CORPORATE UPDATES 13.02.2019

95% REAL ESTATE COMPANIES OUTSIDE THE INCOME TAX NET, FINDS CAG

Nearly 95 per cent of real estate companies registered with the Registrar of Companies (RoC) either do not have any permanent account number (PAN) or the RoC did not have any information in this regard. This is what the Comptroller and Auditor General (CAG) has found in its audit of real companies in 12 states. ROCs did not have information about PAN in respect of 51,670 (95 per cent) of a total of 54,578 companies for which data was made available to Audit, the CAG report said. It was difficult for Audit to ascertain from the information obtained from ROCs whether these companies were in the tax net of the ITD (income tax department) or not except in case of Andhra Pradesh & Telangana where Audit could identify PAN in respect of 147 of these companies. CAG forwarded the information received from ROCs without PAN data to ITD to ascertain whether these companies were filing income tax returns (ITRs) but no reply was received. All corporate assessees are compulsorily required to file their ITRs with ITD irrespective of income or loss. A number of companies have not been filing ITRs. Audit attempted to ascertain whether the companies in ROC data with PAN were regular in filing their ITRs. In respect of 840 companies with PAN coming under selected assessment charges, we noticed that 159 companies (19 per cent) were not filing their ITRs, the report said. The CAG concluded that there was no mechanism with ITD to ensure that all the registered companies had PAN and were filing their ITRs regularly The CAG has recommended that the CBDT, Ministry of Finance and Ministry of Corporate Affairs should have inter-ministerial arrangement where there is an interface between the ITD and ROC so that when a company is registered with ROC, the application for PAN is submitted automatically with the ITD. When PAN is issued to the newly incorporated company, it will automatically be sent to ROC systems for updation. The CAG also recommended that the companies should be compulsorily required to submit a copy of acknowledgement of ITR while furnishing their annual reports in Form MGT-7 The CAG has also asked the Central Board of Direct Taxes (CBDT) to have a mechanism for ensuring that TDR (transfer of development rights) transactions are brought under the tax net by having a provision to tax them at the source. The board should also introduce a system based on checks and validation to minimise manual interventions by assessing officers and avoiding mistakes in scrutiny assessments. In the real estate sector, due importance is not accorded by the Income Tax Department to monitor non-PAN transactions despite these being under the highest risk category from the point of view of tax evasion. The CAG said that there is a lack of a mechanism to ensure that persons involved in high-value sales of immovable properties offer capital gain for tax. The Income Tax Department did not use surveys effectively to widen its tax base in the real estate sector. Transactions, where sales consideration is undervalued and lower than the value adopted for stamp duty purposes, may remain untaxed in the hand of sellers and buyers, thus generating black money in the process. The Central Board of Direct Taxes may put in place an IT-driven mechanism to utilise information on sale and purchase transactions of immovable properties effectively and plug the leakage of reveune, said the CAG report.

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WEST BENGAL HOUSING INDUSTRY REGULATION ACT, 2017 CHALLENGED FOR CONFLICT WITH RERA 2016; SC ISSUES NOTICE

The Supreme Court has been moved challenging the validity of the West Bengal Housing Industry Regulation Act, 2017 (WBHIRA). The Court on Monday issued notice in the petition filed by the Forum for People’s Collective Efforts, which contends that the WBHIRA should be struck down given that it conflicts with a Central Legislation already occupying the field i.e. the Real Estate (Regulation and Development) Act, 2016 (RERA). The petition filed through Advocate Devashish Bharuka states, Since a central legislation [RERA] already occupied the field sought to be covered by the impugned State Act [WBHIRA], the constitutional scheme requires that the State Act should give way to the Central legislation and it is the Central statute alone, which should prevail in the State of West Bengal. RERA was enacted by the Central Government in 2016. The petition recounts that in August the same year, West Bengal notified the draft Real Estate (Regulation and Development) Rules, 2016 under the RERA. To finalise these rules, a stakeholder meeting was also arranged in 2017, for which the petitioner was also invited. However, no further action was taken thereafter. Instead, the WBHIRA, 2017 was notified in March 2018, to come into effect in June the same year. Further, rules under the WBHIRA, 2017 Act was also published in June 2018. The validity of this State Act i.e. the WBHIRA has now been challenged given that it is in direct conflict with the earlier framed RERA, a Central legislation. As pointed by the petitioner, both legislations deal with subjects falling under Entries 6 (property transfer), 7 (matters of contract) and 46 (matters concerning the jurisdiction of courts other than Supreme Court) of the Concurrent List in the Constitution of India. This means that while both the Central and State Government may make laws on such subjects, the State law would have to yield to the Central law if there is any conflict between the two. While this is the case, the Forum has contended that since the RERA already comprises a complete and exhaustive code, there is no scope for any State legislation to be enacted in the area save in terms of Article 254 (2) of the Constitution of India. Article 254 (2) allows for a conflicting State law on a concurrent list subject to prevail over a central law, if it receives the assent of the President. However, as pointed out in the petition, It is an admitted position that the State of West Bengal neither reserved the impugned State Act for consideration of the President nor had ever obtained the President’s assent inspite of the fact that the entire field stood occupied by RERA, 2016 enacted by the Parliament. In view of these contentions, the petitioner has prayed that the Court declares the WBHIRA as unconstitutional and further that it direct the implementation of the RERA in West Bengal. The petitioner approached the Supreme Court after representations made to various government authorities, including the President of India, the Prime Minister, Parliament authorities and State government authorities failed to yield any positive response. Inter alia, the petition also points that the Kerala Government had earlier repealed a similar State Act after taking note that the same was in conflict with the Centre’s RERA.

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BK EDUCATIONAL SERVICES V. PARAG GUPTA AND ASSOCIATES: A CRITICAL STUDY OF THE LAW LAID DOWN BY THE SUPREME COURT

The Supreme Court in BK Educational Services Private Limited v. Parag Gupta and Associates (BK Educational), while interpreting Section 238A of the Insolvency and Bankruptcy Code, 2016 (the Code), held that provisions of the Limitation Act, 1963 are applicable to applications filed by financial and operational creditors under Sections 7 and 9 of the Code from the inception of the Code. While the author does not dispute the fact that the Limitation Act would now apply to the Code, the author respectfully disagrees with the ultimate conclusion of the Court, namely

(1) The right to sue under Section 7 and 9 of the Code accrues when a default occurs;

(2) Save and except those cases where Section 5 of the Limitation Act is applicable, If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act.

The Issue before the Supreme Court The Supreme Court was dealing with Section 238A, which was inserted into the Code by an amendment which states that the Limitation Act shall, as far as may be, apply to the proceedings before the National Company Law Tribunal (NCLT). The issue that arose before the Supreme Court was whether the Limitation Act is applicable to applications that are made under Section 7 and/or Section 9 of the Code from its commencement on December 1, 2016 till June 6, 2018 i.e. the date on which the Amendment Act came into force. The Court came to the conclusion that the Limitation Act would apply to NCLT proceedings. As for Section 238A, the Court said that it should be applied retrospectively, otherwise, applications seeking to resurrect time-barred claims would have to be allowed, not being governed by the law of limitation. The Code cannot be triggered in the year 2017 for a debt which was time-barred, say, in 1990, as that would lead to the absurd and extreme consequence of the Code being triggered by a stale or dead claim. It was held that since the Limitation Act is applicable to applications filed under Sections 7 and 9 of the Code from the inception of the Code, Article 137 of the Limitation Act gets attracted. In effect, the Court held that Section 238A of the Act would apply to applications filed under Section 7 and/or Section 9 of the Code from its commencement on December 1, 2016. Up to this point, there is no difficulty with the verdict. However, the Court further states, the right to sue, therefore, accrues when a default occurs. If the default has occurred over three years prior to the date of filing of the application, the application would be barred under Article 137 of the Limitation Act, save and except in those cases where, in the facts of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing such application. The use of the expression the right to sue is at odds with Article 137 of the Limitation Act, because this expression is nowhere mentioned in the Article. The expression used in Article 137 is the right to apply. The expression the right to sue finds place in Article 113 of the Limitation Act. Both are residuary articles, providing for a limitation period of three years. However, Article 113 applies only to Suits and not to any other legal proceeding. The right to sue arises when the cause of action arises i.e. the right to prosecute to obtain relief by legal means. Article 137, on the other hand, is a residuary article for applications or petitions which can be filed within three years when the right to apply accrues. Article 137 applies to any petition or application filed under CPC as well as Special Laws. Article 137 applies only to applications and not suits The time to make an application under Article 137 begins to run from the moment the applicant first had the right to make the said application. It is this right under to make an application under Article 137 that has been interpreted by two recent judgments of the NCLAT. In Shankar Vardharajan v. Dewachand Ramsaran Corporation Pvt. Ltd. and others, the appellant, while relying on the judgment of the Supreme Court in BK Educational, contended that the claim of the respondent was time-barred as it arose in the year 2014. The NCLAT, while referring to BK Educational, held that the right to apply under Section 9 accrued to the eespondent since December 1, 2016 when the I&B Code came into force. Therefore, in the NCLAT’s opinion, the Section 9 application was filed on time It is pertinent to note that though in the facts of the case, the NCLAT found that there was a continuous cause of action, in the NCLAT’s view, the right to apply under Section 9 accrued from the date on which the Code came into force i.e. from December 1, 2016. It is submitted that this view of the NCLAT is directly contrary to the law laid down in BK Educational, which states that the right to sue accrues when a default occurs and if the default occurred over three years prior to the date of filing of the application, the application would be barred by Article 137. The same view was also taken in another judgment delivered by the NCLAT in Pushpa Shah and Ors. v. IL & FS Financial Services Limited and Ors.

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NCLAT ADJOURNS RCOM'S PLEA FOR INSOLVENCY TO MARCH 6

The National Company Law Appellate Tribunal (NCLAT) Tuesday adjourned the hearing over Reliance Communications' plea to proceed with insolvency process to March 6. A two-member bench headed by Chairman Justice S J Mukhopadhaya said a matter is also pending before the Supreme Court against RCom and hence adjourned it. As the matter is pending before the Hon'ble Supreme Court, we adjourn the matter. Post the case 'for orders' on 6th March, 2019. Parties will inform the development, the appellate tribunal said.

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LENDERS DEMAND MORE COLLATERAL FROM RELIANCE GROUP'S PROMOTER ENTITIES

Lenders including private banks and mutual funds have asked Anil Ambani-controlled Reliance Group’s promoter entities to put more collateral on the table to secure their Rs 6,000-crore exposure The margin calls first started in October last year when the Reliance Power stock began showing signs of weakness, according to a lender. The Anil Ambani group alleged last week that two of the 11 lenders — L&T Finance Holdings and Edelweiss — invoked the pledge and sold the company’s shares illegally, triggering a domino effect. The maximum fall in the group’s shares has been witnessed since early this month, after Reliance Communications declared it would move the National Company Law Tribunal (NCLT) for debt resolution. There was a meeting on February 6 between lenders and Reliance Group officials about additional cover. The group promised additional cover and we are still awaiting a response from them, said an executive of one of the lenders on Tuesday.

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RCOM ATTEMPTED OUT OF COURT SETTLEMENT, BUT ERICSSON REJECTED

Reliance Communications last month made a last-ditch attempt to stave off a personal appearance for its chairman, Anil Ambani, in the Supreme Court, telling Ericsson that it would settle all arrears by January-end, provided the equipment suppler withdrew its contempt petition against the industrialist. The Swedish company, however, said it must be paid first and the matter settled through court. Ambani on Tuesday made his first visit to a court since May 2013, when he had appeared in New Delhi’s Patiala House Court in the 2G case. People familiar with the matter at RCom said its offer to Ericsson was given before the telco moved the National Company Law Tribunal (NCLT) seeking bankruptcy protection. And now that the company has sought protection under the Insolvency and Bankruptcy Code, the question of paying anything to Ericsson does not arise and is totally ruled out, one of the people said. RCom on February 1 said it decided to move the NCLT. Withdraw (the) contempt petition immediately upon the receipt of the balance settlement payment and towards the same, prepare and send for our consideration and for us to mutually agree by 29 January 2019, the draft application to be made to the Supreme Court for withdrawal of the said contempt petitions, said a letter written by RCom’s legal representatives their counterparts at Ericsson. But now that RCom has decided to move the NCLT, the Rs 118 crore that has been deposited with the court registry, which they were offered and they declined as part-payment, will now have to be returned, to be dealt with through the IBC process, the person said. Since Ericsson is an unsecured creditor, and the Hon’ble SC has said in a judgement passed on 25 January 2019 that unsecured creditors can only be paid after the secured creditors have been paid off, they now stand to get a big-fat zero, another person said. RCom tried negotiating with Ericsson to withdraw the legal battle that is simultaneously being fought in the National Company Law Appellate Tribunal. The hearing in that has been pushed to March 6.

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NO CONTEMPT OF COURT, EFFORTS TO RAISE FUNDS FAILED: RCOM TO SC

Lawyers for Reliance Communications (RCom) and its chairman Anil Ambani on Tuesday argued in the Supreme Court that no contempt of court was made out in the case over a Rs 550-crore outstanding payment to Ericsson. The Swedish telecom equipment maker vehemently contested this and claimed that RCom even concealed some payments it had received, while avoiding clearing the dues as agreed in court. After a brief hearing, the bench comprising Justices RF Nariman and Vineet Saran adjourned the case to Wednesday. Ambani, who was present in the court, must appear before it in person on Wednesday as well. RCom tried all it could to clear the arrears, but its efforts to raise funds didn’t materialise after its deal to sell spectrum to Reliance Jio Infocomm fell through, senior advocates Kapil Sibal and Mukul Rohatgi, appearing for the telecom operator and its chief, told the court. We tried our best. Things have gone to the IBC (proceedings under the Insolvency and Bankruptcy Code), Rohatgi told the bench. Rohatgi and Sibal were assisted by lawyer Mahesh Agrawal. The court clarified that the RCom chairman would have to stay on and attend the proceedings on Wednesday.

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BANKRUPTCY CODE COULD BE MISUSED BY DEBTORS AND CREDITORS

The government of India is considering the introduction of a pre-packaged resolution between creditors and debtors in the event of an impending bankruptcy. This would be like a pre-arranged agreement between concerned stakeholders in a business to hasten the legal procedures that would be required under the Insolvency and Bankruptcy Code. This scheme of a pre-packaged resolution is already in vogue in the United Kingdom and the United States of America. What this arrangement implies is that, before a company files for bankruptcy, it sits with shareholders, vendors, suppliers and works out a mutually agreed solution (with two-thirds of the shareholders agreeing to the proposals) to realise acceptable values of stressed assets before they can plummet during a long-drawn legal process under the National Company Law Tribunal. in other words, the debtors and the creditors mutually agree on a reorganisation of the business and transfer of assets. Hence, it is in the interests of creditors to utilise this shortcut to minimise their losses. From the social point of view, it reduces costs of litigation and arbitration. This procedure is quite effective in mature market economies. Having said this, however, in India, it is not always the case that businesses run into stress because of poor decisions or shrunken markets. Many a times the loans are not paid and assets are stripped, and failures are actually organised forms of wealth accumulation in disguise. In such cases, some creditors and debtors can actually indulge in opportunistic behaviour, and the transfer of assets can be a win-win situation for both parties. A creditor can be aggressive for a settlement if bankruptcy is deemed to be imminent. Others can follow suit and a quick settlement could be reached. The debtor can clear off fast and enter into other ventures.

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ESSAR STEEL: RUIAS WANT IN AT COC MEETINGS

Raising fresh objections to the approval given by the Committee of Creditors (CoC) to ArcelorMittal’s resolution plan for the stressed Essar Steel India Ltd (ESIL), the latter’s promoters, the Ruias, have invoked their rights to participate in CoC meetings and veto the plan Arguing in front of a two-member Ahmedabad Bench of the National Company Law Tribunal (NCLT), comprising adjudicating authorities Harihar Prakash Chaturvedi and Manorama Kumari, the counsel appearing for the Ruias said that when the resolution plan offered by ArcelorMittal was finalised, the promoters had been deprived of two rights. One, to participate in the meeting that was called to consider the resolution plan, and second, to challenge the plan further before the appellate authority, the counsel said. Unless I get the resolution plan, I can’t have these two rights. The counsel cited the recent Supreme Court order in the Ruchi Soya case, which entitled the suspended board of the company to participate in CoC meetings and comment on the plan. The apex court had also ruled that the resolution plans should be shared with the suspended board members of the company. On these grounds, the counsel sought that ArcelorMittal’s resolution plan be sent back to CoC, and the promoters be given a copy to make comments on it, and till then the plan should not be approved. The counsel further said the suspended management should be invited to the meetings so that they can meaningfully participate in them. The Ruias were not given ArecelorMittal’s resolution plan, and had not been able to comment on it, the counsel added. As per the law, members of the erstwhile board have a right to participate in the meetings of the CoC. In February 2018, the first resolution plan was submitted by two parties, ArcelorMittal and Numetal. Both were rejected. But we were not allowed to participate in the CoC meetings where the plans were rejected, said the counsel.

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SEBI HIRES MORE HANDS TO INVESTIGATE STOCK MARKET FRAUDS

Recent stock market volatility and growing complaints of market manipulation have prompted the Securities and Exchange Board of India (Sebi) to increase the number of experts in its investigation department Sebi traditionally always had one chief general manager (CGM) as the head of the department for investigations. Now, owing to the case load, Sebi has increased the number to four, said a person with direct knowledge of the matter. Sebi’s move assumes importance in the wake of increased cases and complaints of market manipulation and unusual volatility in a select few stocks. Sebi has been increasing its surveillance and investigation efforts to clear the backlog of cases. But new cases of alleged market manipulation are being observed. More resources need to be channelled towards investigating these cases to protect the interest of investors. Sebi is also planning to recruit 100 employees every year for the coming three years and most of the manpower will be devoted in strengthening investigations, said the first person quoted above.

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SEBI LOOKS TO MAKE MARGIN RULES STRICTER FOR DERIVATIVES TRADE

The Securities and Exchange Board of India (Sebi) is planning to tighten risk management practices in equity derivatives and stocks in the runup to the general elections. The market regulator is likely to tighten margin rules for futures and options trades and restrict introduction of strike prices in options intra-day as it looks to curb wild speculation by traders, said three people privy to the development. It is also planning to bring more stocks under its surveillance schemes, they said. Brokers said the cost of trading in derivatives could rise by at least 20 per cent. These proposals were discussed in a meeting of Sebi’s secondary market advisory committee (SMAC) held in late January. Under the new system, the margin is higher for stocks that are volatile, while it is lower for the more stable ones. The regulator has formed an expert committee to discuss the proposal. The panel would submit a report in the next few weeks Basing the margins on the risk involved would reward genuine investors while it discourages speculative traders using smaller scrips, said an SMAC member.

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SEBI MAY REDUCE CHARGES LEVIED ON INTERMEDIARIES BY UP TO 60%

The Securities and Exchange Board of India (Sebi) is all set to reduce the charges levied on intermediaries to lighten their regulatory burden, said two people with direct knowledge of the matter, requesting anonymity. It may, however, increase the levy on stock exchanges. The committee set up by the markets regulator last year has submitted its report last month recommending that Sebi reduces the charges it levies on brokers and for filing documents, said the first person cited above. The panel has recommended reducing the regulatory levy on stock brokers by more than 30%, on commodity brokers by 60% and for filling public issues by 50%, they added. The changes in the fee structure comes at a time when Sebi’s income from intermediaries has increased marginally. In 2017-18, Sebi had ₹1,738 crore in its corpus, or 4% more than what it had in FY17.

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SEBI LOOKS TO COUNTER PLEDGED SHARES MENACE TO AVERT CRISIS

High financing deals involving loan against shares to promoters of listed companies are now being examined by the government and market regulator SEBI which is now discussing ways to avert a possible crisis. After the Anil Ambani-led Reliance group complained to SEBI against fire-sale of shares in its companies by NBFCs, the lenders have informed the market regulator that they have no option but to offload promoter shares at the first sign of adverse news as many promoters have defaulted on their margin obligation and are not responding to their calls, sources close to the development told BusinessLine. Latest available data from the BSE show that shares worth around ₹2 lakh crore have been pledged by promoters of listed companies with a handful of NBFCs. Lenders are allowed to finance around 50 per cent against the value of equity shares. But even as the benchmark indices stay at an elevated level, shares of most small- and mid-cap companies have witnessed more than 50 per cent erosion in value from their peak levels seen some time in mid-2018. This has led many NBFCs to follow up with company promoters asking them to bring in additional margin, a call which has not been heeded by many. Add to this the funding by some of the large mutual fund houses to corporate entities without adequate collateral, and the pain becomes intense, sources said. Companies that are part of the Anil Ambani group recently complained against Edelweiss and L&T group linked NBFCs for indulging in fire sale and destroying the market value of the group. But details on the margin call made and whether these companies adhered to it are yet to emerge, sources said. Loan against shares, which is such a big issue now, is nothing new. But it has assumed a gargantuan proportion as the entire system ran blindfolded, said Deven Choksey, founder promoter, KR Choksey. Since checks and balances were not applied earlier, the system definitely needs handholding now to ensure that there is no fire-sale of assets. The best thing to do is to bring such financing deals on the exchange platform, which are currently conducted under the radar, he added.

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RELIANCE POWER ASKS SEBI TO IMMEDIATELY BAN EDELWEISS GROUP FROM CAPITAL MKTS

Anil Ambani-led Reliance Power has asked the Sebi to immediately ban Edelweiss Group from the capital market, alleging illegal and market disruptive activities to cause a steep plunge in the company's share price. Reliance Group, last week, accused L&T Finance and Edelweiss Group entities of illegal and motivated actions in invoking the pledged shares of Anil Ambani group's three listed firms and selling them in open market causing a steep fall in share values. L&T Finance and Edelweiss Group have refuted the allegations and have counter-alleged that Reliance Group failed to make timely payments which they said necessitated sale of pledged shares. Reliance Power, in a fresh letter to the Sebi dated February 11, also asked the markets regulator to declare all Edelweiss Group entities as not being fit and proper and impose a ban on each of them from the capital markets and related activities. It also asked the regulator to investigate the sale of Reliance Power shares by Edelweiss Group on February 4-5.

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BANK OF AMERICA ML SOLE BIDDER FOR SBI’S ESSAR STEEL DEBT

Bank of America Merrill Lynch emerged as the sole bidder in State Bank of India’s auction of its loans to bankrupt Essar Steel, but it bid for only a part of the Rs 13,000-crore loans the lender put on the block, two people familiar with the matter told. The multinational investment bank has bid for about one-sixth of the loans that were up for sale, and is said to have offered Rs 1,300-1,500 crore, the people said. It is unclear whether SBI would accept the bid as there was no competition.

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CCI PROBES ACCUSATIONS THAT GOOGLE ABUSED ANDROID TO HURT RIVALS

India's antitrust commission is looking into accusations that Alphabet Inc's unit Google abuses its popular Android mobile operating system to block its rivals, four sources with direct knowledge of the matter told. The Competition Commission of India (CCI) has for the past six months been reviewing a case similar to one Google faced in Europe that led to a fine of 4.34 billion euro ($5 billion) by antitrust regulators last year, three of the sources said. Google has challenged that order. The European Commission found Google had abused its market dominance since 2011 with practices such as forcing manufacturers to pre-install Google Search and its Chrome browser, together with its Google Play app store on Android devices. It is on the lines of the EU case, but at a preliminary stage, said one of the sources, who is aware of the CCI investigation. The watchdog's enquiry into allegations against Google over its Android platform has not previously been reported. The CCI will have a tough time not initiating a formal investigation into Google given the EU case, unless they can show the problem has been addressed (by remedies), one of the sources said.

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JSW STEEL GETS LETTER OF INTENT FOR BHUSHAN POWER & STEEL

JSW Steel has received the letter of intent from the resolution professional overseeing the auction of Bhushan Power & Steel, taking the country's largest steelmaker a step closer in its acquisition of the insolvent company. The development comes more than a week after the National Company Law Appellate Tribunal on February 4, turned down Tata Steel's request to consider its bid as the 'most legitimate one for Bhushan Power & Steel. Confirming the development, resolution professional Mahender Khandelwal told that JSW Steel has accepted the LoI. The resolution will be submitted to the National Company Law Tribunal on Wednesday. According to the procedure, the Tribunal will now have to give the stamp of approval, before Bhushan Power & Steel comes under the JSW Steel umbrella.

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ALLAHABAD BANK DIALS RBI FOR TRANSFER OF BAD LOAN FROM HONG KONG

State-run Allahabad Bank has sought Reserve Bank of India’s permission to transfer the bad loans in its Hong Kong branch into the Indian balance sheet even as it is looking to sell down the good assets to other lenders The transfer and offloading of assets is necessary as the lender is in the process of winding up its lone overseas branch in Hong Kong. The transfer of NPAs is taking more time than expected as this needs the regulator’s approval. The bank is, by all probability, set to miss the March deadline set by the government for winding up the branch. The government owns 83% in the bank. We are in talks with RBI to finalise the mechanism (for transfer of bad loans). This will happen only after March, managing director SS Mallikarjuna Rao said. The branch has about Rs 4700 crore of standard loans while the bad loan amounted to Rs 30-40 crore. Hong Kong does not have any asset reconstruction mechanism. The Kolkata-based lender has Rs 15000 core overseas business at the end of March last year which has now shrunk to about Rs 5200 crore, bank officials said. Of this, Rs 460 crore is deposits. The lender's gross non-performing assets ratio slipped to 17.8% from 17.53% a quarter back, while net NPA was at 7.7% at the end of December, improved from 7.96% sequentially.

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ICAI ELECTS NEW PRESIDENT AND VICE-PRESIDENT

The Institute of Chartered Accountants of India has elected new Torchbearers for the year 2019-20. The tenure of the current President CA Naveen N D Gupta expired this February. Prafulla P. Chhajed, President, ICAI is the crusader of inclusive growth in the accountancy profession, CA. Prafulla P. Chhajed has been elected as President of The Institute of Chartered Accountants of India on February 12, 2019, for the term 2019-20. He is 67th President of the Institute. With commendable professional acumen and standing, at present, he is the Chairman of the Board of Directors of ICAI-ARF (Accounting Research Foundation) and XBRL India. He is also one of the Directors of Indian Institute of Insolvency Professionals of ICAI, which incidentally is the first Insolvency Professionals Agency (IPA) of India. He is also on the Boards of various other reputed companies/ corporate and banks. Coming from the industrial capital of India, i.e. Mumbai, CA. Prafulla Chhajed has a very well-defined vision and mission, which is to pursue the agenda of inclusive growth and take the Institute and accountancy profession of India to greater heights so that its members could stand tall and strong before the accountancy fraternity of the world. In the last 16 years, CA. Prafulla P. Chhajed has contributed more than 600 articles and write-ups on Taxation and Investments in the well-known Marathi daily- Maharashtra Times. Atul Kumar Gupta is a fellow member of the Institute of Chartered Accountants of India and the Institute of Cost Accountants of India, besides a Law Graduate. Hailing from Delhi, he is also a member of various other professional bodies and Institutions. CA. Atul Gupta is a thorough scholar and has qualified CA examination with All India Rank. An altruistic hard-worker bestowed with exceptional organizational, networking, administrative and leadership skills, at present, he is serving as Director of Accounting Research Foundation (ARF) of ICAI for promoting research in field of Accounting and XBRL India and is Member of more than 15 Committees of ICAI. He is also a Member of Advisory committee for GST in GSTN Board (Government of India IT Initiative for implementation of GST in India) and Member of Finance Committee of Delhi Management Association. Atul Gupta has authored several books & his articles have also been published in leading newspapers and various professional magazines across the country.

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ICAI CLARIFIES USING INFORMATION AVAILABLE AT INFORMATION UTILITY (IU) PLATFORM FOR EXTERNAL CONFIRMATIONS

The Institute of Chartered Accountants of India has clarified certain things on using Information available at Information Utility (IU) Platform for External Confirmations by Auditors. Standards on Auditing (SAs) recognize the importance of ‘External Confirmations’ as audit evidence. A recent announcement of the ICAI said that on the matter of External Confirmations the ICAI has recently received communication from the National Financial Reporting Authority (NFRA) regarding functions of National e-Governance Services Limited (NeSL) which might be useful for the auditors in obtaining audit evidence through external confirmations. The highlights of the same areas under: NeSL incorporated as a Union Government Company has set up the ‘Information Utility (IU)’ and is regulated by the Insolvency and Bankruptcy Board of India. The IU is designed as an institutional intervention that stores evidence of financial contracts to assist in stressed assets resolution The IU is open to financial and operational creditors since January 2018. Till date, approx. two-thirds of the loans to companies given by banks have been filed in the IU as creditors have an incentive to buy protection and enhance enforceability of contracts under the IBC. The IU is designed to receive financial information from any party to the debt. The debtors are expected to verify and authenticate the liability as sent by their respective creditors to IU. However, in the absence of any such statutory requirement, the debtors are not filing this information or reconciling the same with IU. The auditors can have full access to the information stored in IU in respect of client company as reported by their creditors. The Auditing and Assurance Standards Board of ICAI at its 193rd meeting held on 25th January 2019 (meeting adjourned and continued on 5th February 2019) considered the aforesaid communication received from NFRA. After a detailed discussion on the matter, the Board was of the view that the information available at the IU platform would be highly useful in the audit process and will strengthen the audit opinion. Accordingly, the ICAI issued the following guidance for the benefit of the members. Whenever external confirmations are required as per the requirements of SA 505 – External Confirmations, auditors should seek external confirmations directly from the third parties (the confirming parties). Further, auditors are advised to use the information available at the Information Utility platform of National e-Governance Services Limited, as detailed in paragraph 3 above, as an additional source of external confirmations to strengthen the audit evidence, the ICAI said.

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SEBI BARS GANGA SAGAR FOODS & BEVERAGES FROM RAISING FUNDS FROM PUBLIC

Markets regulator Sebi on Tuesday barred Ganga Sagar Foods and Beverages from raising funds from public with immediate effect Besides, the regulator has asked the firm and its seven present and former directors not to buy, sell or deal in securities market either directly or indirectly with any listed company. The move comes after the regulator received complaints that the firm is not refunding the money to the investors raised through secured redeemable non-convertible debentures (NCDs). Following the complaints, Sebi found that the firm had collected at least Rs 43 lakh from 71 investors during 2012-13 by issuing the NCDs. As the number of investors were more than 49, the offer was prima facie a public issue for which the firm was required to register its prospectus with the Registrar of Companies (RoC), followed by compulsory listing, among other requirements. However, it failed to do so, the regulator said. The regulator also barred debenture trustee Madhumita Saha from dealing in markets either directly or indirectly for not registering with Sebi to act as debenture trustee for the offer of NCDs.

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TWO INDIAN FUNDS SEE ASSETS DROP BY HALF AMID EXIT FROM RISK

Indiabulls Asset Management and DHFL Pramerica Mutual Fund have seen their assets plunge by more than half in the December quarter. That shows fears of India's non-bank finance companies still linger. The dwindling in assets is the most among any mutual-fund company in India during the period, data compiled by Bloomberg show. While flows to the industry have slowed recently because of heightened market volatility and political uncertainty ahead of general elections due by May, it also suggests investors continue to shun risk months after defaults by an infrastructure lender shocked India's non-bank finance companies. Institutional investors have been pulling out of debt funds that hold a high exposure to papers of their NBFC parent or from schemes with high NBFC exposure, said Vidya Bala. DHFL Pramerica's ultra short-term fund last month held 34 per cent of its assets in bonds sold by the troubled mortgage lender Dewan Housing Finance Corp., according to Bala. The fund saw its assets plummet from Rs 20 billion ($281 million) in August to Rs 3.6 billion in January, she said.

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BUY-BACKS GAIN SPEED AMID VOLATILE MARKET

While the current financial year had already seen 44 buy-back offers with a cumulative offer size of more than ₹38,000 crore, there are almost 20 more companies in the pipeline that have already taken board approval for buy-back and will be launching the offers in the near future. Data from Prime Database shows, the year 2017-18 saw a cumulative offer size of ₹53,307 crore the highest so far. For the current financial year, data shows that companies such as Ajanta Pharma, Coal India, Indian Energy Exchange, Infosys, Kwality, NTPC, Monte Carlo Fashions and Shanthi Gears, among others, are scheduled to launch their buy-back offers in the near future. Market participants are of the view that with most companies, especially mid-caps, trading well below their highs, entities are looking at buying back the shares at an attractive premium to the market price. Some of the mid-caps have seen their share prices fall significantly when compared to their recent highs. Meanwhile, January alone saw eight buy-back offers totalling almost ₹9,700 crore. Currently, buy-back offers are underway for companies such as Bosch, Natco Pharma, NMDC, Tata Investment Corporation, Baba Arts, Oil India and Persistent Systems. Interestingly, the cumulative amount of buy-back offers in the current fiscal would have been still higher if the Securities and Exchange Board of India (SEBI) had not rejected the ₹9,000 crore buy-back of engineering major Larsen & Toubro (L&T).

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INFLOW TO EQUITY FUNDS SLUMP 60% TO RS 6,158 CRORE IN JANUARY

Amid market volatility and political uncertainty, inflow to equity mutual funds plunged by 60 per cent to Rs 6,158 crore in January this year against Rs 15,390 crore seen in such schemes in the same month last year. This also marked the third consecutive monthly decline in inflows in such schemes, according to the data available with Association of Mutual Funds in India (Amfi). As per Amfi data, equity and equity-linked saving schemes saw an infusion of Rs 6,158 crore in January 2019, compared with a staggering inflow of Rs 15,390 crore seen in such schemes in January last year. Inflow in equity funds was at Rs 6,606 crore in December, Rs 8,414 crore in November and Rs 12,622 crore in October 2018. Overall, the mutual fund industry witnessed a net inflow of Rs 65,439 crore in January as against an inflow of Rs 1.06 lakh crore in the same month last year. The assets under management (AUM) for the industry stood at Rs 23.4 lakh crore in January this year compared to Rs 22.41 lakh crore at the end of January 2018.

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COMPANY THAT PROMISED ONE-WAY TICKET TO MARS GOES BANKRUPT

Mars One Ventures, the company that made space-high promises of sending part of the human race to the Red Planet, is reportedly bankrupt The company was long-suspected to be a scam, duping people without any real plan to take them to Mars. The news of Mars One Ventures going bankrupt was into the fore when a Redditor spotted a notice for bankruptcy on a website for the city of Basel. The company claimed to have even shortlisted 100 people from across the world to fly on the trip. However, the procedure of selection was questionable and the company kept changing its dates for the mission.

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AIR INDIA PRIVATISATION PUT ON HOLD

The government has not given up plans for privatisation of Air India but it has been kept on hold, Vinod Hejamadi. He said that the government deferred the divestment process as the market conditions were not right. There are mixed feeling among employees. Of course every one will like to be a government owned but people also realise that the airline cannot be with government forever, he said. He added that the government decision to give off the airline to a special purpose vehicle will help the airline save around ₹ 3,000 crore which will help Air India turn around financially. He also outlined a number of steps which the airline has been taking to improve it operations and financial performance. Vinod said almost $ 100 million had been invested in the engineering department which has helped bring more aircraft into the fleet of the carrier. He justified the decision on adding flights to tier II and tier III cities by the national carrier as there was over capacity in the Delhi-Mumbai route.

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AIRTEL WILL NOT CUT CALL, DATA PRICES FURTHER

Cellular services major Bharti Airtel believes that amid huge bleeding in the last few quarters the company will not reduce call and data prices further and as only three big players are vying for the India's telecom pie, the market will stabilise with the improvement of ARPUs (average revenue per user), a key performance parameter. Rajan Bharti Mittal, said: The price (plan price) is already so very low. There is always a pressure on price but something must move the needle. The market needs to improve. And we hope that it will happen. The market structure needs to be managed and pricing needs to move up. He said: Now, only three players (Bharti Airtel, Vodafone Idea and Reliance Jio) are left. I believe that the market will stabilize now along with the improvement of ARPUs (average revenue per user). The worst could be over. The onset of Reliance Jio's low pricing strategy has seen the other telecom players like Bharti Airtel and Vodafone-Idea bleeding profusely in the recent quarterly results. Bharti Airtel posted nearly 72% fall in net profit for the three months through December 31 at Rs 86 crore compared with a profit of Rs 306 crore in the year-ago quarter, while Vodafone Idea, India's largest telecom firm by number of subscribers, reported a marginal increase in net loss of Rs 5,005 crore in the same quarter. In the third quarter of the current financial year, Reliance Jio had posted an ARPU of 130, which way ahead of Bharti Airtel (104) and Vodafone Idea (89).

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EASING CORE INFLATION SETS STAGE FOR MORE INTEREST RATE CUTS BY RBI

India’s headline and core inflation rates are set to converge in the coming months as the economy slows, increasing the chance of more interest rate cuts. The core measure -- which strips out volatile fuel and food costs -- has remained sticky at around 6 per cent and is a key reason economists cautioned against more rate cuts after last week’s surprise easing. It softened to 5.4 per cent in January, according to economists at Yes Bank Ltd. and Axis Bank Ltd. Pranjul Bhandari, chief India economist at HSBC Holdings Plc, sees it slowing to as low as 4 per cent this year. For now, headline inflation eased further as food prices extended their fall, albeit at a slower pace. Consumer-price growth reached 2.05 per cent in January, well below the Reserve Bank of India’s medium term target of 4 per cent. It looks like headline inflation will begin to move towards core, said HSBC’sBhandari. With rupee and fuel costs stabilising, the core could also start coming down.

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EXIM BANK TO FINANCE 27 SOLAR POWER PROJECTS IN 15 NATIONS

Export-Import Bank of India (Exim Bank) will finance 27 solar power projects worth $1.4 billion spread across 15 countries, said David Rasquinha. As an agent of Government of India, we are trying to promote solar power projects across the world, said Rasquinha. The solar projects predominantly located in Africa and South America are identified by International Solar Alliance and will include grid projects to generate solar power and off-grid projects like rooftop solar and irrigation pumps powered by solar panels. Exim Bank has already provided LOCs worth $226 million to finance 16 solar projects in various developing countries, Rasquinha added. On the capital infusion announced by the government, Rasquinha said, of the total infusion of ₹6,000 crore, the first tranche of ₹4,500 crore is expected in the current fiscal while the remaining ₹1,500 crore will come in the next year. The first tranche will be through issuance of recapitalisation bonds (recap bonds) and on the second tranche, ₹900 crore will be in the form of cash and balance through recap bonds, Rasquinha added. On the bank’s Non-performing assets (NPAs), Rasquinha said, the bank has adequate capital and has an excellent provision coverage ratio at 75 per cent. We made a huge provisioning towards Bhushan power and we now see a significant recovery once the insolvency process is completed by National Company Law Tribunal (NCLT), Rasquinha added. Lauding the government for introducing Insolvency and Bankcruptcy Code (IBC), Rasquinha said, besides Bhushan power, the bank expects to make recovery from Essar Steel and various other strained assets. He also said that the bank is in the process of setting up a consultant to relook its business strategy and submit a report by April 2019. We started business in 1981 and we are now in a completely different economic scenario hence we are setting up a consultant to relook everything we do, Rasquinha said.

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48% EMPLOYEES KEEN ON SWITCHING JOBS FOR GREATER FLEXIBILITY

Keeping in line with the changing priorities of millennials, a survey has revealed that almost 48 percent of respondents said they would consider switching jobs for greater flexibility Almost half (48 percent) of employees surveyed agreed that they would consider changing their job if their current workplace eliminated their remote work policy, according to a survey by global job site Indeed. Further, 73 percent of employees whose current workplace does not offer remote work options would like their companies to offer the alternative and 53 percent would even consider taking a pay cut if they could have the option, it added. The survey found that 76 percent of employees whose current workplace does not offer remote work options would consider switching to a job that offered more flexibility, while 42 percent said they have already searched for such job options. Even though 47 percent of employers surveyed felt the investment required in technology to facilitate remote work is a deterrent, 83 percent of employers believed that offering employees flexibility in work improve productivity.

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INDIGO CANCELS 30 MORE FLIGHTS DUE TO PILOT SHORTAGE

Shortage of pilots continued to hamper budget carrier IndiGo's operations with the airline cancelling as many as 30 flights Tuesday from across stations and passengers allegedly being forced to buy last minute high fares for its flights, a source said. On Monday also, the Gurugram-headquartered airline had pulled out 32 flights from its network. On the other hand, there was no indication of any probe by the aviation regulator into the cancellation of such large number of flights by the airline since last Saturday. IndiGo has cancelled 30 flights for Tuesday due to the on-going pilots issue. Most of the flights have been cancelled from Kolkata, Hyderabad and Chennai, the source said. While eight flights are not being operated from Kolkata, another five flights are cancelled from Hyderabad and four each from Bangalore and Chennai, among others, he added. In a statement on Sunday, the airline had blamed on weather for disruption in operations across its network. As part of recovering our schedule, positioning of the crew and aircraft had to be readjusted. As a result, a number of flights were cancelled, it had said without giving any specific number of flights were cancelled.

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FACEBOOK HIRES EX-JOURNALIST NATASHA JOG AS ELECTION INTEGRITY LEAD FOR INDIA

Facebook has tapped former journalist Natasha Jog as its election integrity lead for India, according to multiple persons aware of the development, thereby bringing an end to a search process that began nearly four months ago. The New Delhi-based Jog will report to Katie Harbath, Facebook’s public policy director, global elections. Harbath is based out of Facebook’s headquarters in California. According to her LinkedIn profile, Jog was employed with New Delhi Television (NDTV) for more than eighteen years, across various roles. As of July 2018, when she quit the company, Jog was senior editor, special programming and senior anchor, while also looking after StartUp programming for four years along with heading education programming for the channel. Jog began her career at NDTV in 2000 as an anchor, news editor and reporter. However, Jog is not the only hire Facebook is making in the run-up to the elections. It has also hired two more seasoned public policy professionals, who will look after politics and government. The two new hires, along with Jog, will oversee the Menlo Park-headquartered social network’s election integrity efforts in India.

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CS Meetesh Shiroya