CLARIFICATION
ON FILING OF E-FORM RD-1-CONVERSION OF PUBLIC COMPANY INTO PRIVATE COMPANY AND
CHANGE IN A FINANCIAL YEAR
This Ministry vide notification no. G.S.R
1219(E) dated 18/ 12/ 18 has notified Companies (Incorporation Fourth
Amendment) Rules, 2018, whereby applications u/ s 2(41) (change in a financial
year) and u/ s 14 of the Companies Act, 2013 (conversion of public limited
company into private company), along with e-form RD-1 shall be processed by
Regional Directors. Stakeholders have expressed certain difficulties in filing
e-form RD-1 on account of aforesaid two purposes pending deployment of revised
version of e-form RD- 1. It is therefore clarified and Regional Directors are
advised to process e-form RD-1 for the above referred applications, if 'others'
is selected on account of aforesaid two counts, till the revised form is
deployed by this ministry. Further, it is also clarified that such applications
filed in e-form no. RD- I should not be rejected merely on the ground that
"others" is selected and "e form is not available", till
the said form is deployed by this Ministry.
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EXTENSION
OF TENURE OF HIGH LEVEL COMMITTEE ON CORPORATE SOCIAL RESPONSIBILITY
The High Level Committee on Corporate Social
Responsibility, 2018 was constituted under the Chairmanship of Secretary,
Ministry of Corporate Affairs vide OM of even no. dated 22.11.2018 to review
the existing framework and formulate a
coherent policy on Corporate Social Responsibility. The Committee has been granted
extension of three months with effect from 04.03.2019 with the approval of
Hon'ble Union Minister for Corporate Affairs to submit its report.
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RE-CONSTITUTION
OF INSOLVENCY LAW COMMITTEE AS STANDING COMMITTEE FOR REVIEW OF IMPLEMENTATION
OF INSOLVENCY & BANKRUPTCY CODE, 2016
The provisions relating to insolvency
resolution for corporate persons (Part II of the Insolvency and Bankruptcy
Code, 2016), regulation of insolvency professionals, agencies, information
utilities and establishment of the Insolvency and Bankruptcy Board of India
(the Board) (Part IV of the Code) and Miscellaneous provisions (Part V of the
Code) have been brought into force, in phases. Part Ill of the Code, which
deals with insolvency resolution and bankruptcy for individuals and partnership
firms is yet to be commenced Two amendments in the code has been done so far
based on the stakeholder 's consultation and Insolvency Law Committee (ILC)
recommendations . Further ILC has submitted its report on Cross Border
Insolvency The provisions of the Code are evolving as a result of various
judicial pronouncements and amendments made in the Code. Keeping in view the
dynamic nature of the issues involved in the implementation of the Code
pertaining to the corporate insolvency resolution process, the corporate
liquidation process and to address new issues viz cross border insolvency,
individual insolvency, group insolvency, avoidance action, Boards investigation
powers & regulatory functions etc, it was considered prudent to have an
advisory body for guidance & stakeholders consultations on the issues of
implementation of code on continuous basis. Accordingly , in suppression of the
Order No 35/14/2017 dated 16.11.2017, the Government hereby re-constitutes the
Insolvency Law Committee as Standing Committee for review of implementation of
Insolvency & Bankruptcy Code, 2016 consisting of members
·
Secretary , Ministry of Corporate Affairs -
Chairperson
·
Chairperson, IBBI – Member
The Committee will analyze the functioning
& implementation of the Code identifying issues impacting the efficiency
and effectiveness of the corporate insolvency resolution and liquidation
framework prescribed under the Code and make suitable recommendations to
address such issues The Committee will also study the insolvency resolution and
bankruptcy framework for individuals and partnership firms and make
recommendations for its successful implementation. The Committee may also make
any other relevant recommendation as it may deem necessary. The Chairperson of
the Standing Committee may also invite or co-opt practitioners , experts
(subject specific) who have knowledge or experience of insolvency framework,
law and economics and representatives from other regulators or Ministries. The
Committee may also consult other stakeholders as part of its deliberations. The
non-official members of the Committee shall be eligible for travelling ,
conveyance and other allowances as per extant government instructions , to be
decided by Chairperson of the Committee. Secretarial/technical support to the
Committee will be arranged by Ministry of Corporate Affairs or Insolvency and
Bankruptcy Board of India. The Committee shall submit its recommendation to
Ministry from time to time as directed by Chairperson of the Committee .
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NOTICE OF
NCLAT APPEAL HAS TO BE SERVED REGARDLESS OF SUPPLY OF ADVANCE COPY OF APPEAL
PAPER BOOK: SC
The Supreme Court has observed that
stipulation of service of notice on the other side, pursuant to issuance of
notice by the National Company Law Appellate Tribunal in an appeal, has to be complied
with, regardless of supply of advance copy of appeal paper book prior to the
issuance of notice by NCLAT. The State Bank of India had approached the
National Company Law Appellate Tribunal against an order passed by the National
Company Law Tribunal, Calcutta. It set aside the NCLT order and directed to
admit the application filed by the bank against Jai Balaji Industries Limited
under Section 7, Insolvency and Bankruptcy Code. The company preferred appeal
before the Apex court. Kapil Sibal, on behalf of the company, approached the
Apex Court contending that principles of natural justice, was violated as the
company was neither been served with notice of appeal before the NCLAT nor been
given a hearing before it. On the other hand, Mukul Rohatgi, who appeared for
the bank, submitted that the advance copy of the appeal paperbook filed by the
Bank and was duly delivered by post at the registered office of the Company,
wherein it showed intent to challenge the order of the NCLT. The bench
comprising Justice NV Ramana and Justice Mohan M. Shantanagoudar observed: Rule
48 of the NCLAT Rules clearly stipulates service of notice on the other side,
pursuant to issuance of notice by the NCLAT in the appeal, regardless of supply
of advance copy of appeal paperbook prior to the issuance of notice by NCLAT.
Further, Rule 52 of the NCLAT Rules categorically states that the judicial
section of the registry of the NCLAT shall record, in the Notes of the Registry
column in the order sheet, the details regarding completion of service of
notice on the respondents. Therefore, the court observed that, since no notice
was served upon the company before the NCLAT as stipulated under the rules, and
its right to be heard audi alteram partem, has been violated The bench then set
aside the NCLAT order and remanded the matter back to NCLAT with a direction to
dispose of the matter as expeditiously as possible after affording an
opportunity of hearing to the parties.
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GOVERNMENT
SET TIGHTEN TAX NET ON REAL ESTATE
Taking cognisance of the Comptroller and
Auditor General’s (CAG) report on tax evasion in real estate, the Finance
Ministry is in the process of introducing strict compliance rules in order to
bring more real estate developers under the tax net. A CAG tabled last month
had said that 95 per cent of developers are outside the income tax net and
noted that the Income Tax department has no mechanism to ensure that all
registered companies have PAN and are filing their Income Tax Returns (ITRs)
regularly. The CBDT has taken note of the CAG report. The numbers are alarming.
The department is planning to take a series of steps to ensure better
compliance among real estate developers, a senior official in the finance
ministry said. The Central Board of Direct Taxes (CBDT) is also planning to set
up a committee which will look at the necessary reforms required. The sector is
also a nesting place for parking black money. The department is planning to
initiate proper listing of the companies, its board of directors and the PAN
number, the official added. The CAG had based its report on 54,578 companies
for which data was made available for the audit. 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 report noted. There is no mechanism
with ITD to ensure that all the registered companies have PAN and are filing
their ITRs regularly, it went on to point out. Officials also added that the
I-T department will work closely with the Ministry of Corporate affairs to
update the databases with income tax filed by these companies. The department
is also looking at the rampant mistakes in assessment which had cost the
exchequer. Out of 78,647 assessments made in the period, we checked 17,155
assessment records with assessed income of Rs 1,02,106 crore. We noticed 1,183
mistakes having tax effect of Rs 6,093.71 crore thus causing loss of revenue to
the Government, the CAG report had added, also flagging weak enforcement of
income tax law. The system to ensure compliance of filing of ITRs by the
sellers of high-value immovable properties was not effective. The enforcement
of provisions in respect of filing AIRs by the ITD was weak, the CAG had
observed. Officials also hinted that some of the initial recommendations may be
included in the Direct Tax Code, which is likely to come into effect by June
this year.
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NCLAT
SLAMS SBI-LED LENDERS OF RCOM FOR MISLEADING TRIBUNAL
An appellate tribunal slammed the lenders of
Reliance Communications (RCom), especially the State Bank of India, for
painting a rosy picture of the Anil Ambani-owned telco’s asset sale plan, which
had turned out to be false and questioned why action shouldn’t be taken against
the joint lenders group. The two-member bench of the National Company Law
Appellate Tribunal (NCLAT), headed by Justice SJ Mukhopadhaya, Monday said, You
have failed. JLF (Joint Lenders' Forum) has failed. No sale took place Further,
the bench asked as to why proceedings against them (lenders) should not be
initiated for misleading the tribunal by giving a golden outlook to recover
around Rs 37,000 crore from sale of assets – to Reliance Jio Infocomm – but no
such sale has taken place. You clapped with RCom and claimed that you would
recover around Rs 37,000 crore from sale of assets to Reliance Jio, said the
bench. The bench reacted sharply to SBI’s refusal to release income-tax refunds
received by RCom to clear the Rs 453 crore that the operator needs to pay
Swedish telecom gear maker Ericsson by March 19. SBI said it can’t release the
funds till it gets clearance from all lenders. Why not give effect to the
orders of the Supreme Court? Sending someone (Anil Ambani) to jail will not
solve the problem before us, the bench observed. The Supreme Court on February
20 held RCom chairman Anil Ambani in contempt for not paying Ericsson its dues
worth Rs 571 crore, including interest, despite having the money to do so and
directed the telco and its units to pay the operational creditor the money in
four weeks. Failing this, Ambani would go to jail for three months. RCom has
already deposited Rs 118 in the apex court. Arguing for RCom in the NCLAT on
Monday, senior counsel Kapil Sibal said that the telco needs to pay Ericsson
its dues by March 19 and the income tax refunds of around Rs 260 crore held by
SBI should be deposited to the Swedish company directly. Sibal was assisted by
lawyer Mahesh Agarwal. But SBI refused to do so, prompting the bench to say
that after failing to get money from sale of assets, the lenders are now trying
to recover Rs 260 crore from the refunds. NCLAT will next hear the matter on
March 12. SBI is the lead banker in a consortium of 37 banks and financial
institutions which are seeking to recover their dues from RCom. Ericsson is an
operational creditor.
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EX-ESSAR
STEEL DIRECTORS APPROACHES NCLT AGAINST ARCELORMITTAL TAKEOVER
Three directors of erstwhile board of Essar
Steel on Monday approached the National Company Law Appellate Tribunal (NCLAT)
against a lower bankruptcy court order that allowed takeover of the company by
ArcelorMittal. The matter was mentioned before a two-member bench headed by
Chairman Justice S J Mukhopadhaya, which asked it to be listed after the
Ahmedabad bench of the National Company Law Tribunal (NCLT) posts its full
written order. The three directors of Essar Steel are - Prashant Ruia, Dilip Oommen
and Rajiv Bhatnagar. Standard Chartered Bank has also approached the appellate
tribunal against the order. On Friday, the Ahmedabad bench of the NCLT had
approved the lenders' plan to let global steel giant ArcelorMittal take over
the debt-idden Essar Steel. Passing an order, the tribunal had suggested that
the payment of Rs 42,000 crore by ArcelorMittal be distributed among financial
and operational creditors in the ration of 85:15.
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NCLAT
RESTRICTS HANDING OVER OF BAFNA PHARMA TO ITS PROMOTER
The National Company Law Appellate Tribunal
(NCLAT) has called upon the monitoring committee for Chennai-based Bafna
Pharmaceuticals Ltd not to hand over possession of the company to its promoter.
The order comes in an appeal filed by Saravana Global Holdings Ltd and others
against the company. Earlier, the National Company Law Tribunal (NCLT) had
issued an order approving the resolution plan by the promoter, Bafna Mahavir
Chand, based on approval by the Committee of Creditors, as it falls within the
meaning of Micro, Small and Medium Enterprises. Based on the appeal, Justice S
J Mukhopadhaya, chairperson of NCLAT and Justice Bansi Lal Bhat, member
(Judicial) issued an order restricting handing over the possession but if the
possession has already been handed over, the resolution applicant, which is the
promoter of the company, will maintain status quo without alienating,
transferring or creating third-party encumbrance of properties. He also has to ensure
the company remains a going concern the order said. As per the resolution plan
approved by the NCLT, the total claim for all financial creditors was Rs 49.23
crore, and the payment proposed was Rs 34.46 crore. The NCLT order said the
plan provides for settling the claim of various stakeholders including workers
and operational creditors. At the NCLT, the Committee of Creditors decided to
defer the issuance of the expression of interest for the resolution plan on the
ground that the company is an MSME and the promoter was allowed to submit the
resolution plan.
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SEBI
SEEKS POWERS TO GRANT IMMUNITY, IMPOSE LESSER PENALTY IN LIEU OF ASSISTANCE IN
PROBE
With an aim to bolster its
information-gathering mechanism and fast-track its probe, market regulator Sebi
has sought direct powers to grant immunity in select cases and to impose lesser
penalty if the accused agrees to provide assistance against other wrongdoers. In
two separate proposals for the government, the Securities and Exchange Board of
India (Sebi) has opined that such provisions would help it in establishing and
securing stronger findings and orders against defaulters against whom
sufficient evidence may not be available otherwise, officials said. The new
powers can be crucial for Sebi in some ongoing cases, including one involving a
large bank and several high-profile names, officials added. At present, any
immunity for securities law violations can be granted only by the central
government. Citing similar powers available with the fair trade watchdog
Competition Commission of India (CCI), Sebi has proposed to impose a lesser
penalty on a person who may have violated securities laws but provides
assistance to the regulator in proceedings against other accused before
completion of investigation, inquiry, inspection or audit ordered by it. Finance
Ministry has opined any such powers should remain with the central government
and a provision for that can be made by suitable amendments to the Sebi Act and
the Securities Contracts Regulation Act (SCRA). Clarifying that the proposal to
impose a lesser penalty is different from granting immunity, Sebi has said the
conduct of a person in an actionable proceeding may be considered as a
mitigating factor and the regulator or its adjudicating officer should be
empowered to impose a smaller fine against an individual providing help in
probe. This would, however, depend on the person having made a full and true
disclosure in respect of his or her alleged violations and the disclosure
should be vital for the regulator. Also, the penalty cannot be reduced in cases
where the disclosure is made after receipt of report of inspection, inquiry,
audit or investigation. In cases where the informant stops cooperating with the
regulator before completion of the proceedings would also not qualify for the
leniency. Besides, Sebi can act against such an informant at a later stage if
it finds that the person has failed to comply with the necessary conditions for
the leniency, had given false evidence or the disclosure was not vital or to
the satisfaction of the regulator or its adjudicating officer. On the proposal
regarding power to grant immunity , the regulator is of the view that such
powers currently lies only with the central government. However, the Committee
on Fair Market Conduct has recommended that such a power can also be
exercisable by Sebi. The Committee has also suggested necessary amendment to
the Section 24B of the Sebi Act to give power to Sebi to impose lesser penalty
along the lines of a similar provision in the Competition Act.
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SEBI
IMPOSES RS 25 LAKH FINE ON INDUS PORTFOLIO FOR FRAUDULENT TRADE
Markets watchdog Sebi has levied a penalty of
Rs 25 lakh on Indus Portfolio for carrying out reversal of trades in the
illiquid stock options segment on the BSE. The firm had indulged in execution
of reversal trades with the same counter parties during the same day at
substantial price difference, Sebi noted in an order dated March 8. Such trades
are non-genuine as they are not executed in normal course of trading, lack
basic trading rationale, and lead to creation of artificial volume. Further,
the regulator said that the scheme, plan, device and artifice employed by the
noticee in this case of executing reversal trades in illiquid stock options
contracts at irrational, unrealistic and unreasonable prices, tantamount to
fraud on the securities market.
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RBI MAY
BAR DUAL FUNCTIONS OF RATING AGENCIES
The Reserve Bank of India may disallow credit
rating agencies from the dual role of being advisor-cum-rating agencies for
companies. The move aims to prevent such entities from making biased
assessments about the financial condition of their clients and restrict
conflict of interest that may seep in. Official sources said that the banking
regulator may soon initiate a dialogue with market regulator Securities and
Exchange Board of India (SEBI) to flesh out new regulations that would impact
the way credit rating agencies function. The changes have become imperative
post the IL&FS fiasco where the role of rating agencies came into question.
Just a month after giving high ratings for debt papers of IL&FS bonds in
August, the ratings were brought down several notches following the company
defaulting in interest payments on its bonds. Credit rating agencies are
jointly regulated by both Sebi and RBI as these firms rate bank loans and
NBFCs, which constitute 70 per cent of their business.
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TRIBUNAL
TELLS IRDAI TO RENEW TPA LICENCE
In a rare instance, the Securities Appellate
Tribunal (SAT) has quashed an order issued by the Insurance Regulatory and
Development Authority of India (IRDAI) and directed the insurance regulator to renew
the licence of an entity that was cancelled by IRDAI in July 2016. While
directing IRDAI to renew the licence of Happy Insurance TPA Services within
four weeks, the tribunal said that the stance taken by the regulator was not
‘justifiable’ and that it acted ‘discriminately’ since it could have levied a
monetary penalty rather than rejecting the application. Incidentally, this is
the first time since August last year that the tribunal has passed an order in
a matter related to the insurance regulator. The roots of the matter go back to
October 2015, when Happy Insurance TPA applied to IRDAI for renewal of its
licence to act as a third-party administrator for health insurance. While
seeking certain clarifications, IRDAI issued a show-cause notice in May 2016
before a final order was passed on July 19, 2016, rejecting the application for
licence renewal. According to IRDAI, the application was rejected as the
applicant had a working capital of less than ₹1 crore
during three financial years and that there was a difference in the two audited
financial reports submitted for the year 2015-16. In August 2017, the Supreme
Court, while deciding on an appeal filed by Happy Insurance, ruled that since
the working capital of the intermediary was more than ₹1 crore, the regulator should take a re-look
at the application. IRDAI passed a fresh order in January 2018 rejecting the
application and reiterating the stance it took in the previous order passed in
July 2016. Thereafter, the intermediary challenged the IRDAI order in SAT. While
deciding on the matter, SAT highlighted the fact that submissions made by the
intermediary showed that there were no two different audit reports but only one
with a corrigendum to withdraw the earlier audit report and further, an error
related to the working capital was rectified in the subsequent financial years.
It is a recent trend that some insurance companies and certain intermediaries
have started challenging IRDAI’s orders, said Sumit Agrawal.
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RBI FACES
TROUBLE GETTING BANKS TO CUT RATES
Indian lenders haven’t fully passed on the
central bank’s latest interest rate cut to borrowers, pressuring the monetary
authority to loosen policy even more to support economic growth. A mismatch
between deposits and credit growth, and competition from the government for
small-savings mean banks face a high cost of capital, limiting their ability to
transmit monetary policy easing. Bankers say the Reserve Bank of India’s 25
basis-point reduction in the repurchase rate to 6.25 percent in February was a
start, but was probably too little to have any impact on lending rates just
yet. Latest data from the central bank shows the main overnight lending rate
offered by commercial banks has been sticky in a range of 8.15 percent to 8.55
percent since the beginning of the year. Most banks have trimmed lending rates
by a ‘token’ 10 basis points, said Ashutosh Khajuria, adding that the RBI needs
to move by a bigger-than-usual 50 basis points to spur lending. If it is a 50
basis points cut, it will be an accelerated transmission, Khajuria said. If
inflation behaves the way it has been, rates will certainly go down in the
first quarter of the next financial year starting April. Subdued Inflation
Calls for rate cuts have been building, given
benign inflation and weak demand. Inflation has been subdued at about 2
percent, much lower than the central bank’s medium-term target of 4 percent.
The latest inflation data is due on Tuesday, with economists surveyed by
Bloomberg forecasting consumer prices to rise 2.4 percent. Shaktikanta Das, the
new RBI governor, has been trying to nudge bankers to lower lending rates
holding meetings with bank chiefs last month to discuss the monetary policy
transmission. In India, rate adjustments take about six to nine months to work
its way through the economy. Most bankers remain cautious though and are not
willing to cut rates as deposits and household financial savings are at
historical lows, said Prachi Mishra. Even while policy rates are down, the
rates paid by the government on small savings are significantly higher than
bank deposit rates. The problem is unlikely to go away soon, posing a headache
for banks already struggling with soured loans and tight financial conditions.
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SUN
PHARMA: SEBI REFUSES TO DISCLOSE INFORMATION UNDER RTI ON WHISTLEBLOWER
DOCUMENT AND ACTION TAKEN
Market regulator Securities and Exchange
Board of India (SEBI) has turned down an Right to Information (RTI) request
followed up by an appeal to provide information on the documents provided by a
whistleblower in the Sun Pharmaceutical matter. Interestingly, the refusal is
on the grounds that it will affect. Responding to first appeal filed by an
applicant, the market regulator says, Providing copy of the complaint would
reveal the identity of the whistleblower and may lead to the undesirable
consequences of danger to the life or physical safety of the person. In any
case, the applicant had not asked for details about the whistleblower and had
specifically mentioned that anything sensitive can be redacted. SEBI however
argued that, Severing the name and personal details of the whistleblower from
the complaint may not be sufficient to avoid the perceived danger, since the
contents of the complaint, the language used, timing of the complaint may be
sufficient to ascertain identity of the whistleblower. Similarly, the file
notings in the matter may reveal identity of the dealing officials by factors
similar to those mentioned above, including the handwriting, hierarchy of
officials in the particular department dealing in the matter. Whistleblower
complaints are made with an objective that the information contained in the
complaints may be used for examination of the alleged irregularities by SEBI
which may result in enforcement actions. Such complaints may, therefore, be
considered as a source of information and assistance given in confidence for
law enforcement, which is specially exempt from disclosures under section
8(1)(g) of the RTI Act, SEBI stated. While denying information under the RTI
Act, the market regulator accepted that complaints from whistleblowers are
vital source of information for enforcement authorities and that such
complaints are relevant for SEBI in discharging its statutory obligation to
regulate securities market. It is further observed that complaints from
whistleblowers are received and held by SEBI in a fiduciary capacity, since
such complaints are made under an implicit trust that identity of the
complainant would be kept confidential and that allegations mentioned in the
complaint would be examined by SEBI in the interest of investors and securities
market, Anand Baiwar, first appellate authority at SEBI stated in is order.
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‘INDIA
RANKS 11TH IN GOLD HOLDING’
India, which is the world’s largest consumer
of gold, has the 11th largest gold reserve with the current holding pegged at
607 tonnes, as per the latest report by the World Gold Council (WGC). India’s
overall position in terms of total gold holding would have been tenth had the
list included only countries. Whereas, International Monetary Fund (IMF) is
included and is third on the list with total gold reserves of 2,814 tonnes. The
numero uno slot is occupied by the U.S., which boasts of gold reserves of
8,133.5 tonnes, followed by Germany with 3,369.7 tonnes. Italy and France
complete the top five list with reserves of a little over 2,400 tonnes each.
Meanwhile, among Asian countries, China and Japan have more reserves of the
precious metal when compared to India. China – WGC takes into account only
‘Mainland China’ – has reserves of 1,864.3 tonnes, while Japan has gold
reserves of 765.2 tonnes. Following the multi-decade high in gold reserves
growth in 2018, central banks’ appetite remained healthy at the start of 2019,
said Alistair Hewitt, Director of Market Intelligence, WGC. Gross purchases of
48 tonnes and gross sales of 13 tonnes led to global gold reserves rising by 35
tonnes on a net basis in January, with sizeable increases from nine central
banks. This is the largest January increase in gold reserves in our records
[back to 2002], and illustrates the recent strength in gold accumulation, added
Mr. Hewitt. Pakistan, with its gold reserves of 64.6 tonnes, occupies the 45th
position.
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BANKS IN
NO HURRY TO LINK REPO WITH INTEREST RATES
Public sector banks are in no hurry to follow
big brother SBI in linking their deposit and lending rates to the RBI's repo
rate, which may further irk the Reserve Bank of India for not transmitting the
lower interest rates to the customers. While some of them do admit that
ultimately linking to repo rate might happen but they are not firm on the time
of such commitment. Also, several PSU banks have not responded when asked if
they planned to go for the external benchmark linking with repo rate. A Punjab
National Bank source told IANS: No decision has been taken, but bank will take
a call soon. Other banks have to follow suit sooner or later. A Bank of India
source said no such decision has been taken. By doing this SBI became the first
bank to announce linking its interest rates on deposits and loans to an
external benchmark from May 1, 2019. This was expected to be followed by peers.
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GIFT
CITY’S FUTURE UNCERTAIN OVER IL&FS GROUP'S FIN WOES
The fate of the Rs 70,000-crore Gujarat
International Finance Tec-City (GIFT City) hangs in the balance as the new
board of Infrastructure Leasing and Finance Services (IL&FS) recently
admitted that many of the IL&FS group companies involved in the project
including the joint venture partner — holding company IL&FS — will not be
able to pay off their debt to financial creditors GIFT City Co, which is
implementing the GIFT City project in Gandhinagar, is a 50:50 joint venture
between IL&FS and the state government-owned Gujarat Urban Development Co
(GUDC). The project houses the country’s first International Financial Services
Centre (IFSC). Of the 880 acres over which the GIFT City project has been
envisaged, about 250 acres is earmarked for IFSC.
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TARIFF
ORDER MAY HIT SALE OF STRESSED POWER ASSETS
Lenders’ rush to complete the resolution of a
few stressed power plants by March-end may run into a rough patch as the
electricity regulator has sought lower tariff from projects being bought at
very low valuations. The Uttar Pradesh Electricity Regulatory Commission
(UPERC) has set the precedent that will benefit power consumers but might
dissuade bidding firms. The regulator, while hearing a case filed by the State
Bank of India for approval to transfer the ownership of Jaiprakash Associates’
Prayagraj plant to Resurgent Power, said on March 7 that the sale of power
assets by banks at lesser valuation without tariff adjustment will create a
perverse incentive for buying these assets and pave way for an undue arbitrage.
The Rs 6,000-crore plan of Resurgent Power, which is backed by Tata Power and
ICICI Ventures, to acquire Prayagraj power plant has hit a roadblock with the
watchdog asking it to come up with a tariff reduction proposal in a week.
Spokespersons of ICICI Ventures and Tata Power did not offer comments. UPERC
has said that the acquiring firm should share gains with consumers and disclose
the computation based on which the discount has been offered. Industry insiders
said resolution proceedings outside the Insolvency and Bankruptcy Code (IBC)
are protected by non-disclosure agreements. Prayagraj Power Generation Corp Ltd
(PPGCL) is the first stressed asset to have identified the new promotor after
the Reserve Bank’s February 12, 2018, circular on stressed assets. Lead lender
SBI needs these approvals to transfer ownership to Resurgent Power. Resolution
proceedings are close for pofew other projects like GMR Energy Chhattisgarh Ltd
and RattanIndia’s Amravati project. The commission said the new incumbent did
not lower tariffs, although the entire debt load of PPGCL would go off the
books after the deal. There is no denying of the fact that now with zero debt,
the element of interest on loan, which is part of fixed cost, would become
zero. As a result, enough headroom is available for the new incumbent to share
this savings with the consumer, UPERC said.
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BANKS'
RELIANCE ON BULK DEPOSITS LIKE TO INCREASE: IND-RA
Scheduled commercial banks' reliance on bulk
deposits is likely to increase if credit growth is higher than that of deposit,
India Ratings and Research (Ind-Ra) said Monday. As per the rating agency, the system
level credit growth of 12.9 per cent year-on-year continues to outpace deposit
growth at 9.3 per cent, thereby intensifying competition for deposits among
banks. This is based on RBI's quarterly statistics on deposits and credit of
scheduled commercial banks for December 2018. In third quarter of this fiscal,
state-owned banks have seen credit growth of 8.4 per cent and deposit growth at
4.9 per as compared to the year-ago period, implying that they could also
compete to recoup some of the deposit market share loss that they have conceded
to private banks over the years. With private banks seeing continuing strong
credit growth at 22 per cent year-on-year in third quarter of 2018-19, they are
likely to solicit deposits even by offering higher rates, Ind-Ra said. It
believes that if credit growth continues to outpace deposit growth, then
scheduled commercial banks' reliance on bulk deposits is likely to increase
which could lead to a higher cost of funds along with increasing volatility in
the asset-liability structure of banks. During April-February 2018-19, deposits
raised by banks were up 24.6 per cent as compared to the year-ago period even
as the outstanding amount was up only 3.6 per cent at Rs 1.78 lakh crore, it
said. Private banks saw an increase of 235 bps to 26.2 per cent and 234 bps to
31.4 per cent in market share in deposits and credit, respectively, in the last
one year while PSBs saw a 274 bps decline to 65.7 per cent in deposits and a
253bps decline in credit to 60.9 per cent.
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MOODY'S
UPGRADES RATING FOR CENTRAL BANK, IOB OVER CAPITAL INFUSION
Global agency Moody’s has upgraded the rating
for long-term foreign currency deposits raised by Central Bank of India (CBI)
and Indian Overseas Bank (IOB) from Ba3 to Ba2, on improvement in their
solvency following capital infusion in them by the Government of India. Moody's
has also upgraded their Baseline Credit Assessment (BCA) to b2 from b3. In the
case of Bank of India, Canara Bank, Oriental Bank of Commerce and Union Bank,
Moody's has affirmed their local and foreign currency deposit ratings at
Baa3/P-3, Moody’s said in a statement. The rating upgrade reflects improved
solvency of the banks, following the capital infusion from the government.
Moody's estimates that both banks will achieve a common equity tier-1 (CET1) of
more than 8 per cent by March 2019. This will create a buffer above the
regulatory requirement under Basel III of 7.375 per cent, which includes a
minimum CET1 requirement of 5.5 per cent and a capital conservation buffer of
1.875 per cent. For CBI and IOB, which are among the weakest rated PSBs, the
rating upgrade reflects the improved solvency following the capital infusion
from the government. Moody's estimates that both banks will achieve a common
equity tier-1 (CET1) of more than 8 per cent by March 2019. This will create a
buffer above the regulatory requirement under Basel III of 7.375 per cent,
which includes a minimum CET1 requirement of 5.5 per cent and a capital
conservation buffer of 1.875 per cent.
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GOYAL
SEEKS RS 750-CR LIFELINE FROM ETIHAD, WARNS DELAY MAY GROUND JET
Jet Airways chairman Naresh Goyal has sought
an urgent funding of Rs 750 crore from its equity partner Etihad, citing the
very precarious position of the airline following the lingering cash flow
issues which got amplified after the forced grounding of over 50 of its planes.
In a letter to the Gulf-based carrier's group chief executive Tony Douglas,
Goyal also said the airline has also secured the go-ahead from the aviation
ministry to pledge its shares in JetPrivelege for securing the interim funding.
The airline holds 49.9 percent stake in the loyalty programme, while the
majority is with Etihad. It can be noted that Etihad board is meeting in Abu
Dhabi Monday to discuss the resolution plan for Jet in which it owns 24 percent
stake since April 2014. I now look forward to your support and cooperation in
saving the airline by an urgent fund infusion of Rs 750 crore by early next
week, so that a matching contribution from banks is also disbursed, as per the
resolution plan, Goyal said in the letter dated March 8.
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JET
AIRWAYS GETS ₹2,050
CRORE LOAN FROM PNB
Jet Airways (India) Ltd has secured fresh
credit facilities of ₹2,050
crore from state-run Punjab National Bank (PNB) that could provide a temporary
lifeline to the cash-strapped airline. The Mumbai-based airline has raised
foreign currency term loans worth ₹1,100
crore and a non-fund based credit facility of ₹950 crore
from PNB, according to loan documents. Although the documents mention that Jet
Airways will use the credit facility for its working capital needs, a person
directly aware of the airline’s plans said on condition of anonymity that the
money would be primarily used to pay rental dues to aircraft lessors and salary
arrears. If the loan proceeds are used to pay dues to lessors and pare the
company’s debt, then this may improve Jet Airways’ credit rating and also help
it resume flights it stopped after at least 49 leased planes were grounded
since 8 February because of non-payment of rents. The consortium partners
continue to be in talks with the Jet Airways management to explore different
ways of resolving its issues, a PNB spokesperson said on Monday. The credit
facility has been raised in two lots through separate agreements with PNB.
Under one agreement, Jet Airways received a credit facility of ₹1,050 crore, including a term loan in dollars
worth ₹350 crore (at a notional rate of ₹67 per dollar) and a non-fund based facility
of ₹700 crore. The second agreement, a credit
facility of ₹1,000 crore, includes a
term loan of ₹750 crore and a non-fund
based facility of ₹250
crore. PNB’s ₹2,050 crore credit
facility to Jet Airways has been secured against its four flight training
simulators, trade receivables coming to ICICI Merchant Services and any
additional receivables coming to TRA by virtue of Jet Airways’ agreement with
PNB or any other merchant services provider in the future.
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FOR
SPEEDY SETTLEMENT, IRDAI MOOTS CHANGES IN NORMS FOR SURVEYORS
A Working Group (WG) of the Insurance
Regulatory and Development Authority of India (IRDAI) has suggested
modifications in the norms for surveyors and loss assessors for speedy
settlement of claims. Insurance claim settlements are based on reports prepared
by these specialists who survey and assess the damage/loss. On timelines for
submission of survey report, the panel said that within seven working days of
the claim intimation, inform insurer/claimant of the essential documents and
other requirements that the claimant should submit in support of the claim. Where
documents are available in public domain or with a public authority, the
surveyor should obtain them, it added. The survey should start immediately and
in an interim report the physical details of the loss should be submitted to
the insurer within 15 days from the date of first visit. Submit final survey
report to the insurer within 30 working days from date of submission of last
relevant and necessary document by the insured, the group said. The panel
suggested that the requirement of practical training may be done away with as
it does not seem to serve the purpose that was envisaged. It is recommended
that instead of training requirements, examination of high quality based on
relevant syllabus with proper testing that has a quantitative and practical
orientation that will ensure that surveyors have the required wherewithal to
carry out survey and loss assessment, the report said. In respect of crop
insurance, the recognised qualifications of surveyors and loss assessors may be
expanded to include graduation with at least one subject being agricultural
science from a recognised university. However, government schemes may be
exempted from this.
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IRDAI
SEEKS PROPOSAL FROM LIC TO CUT ITS EQUITY STAKE IN IDBI
Insurance regulator IRDAI Monday said it has sought
proposal from Life Insurance Corporation of India (LIC) for paring its
shareholding in the recently acquired controlling stake in IDBI Bank. Insurance
Regulatory and Development Authority of India (IRDAI) stipulates that insurers
are allowed to hold only up to 15 per cent stake in any listed entity. But LIC,
with a special dispensation from IRDAI, holds more than the limit in some
state-run banks. Besides, the Reserve Bank permits a ceiling of 15 per cent for
promoter stake in a private sector bank. We will decide on the timeline (for
stake reduction by LIC in IDBI Bank). We are not leaving it to them. I have
asked them (LIC) to give a proposal and after that we will take a decision, Subhash
Chandra Khuntia said. With regard to exposure of the insurance firm to debt-
ridden IL&FS group companies, Khuntia said, the regulator will ensure that
policyholders do not lose money. Either they get it back fully or they will
have to provide for it. Some of the IL&FS companies may be better off. We
will find some ways so that policyholders are protected, he said.
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IDBI BANK
APPOINTS LIC AS AGENT, FORMS JOINT GROUP TO IDENTIFY SYNERGIES
The IDBI Bank on Sunday said it has started
aligning its businesses with that of its new owner LIC, appointing the life
insurer as a corporate agent under bancassurance besides setting up a joint
task force to chart out their roadmap for the future. Both the partners have
identified major areas of synergy between them to gain from the full potential
of such strengths, the bank said in a statement. The Life Insurance Corporation
(LIC), which had been looking to enter the banking space by acquiring a
majority stake in the IDBI Bank, completed acquisition of 51 per cent stake in
the bank in January. The deal is expected to provide business synergies to it
despite the lender's stressed balance sheet and high NPA. The major areas of
synergy identified for the immediate short term are pertaining to selling of
LIC policies through IDBI Bank branches, management of cash and other premium
receipts of LIC through the bank's branches, enabling the technical wherewithal
available in both the bank and LIC for offering digital solutions to both
policy holders of LIC and customers of IDBI Bank. Towards this end, Bank's
Board has approved appointment of LIC as a corporate agent under bancassurance,
the statement said. Additionally, a working group has been created to carry
forward the initiatives identified for synergy and to effectively implement the
decisions taken at the management level both for the bank as also for the
associate companies, it said. For the present, the bank and LIC, through their
collective network of branches, offices and workforce, have started leveraging
their mutual business synergies. The long term strategy include common
investment strategy, use of other resources like real estate, commercial and
residential space, IDBI Bank branches, premises and ATMs, digital marketing,
and rationalization of common subsidiaries in mutual funds and life insurance.
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PE/ VC
INVESTMENTS RISE 51% IN FEB: EY INDIA
Buoyed by an improvement in deal activity in
listed securities, private equity and venture capital (PE/VC) investments recorded
a 51 per cent increase to $2.6 billion in February, compared with that in the
same month a year ago. This also represents a 41 per cent rise compared with
the previous month, according to a report by EY. With large investments by
Softbank and buy-outs by funds such as Blackstone, True North and AION, among
others, the appetite of PE/VC funds for deals appears to be strong,
notwithstanding prevailing uncertainties around global growth and impending
general elections in India. Underlying deal activity remains robust across
large and mid-sized deals, although valuations appear to have corrected for
many sectors compared with the pre-September 2018 levels. We think 2019 could
well be one of the best for Indian PE/VC investments, he added. The growth was
driven by a higher number of large deals (deals of value greater than $100
million), with the reporting month recording nine large deals of $1.8 billion
compared with four large deals of $655 million in February 2018. This is also
higher than large deals worth $1 billion recorded in January 2019. SoftBank and
Carlyle’s $415-million investment in Delhivery was the largest deal in February
2019 and also the largest PE/VC deal in the logistics sector ever, the study
said. Based on the type of investments, growth investments at $1.2 billion were
up by 27 per cent compared with February 2018. Private investment in public
equity (PIPE) investments recorded a rebound in February 2019, emerging from a
four-year low of $2.8 million recorded in January 2019. At $431 million, PIPE
investments in February 2019 were at their highest in the past eight months. The
reporting month also recorded two buy-outs worth $262 million, compared with
four buy-outs worth $273 million in February 2018. Start-up investments in
February 2019, at $156 million across 32 deals were 52 per cent lower compared
with $325 million recorded across 31 deals in February 2018. Credit investments
in February 2019, at $548 million, were the highest in the previous 12 months,
on the back of the $350-million debt funding of ReNew Power by Overseas Private
Investment Corporation (OPIC), the US Government’s development finance
institution. From a sector point of view, financial services ($712 million
across 13 deals in February 2019 vs $619 million across 13 deals in February
2018) was the top sector, followed by logistics ($470 million across four deals
in February 2019 vs one deal of $2 million in February 2018), which recorded
its highest ever monthly investment on the back of the large investment in
Delhivery. E-commerce ($35 million across five deals in February 2019 vs $362 million
across nine deals in February 2018), which is generally among the top sectors,
recorded a sharp decline in deal value. Exits in February at $472 million were
almost three times the value recorded in February 2018. This comes on the back
of a rebound in open market exits in the wake of volatility in the stock
markets subsiding. There were four open market exits in February 2019 worth
$351 million, more than three times the value recorded in February 2018 and the
highest in the past six months. There was one PE-backed IPO in February 2019
that saw Goldman Sachs and Kuwait Investment Authority backed Chalet Hotels Ltd
list on the bourses. The largest exit in February 2019 saw Bain Capital and GIC
sell 5 per cent stake in Genpact for $324 million. From a sector perspective,
technology was the top sector, primarily on account of the large Genpact deal. The
reporting month also saw funds worth $285 million being raised and fund raise
plans worth $779 million being announced. The $250-million raised by the India
life Sciences Fund for its third fund was the largest fund raise in February
2019.
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NBCC TO
MONETISE JAYPEE INFRATECH ASSETS TO COMPLETE STUCK PROJECTS
State-run NBCC has informed home buyers of
crisis-hit realty developer Jaypee Infratech that it would rely on monetising
the latter’s assets rather than putting own funds to complete the stuck
projects. NBCC also assured the home buyers of completing the pending projects
within 3 years if its acquisition bid gets accepted. The assurance came on a
query from one of the homebuyers that NBCC in its resolution plan had proposed
infusing only Rs 500 crore into Jaypee Infratech against which it would get
2,000 acres and 6,000 units of unsold, or unclaimed home units. Two companies
-- NBCC and Suraksha Asset Reconstruction Company -- have submitted separate
bids to acquire Jaypee Infratech under the Insolvency & Bankruptcy Process.
About 250 home buyers from 9 associations representing total 9,000 buyers met the
management of NBCC to seek clarity on project completion schedule and
financing. The meeting took place following a request by these homebuyers. It
is for the first time a public sector undertaking (PSU) is bidding to safeguard
or resolve issues of home buyers. Our aim is to get you relief, but as a
company also we wouldn’t want to incur losses, Anoop Kumar Mittal, told home
buyers. We will definitely try and give your home within 3 years, and will
further try to reduce the timelines. The buyers also suggested that a forensic
audit of Jaypee Infratech needs to be conducted.
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COMPLETE REAL
ESTATE PROJECTS OR AUTHORITY WILL GET THEM COMPLETED, UPRERA’S CLEAR MESSAGE TO
DEVELOPERS
Even as nearly 53,000 flats are likely to be
delivered by December, in projects where promoters are not forthcoming
Authority will get them completed Rajive Kumar, told. Recently, the Authority issued
deregistration notices under Section 7 of the RERA Act to 7 builders for
failing to meet their commitments to buyers covering 14 projects and about
4,800 residential units. The section says that directions can be issued by the
Authority to see the projects are completed so need to finally go to the level
of de-registration doesn’t arise. This experience will benefit everyone as
others could see it as a shape up kind of warning, he added. The process is
that in consultation with the state government, the future course of action
will be decided and the buyers association has the first right of refusal in
getting together and completing. So, we will first offer it to them, he noted. Various
projects have been stuck on account on issues including required liquidity, he
also said.
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INDIA'S
INTERNET BASE CROSSES 500 MN MARK, RURAL INDIA DRIVING GROWTH, USAGE
The internet user base in India has exceeded 500
million mark and is likely to reach 627 million by end 2019, according to a
newly released Kantar IMRB ICUBE report. The number of internet users is
estimated to be 566 million as of December 2018, registering annual growth of
18%, said the report on digital adoption and usage trends in India. The report
finds that 87% of the total user base, or 493 million Indians, are defined as
regular users, having accessed the internet in the last 30 days. Of this, 293
million active internet users reside in urban India, while there are 200
million active users in rural India. Not surprisingly, 97% of users access the
internet on their mobile device. According to the report, digital adoption is
now being propelled by rural India and figures show that it has registered 35%
growth in internet users over the past year. It is now estimated that there are
251 million internet users in rural India, and this is expected to reach 290
million by the end of 2019. Consequently, the penetration in rural India has
increased from 9% in 2015 to 25% in 2018. The report claims that Bihar shows
the highest growth in new internet user additions across both urban and rural
areas; registering a growth of 35% over last year. This is closely followed by
Orissa. Kantar reports that women today comprise 42% of total internet users.
Besides their sheer presence in the digital universe, women are also equally engaged
and active in the digital world – spending as much time on the internet as men.
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COURTING
ECONOMIC FAILURE
India’s judicial system has many positive
features. It is reasonably fair and impartial, and it has often acted to
protect citizens against politicians or the powerful overstepping their bounds.
Of course, there is considerable room for improvement in equal treatment under
the law especially in a country riven with social and economic inequalities as
India is. And there have been instances of judicial corruption which is always
disturbing, even if rare. A separate issue is the quality of India’s laws: do
they adequately support ideals of fairness and protection of human rights, and,
separately, do they promote economic efficiency? The deeper philosophical
challenges of assessing India’s legal system are much greater than analysing
their economic efficiency, and much progress has been made since pioneering
efforts such as Project LARGE, headed by Bibek Debroy, a quarter century ago,
to improve laws with a view to enhancing economic efficiency. The approach to
reforming the legal code associated with the relatively recent Financial Sector
Legislative Reforms Commission displayed economic sophistication and attention
to detail, and one has seen improvements in areas such as bankruptcy law, which
have been slowly taking root. Yet another problematic aspect of the India’s
legal system, however, is its slowness. The best laws in the world will not
help if legal judgments are subject to lengthy delays. Again, as far back as
the early 1990s, Dilip Mookherjee, building on the Malimath Committee Report
from that period, had detailed the shortage of judges, the lack of effective
management of caseloads, and poor work practices among lawyers as amongst the
factors contributing to delays. These problems have persisted, despite the
possibility of tackling some of them without significant new resources: the
obstacles have reflected political economy factors, where politicians, lawyers,
and, perhaps, judges too, all benefit from the current badly-run system.
Another possible barrier to change may have been the difficulty of quantifying
the costs of the current system. This gap has started to be addressed by new
economic research. In 2016, Amrit Amirapu provided one of the first
quantitative analyses of the economic costs of judicial delays in India. In
particular, slow courts increase the costs of enforcing contracts, and may
delay investments, or even lead to such investments not taking place at all.
Amirapu utilised geographic variation in contract enforcement delays across
India’s states for industries where such contract enforcement would likely
matter, versus less contract-intensive industries. He found that court
efficiency in civil cases (often involving property or other contracts) did
matter quite significantly for industrial growth. The fact that court
efficiency in criminal cases did not have such a growth effect made these
results more credible. In 2018, Johannes Boehm and Ezra Oberfield carried out a
similar study. Working with different industry data, but again using
cross-state variation, they found that court delays distorted production
decisions, and even the organisation of firms, resulting in significant
productivity losses. These results complement and reinforce Amirapu’s results.
The bottom line is that multiple ways of examining the data confirm that the
inefficiency of India’s courts in the realm of contract enforcement has large
negative consequences for economic performance. Will studies such as the two
highlighted here help in influencing policymakers? One place to start may be
the World Bank’s Ease of Doing Business Index. The Indian government became
very excited when the country’s ranking according to this index soared
recently. The change was associated with improvements in the bankruptcy code
(dealing with insolvency is one of the index components), although the index
may have given more weight to the promise of those improvements than the reality
of them. But India’s ranking on contract enforcement is a dismal 163rd
One weakness of the index is that it cannot ensure that components receive
weights that properly reflect their importance for economic performance. If one
could make the argument that improving India’s ranking in contract enforcement
will cause it to rise further in the rankings (with the associated reputational
benefits), as well as having large direct benefits for economic performance,
this might be a starting point for improvements in court functioning. Of
course, changing massive bureaucracies such as the court system is much harder
than rewriting legal codes. Here, another aspect of the quantitative studies
may help. Since they exploit variations across states, there is scope for
benchmarking and competition between states for improvements in judicial
contract enforcement, just as states have competed to be recognised overall as
attractive destinations for corporate investment. Quantifiable benefits of
location choices may affect such decisions for companies, although
infrastructure and access to supply chains and markets may be more decisive.
Interestingly, the 2018 academic study relied on data compiled in a report by
Daksh, a non-profit based in Bengaluru, which aims to promote accountability
and better governance in India. This may be a crucial part of the process for
effecting change. Non-profits can enable and complement academic research, and
both together can make the case for policy reform. The academic studies show that
inefficient courts have high economic costs, but do not have specific policy
recommendations. Organisations such as Daksh can use these studies to bolster
arguments for institutional reform at the micro level, perhaps engaging with
organisations representing lawyers and judges to fine-tune reform
recommendations for India’s judicial system. We know for sure that delay in
doing this will be costly.
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GOVT
CRACKDOWN ON PONZI SCHEMES AIMED AT PROTECTING THE SMALL DEPOSITOR
The President of India recently promulgated
the Banning of Unregulated Deposit Schemes Ordinance, 2019, with effect from
February 21, 2019. India, traditionally, did not have a unified regulatory
regime to counter Ponzi or pyramid schemes whose operators typically grab
deposits to meet their promise of guaranteed returns to savers. Such schemes
optically swell but are destined to eventual collapse when they run out of new
savers. The lack of sanctions meant that the kingpins behind such failed deposit
schemes are rarely punished. As per the website of the Ministry of Corporate
Affairs, there are close to 11,000 registered chit funds in India The projected
number of unregistered chit funds would be multi-fold of the registered ones.
Taking advantage of low literacy, unemployment and urge of people to earn easy
money, many fraudulent deposit schemes and chit funds have been collecting huge
sums of money and vanishing overnight. It is estimated that over 5 lakh crore
has been lost so far in various such scams nationally. Now, with this
ordinance, any deposit taker promoting, operating, issuing any advertisement,
soliciting participation or enrolment in, or accepting deposits (directly or
indirectly) in pursuance of any deposit scheme that is not regulated would be
subject to stringent penalties. However, the implementation channels are still
to be laid. Notification of competent authorities, designated courts, central
database, etc., needs to be done to ensure that this legislation is not a
non-starter. People must be vigilant to the announcements to be made by the
government in this regard. Till that happens, some short-term actions must be
taken immediately. While it better for depositors to invest in regulated
schemes such as Systematic Investment Plans (SIP) in mutual funds, banks or
post offices, if they still want to pursue the deposit route, they must ensure
that money is not put in any unregulated schemes, including chit funds and gold
savings schemes. The fate of the existing unregulated schemes is still unclear
and the depositor may have to wait for some time to hear some announcements
from the government on this new legislation. It needs to be kept in mind that
this law would regulate the deposit running entities going forward and the
credibility of schemes should get higher in the longer run. Depositors must
keep in mind that deposit takers such as Sahara, Rose Valley and Saradha would
have to now go by the rule book. The statute adopts a prescriptive approach to
describe regulated deposit schemes and provides a list of schemes/ arrangements
that are considered regulated deposit schemes, by nine specified regulators,
including RBI, Sebi, MCA, EPFO, NHB and state and Union territory governments.
This includes chit funds with the sanction of the state government and
regulated by Chit Fund Act, 1982 as well.
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ETIHAD,
NIIF TO REFUEL JET WITH RS 3.8K CRORE; NARESH GOYAL TO BE DEBOARDED
Etihad Airways and a new partner will together
invest nearly Rs 4,000 crore to revive beleaguered Jet Airways while
founder-promoter Naresh Goyal and his wife will step down from the board and
all executive positions. The lenders will convert a portion of their loans into
equity and Jet Airways’ 51% stake in Jet Privilege will be pledged with them to
raise money, according to draft proposals being discussed among key
shareholders and the board. If the proposals are accepted, this would be the
end of the road for Goyal in the airline and will give Etihad and NIIF— which
will invest Rs 1,900 crore each —a major say in its functioning. Of the total
amount, Etihad will put in Rs 750 crore as interim funding. Late on Monday
night, Jet Airways said it has delayed part repayment of foreign debt which was
due on March 11. The delay was due to financial difficulties, it added.
According to the draft, the airline will have a 12-member board, which will
have two nominees each of Naresh Goyal, Etihad and the new investor, one
nominee of lenders and one senior management personnel. There will also be four
independent directors, one of whom will be elected as the chairman. The
proposals bar Goyal from getting into any competing business for three years,
or till his shareholding in Jet Airways is 10% or above. Neither Goyal nor
Etihad will provide any personal and corporate guarantees. Etihad has also been
exempted from pledging any of its shareholding in Jet Airways but Jet’s stake
in Jet Privilege will be pledged to get financing for the airline.
#For Source of Information copy and paste the heading in google.
Thanks & Regards,
CS Meetesh Shiroya
Thanks & Regards,
CS Meetesh Shiroya
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