SEBI AND CORPORATE LAWS
|
Vol. 82, Part 1, for the week of February 18 – February 24, 2008 |
Contents
circular/press
note
rbi/fema
- Exim Bank’s Line of Credit of USD 35.20
million to the Government of the Kingdom of Combodia - A.P. (DIR series)
Circular no. 27, dated 5-2-2008
- Memorandum of Instructions for Opening and
Maintenance of Rupee/Foreign Currency Vostro Accounts of Non-resident Exchange
Houses - A.P.
(DIR series) Circular no. 28/a.p. (fl/rl series) circular no. 02, dated
6-2-2008
sebi
- SEBI (Issue and Listing of Debt Securities)
Regulations, 2008/SEBI (Public Offer and Listing of Securitized Debt
Instruments) Regulations, 2008/SEBI (Intermediaries) Regulations,
2008/Amendment to SEBI (Mutual Fund) Regulations, 1996 - press release no.
24/2008, dated 30-1-2008 2
- ‘Art Funds’ Covered by Collective Investment
Scheme - press
release no. 44/2008, dated 13-2-2008
circular/press
release
sebi
- Amendment to Securities Contracts
(Regulation) Rules proposed - press release, dated 1-2-2008
notification
industries
(development and regulation) act
- Section 29B of the Industries (Development
and Regulation) Act, 1951 - Power to exempt in special cases - Amendment in
Notification No. S.O. 477(E), dated 25-7-1991 - notification no. s.o. 246(e), dated 5-2-2008
rules/regulations
insurance
matters
- Insurance Regulatory and Development
Authority (Obligations of Insurers to Rural or Social Sectors) (Third
Amendment) Regulations, 2008 - Amendment in regulation 3; insertion of
regulations 3B, 4A, 5, 6 and 7 - notification f. no. irda/reg/1/42/2008, dated
3-1-2008
- Insurance Regulatory and Development
Authority (Obligations of Insurers to Rural or Social Sectors) (Fourth
Amendment) Regulations, 2008 - Amendment in regulation 3 - notification f. no.
irda/reg. 2/13/2008, dated 25-1-2008
secretarial
standards
companies
act
- Secretarial Standard on Minutes (SS-5)
- Secretarial Standard on Transmission of
Shares and Debentures (SS-6)
table
of cases
Bapi Construction v.
Pronob & Co. (P.) Ltd. (Cal.)
Harinarayan G. Bajaj v.
Union of India (Bom.)
On Line Media
Solutions Ltd., In re (AP)
Oswal Agro Furane
Ltd., (In Liquidation), In re (Punj. & Har.)
Pearl Stripes (P.)
Ltd. v. Secure Industries Ltd. (All.)
Sonbhadra Minerals
(P.) Ltd. v. Saxena (S.K.) (All.)
Tax Recovery Officer v.
Custodian (SC)
subject index
Companies Act, 1956
Share capital
Reduction
of
- Petitioner-company filed petition seeking confirmation
of proposal to reduce paid-up capital so as to bring parity with its assets and
also to write off accumulated losses - Articles of association of petitioner
enabled it to reduce its share capital in accordance with section 100 and
shareholders of petitioner, in their annual general meeting, confirmed that
proposal, by passing special resolution - Company had no secured creditors and
two unsecured creditors had given their consent to reduction of capital -
Reduction in share capital was uniform to all shareholders and was applicable
to entire paid-up capital - Whether, on facts, proposal to reduce share capital
was to be confirmed - Held, yes - On Line Media Solutions Ltd., In
re (AP)
Winding up
Circumstances
in which a company may be wound up
- Appellant filed winding up petition against
respondent-company, alleging that goods sold and supplied by it were not paid
for - Respondent’s case was that appellant’s demand was in respect of three
introductory supplies which, not being as per respondent’s specification, had
been returned to it and if appellant contended that it had not taken back said
supplies, it should explain as to why it had not demanded payment therefor
immediately but after more than one year - Company Judge refused to admit petition
holding that respondent’s defence was not mala fide or moonshine -
Whether on facts, Company Judge was justified in dismissing winding up petition
filed by appellant - Held, yes - Pearl Stripes (P.) Ltd. v.
Secure Industries Ltd. (All.)
- In respect of three purchase orders issued on
respondent-company for supply of material, petitioner paid certain sum to
company as advance - As company supplied material against two purchase orders
only, petitioner after adjusting company’s bills for supplies, demanded refund
of balance advance - In response to statutory notice, respondent contended that
by issuing two letters, it had reminded petitioner that due to petitioner’s
failure to lift goods, it had incurred heavy loss and after adjusting balance
advance against such loss, petitioner itself was liable to pay certain amount
to respondent-company - Petitioner admitted receipt of said letters and
produced same - It was found that both letters were bland demands for supply of
sales tax declarations forms - Whether, on facts, company’s defence was without
any basis and, therefore, petition was to be admitted - Held, yes - Bapi
Construction v. Pronob & Co. (P.) Ltd. (Cal.)
Overriding
preferential payment
- Subsequent to winding up order and sale of
assets of company-in-liquidation, workers filed an application before High
Court seeking a direction to Official Liquidator to settle their claim - Court
directed Official Liquidator to appoint a chartered accountant for scrutiny of
workers’ claim and to settle their claims on basis of said report - Chartered
accountant, so appointed, classified claims of workers under section 529A and
claims of 33 employees under section 530 - Workmen conveyed acceptance to
report of chartered accountant in respect of claims classified under section
529A, but in respect of claims classified under section 530, it was stated that
fresh claims would be submitted - However, Official Liquidator, without seeking
further evidence in terms of rule 159 and without accepting/rejecting claims of
employees classified under section 530, sought approval of Court as if their
claims fell under section 529A and after Court permitted him to pay dues of
workmen as per report of chartered accountant, he paid all workmen including
aforesaid 33 employees - Whether since claim of 33 employees had been paid
without any acceptance of claims by Official Liquidator and on
misrepresentation by Official Liquidator to Court, disbursement made to said
employees was wholly unjustified, illegal and without jurisdiction - Held,
yes - Whether, therefore, said 33 employees were to be directed to refund
amount disbursed to them and Official Liquidator was to be directed to consider
and pass appropriate order after adjudicating claim of employees classified
under section 530 in terms of report of chartered accountant - Held, yes
- Oswal Agro Furane Ltd., (In Liquidation), In re (Punj. &
Har.)
Powers
of liquidator
- Whether though Official Liquidator, under
Court’s supervision, has jurisdiction to sell only assets of company-in-liquidation,
Act does not prohibit Company Court to include an asset held by promoters, on
their representation, which is integral part of sale or may be necessary to be
included to make sale more attractive - Held, yes - A company, wholly
owned and controlled by State Government, was ordered to be wound up - Tenders
were invited for sale of assets of company-in-liquidation - Assets offered for
sale also included certain mines, adjacent to factory of company, owned by
State Government - Sale was confirmed in favour of highest bidder after
receiving valuable consideration - In course of proceedings, Court was informed
about some illegal mining going on in said mines and interim orders were passed
restraining illegal mining activities - Applicant sought to recall those
injunction orders, alleging that aforesaid mines, despite being in close
proximity of factory premises of company-in-liquidation, were never its assets
and Company Court had no jurisdiction to sell any property which was not asset
of company-in-liquidation; and that those mines were subject of joint venture
agreement and State Government had accorded approval for renewal of mines and
permitted applicant to carry out mining activities in that area and, thus, it
was wrongly restrained to carry on its legitimate and lawful mining activities
- Whether since State Government, being guarantor to loans given by banks and
financial institutions to company-in-liquidation, was interested to secure best
available price to discharge its contractual liabilities and, therefore, agreed
to add some more assets and offered reliefs and concessions to make sale more
attractive for expeditious disposal of assets of company-in-liquidation for
benefit of secured creditors including banks and financial institutions and about
6,000 workmen starving for last eight years, Court would not allow applicant to
intermeddle in matter, particularly when it had not brought on record necessary
approvals of mining operations to demonstrate that it was carrying on valid and
legal mining activity in that area - Held, yes - Whether, therefore,
application was liable to be rejected - Held, yes - Sonbhadra
Minerals (P.) Ltd. v. S.K. Saxena (All.)
Companies Act, 1956
- Section 100
- Section 433
- Section 457
- Section 529A
SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1994
Applicability of
regulation
- Whether an indirect takeover of a company, by
acquiring control of a corporate body, which holds a large percentage of shares
of target company, attracts provisions of 1994 Regulations and Listing
Agreement and makes it mandatory for acquirer-company to make public
announcement/offer - Held, no - Whether if there is no acquisition of
shares in a target company, provisions of Chapter III do not get triggered - Held,
yes - Whether Chapter III does not apply to acquisition of shares of companies
(formed and registered under the Companies Act, 1956 or earlier Companies Acts)
which are not listed on any stock exchange - Held, yes - Respondent No.
4, a foreign company, held 51 per cent shareholding in respondent No. 3, target
company listed in India - Respondent No. 4 was a hundred per cent subsidiary of
another foreign company ‘E’, which, in turn, was a wholly owned subsidiary of
respondent No. 5, another foreign company (MITSUI Group) - Before respondent
No. 4 became a hundred per cent subsidiary of ‘E’, it was a hundred per cent
subsidiary of LIVA, which was owned by a consortium of companies held by RIVA
Group - In course of time, shareholding of respondent No. 4 changed hands from
LIVA to ‘E’ and, therefore, control and management of respondent No. 3 passed
on from RIVA Group to MITSUI Group - Petitioner alleged that acquisition of
respondent No. 3 by respondent No. 5 through respondent No. 4 was in violation
of 1994 Regulations and was also in violation of provisions of clauses 40A and
40B of Listing Agreement of Stock Exchange - Whether since no shares/securities
were acquired in respondent No. 3 by any entity and only ownership of
respondent No. 4 changed, transaction did not come within ambit of provisions
of 1994 Regulations - Held, yes - Harinarayan G. Bajaj v. Union
of India (Bom.)
Takeovers
- Acquisition of 10 per cent or more of shares
of any company through negotiations - Whether expression ‘securities’ in regulation
9(3) clearly and obviously refers to securities of target company and not
securities of a company which holds shares in target company - Held, yes
- Harinarayan G. Bajaj v. Union of India (Bom.)
SEBI (Substantial
Acquisition of Shares and Takeovers) Regulation, 1994
- Regulation 3
- Regulation 9
SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997
Applicability of
regulation
- Whether indirect acquisition of shares or
change in control has been introduced for first time by 1997 Regulations - Held,
yes - Harinarayan G. Bajaj v. Union of India (Bom.)
Repeal and savings
- Whether SEBI (Substantial Acquisition of
Shares and Takeovers) Regulations, 1994, on being repealed by 1997 Regulations,
would be restricted in their operation as given in regulation 47, which
provides for repeal and savings, but insofar as changes introduced by 1997
Regulations are concerned, particularly those provisions, which are substantive
in nature and did not exist in 1994 Regulations, will have to be read in
context of regulations which stand substituted - Held, yes - Harinarayan
G. Bajaj v. Union of India (Bom.)
SEBI (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997
- Regulation 3
- Regulation 47
Special Court
(Trial of Offences Relating to Transactions in Securities) Act, 1992
Special Court
Powers
of
- Company ‘D’ was notified under Act and its
assets stood attached to Special Court - ‘K’ owed substantial amount of money to
‘D’ - On recovery suit filed by Custodian on behalf of ‘D’, decree was passed
against ‘K’ in execution of which, properties of ‘K’ were put to auction and
money was realized - At that stage, Tax Recovery Officer filed intervention
application before Special Court praying to restrain Custodian from
distributing sale proceeds without first satisfying claim of Income-tax
Department against ‘K’, which was pending for recovery - Application was
rejected by Special Court as not maintainable - Whether in view of section 9A,
jurisdiction of Special Court is in relation to any matter or claim relating to
any property belonging to any person notified under Act and since, in instant
case, notified party was ‘D’ and not ‘K’, application moved by Income-tax
Department for realization of its income-tax dues from ‘K’ was rightly rejected
- Held, yes - TRO v. Custodian (SC)
Special Court
(Trial of Offences Relating to Transactions in Securities) Act, 1992
- Section 9A
MAGAZINE
features
FOREIGN
EXCHANGE LAWS
MANOJ
FOGLA
- A critique of the proposed Foreign
Contribution (Regulation) Bill, 2006
securities
laws
Tulika
Sinha
- Role of stock exchange in development of
economy
Case Digest
table
of cases
Branch Manager, Indian
Bank v. Krishnamoorthy (Ker.)
Indian Steel & Wire
Products Ltd. v. Kothari Metals Ltd. (Cal.)
Subject
Index
Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002
Civil Court not to
have jurisdiction
- Respondent-borrower filed suit seeking decree
for permanent injunction restraining petitioner-bank from trespassing into his
plaint property - Petitioner filed interim application contending that suit was
not maintainable by virtue of section 34 - Trial court, however, dismissed said
application - Whether when respondent did not dispute amount due and did not
claim that notice sent under section 13(2) was bad for non-mentioning details
as provided under section 13(3), he was not entitled to circumvent provisions
of Act or avoid bar under section 34 - Held, yes - Whether, therefore,
it was absolutely clear that suit was barred under provisions of section 34 - Held,
yes - Branch Manager, Indian Bank v. Krishnamoorthy (Ker.)
Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002
- Section 34
Sick Industrial
Companies (Special Provisions) Act, 1985
Suspension of legal
proceedings, contracts, etc.
- Whether if BIFR sanctions a scheme making
provision for payments over several years to creditors, whose dues are reflected
in company’s records up to a specified date, then dues of later creditors would
not be covered by said scheme - Held, yes - Whether if BIFR, in a
sanctioned scheme, does not provide for payment to some creditors, whose dues
are reflected in sick company’s books, then it is not to be easily concluded
that such creditors need not be paid at all, unless there is specific provision
therefor, which is subject to appeal and judicial review - Held, yes -
Whether an ordinary right of a supplier to receive payment for his wares can be
deemed to have evaporated upon his claim not finding mention in scheme
sanctioned by BIFR - Held, no - On a reference, a rehabilitation scheme
was sanctioned by BIFR on 20-12-2003 - Petitioners claimed to have effected
supplies to company during 2002-03 and 2003-04 - Whether embargo of section 22
was applicable in case of petitioners - Held, no - Whether petitioners’
claim could be disregarded merely because scheme was sanctioned at a time
subsequent to entirety or part of their payments having fallen due - Held,
no - Indian Steel & Wire Products Ltd. v. Kothari Metals Ltd.
(Cal.)
Sick Industrial
Companies (Special Provisions) Act, 1985
- Section 22