SEBI AND
CORPORATE LAWS
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Vol. 81, Part 4, for the week
of January 28 – February 3, 2008 |
CONTENTS
STATUTES
circular/press
note
rbi/nbfcs
- Regulatory framework for Mortgage Guarantee
Company - CIRCULAR NO.
DNBS/PD(MGC) C.C. 111/ 03.11.001/2007-08, DATED 15-1-2008
sebi
- Introduction of Volatility Index - CIRCULAR NO. DNPD/CIR-35/2007, DATED 15-1-2008
notification
- Section 57 of Prevention of Money Laundering Act,
2002 - Letter of request to Contracting State in certain cases - Specified
letter of request - NOTIFICATION
NO. S.O. 83(E), DATED 14-1-2008
rbi/nbfcs
- Section 45-I(f)(iii) of the Reserve
Bank of India Act, 1934 - Non-Banking Financial Company - Notified Non-Banking
Financial Company - NOTIFICATION
NO. DNBS (MGC) 1/CGM(PK)-2008, DATED 15-1-2008
- Section 45NC of the Reserve Bank of India
Act, 1934 - Power of bank to exempt - Notified Non-Banking Financial Company - NOTIFICATION NO. DNBS
(MGC) 2/CGM(PK)-2008, dated 15-1-2008
table
of cases
Brij Mohan Grover v.
O.L., High Court of Bombay (Bom.)
Enforcement
Directorate v. Sangeeta Granites Ltd. (ATFFE - New Delhi)
Jain (P.D.) v.
Oswal Agro Mills Ltd. (Punj. & Har.)
Jain (S.P.) v.
Official Liquidator (Punj. & Har.)
Mohd. Saleem,
Proprietor v. Enforcement Directorate (ATFFE - New Delhi)
Official Liquidator,
Metallic Soaps and Chemicals (P.) Ltd. (In Liquidation) v. Manager,
Karnataka State Financial Corpn. (Kar.)
Rydak Syndicate Ltd. v.
Roshanlal Agarwal (Cal.)
Shanth Kumar (K.N.) v.
The Printers (Mysore) (P.) Ltd. (CLB - Chennai)
Shree Rama Multi-Tech
Ltd. v. SEBI (SAT - Mum.)
VCCL Ltd. v.
Ram Karan (All.)
Vaishu Engineering
Industries Ltd. (In Liquidation) v. A.P. Industrial Development Corpn.
(AP)
subject index
Companies Act, 1956
Compromise and
arrangement
- Whether wide powers have been given to Company
Court to modify scheme of a compromise or arrangement as it may consider
necessary for proper working of compromise or arrangement and Court can
exercise these powers even suo motu without calling meeting of all
members or creditors at time of sanctioning scheme - Held, yes - Whether
workers of company, who were not paid their dues, were creditors of company
and, therefore, persons entitled to propose a scheme under section 391 - Held,
yes - Petitioner, who was shareholder and ex-managing director of company
in liquidation, filed petition seeking sanction of scheme of arrangement
between company and its shareholders, creditors and workers - Scheme was
approved by shareholders and creditors, but workers did not approve scheme and
suggested modifications therein - Whether since no objection had been raised to
scheme as modified by workers and said scheme was more advantageous to all
concerned, scheme as modified by workers should be sanctioned and scheme
proposed by petitioner was liable to be rejected - Held, yes - Brij
Mohan Grover v. O.L., High Court of Bombay (Bom.)
Oppression and
mismanagement
- Petitioner was director and editor of
respondent No. 1, a publishing company - He filed petition under section
397/398 complaining about his removal from post of editor and appointment of
respondent No. 2 as editor without sanction of board of directors - CLB, by an ex
parte interim order, directed respondents to maintain status quo
regarding position of petitioner as editor - Respondents sought for quashing of
said order, contending that it had been practice in company for managing
director to appoint editor and petitioner's appointment as editor was also not
by board of directors, but by respondent No. 2 who was occupying position of a
managing director and, thus, appointment of respondent No. 2 as editor of
publications followed by statutory declarations was decision taken by competent
person in normal course of business - Whether since in terms of articles of
association of company, power of managing director was not absolute, but only
subject to supervision, control and directions of board of directors,
appointment or removal of editor could be made only with sanction of board of
directors of company - Held, yes - Whether, therefore, board of
directors of company would convene meeting to deliberate and decide appointment
of editor and till that process was over, status quo in regard to
position of petitioner as editor would be maintained - Held, yes - K.N.
Shanth Kumar v. The Printers (Mysore) (P.) Ltd. (CLB - Chennai)
Winding up
Avoidance
of certain attachments, executions, etc.
- Whether sale effected by State Financial
Corporation of company’s property without leave of Court after commencement of
winding up proceedings was void in terms of section 537(1)(b) - Held,
yes - Official Liquidator, Metallic Soaps and Chemicals (P.) Ltd. (In
Liquidation) v. Manager, Karnataka State Financial Corpn. (Kar.)
- Whether after liquidation proceedings have
commenced, any attachment or sale of assets of said company, effected without
leave of Court and without association with Official Liquidator, would be null
and void - Held, yes - Whether once proceedings of BIFR
recommending winding up of company are received by registry, proceedings for
winding up would be deemed to have commenced and pending before High Court - Held,
yes - Whether where auction purchaser, after purchasing company’s property
in auction bona fide without having any notice of pendency of winding up
proceedings against company, had invested huge amount on purchased property and
Official Liquidator also did not move High Court immediately after sale or
within reasonable time, but after seven years, sale in favour of auction
purchaser could not be interfered with - Held, yes - Vaishu
Engineering Industries Ltd. (In Liquidation) v. A.P. Industrial
Deve-lopment Corpn. (AP)
Circumstances
in which a company may be wound up
- Respondent-company defaulted in payment of
dividend payable to appellant - Appellant filed winding up petition, but later
parties resolved their differences and, therefore, Company Court passed a
consent order - Respondent paid settled amount - Thereafter, appellant claimed
further interest under section 205A(4) - Single Judge of High Court dismissed
his application and, therefore, appellant filed instant appeal - Whether no
proceedings could have been initiated by appellant since respondent had agreed
to pay a sum of Rs. 1.51 crores as full and final amount settled between
parties for all claims which included claim of interest - Held, yes -
Whether application and appeal of appellant were a sheer misuse of process of
Court and there being no merit in appeal, same was liable to be dismissed - Held,
yes - P.D. Jain v. Oswal Agro Mills Ltd. (Punj. &
Har.)
- Whether in absence of any pleadings or prayer
for winding up of company on any of grounds mentioned in section 433, mere
filing of petition under heading of some of its sub-clauses, would not
automatically mean that there is a prayer for winding up of company - Held, yes
- Whether where petition was titled as company petition under section 433(c),
(d), (e) and (f), but, in substance, it contained
allegation that since proceedings were pending before Industrial Tribunal,
company be restrained from transferring or alienating property, during pendency
of those proceedings, Company Judge was justified in allowing petition - Held,
no - VCCL Ltd. v. Ram Karan (All.)
- Respondent’s petition for winding up of
appellant-company on ground that it failed to pay its dues was admitted by
Company Judge - Appellant challenged said order, inter alia, on ground
that respondent’s claim could not be adjudicated in summary proceedings -
Whether fact that during pendency of petition, appellant remitted certain
amount towards respondent’s dues and statement of appellant’s advocate before
Company Court that at best respondent’s claim could be of Rs. 3,49,000 and not
Rs. 5,50,417 as claimed by him showed that as on that date, said amount was due
and payable by appellant to respondent and, therefore, there was no reason to
interfere with order passed by Company Judge on given facts - Held, yes
- Rydak Syndicate Ltd. v. Roshanlal Agarwal (Cal.)
Preferential
payments
- Whether where liquidator retained possession
of leasehold premises even after termination of lease to ensure and facilitate
successful sale of assets of company-in-liquidation lying stored in that
premises, claim of landlord for mesne profits/rent would necessarily partake
nature of expenses of liquidation and would, thus, have to be accorded priority
in matters of payment - Held, yes - S.P. Jain v. Official
Liquidator (Punj. & Har.)
Companies Act, 1956
- Section 391
- Section 397/398
- Section 433
- Section 530
- Section 537
Foreign Exchange
Regulation Act, 1973
Payment for
exported goods
- Whether once RBI allowed exporter to write
off export proceeds, he could not be held guilty for contravention of section
18(2) - Held, yes - Mohd. Saleem, Proprietor v. Enforcement Directorate
(ATFFE - New Delhi)
- Respondent-company exported certain goods but
foreign buyers failed to pay price - Proceedings for contravention of sections
18(2) and 18(3) were initiated against respondent-company and its three
directors - Respondent contended that concerned buyers had become bankrupt and
untraceable - Adjudicating authority considering two letters filed by
respondents, i.e., one from some private agency relating to bankruptcy
of buyers and other from solicitors relating to untraceability of buyers,
dropped proceeding against directors, but imposed penalty on respondent-company
for not taking reasonable steps for repatriating outstanding export proceeds -
Enforcement Directorate filed revision petitions challenging impugned order on ground
that adjudicating authority should not have accepted said letters as proof of
bankruptcy or untraceability of foreign buyers - Whether field of appreciation
of evidence on facts solely lies within jurisdiction of adjudicating authority
and Tribunal cannot enlarge its jurisdiction by looking at evaluation of
evidence - Held, yes - Whether since adjudicating authority had accepted
those two letters as proof of contention of taking reasonable steps by
respondents and no evidence was brought by Enforcement Directorate against
acceptability of said letters, revision petitions were to be dismissed as
having no merits - Held, yes - Enforcement Directorate v. Sangeeta
Granites Ltd. (ATFFE - New Delhi)
Foreign Exchange
Regulation Act, 1973
- Section 18
SEBI (Prohibition
of Fraudulent and Unfair Trade Practices Relating to Securities Market)
Regulations, 2003
Prohibition of
manipulative, fraudulent and unfair trade practices
- Appellant-company’s shares were listed, among
others, on NSE and BSE - Board carried out investigations into trading of scrip
of company, which revealed that company and its directors provided funds
through ‘G’ to five clients, who were their associates, to enable them to
manipulate price of scrip of company - Board, after considering replies of
appellants, found company and its directors guilty of charge and, accordingly,
restrained them from accessing capital market for a period of five years -
Whether since there were some basic errors in charges against appellants which required
correction and matter qua appellants required reconsideration, impugned
order was to be set aside and matter was to be remanded back to Board to pass
fresh orders after obtaining fresh replies from appellants - Held, yes -
Shree Rama Multi-Tech Ltd. v. SEBI (SAT - Mum.)
SEBI (Prohibition
of Fraudulent and Unfair Trade Practices Relating to Securities Market)
Regulations, 2003
- Regulation 4
State Financial
Corporations Act, 1951
Rights of Financial
Corporations in case of default
- Whether powers conferred on Financial
Corporations under section 29 are restricted by virtue of provisions of section
529 of Companies Act - Held, yes - Vaishu Engineering Industries Ltd.
(In Liquidation) v. A.P. Industrial Development Corpn. (AP)
State Financial
Corporations Act, 1951
- Section 29
MAGAZINE
features
Company
law
r.
kalidas (Company Secretary)
- Law relating to interim dividend - An
analysis
Securities
Laws
priyadarshini
shetty
- Disgorgement - Its use and misuse?
Case Digest
table
of cases
Khamgaon Urban Co-op.
Bank Ltd. v. Karunashankar Ramkishore Tiwari (Bom.)
Srinivasa Rice &
Flour Mill v. Authorised Officer, State Bank of India (AP)
Subject
Index
Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002
Enforcement of
security interest
- Whether section 13(2), read with section 2(o),
only requires classification by a bank of a debt as ‘NPA’ within legislative
guidelines spelt out in definition of ‘NPA’; such a classification may, in a
given case, be expressed in a formal internal declaration; however, that course
of action is not condition precedent for proceeding under Act - Held, yes
- Whether, therefore, it is not required that word ‘NPA’ should be recorded in
every circumstance; if on a holistic consideration of relevant facts, bank is
satisfied that an account of borrower is doubtful/loss asset in accordance with
directions or guidelines issued on this aspect by RBI, an inference that
assessment and classification by bank, that it is ‘NPA’, has been properly
arrived at, must follow - Held, yes - Petitioner defaulted in prepayment
of term loan availed of for its business from respondent-bank - Bank decided to
recall its advances after account was determined as ‘NPA’ - Thereafter, on
request of petitioner, respondent agreed to a one time settlement (OTS), but
petitioner did not conform to terms of OTS and it was treated as inoperative -
Again on request of petitioner, respondent sanctioned a rehabilitation scheme
and released certain amount as working capital term loan to petitioner, but
that scheme also did not come upto expectation of respondent and petitioner
also failed to bring in margin money - Therefore, respondent issued notice
under section 13(2) - Whether on facts, categorisation of account of petitioner
as ‘NPA’ by respondent-bank could be said to be arbitrary or contrary to
provisions of Act or without application of mind - Held, no - Whether,
therefore, petitioner’s writ petition challenging notice issued under section
13(2) was to be dismissed - Held, yes - Srinivasa Rice & Flour
Mill v. Authorised Officer, State Bank of India (AP)
- Whether a suit for specific performance,
where no relief is sought against a secured creditor and where action under
section 13(4) is not being hindered, can always be maintainable; however,
prayer for specific performance of agreement to sell would get frustrated, once
action under sub-section (4) of section 13 is complete and reaches finality - Held,
yes - Whether any person, who is aggrieved by measures taken under section
13(4) by financial institution, can prefer an appeal and DRT, as a forum of
challenge, will consider question as to whether measures taken by financial
institution under section 13(4) are in accordance with provisions of Act, but
where plaintiff seeks any restraint against any action taken by secured
creditor under section 13(4), jurisdiction of civil court to scrutinise such
action is ousted - Held, yes - Khamgaon Urban Co-op. Bank Ltd. v.
Karunashankar Ramkishore Tiwari (Bom.)
Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002
- Section 13