Chapter VI of the Finance Bill, 2021 provides for amendments to the Securities Contracts (Regulation) Act, 1956 (SCRA), Recovery of Debts Due To Banks And Financial Institutions Act, 1993 (RDDB Act) , Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), SEBI Act,1992 and the Indian Stamp Act 1899, among other Acts.
Significantly, the SCRA is amended to recognise “pooled investment vehicles” and to provide that pooled investment vehicles are eligible to borrow and issue debt securities. Consequently, the definition of borrower under SARFAESI Act is amended to include pooled investment vehicles and the definition of ‘debt’ under the RDDB Act is amended to include debt incurred by pooled investment vehicles.
The Indian Stamp Act is amended to provide that strategic sale, disinvestment, etc., of immovable property by a Government company is not liable to stamp duty; and the SEBI Act is amended to bar a person from sponsoring or carrying on the activity of an AIF or a business trust, unless a certificate of registration is granted by the Board in accordance with the regulations made under this Act.
Amendments to the Securities Contracts (Regulation) Act, 1956 (in Part IV), effective from 1 April 2021.
A definition of Pooled Investment Vehicle has been inserted as clause (da) of Regulation 2, being “a fund established in India in the form of a trust or otherwise, such as mutual fund, alternative investment fund, collective investment scheme or a business trust as defined in sub-section (13A) of section 2 of the Income tax Act, 1961 and registered with the SEBI, or such other fund, which raises or collects monies from investors and invests such funds in accordance with such regulations as may be made by SEBI in this behalf.”
A new Section 30 B provides for special provisions related to pooled investment vehicle, that, a pooled investment vehicle, whether constituted as a trust or otherwise, shall be eligible to borrow and issue debt securities and shall be permitted to provide security interest to lenders, in terms of the facility documents, entered into by such pooled investment vehicles. It further provides that in case of default, the lenders shall recover the defaulted amount against the trust assets, by initiating proceedings against the trustee acting on behalf of the pooled investment vehicle, and whatever remains after paying the lenders shall be remitted to the unit holders.
Consequential amendments to RDDB Act and SARFAESI Act (in Part VIII and Part X, respectively), effective from 1 April 2021
Definition of “debt” in clause(g) of section 2 of the RDDB Act amended as under :
[(g) “debt” means any liability (inclusive of interest) which is claimed as due from any person or a pooled investment vehicle as defined in clause (da) of section 2 of the Securities Contracts (Regulation) Act, 1956, by a bank or a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil Court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application [and includes any liability towards debt securities which remains unpaid in full or part after notice of ninety days served upon the borrower by the debenture trustee or any other authority in whose favour security interest is created for the benefit of holders of debt securities or]
Definition of “borrower” under SARFAESI Act amended as under :
[(f) “borrower” means any person any person who, or a pooled investment vehicle as defined in clause (da) of section 2 of the Securities Contracts (Regulation) Act, 1956 which,has been granted financial assistance by any bank or financial institution or who has given any guarantee or created any mortgage or pledge as security for the financial assistance granted by any bank or financial institution and includes a person who, or a pooled investment vehicle which, becomes borrower of an asset reconstruction company consequent upon acquisition by it of any rights or interest of any bank or financial institution in relation to such financial assistance or who has raised funds through issue of debt securities.]
Definition of secured creditor under SARFAESI Act amended to include a debenture trustee appointed by a pooled investment vehicle by removing the limitation of appointment of a debenture trustee by a company, as under :.
[(zd) “secured creditor” means –
Amendment to SEBI Act (in Part VII) : A new sub-section (1C) in section 12 provides that no person shall sponsor or cause to be sponsored or carry on or cause to be carried on the activity of an alternative investment fund or a business trust as defined in clause (13A) of section 2 of the Income-tax Act, 1961, unless a certificate of registration is granted by the Board in accordance with the regulations made under this Act. This amendment will take effect from 1st April, 2021.
Amendment to Indian Stamp Act, 1899 ( in Part I) : A new section 8G provides that Strategic sale, disinvestment, etc., of immovable property by Government company shall not be liable to stamp duty – “Any instrument for conveyance or transfer of a business or asset or right in any immovable property from a Government company, its subsidiary, unit or joint venture, by way of strategic sale or disinvestment or demerger or any other scheme of arrangement, to another Government company or to the Central Government or any State Government, after the approval of the Central Government, shall not be liable to duty under this Act.
Explanation.- For the purposes of this section, “Government company” shall have the same meaning as assigned to it in clause (45) of section 2 of the Companies Act, 2013”.
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