Vol-XXV-2013-2nd
| July 2013
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th
Edition
EDITORIAL
- Bhargesh Ojha
“We need to call out those who are responsible for cyber theft and empower the
president to hit the thieves where it hurts most — in their wallets…….”
- Carl Levin, US Senator and co-sponsor of the Deter Cyber Theft Act
In the 20th edition of the Lex Scripta we had quoted General Keith Alexander's warning to
American legislators that cyber theft of intellectual property was leading to the 'greatest
transfer of wealth in history'. With global cyber theft amounting to around $388 billion and an
additional one trillion USD spent on remediation the General's warning is not exaggerated. In
fact the US Congress has paid heed to this warning, and with a view to protect business and
innovation from cyber theft, has enacted the Deter Cyber Theft Act.
A landmark legislation, the Deter Cyber Theft Act aims legislative wrath at foreign
governments, corporations and individual hackers who acquire trade secrets and other
valuable intellectual property from American entities through cybercrime. The Act
recognizes that American companies that invest billions in innovation and research and
development are falling victim to theft of their valuable intellectual property to foreign
entities. These entities then use this stolen technology to sell products cheaply which puts
such American companies at a severe competitive disadvantage. The Act penalizes
corporations and governments that sponsor or benefit from cyber crime by blocking their
products from accessing the lucrative US market and also placing other economic sanctions.
Individual hackers are also not spared as they can have their US assets frozen or their and their
families' visas revoked.
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Team Lex Scripta : Akhil Kumar| Amrita Shetty | Anirban Ghosh
In This Issue
EDITORIAL ..............................
Predatory Pricing ......................
Law and Practice ......................
Legal Potpourri ........................
Did You Know ? .......................
In House News !! .....................
Gowns And RobesThe Funny Side !!! ....................
Lex Scripta Recommends !!!.......
Disclaimer
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India too must elevate combating cyber theft as a national security priority and Indian lawmakers need to enact a similar legislation
before disaster strikes. India is growing as an innovation hub with several corporations setting up their R&D centres in the country and an
enactment like the Deter Cyber Theft Act will give a boost to innovation and give India Inc. the confidence that its valuable intellectual
property is protected.
Moving on from issues of national security in the cyber world, we welcome you to the 25th edition of the Lex Scripta. Our feature article
takes an analytical look at predatory pricing and its effects on competition, an important focus of competition law in the country. In our
new section titled 'law and practice' we bring you a write up on court procedures that explores the interesting question of whether marking
a document as an exhibit in a civil suit amounts to judicial opinion as to its proof. This new section also provides an update on an
important amendment to stamp laws in the state of Maharashtra.
Of course we have our other regular features- Did You Know- explaining various legal doctrines and principles and our recommendations
of movies and books to fuel your interest in the law.
We once again remind you of our Learning the Law feature through which we invite your suggestions on topics/legal issues on which you
would like to read an article. Do write in with your topics and we shall endeavour to present an article on a topic of your choice. As always,
we invite and look forward to your comments, suggestions and feedback on this edition of the Lex Scripta. Please do write in to us at
[email protected]. We greatly appreciate your feed back.
Happy Reading !!!
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(a) directly or indirectly, imposes unfair or discriminatory -
PREDATORY
PRICING
- Aditi Shroff
The Competition Act, 2002 (“the Act”) defines
a predatory price as the sale of goods or
provision of services, at a price which is below
the cost, as may be determined by regulations,
of production of the goods or provision of
services, with a view to reduce competition or
eliminate the competitors. In other words,
predatory pricing is the sale of goods or
services at a price that is lesser than its cost in
order to reduce, eliminate or purge
competition.
The Act primarily governs three broad
categories - (i) Anti-competitive agreements;
(ii) Abuse of dominant position; and (iii)
Combinations. Predatory pricing is a form of
abuse of dominance falling within the purview
of Section 4 of the Act. Section 4 has been
reproduced below for your reference:
“Abuse of dominant position
4.
(i)
condition in purchase or sale of goods or service; or
(ii) price in purchase or sale (including predatory price) of goods
or service.
Explanation. - For the purposes of this clause, the unfair or discriminatory condition in
purchase or sale of goods or service referred to in sub-clause (i) and unfair or
discriminatory price in purchase or sale of goods (including predatory price) or
service referred to in sub-clause (ii) shall not include such discriminatory condition or
price which may be adopted to meet the competition; or
(b) limits or restricts (i)
production of goods or provision of services or market therefor; or
(ii)
technical or scientific development relating to goods or services to the
prejudice of consumers; or
(c) indulges in practice or practices resulting in denial of market access in any
manner; or
(d) makes conclusion of contracts subject to acceptance by other parties of
supplementary obligations which, by their nature or according to
commercial usage, have no connection with the subject of such contracts; or
(e) uses its dominant position in one relevant market to enter into, or protect,
other relevant market.
Explanation.—For the purposes of this section, the expression—
(a) "dominant position" means a position of strength, enjoyed by an enterprise,
in the relevant market, in India, which enables it to—
(1) No enterprise or group shall abuse its
dominant position.
(i)
(2) There shall be an abuse of dominant
position under sub-section (1), if an
enterprise or a group.—
(ii) affect its competitors or consumers or the relevant market in its favour.
operate independently of competitive forces prevailing in the relevant
market; or
(b) "predatory price" means the sale of goods or provision of services, at a. price
which is below the cost, as may be determined by regulations, of production
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of the goods or provision of services,
with a view to reduce competition or
eliminate the competitors.
(c) “group” shall have the same meaning
as assigned to it in clause (b) of the
Explanation to section 5.”
An enterprise is said to be in a dominant
position when it has a strong economic hold in
the market and is unaffected by other players in
the market. The Act states that an enterprise is
said to abuse its dominant position when it
directly or indirectly imposes any unfair or
discriminatory condition or price, in purchase
or sale of goods or services. The legislature
seeks to prohibit any such behaviour of an
undertaking whereby it attempts to abuse its
dominant position, in turn affecting the
harmonious functioning of the market.
However, it may be worthwhile to note that the
Act does not seek to prohibit an enterprise from
attaining a dominant position; it only seeks to
prohibit the abuse of such dominant position.
The European Court of Justice in United
Brands v. Commissioni has stated the key
elements of dominance: “The dominant
position ... relates to a position of economic
strength enjoyed by an undertaking which
enables it to prevent effective competition
being maintained on the relevant market by
affording it the power to behave to an
appreciable extent independently of its
competitors, customers, and ultimately of its
consumers.”
The question to ponder is why do enterprises indulge in predatory pricing? The answer
to the question is enterprises resort to predatory pricing to strengthen their position in
the market. An enterprise, particularly a dominant one, first reduces its prices to a level
much below the market price which in turn has a hostile effect on the other contenders
in the market. When the other contenders are expelled from the market, the dominant
enterprise raises its price again. In the United States, position of predatory pricing is
determined by the ratio in Brook's case.ii As per the decision, a plaintiff is required to
satisfy two tests – a plaintiff must prove that the alleged predatory price is below the
appropriate measure of defendant's cost and that the defendant would be able to
recoup its investment in below cost price. In reality, the fact of predation is only
established once the rival has left the market and the predator has acquired a monopoly
position in the market.iii
Determination of Cost under Competition Commission of India (Determination
of Cost of Production) Regulations 2009 (“the Regulations”)
Selling below the cost is the primary factor taken into consideration when determining
predatory behaviour of an enterprise. However, it is extremely difficult to make a
distinction between predatory pricing and pro-competitive pricing. The Regulations
lay down the various types of cost in order to ascertain a predatory price:
“Average Variable Cost” means total variable cost divided by total output during the
referred period;iv “Total Cost” means the actual cost of production including items,
such as cost of material consumed, direct wages and salaries, direct expenses, work
overheads, quality control cost, research and development cost, packaging cost,
finance and administrative overheads attributable to the product during the referred
period;v
“Total Variable Cost” means the total cost minus the fixed cost and share of fixed
overheads, if any, during the referred period;vi
“Total Avoidable Cost” means the cost that could have been avoided if the enterprise
had not produced the quantity of extra output during the referred period;vii
“Average Avoidable Cost” is the total avoidable cost divided by the total output
considered for estimating 'total avoidable cost';viii
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“Long Run Average Incremental Cost” is the
increment to long run average cost on account
of an additional unit of product, where long run
cost includes both capital and operating costs;ix
“Market Value” means the consideration
which the customer pays or agrees to pay for a
product which is sold or provided or can be
sold or provided, as the case may be;x
The CCI in MCX Stock Exchange Ltd. Vs.
National Stock Exchange of India Ltd.xi has
discussed the appropriate methods to
determine cost. It states, “…..Based on
documents such as the 2008 report of US
Department of Justice on Single Firm Conduct
under section 2 of the Sherman Act and Review
of Article 82 EC and the publication by DG
Competition (European Commission) of 2005
Discussion Paper on EC Exclusionary Abuses,
the DG report observes that average variable
cost (AVC) is not taken as a reliable method of
costing. More reliance is placed on average
avoidable cost (AAC) which represents losses
that could have been avoided by not producing
that output which was charged lower during
the referred period….. As yet, there is no
complete unanimity in international
jurisdictions over what may be the best cost
measure to evaluation predation claims. The
limitations of AVC and AAC forced an
inclination towards long run average
incremental cost (LAIC or LRAIC) as an
appropriate cost measure for assessing
predation. Unlike AVC, LAIC includes all products specific fixed costs whether
recoverable or sunk. It also includes costs incurred before predation period.”
Legal Position - Predatory Pricing in India
In H.L.S. Asia Limited vs. Schlumberger Asia Services Ltd.,xii it was alleged that the
Opposite Party was indulging in predatory pricing. The brief facts are that Oil &
Natural Gas Corporation Limited floated an e-tender in respect of wireline logging
and perforation services required for Oil & Natural Gas exploration. The allegation of
the Informant was that Opposite Party quoted unreasonably low rates for the standard
services which were to be the basis for evaluation of tender while considering the
financial bid of the parties. The CCI held “….in order to make out a case for predatory
pricing, it is necessary for a party to show as to what was the cost of providing services
to the party who resorted to predatory pricing and how the cost at which service was
being provided to the customer was lower than the cost to the party…..
……A party bidding for the provision of a service takes into account cost of his
equipment, the life of equipment, the maintenance requirements of equipment, the
operational cost and some reasonable returns on the capital invested. A party will bid
at a price which is equal to the minimum of its' average variable cost to exploit scale
economies. It will be not prudent for abiding firm to keep its capacity idle and bid at a
price higher than its minimum average variable cost. Hence, the aspect of predatory
pricing has to be looked from an appropriate cost benchmark.”
The case against the Opposite Party was dismissed as the Opposing Party was able to
prove that over a period of time, the prices of standard services had been falling from
2008 onwards (owing to recession and discovery of shale gas in USA and
development of technology to extract shale gas economically, which had considerably
reduced dependence of US on conventional fuel and had brought pressure for
reduction of price in normal exploration of offshore and onshore oil and gasses) and
even the price quoted by the Informant had been lower than the price quoted by
Informant in the previous tender. The decrease in the price of different players has
been up to 36%. The Informant also reduced its quoted price by 21% from the
estimates given by ONGC. Another factor stated was that on the last occasion when
tender was floated, there were only 4 bidding parties and this time there were 10
competing parties. Thus it was the increase in competition and global market scenario
that lead to reduction in prices.
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In another case MCX Stock Exchange Ltd. Vs.
Conclusion
xiii
National Stock Exchange of India Ltd., the
CCI concluded that NSE had was behaving in a
predatory manner on basis of its acts such as
fee waivers, denial of Application Programme
Interface Code (APIC) and distribution of a
software namely NOW for free were clear acts
of protecting its position in the currency
derivatives (CD) segment and was possible
due to its position of strength in the non CD
segment. CCI held that “…..Had NSE and
MCX-SX been on equal footing in terms of
resources directly available, spectrum and
scale of operation, nationwide presence,
length of existence etc. perhaps perception of
unfairness would not have been so blatant and
impossible to ignore, but in this case, the sense
of the two being equal or even almost equal
does not exist. Therefore, this Commission
concludes that the zero price policy of NSE in
the relevant market is unfair. In this case, the
conduct of zero pricing by the NSE is beyond
the parameters of promotional or penetrative
pricing. It can, in fact, be termed as
annihilating or destructive pricing……..
Therefore, it is concluded that NSE has used its
position of strength in the non CD segment to
protect its position in the CD segment.”
All prices that are below the cost may not be a result of predatory pricing. The
Supreme Court in Haridas Exports vs. All India Floating Glass Mfrs. Association and
Orsxiv held that in all situations, availability of goods outside India at prices lower than
those that are indigenously produced would encourage and would not necessarily per
se eliminate competition in India, as long as buyers benefit from such a situation. To
conclude, predatory pricing acts as an entry barrier. It prevents new firms from
accessing the market due to the unfair prices charged by the enterprise, thus having a
detrimental effect on consumers as well.
i
Case 27/76 United Brands Company and United Brands Continental BV vs. Commission of the European
Countries [1978] ECR 207
ii
Brooke Group Ltd. vs. Brown & Williansom Tobacco Corp.; 509 U.S 209 (1993)
iii
Raghavan High Level Committee on Competition Law and Policy, 2000
iv
Regulation 2 (b) of Competition Commission of India (Determination of Cost of Production) Regulations 2009
v
Regulation 2 (c) (i) of Competition Commission of India (Determination of Cost of Production) Regulations 2009
vi
Regulation 2 (c) (ii) of Competition Commission of India (Determination of Cost of Production) Regulations 2009
vii
Regulation 2 (c) (iii) of Competition Commission of India (Determination of Cost of Production) Regulations 2009
viii
Regulation 2 (c) (iv) of Competition Commission of India (Determination of Cost of Production) Regulations 2009
ix
Regulation 2 (c) (v) of Competition Commission of India (Determination of Cost of Production) Regulations 2009
x
Regulation 2 (c) (vi) of Competition Commission of India (Determination of Cost of Production) Regulations 2009
xi
Case no. 13/2009
xii
Case no. 80/2012
xiii
Case no. 13/2009
xiv
AIR 2002 SC 2728
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LAW AND
PRACTICE
-Yogesh singh Rohilla
Marking Exhibits on documents in Civil
Suits
We have found advocates in courts generally
taking objections (document is not proved,
document in original has not been filed, only a
copy has been filed, witness does not have
personal knowledge of the contents of the
documents etc.) at the time of tendering the
documents in evidence on the point of marking
such documents as exhibits. During my
practice in Delhi courts I asked several lawyers
about the provisions relating to marking
documents as exhibits but could not find any
satisfactory explanation. I have not come
across any statutory provisions on point. The
questions, which are often posed before courts
having original jurisdiction in civil suits, are
relevant for the purpose of this article. Can a
document be marked as an exhibit only when it
has been proved? Does mere endorsing of an
exhibit mark on a document amount to
expression of judicial opinion on its proof?
Delhi High Court in Sudhir Engineering Co.
Vs. Roadways Ltd. has dealt with the matter at
length. At the request of the court members of
the Bar stated that a document cannot be
marked until it is proved. Once the document is marked exhibit, the other party cannot
contend at final hearing that the document was not duly proved. Members of the Bar
further stated that (i) the documents admitted by opposite parties at the stage of
Admission-Denial are marked EX.P-1, P-2 (documents filed by Plaintiff) or D-1, D-2
(documents filed by Defendant)and so on. (ii)Documents which are tendered during
examination of witnesses of Plaintiff are marked as PW1/1 PW1/2, PW2/1, PW2/2,
and those tendered by witnesses of Defendant as DW1/1, DW1/2, DW2/1 and so on;
the earlier part denoting the number of witness and latter part denoting number of
document. (iii) The documents insisted to be marked exhibit by one party and opposed
by other party are marked as Ex. A, Ex. B and so on i.e. by using alphabet and not a
number.
The court requested the members of the Bar to show the source of this practice but no
one could show any such source and the court presumed that there was none. The court
analyzed the law on the point and observed that a document passes through three
stages before it is held as proved or disproved.
1.
When a document is filed in the court. The document though is on file but does
not make part of the judicial record.
2.
When a document is tendered in evidence by a party and the court admits the
document in evidence. Such document becomes part of the judicial record.
3.
When the court is called upon to apply its judicial mind to hold it proved, not
proved or disproved as per section 3 of the Indian Evidence Act. This stage
generally arrives at final hearing of suit.
The court further quoted Order XIII Rule (4) sub rule (1) which provides for
endorsement on every document which has been admitted in evidence in a suit by
writing on it number and title of the suit, name of the person who produced the
document, date of its being so produced, a statement of its being so admitted in
evidence. The endorsement needs to be signed by the Judge.
The court observed that mere admission of document in evidence does not amount to
its proof. The right of a party to argue that the document was not duly proved cannot be
taken away just because the party did not object to its admissibility. For example a
party cannot be excluded from arguing at final hearing that the Will was not duly
proved although the Will is exhibited. Supreme Court in Sait Taraji Khimechand Vs.
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Yelamarti Satvan laid down that mere marking
conveyance, lease etc.) on the persons executing the instruments e.g. mortgagor,
of exhibit does not dispense with the proof of
purchaser, lessee etc. in the absence of any contract to the contrary.
document. Two Division Benches of Lahore
High court have held that admission of
documents under Order XIII Rule (4) does not
bind the parties and unproved documents
cannot be regarded as proved nor they become
evidence in the case without formal proof.
The court analyzed Delhi High Court (Original
Side) Rules1967and Original Side Practice
Direction (No. 3 of 1974) and observed that
marking of exhibit by court master on a
document is 'admission in evidence' and not
proof of a document. Admission of document
and proof of a document are two different
stages and not to be confused with each other.
The marking of a document as an exhibit, be it
in any manner either by use of alphabets or
numbers, is only for the purpose of
identification. So, when documents admitted
in evidence an endorsement as exhibit may be
marked on it and the document would be held
Instruments executed on or after 1st May 2013: Now a new section 30A has been
inserted by the Maharashtra Tax Laws (Levy and Amendment) Act 2013vide
Notification dated 25th April 2013 which shifts the responsibility of payment of stamp
duty on the instruments executed in favour of Financial Institution (including banks,
NBFCs, HFCs and the like) on or after 1st May 2013 and creating any right in favour
of such Financial Institutions; from persons as mentioned in Section 30 to such
Financial Institutions. The new section 30A has been given overriding effect over
section 30. Financial Institutions may collect amount of stamp duty from the other
party (borrower, mortgagor etc.) if they have any such right to collect such amount of
stamp duty from the other party. Financial Institutions should incorporate in security
documents or financial documents or any other agreement a covenant to this effect in
order to create a right to collect or recover the amount of stamp duty paid or to be paid.
Instruments executed before 1st May 2013: Section 33 of Bombay Stamp Act fixes
the responsibility of every person having by law or consent of the parties, authority to
receive evidence and every person in charge of a public office of impounding any
documents which are not duly stamped. Now by virtue of new sub section (2) of
section 30 A, Financial Institutions have also been given the responsibility to impound
such instruments as mentioned in sub section (1) of section 30 A (as mentioned in
preceding para) which were executed before 1st may 2013 and forward the same to
collector for recovery of stamp duty.
proved or not proved or disproved at a later
stage by the court. Endorsement of exhibit
number is not expression of judicial opinion on
its proof.
Penalty: Sub section (3) of section 30 A provides for a penalty to be imposed on the
Financial Institution which fails to impound the instruments as mention in sub section
(2) of section 30 A. Amount of penalty shall be equal to the amount of stamp duty
payable.
Amendment in Maharashtra Stamp Duty
Laws
Section 30 of the Bombay Stamp Act fixes the
responsibility of payment of stamp duty on
certain instruments (Agreement relating to
deposit of title deeds, mortgage deed,
Evidentiary value of the documents after payment of penalty under sub section
(3) of Section 30 A: It appears from sub section (3) of Section 30 A that provision of
penalty has been incorporated in order to ensure compliance of sub section (1) and (2)
of new section 30 A only. So, payment of penalty would not make the document
admissible in evidence. In order to make a document admissible in law the stamp duty
along with penalty as mentioned in section 34 has to be paid.
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Legal
Potpourri
-Lex Scripta Team
Supreme Court passes historic judgment
for wildlife conservation in the matter of
Centre for Environmental Law WWF-1 v.
Union of India and others
The Supreme Court in a landmark judgment
dated 15th April 2013 has upheld the nation's
right to have a second habitat for lions by
directing the state of Gujarat to shift some
lions to Kuno-Palpur wildlife sanctuary at
Madhya Pradesh, in a matter where the Court
had to decide the issue of the necessity of a
second home for Asiatic Lion (Panthera leo
persica), an endangered species, for the
purposes of its long term conservation.
The Court passed directions as under1.
2.
all the endangered species of flora and fauna, study their needs and survey
environments, followed subsequently by regular reviews that correlated the data
with the Red List published by the International Union for Conservation of
Natgure (IUCN) every three years.
The Court observed that there was a necessity for an exclusive parliamentary
legislation for the preservation and protection of endangered species as Wildlife
Protection Act, 1972, the existing law that guides any work pertaining to conservation
of species had failed in its implementation to protect the endangered species.
The Court also observed that the eco-centric approach envisaging conservation
planning based on what is best for the species must be undertaken and rejected the
prevailing principles of human-centricism or anthropocentric that focused solely on
people's profitability, further noting even principles of sustainable development were
anthropocentric in nature. The Court held that anthropocentrism is always human
interest focussed thinking that non-human has only instrumental value to humans, i.e.
humans take precedence and human responsibilities to non-human are based benefits
to humans.
The Court was of the view that the cardinal issue was not whether the Asiatic lion is a
“family member” or is part of the “Indian culture and civilization”, or the pride of a
State but for the preservation of an endangered species, the “species best interest
standard had to be applied and that the overall approach had to be eco-centric.”
The Court also outlined the concept of intrinsic worth and emphasised that all species
have the right to exist, whether humans deemed them worthy or not. The Court
observed that typically conservation attention had gone only to a few charismatic
species deemed worthy of this attention and that we had chosen who to save. The
intrinsic worth and eco-centrism approach meant that the government ought to protect
and save all the species that are endangered and not target only those species which
having instrumental value for humans or those species considered beautiful, or those
adding to human industry like tourism.
To the Ministry of Environment and
Forests (MOEF) to take urgent steps and
start species recovery plans for
threatened species such as the Bengal
Florican, Manipur Brow-antlered deer,
Great Indian Bustard, dugong and
wild buffalo.
Courts in India have no jurisdiction to set aside interim awards passed under
Singapore International Arbitration Centre Rules, 2007
To the Government of India and MOEF
for operationalizing the National Wildlife
Action Plan (2002-2016) and to identify
The High Court of Madhya Pradesh in the matter of Yograj Infrastructure Limited
versus Ssangyong Engineering and Construction Co Limited, dismissing the appeal
by an order dated May 9, 2013, held that the Indian Courts had no power to set aside an
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interim award passed under arbitration
proceedings governed by the Singapore
International Arbitration Centre Rules, 2007
("SIAC Rules") and the only recourse was to
challenge the award in the courts of Singapore.
The Court arrived at the said conclusion upon a
conjoined reading of the SIAC Rules and the
International Arbitration Act ("IA Act").
Ssangyong had sub-contracted a project from
the National Highways Authority of India to
Yograj but subsequently terminated it on
various grounds relating to performance of the
agreement. The Supreme Court in 2011 in a
previous matter contested between the parties
held that the rule laid down in the matter of
Bhatia International v Bulk Trading regarding
the applicability of Part - I of the Arbitration
and Conciliation Act, 1996 ("Act") was not
applicable in the present matter since the
parties had agreed to the arbitration
proceedings to be referred to arbitration in
Singapore under the SIAC Rules ("2011
Matter").
The Court perused the SIAC Rules and
observed that rule 32 laid down that the
applicable law for any arbitration conducted in
Singapore under the SIAC Rules is the IA Act
and would also apply for setting aside an award
of any proceedings. These provisions had to be
read with article 34(2) of the First Schedule (an
award can only be set aside by courts under
article 6 of Chapter I of the same schedule) and
article 6 of Chapter I of the First Schedule
(only states which have enacted the
UNCITRAL Model law can perform the functions under article 34(2) of setting aside
an award). The IA Act was enacted for this purpose. The Court therefore arrived at this
view that procedurally the aforesaid rules had to be conformed to while setting aside
an award.
The Court further held that the Bhatia International judgment did not apply in the
instant case as the parties in terms of their agreement had clearly submitted to the
proceedings being held as per the SIAC Rules.
This judgment has again has upheld the well settled proposition of law in respect of the
courts in India not having jurisdiction to decide matters pertaining to setting aside of
foreign awards.
Issue and Listing of Non-Convertible Redeemable Preference Shares
Regulations, 2013, notified by SEBI
SEBI has notified Issue and Listing of Non-Convertible Redeemable Preference
Shares Regulations, 2013 w.e.f 12th June 2013, putting in place a comprehensive
regulatory framework for public issuance of non-convertible redeemable preference
shares and for listing of privately placed redeemable preference shares. The objective
of these regulations is to ensure transparency in raising funds through such securities
and to safeguard the interest of small investors from such high-risk securities.
The highlights of the regulations are as under
-
Listing of privately placed non-convertible redeemable preference shares would
require a minimum application size of Rs. 1 (one) million for each investor.
-
Public issuance of non-convertible redeemable preference shares would require
minimum 3 (three) year tenure of these instruments as well as a minimum rating
of “AA-” or equivalent.
-
In case of public issuance of non-convertible redeemable preference shares, an
issuer is required to make an application for approval to a recognized stock
exchange for listing of such securities along with the last three years audited
annual reports, disclosure of details of any outstanding loans, of any defaults
committed and other financial indebtedness including corporate guarantee given
by the company in the past five years. Approval from the stock exchange is
required.
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-
In case of delay in listing of such shares
beyond 20 days from the deemed date of
allotment, the company would have to
pay penal amount of at least 1% per
annum over the dividend rate from the
expiry of 30-day from the deemed date of
allotment till the listing.
-
Regulations shall also applicable to
non-equity instruments issued by banks
such as perpetual non-cumulative
preference shares and innovative
perpetual debt instruments which are in
compliance with the specified criteria for
inclusion in Additional Tier I Capital, as
per Basel III norms.
crores and above to periodic legal audit and re-verify the title deeds with relevant
authorities as part of regular audit exercise till the full repayment of the loan.
The banks in terms of this circular may furnish a review note to its Board/ Audit
Committee of the Board at quarterly intervals on an ongoing basis giving therein the
information in respect of such legal audits which should cover details such as number
of loan accounts due for legal audit for the quarter, how many accounts covered, list of
deficiencies observed by the auditors, steps taken to rectify the deficiencies, number
of accounts in which the rectification could not take place, course of action to
safeguard the interest of bank in such cases and action taken on issues pending from
earlier quarters.
The regulations have clarified the process of
generating capital through non-convertible
redeemable preference shares and will result in
major changes in capital generation by
corporate entities and banks through various
instruments.
RBI issues circular mandating regular legal
audit of title documents relating to large
value loan accounts
RBI in 2011 had issued guidelines that the
concurrent auditors were required to look into
and report on the genuineness of the title
documents especially for large value loans.
RBI has now decided upon a further review of
these directives that the banks should also
subject the title deeds and other documents in
respect of all credit exposures of rupees five
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LS
LEX SCRIPTA
Did You
Know?
above and below the ground – preventing overhanging parts of neighboring buildingsbut do not have rights to control flights far above their property, or subway
construction below.
A 'donatio mortis causa' is a gift made during the lifetime of the donor which is
conditional upon, and takes effect upon, death. It is separate and distinct from both a
normal inter vivos gift, under which title passes immediately to the transferee, and
from a testamentary gift, which takes effect under the provisions of a properly
executed will. The donor, contemplating imminent death, declares words of present
gifting and delivers the gift to the donee or someone who clearly takes possession on
behalf of the donee. The gift becomes effective at death but remains revocable until
that time.
The 'Tipsy Coachman' doctrine is a rule of
law that upholds a correct conclusion despite
flawed reasoning by the judge in a lower court.
In other words, the lower judgment was right,
but for the wrong reason. The colorful "tipsy
coachman" label comes from a 19th century
case in which the Georgia Supreme Court
noted that the human mind is so constituted
that in many instances it finds the truth when
wholly unable to find the way that leads to it.
Jurisdictional arbitrage is the practice of taking advantage of the discrepancies
between competing legal jurisdictions. It takes its name from arbitrage, the practice in
finance of purchasing a good at a lower price in one market and selling it at a higher
price in another. Just as in financial arbitrage, the attractiveness of jurisdiction
arbitrage depends largely on its transaction costs — in this case the costs of switching
legal service providers from one government to another.
'Cuius est solum, eius est usque ad coelum et
ad inferos' (Latin for whoever owns the soil, it
is theirs all the way up to Heaven and down to
Hell) is a principle of property law, stating that
property holders have rights not only to the
plot of land itself, but also to the air above and
the ground below. In modern law, this principle
is still accepted in limited form and the rights
are divided into air rights above and subsurface rights below. Property holders
generally have a right to the space immediately
Diplomatic immunity is a form of legal immunity and a policy held between
governments that ensures that diplomats are given safe passage and are considered not
susceptible to lawsuit or prosecution under the host country's laws, although they can
still be extradited. The concept of diplomatic immunity can be found in ancient Indian
epics like Ramayana and Mahabharata where messengers and diplomats were given
immunity from capital punishment. Originally, these privileges and immunities were
granted on a bilateral, ad hoc basis, which led to misunderstandings and conflict. An
international agreement known as the Vienna Conventions codified the rules and
agreements, providing standards and privileges to all states. Abuse of diplomatic
immunity and violation of the law by diplomats has included espionage, smuggling,
child custody law violations, and even murder.
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Team Lex Scripta : Akhil Kumar| Amrita Shetty | Anirban Ghosh
LS
LEX SCRIPTA
In - House News !!
We welcome Ms. Raisa Contractor who is doing an internship for one month with the corporate legal team at Mumbai. She is a 5th year
student at ILS Law College, Pune.
We welcome Ms. Manali Patil who is doing an internship for one month with the corporate legal team at Mumbai. She is a 3rd year student
at the Pravin Gandhi College of Law, Mumbai.
We welcome Mr. Akshat Swaroop who is doing an internship for one month with the corporate legal team at Mumbai. He is a 4th year
student at Amity University, Noida.
Gowns and RobesThe Funny Side !!
Two men were lost on a hot air balloon journey. The only way to determine their location was to maneuver the balloon close enough to the
ground so that they could yell down, and ask someone. They came across a man walking his dog. "Where are we," they shouted? The
man looked up . . . and yelled back, "In a Hot Air Balloon." One balloonist then turned to the other and shrugged. "Isn't that our luck, to
only come across a lawyer." "How do you know he was a lawyer?" "Because the information, as usual, was accurate, but useless."
"Well," said the other, at least he didn't charge us.”
Questions during a trial
Q: What is your relationship with the plaintiff?
A: She is my daughter.
Q: And was she your daughter on February 13, 1979?
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LS
LEX SCRIPTA
Lex Scripta Recommends !!!
The Court Martial of Billy Mitchell (*ing Gary Cooper, a legal drama involving the army)
High Crimes (*ing Morgan Freeman and Ashley Judd, a wife defends her husband in a murder case)
Narrow Margin (*ing Gene Hackman, a lawyer goes all out to protect his witness)
From the Hip (A comedy about a young lawyer's first trial)
Find Me Guilty (A courtroom drama involving the mafia)
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