THE CORPORATE LEGAL

Advisory | Networking | Training

NEWSLETTER

VOLUME 1, ISSUE 1

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FOREWORD

The Corporate Legal group, which came into existence on 31st July, 2016, has been an active
platform for its members for information sharing and seeking views and advice on corporate
and other laws.

Each of our members is very experienced and has attained accolades in their areas of practice
and have demonstrated time tested responsibility with complete accountability. Our members
focus on the legal aspects of the clients’ businesses so that the clients can, in turn, focus on
their own business. The members concentrate on “how” rather than “if” thereby bringing in
solution centralism on the table. Integrity and Excellence in Services are the basic values that
each of our members practice in their day to day working.

The Group envisions providing its clients with the best possible and skilled advice on diverse
legal and other matters timely and efficiently. Our Mission is to integrate all our members to
create a nation wide network of legal and advisory professionals in our identified sectors and
functional areas. By doing that, our mission is to become one of the top 20 legal and advisory
group within the next 5 years.

During the ongoing COVID-19 lock downs when most businesses were either locked down or
professionals were working from homes, our group embarked on education programs by way
of webinars and panel discussions on diverse but topical issues. In the past two months, we
have organized around 10 such programs wherein our members had invited key note speakers
who dwelled on those topics for the benefits of our members, clients, students of law and public
at large. Recording of all such programs are also available on our YouTube channel. These
programs have been widely appreciated thereby inspiring us to organize similar programs and
even focused workshops on identified practice areas in near future. The work on those
initiatives has already commence.

A need was felt during the ongoing locked down period to update our members, clients and
public on legal and other important developments. To put an end to this long pending idea of
crafting a Newsletter, intricately designed yet simple, with its Volumes and Issues, a unanimous
decision was taken by our members and hence, the Editorial Board worked hard to bring this
first issue out.

Please stay tuned as we will bring you the latest updates, developments and information
sharing session on topical issues.

Please be safe and sound and keep being informed of the best domestic and international
corporate legal news.

Jaydeep Mehta, Founder &

Team, The Corporate Legal

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 Contents

FOREWORD ................................................................................................................................ 2

MICRO, SMALL AND MEDIUM ENTREPRISES ( MSMES) – COVID19 AND WAY................. 4

FORWARD FOR MSMES TO RECEOVERY DEBTS OVER IBC, 2016 ........................................ 4

SATYAMEV@JAYATE - #COURTS ............................................................................................ 7

REAL ESTATE AND THE COVID-19 EMBARGO- LEGAL PERSPECTIVE ................................ 10

WEAVING A NEW OPPORTUNITY WITH “MAKE IN INDIA” ............................................... 14

DAWN OF A NEW ERA IN ELECTRICITY DISTRIBUTION– TATA POWER TAKES OVER THE

MANAGEMENT CONTROL OF CESU IN THE STATE OF ODISHA ........................................ 18

ANIL AMBANI OWNED RELIANCE ADA GROUP SET TO SELL ITS 51% EQUITY STAKE IN

DELHI POWER DISTRIBUTION BUSINESS ............................................................................. 20

LEGAL UPDATES ...................................................................................................................... 22

LIST OF WEBINARS DONE ...................................................................................................... 23

OUR EDITORIAL BOARD ......................................................................................................... 24

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 MICRO, SMALL AND MEDIUM ENTREPRISES ( MSMES) – COVID19 AND WAY
FORWARD FOR MSMES TO RECEOVERY DEBTS OVER IBC, 2016

Jaydeep Mehta
Designated Partner
Lexstreet Advisors, LLP
Advocates and Solicitors

INTRODUCTION

Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and
dynamic sector of the Indian economy over the last five decades. MSMEs not only play crucial
role in providing large employment opportunities at comparatively lower capital cost than large
industries but also help in industrialization of rural & backward areas, thereby, reducing
regional imbalances, assuring more equitable distribution of national income and wealth.
MSMEs are complementary to large industries as ancillary units and this sector contributes
enormously to the socio-economic development of the country.

The capability of Indian MSME products to compete in international markets is reflected in its
share of about 48% in national exports. In case of items like readymade garments, leather
goods, processed foods, engineering items, the performance has been commendable both in
terms of value and their share within the MSME sector while in some cases like sports goods
they account for 100% share to the total exports of the sector. In view of this, export promotion
from the small scale sector has been accorded high priority in India’s export promotion strategy
which includes simplification of procedures, incentives for higher production of exports,
preferential treatments to MSMEs in the market development fund, simplification of duty
drawback rules, etc.

It has, therefore, become very imperative that MSMEs can produce goods & render services
effectively and seamlessly, their payments against goods sold and services rendered should
not be a hindrance in their growth.

EFFECT OF COVID-19 ON MSMEs

The World Health Organization (WHO) on March 11, 2020, has declared the novel coronavirus
(COVID-19) outbreak a global pandemic. The outbreak of the COVID 19 pandemic across the
globe including India, has largely affected the businesses of MSMEs as well as large scale
industries, which in turn, compelled the Government to amend various legislations to protect
and to forestall the collapse of the economy of the country.

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Ministry of Finance, Government of India, in its first tranche of Rs. 20,00,000 crores package,
announced various benefits for safeguarding the interests of MSMEs. On 17th May, 2020,
Ministry of Finance also announced various measures as a part of ease of doing business
through IBC related measures. The Ministry of Finance proposed the following measures
related to IBC, 2016.

1. Minimum threshold limited to initiate insolvency proceedings raised from Rs. 1 lakh to
Rs. 1 crore (which largely insulates MSMEs).
2. Special Insolvency Resolution framework for MSMEs under Section 240A of the IBC to
be notified soon.
3. Suspension of Section 7/9/10 of the IBC for fresh initiation of fresh insolvency
proceedings up to ONE year depending upon the pandemic situation.
4. Empowering the Central Govt. to exclude Covid-19 related debt from the definition of
default under the IBC for the purpose of triggering insolvency proceedings.

The above proposed changes in the IBC will take the right of MSMEs to initiate insolvency
proceedings against larger companies from whom Rs.1 lakh or more payment is outstanding
and payable to MSMEs. In such a situation, the question that arises is what are the alternative
remedies available to MSMEs to recover their dues.

These situations will take us to an era of pre IBC, 2016.

STATUTORY PROVISIONS UNDER THE MSME DEVELOPMENT ACT, 2006

The Govt. of India introduced a special Act for MSMEs in 2006 which is known as Micro, Small
and Medium Enterprises Development Act (MSMED Act), 2006 to provide for facilitating,
promotion and development and enhancing the competitiveness of micro, small and medium
enterprises. In the stimulus package of Rs. 20,00,000 Crore announced on 13th May, 2020,
the Govt. of India have also announced various measures to protect the interest of MSMEs. In
the first tranche of stimulus package announced on 13th May, 2020, The Govt. of India revised
the definition of MSMEs, as given in the table below.

WAY FORWARD FOR MSMEs TO RECOVER THEIR DEBTS

MSMEs enjoy special status in the Indian economy. Keeping this view and to protect the
interest of MSMEs, the Govt. of India promulgated Micro, Small and Medium Enterprises
Development Act (MSMED Act), 2006. In the IBC, 2016, MSMEs are treated at par with other
operational creditors and accordingly, MSMEs are eligible to file an application under Section
7 and 9 of the IBC to initiate insolvency proceedings against corporate debtors. However, after

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the suspension of Section 7 & 9 of the IBC, MSMEs will not be able to take this route under
IBC. The other options available to MSMEs to recover their dues are given hereunder.

 MSMEs can always take the shelter under MSMED Act, 2006.
 Section 15 of the MSMED Act states that “ where any seller supplies any goods or
renders any services to any buyer,, the buyer shall make payment thereof on or before
the date agreed upon between him and the supplier in writing or where there is no
agreement, in this behalf, before the appointed day but not later than 45 days. Thus,
the buyer of goods or services has to make payment to the MSME within a maximum
period 45 days.
 Section 16 of the MSMED Act further states that in case the buyer fails to make the
payment to the supplier within 45 days, the buyer shall be liable to make pay compound
interest on the said outstanding amount at three times of the bank rate notified by the
Reserve Bank of India.
 Section 18(1) of the MSMED Act states that any party to a dispute may make a
reference to the Micro and Small Enterprises Facilitation Council (MSEFC) and the
MSEFC shall either itself conduct conciliation or seek the assistance of any institution
or centre providing ADR services and the provisions of Section 65 to 81 of the
Arbitration and Conciliation Act, 1996 ( as amended from to time) shall apply to such a
dispute.
 Alternatively, if there is an Agreement duly executed between the suppliers and the
buyers and if it contains a clause of Arbitration, then in such case, the dispute can be
referred to the arbitrator to be appointed as per the terms of the arbitration clause.
 The other alternative available to MSME is that the aggrieved MSME can file a summary
suit in commercial court having proper jurisdiction.

No doubt, if the proposed amendment in IBC as announced by the Govt of India are brought
into force in the form of an ordinance, it will also protect the MSMEs as corporate debtors, from
being dragged into insolvency process by financial and operational creditors under the IBC.
However, this also takes away the exceptional rights of the MSMEs as Operational Creditors.

It remains to be seen when the Govt. of India will finally bring in ordinance for suspension of
the provisions of IBC. The primary objective of the Govt. is to protect the interest of MSMEs
and thereby to protect the economy of the country.

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 SATYAMEV@JAYATE - #COURTS

Rajdeep Lahiri
Counsel

Our indefatigable history is a concoction of an old civilization with a young population (median
age being 26.2 years), as well as being riddled with an opaque political system modelled after
our disputed forefathers. For the purposes of this article, our new relatives, Technology-in-law
being vested in the controls of the Central Ministry.

For perspectives into this sudden technological revolution, this year would make us have the
world’s largest working population, with an estimate of 125 million having the working
knowledge of English, hence providing a beacon to attract foreign entities do paint their laundry
at throw away prices. No jokes, we all have heard of India being the market place for cheap
labour.

The gossip around technology speaks of two, rather intrinsically related factors. A conducive
political climate, symbiotic with the policies spewed by the ruling legislature.

An installation of the ‘HEC-2M’ (designed by Mr. AD Booth in England) at the Indian Statistical
Institute at Kolkata in the year 1955 initiated the revolution of sorts, also at a time when only a
handful of scientists knew the conceptual working of computers. Once gaining momentum, the
commercialization of the machines boomed from across the wide expanse of the nation.

Relative to the theories of economics, prices went south once the demand hit ceilings. The
computers were slowly introduced to the daily households, education institutions and other like
institutions. It was time for a touch-down on the judicial turfs, tragically the most important yet
technologically backward arm of the Constitution.

Quite imminent with all the build-up, the National Informatics Centre was established in the
year 1976, envisioned with the objective of supporting the efforts of the Government with its e-
Governance and bring about a digital age into the culture of the Indian politburo predominantly.

The NIC, as its fondly called, later on spearheaded various programs, notably the ‘Informatics-
led-Development’, which essentially linked various executive bodies with each other, offering
seamless communication and dissipation of information. It began the computerization of the
Supreme Court of India, with computers being installed within its hallowed halls and its
subjects. The objective behind such a move was the most obvious and oblique, removal of
backlogs, clearing of the arrears and the stigmatic problem of the unprecedented rise of delays

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in the disposal of the cases. These were distant dreams at the relative point in time, now made
to realise that this could come true.

The nation never looked back ever since. Its importance, manifold and functionality,
impeccable. It was time for the subjects to pick up speed and ramp up procedures to clear way
for ease into our already chocked and listless system.

JUDIS (Judgment Information System) for one, provides complete text of all reported
judgments of the Courts, COURTNIC, provides for the case status available for the Advocates
and litigants alike and LOBIS (Lis of Business Information System) provides for the digital
generation of the Courts cause lists.

This robust system, however, restricted mainly to the superior courts, has by far successfully
reduced the burden upon the respective registries by streamlining their activities and making
a provision for the grouping of cases involving similar ground or question of law. This
unquestionably and more significantly, depletes ‘pendency’ from our throat. A once upon a
time day dream.

Technology in our Courts have always been chequered, in the sense that the process took a
significant amount of time, money and resources and have always had an intrinsic involvement
with the Executive and the Legislature. It started as a failure of the ‘Centrally Sponsored
Scheme’, which in essence, is the computerization of all the district courts in line with the
technology adopted by the High Courts in the year 1997.

The highlight of the project was to streamline trial court functions and activities and provide
access to legal databases by the trial court judges. However, in the year 2001-2002, under the
aegis of a centrally funded pilot project with a very debatable cost (Ministry of Justice reports
at Rs. 17.26 Crores, RTI exposes Rs. 18.22 Crores and the original costs being Rs. 10.60
Crores), computerization of all the courts and tribunals in the cities of New Delhi, Kolkata,
Chennai and Mumbai was undertaken and finished.

Thereafter, in the year 2003-2004. The project for the computerization of the courts where the
high courts were located was undertaken as reported under the Fifteenth Report of Grants
(2006-2007) at a whooping cost of Rs. 24.24 Crores.

We have to agree that computerization of the Indian judiciary, has had its repeated tryst with
failed leadership and lack of enigmatic co-operation amongst the legislative members and
authorities, which makes any such plan, always an uphill task.

However, historically, a significant plan was made and a report published in the form and
substance of ‘E-Committee for Monitoring use of technology in Indian judiciary’ by the Supreme

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Court of India under the Chairmanship of Justice (Retd.) GC Bharuka in 2005. Vide the said
Report, action plans were sought and sought to be vigorous implemented, with a clear vision
to attain international and seamless standards in the justice delivery system.

Today as we stand, the pandemic era has suddenly ensued a paradigm shift in the process
and style of justice delivery. We have seen various court proceedings being undertaken vide
various video conferencing platforms, both international and domestic companies, to ensure
there is no absolute standstill.

We have traversed by far, into the modern technology age, almost pushed into the IT realm by
an unseen force, the very fact that the entire judiciary collectively is moving ahead with the
introduction of the e-courts system and its mechanism for the aid and assistance of the litigants,
is proof that the country is equipped with the changing times.

We are no more, like the yesteryear dialogues, 20 years behind the international system.

We @ ahead.

We @ adaptable.

Satyamev@Jayate

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 REAL ESTATE AND THE COVID-19 EMBARGO- LEGAL PERSPECTIVE

Ritu Agwekar
Advocate

Amidst the COVID-19 crisis, when the Government has ordered a nationwide lockdown it is
important to note and assess the nature of lockdown impact which will ideally vary from
jurisdiction to jurisdiction, depending largely on the “socio economic lifestyle” of the jurisdiction
of each state.

It is pertinent to note that the guidelines restricting freedom of trade/occupation/profession have

been framed under the National Disaster Management Act, 2005, and interestingly these
guidelines do not put a direct restriction on the freedom of movement. The movement of
citizens is restricted through a collective series of executive orders passed under Section 144
of the Code of Criminal Procedure, 1973 coupled with the addendum issued by the Home
Ministry and read with the colonial era Epidemic Diseases Act, though, till recent, there have
been efforts to update this colonial and draconian law as it does not provide clear cut and
ample guidelines to the states, to act, to prevent and to mitigate epidemics.

In a country with huge socio-economic diversity and disparity across sects, blanket restrictions
of a pervasive nature could produce highly inequitable effects upon enforcement and in view
of the various notifications issued by the state governments , dictating the mid-level industry
and factory owners to ensure timely and full payment of wages to the workers despite complete
lockdown of their operations, the impact is a double whammy and the repercussions can be
lethal and disastrous for a sizeable number of businesses, which could result in a complete
stoppage of operations along with an added obligation to pay timely salaries to the employees.

Amongst the widely noticeable impacts of the Covid-19, are its imperative effects on
contractual agreements with respect to the Force Majeure reasons and effect of the
Government notifications issued in lieu of the COVID-19 pandemic. One such notification,
dated February 19, 2020, issued by the Ministry of Finance, has clarified that Force Majeure
under Manual of Procurement of Goods 2017, would be applicable in this pandemic due to
disruption of numerous supply chains. It has also been stated that it should be considered as
a natural calamity and the Force Majeure clause should be invoked, following the due
procedure. The Ministry of New & Renewable Energy with respect to solar project developers,
vide office memorandum dated March 20, 2020 has declared that the parties involved can
invoke the Force Majeure clause to avoid financial penalties, if they miss the contractual
obligations on account of COVID-19.

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It is pertinent to note that one complex element in application of the doctrine of force majeure
is difficulty to prove such reason unless the type of event is specifically mentioned in a contract.
The specific mention of force majeure events in a contract may relate to events other than the
novel coronavirus virus. It is highly unlikely that contracts drawn before 2020 would mention
the occurrence of COVID-19. However, the mention of the cessation of a contract due to an
epidemic, pandemic or other such events being forces outside the control of the contracting
parties could perhaps be relied upon to invoke force majeure.

It is important to point out that even if a contract makes no mention of a force majeure
eventuality, parties to a contract may rely on section 56 of the Indian Contract Act, to plead
frustration of a contract in the present lockdown situation. This section allows termination in
the event that a contract is frustrated and cannot be performed. Such interpretation will depend
on the length of the lockdown and on each individual case. Several large business houses
have already invoked the provisions of force majeure to stall the payment of license fees and
to restrain the invocation of penalties.

A major setback has also been felt by the construction sector and the interpretation of the Force
Majeure in view of the provisions under the relevant act/s. In exercise of powers conferred
under Section 10(2) (l) of the Disaster Management Act, 2005, the Ministry of Home Affairs,
Government of India came up with guidelines under Order No 40-3/2020-DM-I(A) dated
24.03.202. Under the guidelines all commercial and private establishments except for essential
services listed were asked to remain closed for a period of 21 days with effect from 25.03.2020.
The list of exceptions of essential services did not include construction services and hence all
construction of real estate projects have come to a halt from the date. Hence contractually, if
the Force Majeure clause of the Model Agreement to Sale, has been adopted by the promoter
then Force Majeure can be triggered under Part (ii) of the clause. However, depending on the
clause adopted, each agreement should be looked at in the spirit in which it was entered into,
needless to emphasize that COVID-19 has been described as “threatening disaster situation”
by National Disaster Management Authority and for all practical and logical interpretation the
meaning of ‘disaster’ may be assigned to ‘calamity’ as mentioned under The Real Estate
(Regulation and Development) Act, 2016, thus invoking the Force Majeure. However, strictly
speaking, the invoking of the Section 6 is not automatic and the promoters shall have to make
an application to the Authority.

The Maharashtra Real Estate Regulatory Authority in its Order 13/2020 dated 02.04.2020 has
extended the completion dates of all projects, with completion dates on or after 15th March
2020 by 3 months. The Authority has cited lockdowns, disruptions in supply of construction
material and migration of labour force for issuance of the Suo Moto Order. It is also prudent to

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point out that if the Force Majeure clause in an agreement is established to be triggered, the
COVID-19 situation shall not frustrate the entire contract or absolve the promoter of delivery of
units but merely give a time extension to perform the agreement. Hence, the promoter of a real
estate project shall get extension of time to handover the possession of the constructed
property and the allottee shall get the time extension in payment of money based on
percentage of completion of the project.

In view of the above the impact on the Real Estate Sector has been multifold, from disrupted
supply chains to delayed construction activity on account of reasons not limited to lack of man
force on the sites due to the lockdown effects, all stakeholders from the builders to the lessees,
are affected from the pandemic and the resultant lockdown. The Builder Agreements usually
contain such Force Majeure clauses and the same can easily be invoked but the same is not
the case with lease /leave and license (commercial) agreements. In case there is no Force
Majeure clause, then Doctrine of Frustration under Section 56 of the Indian Contract Act , does
not come to the aid of the parties.

Keeping in mind the genuine crisis that the industry is facing, a statement was released by the
Confederation of Real Estate Developers Association of India (CREDAI) wherein the following
policy relief was immediately sought from the Ministry of Housing and Urban Affairs:

1. Inclusion of Covid-19 as a force majeure condition under Section 6 of the RERA.

2. Extension of registration period by at least One (1) year.
3. Requirement of additional funds on the same terms as existing loans without
additional collateral from financial institutions to meet the increased costs.
4. Loans by real estate developers should not be classified as NPA in case of default
on interest or principal repayment.
5. Interest and principal repayments falling due over the next three months in case of
real estate projects be put off and recovered over the next nine months.

The CREDAI has brought forth the proposal of addition of Covid-19 as a force majeure
condition in light of the country-wide lockdown which has led to nearly no economic activity
and necessitated Work from Home arrangement in the private sector. For all registered projects
where completion date, revised completion date or extended completion date expires on or
after 15th March 2020, the period of validity for registration of such projects has been extended
by three months and project registration certificates, with revised timelines for such projects
would be issued, subsequently. Further, the time limits of all statutory compliances in
accordance with RERA due in March, April and May have been extended to 30th June 2020.

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The Timelines have been extended further for 6 months as per the final order issued by the
Maharashtra Real Estate Regulatory Authority bearing No. MahaRERA/ Secy/ Order 26/2020
dated 18th May, 2020, it has been announced to:

1. Treat Covid-19 as ‘force majeure’ under RERA.

2. Extend the registration and completion date, suo motu, by six months for all registered
projects expiring on or after March 25 without individual applications.
3. Regulators may extend this for up to three months more, if needed
4. Issue fresh ‘project registration certificates’ automatically with revised timelines.
5. Extend timelines for various statuary compliances under RERA concurrently

Another impacted area is upon the Validity Period/ Renewal Process of operational licenses
for construction and manufacturing units, it is important to note that though a nation-wide
lockdown was imposed from March 25, 2020, which is currently in force till 31st May, 2020, the
clarity on calculating the validity period of the operational as well as many other licenses
remains a question. It is not clarified if the lockdown period will be excluded while calculating
the validity period of operational as well as many other licences, permits and registrations
required for day-to-day running of businesses and whether the operation of such licences be
considered suspended during this period?

Additionally, third-party services such as surveyors, technical consultants, site inspectors etc.,
would remain unavailable until normalcy is attained. Non-availability of such services poses
yet another operational challenge in applying for the renewal of licences as well as grant of
new ones.

The corrective measures to be undertaken, which still remains a herculean task, with obtaining
of licenses, ease of obtaining sanctions, permissions, licenses and registration, through “single
window clearance” system, the post Covid 19 availability of the labour, prices of the dependent
sector, corrective costing thereof, consumer sentiment, the buzz still is very positive on the
Real Estate, with the builders offering lucrative offers, lowered housing loan interest rates, the
new normal “Work from Home” trend, an undented demand for affordable housing , rise in
demand for establishment of industries , Real Estate Sector is set to see a mammoth change
and renewed and structured growth, in times to come.

It has been rightly said by Franklin D. Roosevelt “Real Estate cannot be lost or stolen nor can
it be carried away. Purchased with common sense, paid for in full and managed with
reasonable care, it is about the safest investment in the World”

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 WEAVING A NEW OPPORTUNITY WITH “MAKE IN INDIA”

Puja Mehta
Partner, Solidus Capital

With the advent of liberalization, privatization, globalization and fierce corporate competition,
survival of the fittest was given birth to. Thus, came in cutting edge of Collaborations and Joint
Ventures. As Indian companies and brands nurtured global ambitions, they faced a plethora of
challenges of understanding complex, new markets and customers making it as a daunting
task.

Therein, the “Make in India” Initiative was launched by our Honorable PM, Mr. Narendra Modi
in 2014. This was a type of Swadeshi movement covering 25 sectors of the economy. This
concept clutched homegrown brands and turned conventional wisdom on its head and scripted
exceptional growth stories by overcoming daunting challenges with innovation, human
ingenuity, effective leadership, social conscience – that is committed to inclusive and equitable
growth of the nation. This reform is also aligned with parameters of World Bank’s “Ease of Doing
Business” index to improve India’s ranking as a favorable manufacturing destination on the
global map. Further, this initiative also gave birth to the development of “SMART CITIES”.

An eye-opener and a leading instance under “Make in India” program was the mobile
giant- “SAMSUNG ELECTRONICS”. Samsung mobile handsets inaugurated the world’s
biggest mobile manufacturing facility in India. Since, Electronics and Hardware industry was
pushed the most under this program leading to technology transitions such as the roll out of
4G/LTE networks and IOT. This initiative shall also curb the 60% electronics import
dependency of Indian market. Additionally, Micromax Phones also announced setting-up of
three new manufacturing units in Rajasthan, Telangana and Andhra Pradesh after planning to
shift its manufacturing base from China. India has primarily become an assembly hub in
industries such as mobile phones, lighting and consumer electronics from imported electronic
components to meet domestic demand. Make in India is likely to press the accelerator on
vertical integration, where the components supply-chains are coerced to be local because of
import substitution.

This “Make in India” scheme promoted not only manufacturing in India, but also development
of manufacturing sector, international infrastructure, job creation, skill enhancement, business
processes, foreign investment, innovation and protected intellectual property.

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In lines with this program, it also announced several other policy initiatives creating a business-
friendly and governance-oriented financial and economic environment. This resulted in various
Indian and global manufacturers announcing their expansion plans. For instance, 100% Foreign
Direct Investment (FDI) in retail gave a boost to the major acquisitions and India Entry by world
giants like AMAZON, WALMART, ALIBABA and IKEA. It also started the well-known war between
the cab service providers “India based OLA” and “UBER worldwide”.

With the opening up of FDI in sectors like defence and aviation too, “BOEING” was invited to
manufacture under this “Make in India” concept and entered into a strategic aerospace
partnership with TATA Advanced Systems. Since India retained its position as World’ No. 1
Greenfield FDI destination, this initiative shined and touched FDI of $5,000 Crores in April’18.

With the outcry of Corona Pandemic in 2020 and further numerous countries shifting its base
from China to other neighboring countries, Indian Government announced various stimulus
packages in tranches offering major economic, legal, policy reforms offering economies of
scale and laying down a level playing field. Strategically, Government of India, is ready to take
advantage of the situation and announced first measures of “India Entry Incentive” and various
other sops to the foreign investors and economies shifting its base. In March 2020, Govt. of
India announced that FDI in India from a foreign entity incorporated in or where a Beneficial
Owner of such an Investment into India is situated in/ is a citizen of any such country, which
shares the border with India, can now be made through Govt. approval route. Thus, imposing
a balance check system.

We thereby request all global manufacturers to take support and advantage of this GOLD
Initiative of our Honorable PM and make India as the “biggest Manufacturing and Export Hub of
the world”. These reforms will continue….irrespective of the change in political ideologies,
leading to the development of the biggest emerging market, India. With its innovative minds,
biotechnologies offered, integrated approach, replicating cost, it is appearing as the most
sought after global investment destination now. The latest one was Reliance Jio and Facebook
FDI deal. Even huge foreign funds inflow is happening in Indian start-ups with state of the art
artificial intelligence, fintech and superlative techniques. Due to its agile yet nimble and
innovative entreprenuers, the sun looks to shine on India.

India was the most well prepared country combating Corona pandemic at its best introducing
revolutionary techniques and improved working conditions with safety and sanatisation
measures.

Since India already caters to a ready platter of advantages i.e. cheap labor, single window of
fast track clearances, labor reforms, highly educated, tech-savvy and English speaking 53%

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youth dominated country, it is emerging as the 2nd largest economy of the world. The stimulus
offered by the Govt. of India also includes Compliance relaxations i.e. timelines for realization
and repatriation of export proceeds increasing from 9 months to 15 months from the date of
export. Said relaxation has been provided for exports up to or on 31.07.20. India being the
most self sustainable economy with least import dependency is offering global solutions to the
world.

In this global pandemic scenario, Consolidation both at domestic and international level shall
play a pivotal role. Thus, offering a field for Joint Ventures and Technical Collaborations with
enhanced and effective synergies. All the countries and their leaders look up to India for
solution in this pandemic era. Containment & then vaccines, India, often termed as “the
pharmacy to the world”, meets over 50% of the demand for global vaccines. Thus, competitors
coming up together & pulling-up their Patents. Collaborations have been like never before due
to changes in consumer behavior.

India was the first country that offered and exported Hydroxychloroquine (HCQ) drug as a
CORONA treatment solution to the world. An Indian pharmaceutical giant joined the fight by
testing a leprosy drug on COVID-positive patients in Chandigarh and helped in treating and
reducing mortality rate in critically ill patients. Plasma therapy, Favilavir and Remesdivir long,
extensive trials strengthening immunity against COVID are also happening in New Delhi. India
is posing itself as a pharma giant to the world, by also offering HIV medicines working as a
combination therapy, and also used to treat regressive forms of cancer and chronic illnesses,
made in Kerala. Himachal and now Maharashtra attracts 3000 pharma companies by offering
single window clearance system. We want to compete with China in the production of generic
medicines. The focus will be on production of Ayurvedic medicines. There are plans to make
a pharma hub between Aurangabad and Nashik along the Mumbai-Nagpur Samruddhi Corridor
and set up a world class lab at the pharma hubs.

Serum Institute of India, the world's largest vaccine manufacturer by number of doses produced
and sold globally, has partnered with US-based Codagenix Inc. to develop a vaccine against
the novel coronavirus. This is the first of its kind of such a collaboration between India and US
pharma, and the pair are working specifically to produce a live-attenuated vaccine. Cadila
Healthcare too has worked extensively on the coronavirus, having ramped up production of
HCQ, diagnostic kit and now vaccine. Company is using biologic drugs used for the treatment
of Hepatitis B and C. Mylab also increased production capacity of Covid-19 testing kits to 2
lakh per day. Thus, with all this, Indian pharma products have a good response in Europe.

Further, What Y2K was for Indian software companies, post-covid would be for the hardware
industry. It has made us realize that we have to be self-reliant." Indian software companies

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made a killing debugging Y2K, called the millennium bug, from computer systems worldwide.
The winners of the post-covid industrial strategy, could be Indian manufacturers, even small
ones. Even Apple Inc. plans to move almost a fifth of its production capacity from China
to India to reap the benefits of new production-linked incentives (PLI) scheme to encourage
local production in the country.

Government of India too has rolled out initiatives to support treatment development, including
disbursement of funds. The Govt. seeks to push domestic manufacturers up the value chain,
esp. MSMEs. Global tenders would be disallowed in Govt. procurement up to INR 200 Crores.
With the $26-million cap, global companies cannot bid for many government contracts.

But that needs a lot of work on the ground. Besides consistency in policy, success of the
strategy, now even reliefs are provided to the industry that calls good infrastructure and efficient
logistics, making India “vocal for their local”. Details hovering around this, shall be elaborated
and followed in my next post.

Due to this, Mr Donald Trump proposes to call G7 to be restructured to include other countries
including India and South Korea. He is even proposing face to face meeting in a month or so,
proving India is rising.

Mother India is eagerly waiting by spreading a red carpet, welcoming all global giants to make
India as a global manufacturing hub and the World is embracing this vision of our PM

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DAWN OF A NEW ERA IN ELECTRICITY DISTRIBUTION– TATA POWER TAKES
OVER THE MANAGEMENT CONTROL OF CESU IN THE STATE OF ODISHA

Naveen Kapoor
Power Sector Specialist

Tata Power Company Limited (TPCL), a Tata Group company, has raised its customer base
to about 5 million when it took over the management and control of Central Electricity Supply
Utility (CESU) from June 1, 2020. A Letter of Intent to that effect was awarded by the Odisha
Electricity Regulatory Commission (OERC) in December 2019 while the vesting order to this
effect was issued on 28th May, 2019.

Earlier, two bidders viz. TPCL and a Consortium of Feedback Energy Distribution Company
Ltd & India Power Corporation Ltd had submitted their bid for purchase of 51% stake in CESU.
Tata Power Company Limited (TPCL) emerged successful with a price of Rs.178.50 Crore.

In terms of the deal, Tata Power will hold 51% equity with management control while GRIDCO,
the State owned bulk supply company will hold the remaining 49% equity in the company. The
license for distribution and retail supply is for 25 years. TPCL has assured to invest Rs 1541
Crores in the next 5 years for system improvement and reduce the aggregated technical and
commercial losses, also known as AT&C Losses, as per the loss reduction trajectory approved
by the OERC failing which the performance guarantee of 150 Crores submitted by TPCL could
be invoked. Out of the Rs 1800 Cr worth of outstanding arrears, TPCL has also assured to
recover Rs 200 Cr from the customers. In terms of the agreement as also for a smooth
transition, TPCL has also agreed to retain all the current employees of CESU while it will be
free to bring the best talent from outside to meet its obligations.

The Odisha power sector reforms in 1996 resulted in unbundling of the entire electricity value
chain including formation of four distribution companies under different zones by dividing the
entire state into four zones namely North, West, South and Central. NESCO, WESCO,
SOUTHCO and CESCO were licensed to undertake electricity distribution in their respective
license area. The primary business activity of these distribution companies is purchase of
power from GRIDCO at an approved bulk supply rate (BSP) and distribute to consumers which
are broadly classified as Extra High Voltage (EHT), High Voltage(HT) and Low Voltage (LT)
consumers depending upon the voltage of supply.

Odisha achieved the distinction of becoming the first State in India to privatize electricity
distribution in 1999 as part of its continuing power sector reforms. Under the privatization, a
sale of 51% share of the above four power distribution companies was done to AES
Corporation, a US based company (for CESCO) at Rs 42 crore and Reliance Infra Ltd, formerly
BSES (for NESCO, WESCO and SOUTHCO) at Rs 117 crore.

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Post super cyclone, AES quit the management of CESCO in 2001 which led to revocation of
its license in 2005 under Section 19 of the Electricity Act, 2003. The company was transferred
under CESU Scheme 2006 in terms of the provisions of Section 22 of Electricity Act 2003 until
its sale was to be effectively consummated. It has been operating as CESU since then. During
an earlier unsuccessful attempt to privatize CESU, the Odisha government decided to invite
NTPC to take the management control of CESU, wherein NTPC was to initially manage CESU
on a five-year management contract basis post which it might take over the company. The
process was later cancelled after which CESU invited Distribution Franchisees in its major
areas of supply except Bhubaneswar and Cuttack cities.

Spread over 30000 Sq KMs with a population of over 1.4 Crore, CESU operates in 5 electrical
circles and 20 electrical divisions within its license area. The five electrical circles are
Bhubaneswar (Electrical Circle - I and II), Cuttack, Paradip and Dhenkanal. CESU has a
customer base of 2.5 million. The average demand of CESU is around 1,300 MW with the
annual input energy of 8,400 million units as of FY 2018. Besides a high level of AT&C loss of
34.65% which TPCL has to reduce to a level of 20.19% by March 2025, TPCL will have to
overcome other challenges like unreliable electricity supply, low technology and automation
usage besides old and ageing infrastructure.

Presently, Tata Power has a total consumer base of 2.5 million across Mumbai (0.70 Million),
Delhi (1.60 Million) and Ajmer (0.14 Million). Post acquisition of CESU, its consumer base is
set to double to touch 5 million consumers.

Following the privatization of CESU, the OERC has commenced the process to privatize
NESCO, WESCO and SOUTHCO as well. The regulator had earlier cancelled the licenses of
Reliance Infra owned distribution companies over disobeying of its orders on improvement in
power supply efficiency among other reasons. Presently, these 3 distribution companies are
being managed by GRIDCO. The bid submission was scheduled in the first week of May, 2020
and is ongoing. The OERC has hired CRISIL, a S&P Company, as a transaction advisor for
the sale of 51% equity of SOUTHCO and WESCO while Deloitte India has been appointed as
transaction advisor for NESCO.

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ANIL AMBANI OWNED RELIANCE ADA GROUP SET TO SELL ITS 51% EQUITY
STAKE IN DELHI POWER DISTRIBUTION BUSINESS

Naveen Kapoor
Power Sector Specialist

The Anil Ambani led Reliance Infra is looking to sell its 51% equity stake in BSES Rajdhani
Power and BSES Yamuna Power, two of the power distribution licensees in Delhi. The Delhi
government owns the remaining 49% in both Discoms. Once done, this could be the largest
deal in terms of consumers. According to market sources, Reliance Group is expecting an
enterprise valuation of Rs 5,000 crore, inclusive of debt. Reliance Group had retained KPMG
as its deal advisor.

Non-binding interest had been submitted by Enel Group, Greenko and Torrent Power for this
buy out complying with the deadline of Friday, 22nd May.

A key challenge for the expected enterprise valuation is the adjustment of regulatory assets.
There are about Rs 30000 Crore worth of regulatory assets that are yet to be approved by
DERC although the regulator did approve a claim of Rs 12,000 in FY 2017-18. Despite the
Appellate Tribunal approving a part of companies’ claim, the DERC is yet to allow the same in
its tariff orders due to the potential confrontation with the State Government and the
Customers. The companies reportedly owe around Rs 16000 Crore to the State Generating
Companies. Moreover, the earlier allegations regarding inflated expenses are still pending.

Reliance Infrastructure’s 51% owned BSES Yamuna Power supplies electricity to Central and
East Delhi while BSES Rajdhani Power supplies electricity in South and West Delhi. The two
licensees cater to 4.4 million customers in Delhi, handling peak power demand of 4.8 GW. For
the Financial Year 2019-20, the combined revenue stood at Rs 15,250 Crore and EBITDA at
Rs 2050 Crore. Post take over by the private operators, both licensees have managed to
reduce the AT&C Losses to 9.7% against the national average of about 21%. Apart from being
densely populated, the Discoms have good customer mix comprising of Domestic (59%),
Commercial (26%), Industrial (5%) and Others (10%) that makes entry of new players all the
more attractive. The license period of these Joint Venture companies otherwise ends in 2029.

THE BIDDERS

Torrent Power was among the earliest private utilities to enter power distribution and currently
supplies power to Ahmedabad, Surat, Agra and Bhiwandi. It has been looking at expanding its
footprint.

Page 20 of 24
Greenko is India’s leading renewable energy company and any such acquirer could reduce
BSES’s costs by switching to cleaner and cheaper fuel options. In terms of the renewable
purchase obligation targets, all distribution companies are mandated to purchase at least 21%
of their total energy requirements from renewable sources by Financial Year 2021-22 without
having to bear transmission charges and losses on such renewable power.

Enel Group is a majority stake holder in BLP Energy and Enel Green Power, its renewable
energy arm, owns and operates 172 MW of wind capacity in Gujarat and Maharashtra.

As per the market insiders, as many as 8 other players viz Tata, Adani, CESC, Caisse de
dépôt et placement du Québec (CDPQ), Actis LLP, Brookfield Asset Management, I Squared
Capital and Wade Capital Group LLC were also aiming to join the race for 51% stake buy out
thus bringing the number of interested parties in the race to 11.

In fact, earlier this week, NTPC entered the race to acquire the stake and even wrote to Delhi
Electricity Regulatory Commission (DERC) expressing interest in the majority buy out provided
the equity sale is done through a transparent process. As per the market experts, acquisition
of a majority stake in BSES Distribution business is a logical forward integration strategy for
NTPC as it already supplies about 70 percent of electricity requirement of these companies
from various sources.

LIQUIDITY CHALLENGES
The Group has been under liquidity and debt pressure. To pare its debts, in August, 2018, the
Group had sold the Mumbai city power distribution business to Adani Transmission Ltd for Rs
18,800 Crore (Greenko and Torrent had also bid for that asset as well). The money to be
realized from the stake sale in Delhi Discoms is expected to be used to pay off lenders to
reduce the overall debt exposure. In fact, only recently, a London court had ordered repayment
within 21 days an interim $717 million owed, by a group company Reliance Communication, to
a Chinese banking consortium led by Industrial & Commercial Bank of China, the world’s
largest bank by assets. Not only that, Mr Ambani had also stared at the prospect of a possible
jail term last year for delaying payments to Ericsson.

As per the latest updates from the market, Reliance Infra has dropped KPMG as their deal
advisor for reportedly not being able to bring in proposals in line with the expected enterprise
valuation of Rs 5000 Crores.

Page 21 of 24
 LEGAL UPDATES

1. Reserve Bank of India ( RBI) :

The RBI announced an extension of the moratorium on loan EMIs by three months, i.e.
August 31, 2020 in a press conference dated May 22, 2020. The earlier three-month
moratorium on the loan EMIs was ending on May 31, 2020. This makes it a total of six
months moratorium on loan EMIs starting from March 1, 2020 to 31st August, 2020. The
extension of three-month moratorium on repayment of term loans by borrowers means
that they would not have to pay the loan EMI instalments during the moratorium period.
The extension will provide relief to many individuals, especially the self-employed, as they
would have found it difficult to service their loans such as car loans, home loans etc. due
to loss of income during the lockdown period from March 25, 2020. Missing an EMI
payment would mean risking adverse action by banks which can adversely impact one's
credit score.

2. NCLAT :

In order to prevent the transmission of COVID-19, The National Company Law Appellate
(NCLAT) has decided that all urgent cases will be heard through video conferencing mode
from 1st June, 2020.

3. PM CARES Fund :

PM CARES Fund is not a public authority under the ambit Section 2(h) of the Right to
Information Act, 2005. However relevant information in respect of PM CARES Find may
be seen on the website of pmcares.gov.in

4. EPF Rates :

The reduction in statutory rate of contributions from 12% to 10% for wage months May-
June-July-2020 for all class of establishments covered under the EPF & MP Act, 1952
announced by the Central Govt. on 13th May, 2020 as Part of Atmanirbhar Bharat
Package has been notified vide S.O. 1513 € dated 18th May, 2020 published in the
Gazette of India.

The above reduction of rate contribution is not applicable to establishments like Central
and State Public Sector Enterprises or any other establishment owned by or under control
of the Central or State Govt.

Page 22 of 24
LIST OF WEBINARS DONE

Sr No Speaker Topic

1. Jaydeep Mehta Securities Laws Regime in India

2. Rajdeep Lahiri The Code: A practical preface

3. Naveen Kapoor The Power Sector Regulation in India

4. Nischal Kapadia Understanding the business of Mutual Funds and the

Franklin Templeton Issue

5. Ritu Agwekar The Real Estate Sector and the COVID 19 embargo

6. Vidhya Iyengar Gender Sensitization and the POSH Act

7. Thomas Valenti Preparing and managing disputes in the COVID 19 era

8. Bhumesh Verma M&A in the Covid Era

9. Dharmesh Shah GST – Inspection, Seizure and Arrest

10. Sudha Bhushan International Transactions – Changes we should know

(wrt FEMA and Taxation)

Page 23 of 24
 Our Editorial Board

Jaydeep Mehta Sunil Agarkar Pradeep Nauharia Bhumesh Verma

jaydeep@lexstreet.in sunil@lexstreet.in adv.pnauharia@gmail.com bhumesh.verma@corpcommlegal.in
+91 98240 99514 +91 98241 90002 +91 9814010915 +91 98113 36533
+91 98206 70494 +91 7889005405 +91 87006 11682

Naveen Kapoor Vidhya Iyengar Parmod K Sachdeva Puja Mehta

naveenkap@gmail.com vidhyaiyengar79@gmail.com sachdevapk@gmail.com pujamehta@soliduscapitals.com
+91 99585 94068 +91 99670 31116 +91 9350153501 +91 85869 17908
+91 8595327303 +91 90042 13003

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