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Category: Laws And Business

Land Acquisition Rehabilitation and Resettlement Bill, 2011

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Introduction
The Land Acquisition Act, 1894 (“the Act”) provides for instances when the Government can compulsorily acquire private land for public purposes and for companies. It also provides for the manner of compensation and other incidental matters in this connection. The provisions of the Act have been found to be inadequate in addressing certain issues related to the exercise of the statutory powers of the State for involuntary acquisition of private land and property. The Act does not address the issues of rehabilitation and resettlement of the affected persons and their families. The definition of the crucial term “public purposes” is very wide and is often the subject-matter of great dispute. There have been multiple amendments to the Land Acquisition Act, 1894 not only by the Central Government but also by the State Governments. Further, there has been heightened public concern on land acquisition, especially multi-cropped irrigated land and there is no central law to adequately deal with the issues of rehabilitation and resettlement of displaced persons. As land acquisition and rehabilitation and resettlement need to be seen as two sides of the same coin, a single integrated law to deal with the issues of land acquisition and rehabilitation and resettlement was necessary.

Accordingly, to have a unified legislation dealing with acquisition of land, to provide for just and fair compensation and make adequate provisions for rehabilitation and resettlement mechanism for the affected persons and their families, the Land Acquisition Rehabilitation and Resettlement Bill, 2011 (“the Bill”) was introduced in Parliament. The Bill thus provides for repealing and replacing the Land Acquisition Act, 1894 with broad provisions for adequate rehabilitation and resettlement mechanism for the project affected persons and their families. An important milestone was crossed by the Bill when the Government managed a broad all-party consensus on this crucial legislation. Hence, let us look at some of the salient provisions of this very important Law relating to land acquisition.

Applicability of the Bill

The provisions relating to land acquisition, rehabilitation and resettlement, shall apply, when the Government acquires land,—

(a) for its own use, hold and control; or

(b) with the purpose to transfer it for the use of private companies for public purpose (including Public Private Partnership projects but not including national or state highway projects); or

(c) on the request of private companies for immediate and declared use by such companies of land for public purposes.

The provisions relating to rehabilitation and resettlement shall also apply in cases where,—

(a) a private company purchases or acquires land, equal to or more than 100 acres in rural areas or equal to or more than 50 acres in urban areas, through private negotiations with the owner of the land;

(b) a private company requests the Government for acquisition of a part of an area so identified for a public purpose:

The Bill does not apply to certain land acquisition Acts, such as:

(a) The Ancient Monuments and Archaeological Sites and Remains Act, 1958
(b) The Atomic Energy Act, 1962
(c) The Metro Railways (Construction of Works) Act, 1978
(d) The National Highways Act, 1956
(e) The Special Economic Zones Act, 2005
(f) The Electricity Act, 2003
(g) The Railways Act, 1989

Determination of Social Impact and Public Purpose

Whenever the Government intends to acquire land for a public purpose, it shall carry out a Social Impact Assessment study in consultation with the Gram Sabha in rural areas or an equivalent body in urban areas, in the affected area in such manner and within such time as may be prescribed.

Public Purpose has been defined to include the provision of land for:

(a) strategic defence purposes/national security /safety of the people;

(b) railways, highways, ports, power and irrigation purposes for use by Government and public sector companies or corporations;

(c) project affected people;

(d) planned development of villages or any site in the urban area or provision of land for residential purposes for the weaker sections or the provision of land for Government administered educational, agricultural, health and research schemes or institutions;

(e) residential purposes to the poor or landless or to persons residing in areas affected by natural calamities, or to persons displaced by reason of the implementation of any Government scheme

(f) the provision of land in the public interest for any other use or in case of PPPs (Public Private Partnership) projects with the prior consent of at least 80% of the project affected people

(g) the provision of land in the public interest for private companies for the production of goods for public or provision of public services with the prior consent of at least 80% of the project affected people. However, if public sector companies want the land for similar uses then the 80% consent condition does not apply.

To ensure food security, multi-crop irrigated land shall be acquired only as a last resort. An equivalent area of culturable wasteland shall be developed, if multi-crop land is acquired. In districts where net sown area is less than 50% of the total geographical area, no more than 10% of the net sown area of the district will be acquired. The Social Impact Assessment study shall include all the following:

(a) assessment of nature of public interest involved;

(b) estimation of affected families and the number of families among them likely to be displaced;

(c) study of socio-economic impact upon the families residing in the adjoining area of the land acquired;

(d) extent of lands, public and private, houses, settlements and other common properties likely to be affected by the proposed acquisition;

(e) whether the extent of land proposed for acquisition is the absolute bare-minimum extent needed for the project;

(f) whether land acquisition at an alternate place has been considered and found not feasible;

(g) study of social impact from the project

It remains to be seen whether such a Study delays the land acquisition process. The Study should be evaluated by an independent multi-disciplinary expert group constituted by the Government.

If the land sought to be acquired is 100 acres or more, then the Government must constitute a Committee to examine the land acquisition proposals. It would be headed by the Chief Secretary of State/ Union Territory. The role of the Committee would be to ensure the following:

(a) there is a legitimate and bona fide public purpose for the proposed acquisition which necessitates the acquisition of the land identified;

(b) the public purpose referred shall on a balance of convenience and in the long term, be in the larger public interest so as to justify the social impact as determined by the Social Impact Assessment that has been carried out;

(c) only the minimum area of land required for the project is proposed to be acquired;

(d) the Collector of the district, where the acquisition of land is proposed, has explored the possibilities of—

(i) acquisition of waste, degraded or barren lands and found that acquiring such waste, degraded or barren lands is not feasible;

(ii) acquisition of agricultural land, especially land under assured irrigation, is only as a demonstrable last resort.

Acquisition Process

Whenever it appears to the Government that land in any area is required or likely to be required for any public purpose, a preliminary notification to that effect along with details of the land to be acquired in rural and urban areas shall be published.

The notification shall also contain a statement on the nature of the public purpose involved, reasons necessitating the displacement of affected persons, summary of the Social Impact Assessment Report and particulars of the Administrator appointed for the purposes of rehabilitation and resettlement.

No person shall make any transaction or cause any transaction of land specified in the preliminary notification or create any encumbrances on such land from the date of publication of such notification till such time as the proceedings under this Chapter are completed.

Where a preliminary notification u/s. 11 is not issued within 12 months from the date of appraisal of the Social Impact Assessment report submitted by the Expert Committee, then, such report shall be deemed to have lapsed and a fresh Social Impact Assessment shall be required to be undertaken prior to the acquisition proceeding.

Where no declaration is made u/s. 19 within twelve months from the date of preliminary notification, then such preliminary notification shall be deemed to have been rescinded.

Any person interested in any land which has been notified, may object within 60 days from the date of the publication of the preliminary notification.

The decision of the Government on the objections made shall be final.

Upon the publication of the preliminary notification by the Collector, the Administrator for Rehabilitation and Resettlement shall conduct a survey and undertake a census of the affected families.

The Administrator shall, based on the survey and census, prepare a draft Rehabilitation and Resettlement Scheme as prescribed, which shall include particulars of the rehabilitation and resettlement entitlements of each land owner and landless whose livelihoods are primarily dependent on the lands being acquired. The same shall be open to suggestions /objections in a public hearing. The Administrator shall, on completion of public hearing submit the draft Scheme for Rehabilitation and Resettlement along with a specific report on the claims and objections raised in the public hearing to the Collector.

The Collector shall review the draft Scheme submitted by the Administrator with the Rehabilitation and Resettlement Committee at the Project level. He shall submit the draft Rehabilitation and Resettlement Scheme with his suggestions to the Commissioner Rehabilitation and Resettlement for approval of the Scheme.

When the Government is satisfied that any particular land is needed for a public purpose, a declaration shall be made to that effect, along with a declaration of an area identified as the ‘resettlement area’ for the purposes of rehabilitation and resettlement of the affected families. The declaration shall be conclusive evidence that the land is required for a public purpose and, after making such declaration, the appropriate Government may acquire the land in such manner as specified under this Act.

The Collector shall thereupon cause the land to be marked out and measured, and if no plan has been made thereof, a plan to be made of the same. The Collector shall also make an award of—

(a)    the true area of the land;

b) the compensation as determined along with Rehabilitation and Resettlement award as determined; and

(c)    the apportionment of the said compensation among all the persons believed to be interested in the land.

The Collector shall make an award within 2 years from the date of publication of the declaration and if no award is made within that period, the entire proceedings for the acquisition of the land shall lapse.

Market value of land

The Collector shall adopt the following criteria in assessing and determining the market value of the land, namely:

(a)    the minimum land value, if any, specified in the Indian Stamp Act, 1899 for the registration of sale deeds or agreements to sell, as the case may be, in the area, where the land is situated; or

(b)    the average sale price for similar type of land situated in the nearest village or nearest vicinity area. The average sale price shall be determined taking into account the sale deeds or the agreements to sell registered for similar type of area in the near village or near vicinity area during immediately preceding 3 years of the year in which such acquisition of land is proposed to be made. For this purpose, 50% of the sale deeds in which the highest sale price has been mentioned shall be taken into account.

whichever is higher:

The market value calculated as per sub-section (1) shall be multiplied by a specified factor. For instance, it is 2 in rural land, 1 in urban area land, etc. Thus, only value in rural areas is doubled.

The Collector having determined the market value of the land to be acquired shall calculate the total amount of compensation to be paid to the land owner (whose land has been acquired) by including all assets attached to the land. For determining the market value of the building and other immovable property attached to the land, the Collector may use the services of an Engineer/Other Specialists. Similarly, for assessing the value of crops, trees, plants, attached to the land, the Collector can use the services of an experienced person in the field of agriculture, etc.

The Collector having determined the total compensation to be paid, shall, to arrive at the final award, impose a ‘Solatium ’ amount equivalent to 100% of the compensation amount. The solatium amount shall be in addition to the compensation payable to any person whose land has been acquired. Thus, it is like an additional compensation.

The provisions of the Income- tax Act are also relevant in this respect. Section 45(4) of the Act provides that where capital gains arises from the compulsory acquisition of a capital asset under any law, then the compensation awarded in the first instance shall be taxable in the year of award. If the same is enhanced subsequently, then the enhancement amount would be taxable in the year of receipt by the assessee.

R&R Provisions

The Bill contains provisions for Rehabilitation and Resettlement of Project Affected People (PAP) in case of an acquisition.

The Government may appoint an Administrator for carrying out the R&R provisions. The Government may also appoint a Commissioner for R&R. He may be appointed for supervising the formulation of R&R Schemes and for their proper implementation.

In case the land is purchased privately and is more than or equal to 100 acres within rural areas or is more than or equal to 50 acres in urban areas, then the permission of the Commissioner is required. Thus, the obligation to rehabilitate for private acquisition is only if the area acquired is 50 acres or more.

A Land Acquisition and Rehabilitation and Resettlement Authority would be established for settling any disputes relating to acquisition, compensation and R&R. This would be headed by a sitting/retired High Court Judge.

Temporary Acquisition

Whenever it appears to the Government that the temporary occupation and use of any waste or arable land are needed for any public purpose, or for a company, the appropriate Government may direct the Collector to procure the occupation and use of the same for such terms as it shall think fit, not exceeding 3 years from the commencement of such occupation.

The compensation may be either in a gross sum of money, or by monthly or other periodical payments, as shall be agreed upon in writing between him and such persons respectively.

In case the Collector and the persons interested differ as to the sufficiency of the compensation or apportionment thereof, the Collector shall refer such difference to the decision of the Land Acquisition and Rehabilitation and Resettlement Authority

Other Important Provisions

Any award for land acquisition is exempt from stamp duty.

If any land or part thereof acquired remains unutilised for a period of 10 years from the date of taking over the possession, the same shall return to the Land Bank of the Government by reversion. Whenever the ownership of any land acquired under this Act is transferred to any person for a consideration, without any development having taken place on such land, 20% of the appreciated land value shall be shared amongst the persons from whom the lands were acquired or their heirs, in proportion to the value at which the lands.

Comparison with the Act

A broad comparison of the Act vis-à-vis the Bill reveals the key differences as shown in the table:

Conclusion

The Bill is one of the most important recent laws in the real estate sector. It would have far reaching implications and consequences. Hence, it becomes essential to carefully study and understand this Law.

Transmission Formalities (Part II)

(Last Month, we looked at some transmission formalities which the deceased’s family has to carry out. We continue with some more such procedures in this Concluding Part.)

Death claim for Bank Accounts

Pursuant to the RBI’s Circular, all nationalised and private banks now have simplified processes in case of death claims for bank accounts of deceased. The salient features in this respect are as follows:

(a)    Bank Accounts/Lockers with survivor/nominee clause

In the case of deposit accounts/lockers where the depositor had utilised the nomination facility or where the account was opened with the survivorship clause, the payment of the balance in the deposit account can be made to the survivors/nominee of a deceased deposit account holder provided:

(i)    the bank verifies the identity of the survivors/nominee and the fact of death of the account holder, through appropriate documentary evidence;

(ii)    there is no order from the competent court restraining the bank from making the payment from the account of the deceased; and

(iii)    it has been made clear to the survivor(s)/ nominee that he would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to him shall not affect the right or claim which any person may have against the survivor(s)/nominee to whom the payment is made.

(b)    Bank Accounts/Lockers without the survivor/ nominee clause

In cases where the deceased depositor/locker holder had not made any nomination or for accounts other than those styled as ‘either or survivor’, and if the legal heirs of the deceased customer are identifiable and there is no dispute amongst the legal heirs, then banks generally settle the claims without insisting for obtaining Succession Certificate/Letter of Administration etc. These claims are generally settled after obtaining an Indemnity with or without Surety in favour of the bank. In case only one of the legal heirs wants to claim/receive the amount or contents of locker etc., then he must obtain a Power of Attorney in his favour from the other legal heirs.

(c)    Premature Termination of term deposit accounts

In the case of term deposits, banks incorporate a clause in the account opening form itself to the effect that in the event of the death of the depositor, premature termination of term deposits would be allowed. Such premature withdrawal would not attract any penal charge.

(d)    Treatment of flows in the name of the deceased depositor

With regard to the treatment of pipeline flows in the name of the deceased account holder, banks generally adopt either of the following two approaches:

(i)    The bank could be authorised by the survivor(s)/nominee of a deceased account holder to open an account styled as ‘Estate of Mr.X, the Deceased’ where all the pipeline flows in the name of the deceased account holder could be allowed to be credited, provided no withdrawals are made.

OR

(ii)    The bank could be authorised by the survivor(s)/nominee to return the pipeline flows to the remitter with the remark ‘Account holder deceased’ and to intimate the survivor(s)/nominee accordingly. The survivor(s)/nominee/legal heir(s) could then approach the remitter to effect payment through a negotiable instrument or through ECS transfer in the name of the appropriate beneficiary.

(e) Time limit for settlement of claims

Banks generally settle the claims in respect of deceased depositors and release payments to survivor(s)/nominee(s) within a period not exceeding 15 days from the date of receipt of the claim subject to the production of proof of death of the depositor and suitable identification of the claim(s), to the bank’s satisfaction.

PPF of the Deceased

A nomination can be made even in respect of a person’s balance standing in the Public Provident Fund or PPF. If such a nomination has been made, the nominee or nominees may make an application in Form G together with proof of death of the subscriber and on receipt of such application, all amounts standing to the credit of the subscriber after making adjustment, if any, in respect of interest on loans taken by the subscriber shall be repaid by the Accounts Office itself to the nominee or nominees.

Where there is no nomination in force at the time of death of the subscriber, the amount standing to the credit of the deceased after making adjustment, if any, in respect of interest on loans taken by the subscriber, is repaid by the legal heirs of the deceased on receipt of application in Form G in their behalf, from them.

A balance of upto Rs. 1 lakh may be paid to the legal heirs on production of (i) a letter of indemnity, (ii) an affidavit, (iii) a letter of disclaimer on affidavit, and (iv) a certificate of death of subscriber.

Jewellery/Bullion of the Deceased

The Executor should distribute the jewellery/bullion belonging to the deceased in accordance with his Will. While making such distribution, the beneficiaries should also be given copies of the bills of the jewellery/bullion so that they can keep a record of the cost of acquisition and period of holding since both of these relate back to that of the deceased.

Art and Antiques of the Deceased

The Executor should distribute the Art/Sculptures/ Antiques belonging to the deceased in accordance with his Will. One element to consider when inheriting a work of art or any antiques is the provenance, or the actual history of ownership. This lays down precisely who was the original owner of the work, i.e., the title history. A provenance is very valuable during a resale and fetches a higher price than a work without one. Internationally, sellers of antiques who can provide ownership proof of the items with ancestors can demand a higher price. Again the original purchase bill/proof would help.

Digital Assets of the Deceased
While most people prepare a Will for their assets, how many people prepare a Digital Will? A Digital Will bequeaths a person’s online assets, such as, email accounts, online photos, Facebook account, cloud data, passwords, etc. There are no specific laws in India for a Digital Will and even the Information Technology Act, 2000 does not deal with this situation.

Hence, what happens to a person’s digital assets and online records when he dies is largely controlled by the Terms of Service that ac-company the different websites or companies with which a person has accounts. The terms of some of the popular service providers are as follows:

•    Gmail does not delete a deceased’s account and states that in “rare cases,” it may be able to provide the account content to an authorised representative of the deceased user. The applicant would have to prove his identity, a death certificate and proof of relationship.

•    Hotmail sends a copy of any email messages that may be stored on a deceased’s account, along with any existing contact lists, and will ultimately close the account upon request. It will not provide the password to an account or transfer owner-ship of the account. In most cases, email account contents are deleted after nine months of inactivity, and the account itself is deleted after an additional three months; for a total of one year.

•    Yahoo permanently deletes all content and terminates the account upon receipt of a copy of a death certificate. It will not provide access to user’s accounts or email. The Yahoo! account is non-transferable and any rights to the Yahoo! ID or contents within the account terminates upon your death.

•    Facebook prepares a memorial of the deceased’s account to allow friends and family to write on his wall. The account may be closed upon a formal request from his next of kin or upon a legal request.
•    LinkedIn removes a deceased’s account, after receiving a Death Certificate and the alternative email address registered in the deceased member’s account.

•    Twitter allows family members to remove the deceased’s account and/or save a backup of his public tweets.

•    PayPal allows the Executor of the Estate to close the account.

•    iTunes provides that when a person buys music, movies and books, he is acquiring a non-transferable license for personal use. It does not provide for anything on the death of an account holder.

Foreign Assets of the Deceased
With the introduction of the Liberalised Remittance Scheme of the RBI, residents are now able to acquire foreign securities, immovable property, foreign assets, etc. The bequest/transmission of these foreign assets would be in accordance with the provisions of the applicable foreign law in this respect. The FEMA Regulations provide that a person resident in India may acquire foreign securities by way of inheritance from a person resident in or outside India. However, there is no provision under the FEMA Regulations as to whether foreign immovable property can be inherited by another person resident in India from a person who has acquired it under the LRS.

HUF of the Deceased

On the death of the deceased, his/her eldest child, whether a son or a daughter, would become the Karta of the deceased’s HUF. Necessary steps should be taken for inducting the new Karta as authorised signatory of all bank accounts, demat accounts, etc., of the HUF.

On the death of a Hindu, his/her interest in an HUF passes by any one of the following two modes:

(a)    As per the Hindu Succession Act, a Hindu can make a testamentary disposition of his interest in an HUF. Thus, if he has included his HUF interest in his Will then its disposition would be in accordance with his Will.

(b)    If no will is prepared in respect of the undivided share, then it passes on the legal heirs of the deceased and is governed by the succession rules laid down under the Hindus Succession Act.
Thus, if a father dies, leaving behind his mother, wife, son and daughter and there are three other members in his own HUF, then his interest will devolve by intestate succession upon his legal heirs, i.e., the mother, wife, son and daughter. Thus, the mother would also stand to get a share in her son’s HUF. Prior to 2005, it would have devolved only upon the HUF members and hence, their interest would have increased from ¼ each to 1/3 each. This is an important change brought about by the Hindu Succession Amendment Act of 2005.

Son liable for Father’s Debts?

Under the Hindu Law, a son was personally liable for the debts of his deceased father. This was known as the son’s pious obligation. It was considered that without clearing the debts, his father would not rest in peace. The Supreme Court in the case of Pannalal vs. Mt. Naraini, AIR 1952 SC 170, also upheld this theory but held that the liability of the son is limited only to his share in the joint family property or the property inherited by him from his father.

Section 6(4) of the Hindu Succession Act has been amended in 2005 to do away with the theory of pious obligation. Thus, now a Hindu son’s share in the joint family property or the property inherited by him from his father is not liable for recovery of debts. However, debts prior to 9th September, 2005 (the date of amendment of the Act) would yet be covered by the old law.

No Objection Certificate

In several cases of transmission, the entities may require the legal heirs of the deceased to furnish a No Objection Certificate in favour of the person receiving the asset on transmission. For instance, if a deceased leaves behind a wife and two children and the transmission of an asset is in favour of the wife, then an NOC may be required from the children. An NOC can be executed on a plain paper.

In some cases, an Indemnity is also required. An Indemnity protects the entity which allows the transmission from any legal claims/loss. An Indemnity is to be executed on a stamp paper of Rs. 200 in Maharashtra and requires to be notarised.

Taxation of the Deceased

In the year of death, there would be two assessments in respect of the deceased. U/s. 159 of the Income -tax Act, the Legal Representative of a de-ceased assessee would be liable to pay tax in the like manner and to the same extent as that of the deceased. Section 2(29) of the Act defines the term Legal Representative to mean a person who in law represents the estate of the deceased person. There could be more than one legal representatives but compliance may be practically done by any one legal representative.

The Legal Representative would be liable to pay tax on the income of the deceased received/accruing to him up to the date of his demise. In respect of income, such as interest which accrues on a yearly basis, the income would have to be apportioned between the period up to date of death and thereafter.

A separate procedure is prescribed for e-filing of Return of Income by legal representative. The procedure is available on the Income-tax Department’s Website. As per the procedure, the PAN of legal representative is required to be registered with the Income-tax Department. Based thereon, a legal representative will be able to file return of income by mentioning in verification part, the details and PAN of legal representative, while the form of the return of income may carry the PAN of the deceased. To file a return of income with digital signature, the legal representative is also required to register his digital signature.

In respect of the period commencing from the date of death until the period when the deceased’s Estate is fully executed, his Executors would be liable to tax u/s. 168 of the Act. U/s. 168(3), a separate assessment would be made on the Executor commencing from the date of death up to the date of complete distribution of the Estate to the beneficiaries. In addition to the Return filed by the Executor in his representative capacity u/s. 168, he would also file a Return in his own personal capacity. A PAN may be obtained in the name of the Estate of the deceased.

If there is only one Executor, then he is taxed as if he were an individual. However, if there is more than one Executor, then all of them are taxed as if they were an Association of Persons (AOP). Further, the residential status of the Executor would be that of the deceased during the previous year in which he died. Thus, if the deceased was a non-resident, then the Executor would also be a non-resident.

The assessment in the hands of the Executor shall be made for each completed previous year which begins from the date of the death of the deceased and continues till such time as a complete distribution is made to the beneficiaries according to their several interests. While computing the income of the Executor, any distribution which has already been effected to a specific legatee shall be excluded from the income of the Executor. The same would be taxed in the hands of the specific legatee to whom the distribution was made.

The Full Bench of the Madras High Court in the case of P. Manonmani, 245 ITR 48 (Mad), has held that these provisions apply only when a person dies after leaving a will, i.e., they do not apply to intestate deaths.

Taxation of the Beneficiaries

In respect of any asset received under a Will or by succession, inheritance or devolution, the cost of the asset to the beneficiary and the period of holding to the beneficiary would be the same as that to the deceased. Similarly, for claiming depreciation, the actual cost in case of an asset acquired by inheritance is the actual cost to the previous owner. Recent High Court decisions have held that the benefit of indexation is also available to   the    beneficiary    from    the    date    on    which    it    would    have    
been available to the deceased – Arun Shungloo Trust vs. CIT, (2012) 205 Taxman 456 (Delhi); CIT vs. Manjula J.Shah (Mumbai), (2012) 204 Taxman 691 (Bom).

The provisions of section 56(2)(vii) of the Income-tax Act do not apply to gifts received without consideration if they are received under a will or by way of inheritance. Thus, even if a Will leaves everything to a person    who    is    not    a    “defined    relative”    under    section    56(2) of the Income-tax Act, say, a friend, then the recipient is not liable to tax on the gift so received by him by virtue of this express exemption.

FEMA and Transmission


The FEMA, 1999 and its Regulations contain certain provisions for legacies involving a resident testator and a non-resident legatee or vice-versa. These are as follows:

(i)  A person resident in India may hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such asset was inherited from a person who was resident outside India.

(ii)  A person resident outside India may hold, own, transfer or invest in Indian currency, Indian security or any immovable property situated in India if such asset was inherited from a person who was resident in India.

(iii)  A foreign national of non-Indian origin who is not a Nepalese or a Bhutanese may have inherited assets in India from a person resident in India who acquired the assets (being immovable property, securities, cash, etc.) when he was an Indian resident. Such a Person of Indian Origin or a Foreign Citizen can remit an amount not exceeding $ 1 million per year if he produces documentary proof in support of the legacy, e.g., a    will,    and    a    tax    clearance/no-objection    certificate    from the Income-tax Department. “Assets” for this purpose include, funds representing a deposit with a bank or a firm or a company, provident fund balance or superannuation benefits, amount of claim or maturity proceeds of insurance policies, sale proceeds of shares, securities, immovable properties or any other asset held in accordance with the FEMA Regulations.

(iv)  A Non-Resident Indian or a Person of Indian Origin, who has received a legacy under a will, can remit from his Non-Resident Ordinary (NRO) Account an amount not exceeding $ 1 million per year if he produces documentary proof in support of the legacy, e.g., a will, and a tax clearance/no-objection certificate from the Income-tax Department. The meaning of the term “Assets” is the same as that under (iii) above.

(v)         In    case    of    a    remittance    exceeding    that    specified    in (ii) and (iii), an application can be made to the Reserve    Bank    of     India     in    Form    LEG.    

(vi)   A Person of Indian Origin may acquire any immovable property in India by way of inheritance from a person resident in India or a person resident outside India who acquired the property in accordance with the prevailing foreign exchange law, i.e., FEMA or FERA.

Takeover Regulations
The SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 apply in case of certain transfers in listed companies. If the prescribed threshold limits are breached, then the acquirer of the shares has to make a public offer, i.e.,    an    offer     to    acquire    shares     from    the public. However, the provisions relating     to    making    of    an    open    offer    do not apply to an acquisition of shares of a listed company received by way of transmission, succession or inheritance. The Acquirer is required to file a Report with the stock exchanges where the shares are listed within four days of the acquisition.

Chartered Accountant’s Role
Normally, a CA in his capacity as an Auditor is not directly involved with succession/transmission issues. Nevertheless, a CA can provide a lot of value added services to his clients if he is aware of the law in this respect. He can be of great assistance to his clients in complying with various transmission formalities. It is an area where he can assist his   client and avoid unnecessary problems.

Limited Liability Partnerships Part-III

1. Winding-up of an LLP:

1.1 There are two ways in which an LLP can be wound-up, by an order of the Court or voluntarily.

1.2 An LLP can be wound-up by an order of the High Court under any of the fall owing circumstances:

    a) If the LLP decides that it should be wound-up by a Court Order.

(b) If the minimum number of partners reduces to less than two and remains sa far mare than 6 months,

    c) If it is unable to pay its debts. The Act does not prescribe any minimum amount of debts or any conditions under which an LLP is deemed to be unable to pay its debts. All these are contained in the draft Concept LLP (Winding-up and Dissolution) Rules.

    d) If it has acted against the interests of the sovereignty and integrity of India, security of the State or public order.

    e) If it has made a default in filing the Statement of Account and Solvency or the Annual Return far any 5 consecutive years.

    f) If the Court is of the opinion that it is just and equitable to wind-up the LLP.

1.3 The above section is similar in its operation to S. 433 of the Companies Act. However, unlike the Companies Act, the LLP Act does not contain any provisions far the compulsory or voluntary winding-up of an LLP. All these provisions are contained in the draft Concept LLP (Winding-up and Dissolution) Rules. The final Rules have yet not been notified. It is interesting to note that while normally Rules only contain the procedures and the substantive portion is contained in the Act, the Winding-up Rules, even deal with the substantive portion of winding-up of LLPs. One would expect that such an important provision is passed by the Parliament rather than notified by the Ministry of Corporate Affairs.

1.4 S. 51 of the Act also provides that if an LLP’s affairs are under investigation if, based an an inves-tigatian report made u/s.49, the Central Covernment is of the view that it is expedient to do sa, then the Gavernment may present a winding-up petition to the High Court, The petition may be presented an the ground that it is just and equitable to wind-up the LLP.

2. Investigation of an LLP:

2.1 S. 43 of the Act empawers the Central Government to appoint an inspector to investigate the affairs of an LLP in any of the following circumstances:

    a) If partners having at least 20% voting pawer apply to the Tribunal far an investigation and the Tribunal passes an order to that effect. An application should be accompanied with a security of an amount calculated based an the turnover. The amount of security ranges from Rs.2 to 25 lakhs.

    b) If the Tribunal sua moto passes an order far an investigation into the affairs of an LLP.

    c) Any Court passes an Order that the affairs of an LLP should be investigated.

    d) If in the opinion of the Central Gavernment, there are circumstances suggesting that the business of the LLP is being conducted :

  •     with an intent to defraud  creditors, partners
  •     otherwise far a fraudulent/unlawful purpase
  •     in a manner .oppressive or unfairly prejudicial to its partners

    e) If in the opinion of the Central Gavernment, there are circumstances suggesting that the LLP was farmed far any fraudulent or unlawful purpase.

    f) If in the opinion of the Central Gavernment, there are circumstances suggesting that the LLP’s affairs are not being conducted in accordance with the provisions of the Act.

    g) If in the opinion .of the Central Gavernment, there are circumstances suggesting that, based an a rep art of the RaC, there are sufficient reasons that the affairs of the LLP should be investigated.

2.2 The inspector may make interim reports and on conclusion of the investigation make a final report.

2.3 If based on this report, the Central Government is of the view that any person named in the report is guilty of any offence, then it may launch crimi-nal prosecution against him. The Government may also initiate proceedings:

a) for the recovery  of damages;  or

b) for the recovery of any property of the LLP/ any entity which has been misappropriated or wrongfully retained.

3. Defunct  LLPs :

3.1 The RoC may strike off the name of an LLP from its register. It can do so, where an LLP is not carrying on any business or operation:

    a) For a period of 2 years or more and the RoC has reasonable cause to believe the same, for taking suo moto action for striking off the LLP’s name; or

    b) For a period of 1 year or more and it has made an application to the RoC in Form 24 with the consent of all the partners for striking off its name from the register.

3.2 The RoC shall in all cases of suo moto action provide an opportunity of being heard to the LLP. After that if the RoC is satisfied that the name should be struck off then it will publish a notice in the Gazette and from that date, the LLP shall stand dissolved.

4. Offences  and penalties:

4.1 The LLP Act lays down various penalties and prosecutions for non-compliance with the provisions of the Act. It also lays down penalties for various procedural offences such as not filing forms on time. Further, where any document or return is required to be filed and if it is not so done on time, then it may be filed within 300 days from the original date of filing along with a daily fine of Rs. 100 for every day of delay.

4.2 In offences where no penalty has been pre-scribed, the punishment shall be a fine ranging from Rs.50,000 to Rs.5 lakhs along with a further fine which may extend to Rs.50 per day for every day after which the default continues.

4.3 A petition for compounding of offences can be made in From 31 to the RoC. Only those offences can be compounded for which the punishment is only a fine. Thus, offences which are punishable with imprisonment are not compoundable. This is different from the provisions of S. 621A of the Companies Act. Under this Act, offences for which the punishment is a fine or imprisonment are compoundable. One reason for the same is that there are no offences under the LLP Act for which the punishment is a fine or an imprisonment. The punishments under the Act are in the form of fines and imprisonment. Where any offence by an LLP is compounded no prosecution would be launched against the offender.

4.4 Offences in relation to the Incorporation Document, carrying on of a fraudulent business, making of false statements under the Act, matters arising out an Inspection Report and non-compliance of any Order of the Tribunal, are offences under the Act which also attract imprisonment as a punishment.
Thus, these offences would not be compoundable.

4.5 Where any offence by an LLP is proved to be because of the consent or connivance of a partner or attributable to the neglect of any partner, then such person shall be proceeded against and punished under the Act.

5. Whistle blowers:

5.1 A Court or Tribunal is empowered to reduce or waive any penalty leviable against any partner or employee of an LLP who is a whistle blower, if :

  •     he provided useful information during the investigation of the LLP; or

  •     he provided some information which lead to the LLP or its partner / employee being convicted under any Act.

5.2 The Act also contains a safeguard against harassment of such a whistle blower by providing that he would not be discharged, demoted, suspended, threatened, harassed or discriminated against merely because he provided the above information.