Author name: CBCL

[By Arham Anwar & Suvanwesh Das] The authors are students of the National Law University, Jodhpur and the National Law University, Odisha. Introduction We have always seen doctor’s job as a noble profession but with changing times new questions of law have evolved and new dynamics have been added to supposedly simple concepts. This article seeks to address the issue of whether consultants like doctors can be issued ESOPs under provisions of Companies Act, 2013. This question is especially pertinent because after the COVID-19 pandemic the world has seen rapid emergence of companies providing health care and pathological services. Thus, new complexities have arisen as to whether doctors employed by these companies can be treated as an “employee” .Also if they come under the ambit of employees then can they be given all the benefits that employees of any company are eligible to. The article will first discuss the legal provisions pertaining to ESOPs and the definition of employee(s) under different legislations andthen  relevant case laws will also be taken into consideration as to whether doctors can come under the ambit of employee(s) and finally conclude with our findings. Legal Provisions Pertaining to ESOPs Employees Stock option is defined under Section 2(37) of the Companies Act, 2013 as an “option given to the directors, officers or employees of a company or of its holding company or subsidiary company or companies, if any, which gives such directors, officers or employees, the benefit or right to purchase, or to subscribe for, the shares of the company at a future date at a pre-determined price”. Rule 12 of Companies (Share Capital and Debentures) Rules, 2014 talks about of issue of employee stock options-“A company, other than a listed company, which is not required to comply with Securities and Exchange Board of India Employee Stock Option Scheme Guidelines shall not offer shares to its employees under a scheme of employees’ stock option (hereinafter referred to as “Employees Stock Option Scheme”), unless it complies with the following requirements, namely:-(1) the issue of Employees Stock Option Scheme has been approved by the shareholders of the company by passing a special resolution. Explanation: For the purposes of clause (b) of sub-section (1) of section 62 and this rule ‘‘Employee’’ Means a permanent employee of the company who has been working in India or outside India; or a director of the company, whether a whole-time director or not but excluding an independent director; or an employee as defined in clauses (a) or (b) of a subsidiary, in India or outside India, or of a holding company of the company but does not include- an employee who is a promoter or a person belonging to the promoter group; or a director who either himself or through his relative or through any body corporate, directly or indirectly, holds more than ten percent of the outstanding equity shares of the company” As per section 62(1) (b) of the Companies Act, an unlisted private limited company can issue further shares to employees under the scheme of Employees Stock Option (“ESOPs”), pursuant to a special resolution. If we look at Rule 12 of (Share and Debentures) Rules 2014 it clearly says that ESOPs can only be issued to an employee and Rule 12(1) goes on to define who can be called an employee. A plain reading of Rule 12 (1)(c) of the same talks about entities which are not to be counted as an employee and after reading all these provisions we can very well conclude that doctors can come under the ambit of employee under Rule 12 of (Share and Debentures) Rules 2014. If we read Rule 1(4) of the Securities and Exchange Board of India (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, it specifies that it can be applied to any company whose equity shares are listed on a recognised stock exchange in India ,further Rule 2(i) of the same defines the term “employee “.AlsoRule 4 makes any employee eligible to participate in the schemes of the company as determined by the compensation committee. Here also no bar regarding inclusion of doctors can be observed. In addition to that, SEBI suggested that definition of “employee” should be changed to include non-permanent employees provided that they are designated as employees by their employers and are exclusively working with such company or its group company including subsidiary or its associate company or its holding company in ESOPs benefits as was reflected in SEBI FAQs. It is also important to note that present regulations such as The Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulations, 2002 relating to Professional Conduct of Registered Medical Practitioners don’t contain any explicit restrictions that prevent doctor(s) from being engaged as an employee(s). On top of that Union Ministry of Health and Family Welfare launched ICMR/DHR Policy on Biomedical Innovation & Entrepreneurship for Medical Professionals, Scientists and Technologists at Medical, Dental, Para-Medical Institutes/Colleges. According to the policy, medical experts and doctors will be encouraged to explore entrepreneurial endeavours by building start-up firms, accepting adjunct positions in Companies as Non-Executive Directors or Scientific Advisors, or by joining them as Scientific Advisors. The doctors will also be allowed to work alone or through companies on inter-institutional and industry projects, licence technologies to corporations for commercialization, and generate income for their own support as well as the benefit of society. The medical professionals will also be allowed to take a break to translate and commercialise their innovations through the establishment of their start-up companies with the medical institute’s approval in which they may be working. The goal of this policy is to support entrepreneurship growth and the development of Make-in-India products while also promoting interdisciplinary collaboration, innovation, technological development, and skill development. As we look at catena of judgements given by different High Courts, position pertaining to status of doctors as an employee will be clarified. Case Laws In the case of Commissioner of Income Tax (TDS), Pune vs. Grant Medical Foundation, the issue of law which arose was

[By Saaransh Shukla & Isabel John] The authors are the students of the Narsee Monjee Institute of Management Studies. INTRODUCTION As we all know, share capital is the main source of finance for companies. Since companies may need additional amounts of money periodically, they cannot issue shares every time. However, they can raise money from the public. Around the world, companies, organizations, corporations and other entities raise money from different sources for the purpose of financing. As we all know, share capital is the primary source of funding for businesses. Since businesses may require additional funds on a regular basis, they cannot issue shares every time. They can, however, raise funds from the general public. Companies, organisations, businesses, and other entities all over the world raise funds from various sources in order to finance their operations. In this article, one such means of raising capital, i.e., ‘Wimbledon Debentures’ is considered. With the elucidation of the concept of the Wimbledon Debentures, the proposition is further assessed in relation to the Indian debt market. The paper explores if the Wimbledon Debenture model could be inculcated in the different industries in India, whether such debt financing would be useful and the issues that may occur in its practical application. WHAT ARE WIMBLEDON DEBENTURES? It’s Not A Bond, Not A Stock, Not A Ticket – It’s A “Wimbledon Debenture” The word ‘debenture’ has been derived from the Latin word ‘debere’ which means to borrow. The debenture is a written instrument acknowledging a debt under the common seal of the company. The money raised from the public is a loan that is further divided into units of small denominations. Each unit is called a ‘debenture’ and the holder of such units is called a Debenture holder. Even though the cash raised by debentures turn into a part of the organization’s capital structure, it doesn’t get to be share capital. Therefore, debentures are a widely recognized type of long haul credit that can be taken out by a company. These credits are regularly repayable on a date and pay a fixed rate of interest. Generally, debentures are issued for starting new projects, expansion of the company, refurbishments or improvements of the company, mergers, acquisitions, etc. Swen Lorenz, the author of the blog ‘Undervalued Shares’ claimed that the Wimbledon Debenture is a very quirky security and rightfully so. The Wimbledon Debentures are unsecured but still if we see the last trading price of one debenture was 110,600£, that is huge for an unsecured debt. The Wimbledon Debentures have played a significant role in the history of Wimbledon. The money raised from issuing these Debentures funds the improvements in and around the Wimbledon Grounds solely for the benefit of the esteemed guests. By the purchase of each Debenture, the holder is provided with a premium seat on Centre Court or No.1 Court for the Championships for a period of five years. With the increasing popularity of the sport and the ever-burgeoning public demand, the AELTC raised funds via debentures to purchase and expand their grounds. Presently, the Championships from 2021-2025 are covered under the current series of the Centre Court Wimbledon Debentures. Usually, subscribing to an issue of debentures or bonds requires coughing up a cash investment. But with Wimbledon Debentures, one can pay the cash in phases throughout the duration of the debentures and there is no interest rate payment. Technically speaking, the debentures are zero-coupon debt security that comes with the dividend in the form of ‘tickets’. Then the debenture holders receive access to the best sought-after seats for five years with no additional payment, access to exclusive restaurants and bars, car parking, transferable tickets, etc. As a holder, the daily tickets can either be sold privately or can be transferred to anyone at any price. In April 2018, the Centre Court Wimbledon Debentures (2016-2020) were trading at over £100,000 each. The Wimbledon Debentures model is slightly distinct from the usual debt financing carried out by companies. In comparison to the way debentures are normally issued, the Wimbledon Debentures pay no interest over the life of the security, instead, they are entirely in the form of tickets. As per the prevailing laws, the Debentures are also exempt from the Capital Gains Tax.[1] Looking at the success rate of this form of raising funds, it will be interesting to see if some other companies or corporations engage in debt financing similar to the Wimbledon Debentures model. WIMBLEDON DEBENTURES MODEL – INDIAN PERSPECTIVE According to the Companies Act (2013), the term debenture is defined under Section 2(30). Generally, debentures are issued for starting new projects, expansion of the company, refurbishments or improvements of the company, mergers, acquisitions, etc. Firstly, the Wimbledon Debentures fall within the definition of Qualifying Corporate Bonds (QCBs). In layman terms QCBs are exempted from capital gain taxes. In many countries including India, bonds and debentures are used interchangeably but they have certain differences. Bonds are issued generally by government agencies/large corporations but debentures are issued by companies. Bonds are backed by assets and are thus, secured, unlike debentures which may or may not be backed by assets (secured or unsecured). In debentures, the rates of interest are generally higher when compared to bonds. Additionally, the risk factor is lower for bonds and during repayments, bondholders are given priority over debenture holders. It is pertinent to note that the Wimbledon Debentures are unsecured, but people still purchase them. In the Indian market, the Securities and Exchange Board of India (“SEBI”) has made the process of buying and selling secured debentures difficult for the potential holders. Thus, it is assumed that companies may shift to issuing unsecured debentures in the market and making the technical process easier. Under the provisions of the Companies Act (2013) of India, the power to issue debentures can be exercised on behalf of the Company with a meeting of the Board as per Section 179 (3). Section 71 is related to the issuance of debentures along with the penalties for

[By Amarpal Singh & Abhishek Attri] The authors are students at UPES Dehradun. INTRODUCTION A person can be appointed as an additional or alternate director in the company without being a member (“non-member director”) as per Section 161 of the Companies Act, 2013 (“Companies Act”). Further Section 169 of the Companies Act provides the procedure for the removal of directors. In case the non-member director is illegally removed from the company, traditionally, the remedy available to him would have been to approach the civil court.  Au contraire, after the establishment of the National Company Law Tribunal (“NCLT”), it has been conferred with exclusive jurisdiction over all company matters under Section 430 of the Companies Act. Further, the jurisdiction of the civil courts has been barred. In a situation where an application is made by a member under Section 241, provided the requirements stated in Section 244 of the Companies Act must be satisfied, the NCLT has the power to regulate the affairs of the company under Section 242 of the Companies Act.  In case, a non-member director is illegally removed from the company, he cannot approach the NCLT under Section 241 considering he is not a member of the company. In addition, he will be rendered remediless since the jurisdiction of the civil court is barred under Section 430. The above question of law is pending before the Supreme Court of India (“Supreme Court”) in the case of Manish Kumar v. Topworth Urja & Metals Limited. The courts have expressed divergent views on the aforementioned proposition which has led to certain confusion. This article aims to provide an analysis of the above proposition of law.  Facts Two persons were appointed as additional directors of Topworth Urja & Metals Limited. Manish Kumar (“Appellant”) alleged that the appointment of additional directors was done in contravention of provisions of the Companies Act, 2013, and the Article of Association of the company. He alleged that the appointment was done without his knowledge and by passing a resolution at the purported board meeting. Subsequently, the appointment was ratified by passing a special resolution in the Annual General Meeting. The Appellant aggrieved by the irregularities had filed a suit before the civil court seeking the appointment of directors as illegal and void ab initio. The civil court denied the relief claimed by the Appellant along with a direction to approach NCLT in view of Section 430 of the Companies Act.  The Appellant instead of approaching the NCLT had filed an appeal before the Bombay High Court (“HC”). He contended that he cannot approach the NCLT for seeking relief under Section 241 of the Companies Act as the right rightfully available to the member as per Section 242 of the Companies Act. The Appellant did not fall under the definition of the member as prescribed by Section 2(55) of the Companies Act, 2013. Therefore, the following issue arose before the HC.  Issue Whether a non-member director can approach the civil court for seeking relief against the oppressive acts of the company?  Decision The Bombay HC relied on the decision of the Madras HC in the case of Chiranjeevi Rathnam v. Ramesh and held that the word “any member” used in Section 241 of the Companies Act, 2013 should not be interpreted in a confined way as it may lead to abuse in regards to the process of law. Any person who is interested in the management of the company should not be restricted to approach the NCLT because of the words employed in Section 241 i.e., “any member”. Under Section 242, the NCLT is expected to exercise its power upon an application preferred by any member of the company.  It was further held by the Bombay HC that Section 430 of the Companies Act has to be read along with Section 241. Section 430 bars the jurisdiction of civil courts in respect of any matter which the NCLT or the National Company Law Appellate Tribunal (“NCLAT”) is empowered to determine by or under the Companies Act. The word “any matter” used in Section 430 is of the widest amplitude and includes all company matters. Therefore, the HC dismissed the appeal.  ANALYSIS In the case of Jithendra Parlapalli v. Wirecard India (P) Ltd., the same question arose before the NCLT Chennai bench i.e., whether a non-member director can file a petition for oppression and mismanagement. The applicant relied on the decision of Madras HC in the case of Chiranjeevi Rantham v. Ramesh and contended that the word “any member used in Section 241 of the Companies Act should not be read in a confined way. The NCLT distinguished the case of Chiranjeevi by giving detailed reasoning and held that in the case of Chiranjeevi the judgment was passed by the Madras HC by taking into consideration the facts and circumstances of that particular case. Further, it was held that the case of Chiranjeevi included intermingled issues of a member director adopting a non-member director. Consequently, it was held by the NCLT that a non-member director cannot file an application for oppression and mismanagement as the legislature in its wisdom has granted the right to file an application alleging acts of oppression and mismanagement only to the “members” of the company. If non-member directors are allowed to file an application alleging acts of oppression and mismanagement the intention of the legislature will be defeated and it would lead to torrent of litigation. Therefore, due to the divergent views of the courts, the position of law is still not clear leading to confusion. Illegal removal/ appointment of a director is an act of oppression and mismanagement The NCLAT in the case of Vijaya Hospital C. Kity & Resorts & Ors v. Sibi C.K & Ors.,  held that appointment of a Chairman and Managing Director without holding a board meeting is in non-compliance with the provisions of the Companies Act. Therefore, it amounts to an act of oppression. Similarly, in the present case, the appointment of additional directors was done in