Impact of coronavirus threat and restrictions on Indian companies: legal and regulatory changes

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last updated on 13 May 2020 | reading time approx. 20 minutes

 

India has put in place strict restrictions to combat coronavirus. On March 24, 2020 the Government of India took extraordinary measures to further contain the spread of Covid-19 and enforced a complete lockdown across the nation. For many, this lockdown is a “Once In a Lifetime Event” and will severely impact economic activities, small and medium businesses, supply chains, etc. To minimize some of the advert effects of the lockdown and other restraining measures, the Central as well as State Governments introduced new compliances and regulatory changes which shall help the companies to survive this economic shock. The latest tax, legal and compliance changes are summarized below.

 

 

 

Announcement on regulatory relaxations during the lockdown

The Indian Finance Minister, Mrs. Nirmala Sitharaman has released a Press Note as on March 24, 2020 with various relaxation efforts in order to ease the tensions of missed deadlines under different statutory provisions and schemes. In order to give effect to the announcements made by Indian Finance Minister, the government has brought in an Ordinance on March 31, 2020 which provides for extension of various time limits under the Taxation and Benami Property Acts. It also provides for extension of time limits contained in the Rules or Notification which are prescribed/ issued under these Acts. Some of the important features and time limits which get extended by this Ordinance are as under:
 

Income Tax

  • The last date for filing original as well as revised Income Tax returns for Financial Year 2018-19 has been extended from March 31, 2020 to June 30, 2020. Similarly, the mandatory requirement to link Aadhaar number with PAN (Permanent Account Number) by March 31, 2020 has been extended till June 30, 2020.
  • Due dates for issue of notice, intimation, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents and time limit for completion of proceedings by the authority and any compliance by the taxpayer including investment in saving instruments or investments for roll over benefit of capital gains under Income Tax Act (ITA), Wealth Tax Act, Prohibition of Benami Property Transaction Act, Black Money Act, STT law, CTT Law, Equalization Levy law, Vivad Se Vishwas law where the time limit is expiring between March 20, 2020 to June 29, 2020 shall be extended to June 30, 2020.
  • For delayed payments of advanced tax, self-assessment tax, regular tax, TDS, TCS, equalization levy, STT, CTT made between March 20, 2020 and June 30, 2020, reduced interest rate at 9% instead of 12 % or 18 % per annum ( i.e. 0.75% per month instead of 1 or 1.5 percent per month) will be charged for this period. No late fee shall be charged no penalty/ prosecution shall be initiated for delay relating to this period. This provides the respite needed by corporates who are facing issues with work from home mode in terms of completing the required tax deadlines.
  • The date for commencement of operation for the SEZ units for claiming deduction under Section 10AA of the ITA has also been extended to June 30, 2020 for the units, which received necessary approval by March 31, 2020.
  • The Vivad se Vishwas Scheme, which is a settlement scheme for tax disputes between individuals and the tax department and offers waiver of interest and penalty to taxpayers with a full and final settlement has been given an extended deadline for payments (without additional charge upto 10%), that were otherwise to be made by March 31, 2020. No additional 10% amount to be paid, if payments are done by June 30, 2020.
  • The timeline for making investment for claiming deduction under Chapter VI-B of the ITA that includes payments of insurance premium, public provident fund, mediclaim, donations, etc. has also been extended to June 30, 2020 for claiming deduction for FY 2019-20. Similarly, timeline for making investments/ purchase/ construction of residential house property for the purpose of claiming deduction in respect of capital gains under Sections 54 to 54GB of the ITA is also extended to June 30, 2020 for claiming deduction for FY 2019-20.
    • Further, the Central Board of Direct Taxes (CBDT) has also issued an order under section 119 of the ITA on issue of certificates for lower rate/ nil deduction/ collection of tax at source (TDS/ TCS). Key features of the same have been enumerated below:
    • All the taxpayers who have filed application for lower or nil deduction of withholding tax (TDS/ TCS) on the TRACES portal for FY 2020-21 and whose applications are pending for disposal as on date and they have been issued such certificates for FY 2019-20, then such certificates for FY 2019-20 would be applicable till June 30, 2020 of FY 2020-21 or disposal of the taxpayers’ application by the Assessing officers, whichever is earlier, in respect of the transaction and the deductor/ collector, if any, for whom the certificate was issued for FY 2019-20.
    • In cases where the taxpayer could not apply for issue of lower rate or nil deduction certificates of TDS/ TCS in the TRACES portal for FY 2020-21, but were having the certificates for FY 2019-20, such certificate will be applicable till June 30, 2020 for FY 2020-21. However, they need to apply, at the earliest, giving details of the transactions and the deductor/ collector to the TDS/ TCS Assessing officer as per procedure laid down, as soon as normalcy is restored or June 30, 2020, whichever is earlier.
    • On payments to Non-residents (including foreign companies) having Permanent Establishment in India and not covered above, tax on payments made will be deducted at the rate of 10% (including surcharge and cess), on such payments till June 30, 2020 of FY 2020-21, or disposal of their applications, whichever is earlier.
    • In cases where the taxpayer has not applied for issue of lower rate or nil deduction certificate of TDS/ TCS in the TRACES portal, and the taxpayer is also not having any such certificate for FY 2019-20, a modified procedure for application and consequent handling by the TDS/ TCS Assessing officer is laid down.

     

GST/ Indirect Tax

  • An Ordinance is passed to introduce a new section under CGST Act which extends powers to Central Government, on recommendation of GST Council, to issue notifications to extend the time limit which cannot be completed due to situations such as war, epidemic, flood, drought, etc.
  • The due dates for filing of GSTR-3B returns which are due in the months of March, April and May 2020 will be extended till June 30, 2020.
  • The due date for filing of GSTR-3B return for the month of May 2020 is extended upto 27th June 2020 for taxpayer having aggregate turnover above INR 50 million in preceding financial year and till July 12, 2020 for taxpayer having aggregate turnover below INR 50 million in preceding financial year.
  • The due date for filing annual return in form GSTR-9 / 9C is extended till September 30, 2020.
  • For taxpayers having aggregate annual turnover less than INR 50 million, interest, late fee, and penalty will be fully waived.
  • For taxpayers having aggregate annual turnover more than INR 50 million, the interest will be waived for payments delayed up to 15 days where as a reduced rate of interest at 9% per annum will be charged beyond that period (current interest rate is 18% per annum). No late fee and penalty to be charged, if the compliance is undertaken before the last week of June 2020.
  • Date for opting for composition scheme is extended till June 30, 2020. Further, the last date for making payments for the quarter ending March 31, 2020 and filing of return for 2019-20 by the composition dealers will be extended till June 30, 2020.
  • Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing of return, statements, applications, reports, any other documents, time limit for any compliance under the GST laws where the time limit is expiring between March 20, 2020 to June 29, 2020 shall be extended to June 30, 2020.
  • Payment date under Sabka Vishwas (Legacy Dispute Resolution Scheme), 2019, which is a scheme introduced to resolve Service Tax and Central Excise related disputes, shall be extended to June 30, 2020. No interest for this period shall be charged if the tax dues are paid by June 30, 2020.

 

Customs

  • It is proposed to include the activity of Customs clearance under the list of ‘essential services’ and therefore, customs clearance of imported goods would be carried out 24X7 till June 30, 2020.
  • Due date for issue of notice, notification, approval order, sanction order, filing of appeal, furnishing applications, reports, any other documents etc., time limit for any compliance under the Customs Act and other allied Laws where the time limit is expiring between March 20, 2020 to June 29, 2020 shall be extended to June 30, 2020.

  

Foreign Trade Policy

  • The existing Foreign Trade Policy, 2015-20 which was expiring on 31 March, 2020 is extended for 1 year upto 31 March, 2021.
  • Due date for filing application of MEIS incentive for Ley Export Order received for exports between 1 February, 2019 to 31 May, 2019 is extended from 12 months to 15 months.
  • Due date for filing application of SEIS for FY 2018-19 has been extended to 31 December, 2020 from 31 March, 2020.
  • The list of eligible services entitled to avail the benefit of SEIS for FY 2019-20 and rate of entitlement would be notified separately.
  • Continuation of SEIS for FY 2020-21 would be notified separately.
  • Validity of Advance Authorization and EPCG Authorization for import or export purposes will be automatically extended by 6 months from the date of expiry, if such expiry is falling between 1 February, 2020 to 31 July, 2020 without filing any amendment application or additional composition fees.
  • The exemption from payment of GST under Advance Authorization and EPCG scheme, for physical exports, is extended till 31 March, 2021.
  • The due date for Monthly Reports of EOU unit for the February, 2020 to June, 2020 is extended to 31 July, 2020 and for Quarterly for quarters ending March, 2020 and June, 2020 as well as Annual Reports year ending March, 2020 is extended to 30 September, 2020. 

 

Corporate Affairs

  • No additional fees shall be charged for late filing during a moratorium period from April 1, 2020l to September 30 2020, in respect of any document, return, statement etc., required to be filed in the MCA-21 Registry, irrespective of its due date, which will not only reduce the compliance burden, including financial burden of companies/ LLPs at large, but also enable long-standing non-compliant companies/ LLPs to make a ‘fresh start’;
  • The mandatory requirement of holding meetings of the Board of the companies within prescribed interval provided in the Companies Act (120 days), 2013, shall be extended by a period of 60 days till next two quarters i.e., till September 30, 2020;
  • Applicability of Companies (Auditor’s Report) Order, 2020 shall be made applicable from the financial year 2020-2021 instead of from 2019-2020 as notified earlier. This will significantly ease the burden on companies & their auditors for the year 2019-20.
  • As per Schedule 4 to the Companies Act, 2013, Independent Directors are required to hold at least one meeting without the attendance of Non-independent directors and members of management. For the year 2019-20, if the Independent Directors of a company have not been able to hold even one meeting, the same shall not be viewed as a violation.
  • Requirement to create a Deposit reserve of 20% of deposits maturing during the financial year 2020-21 before April 30, 2020 shall be allowed to be complied with till June 30, 2020.
  • Requirement to invest 15% of debentures maturing during a particular year in specified instruments before April 30, 2020, may be done so before June 30, 2020.
  • Newly incorporated companies are required to file a declaration for Commencement of Business within 6 months of incorporation. An additional time of 6 more months shall be allowed.
  • Non-compliance of minimum residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the Companies Act, shall not be treated as a violation.
  • Due to the emerging financial distress faced by most companies on account of the large-scale economic distress caused by COVID 19, it has been decided to raise the threshold of default under section 4 of the Insolvency and Bankruptcy Code (“IBC”), 2016 to INR 10 million (from the existing threshold of INR 100 thousand). This will, by and large prevent triggering of insolvency proceedings against Medium and Small Scale Enterprises (MSMEs)

 

New Compliance of Web Form CAR for all Companies/ Limited Liability Partnerships (LLPs)

The Ministry of Corporate Affairs (MCA) has released an advisory on March 20, 2020. Through this advisory and with an objective to ensure and generate awareness and confidence on readiness to deal with the situation in India. The MCA has deployed a Web Form for Companies/ Limited Liability Partnerships to confirm their readiness to deal with the threat of COVID-19. The Web Form is named as CAR (Company Affirmation of Readiness towards COVID-19) and  was deployed on March 23, 2020 on the portal of MCA. All Companies/ Limited Liability Partnerships are requested to comply and file the Form CAR. The MCA has clarified that filing of the said Form is purely voluntary. As such no penalty or enforcement related action is applicable.
 

Board meetings allowed to be held via video conference for three months

The Ministry of Corporate Affairs issued a notification on March 18, 2020 allowing companies to hold board meetings dealing with matters like approval of financial statements as well as books of accounts, approval of the board’s report, decisions on mergers, amalgamation and takeovers, through video conferencing for a period of three months. Earlier, meetings dealing with the said subject matters were required to be held with directors physically attending the meeting. Due to travel restrictions, it is challenging for the companies to stay compliant, hence, this move of MCA will surely bring huge relief to the companies and they will be able to take important decisions via video conference and stay compliant during these tough times.

 

Extra Ordinary General Meetings to be held through Video Conference or Other Audio Visual Means

The Ministry of Corporate Affairs (“MCA”) vide its Circular dated April 8,2020 has allowed companies to hold Extra Ordinary General Meetings (“EGM”) through Video-Conference or Other Audio Visual Means. In furtherance to the relaxations allowed for holding all the meetings of the Board of Directors through Video Conference, the MCA has now allowed companies to hold EGM through Video Conference  or Other Audio Visual Means. However, such EGM should be called only for urgent business matters which cannot be delayed and the same are allowed only till 30th June 2020. The transcripts of such a meeting has to be duly maintained as required in the Circular. All the resolutions passed in such meeting have to be filed with the Registrar of Companies within 60 days of the meeting.

 

Annual General Meetings (AGM) for Companies whose financial year ended on 31st December 2019

The Ministry of Corporate Affairs (“MCA”) vide its Circular dated April 21, 2020, the companies whose financial year ended on 31st December 2019, have been allowed to hold their AGM by 30th September 2020, instead of 30th June 2020.
 

Annual General Meetings to be held through Video Conference or Other Audio Visual Means

The Ministry of Corporate Affairs (“MCA”) vide its Circular dated May 5, 2020 has allowed Companies to hold their Annual General Meetings (“AGM”) through Video Conferencing or Other Audio Visual Means, during the calendar year 2020. In such AGM, apart from the ordinary business, only those items of special business, which are considered to be important by the Board, may be transacted. Further, the requirement of dispatching physical copies of the Annual Return is not required and the Company should share a copy of the Annual Return with all its members and any other stakeholder(s) only through emails.
 

Covid-19 related expenses recognised as CSR

Since Covid-19 was declared as pandemic by the World Health Organisation and the Government of India treats it as a notified disaster, the Ministry of Corporate Affairs  clarified on March 23, 2020 that spending of CSR funds for Covid-19 related relief work  is eligible CSR activity. Funds may be spent for various activities related to Covid-19 such as promotion of health care and disaster management.
 

Litigation strategies shall be revisited due to restricted functioning by Courts across India

In and around third week of March, 2020 Supreme Court as well as High Courts in several states, including Bombay High Court, notified that they will take only urgent matters. The litigants have to explain and justify the urgency, otherwise the Court can penalize the party (Bombay High Court imposed penalty of INR 15,000 on litigant for insisting on listing of non-urgent matter). There is no end date to the said notifications. However, on March 23, 2020, the Supreme Court of India issued an order stating that the period of limitation for all court proceedings shall be extended with effect from March 15, 2020 till further order by the Court. Thereby, it is expected that the pendency of litigations in India is going to further increase in coming months. Therefore, it is advisable for the companies to revisit their litigation strategy and analyse the impact of delay in dispute resolution.
 

Legal action for knowingly spreading coronavirus

India is invoking a century old law to combat wilful spreading of COVID 19. The wife and father of the Covid-19 infected Google employee in Bangalore have been booked by the police under the Epidemic Disease Act, 1897 for lying to health officials. Additionally, a Police action is also initiated against them under Indian Penal Code sections 269 (negligent act likely to spread infection of disease dangerous to life) and 270 (malignant act likely to spread infection of disease dangerous to life). Similarly, two people were arrested in State of Jammu & Kashmir, on March 19, 2020, for spreading rumours on social media regarding the death of a man due to Covid-19 in town.
 

Force majeure clause during coronavirus

On February 19, 2020, the Indian Government issued Office Memorandum, stating that coronavirus shall be considered as natural calamity and Force majeure clause may be invoked wherever necessary. It is common practise in India to add Force majeure clause in commercial contracts. Therefore, it is high time for businesses to evaluate all commercial contracts with Force majeure clause and initiate appropriate action under the said clause if it is evident that Covid-19 situation will hamper the capacity of either of the parties to contract, to fulfil their legal obligation on time. Options of triggering of Material Adverse Change (MAC) clauses, possibility of re-negotiating contracts for prices/ volume of supply may also be analysed.
 
Further, the financing documents of organisations needs to be checked with a fine tooth comb to identify any covenants which require action/ intimation to lender(s), should the company apprehend a material adverse impact on its financial performance.
 
The present situation may also impact ongoing Mergers & Acquisitions transactions. This necessitates a requirement for the contracting Parties to revisit the transaction documents and take appropriate measures.
 

Review of Insurance Cover

Companies should review the specific insurance cover to identify if mitigating for business losses on account of this pandemic  is covered in their insurance policies. If yes, appropriate steps may be taken in this regard including intimation to insurance company.

 

Central government brings masks and sanitizers under the Essential Commodities Act, 1955

Amidst the ongoing outbreak of COVID-19 and  increasing concerns raised regarding masks (2 ply and 3 ply surgical masks, N95 masks) and hand sanitizers which are either  not being available in the market or available at exorbitant prices, the Central Government (i.e. the Department of Consumer Affairs) as on 13th March, 2020 notified an order under the Essential Commodities Act , 1955 (EC Act) to declare these items as Essential Commodities up to 30th June, 2020.
 

The said notified order known as the Essential Commodities Order 2020 is passed to  bring the masks including  (2ply and 3ply surgical masks, N95 masks) and hand sanitizers to be included in the Scheduled list of essential items as attached under the EC Act up to 30th June, 2020. The main intent behind this to empower the Indian government and authorities to regulate the production, quality, distribution of these items in the market to ensure smooth sale and availability of these items in the market to the consumers.  Most importantly, the present order empowers the government and authorities to curb unfair profiteering tactics adopted by many in terms of over pricing  hoarding and black marketing of these items due to increased demand of these items in view of the outbreak of this pandemic. The state government/ authorities therefore may proceed to take strict action under EC Act and Prevention of Black-marketing and Maintenance of Supplies of Essential Commodities Act, 1980 (PBMMSEC Act). An offender under the EC Act may be punished with an imprisonment up to 7 years or fine or both and under the PBMMSEC Act, he can be detained for maximum of 6(six)  months.

 

Payment of  Employees’ Provident Fund contribution by the Indian for low earning workers for the  next 3 (three) months

Indian Government as a part of its relief package under “Pradhan Mantri Garib Kalyan Yojana” has announced as on 26, March 2020 that it shall pay for both employer and employee’s contribution towards Employees’ Provident Fund (EPF) for the next 3 (three) months. This benefit is extended to only those establishments which are  having up to 100 workers and 90% of such workers are earning below  INR 15,000/per month. Accordingly the Government of India will pay 24% (i.e. 12% each share of employer and employee) of the monthly salary of low earning workers. However, EPF department has further announced that  in order to avail this benefit, all the establishments have to ensure payment of monthly salaries to their workers and make a  timely submission of ECR. This is introduced with a view to ensure continued employment of these low earning workers who are at risk of losing their employment and also to provide financial  benefit to the organized sectors due to economic disruption caused by Coronavirus pandemic.
 

Lockdown in India

As of 25 March 2020, the whole Republic of India has been put in a lockdown for 21 days, which was going to end as on 14 April 2020. However, considering the increasing number of Coronavirus cases nationwide, on 14 April 2020 the Prime Minister of India, Mr. Narendra Modi first announced the extension of the lockdown until 3 May 2020 thereafter further continuing with the lockdown for another two more weeks until 18 May 2020. Previously areas with low risk were allowed to open up for certain specific activities starting from 20th April 2020. The new guidelines of the lockdown issued by the Ministry of Home Affairs, Government of India on 1 May 2020 came along with some relaxations, in particular to balance the financial burden of companies, but at the same time still implement a rather strict curfew for hot spots and contaminated zones.
 
 Previously all shops, industrial establishments, commercial establishments, private establishments had to be completely closed or work from home only. Exceptions included only essentials like banks; insurance offices; print and electronic media; telecommunications; internet services; broadcasting and cable services; IT and IT enabled services needed for essential services; e-commerce for delivery of essential goods like food, pharmaceuticals, medical equipment; power generation, transmission and distribution units and services; cold storage & warehousing services; private security services; essential services related to food, groceries. Manufacturing companies where units of essential commodities are being produced were also exempted – all other continuous process production units needed permission from State Government.
 
Starting from April 20 2020 more activities were permitted including movement, loading/unloading of goods and cargo (inter and intra state), supply of essential goods, commercial and private establishments to operate e.g. IT and IT enabled services with up to 50 per cent of staff; Industries/Industrial Establishment which are operation in rural areas, manufacturing in Special Economic Zones and Export Oriented Units; manufacturing units of essential goods, food processing industries, production units with continuous process, manufacturing of IT hardware, coal production, manufacturing units of packing material, jute industries with staffed shifts and social distancing, oil and gas refinery, brick kilns in rural areas as well as construction activities in rural areas and construction activities of all renewable energy projects. Further it is has been made compulsory to wear a mask  in all public places and works places.
 
The new guidelines issued by the Ministry of Home Affairs on 1 May 2020 which shall be effective starting from 4th May 2020 extend the previous lockdown for two (2) more weeks. Also it was clarified that districts will be profiled in to risk zones:

  • Green Zones shall be districts with zero confirmed cases until date and/or districts with no confirmed case in the last 21 days;
  • Red Zones or Hotspot Zones shall be districts defined as such a zone by the Ministry of Health and Family Welfare, Government of India:
  • Orange Zones shall be districts which are neither Green Zones nor Red Zones;
  • Containment Zones shall be demarcated within Red Zones or Oranges Zones by states and District Administrations based on the guidelines of the Ministry of Home Affairs.


The following activities will continue to remain prohibited across the country, irrespective of the zone, for a period of two (2) weeks (unless permitted by the Ministry of Home Affairs otherwise):

  • All domestic and international air travel of passengers; all passenger movement by trains; Inter-State Buses for public transport; Metro rail services; Inter-State movement of individuals;
  • All schools, colleagues, educational/training/coaching institutes unless it is carried out online;
  • Hospitality services other than those used for housing health/police/Government Officials/health care workers/stranded person
  • All cinema halls, shopping malls, gymnasiums, sport complexes, pools, entertainment parka, theatres, bars and auditoriums, assembly halls and similar places
  • All social/political/sports/entertainment/academic cultural/religious functions/other gatherings
  • All religious places/places of worship shall be closed for public. Religious congregations are strictly prohibited.


Further it was clarified that the movement of individual for all non-essential activities shall be only allowed between 7 am to 7 pm. However, in all zones persons above 65 years or with co-morbidities, pregnant woman and children below the age of 10 years shall stay at home, except for meeting essential requirements.
 
For containment zones strict perimeter and clear exit and entry points shall and other safety precautions shall be implemented. Further only movement of person for maintaining supply of goods and services shall be permitted.
 
Apart from the overall prohibited activities the activities such as Cycle Rikshaws and Auto Rikshaws, Taxis and cab aggregators, Intra-district and Inter-district plying of buses, Barber shops, spas and salons shall not be permitted in Red Zones. The following activities shall be permitted with restrictions in Red Zones:

  • Movement of individuals and vehicles, only for permitted activities. Also Four Wheeler vehicles shall have maximum two passengers besides the vehicle driver and for two wheelers pillion rider is not allowed;
  • All industrial activities in rural areas shall be permitted. However in Special Economic Zones, Export Oriented Units, industrial estates and industrial townships with access control only manufacturing units for essential goods including pharmaceuticals, drugs, medical devices as well as their raw material and intermediates as well as production units which require continuous process and their supply chain; manufacturing of IT hardware, jute industry with staggered shifts and social distancing and manufacturing units with packing material shall be permitted.
  • Construction activities in urban areas as long it is situ construction (means workers are available on site and no workers are required to be brought from outside) and construction of renewable energy projects. As well as all construction activity in rural areas.
  • Shops selling essential goods in markets and market complexes shall be permitted in urban areas. All standalone shops/neighborhood shop and shops in residential complexes are permitted to remain open in urban areas without distinction of essential and non-essential. However, it was clarified that by a guideline of the Government of Maharashtra on 2 May that this shall not be applicable to Mumbai Metropolitan Region, Malegaon Municipal Corporation, Pune Municipal Corporation and Pimpri-Chinchwad Municipal Corporation.
  • All shops in rural areas, except malls, are permitted to open. However, everywhere social distancing shall be implemented and maintained.
  • E-Commerce activities only in respect of essential goods.
  • Private Offices can operate with up to 33 per cent strength as per requirement with the remaining persons working from home; However, it was clarified that by a guideline of the Government of Maharashtra on 2 May that this shall not be applicable to Mumbai Metropolitan Region, Malegaon Municipal Corporation, Pune Municipal Corporation and Pimpri-Chinchwad Municipal Corporation.
  • All Government offices shall function with officers of the level of Deputy Secretary and above to the extent of 100 per cent strength. The remaining staff will attend up to 33 per cent as per requirement. However, it was clarified that by a guideline of the Government of Maharashtra on 2 May that this shall not be applicable to Mumbai Metropolitan Region, Malegaon Municipal Corporation, Pune Municipal Corporation and Pimpri-Chinchwad Municipal Corporation.

 

Apart from the overall prohibited activities Inter district and Intra-district plying of busses shall not be allowed in Orange Zones. In Green Zones buses and bus depots can operate with 50 per cent seating capacity. All other activities shall be permitted activities unless not specifically mentioned in the Guidelines.  However, the State Governments and Union Government may only allow selected activities as felt necessary to stop the spread of Covid-19.
 
Failure to comply with this order will invoke criminal proceedings under section 188 of Indian Penal Code (disobedience shall be punished with imprisonment which may extend to six months, or with fine which may extend to one thousand rupees, or with both). Further, all persons violating these containment measures would be liable to prosecuted against as per the provisions of Sec 51 to 60 of the Disaster Management Act, 2005 (fines and imprisonment extending up to 2 years, depending on the offence).

 

Impacts on the duties & responsibilities of the employer and the employees

It is every employer’s duty to provide a safe and hygiene working environment and to do everything reasonably possible to ensure infection prevention. This duty of care is particularly important in times of spread of ovid-19 and after coming back to work premises after working from home. However, as there are no specific rules on what is meant by this duty of care apart of special laws like the Factories Act, 1948, employers should take proactive measures according to daily updated risk assessments. These include, among other things, authorising all employees to work from home wherever feasible and now with the lockdown provisions, it is mandatory. If it is not possible in a company to grant work from home as they are part of the exceptions of the essential services, in addition to the provisions of the Epidemic Disease Act, install safety precautions such as maintaining safety distances between employees, disinfecting and cleaning the workplace regularly, providing safety clothing and masks, keeping temperature checks at the office premises, working in shift and only keeping essential staff available, etc. Guidelines were issued by the Government of India how to implement a safe work environment after the lockdown.
 
The employer should ensure that the employees have the required IT infrastructure to work safely from home, especially regarding data protection regulations.
 
The Ministry of Labour & Employment, Government of India has clarified in their notification dated on March 20, 2020, that all employers may be advised to extend their coordination by not terminating their employees or reducing their wages. If any employee takes leave, he should be deemed to be on duty without any consequential deduction. Further, if the place of employment is to be made non-operational, the employee shall be deemed to be on duty.
 
Further, the Governments of Telangana and Karnataka have clarified that employers shall not terminate their employees or reduce their wages. Employers shall grant  their employees Paid Leaves during the lock-down period in case it is not possible for them to work from home.
 
However, it is not clarified yet whether these notifications and circulars are binding or rather a recommendation or advisory. Some of the notifications, orders and circular have been challenged before the Supreme Court through writ petition. The Supreme Court’s decision, which will throw more light on the binding nature of these orders, is still pending. Therefore based on the present situation the same may be interpreted to have a binding effect.
 
Options of employers which might get in a financial tight spot have to be analysed from case to case especially regarding other regulations in Minimum Wage Act,1948, Indian Contract Act, 1872, Industrial Disputes Act, 1947, Employees Provident Fund Scheme etc.

  

Way Forward

 The new guidelines of the Ministry of Home Affairs show the intention of the Government to slowly lift the lockdown, however at the same time health and safety shall remain first priority. Businesses should continue with keeping themselves prepared to adapt with any legal or regulatory change introduced by the Government. In line with other countries, the Indian Government is also expected to announce a larger fiscal stimulus package soon to address the concerns of the economy.
 
It would be prudent for the companies to quickly analyse the contract obligations and determine the exposures due to non-performance, by any of the parties. If the company is not in position to honour the contract due to outbreak of Covid-19  then it should invoke force majeure clause within the prescribed timeframe.
 
Covid-19 threat also exposes business to various labour law related challenges, which can vary as per the nature of business and operation of the company. It is advisable to revisit employment contracts and HR polices to ascertain whether they are properly worded to address the challenges posed for this unusual situation.

  • What are the legal obligations of the employer towards employees if the operations are suspended for few months?
  • Whether the employer is legally authorized to reduce the remunerations by reducing the working hours of employees?
  • What are commercial and labour-law related obligations of the employer in the event of prolonged illness of employee due to Covid-19?
  • Whether the employee has  a right to work-refusal, if he feels that the threat of Covid-19 still persists, in general as well as in specific location, post the lockdown period?

  
The above questions and many more such questions will be faced by companies sooner or later. Therefore, it is advisable to be prepared and compliant in advance.

 
In addition, constantly changing government regulations must be taken into account. Local notifications are regularly issued on short notice, which must be observed by employers. It is therefore inevitable that every employer keeps up to date and thinks about necessary measures in advance so that the company can respond quickly to new situations. 

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