MONTHLY NEWSLETTER
(FEB. 2015 ISSUE)
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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?”
MONTHLY NEWSLETTER
(FEB. 2015 ISSUE)
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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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(FEB. 2015 ISSUE)
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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
MONTHLY NEWSLETTER
(FEB. 2015 ISSUE)
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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
MONTHLY NEWSLETTER
(FEB. 2015 ISSUE)
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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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(FEB. 2015 ISSUE)
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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.
MONTHLY NEWSLETTER
(FEB. 2015 ISSUE)
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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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(FEB. 2015 ISSUE)
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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)]
MONTHLY NEWSLETTER
(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
MONTHLY NEWSLETTER
(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?”