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Big Bang Budget!

Some say Budget 2015 was a ‘big bang budget’, while some stay tight-lipped. Though, hoi polloi may not find too many reasons to be happy with the budget,

corporates and foreign investors might just see a good chance to stay in India. Budget 2015 proposes a bankruptcy code, seeks to eliminate distinction between different types of foreign investments (FPIs & FDIs) and provides for a composite cap for them. Click here to read our analysis of Budget 2015-16.

Experts decode the fine print!

The authors, Nidhi Bothra (Executive Vice President, Vinod Kothari Consultants Pvt. Ltd.) and Abhirup Ghosh (Manager) provide an in-depth analysis of the impact of the Union Budget 2015-2016 on NBFCs. They note that Finance Minister, Mr. Arun Jaitley’s mentioned in the Budget Speech that NBFCs with net worth of Rs. 500 crores or more will be considered as “financial institutions” for the purpose of SARFAESI Act, 2002. The authors observe that such announcement will bring parity between NBFCs and other financial institutions, for the purpose of debt recovery. Click here to read

their article titled, “Union Budget 2015 – 2016: Some fair and some despair for the NBFCs”

In another article, authors, Nidhi Bothra (Executive Vice President, Vinod Kothari Consultants Pvt. Ltd.) and Saurav Malpani (Manager) explain the special tax regime proposed for Category I and Category II Alternate Investment Funds (AIFs). Taking us

10 key takeaways from

Budget 2015-16

Corporate Tax reduced

Govt. to do away with distinctions

between FII and FDI and replace it

with Composite Caps

Section 6 of FEMA to be amended

Will allow foreign investments in

AIF

Replace FPI & FDI limits with

composite caps

To merge FMC with SEBI

Monetary Policy Committee &

Public Debt Management Agency

announced

NBFCs (of certain size) to be

considered Financial Institutions

under SARFESI Act

100% tax exemption in CSR

activities for Clean Ganga Fund &

Swachh Bharat Kosh

Benami transaction prohibition

Bill to be introduced in this

session

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through the Budget proposal, they state that, “The Finance Bill, 2015 has finally provided some clarity on taxation of Alternate Investment Funds. A pass through is provided to this investment vehicle. However the same has been restricted to only Category I AIFs and Category II AIFs.” Click here to read their article titled, “Pass-through for AIFs in Budget, 2015- fair or farce?”

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Corporate Buzz…

Not a single minute passes by without a significant

development in corporate world. Be it Indian

judiciary delivering judgments, Indian Govt issuing

notifications, SEBI clarifying and amending circulars,

we have it all presented to you on a real-time basis.

All under Companies Act

HC sets aside CLB’s ‘harsh’ order of replacing board

with administrator, allows supervision [LSI-324-HC-

2014-(KAR)] - Karnataka HC observed that CLB order

“replacing Board of Directors was too harsh as even

though allegations of non-convening meetings were made,

material on record showed that meetings were

convened”..Click here to read what more did Karnataka

HC observe on the ‘harshness’ of CLB order.

HC orders company’s winding up as consequence of

2G licences quashing [LSI-326-HC-2015-(BOM)] –

Bombay HC held that, “Petition must be admitted on

the ground that there is more than just a prima facie

case that the substratum of the Company has gone with

almost no hope of it being revived, there is a complete

breakdown in the faith and trust between the main

Partners i.e. the Appellants and the Petitioners and

that there is a total deadlock in the management of

the Company and on its Board of Directors”..Click here

to know what Justice Kathawalla said about 2G

licences.

HC dismisses Govt. objection to amalgamation scheme over procedural non-

compliance; Co.’s Articles prevail [LSI-297-HC-2015-(GAU)] – Single Judge of Gauhati

HC observed that, “I find that observations of the Regional Director, Company Law

Board, Eastern Region, Ministry of Corporate Affairs made in paragraph 2(a) of their

Breaking News: MCA notifies

phase wise Ind-AS, Exempts

insurance cos, banks, NBFCs &

SMEs

Apex Court Constitution Bench

to decide validity of NCLT

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Affidavit are unnecessary..It is held that

compliance with provisions of Section 117 of the

Companies Act, 2013 and filing of e-form MGT-14

are not required”.. Click here to read other Govt.

objections.

HC : CLB not empowered to order investigation

against impleaded parties, interprets Sec 247(1A)

[LSI-302-HC-2015-(DEL)] – Delhi HC observed that,

“CLB is not empowered to direct investigation into

affairs of a company which has been impleaded as

party to proceedings, and if it directs investigation

then words “in the course of the proceedings

before it” u/s 247(1A) are rendered otiose”..Click

here to read further on Section 247(1A)

interpretation.

CLB dismisses ‘hopelessly time barred’ petition

for members register rectification; Limitation Act

applicable [LSI-340-CLB-2015-(MUM)] - CLB observed that “although Section 111(4) does

not specifically provide for any period of limitation..., in that case Article 137 of

limitation act shall be applicable”, which provides 3 years limitation period to aggrieved

party to approach CLB.. Click here to read more.

CLB : Disallows substantive amendments to Sec. 397/398 petition changing complete

‘nature of case’ [LSI-328-CLB-2014-(MUM)] – CLB held that, “a party cannot be allowed

by amendment to set up a new case or any new cause of action...but where the

amendment does not constitute an addition of a new cause of action or raise a different

case, the amendments will be allowed even after the expiry of statutory period of

limitation”..Click here to read more.

SEBI FILES

SAT : SCORES compliance is mandatory irrespective of company’s

‘operational status’ [LSI-333-SAT-2015-(MUM)] : SAT upholds SEBI order levying Rs. 1 lakh

penalty for not redressing investor grievances, for failure in obtaining SEBI Complaints Redress

MCA Katta

MCA extends CLB Chairman’s tenure

MCA extends tenure of CLB Member (Judicial)

MCA removes ‘small company’ definition ambiguity; Relaxes conditions for loans & investments

MCA introduces Form No GNL-4

under Companies (Registration

Offices and Fees) Rules, 2014

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System (‘SCORES’) authentication and submitting

action taken report..Click here to read the

interesting arguments made by the parties.

SEBI slams 52 Cr

penalty on DLF & top-

management for sham

share transaction &

disclosure lapses [LSI-

337- SEBI-2015-(MUM)]

– Analyzing the share

transfer transactions between DLF and related parties,

SEBI held “each of which when taken in isolation, may

fall within the four corners of law, but if analyzed

cumulatively, may bring them within purview of

fraudulent transactions. Whether a transaction or

series of transactions constitute to be fraudulent, as

defined in the regulations will depend upon the facts

brought out on record and the connection between the

parties.”.. Click here to read how SEBI rapped DLF and

related parties.

ITC’s ‘Operations Head’ low in management

hierarchy, not

‘Officer’ for

Insider Trading :

SEBI [LSI-339-

SEBI-2015-(MUM)] - SEBI held ‘Heads- Operations’ of ITC

(‘noticee’) as not liable to disclose change in shareholdings

exceeding Rs. 5 lakhs under Regulation 13(4) of PIT

Regulations, as he was not ‘director’/’officer’ of the

company..Click here to read more. Also click here to see what SEBI had to say for Wipro’s

Geography Head on disclosures under Insider Trading Regulations [LSI-335- SEBI-2014-

(MUM)].

SEBI Files

Directs refund of mobilized funds;

Observes ‘public issue’ under

private placement’s garb [LSI-313-

SEBI-2014-(MUM)]

SAT upholds SEBI order penalizing

blind person for disclosure lapses

under Regulations [LSI-316-SAT-2014-

(MUM)]

Accepts Bhubaneswar Stock

Exchange’s voluntary exit application;

Orders post exit obligations

compliance [LSI-312- SEBI-2015-

(MUM)]

SAT upholds SEBI order; Rights issue

made with ulterior motive of

acquiring control [LSI-314-SAT-2014-

(MUM)]

S&P BSE Indices announces rules for

considering differential voting rights

in benchmark indices

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SEBI cancels Sahara AMC’s Portfolio Manager

certificate, cites Subrata Roy Sahara’s ‘antecedents’

[LSI-341- SEBI-2015-(MUM)] - SEBI held Sahara Asset

Management Pvt Ltd Co. (Sahara AMC) not a ‘fit and

proper person’ to act as a Portfolio Manager in Indian

securities market, thus, cancelled its Portfolio

Manager certificate. It further observed that since

adverse actions subsisted against Subrata Roy Sahara

(who has substantial controlling interest in Sahara

AMC) and companies of Sahara group, Sahara AMC did

not comply with eligibility criteria of being a ‘fit and

proper person’ under Portfolio Managers Regulations..Click here to read interesting

observations of SEBI in this unique case.

SEBI orders refund of funds mobilized with ‘assured’

returns; Rejects directors’ ‘being unaware’ defense

[LSI-332- SEBI-2015-(MUM)] - SEBI directed noticee

company, its promoters & directors to jointly and

severally refund monies (with promised returns)

collected through issuance of Redeemable Preference

Shares without following necessary public issue norms of

Companies Act, 1956, also restrains them from accessing

capital market..Click here to read more.

SEBI penalises noticee for aiding promoters in scrip

manipulation,

rejects ‘normal

investor’

defense [LSI-

329- SEBI-2014-

(MUM)] : SEBI’s

Adjudicating

Officer imposed

penalty on

promoters for failure in submitting report to SEBI under

Reg. 3(4) of SAST Regulations within prescribed time..Click here to read why and how SEBI

relied on P. N. Bhagwati Committee report, to impose penalty on promoters.

News Alerts

NCLT constitution kept in

abeyance on account of challenge

in SC : Govt

Govt. clarifies that Companies Act

does not regulate remuneration to

‘other personnels’

SFIO Investigation ordered in 184

cases, adequate precautionary

provisions in Cos. Act, 2013 : Govt

RBI, MCA, CBDT among 11 Govt. services on e-portal to showcase customer focus

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SEBI imposes penalty for delayed Public Announcement; Rejects listing agreement

compliance defense [LSI-303- SEBI-2015-(MUM)] - SEBI held that “Takeover Regulations in

first place has put onus of public announcement on Acquirer, and not on target company, and

rightly so, as public announcement does not merely involve intimation of acquisition to

public shareholders, but, an announcement of open offer

by acquirer for acquiring shares disclosing the size of

offer, offer price….”..Click here to read interesting

arguments and observations.

Forex Chase

HC dismisses writ against order under FERA, as statutory

remedy under FEMA available [LSI-325-HC-2015-(DEL)] – Delhi HC held that “this court

cannot but decline the request of the petitioners to entertain the writ petitions”, in

presence of statutory appeal remedy u/s 35 of FEMA..Click here to see how Delhi HC

interpreted Section 35 of FEMA.

HC : CS certificate absolves non-executive director of

liability for Co.’s FERA defaults [LSI-309-HC-2014-(DEL)] -

HC set aside Foreign Exchange Appellate Tribunal’s order

that penalised a part

time, non-executive

director for company’s

defaults under Foreign

Exchange Regulation

Act, 1973 (FERA). It

held that since

appellant was not

director in-charge of/or

responsible for conduct of Company's day-to-day affairs, he

could not be made liable..Click here to know how Justice S.

Muralidhar compared FERA with Negotiable Instruments Act.

Mint Street

RBI reviews

debentures private

placement guidelines

for NBFCs, aligns

with Cos. Act,2013

RBI permits greater

flexibility on foreign

currency swaps

RBI further eases

gold import norms,

allows banks to

extend gold loans

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Rising Competition…

We saw how MRTP Act was replaced by Competition Act, to keep pace with global economy

and rising market forces. Rulings delivered by

Competition Commission of India, Competition

Appellate Tribunal and Commission’s approvals to big

ticket mergers find place under this head -

HC : Distinguishes Delhi HC, allows DG to be

‘informant’; Dismisses car manufacturers’ writ [LSI-

293-HC-2015-(MAD)] – Madras HC observed that, “To

hold that the Director General will not come within

the

purview

of the

expressio

n

"person",

would be

to render

the

entire

scheme of the Act very brittle and ductile.. So long as

the Competition Commission has the power to initiate

an enquiry suo motu and take the assistance of the

Director General in the conduct of such enquiry and so

long as there is no bar for the Director General to

provide information under Section 19(1)(a) of the Act,

the petitioner cannot find fault either with the

Director General or with the Commission”..Click here

to read other HC observations in this much talked

about case.

COMPAT sets aside CCI’s Rs.52cr penalty on BCCI;

Aggrieved party deserves hearing opportunity [LSI-

330-COMPAT-2015-(NDEL)] – COMPAT held that while

passing the final order, CCI acts as adjudicatory/quasi

Competition Law Dossier

MCA exempts Vessels Sharing

Agreements of Liner Shipping

Industry from anti-competitive

agreement rigours..Click here

to read more..

CCI approves acquisition

of Aon’s Asia-pacific based

payroll business as no

horizontal overlap [LSI-336-

CCI-2015-(NDEL)]

CCI penalises road transport

‘mother body’ for ‘cartel-like’

conduct, impacting common

man [LSI-319-CCI-2015-

(NDEL)]

CCI approves FMC

Corporation’s proposed deal to

buy Auriga arm [LSI-321-CCI-

2015-(NDEL)]

CC rejects information,

observes no dominant position

where adequate alternatives

are available [LSI-320-CCI-

2015-(NDEL)]

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judicial authority, thus, “before recording an adverse finding against a person and holding him

guilty of violating Section 3 or 4 of the Act, the Commission is obliged to comply with various

facets of the principles of natural justice.” Click here to read COMPAT’s observations on principle

of audi alteram partem.

CCI approves ING Vysya-Kotak merger; However rejects Banks' definition of 'product

market' – CCI rejected parties’ definition of relevant product market as banking services

stating that, “banking services would not constitute a relevant product market since many of

the products provided by the banks may not be substitutable, and therefore, separate

relevant markets based on type of services may have to be delineated within the overall

banking services”..Click here to read CCI approval order.

CCI : Coal India abuses dominance by differentiating

captive power consumer from power utilities [LSI-

317-CCI-2015-(NDEL)] – CCI observed that, “From

a plain reading of the Explanation to section 4 of

the Act, ‘dominant position’ means a position of

strength, enjoyed by an enterprise, in the relevant

market, in India, which enables it to operate

independently of competitive forces prevailing in

the relevant market or affect its competitors or

consumers or the relevant market in its

favour”..Click here to learn how despite observing abuse of dominance by Coal India Ltd, CCI

refrained from imposing any penalty on it.

CCI dismisses BEST’s ‘abuse of dominance’ charge

against Tata Power over load shedding [LSI-265-

CCI-2015-(NDEL)]- CCI rejected information filed

by BEST (Transport Undertaking of Greater Mumbai

Municipal Corporation) against Tata Power Company

Limited - transmission division (TPC-T), alleging

unilateral shutting down of transmission points by

TPC-T in Mumbai city (which transmitted electricity

to Informant) amounted to abuse of Tata Power’s dominant position..Click here to read

more.

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How intellectual is intellectual property!!!

This section covers all the interesting happenings on

intellectual property law front..

HC expansively construes ‘place of business’, allows

combining of passing-off & infringement causes [LSI-

327-HC-2015-(BOM)] – Bombay HC ruled that,

“irrespective of whether the particular plaintiff, where

there are more plaintiffs than one, is entitled to the

relief in respect of the cause of action for infringement claimed in the suit, his (licensee) place

of residence or business would confer jurisdiction on the court to entertain the cause of action of

infringement in a jointly instituted suit”..Click here to read Bombay HC on principles of

jurisdiction in trademark infringement case.

HC : Sets aside Single Judge’s ‘hurried’ relief to

Micromax, explains ‘interim injunction’ rule [LSI-

323-HC-2014-(DEL)] - HC ruled that, “Only if a

Court were to find that so grave and so irreparable

is the injury that even a day’s delay cannot be

brooked, and so strong is the prima facie case made

out, only then would a Court be justified in

granting an ad-interim injunction and thereafter

proceeding to consider whether to confirm the

same or not after hearing the defendant”..Click

here to understand when interim injunction can be granted by courts.

HC: Asserts Court’s jurisdiction to hear trademark registration validity issue, interprets

Sec 28 literally [LSI-298-HC-2014-(BOM)] - In a trademark infringement suit, Bombay HC

held that “challenge to the validity of the registration of the trade mark can finally succeed

only in rectification proceedings before the Intellectual Property Appellate Board. However,

there is no express or implied bar taking away the jurisdiction and power of the Civil Court

to consider the challenge to the validity of the trade mark at the interlocutory stage by way

of prima facie finding”..Click here to read more.

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HC : Major relief for Glenmark; Similar name

‘Linezolid API’ doesn’t indicate identical product

[LSI-299-HC-2015-(DEL)] - Delhi HC division bench

set aside Single Judge interim order which granted

injunction against Glenmark (defendant) from making

Linezolid drug, which had similar key ingredients as

that in plaintiff’s patented process; Notes that Single

Judge did not examine whether active

pharmaceu

tical

ingredient

in plaintiff

and

defendant’

s drug were

identical as

required

u/s 104A of

Patents

Act..Click here to read appreciation of Senior

Advocate P. Chidambaram’s arguments by division

bench of Delhi HC.

HC: Drug patent rejection without notice of pre-

grant opposition, violates natural justice principles

[LSI-285-HC-2015-(DEL)] – Delhi HC allowed Gilead’s

writ petition against Patent Office’s order whereby

its patent application for Hepatitis C virus (HCV) drug

was rejected, without giving it notice u/s 25

regarding pre-grant oppositions filed by NATCO and

IMAK..Click here to read more.

IP Law Wrap-Up

HC : Protects 21 years old

show “AAP KI ADALAT”

from piracy & trademark

infringement [LSI-304-HC-

2014-(DEL)]

HC : ‘LAVASA’ in NCR

infringes ‘LAVASA’ in

Maharashtra, no co-incidence

in using similar ‘LAVASA’

[LSI-308-HC-2014-(DEL)]

HC : Honesty in adopting

mark no defence to

infringement; CS affirmed

plaint proper [LSI-307-HC-

2015-(BOM)]

HC : Relief to WWE, prevents

unjust enrichment of Indian

seller passing-off WWE

merchandise [LSI-306-HC-

2015-(DEL)]

HC : Grants permanent

injunction & punitive damages

for infringement of well-

known trademark [LSI-305-

HC-2014-(DEL)]

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(FEB. 2015 ISSUE)

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Master Class

A separate section where our experts speak on various rulings/ notifications or legal issues...

Entrenchment clause – Question mark on Validity!

Companies Act, 2013 introduces the provision of having ‘entrenchment’ clause in Articles of Association. An ‘entrenchment’ clause denotes a provision that makes certain amendments either more difficult or impossible. However, the Act does not define entrenchment nor does it specify the scope of entrenchment clause in the Articles.

The author, Vijay Kumar (Lawyer, Madras High Court), in his article defines ‘entrenchment’ referring to Oxford Law Dictionary. He further points out that, “Though there was nothing specific as “entrenchment” Clause in Companies Act, 1956, the Old Act did recognise the concept of additional legal safeguards and checks and controls through judicial decisions”, and refers to Supreme Court ruling in V.B. Rangaraj vs V.B Gopalakrishnan [73 Comp Cas 201]. In absence of any definition or explanation of such a clause in the statute, the author expresses his doubt on validity of such entrenchment clause, “The additional safeguard provided by the Entrenchment Clause will raise number of legal issues about their validity”.

Click here to read the illustrative article titled, “Entrenchment clause – Question mark on Validity!

Managerial Remuneration Conundrum - Cos Act. 1956 to the rescue?

Section 197 of Companies Act, 2013 relates to "Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits" and was made applicable on April 1, 2014. Whereas, Section 197(1) talks about ‘public company’, Section 197 (3) mentions only ‘company’, leading to confusion on its applicability of Section 197 to private companies.

The author, Subodh Dandawate (Company Secretary, Venkateshwara Hatcheries Pvt Ltd) in his article interprets Section 197 and states, “however the wording may be construed as ambiguous, sub-section (3) of section 197 does not apply to private companies in so far as payment of remuneration to managerial personnel is concerned in case it has no profit or its profits are inadequate”. The author also compares Section 198 of Companies Act, 1956 with Section 197 of Companies Act, 2013 (being corresponding sections) and suggests that when Section 198 of Companies

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(FEB. 2015 ISSUE)

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Act, 1956 excluded private companies, same had to be read into current amended provision. He says, “it could be legitimate to say that it takes colour and meaning as it may be given to it in first mentioned act i.e Companies Act, 1956... Where a provision is adopted in any later act such adoption by incorporation ordinarily and normally takes in all the amendments in the earlier act till then date of adoption.”

Click here to read the article titled, “Managerial Remuneration Conundrum - Cos Act. 1956 to the rescue?”