Various Initial Registrations & Licenses – Setting Up of Business Entities and Closure Important Questions

Question 1.
Rakshit is Science Graduate and just obtained Permanent Account Number from the Income Tax Department by submitting the necessary; information and documents online. He is not aware for what purposes [ PAN is used and the benefits of having PAN. As a Consultant, you are required j to explain the benefits and use of having PAN to Rakshit.
Following are some of the benefits/use/purposes of obtaining PAN:
IT Returns Filing: All individuals and entities that are required to pay Income tax have to file their IT returns. A PAN card is necessary for filing g of IT returns and is the primary reason individuals, as well as other entities, apply for the same.

Opening a bank account: A PAN card is required in order to open a new bank account, whether it is a savings or a current account. All banks, whether public, private, or cooperative, require the submission of a PAN card in order to open an account with them.

Applying for a credit or debit card: When applying for either a debit card or a credit card at any bank or financial institution, furnishing your PAN card details mandated by regulations. The bank will not issue the card if this criterion is not met.

Purchase of jewelry: If you are looking at buying any sort of jewelry that is valued at over ₹ 5,00,000, you will have to provide your PAN card details at the time of purchase.

Making investments: Investing in securities is seen as a good way to build wealth. If you are considering investing in securities, you would have to furnish your PAN details for any transactions amounting to above ₹ 50,000. Proof of Identity: A PAN card is accepted as valid proof of identity anywhere in the country, and is also considered as proof of age. It can also be used as proof of identity when making an application for a passport, voter ID card, driving license, electricity connection, etc.

Foreign Exchange: If you are traveling abroad and wish to convert your Indian currency into foreign currency, you are required to provide details of your PAN at the money exchange institution where you are converting the money.

Property: Buying, selling, or renting a property in India now requires PAN card proof. In the case of buying of property, the PAN details of the buyer, as well as the seller, have to be listed on the sales deed and any other such documentation for the sale to be complete.

Loans: If you are taking a loan, all loan providers, both banks as well as other lending institutions, require you to submit details of your PAN at the time of loan application.

Fixed Deposits: If you plan on investing your money in a Fixed Deposit (FD) amounting to above ₹ 50,000 in a bank, you will have to provide your PAN details. This is done as the bank will deduct TDS (Tax Deductible at Source) on the FD interest amount.

Cash Deposits: If you are making a cash deposit that amounts to over ₹ 50,000 at a time, you will have to submit your PAN details as well. This is in keeping with the RBI mandate, which directs banks to report any large cash deposits to the RBI, as a way to prevent money laundering.

Question 2.
Any corporate body doing business in India requires a PAN card whether it is registered in India or not. Elucidate. [Dec. 2018 (3 Marks)]
Permanent Account Number (PAN) is a code that acts as an identification for individuals, HUF, and corporates (Indian and Foreign as well), especially those who pay Income Tax.

It is a unique, 10-character alpha-numeric identifier, issued to all judicial entities identifiable under the Income-tax Act, 1961. The Income Tax PAN code and its linked card are issued u/s 139A of the Income-tax Act. It is issued by the Indian Income Tax Department under the supervision of the Central Board for Direct Taxes (CBDT) and it also serves as an important proof of identification.

Who is required to hold PAN Card in India: Any corporate body doing business in India requires a PAN card whether it is registered in India or abroad. Equally, an individual or entity which is engaged in a business with an Indian firm/entity requires a PAN card.

It is also required for anybody who is involved in generating money out of India whether the company is registered, or has a permanent establishment, or an office in India. Given below is a list of the entities that are required to hold a PAN card in India.

  • Body Corporate
  • Companies
  • Firms
  • One Person Company
  • LLP
  • Sole Proprietor
  • Trusts
  • Corporations
  • Other Associations
  • Foreign Institutional Investors
  • Hedge Funds

Question 3.
Referring to the relevant provisions of the Income-tax Act, 1961, answer the following:
(i) Who is required to apply for Tax Deduction & Collection Account Number (TAN)?
(ii) On which documents such as TAN are required to be quoted?
(iii) What are the consequences of not quoting TAN?
(iv) Is it possible to quote PAN in place of TAN?
(v) Can taxpayers hold more than one TAN?
Meaning of Tax Deduction & Collection Account Number (TAN):
Tax Deduction Account Number or Tax Collection Account Number is a 10-digit alphanumeric number issued by the Income-tax Department.

Structure of TAN: First 4 digits of TAN are alphabets, the next 5 digits of TAN are numeric and the last digit is an alphabet.

The First 3 alphabets of TAN represent the jurisdiction code, 4th alphabet is the initial name of the TAN holder who can be a company, firm, individual, etc. For example, TAN allotted to Mr. Mahesh of Delhi may appear as – DEL M 12345 L

Who is required to apply for TAN: As per Section 203A of the Income-tax Act, 1961, every person, deducting or collecting tax shall within such time as may be prescribed, apply to the Assessing Officer for the allotment of a “Tax Deduction & Collection Account Number”.

Quoting of Tax Deduction & Collection Account Number: A person to whom Tax deduction and Collection Account number has been allotted shall quote such number on the following documents:
(a) TDS statements Le. return
(b) TCS statements Le. return
(c) Statement of financial transactions or reportable accounts
(d) Challans for payment of TDS/TCS
(e) TDS/TCS certificates
(f) Other documents as may be prescribed.

Consequences of not quoting TAN: Section 272BB(1) provides for penalty for failure to obtain TAN and section 272BB(1A) provides for penalty for quoting incorrect TAN. The penalty imposable under section 272BB is ₹ 10,000.

Government deductors are also liable to obtain TAN: Like Non-Government deductors, Government deductors are also required to apply for TAN.

PAN cannot be quoted in place of TAN: PAN should never be quoted in the field where TAN is required to be quoted. In other words, the deductor/ collector cannot quote his PAN in place of TAN. If he does not possess TAN, then he has to apply for the same. However, a person required to deduct tax under section 194-IA can use PAN in place of TAN as such person is not required to obtain TAN.

Taxpayers cannot hold more than one TAN: It is illegal to possess or use more than one TAN. Different branches/divisions of an entity may, however, have separate TAN.

In case more than one TAN has been allotted, then the TAN which is being used regularly should be continued and the other TAN(s) should immediately be surrendered for cancellation using “Form for changes or correction in TAN” which can be downloaded from NSDL-TIN website or maybe procured from TIN-FC.

Changes in the basic data communicated at the time of making the application for allotment of TAN: Any change or correction in the data associated with TAN should be communicated to the Income-tax Department by filling up “Form for changes or correction in TAN data for TAN allotted” along with necessary fees at any of the TIN-FCs or NSDL-TIN website.

Question 4.
Certain categories of persons are not liable to register under the Central Goods & Services Tax Act, 2017. Explain. x
As per Section 23 of the Central Goods & Services Tax Act, 2017, the following persons shall not be liable to registration under the GST:

  • Any person engaged in the business of supplying goods or services or both that is not liable to tax.
  • Any person engaged in the business of supplying goods or services or both that is wholly exempt from tax.
  • An agriculturist, to the extent of supply of produce out of cultivation of land.
  • Specified categories of persons notified by the Central Government on the recommendations of the GST Council.

Question 5.
Under what circumstances registration of a taxable person can be canceled under the GST Law?
The proper officer may, either on his own motion or on an application filed by the registered person or by his legal heirs, in case of death of such person, cancel the registration, in such manner and within such period as may be prescribed.

Application for cancellation of registration shall be filed electronically in Form GST REG-16.

Voluntary registration cannot be canceled within 1 year [Rule 20 of CGST Rules, 2017]: Application for cancellation of voluntary registration shall not be considered before the expiry of 1 year from the effective date of registration.

Cases in which registration can be canceled: The proper officer may cancel the registration in the following cases:

  • The business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged, or otherwise disposed of.
  • There is no change in the constitution of the business.
  • The taxable person, other than the person registered under Section 25(3), is no longer liable to be registered u/s 22 or 24.

However, during the pendency of the proceedings relating to cancellation of registration filed by the registered person, the registration may be suspended for such period and in such manner as may be prescribed.

Suo Motu cancellation of registration by Proper Officer: The Proper Officer may cancel Suo Motu the registration in the following cases:

  • A registered person has contravenes the provisions of the CGST Act or the rules made thereunder.
  • A person paying tax has not furnished returns for 3 consecutive tax periods.
  • Any registered person [other than a person specified in clause (h)\ has not furnished returns for a continuous period of 6 months.
  • Any person who has taken voluntary registration has not commenced business within 6 months from the date of registration.
  • Registration has been obtained by means of fraud, wilful misstatement, or suppression of facts.

The proper officer shall not cancel the registration without giving the person an opportunity of being heard.

Question 6.
Registration under the Central Goods & Services Tax Act, 2017 is made compulsory in certain cases, irrespective of the aggregate turnover. Explain. [Dec. 2018 (4 Marks)]
Provisions of compulsory registration are contained u/s 24 of the Central Goods & Services Tax (CGST) Act, 2017.

Categories of persons who are required to obtain compulsory registration are listed herein below:

  • A person engaged in the inter-State taxable supply of goods or services or both.
  • A casual taxable person engaged in taxable supply.
  • Persons are liable to pay tax under the reverse charge mechanism.
  • A non-resident taxable person engaged in providing taxable supply.
  • A person is liable to pay tax u/s 9(5) of the Act.
  • The person is liable to deduct tax at source (TDS).
  • Input Service Distributor.
  • E-commerce operator who is required to collect tax u/s 52.
  • A person engaged in supplying goods or services or both through an e-commerce operator who is required to collect tax at source (TCS).
  • The person engaged in supplying online information and database access or retrieval services from a place outside India to an unregistered person.
  • Persons engaged in the taxable supply of goods or services or both on behalf of another registered taxable person, whether as an agent or otherwise.

It must be noted that categories of the person covered under compulsory registration are mandatorily required to obtain registration irrespective of the quantum of turnover.

Question 7.
Ramesh has purchased a shop in the local market of New Delhi and wants to set up a business of electronic goods. Is he required to get his shop registered under the Shops and Establishment Act? If so, advise him of the procedure. [Dec. 2018 (3 Marks)]
A business owner of a shop or establishment is compulsorily required to get the same registered under the Shops and Establishment Act of the State where the business is located.

Procedure for registration of the Shops and Establishment differs from State to State as each State have their own Shops and Establishment Act.

Generally, the following procedure can be adopted for registration of the Shops and Establishments:
1. Submit an application in the prescribed form to the Inspector of the area within 30 days of starting any work in the shop/establishment. The application is to be submitted along with the prescribed fees and should contain the following information:

  • Name of the employer, owner, and the name of a manager, if any.
  • Postal address of the establishment.
  • Name of the establishment.
  • Such other particulars as may be prescribed.

2. Upon receiving the application for registration and the fees, the Inspector shall verify the accuracy and correctness of the application.

3. Once suitably satisfied, he shall enter the details in the Register of Establishments and issue a registration certificate.

4. This certificate will be valid for the specified period and has to be renewed thereafter.
It is important that the registration certificate has to be prominently displayed at the shop or establishment.

Question 8.
Explain the procedure to be adopted for change in address of business premises under the Shops & Establishment Act.
Communication of change to the Inspector: In case of any change with respect to any of the information given during the application for registration, the same has to be notified to the Inspector’s office within 15 days after the change has taken place. [Period of 15 days specified here may differ from State to State as each State have its own Shop & Establishment Act]

The Inspector will verify the correctness of the details furnished, make the related change in the Register of Establishments, amend the registration certificate or issue a fresh registration certificate.

Closing of Establishment to be communicated to Inspector: In case the shop or establishment would like to close down the business, the occupier should notify the Inspector in writing within 15 days of the closing.

The Chief Inspector after reviewing the request for closure can remove the shop or commercial establishment from the register and cancel the registration certificate.

Question 9.
How enterprises are classified under the Micro, Small & Medium Enterprises Development Act, 2006?
Classification of Enterprises [Section 7(1)]:
(a) In the case of industry specified in the First Schedule to the Industries (Development & Regulation) Act, 1951, as:

  • Micro Where investment in plant & machinery is below ₹ 25 lakhs
  • Small Where investment in plant & machinery is above ₹ 25 lakh but below ₹ 5 Crore
  • Medium Where investment in plant and machinery is above ₹ 5 Crore but below ₹ 10 Crore

(b) In the case of the enterprises engaged in providing or rendering of services, as:

  • Micro Where the investment in equipment is below ₹ 10 lakh
  • Small Where the investment in equipment is above 110 lakh but below ₹ 2 Crore
  • Medium Where the investment in equipment is above ₹ 2 Crore but below ₹ 5 Crore

Note: It has been clarified that the cost of pollution control, research and development, industrial safety devices, and such other items as may be specified will be excluded while calculating the investment in plant and machinery.

Question 10.
Ankush is running a small factory in the industrial area of Pune District. In order to avail various benefits available under various laws and policies framed by the Central and State Governments, he wants to register his factory as Small Enterprise. Advice him regarding the process to be j followed for such registration. Also, state the various documents required j to be submitted at the time of application for registration.
MSME stands for micro, small and medium enterprises and any enterprise that falls under any of these three categories. MSME enterprises are the backbone of any economy and are an engine of economic growth, promoting equitable development for all. Therefore, to support and promote MSMEs, the Government of India through various subsidies, schemes and incentives promote MSMEs through the MSMED Act. To avail the benefits under the MSMED Act from Central or State Government and the Banking j Sector, MSME Registration is required.

Micro, Small, and Medium-sized enterprises in both the manufacturing j and service sectors can obtain MSME Registration under the MSMED Act. Though the MSME registration is not statutory, it is beneficial for businesses at it provides a range of benefits such as eligibility for lower rates of interest, excise exemption schemes, tax subsidies, power tariff subsidies, capital investment subsidies, and other support.

Registration Process: The registration Process of Micro & Small Enterprises is as follows:

  • To register the small and medium scale industry, the owner has to fill a single form which he can do online as well as offline.
  • If a person wants to do registration for more than one industry then also he can do individual registration.
  • To do the registration he has to fill a single form which is available on the website.
  • Document required for the registration is Personal Aadhaar number, Industry name, Address, bank account details, and some common information.
  • There are no registration fees required for this process.
  • Once the required details and documents are submitted the registration number will be issued.

Documents required for MSME Registration:

  • Business Address Proof
  • Copies of Sale Bill and Purchase Bill
  • Partnership Deed in case of Firm
  • MOA and AOA in case of a company
  • Copy of Licenses and Bills of Machinery Purchased

Question 11.
What do you understand by Udyog Aadhaar Registration? Discuss its purpose, benefits, and registration process in detail.
In recent times, for boosting small-scale businesses in the country, the Government of India has initiated the Udyog Aadhaar Registration process. Earlier, if you wished to start a business and get SSI Registration or MSME registration, you needed to go through a lot of paperwork. Now, you need to fill in only two forms: Entrepreneur Memorandum-I and Entrepreneur Memorandum-II instead of 11 different types of forms that were required earlier.

The Udyog Aadhaar Registration is a completely online process that is totally free of cost. Industries registered with Udyog Aadhaar become entitled to receive the benefits of several government schemes such as subsidies, easy loan approvals, etc.

UAM (Udyog Aadhaar Memorandum): Udyog Aadhaar Memorandum is the registration form wherein the MSME certifies its existence and provides mandatory information such as the owner’s Aadhaar details, bank account details, etc.

After submitting this form, an acknowledgment form is released to the registered email of the applicant containing the unique UAN (Udyog Aadhaar Number).

As it is a self-declaration form, there’s no need for any supporting documentation.

Note: Even though supporting documents are not required, any central or state authority can ask for specific documentation as proof of information provided in the UAM form.

Udyog Aadhaar Registration Process:

  1. The SME (Small and Medium Scale Enterprises) owner needs to fill a one-page form online. For online registration, the applicant should visit the official website:
  2. If someone wishes to register for more than one industry then they should opt for individual registration.
  3. The MSME has to self-certify its existence, details of the business activity, bank account, ownership and employment details, and other information.
  4. During the registration process, the individual needs to provide self-certified certificates, documents, and other required information.
  5. No registration fees are required to be paid.
  6. After filling in the details and uploading the same, the registration number would be generated and the same would be mailed to the email address given in the UAM which should contain a unique UAN (Udyog Aadhaar Number)

Benefits of Udyog Aadhaar Registration: Various benefits of Udyog Aadhaar Registration are given below:

  • Loans at subsidized rates of interest from government and banks.
  • Financial support for participating in foreign expos.
  • Various government subsidies.
  • Reduction in fee for filing patents and trademarks.
  • Concession in electricity bills
  • Fast resolution of disputes
  • Octroi benefits
  • Several exemptions from direct & indirect tax laws
  • Exemption while applying for government tenders
  • Preference in the allocation of government tenders

With two lakhs registered businesses in the MSME category, the industry is moving towards becoming organized and systematized with maximum benefits for the entrepreneurs.

Question 12.
Bermuda Sports Manufacturing Unit, a Micro and Small Enterprise, seeks registration under the Single Point Registration Scheme of NSIC. State the various benefits/facilities available to the registered units. [June 2019 (3 Marks)]
NSIC Registration: The Government is the single largest buyer of a variety of goods. With a view to increasing the share of purchases from the small-scale sector, the Government Stores Purchase Programme was launched in 1955-1956. National Small Industries Corporation [NSIC] registers Micro & Small Enterprises (MSEs) under Single Point Registration Scheme (SPRS) for participation in Government Purchases.

Benefits of NSIC Registration: The units registered under the Single Point Registration Scheme of NSIC are eligible to get the benefits under the Public Procurement Policy for Micro & Small Enterprises (MSEs) Order, 2012 as notified by the Government of India, Ministry of Micro Small & Medium Enterprises, New Delhi.

  • Issue of the Tender Sets free of cost.
  • Exemption from payment of Earnest Money Deposit (EMD),
  • In tender participating MSEs quoting price within a price band of L1+15% shall also be allowed to supply a portion up to 2096 of requirement by bringing down their price to LI Price where LI is non-MSEs.
  • Every Central Ministries/Departments/PSU shall set an annual goal of a minimum of 20% of the total annual purchases of the products or services produced or rendered by MSEs. Out of the annual requirement of 2096 procurement from MSEs, 496 is earmarked for units owned by Schedule Caste/Schedule Tribes.
  • In addition to the above, 358 items are also reserved for exclusive purchase from SSI Sector.

Question 13.
State the procedure for registration of employers and employees under the ESI Scheme.
ESI stands for Employee State Insurance managed by the Employee State Insurance Corporation which is an autonomous body created under the Employees State Insurance Act, 1948 and works under the Ministry of Labour and Employment, Government of India.

This scheme is started for Indian workers. The workers are provided with a huge variety of medical, monetary, and other benefits from the employer. Any Company having more than 10 employees (in some states it is 20 employees) who have a maximum salary/wage of ₹ 21,000 per month has to mandatorily register itself with the ESIC. The wage limit for Employees with ‘Disability’ is ₹ 25,000 per month.

Under this scheme, the employer needs to contribute an amount of 4.7596 of the total monthly salary payable to the employee whereas the employer needs to contribute only 1.7596 of his monthly salary every month of the year. ESI Registration Procedure Registration of Employer: Any employer having more than 10 employees is mandatorily required to take up the ESI Registration.

Within 15 days of submission of the Employer’s Registration Form (Form 1), the company or firm is expected to obtain an Identification number or Code Number from the Regional office. This figure will be used in correspondence related to the scheme.

Documents required:

  • Documents about the establishment of the company.
  • Evidence supporting the date of commencement of production/business.
  • List of partners, stakeholders, directors along with necessary information and proof of address.
  • Copy of PAN
  • Identity proof like Voter ID/passport
  • List of employees

Registration of Employee: At the time of joining the Establishment, an employee is required to fill the Declaration Form with a copy of the family photo which the employer will be submitting at the ESI branch office.

Within 3 months a permanent Photo ID is provided to the employee with an insurance number for identification purposes under the scheme.

Question 14.
State the procedure for registration of establishment under the law governing the provident fund.
To provide financial stability and security to employees when they are temporarily or no longer fit to work, the Parliament enacted the Employee’s Provident Fund Scheme (EPFS) 1952. The central government trust manages these funds, and employees are required to contribute a part of their salary to it every month during their employment tenure.

An establishment with less than 20 employees can voluntarily opt for PF registration. However, establishments with more than 20 employees compulsorily have to register.

PF Registration Process:

  • A detailed application form in Form 5A with Annexure-1 has to be filed while registering the company online.
  • After that, a temporary PF registration number allotted, and an employer has to submit all concerning documents online.
  • After that, the PF authorities carry out an inspection of the premises and verify the documents submitted online.
  • PF allotment letter will be issued.

Documents required to be submitted: The documents required to submit with the Performa of coverage for EPF along with a list of employees are listed below.

  • A copy of Memorandum and Articles of Association and the certificate of incorporation issued by the Registrar of Companies, in the case of Public and Private Ltd. Companies.
  • A copy of the partnership deed in the case of partnerships.
  • A copy of the Registration certificate issued by the Registrar of Co-operative societies.
  • A copy of the Registration certificate issued by the Registrar in the case of societies registered under the Societies Registration Act along with a copy of the objects and Rules of the Society.
  • Partition deeds creating HUF.
  • Any agreement or other legal documents in the case of Association of persons as defined in the Income Tax Act.

Question 15.
State the procedure for making an application for FCRA Registration.
The procedure for FCRA Registration is given below:
1. An application for registration of a person for acceptance of foreign contribution shall be made electronically online in Form FC-3, and shall be followed by forwarding the hard copy of the online application duly signed by the Chief Functionary of the association together with the required documents.

2. The hard copy of the online application shall reach the Central Government within 30 days of the submission of the online application, failing which the request of the person shall be deemed to have ceased.

3. Any person whose request has ceased may prefer a fresh online application with the Central Government only after 6 months from the date of cessation of the previous application.

4. A person seeking registration shall be required to open an exclusive bank account to receive the foreign contribution.

  • An application made for the grant of the registration shall be accompanied by a fee of ₹ 2,000.
  • The fee, as applicable, shall be remitted by demand draft or banker’s cheque in favor of the ‘Pay and Accounts Officer, Ministry of Home Affairs”, payable at New Delhi.
  • Every certificate of registration granted to a person under the Act shall be valid for a period of 5 years from the date of its issue.

Question 16.
Abhishek has recently been appointed as Finance and Legal Compliance Officer of a Charitable Organization – doing palliative care service to aged persons, seeks to receive foreign funds, has approached you to find out the eligibility criteria for obtaining registration. Brief him on the provisions of the Foreign Contribution (Regulation) Act, 2010 on the eligibility criteria for registration. [June 2019 (3 Marks)]
As per Section 11 of the Foreign Contribution (Regulation) Act, 2010, a person/organization having a definite Cultural, Economic, Educational, Religious or Social Programme shall accept foreign contribution only after obtaining a certificate of registration from the Central Government. Such a registration under the Foreign Contribution (Regulation) Act, 2010 is called an FCRA registration.

Eligibility for obtaining FCRA Registration:

  • Organizations seeking foreign contributions for definite cultural, social, economic, educational, or religious programs may obtain FCRA registration or receive foreign contributions through the “prior permission” route.
  • It is preferable for an FCRA applicant to be a Trust or Society or a Section 8 Company. The not-for-profit entity must have also been in existence for a minimum of 3 years while making the FCRA application and should not have received any foreign contribution prior to that without the Government’s approval.

The entity seeking registration should have spent at least ₹ 10,00,000 over the last 3 years on its aims and objects, excluding administrative expenditure. Statements of Income & Expenditure, duly audited by Chartered Accountant, for the last 3 years are to be submitted to substantiate that it meets the financial parameter.

In case a newly registered entity would like to receive foreign contributions, then approval for a specific activity, specific purpose, and from a specific source can be made to the Ministry of Home Affairs through the Prior Permission (PP) method.

Question 17.
Which type of project requires Environment Clearances? Also, state projects/industries that are exempted from obtaining such Environment Clearance.
1. Entrepreneurs are required to obtain Statutory clearances relating to Pollution Control & Environment for setting up an industrial project, for 30 types of projects. Environmental clearance needs to be obtained from the Ministry of Environment, Government of India. This list includes industries like petrochemical complexes, petroleum refineries, cement, thermal power plants, bulk drugs, fertilizers, dyes, paper, etc.

2. If the investment is less than ₹ 1,000 million, such clearance is not necessary, unless it is for pesticides, bulk drugs and pharmaceuticals, asbestos and asbestos products, integrated paint complexes, mining projects, tourism projects of certain parameters, tarred roads in the Himalayan areas, distilleries, dyes, foundries, and electroplating industries.

3. Any item reserved for the small-scale sector with an investment of less than ₹ 10 million is also exempt from obtaining environmental clearance from the Central Government under the Notification.

4. Powers have been delegated to the State Governments for grant of environmental clearance for certain categories of thermal power plants.

5. Setting up industries in certain locations considered ecologically fragile (e.g. Aravali Range, coastal areas, Doon valley, Dahanu, etc.) are guided by separate guidelines issued by the Ministry of Environment of the Government of India.

Question 18.
Rajkumar is running a business of handicraft in Jaipur. He lias explored some opportunities for handicraft products aboard and he wants to encash the huge demand outside India for such products. He seeks your advice on whether he would be required to get himself registered with the Directorate General of Foreign Trade (DGFT) for exporting goods. If yes, what are all the documents required for such registration? Also, enlighten him on the features available from such registration. [June 2019 (5 Marks)]
IEC registration is required by a person for exporting or importing goods. It is issued by the Directorate General of Foreign Trade (DGFT). Importer-Exporter Code (IEC): An IEC is a 10-digit number allotted to a person that is mandatory for undertaking any export and import activities. Now the facility for IEC in electronic form or e-IEC has also been operationalized.

No Export/Import without IEC:
(a) No export or import shall be made by any person without obtaining an IEC number unless specifically exempted.
(b) Exempt categories and corresponding permanent IEC numbers are given in the Handbook of Procedures.

As per Foreign Trade Policy [2015-2020] issued by the Government of India following procedure has been prescribed for obtaining Importer Exporter Code Number
(a) Application for IEC/ e-IEC: Application for obtaining IEC can be filed manually and submitting the form in the office of the Regional Authority of DGFT. Alternatively, an application for e-IEC may be filed online in ANF 2A, as specified in the Handbook of Procedure on payment of the application fee of ₹ 500, to be paid online through net banking or credit/ debit card. Documents/details required to be uploaded/submitted along with the application form are listed in the Application Form (ANF 2A).

(b) When an e-IEC is approved by the competent authority, the applicant is informed through e-mail that a computer-generated e-IEC is available on the DGFT website. By clicking on “Application Status” after having filled and submitted the requisite details in the “Online IEC Application” webpage, an applicant can view and print his e-IEC.

(c) Briefly, the following are the requisite details/documents (scanned copies) to be submitted/uploaded along with the application for IEC:
1. Details of the entity seeking the IEC:

  • PAN of the business entity in whose name Import/Export would be done (Applicant individual in case of Proprietorship firms).
  • Address Proof of the applicant entity.
  • LLPIN/ CIN/Registration Certification Number (whichever is applicable).
  • Bank account details of the entity. Canceled Cheque bearing entity’s pre-printed name or Bank certificate in prescribed format ANF2A(I).

2. Details of the Proprietor/Partners/Directors/Secretary or Chief Executive of the Society/Managing Trustee of the entity:

  • PAN (for all categories)
  • DIN/DPIN (in case of Company/LLP firm)

3. Details of the signatory applicant:

  • Identity proof
  • PAN
  • Digital photograph

(d) In case the applicant has a digital signature, the application can also be submitted online and no physical application or document is required.

In case the applicant does not possess a digital signature, a printout of the application filed online duly signed by the applicant has to be submitted to the concerned jurisdictional Regional Authority, in person or by post.

Features of the Import Export Code (IEC) Registration:
International Exposure: IEC Code helps to grow business from local market to international market and expand product or service across the globe.

Government Benefits: The government of India always promotes export activity in India so through IEC Code Registration one can avail all the export scheme benefits from DGFT, Customs, and Export Promotion Council. No Renewals: IEC Code issued by the DGFT for the lifetime validity so there is no need to renew it every year.

No Annual Compliance: IEC Code has no annual compliance like returns filings etc.

Individual Person: IEC Code can be obtained by the individuals and it not necessary that business must be set up as a Firm or Company.

Question 19.
Mr. Lucky has just obtained the degree of Bachelor of Pharmacy (B. PHARMA) and he is interested to start a medical shop in his locality. In this connection you are required to answer the following:
(i) What qualification is required for opening a medical shop?
(ii) What are the minimum requirements for obtaining a drug license or starting a pharmacy business in India?
In India import, manufacturing, sale, and distribution of the drug are regulated under Drugs & Cosmetics Act, 1940 and Drugs and Cosmetic Rules, 1945.

To start a pharmacy business, a drug license is required. The Central Drugs Standard Control Organization & State Drugs Standard Control Organization control the issue of drug licenses in India.

Drug license for setting up a pharmacy business is usually under the purview of the State Drugs Standard Control Organization. Normally, the Drug Control Organization issues two types of licenses for operating a pharmacy business.

  1. Retail Drug License (RDL): It is the issued to run a general chemist shop.
  2. Wholesale Drug License (WDL): It is issued to persons or agencies engaged in the wholesale of drugs and medicines.

In most States, a retail drug license is only issued to persons who possess a Degree/Diploma in pharmacy from a recognized Institute or University on account of the fact that it is a specialized job and only qualified persons can handle it. A person applying for gas pays a specified fee for obtaining the license.

Requirements for obtaining Drug License: Following are minimum requirements for obtaining a drug license or starting a pharmacy business in India:
1. Area: The minimum area of 10 square meters is required to start a medical shop or pharmacy or wholesale outlet. In case, the pharmacy business combines retail and wholesale, a minimum of 15 square meters is required.

2. Storage Facility: The store must have a refrigerator & air conditioner on the premises. According to current prevailing guidelines, certain drugs like vaccines, sera, insulin injections, etc. are required to be stored in the refrigerator.

3. Technical Staff:
(a) Wholesale: The sale of the drug by wholesale shall be made either in the presence of a registered pharmacist or in the presence of a competent person who shall be a graduate with 1-year experience in dealing in drugs or a person who has passed S.S.L.C. with 4 years experience in dealing in drugs, specially approved by the department of drug control for the purpose.

(b) Retail: The sale of drugs by retail must be made in the presence of a registered pharmacist approved by the department. The registered pharmacist is required to present throughout the working hours.

Question 20.
What do you understand by ‘FSSAI Licensing & Registration’? Who is Petty Food Business Operator? What is the registration process of such a food business in India?
Meaning: FSSAI stands for Food Safety and Standards Authority of India which is an organization that monitors and governs the food business in India. It ensures the food products undergo quality checks thereby curtailing the food adulteration and sale of sub-standard products. It is responsible for the registering and licensing of the food business operators (FBO) in India and it lays down the rules and regulations for running the food business in India.

All the manufacturers, traders, restaurants who are involved in the food business must obtain a 14-digit registration or a license number which must be printed on food packages.

The registration and licensing of food businesses in India is governed by the Food Safety and Standards (Licensing & Registration of Food Businesses) Regulations, 2011. As per the regulation, all food business operators in India must have an FSSAI registration or license if they are involved in the manufacturing, storage, transportation or distribution of food products. Based on the size nature of the business, FSSAI registration or FSSAI license may be required.

FSSAI License & Registration:
FSSAI Online Registration is done through the official website of FSSAI for the basic and central level. For state, the FSSAI registration is also done through offline mode.

FSSAI registration is required for all Petty Food Business Operator. Petty Food Business Operator is any person or entity who:
(a) Manufactures or sells any article of food himself or a petty retailer, hawker, itinerant vendor, or temporary stall holder; or

(b) Distributes foods including in any religious or social gathering except a caterer; or

(c) Other food businesses including small scale or cottage or such other industries relating to food business or tiny food businesses with an annual turnover not exceeding ₹ 12 lakhs and whose:

  • Production capacity of food (other than milk and milk products and meat and meat products) does not exceed 100 kg/ltr. per day or
  • Procurement or handling and collection of milk is up to 500 liters of milk per day or
  • Slaughtering capacity is 2 large animals or 10 small animals or 50 poultry birds per day or less.

Petty Food Business Operators are required to obtain an FSSAI registration by submitting an application for registration in Form A. On submission of an FSSAI registration application, the registration should be provided or the application rejected in writing within 7 days of receipt of an application by authority.

FSSAI registration certificate contains the details of registration and a photo of the applicant. The certificate must be prominently displayed at the place of the food business, at all times while carrying on the food business.

Question 21.
State the procedure for registration of a trademark
Registration of a trademark is not mandatory, though highly desirable when stakes are high. The process of registration of a trademark is given below:
1. Select the trademark for which registration is sought.

2. It is advisable for the applicant to search the trademark records registry and ensures that the intended trademark does not resemble or identical to the registered mark. The search can be done online or through the trademark office.

3. After thorough research, the application for registration in the trademark can be made in the prescribed form. The application for a trademark can be made both online and offline. For online application, Class III Digital Signature Certificate is required.

4. The application for the registration of the trademark should contain the following particulars:

  • ‘Mark’ chosen to be registered,
  • Trademark owner’s information,
  • List of goods or services for which the trademark will be used.

5. Once the application for the trademark registration is made, the Registrar will search for the uniqueness of the name and will check the registered marks and pending applications to ascertain whether any such marks exist and whether the applied mark can be registered as a trademark under the Trademark Act, 1999.

6. In case, of objection by the registrar for acceptance of the application or propose to accept the application with certain term and conditions, amendments, limitations, etc., the same is communicated in writing to the applicant and the applicant has to give the reply within a period of 3 months.

7. After examination of the applied mark by the office of trademark registry, if they found that the application is allowable under the Trademark Act, 1999, a Letter of Acceptance will be issued. Thereafter, the applied trademark will be published in the Trade Marks Journal.

8. If there are no oppositions within 4 months from the date of advertisement in the Trade Marks Journal, then the trademark registration certificate will be issued.

9. Once the trademark is registered, it is valid for a period of 10 years from the date of application. The registration can then be renewed indefinitely as long as the renewal fees are paid every 10 years.

Question 22.
Whether registration of copyright is compulsory? Whether non-registration deprives the owner of his right to bring both a civil and criminal action against on offense of infringement? [Dec. 2000 (4 Marks)]
Registration of copyright is not obligatory it is optional. Non-registration does not deprive the owner of his right to bring both a civil & criminal action against an offense of infringement. For registering the work in copyright application has to be made in Form IV with prescribed fee to the Registrar of Copyright.

Discuss briefly the process of registration of copyright.
To obtain the copyright registration the following process has to be followed:

  • An application in Form IV has had to be made to the Registrar of Copyright along with the requisite fees. A separate application has to be made for separate works.
  • Every application has to be signed by the applicant as well as an Advocate in whose favor a Vakalatnama has been executed.
  • The registrar will issue a Dairy No. and then there is a mandatory waiting time for a period of 30 days for any objections to be received.
  • If there are no objections received within 30 days, the scrutinizer will check the application for any discrepancy and if no discrepancy is there, the registration will be done and an extract will be sent to the Registrar for entry in the Register of Copyright.
  • If any objection is received, the examiner will send a letter to both parties about the objections and will give them both a hearing.
  • After the hearing, if the objections are resolved the scrutinizer will scrutinize the application and approve or reject the application as the case may be.

Question 23.
A Start-up Company intends to register its invention by filing a patent application. As a Practicing Company Secretary advise the company about the process to be adopted for registration of patents in India.
Patent filing has become increasingly popular in India due to the rising intellectual property rights awareness and Startup India Action Plan. In the Startup India Action Plan, eligible startups would receive an 80% rebate in patent filing fees to provide a boost to patents registered by Indian companies. Hence, there is tremendous interest amongst startups in obtaining patent registration.

Procedure for obtaining a Patent:
1. File Patent application in Form 1 in triplicate. An application of a patent is generally accompanied by Provisional Specification or Complete Specification. Drafting a patent specification is a highly skilled job, which can be only performed by persons who have both technical as well as patent law expertise.

If a person or company is serious about protecting their intellectual property, it is highly recommended to use the services of professional patent practitioners. A provisional application is a temporary application filed with a Patent Office to claim a “Priority Date” and when an invention is not complete in all aspects. However, the complete application needs to be filed within 12 months, or else it will be treated as abandoned.

2. After making an application for a patent the applicant has to file a request for examination of the patent in the prescribed form.

3. Where a request has been made by the applicant or by any other interested person, it will be taken up for examination, according to the serial number of the requests received. A First Examination Report (FER) stating the objections/requirements is communicated to the applicant or his agent ordinarily within 6 months from the date of the request for examination. Application or complete specification should be amended in order to meet the objections/requirements within a period of 12 months from the date of the First Examination Report (FER).

4. Patent office then will publish the application with specifications.

5. If any person file objection to the grant of a patent then all such objections have to be resolved.

6. When all the requirements are met or in case of opposition if the opposition is decided in favor of the applicant, the patent is granted, after 6 months from the date of publication. The letter patent is issued, entry is made in the register of patents and it is notified in the Patent Office, Journal.

Question 24.
What are the provisions regarding ‘registration of design’ under the Design Act, 2000?
Application registration of designs [Section 5]:
1. Who can make an application: A new or original design can be registered by the Controller if it is not previously published in any country and is not contrary to public order or morality.

2. Reference to the examiner: The Controller shall before such registration refer the application for examination to the appointed examiner to whether the design is capable of being registered under the Act or not.

3. Application Form & Fees: Every application shall be made in the prescribed form and shall be filed in the Patent Office in the prescribed manner and shall be accompanied by the prescribed fee.

4. Registration for one class only: A design may be registered for one class only. In case of doubt as to the class in which a design ought to be registered, the Controller may decide the question.

The Controller may refuse to register any design presented to him for registration. Any person aggrieved by such refusal may appeal to the High Court.

5. Abandonment of application: If an application for registration is not been completed within the prescribed time, it shall be deemed to be abandoned.

6. Effective date of registration: A design when registered shall be registered as of the date of the application for registration.

Publication of particulars of registered design [Section 7]: After the registration of a design the Controller shall publish the prescribed particulars of the design in a prescribed manner and thereafter the design shall be open to public inspection.

Certificate of registration [Section 9]: The Controller shall grant a certificate of registration to the proprietor of the design when registered.

In case of loss of the original certificate or in any other case the Controller furnishes one or more copies of the certificate.

Question 25.
For which classes of insurance business requisition for registration application may be made as per the IRDAI (Registration of Indian Insurance Companies) (Seventh Amendment) Regulations, 2016?
The classes of business of insurance for which requisition for registration application may be made are:

  1. Life insurance business;
  2. General insurance business;
  3. Health insurance business exclusively;
  4. Reinsurance business.

An applicant shall make a requisition for registration application either for Life Insurance Business or General Insurance Business or Health Insurance Business exclusively or Reinsurance Business.

Question 26.
ABC Ltd. is planning to enter into the business of insurance for which | Board of Directors of the Company seeks your advice about the norms in j respect of paid-up equity capital for carrying out the business of an insurer, Advise them accordingly with reference to provisions of the Insurance Act, 1938 as amended by Insurance Regulatory and Development Act, 1999. Also, state the items that are excluded in determining the amount of paid-up equity capital of an insurer under the said Act. [Dec. 2018 (3 Marks)]
As per Section 6 of the Insurance Act, 1938 as amended by Insurance j Regulatory & Development Act, 1999, no insurer carrying on the business of life insurance, general insurance, or re-insurance in India on or after the commencement of the Insurance Regulatory and Development Authority- Act, 1999, shall be registered unless it has:

  1. a paid-up equity capital of ₹ 100 Crore, in case of a person carrying on the business of life insurance or general insurance; or
  2. a paid-up equity capital of ₹ 200 Crore, in case of a person carrying « on exclusively the business as a re-insurer.

However, in determining the paid-up equity capital specified under clause (1) or clause (2), the deposit to be made u/s 7 and any preliminary expenses j incurred in the formation and registration of the company shall be excluded,

An insurer carrying on the business of life insurance, general insurance, or reinsurance in India before the commencement of the Insurance Regulatory & Development Authority Act, 1999 and who is required to be registered under j the Act, shall have a paid-up equity capital in accordance with clauses (1) & (2), as the case may be, within 6 months of the commencement of that Act.

Question 27.
List out the grounds under which the Insurance Regulatory and Development Authority of India (IRDAI) is compulsorily required to cancel the Certificate of Registration for Insurer/Insurance business. [June 2019 (3 Marks)]
The IRDAI (Registration of Indian Insurance Companies) Regulations, 2000 as amended in 2016 deals with the suspension and cancellation of | certificate of registration of insurer.

These provisions are discussed below:
Suspension of the certificate [Regulation 23]: Without prejudice to any penalty which may be imposed or any action taken under the provisions of the Act, the registration of an Indian insurance company or insurer may be suspended for a class or classes of insurance business for such period as may be specified by the Authority by an order under the following circumstances
1. The insurer fails, at any time, to comply with the provisions of Section 64VA as to the excess of the value of its asset over the number of its liabilities.

2. The insurer is in liquidation or is adjudged as insolvent.

3. The business or a class of the business of the insurer has been transferred to any person or has been transferred to or amalgamated with the business of any other insurer without the approval of the Authority.

4. Defaults in complying with, or acts in contravention of, any requirement of the Act or of any Rule or any Regulation, direction, or order issued by the Authority, particularly if the insurer:
(a) conducts its business in a manner prejudicial to the interest of the policyholders;
(b) fails to furnish any information as required by the Authority relating to its insurance business;
(c) does not submit periodical returns as required under the Act or by the Authority;
(d) does not cooperate in any inquiry conducted by the Authority;
(e) indulges in manipulative practices;
(f) indulges in unfair trade practices;

(g) fails to make the investment in the infrastructure or social sector specified in the regulations.

  • The Authority has reasons to believe that any claim upon the insurer arising in India under any policy of insurance remains unpaid for 3 months after final judgment in a regular court of law.
  • The insurer carries on any business other than the insurance business or any prescribed business.
  • The insurer defaults in complying with any direction issued or order made, as the case may be, by the Authority under the Insurance Regulatory and Development Authority Act, 1999.
  • The insurer defaults in complying with or acts in contravention of, any requirement of the Companies Act, 2013, or the General Insurance Business (Nationalization) Act, 1972, or the Foreign Exchange
    Management Act, 1999 or the Prevention of Money Laundering Act, 2002.
  • The insurer fails to pay the annual fee required u/s 3A.
  • The insurer is convicted for an offense under any law for the time being in force.

However, the Authority for reasons to be recorded in writing may, in case of repeated defaults of the type mentioned above, may impose a penalty of cancellation of Certificate of Registration.

Manner of making order of suspension or cancellation of Certificate [Regu-lation 24]: No order of suspension or cancellation shall be imposed except after holding an inquiry in accordance with the specified procedure.

Effect of suspension or cancellation of Certificate [Regulation 27]: On and from the date of suspension or cancellation of the Certificate, the insurer shall cease to transact new insurance business. However, the Authority may direct the insurer to continue to service the existing policyholders for such a period as may be specified in the Order.

Publication of order [Regulation 28]: The Order passed by the Authority shall be published in at least two daily newspapers in the area where the insurer has its principal place of business.

Question 28.
TRAI’s mission is to create and nurture conditions for the growth of telecommunications in the country. Explain.
In India, the telecom market and business thereunder are governed and regulated by the Telecom Regulatory Authority of India (TRAI), which is a statutory body set up for regulating the Telecom and Broadcasting Sectors.

The entry of private service providers brought with it the inevitable need for independent regulation. The Telecom Regulatory Authority of India (TRAI) was, thus, established with effect from 20th February 1997 by an Act of Parliament, called the Telecom Regulatory Authority of India Act, 1997, to regulate telecom services, including fixation/revision of tariffs for telecom services which were earlier vested in the Central Government.

TRAI’s mission is to create and nurture conditions for the growth of telecommunications in the country in a manner and at a pace that will enable India to play a leading role in the emerging global information society.

One of the main objectives of TRAI is to provide a fair and transparent policy environment that promotes a level playing field and facilitates fair competition.

In pursuance of the above objective, TRAI has issued from time to time a large number of regulations, orders, and directives to deal with issues coming before it and provided the required direction to the evolution of the Indian telecom market from a Government-owned monopoly to a multi-operator multi-service open competitive market.

The directions, orders, and regulations issued cover a wide range of subjects including tariff, interconnection, and quality of service as well as governance of the Authority.

The TRAI Act was amended by an ordinance, effective from 24 January 2000, establishing a Telecommunications Dispute Settlement & Appellate Tribunal (TDSAT) to take over the adjudicatory and disputes functions from TRAI. TDSAT was set up to adjudicate any dispute between a licensor and a licensee, between two or more service providers, between a service provider and a group of consumers, and to hear and dispose of appeals against any direction, decision, or order of TRAI.

Question 29.
Which type of service provider requires OSP registration in India?
OSP Registration in India: As per the New Telecom Policy (NTP) 1999, service providers in India involved in providing services like telebanking, telemedicine, Tele-education, Tele-trading, e-commerce, call center, network operation center, and other IT Enabled Services, using telecom resources are termed as “Other Service Providers” (OSP).

These Other Service Providers or OSP’s are required to obtain an OSP Registration from the Department of Telecommunication (DOT).

OSP Registration Applicability: Service providers in India involved in providing services like telebanking, telemedicine, Tele-education, Tele-trading, e-commerce, call center, network operation center, and other IT Enabled Services, using telecom resources are required to obtain OSP Registration. Telecom Resources are telecom facilities used by an OSP including, but not limited to Public Switched Telecom Network, Public Land Mobile Network, Integrated Services Digital Network (ISDN), and/or the telecom bandwidth provided by authorized telecom service provider.

OSP Registration Requirement: To obtain an OSP Registration in India, it is mandatory for the entity to be a Private Limited Company. Therefore, Entrepreneurs having plans for starting a call center or BPO or e-commerce, or other IT Enabled Services must incorporate a Private Limited Company.

The following are the documents necessary for OSP Registration in addition to the application in the prescribed format:

  • Certificate of Incorporation of Private Limited Company
  • Memorandum of Association (MOA) and Articles of Association (AOA)
  • Board of Resolution or Power of Attorney authorizing the authorized signatory
  • Name of Business and Activities Proposed
  • List of Directors
  • Present Shareholding

The above documents must be certified with seal by a Company Secretary or Director of the Company or Statutory Auditor or Public Notary.

Question 30.
Aravind has recently completed Telecommunications engineering and he is keen on starting his own venture for Telecommunication support services. He has heard about OSP License and approached you to get more information on it. Brief him, on the purpose, authority authorized to issue such license, documents necessary for making application, and compliance after registration. [Dec. 2019 (5 Marks)]
According to the New Telecom Policy (NTP) 1999, service providers in India involved in providing services like telebanking, telemedicine, Tele-education, Tele-trading, e-commerce, call center, network operation center and other IT Enabled Services, using telecom resources are termed as “Other Service Providers” (OSP).

These OSP’s are required to obtain an OSP Registration from the Department of Telecommunication (DoT).
If Aravind is keen on starting his own venture for telecommunication support services, he has to know about the OSP License procedures which are as follows:

To obtain an OSP Registration in India, it is mandatory for the entity to be a Private Limited Company. Therefore, entrepreneurs having plans for starting a call center or BPO or e-commerce or other IT Enabled Services must incorporate a Private Limited Following document necessary for OSP Registration

  • Certificate of Incorporation of Private Limited Company
  • Memorandum of Association (MOA) and Articles of Association (AO A)
  • Board Resolution or Power of Attorney authorizing the authorized signatory
  • Name of business and activities proposed
  • List of directors
  • Present shareholding

The above documents must be certified with seal by a Company Secretary, or director of the company or statutory auditor or public notary Compliances after registration
(a) OSPs are required to submit an “Annual Return” to the DOT mentioning the activities undertaken and the present status of the OSP. The annual return for OSP License renewal must be submitted within 6 months of completion of the financial year.

(b) Maintaining compliance with the terms and conditions prescribed by the DOT for OSP.

Question 31.
Which industries come under the purview of compulsory licensing as per New Industrial Policy, 2015? [Dec. 2018 (3 Marks)]
Industrial Licensing was also abolished for all except the shortlist of 18 industries in New Industrial Policy 1991. This number was further pruned to 6 industries. As in 2015, only 5 industries were under compulsory licensing mainly on account of environmental, safety, and strategic considerations.

They are:

  1. Distillation and brewing of alcoholic drinks
  2. Cigars and cigarettes of tobacco and manufactured tobacco substitutes.
  3. Electronic Aerospace and defense equipment – all types.
  4. Industrial explosives including detonating fuses, safety fuses, gun powder, nitrocellulose, and matches.
  5. Specified hazardous chemicals including items hazardous to human safety and health.

Regarding Alcoholic products, production of rectified spirit exclusively for industrial use falls under the Centre’s purview while in the case of potable alcohol, States have the last word. (This is as per Supreme Court decision in “Bihar Distillery Case”). So, DIPP is not the licensing authority in the case of potable alcohol.

Question 32.
Write a short note on Industrial Entrepreneurs Memorandum (IEM). [June 2019 (3 Marks)]
Industrial Entrepreneurs Memorandum (IEM): The industrial policy reforms have reduced the industrial licensing requirements, removed restrictions on investment and expansion, and facilitated easy access to foreign technology and foreign direct investment.

All industrial undertakings exempt from the requirements of industrial licensing, including existing units undertaking substantial expansion, are required to file information in the prescribed form for Industrial Entrepreneurs Memorandum (IEM) with the Secretariat of Industrial Assistance (SIA), Department of Industrial Policy and Promotion (DIPP), Government of India, and obtain an acknowledgment. No further approval is required.

All Industrial undertakings also need to file information in Tart B’ of the Memorandum at the time of commencement of commercial production.

Eligibility for getting IEM: All industrial undertakings exempted from the requirements of industrial licensing under I (D&R) Act, 1951 and having an investment of ₹ 10 Crore or above in the ‘manufacturing sector’ and ₹ 5 Crore or above in the ‘services sector’, including Existing Units, New undertaking (NU) and New Article (NA), are required to file an IEM in the prescribed format ‘Part A’.

Cases requiring IEM/Letter of Intent (LOI): The promoter can file IEM in the following categories:

  • To set up a new industrial undertaking,
  • To effect substantial expansion of the industrial undertaking,
  • To manufacture a new article
  • To carry on the business of existing SSI units after graduating into the large-scale industry.

Procedure for filling of IEM: The promoter has to make an application §; to Government of India in prescribed format along with Demand Draft P of ? 1,000 in the name of Secretariat for Industrial Assistance (SIA), New Delhi with 6 copies.

Steps Post-Filling IEM: After filling IEM to Govt, of India, Govt, of India gives acknowledgment receipt to the applicant and informs the Directorate of Industries. After receipt of an acknowledgment, an applicant can take further initiatives step to set up the unit.

Role of Directorate of Industries: Secretariat for Industrial Assistance (SIA), New Delhi circulates office memorandum enclosing one copy of the application for the necessary comments from Directorate of Industries. The Directorate of Industries- offers the comments to the GOI in respect of location after getting appropriate documents/certificates from the promoters. Those industrial promoters who have obtained IEM and gone into commercial production or implemented the project have to submit PART B with the Government of India or Directorate of Industries with 7 copies for the record.

Question 33.
Bhaskar is presently running a business of finance. He has planned to promote an Infrastructure Finance Company along with his friends. He seeks your advice to know whether it is a Non-Banking Finance Company requiring Reserve Bank of India’s registration and criteria to be satisfied by such Company. Also, clarify how Net owned Fund is calculated. [Dec. 2019 (5 Marks)]
Yes, the proposed Infrastructure Finance Company is a non-banking finance company that
(a) deploys at least 75 percent of its total assets in infrastructure loans
(b) has a minimum net owned funds of ₹ 300 crore
(c) maintains a minimum credit rating of ‘A’ or equivalent
(d) and has a capital to risk assets ratio (CRAR) of 15% It requires registration with the Reserve Bank of India.

Net Owned Fund Formula
The net owned fund would be calculated based on the last audited balance sheet of the company. The net-owned fund will consist of paid-up equity capital, free reserves, balance in share premium account, and capital reserve representing surplus arising out of sale proceeds of assets but not reserves created by revaluation of assets.

From the aggregate of items, it will be deducted, accumulated loss balance, and a book value of intangible assets, if any, to arrive at owned funds. Further, investment in shares of other § NBFCs and in shares, debentures of subsidiaries, and group companies in excess of 10% of the owned funds mentioned above will be deducted to arrive at the Net Owned Fund.

In terms of section 45-IA of the Reserve Bank of India Act, 1934, a non-banking financial company can commence or carry on the business of a non-banking financial institution only after obtaining a certificate of registration from the Reserve Bank of India.

Question 34.
What are the circumstances under which RBI may cancel the license granted to a banking company regulated under the Banking Regulation Act, 1949? [Dec. 2019 (3 Marks)]
The Reserve Bank of India may cancel a license granted to a banking company under section 22(4) of the Banking Regulation Act, 1949

  1. if the company ceases to carry on banking business in India; or
  2. if the company at any time fails to comply with any of the conditions imposed upon it under sub-section (1) of section 22; or
  3. if at any time, any of the conditions referred to in sub-section (3) and sub-section (3A) is not fulfilled:

Provided that before canceling a license under clause (2) or clause (3) of this sub-section on the ground that the banking company has failed to comply with or has failed to fulfill any of the conditions referred to therein, the Reserve Bank of India unless it is of opinion that the delay will be prejudicial to the interests of the company’s depositors or the public, shall grant to the company on such terms as it may specify, an opportunity of taking the necessary steps for complying with or fulfilling such condition.

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