Mapple Inc. If however, The agreement was non-exclusive and iPhones were available
the operating system of jail broken iPhone is upgraded, the in India through a number of other distributors/channels and
iPhone gets re-locked and all the third-party applications are XPhone, being a telecom service provider provided the best tariff
deleted by the servers of Mapple Inc. permanently. XPhone and plans to its customers and XPhone never imposed any restrictions
Sintel refused to accept any iPhone for repairs at their authorized on its customers with respect to using unlocked phones and
service centers if the same is not purchased from them. However, therefore, there it can be said that there is no violation.
an unlocked iPhone can be purchased from abroad. Also, a The tariff plans, as were provided to iPhone customers were
consumer who has purchased a locked iPhone in India and has the same and if not, even better than the normal plans offered
paid the unlocking fees is free to choose the network operator of to other subscribers. Further, the tariff plans, as approved by
his choice after unlocking the iPhone. Mapple Inc. were filed with the TRAI in August 2008 and were
Out of the total market share for smartphones in India, Mapple in full compliance with the TRAI regulations. Additionally, it
India had a market share of 1.5% in the year 2008; less than 1% is important to note that, even if an iPhone specific plan was
in 2009 and 2010 respectively, and 2.4% in 2011. Additionally, at published, the customers always had complete freedom to
the time of the launch of the iPhone in India, there were about choose from other plans which were not iPhone specific and
250 million GSM mobile subscribers which subsequently rose to rather the customer were spoilt for choice, given the range
about 600 million in the year 2011. of plans available to them. Therefore, there is no question of
XPhone, being discriminating with iPhone customers vis-à-vis
An allegation by Ms. Rekha: its other customers.
Ms. Rekha was one of the biggest fans of iPhones. After it was The concept of “collective dominance” is not recognized under
launched in India, she purchased an iPhone but was extremely section 4 of the Competition Act. Both, Sintel and XPhone
disappointed when she realized, that, there were so many are separate legal entities, with no structural links and with
restrictions for using such iPhone which did not appear, value completely different boards of directors and management.
for money. When she investigated more into this, she found out Therefore, the question of “collective dominance” does not arise.
that Mapple India was taking undue advantage of the dominant
iPhones are easily available in the open market and without any
position that it enjoyed in the market. She then approached the
network locking. More importantly, even the iPhones bought
CCI, to file a complaint against such abuse, in violation of section
through XPhone distribution channels were unlocked as and
4 of the Competition Act, 2002. In her complaint, she made the
when a request was made after following the due process. Further,
following allegations -
the TRAI’s MNP (mobile number portability) regulations give
Mapple India enjoys a dominant position in the relevant market a right to the customer to move from one service provider to
for smartphones, both in India as well as internationally, as another freely, and consequently, the same customer can unlock
iPhone, being the largest selling smartphone in the world. The his phone without any hassle. These facts clearly indicate that the
informant also averted that XPhone and Sintel jointly enjoyed allegations in the information are mere speculations and should
a dominant position in the relevant market for GSM mobile be dismissed outright.
telephony services in India. The informant further submitted
that XPhone and Sintel have abused their dominant positions by
imposing unfair conditions on the purchasers of Mapple iPhones. Answer the following questions:
Multiple Choice Questions
Reply by Sintel to the report of CCI: 1. The relevant market(s) that the Director-General will identify
It fails to consider that any dispute in relation to a while making the inquiry is/are
telecommunication service is actionable under the Telecom I. Smart Phones in India
Regulatory Authority of India Act, 1997, and the Competition II. GSM cellular service in India
Act, 2002 cannot be invoked as the CCI does not have any III. Smart Phones in America and India
jurisdiction on the matters of cellular service providers in India (a) Only I
when TRAI is the regulatory body. The bundled offer was in (b) I and II
compliance with the guidelines of TRAI. (c) II and III
The informant failed to make any averment of having purchased (d) I, II, and III
Mapple iPhone 3G/3GS to show that she had any interest in the
matter and has the locus standi to file the information. 2. The iPhones sold by XPhone and Sintel came in the
The informant also failed to state that she had purchased iPhone compulsorily locked form, thereby meaning, that the handset
3G and 3GS from the grey market in India or abroad and purchased from either of them shall work only on their
consequently it is inexplicable as to how she has a grievance in respective networks and none other. This is in the nature of
this regard. (a) Exclusive supply agreement
(b) Horizontal agreement
Mapple iPhone 3GS is being sold since June 2011 without its
(c) Tie in agreement
network being locked. For this reason, the issue raised in the
(d) Refusal to deal
information filed by Ms. Rekha is infructuous. The practice
3. Whether the contention of Sintel that CCI does not have
of locking the network onto the Mapple iPhone, even though
jurisdiction on the matters of cellular service providers in
in accordance with international practice, has long been
India when TRAI is the regulatory body is correct?
discontinued in India.
(a) Yes, TRAI has sole jurisdiction as the industry regulator,
CCI does not have jurisdiction
35
Economic Laws
(b) No, both have the jurisdiction; but TRAI can supersede 5. (a) Central Government
and has primacy being industry regulator over CCI.
(c) No, both are special Acts and primacy have to be given 6. Legal Position: As per section 19(4) of the Competition Act
to the respective objectives of both the regulators under 2002, the Commission (CCI) shall, while inquiring whether
their respective statutes. an enterprise enjoys a dominant position or not, have due
(d) Can’t say, as information on TRAI regulations is not regard to all or any of the following factors, namely:—
provided. a. market share of the enterprise;
b. size and resources of the enterprise;
4. Assuming that iPhone is not purchased by Miss Rekha from c. size and importance of the competitors;
the Mapple store. Can she file a case, in the forum under the d. economic power of the enterprise including commercial
Competition Act 2002? advantages over competitors;
(a) No, as Ms. Rekha has purchased iPhone from the grey e. vertical integration of the enterprises or sale or service
market i.e. through distributors and thus, has no right to network of such enterprises;
file a case f. dependence of consumers on the enterprise;
(b) No, as Ms. Rekha has not suffered any loss due to tie- g. monopoly or dominant position whether acquired as a
up agreement made by Mapple India with XPhone and result of any statute or by virtue of being a Government
Sintel respectively company or a public sector undertaking or otherwise;
(c) Yes, as Ms. Rekha has used the iPhone and availed the h. entry barriers including barriers such as regulatory
cellular services, so she indirectly gets affected barriers, financial risk, the high capital cost of entry,
(d) Yes, not only Ms. Rekha but any person can file such a marketing entry barriers, technical entry barriers,
case economies of scale, high cost of substitutable goods or
service for consumers;
5. The chairperson and other members of the CCI office shall i. countervailing buying power;
be appointed by: j. market structure and size of the market;
(a) Central Government k. social obligations and social costs
(b) Relevant State Government l. relative advantage, by way of the contribution to the
(c) High Court economic development, by the enterprise enjoying
(d) Central Government and the selection committee a dominant position having or likely to have an
appreciable adverse effect on competition;
Descriptive Questions m. any other factor which the Commission may consider
6. Whether there can be a case of abuse of dominant position relevant for the inquiry.
against Mapple India, XPhone, and Sintel respectively? The dominant position has been defined under explanation
(a) to Sec 4 as a position of strength, enjoyed by an enterprise,
7. Is there an appreciable adverse effect on competition due in the relevant market, in India, which enables it to operate
to the agreement made by Mapple India with XPhone and independently of competitive forces prevailing in the
Sintel respectively? relevant market; or affect its competitors or consumers or
the relevant market in its favour.
8. Briefly states the duties of the CCI and the orders that can
be passed by it after the establishment of infringement of Analysis of the case
section 3 or section 4 respectively? Mapple India had a market share of 1.5% in the year 2008; less
than 1% in 2009, and 2010 respectively and 2.4% in 2011. Prima
Answers to Case study 4 facie, these percentages of market share don’t suggest anything
that tantamounts to the existence of dominance.
1. (b) I and II
XPhone and Sintel are leading mobile service providers in India,
2. (c) Tie in agreement jointly having more than 30 crore Indian subscribers that account
for almost 52% market share in the GSM market. As regards the
3. (c) No, both are special Acts and primacy has to be given dominance of XPhone and Sintel in the relevant market, since
to the respective objectives of both the regulators under both are two separate entities without the evidence of having any
their respective statutes horizontal agreement or cartelization between them that could
The honorable apex court in the Civil Appeal no. 11843 be deemed as anti-competitive. Hence, on the basis of section
of 2017 (CCI vs Bharti Airtel Ltd) recognised that the 19(4) conditions that neither Sintel nor XPhone, individually,
TRAI Act and the Competition Act are both special have any adequate market power so as to be deemed dominant.
Acts and primacy has to be given to the respective Also, the argument that XPhone and Sintel hold nearly 52% of
objectives of both the regulators under their respective the market share in the GSM services in India cannot be accepted
statutes. CCI’s jurisdiction is not excluded by the for the fact that they are horizontal competitors who fight for
presence of sectoral regulators and to that end, the CCI greater market share. Moreover, there is no allegation, qua these
enjoys primacy with respect to issues of competition OPs that they have indulged in anti-competitive conduct among
law. themselves for a common cause.
4. (c) Yes, as Ms. Rekha has used the iPhone and availed the Conclusion
cellular services, so she indirectly gets affected Thus, it can be concluded that since dominance does not get

36
Economic Laws
established, there can be no case for abuse of dominance against the network services can be availed on any mobile handset,
all the three aforesaid entities under Section 4 of the Act. even an unlocked iPhone purchased from abroad. Also, a
consumer who has purchased a locked iPhone in India and
7. According to Section 3(1) of the Act, “No enterprise paid the unlocking fees is free to choose the network operator
or association of enterprises or person or association of his choice.
of persons shall enter into any agreement in respect of Also, there is no evidence to show that entry barriers have
production, supply, distribution, storage, acquisition or been created for new entrants in the markets i.e. in the
control of goods or provision of services, which causes or is smartphone market and mobile services market by any of
likely to cause an appreciable adverse effect on competition the impugned parties. Similarly, existing competitors have
within India”. not been driven out from the market, or that the market
Section 3(4) of the Act, highlights anti-competitive itself has been foreclosed. Hence, the belief that the tie-
agreements between vertically related enterprise as “Any in arrangement has caused serious harm appears untrue.
agreement amongst enterprises or persons at different Hence, there appears no appreciable adverse effect on
stages or levels of the production chain in different markets, competition due to agreement by Mapple India with XPhone
in respect of production, supply, distribution, storage, sale and Sintel respectively.
or price of, or trade in goods or provision of services,
including — 8. As per section 18 of the Competition Act 2002, the duties of
(a) tie-in arrangement; the Commission are as follows:
(b) exclusive supply agreement; (a) To eliminate practices having an adverse effect on
(c) exclusive distribution agreement; competition,
(d) refusal to deal; (b) To promote and sustain competition in markets in India,
(e) resale price maintenance, (c) To protect the interests of consumers and
shall be an agreement in contravention of sub-section (1) if (d) To ensure freedom of trade carried on by other
such agreement causes or is likely to cause an appreciable participants in markets in India.
adverse effect on competition in India”. As per section 27 of the Competition Act 2002, where after
Further, what constitutes appreciable adverse effect on an inquiry under section 19 regarding alleged contravention
competition has been provided for in Section 19(3) of the of entering into an anti-competitive agreement or abuse
Act. of dominance as per procedure detailed in section 26, if
Commission find the allegation true and contravention of
In the above case, some kind of ‘tie-in arrangement’ can be
section 3(1) or 4(1) respectively, it may pass all or any of the
seen which has an adverse implication on the purchaser of
following orders-
iPhones in terms of their ability to choose and switch between
various cellular service providers and data plans. However, Cease and desist order - direct any enterprise or association
none of following - Mapple India / Sintel / XPhone, have a of enterprises or person or association of persons, as the case
dominant position in their respective market, and that there may be, involved in such agreement, or abuse of dominant
has been no intentions and evidence to show that the market position, to discontinue and not to re-enter such agreement
has been foreclosed to competitors or that entry-barriers have or discontinue such abuse of dominant position, as the case
been erected for new entrants in any of the markets by any may be.
of the opposite parties. Mapple India had a share of less than Impose penalty - as it may deem fit which shall be not more
3% in the market of smartphones during the period 2008-11. than ten percent of the average of the turnover for the last
Furthermore, the share of GSM subscribers using Mapple three preceding financial years, upon each of such person or
iPhone to total GSM subscribers in India is minuscule (less enterprises which are parties to such agreements or abuse.
than 0.1%). No operator has more than 30% market share, Modification of the terms of such agreements -
in an otherwise competitive mobile network service market. Agreements shall stand modified to the extent and in the
As none of the impugned operators, (XPhone / Sintel) have manner as may be specified in the order by the Commission;
market-share exceeding 30%, that smartphone market in
To abide - Which direct the enterprises concerned to abide
India is less than a tenth of the entire handset market, and
by such other orders as the commission may pass and comply
that Mapple iPhone has less than 3% share in the smartphone
with the directions, including payment of costs if any.
market in India, it is highly improbable that there would be
an AAEC in the Indian market for mobile phones. Such other order or issue such directions as it may deem fit.
Moreover, the lock-in arrangement of the iPhone to a In case any agreement referred to in section 3 has been
particular network was only for a specific period and not entered into by a cartel, the Commission may impose upon
perpetual, a fact known to prospective customers. It is each producer, seller, distributor, trader, or service provider
difficult to construe consumer harm from entering into a included in that cartel, a penalty of up to three times of its
‘tie-in arrangement' by the horizontally related enterprises. profit for each year of the continuance of such agreement or
It is observed that there is no restriction on consumers to use ten percent of its turnover for each year of the continuance
the network services of XPhone and Sintel to the extent that of such agreement, whichever is higher.
37

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