CORPORATE UPDATES 20.04.2019

MCA

MCA21 system will be intermittently unavailable from Friday, 19th Apr 2019 10.00 pm to Saturday, 20th Apr 2019 02.00 am IST due to maintenance activity. Stakeholders are requested to plan accordingly.

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NEW ACCOUNTING NORMS TO HIT ASSET-LIGHT COMPANIES

Companies with asset-light business models are prone to be affected by the new accounting standard on lease that came into effect from April 1, say brokerages. Ind AS 116, or the new accounting norms notified by the corporate affairs ministry, calls for elimination of classification between operating and finance leases, thereby recognising all leases on the lessee’s balance sheet. As a result, the balance sheet of asset-light companies in aviation, retail, multiplex, healthcare, logistics & warehousing and telecom sectors will expand sharply, say Edelweiss analysts. For instance, HealthCare Global Enterprises, with the highest rent as a percentage of revenue among hospitals, will see maximum impact. HCG, which has 20 out of its 26 hospitals on lease, will see their capital employed rise by 30 per cent and EBITDA will jump 50 per cent. PBT will also be eroded 45 per cent, Edelweiss said. Similarly, most aviation companies acquire aircraft via lease, while retail and multiplex firms in the organised space run mainly from leased premises. Telecom firms will also have to recognise agreements for sharing passive infrastructure in balance sheet, said analysts. They said profitability of the firms will be adversely impacted in the initial years, due to higher component of finance cost. Typically, longer the lease tenure, higher the impact on profit before tax.

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PRINCIPLES OF NATURAL JUSTICE TO BE FOLLOWED BEFORE BRANDING A COMPANY A SHELL COMPANY, GAUHATI HC

Recently, the Gauhati High Court, in Assam Co. India Ltd. v Union of India (2019) 213 Comp Cas 420 (Gauhati), held that the term shell company is not defined in any statute and as such, an order branding any company as a shell company, without serving notice or hearing, violates principles of natural justice In the instant case, the petitioner was in the business of cultivation and manufacture of tea, having several tea estates in the State of Assam. As per a statement submitted to the High Court, the petitioner has 14 tea estates producing approximately 11 million kilograms of tea per year, which are sold either through auction or through private sale. It also employs about 20,000 workers across these tea estates. On August 7, 2017, the petitioner came to learn that the Securities and Exchange Board of India (SEBI) had initiated proceedings against it by instructing the Bombay Stock Exchange, National Stock Exchange and Metropolitan Stock Exchange to restrict and/or to suspend trading of shares of the company. The petitioner also came to learn that SEBI had initiated such proceedings on the basis of a letter dated June 9, 2017 received from the Government of India in the Ministry of Corporate Affairs forwarding the database of 331 listed shell companies for initiating necessary action. After hearing both the parties, the Court noted that the term shell company is not defined in any statutes in India. In fact, the Parliamentary Standing Committee on Finance had suggested that the term shell company be defined under the Companies Act, 2013. It was also noted that the committee was of the view that all shell companies may not have fraudulent intention Therefore, the expression shell company was suggested to be defined as having fraudulent intent as one of the characteristic features of such a company. The popular understanding of a shell company was explained by the High Court in the following manner:

_16.1. In popular parlance, a shell company is understood as having only a nominal existence; it exists only on paper without having any office and employee. Just like a shell which has a thick outer covering but is hollow inside, a shell company is a corporate entity without having active business operations or significant assets It may be used as a deliberate financial arrangement providing service as a tool or vehicle of others without itself having any significant assets or operations i. e., acting as a front. Popularly shell companies are identified as companies which are used for tax evasion or money laundering, i.e., channelizing crime tainted money or proceeds of crime into the formal economy._

However, the Court was quick to note that being a paper company and not having any assets or business operations per se is no offence: a corporate entity may be set up in such a fashion with the objective of carrying out corporate activities in future. This, according to the High Court, was perfectly legal and would not make it an illegal entity. The Court also placed reliance on the definition of a shell company in the glossary of foreign direct investment terms prepared by the Organisation for Economic Co-operation and Development (OECD), and Justice Radhakrishnan’s observations in Vodafone International Holdings B.V. v. Union of India [2012] 170 Comp Cas 369 (SC). The Court then summarized the existing situation in the following manner:

_21. Thus, from the above, what can be deduced is that though a shell company is defined in other jurisdictions, in India there is no statutory definition of a shell company. However, in popular parlance as well as from the perspective of the Government and its agencies, a shell company is ordinarily identified with dubious activities concerning serious economic offences, such as tax evasion, money laundering, benami transaction, conversion of black money into white, round-tripping with host of other associated offences. The general perception is that presence of shell companies and its potential use for illegal activities threatens the very economic foundation of the country and severely compromises its economic foundation and ultimately sovereignty._

In the end, the Court held that it is no offence to be a shell company per se It was also held that the maximum a Registrar of Companies can do is to strike off the name of such company from the registrar of companies. But, the Court also qualified that if the shell company is involved in money-laundering or tax evasion, then relevant provisions under the Prohibition of Benami Transactions Act, 2016, Prevention of Money-Laundering Act, 2002, Income-tax Act, 1961, and the Companies Act, 2013 would be attracted. The Court held that considering the negative implications of being branded as a shell company it was not justified either on the part of the SFIO or SEBI to treat the petitioner as a shell company straightaway and thereafter to initiate an investigation to justify such branding. Adding further, it was also held that the principles of natural justice would require that before such branding is done, the company should have been put on notice and afforded it a reasonable opportunity of hearing as to why and on what grounds it was being suspected to be a shell company, and only if the response was found to be not satisfactory, such a finding could have been recorded. In short, the Gauhati High Court held that a finding of shell company de hors any notice or hearing would not be justified having regard to its negative implications and serious consequences.

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IBBI SUSPENDS ERRING INSOLVENCY PROFESSIONAL FOR TWO YEARS

Insolvency regulator IBBI has suspended for two years the registration of Sanjay Kumar Ruia, an insolvency professional. This follows the IBBI’s Disciplinary Committee concluding that Ruia, a professional member of the Indian Institute of Insolvency Professionals of ICAI, had contravened certain provisions of the Insolvency and Bankruptcy Code (IBC). The Insolvency and Bankruptcy Board of India (IBBI) has also directed that Ruia should not seek or accept any process or assignment or render any services under the IBC during the period of suspension. Ruia has also been directed to undergo the pre-registration educational course from his insolvency professional agency and work for atleast six months as an intern with a senior insolvency professional, at any time during the period of suspension, to improve his understanding of the IBC and regulations made under it.

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HC DISMISSES PLEA SEEKING DIRECTIONS TO GOVERNMENT TO PROVIDE JET AIRWAYS INTERIM FUNDING

The Bombay high court on Thursday dismissed a petition seeking directions to the government to provide interim funding to Jet Airways. Meanwhile, Kiran Pawaskar of Jet Airways’ Officers & Staff Association said around 22,000 employees are without a job after Jet Airways, once India’s largest private airline, suspended operations on Wednesday. On Thursday, the division bench of chief justice Pradeep Nandrajog and justice NM Jamdar heard a petition by advocate Mathews Nedumpara and three others, pleading the court to direct the government to give Jet Airways minimum funds to continue operations until the cash-strapped airlines is sold The petition said the airline had been forced to suspend services because the State Bank of India (SBI) and a consortium of lenders had refused to provide critical interim funding. However, the bench said that it had no jurisdiction to interfere and directed the petitioner to take the matter to the National Company Law Tribunal (NCLT) before dismissing the petition.

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LENDERS INVOKE IBC NORMS TO KEEP STRESSED ASSETS IN NCLT

Lenders will cite one day default clause under Insolvency and Bankruptcy Code (IBC) to defend their action against erring promoters taken to insolvency under the now defunct February 12, 2018 circular of the Reserve Bank of India (RBI). Sources said promoters of about half a dozen stressed power entities referred to National Company Law Tribunal have approached the bankruptcy court to quash insolvency proceedings against them as it has become non-maintainable following the Supreme Court order declaring the RBI circular ultra vires. But banker's are confident that stressed assets referred to NCLT will continue to face bankruptcy proceedings as IBC clearly states such referral even if there is one day delay or default by any entity in meeting its loan commitments. There is no question that stressed assets referred to NCLT will come out from there following the apex court's ruling. These assets continue to remain stressed and lenders are sure that resolution under IBC framework would work best for all stakeholders, said chairman and managing director of a leading state-owned financial institution asking not to be named. If need be, lenders would also file an affidavit with NCLT to continue the bankruptcy proceedings in the case of companies that faced such action over the earlier RBI circular, he added. In all about 70 cases with total bank exposure of about Rs 4 lakh crore was declared as stressful by the banks post the RBI circular. This included 34 stressed power projects worth 40,000 MW having total bank of close to Rs 1.8 lakh crore. Its not that institutions, including PFC did not try to resolve certain power projects, but none of the attempts remained successful. In the case of KSK Mahanadi, Adani Group showed interest but it soon withdrew from the race as lenders were divided on the level of hair cut and UP state regulator sought cut in tariff for the project. In case of an Rs 600 crore one time settlement scheme worked out for Lanco Amravati, the sole investor backed out from the race at the last minute.

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‘HOMEBUYERS’ VOTING RIGHTS NEED CLARITY’

A bench of the National Company Law Tribunal (NCLT) New Delhi, has ordered notices to the Union government and Chairman, Insolvency and Bankruptcy Board of India (IBBI), seeking their views on the issue of voting rights of homebuyers and financial creditors of Jaypee Infratech Limited. The case relates to a deadlock over resolutions to be passed at a meeting of the firm’s committee of creditors (CoC). The President of NCLT referred the case to the single bench, in exercise of powers under Section 419(5) of the Companies Act 2013, after two members of the Allahabad Bench took contrary views on the issue. As per the court filings, the voting rights of various parties in the total debt of the company is as follows — lenders 41.8%, homebuyers 58.10% and fixed depositors 0.01%. After two meetings of the CoC, nine of the 10 resolutions proposed had been rejected in view of the poor response in voting by the homebuyers compared with the en masse participation by the lenders. As a result, the threshold voting for passing the resolution was not met. At the CoC meeting, the resolution professional contended that abstention from the voting process would be counted as negative vote. Homebuyers, however, objected to it, and argued that they are to be considered as a separate class of creditors and the rule of majority in cases of voting by creditors in the class should be made applicable for the corporate insolvency resolution process. The judicial member of NCLT Allahabad ruled that in cases where the CoC comprised real estate class of creditors with up to 50% voting share or more and when there was a deadlock in passing the resolutions, the highest voting share in favour of the resolution had to be taken into consideration, without looking into the threshold provision under the Insolvency and Bankruptcy Code, except in case of withdrawal of petition or approval of resolution plan or liquidation. He said this would enable the process to go on. He went on to suggest that the Centre should bring in the necessary provisions in cases where the voting rights of homebuyers was 50% or more and including the procedures to be followed in case of a deadlock in passing resolutions. The technical member of NCLT Allahabad ruled that the lasting solution to the problem could only be found by treating homebuyers as a class and their voting pattern taken with reference to total voting share of the class, to reflect the will of the class. The single bench, to which the case was referred by the NCLT President, said it was important to take the views of the Centre and IBBI, given that larger public interest was involved and interpretation of the provisions having wider ramifications not only in relation to the present case but also other pending cases and others which might come in the future. It ordered issue of notices to the Ministry of Corporate Affairs and Chairman IBBI. The notices are returnable by April 22.

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COC QUESTIONS FUND FLOW FROM SUNIL HI-TECH ARM

In a meeting of the committee of creditors (CoC) for Seam Industries Limited — a subsidiary of Sunil Hi-Tech — a city company, concerns have been raised on movement of funds between the two entities. It was pointed out that the dealing could be fraudulent too. During the CoC meeting held on Thursday, it was mentioned that an amount of Rs 73 crore which is more than the total claim by the creditors went from Seam Industries to Sunil Hi-Tech. The transfer took place when the matter for initiating corporate insolvency resolution process (CIRP) against the company was under adjudication. Both, the parent company Sunil Hi-Tech and its wholly owned subsidiary Seam Industries, which is located at Butibori, are facing insolvency proceedings since nearly a year. The chairperson said the funds were transferred when the matter for initiating CIRP was under adjudication before the national company law tribunal (NCLT). The sum was netted off against 2 journal vouchers. The chairman said these transaction may also be fraudulent, depending upon the end use of these funds. It has been mentioned in the minutes that the chairperson had also sought an explanation from the chief financial officer (CFO) of Sunil-Hi-Tech about the transactions but had not received any response. There was no response on the matter from forensic auditor of Sunil Hi-Tech, say the minutes.

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BANKERS HOPE FOR LESS PAIN AS RBI READIES NEW STRESSED-ASSET NORMS

Bankers are hoping the Reserve Bank of India (RBI) will be somewhat liberal when it brings out a fresh circular on the resolution of stressed assets. On the wish-list are an extended timeline for filing of the Corporate Insolvency Resolution Process (CIRP) with the National Company Law Tribunal (NCLT) as well as implementation of the resolution plan, and reversal of provisions at the time of change of management. Shaktikanta Das had said necessary steps, including the issuance of a revised circular for quick and effective resolution of stressed assets, will be taken. Banks have suggested to the RBI that the time period for the filing of the CIRP with the NCLT be extended to 30 days (against 15 days in the defunct circular) on default during the ‘specified period’. Extra time has been sought to explore the possibility of regularisation of accounts. ‘Specified period’ means the period from the date of implementation of the resolution plan (RP) up to the date by which at least 20 per cent of the outstanding principal debt as per the RP and interest capitalisation sanctioned as part of the restructuring, if any, is repaid. Further, banks have pitched for an extension of the 180-day timeline from the reference date for implementation of the RP in the case of large accounts to 270 days. Bankers reasoned that implementation of the CIRP within 180 days from the date of default — with mandate approval from all the banks in the consortium, taking into account techno-economic viability study, stock audit, forensic audit, completion of documentation and creation of security interest — is difficult, especially in the case of large and complex projects. To alleviate the impact of provisions on their bottomline, banks have made a plea that they should be allowed to reverse provisions at the time of change of management under the Insolvency and Bankruptcy Code as well as outside it.

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VARDHMAN CASE: JSW STEEL TO MOVE NCLAT

JSW Steel has decided to move the National Company Law Appellate Tribunal against the NCLT order rejecting the company’s plea in the Vardhman Industries case. Last December, the company’s resolution plan for the stressed Vardhman Industries was approved by the NCLT. However, the committee of creditors had made modification in the resolution plan unilaterally. JSW Steel had moved the NCLT against the modification and sought clarification from the Tribunal before going ahead with implementation of the resolution plan. On April 16, NCLT had upheld the modification and rejected the company’s plea. Since certain important relief measures sought by the company that have material bearing on the feasibility and viability of resolution plan, have not been granted, the company will be appealing against the said order before the relevant judicial authority, said the company in a statement.

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JAYPEE: HOMEBUYERS' COMPLAINTS UNDER CONSUMER PROTECTION ACT MAINTAINABLE DURING INSOLVENCY PROCEEDINGS, SUPREME COURT

The Supreme Court has upheld the judgment of the National Consumer Disputes Redressal Commission (NCDRC) against Jaiprakash Associate Limited (JAL) on the issue of maintainability of consumer complaints before NCDRC. The NCDRC had held that consumer complaints filed by the aggrieved homebuyers against JAL can be proceeded with before the NCDRC. These proceedings can continue during the pendency of Insolvency proceedings against Jaypee Infratech Limited (Jaypee), the Commission had held. Jaypee is a special purpose vehicle created by its holding company, Jaiprakash Associates Limited (JAL). The Commission thus placed as many as 300 matters involving over 14500 aggrieved homebuyers before it. This decision was challenged before the Supreme Court by JAL. It was contended by JAL that the Commission’s decision is likely to denude it from pursuing its plea against the claims set up by the complainants, the homebuyers. The Supreme Court Bench of Justices AM Khanwilkar and Ajay Rastogi held that the NCDRC’s judgment was restricted to the point of maintainability of the claim of the complainants before the NCDRC. The Court said,

_[T]he position that the observations in the impugned judgment are for the limited purpose of deciding the preliminary objection taken by the appellant regarding the maintainability of the complaint before the Commission, in particular, against the appellant JAL._

The Court further stressed that the NCDRC’s judgment has only considered the preliminary objection and is not an opinion on the merits of the pleas of any of the parties. All the contentions available to the Respondents will have to be considered on their own merits, the Court made clear.

_[A]ll contentions available to the respondent(s) in the complaint including on the relief of possession and refund against JAL will have to be adjudicated by the Commission on its own merits in accordance with law uninfluenced by the observations made in the impugned judgment._

The NCDRC’s judgment does not give any directions to the Respondents with respect to their claims and the Commission may do so in its final judgment. This final judgment, however, will be subject to the outcome of the insolvency proceedings against JAL and Jaypee before the National Company Law Tribunal (NCLT), the Court clarified. This judgment comes in the wake of the Supreme Court’s decision in the Chitra Sharma case wherein the Court had sent the matter back to the NCLT for adjudicating on the issue under the Insolvency and Bankruptcy Code (IBC) leaving the aggrieved homebuyers in a lurch. The decision of the NCDRC which has now been upheld by the Supreme Court validates the maintainability of consumer claims of homebuyers against Jaypee for refunds and damages on account of delayed possession.

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'RECEIVING OC WOULDN'T ABSOLVE DEVELOPER FROM PAYING INTEREST'

Mere receiving an Occupation Certificate wouldn't absolve a developer from paying interest to the home buyer if there's a delay in handing over possession. A building had received the Occupation Certificate, even before the home buyer went ahead with his complaint to the Maharashtra Real Estate Regulatory Authority (MahaRERA) for the delay in possession. The builder argued that he had the Occupation Certificate, but the authority held that the developer's Occupation Certificate came after the date of possession mentioned in the agreement and finally the home buyer was awarded interest for delay in possession. Homebuyer Lalit Bhidur had filed the complaint against Namrata Developers Pvt Ltd, asking MahaRERA to direct the developer to pay interest for delayed possession and give possession of his flat in the project Namrata Eco City, Pune. However, the developer failed to complete the project and hand over possession of the flat till date. Thus there was a delay and he claimed interest. The developer filed the reply on record of MahaRERA and disputed the claims of the home buyer. He stated that the project was delayed due to the change in the planning authority and delay in the permission given by the said authority. The developer further submitted that they have received the Occupancy certificate in August 2018, that is prior to the filing of the complaint and he is ready to give possession of the flat. Vijay Satbir Singh, heard the case and stated that in the present case, the problems faced by the developer do not fall in the category of force majeure the home buyer, therefore, is entitled to the interest for delay. Even though the developer has received the OC in the year 2018, the date of possession written in the agreement for sale is relevant to calculate the period of delay. Finally, Singh ordered the developer to pay interest to the home buyer at marginal cost lending rates plus two per cent for the period of delay as per mentioned in the agreement for sale..

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HOMEBUYERS NOT ENTHUSED BY JAYPEE GROUP PROMOTER'S OFFER OF COMPLETING DELAYED PROJECTS

Manoj Gaur, on April 19 once again offered to complete the much-delayed real estate projects within a period of four year by pumping in Rs 1,500 crore in an escrow account. Homebuyers were however skeptical and termed the meeting as an 'eyewash' and questioned the timing of the meeting, saying that it was perhaps called to garner support from homebuyers, whose approval is required for any resolution plan or settlement plan to go through. Gaur, during the meeting with homebuyers, claimed that he was a 'victim of circumstances' made a presentation and proposed that Rs 1,500 crore would be set aside in an escrow account for completion and construction of the projects within four years. Ajit Kumar, adviser Jaypee Group, said that the company is aware of the problems faced by homebuyers. We have submitted a proposal under Sec 12A of the IBC procedure in April. To begin with, we will set aside Rs 1,500 crore in an escrow account which will be monitored by a committee. The entire amount will be used for construction and completion of the houses. The monitoring committee would constitute a retired judge of a Supreme Court, a technical member and I will be the convenor. It’s been 18 months since the resolution process is on and there is still no solution. Our Chairman has apologised for the delay. We need one more chance. The final decision ultimately lies with the NCLT. We have made a presentation to the buyers. We are committed to delivering their houses. Over 600 buyers attended the meeting. Some homebuyers decided to boycott the meeting to protest against the almost decade long delay in possession of their flats. They even demanded that banks should be asked to suspend monthly EMIs for the time being to provide some relief.

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BANKING SYSTEM FACES RS 70,000 CRORE LIQUIDITY DEFICIT

Muted government spending and high election-related spending have created a liquidity deficit of Rs 70,000 crore in the banking system, stymieing the Reserve Bank of India's record liquidity infusion via bond purchases and the innovative dollar-rupee swap, blunting the recent rate cut and clogging the efficacy of policy transmission. System liquidity seems to be slightly more in deficit that is normal at this time of the year, said Saugata Bhattacharya, chief economist at Axis Bank. The proximate reason seems to be relatively high government balances with RBI, which might be due to lower spends. Other contributing factors might be higher cash withdrawal, weaker foreign exchange inflows and higher CRR (cash reserve ratio) balances of banks, he said. The deficit is at Rs 70,266 crore on April 16 compared to Rs 31,396 crore on April 3, data from the Bloomberg India Banking Liquidity gauge showed. During the same period, the system was running in surplus cash in the range of Rs 33,400 and Rs 84,600 crore although New Delhi’s currency swap programme (DeMon) increased cash in the banking system around that period. Extended deficit liquidity could become detrimental to smoother monetary policy transmission said Upasna Bhardwaj. One of the primary reasons for tighter liquidity conditions in April has been the unexpected muted spending by the government. The surplus cash balance with the government is now at about Rs 47,333 crore as on April 16 compared to nil balance in the corresponding period last year. GST collections towards the end of the week are expected to have further increased the cash balance and worsened liquidity deficit given the absence of aggressive spending, she said. The liquidity deficit may cross Rs 1 lakh crore by the end of last week in April, experts said. While RBI has injected Rs 2.98 lakh crore in liquidity into the banking system in 2018-19, it also conducted a dollar swap auction for $5 billion or Rs 34,500 crore in March. Similar dollar auction will also be carried out on Tuesday to infuse similar quantum. Factors like ongoing weekly high central and state government bond auctions too added to the deficit problem, Niyogi said. On an average the central bank has sold about Rs 20,000-30,000 crore state and central government debt in the first two weeks in April.

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NEW MANAGEMENT COMMITTED TO ENSURE GOOD GOVERNANCE, SAYS RELIGARE ENTERPRISES

Religare Enterprises Friday said the new management team is committed to ensure that good governance and accountability are the hallmarks of the group as it dubbed allegations made by its former chief Sunil Godhwani as an attempt to divert attention from fraudulent transactions. Godhwani has alleged conspiracy of the company's current management and erstwhile promoters Malvinder Singh and Shivinder Singh against him. In a submission to the corporate affairs ministry, he had also said that an investigation should be started into the management change that happened in February 2018. Against this backdrop, the company said allegations are being made by Godhwani to divert attention from the fraudulent transactions carried out in a listed company and the perpetrators need to brought to book. It also said that the new management team is committed to ensure that going forward the ethos of good governance, ethics and accountability become the hallmark of the Religare Group.

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REGULATORY SANDBOX SHOULD COVER BIG COS, TOO: FINTECH FIRMS

The Reserve Bank of India's draft framework to enable regulatory sandbox (RS) for fintech innovation has been well-received by a majority of fintech players, even as some have suggested a few tweaks in order to make it even more comprehensive. The draft was released for stakeholder comments on Thursday. Incidentally, an RS is a controlled environment for commercial testing of new technology with limited regulations and customer exposure. The RBI draft is based on recommendations from an inter-regulatory committee headed by a former executive director of RBI, Sudarshan Sen. Regulatory sandboxes have been used in most advanced economies to test the commercial viability and regulatory scope of any new technology. Even while this method has been used by some major banks in India before, a major regulator testing it would be hugely beneficial for the growth of entire fintech ecosystem, said Mandar Agashe. However, the regulators should also have opened the sandbox for established companies as well and not just start-ups since it would have widened the scope of innovations. A lot of fintech companies would have benefited from the findings of operating in such a controlled environment, he said. The draft released by RBI said it would look for technology solutions which should highlight an existing gap in the financial ecosystem and provide suitable solutions in avenues such as payments interface, data analytics and blockchain. The application would be open only for registered Indian start-ups with a minimum worth of 50 lakh. Fit and Proper criteria for promoters and directors is a welcome move as it will prevent unscrupulous operators from entering the RS and preserve the sanctity of the initiative, said Anurag Jain.

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WILL INDIA CONTINUE GROWING OR BREAK THE LINE?

India is far better off economically than it was five years ago. Fiscal management has been outstanding, and it has been clocking the highest growth rate among large economies. Major reforms such as goods and services tax (GST), Insolvency and Bankruptcy Code (IBC), and Real Estate Regulatory Authority (Rera) have been enacted. Infrastructure, financial inclusion and social reform campaigns have moved at a brisk pace. Doing business is easier, there is less corruption, more innovation. As a result, the individual citizen is better off than she was five years ago. Despite this progress, however, India fares poorly when compared to its peers among the Brics (Brazil, Russia, India, China, South Africa) countries, never mind the developed OECD (Organisation for Economic Co-operation and Development) group. It also languishes in the UN Human Development Index (HDI). Therefore, India’s journey to progress and prosperity is far from complete. At current growth rates of about 7%, it will take two more decades for India to reach ‘high income’ or ‘high human development’ country status. Faster growth can come only with ‘deep reforms’ such as land acquisition and labour regulations. Many commentators believe that India can transform itself without transformational leadership — that no matter what government comes, India will continue its march towards its manifest destiny. History, however, teaches that leadership matters — every nation that has transformed itself has needed a transformational leader for a considerable period, whether Kamal Ataturk in Turkey in the 1920s-30s, Franklin D Roosevelt in the US in the 1930s-40s, Lee Kuan Yew in Singapore from the 1960s to 1980s, Deng Xiaoping in China from the 1970s to 1990s, and Helmut Kohl in Germany from the 1980s to 1990s. All of these leaders had the charisma, vision, integrity, pragmatism and execution skills to change the trajectory of their nations to such a degree that their leadership is considered ‘transformational’. Among India’s leadership, Jawaharlal Nehru, Indira Gandhi and Narendra Modi exhibit some of the qualities considered to be that of transformational leaders. In the absence of transformational leadership, countries progress to a certain extent, but then can either fall into the ‘middle income trap’ (e.g., Argentina, Brazil), or plateaus out before it can reach its peak (e.g., Japan). India also has a ‘window of opportunity’ to seize, as China slows down, with the latter’s labour cost advantage diminishing and labourintensive industries seeking to relocate. Countries such as Indonesia, Vietnam and Mexico are aware of such opportunities. An example of India missing out on this because of lack of reforms or policy is the garment industry, where Bangladesh is now far ahead of us. India is at a crossroad It can either seize the opportunity to transform itself into a developed country over the next decade or two. Or it can continue with its ‘business as usual’ journey with its current growth rates. The continuing concerns about jobless growth and farmer distress are unlikely to be abated without ‘deep reforms’. Seizing the opportunity will require transformational leadership.

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MOST IPOS LISTED THIS YEAR TRADING OVER THEIR ISSUE PRICE

Stock market listings in the first four months of calendar year 2019 kicked off on a positive note with shares of six out of seven main companies that went for initial public offers (IPO) trading at a price higher than their listing prices However, five of the ten SME IPOs listed during this period are trading below their issue price as they failed to retain sufficient investor interest. The first four months of 2019 witnessed a cumulative fundraising of around Rs 9,591.71 crore from the main IPOs as against a whopping Rs 18,435.66 crore raised during the corresponding period of 2018. A K Prabhakar, said there has been an improvement in the overall IPO sentiment, but promoters must bring something to table to attract investors to create demand. More often promoters alone want to make money. If they offer some discounts to investors that would help investors to make money as well, Prabhakar said. Metropolis Healthcare and Polycab India debuted on the stock exchanges this week at a premium to their issue prices. While Metropolis listed on the exchange at a premium of 9%, Polycab debuted at a premium of over 21%. Apart from MSTC, which listed on the exchange at a discount of 10.78% and is currently trading at 17.73% lower than its issue price, all other stocks such as Xelpmoc Design and Tech, Chalet Hotels, Embassy Office Parks REIT, Rail Vikas Nigam, Metropolis and Polycab are trading between 9.5% and 38% higher than their issue price. On the other hand, there is a decline in the number of IPOs in the SME segment compared to the same period last year. Till March 2019, around 17 SMEs tapped the market to raise a cumulative Rs 250.59 crore compared to 52 such companies, which raised a cumulative Rs 917.42 crore during the same period last year, as per data available with Prime Database. According to data available with a financial news portal, five out of ten recent SME IPOs are trading below their issue price. Prabhakar said takers for SME issues are limited as there are a lot of restrictions. Retail participation is limited because unlike in main IPO, purchases are to be made in huge lots. The regulations are made to attract high networth individuals. Besides, chances of bankruptcy are also high in case of these companies, hence investors are cautious with these stocks, Prabhakar said, adding that only 40% of SME stocks can be expected to offer good returns. Kejriwal said there had been mis-marketing in SME IPOs in the past. There was an era for SME when anything and everything got sold. But investors have now become cautious, and so are the merchant bankers. Thus the going has become very tough for SMEs.

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SIPS IN EQUITY MFS LOG 10.26% ANNUAL RETURNS IN FIVE YEARS, BEAT GOLD, FDS

Investors investing money in equity mutual funds through systematic investment plans (SIPs) have earned an average return of 10.26% in the last five years since the Narendra Modi-led NDA government came to power. In the last five years, the benchmark Nifty returned 11.58% on a compounded basis every year. The Nifty Midcap index gained 16.28% and the Nifty Smallcap index rose 12.48% on a compounded basis during this period. The best performing fund was Mirae Emerging Bluechip, returning 17.77% on a compounded basis every year, while the worst performer was Baroda Midcap, which returned 3.58% in this period. SIPs have been the preferred mode of investment for retail investors with monthly mobilisations through this route moving up from 1,206 crore a month in March 2014 to 8,055 crore in March 2019. Almost 90% of the Nifty returns during the last one year came from six stocks – Reliance Industries, HDFC Bank, Infosys, TCS, ICICI Bank and Axis Bank. With equity schemes having investment restrictions in every stock, the skewed performance has also hurt the returns of equity schemes.

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NON-LIFE INSURERS WITNESS 13% RISE IN PREMIUM

Non-life insurance firms registered a rise of 13 per cent in their collective premium income to Rs 1.70 lakh crore in the financial year ended March, according to data from Irdai. The 34 non-life insurers had a gross premium of Rs 1.51 lakh crore in 2017-18. Among these insurers, as many as 25 are categorised as general insurers, seven as standalone private sector insurers while the rest of the two are government-owned specialised insurers. For the 25 general insurers, the collective gross premium in 2018-19 stood at Rs 1.50 lakh crore, up by nearly 13 per cent from Rs 1.33 lakh crore a year ago, showed the Insurance Regulatory and Development Authority of India (Irdai) data. While the standalone private health insurers witnessed a rise of 37 per cent in their combined premium to Rs 11,368.82 crore in the financial year ended March 2019, against Rs 8,314.27 crore a year ago. However, the state-owned specialised insurers -- Agricultural Insurance Company of India and ECGC Ltd -- registered a drop of 7.75 per cent in premium at Rs 8,425.75 crore during the fiscal ended March 2019, as against Rs 9,133.78 crore in the previous financial year.

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CCI APPROVES DHFL’S 50% STAKE-SALE IN PRAMERICA MF

The Competition Commission of India has given its nod for the transaction involving US-based Prudential Financial buying out DHFL’s 50 per cent shareholding in their joint venture DHFL Pramerica Mutual Fund. It may be recalled that crisis-ridden DHFL had late last year announced its exit from DHFL Pramerica Mutual Fund through sale of its 50 per cent shareholding each in both DHFL Pramerica Asset Managers and DHFL Pramerica Trustees to PGLH of Delaware Inc, an entity owned by Prudential Financial. With the assent of the competition watchdog, US-based Prudential Financial will gain sole control over DHFL Pramerica Mutual Fund.

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FOREX KITTY CONTINUES TO SWELL, ADDS ANOTHER USD 1.1 BILLION

India's foreign exchange reserves continued its northward push, increasing by USD 1.105 billion to touch USD 414.886 billion in the week to April 12, the Reserve Bank data showed on Friday. Gold reserves also increased by USD 77.4 million to USD 23.303 billion, according to the data. The special drawing rights with the International Monetary Fund was up by USD 3.3 million to USD 1.458 billion. The country's reserve position with the Fund also increased by USD 378.1 million to USD 3.362 billion, the apex bank said.

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INDIA GOVT HAD NO OUTSTANDING LOANS FROM RBI IN WEEK TO APRIL 12

India's government had no outstanding loans with the Reserve Bank of India (RBI) under ways and means advances in the week ended April 12, according to the central bank's weekly statistical supplement released on Friday. The central government had no outstanding loans in the week earlier as well. The state governments had Rs 6,032 crore ($869.34 million) loans from the RBI in the week ended April 12, compared with Rs 7,382 crore in the previous week, the release showed.

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GOLD IMPORTS DIP 3% TO $32.8 BN IN 2018-19, WILL KEEP A LID ON CAD

The country's gold imports dipped about 3 per cent in value terms to $ 32.8 billion during 2018-19, which is expected to keep a lid on the current account deficit. Total imports of the precious metal in 2017-18 had stood at $ 33.7 billion, according to data from the commerce ministry. Trade experts said softening prices of the yellow metal in the global markets could be the reason for the contraction in the value of imports. After recording negative growth in February, the imports grew 31.22 per cent to $ 3.27 per cent in March. The outbound shipments dipped only marginally by 0.37 per cent to $ 3.42 billion in March. The government had introduced several measures to restrict the import of gold. Import of the yellow metal attracts 10 per cent duty.

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FINOLEX FAMILY DISPUTE ESCALATES AMID SEVERAL COUNTER-ALLEGATIONS

The family dispute at the Rs 15,000-crore Finolex Group has taken a new twist as cousins Prakash Chhabria and Deepak Chhabria have accused each other in separate exchange filings, of scheming to gain control of Finolex Cables Ltd (FCL). Prakash is the biggest shareholder of Orbit Electricals, the promoter entity of Finolex Cables, while Deepak is the latter company’s executive chairman. Prakash Chhabria controls about 78 per cent of Orbit Electricals while Deepak Chhabria owns a 8 per cent stake. Finolex Cables alleged in a March 26 letter that Prakash Chhabria had submitted fraudulent documents to the board of Orbit Electricals in a bid to gain control of the company. On behalf of Prakash Chhabria, Orbit Electricals denied all allegations in a stock exchange filing on Wednesday. The gift deed related to the stake of the late Prahlad Chhabria passing on to his son Prakash Chhabria was not valid due to mismatched signatures, non-registration of the document and inadequate stamp duty, Finolex Cables had alleged. The letter also said the relevant minutes of the Orbit Electricals board meeting had been concocted and the transfer of shares to Prakash Chhabria was illegal, since there wasn’t a quorum. A case related to the matter is currently being heard in the Bombay High Court. FCL has not acted independently and certainly not in the interest of its stakeholders especially the public. Prakash Chhabria had filed an appeal in the Bombay High Court last year against the continuance of Deepak Chhabria.

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HOUSING SALES UP 5% DURING JAN-MAR IN 9 MAJOR CITIES: PROPEQUITY

Housing sales saw a 5 per cent rise at 56,146 units during January-March 2019 over the year-ago quarter in the nine major cities, driven by improved demand for finished projects, according to data analytics firm PropEquity. New launches, however, declined 7 per cent to 42,504 units in the first quarter of 2019 as against the year-ago period in these nine cities -- Gurugram, Noida, Mumbai, Kolkata, Pune, Hyderabad, Bengaluru, Thane and Chennai. Indian real Estate market is currently an end-user driven market as ready-to-move-in or nearing completion properties are being preferred as they have minimum or no risk attached to them, PropEquity said in its report. Unsold inventories dipped to 5.91 lakh units from 6.16 lakh units at the end of December 2018 on higher sales and drop in new supply. As per the data, Pune saw maximum rise in sales at 32 per cent at 14,996 units during January-March 2019 against the corresponding period of the previous year. Housing sales in Bengaluru were up 5 per cent at 10,271 units, while Chennai witnessed 24 per cent rise in demand at 4,108 units. Sales in Mumbai went up by 12 per cent at 5,619 units and by 3 per cent in Thane (near Mumbai) at 11,404 units. Noida in Uttar Pradesh posed 19 per cent jump in sales at 1,097 units. However, Gurugram (Haryana) and Hyderabad clocked 29 per cent fall in sales at 2,918 and 3,216 flats, respectively. Kolkata, too, saw a dip of 22 per cent at 2,517 units. Housing demand is expected to rise from this quarter on the back of lower GST. In this year's interim budget, tax incentives were announced for purchase of second property.

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REAL ESTATE INDUSTRY COMPLAINS TO FINANCE MINISTRY ABOUT NBFCS, INDIABULLS

The real estate industry has written to the finance ministry, complaining about NBFCs arbitrarily increasing interest rates on real estate projects. Real estate body Confederation of Real Estate Developers’ Associations of India (Credai) has written to finance minister Arun Jaitley seeking issuance of guidelines to non-banking financial companies (NBFCs) for timely completion of real estate projects. The real estate developers have said some NBFCs are arbitrarily and unilaterally increasing rate of interest charged on real estate projects. Highlighting the specific case of Indiabulls, in a letter dated April 8, Credai has alleged that Indiabulls being one of the largest lenders in the sector is causing undue hardship for developers and creating a situation of financial strangulation. Credai said in the last eight months, Indiabulls has increased the interest rate by 4.5-6% for all developers. Since RBI has been lowering benchmark rates, it is clear that the interest rate has been increased by Indiabulls arbitrarily and illegally, it said. On the other hand, Credai said: To add to the misery of the developers and homebuyers, Indiabulls has also increased the escrow percentages from 30% to 100% for many developers. Such an increase in escrow percentages is totally illegal and against the norms of Rera which require 70% of the collections to be used towards construction and land cost only. With 100% of the collections going to Indiabulls through the escrow account, no money is available with the developers for construction of the project, Credai said in the letter. The industry body also said disbursements are not being made by Indiabulls to carry out construction of the project. Indiabulls being in a dominant position as a lender is abusing its position and creating a situation of financially strangulating the projects, Credai said. The spokesperson added that Indiabulls Housing Finance is still disbursing and did a total of 11,000-crore disbursal in the last eight months. Also, escrow mechanism with our borrowers remains absolutely the same as before, developers are free to prepay or refinance if they find interest rates high and we are waiving the entire prepayment fees for such cases. Quite a few developers have also chosen to prepay and we have accepted the repayments without prepayment fees, though it was a part of the agreement, the Indiabulls spokesperson said. Credai has urged the FM Arun Jaitley to have necessary guidelines issued to NBFCs that the interest rates on ongoing projects may not be revised upwards for as long as RBI does not raise the benchmark rates. It has also said the escrow amount being withheld by the lender must be well within the norms stipulated by Rera to ensure timely delivery to homebuyers and disbursements to ongoing real estate projects may not be stopped for next two years.

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RECRUITERS COLD TO DIFFERENTLY-ABLED, ONLY 15% HIRE FROM THIS SET: STUDY

The survey finds that the bulk of recruiters, or about 85 per cent of the respondents, have either not hired or are companies in which such a concept is still in pipeline. Effectively, only roughly 15 per cent of the respondents actually have specially-abled employees on their rolls. This is despite that fact that close to 40 per cent of India Inc believes in hiring differently-abled for exploiting untapped skills, while another 30 per cent does so to meet corporate social responsibility (CSR) obligations. According to Genius Consultants, roughly 2.13 per cent of India's population is differently- or specially-abled based on World Bank's definition of eight per cent disability in the form of loss of locomotor skills, vision, hearing, speech and mental faculties. The survey was conducted across companies, psychologists and specially-abled job seekers and employees across sectors such as auto, BFSI, construction and engineering, education, FMCG, hospitality, retail, telecom, and logistics, among others. Further, 57.24 per cent of recruiters said that they were not yet ready to invest in infrastructural changes or processes before employing differently-abled people. When asked if hiring differently-abled was important to them or not, 78.8 per cent recruiters responded positively, while 21.20 per cent said that it was not important and led to losses in productive work hours and employable workforce. What's more, majority of recruiters, at 61.74 per cent, agreed that the biggest challenge in employing people with special abilities was the attitude of co-workers Though Indian corporates are working towards finding the most effective way of utilising differently-abled people, but still 44.06 per cent are yet to explore the untapped pool of manpower. Almost one third or 27.58 per cent of corporate think that they are helping differently abled people to integrate normally into society whereas only 21.39 per cent do so for an integrated workplace, creating a sense of equality among employees. Also, 61.74 per cent of corporate think that due to biased attitude among co-workers, there has been less number of specially abled employees in the corporate sector. However, 57.24 per cent of recruiters are ready to invest in making work places specially abled friendly. As per specially abled employees, 54.16 per cent admit that there are only 10 or more such people hired at their workplaces, though 95.83 per cent want to continue with their current employer.

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87% INDIANS WANT SEXUAL HARASSMENT PREVENTION TO BE AN IMPORTANT FACTOR FOR HIRING

A whopping 87 per cent of professionals in India say that harassment prevention at the workplace is a very important trend for the future of hiring and HR compared to 71 per cent globally, a new LinkedIn report said on Thursday. In India, 50 per cent of hiring professionals said that companies now talk about their harassment policies as part of their pitch to potential hires -- nearly double the global average of 29 per cent. Anti-harassment is an especially hot-button issue in India, said the LinkedIn Global Talent Trends 2019 report that surveyed over 5,000 talent professionals in 35 countries, including more than 400 professionals in India. While 75 per cent of those surveyed globally noticed some change in workplace dynamics/culture over the last two years, 92 per cent in India said that their company has implemented some harassment prevention action or tactic in the last 12 months or is planning to -- which is higher than the global average of 80 per cent. There has been an over 71 per cent (year-on-year) increase in workplace harassment content shared on LinkedIn. Employees are starting to feel more empowered to stand up against harassment - not just by calling for change, but by changing their own workplace behaviour, said the Microsoft-owned professional networking platform. Work flexibility was another important factor in considering a new job. About 67 per cent of talent professionals in India agree that workplace flexibility -- the option for employees to work when and where they'd like -- is extremely important in shaping the future of recruiting and talent, the findings showed. Globally, in just the last two years, there's been a 78 per cent increase in job posts on LinkedIn that mention work flexibility. In the space of only four years, there's been a 24 per cent increase in the number of people who say flexible work arrangements are a very important factor when considering a new job. With technology easing the way we work, 74 per cent respondents in India believe that the main benefit from allowing employees to work remotely, is enabling them to achieve better work-life satisfaction. In the opinion of 66 per cent respondents, flexible work hours encourage employee retention. Women are 22 per cent more likely than men to cite flexible work arrangements as a very important factor when considering a job, with those aged 36 to 45 being the most likely to do so, the report said. In India, 87 per cent respondents believe that candidates with strong soft skills will be increasingly important to the success of their organizations, however, only 53 per cent say their companies have a formal process for assessing soft skills. Nearly 71 per cent respondents in India agree that the top benefit of sharing salary ranges is fostering greater job satisfaction for employees. That said, 78 per cent also fear that this will create salary disputes among current employees, the report noted.

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HOW MUKESH AMBANI’S BET ON THE INDIAN MIDDLE CLASS IS PAYING OFF

Billionaire Mukesh Ambani’s debt-fueled bet on the rise of the Indian consumer is starting to pay off with his retail and telecommunications businesses contributing an increasing share of revenue and profit to his $87 billion empire. The two divisions accounted for a combined 23 percent of revenue for the year ended March, up from 17% in the previous year, according to data. That growth has come at the expense of the conglomerate’s energy-related arms, which have been the bedrock of Ambani’s business for more than a decade. Their revenue share dropped to 77% from 83%, the data show. Asia’s richest man has ambitions to take on Amazon.com Inc. and Walmart Inc. in India, where the power of the middle class is growing along with demand for e-commerce. Ambani launched the telecommunications business in 2016, spending $36 billion to roll out a 4G wireless network across India and luring millions of subscribers with free or cut-price data services. He’s now building on that business to create an online shopping platform, just as the US giants come up against constraints on foreign e-commerce activity in India. Mukesh Ambani has set big expectations for Reliance’s consumer divisions, saying they will contribute almost as much to the conglomerate’s earnings as energy-related arms by the end of 2028. The push into e-commerce shows how the billionaire is trying to put his mark on an empire that he largely inherited. Reliance Industries’ net debt climbing to ₹1.93 trillion in the year ended March, or about 2.3 times ebitda, according to data. That compares with the 2.69 times average for companies on the S&P BSE Sensex index as of Dec. 31. Mukesh Ambani, 62, has been acquiring or purchasing stakes in businesses from Radisys Corp. to Vakt Holdings Ltd. in a series of deals worth $2.5 billion over the past two years. Reliance, Amazon and Walmart’s Bangalore-based Flipkart Online Services Pvt. are seeking to carve up an online shopping market that Morgan Stanley estimates will grow to $200 billion by 2028, from about $30 billion last year.

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ALIBABA HEAD’S REMARKS SPARK DEBATE OVER CHINA WORKING HOURS

Remarks by the head of Chinese online business giant Alibaba that young people should work 12-hour days, six days a week if they want financial success have prompted a public debate over work-life balance in the country. Mandatory overtime reflects managerial arrogance and was also impractical and unfair to workers. Online complaints included blaming long work hours for a lower birth rate in the country.

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R VENKATARAMANAN QUITS RATAN TATA'S INVESTMENT ARM RNT ASSOCIATES

R Venkataramanan, the former managing trustee of Tata Trusts, has resigned from RNT Associates Private Limited, the personal investment vehicle of Tata group patriarch Ratan Tata. According to a Ministry of Corporate Affairs filing, Venkataramanan quit the firm as director on March 29. Since 2014, RNT Associates, along with UC-RNT Fund, has been investing in a series of new-age companies in India and overseas. It was also one of the early investors in companies like cab aggregator Ola and online retailer Snapdeal. A Tata group insider said Venkat, as Venkataramanan is popularly known, was instrumental in making some marquee investments in Indian start-ups on behalf of RNT Associates, and used to personally vet all proposals sent to Tata for investment in his personal capacity.  UC-RNT Fund, an alternative investment fund with a corpus of $300 million, in partnership with RNT Associates and the University of California, has invested in several disruptive, technology-oriented businesses across the world. It takes a long-term, founder-centric approach to investing. To date, the fund has made investments in companies like NestAway, YourStory, CureFit, and MSwipe Technologies. However, since June last year, it has not made any new investment. According to media reports, Venkat has not been attending the fund’s meeting since March last year.

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TIK-ING THE WRONG BOXES: APPS TO FACE MORE SCRUTINY

Social media, content and gaming apps are grappling for a way to deal with heightened regulatory scrutiny as Indian courts step in to stem the flood of socalled objectionable content on these platforms, in one of the world’s fastest-growing internet markets. Companies such as Facebook, Google-owned YouTube as well as Chinese apps such as TikTok and Bigo Live will face even more regulatory scrutiny in future, according to people in the know. As India debates the contours of a proposed data law and awaits clarity on amendments to intermediary guidelines for technology platforms, those concerned about the potentially harmful effects of certain content on these apps are turning to the courts for redressal. The courts are filling a vacuum and that’s a good thing, said a senior official at the ministry of electronics and IT. The official expects there will be a vacuum until new laws are finalised. Section 79 of the Indian Information Technology Act, 2000 exempts intermediaries from liability for obscene and illegal content, as long as they do not play any part in creation of content. The proposed amendment have stricter timelines on takedown of harmful content once notified by the government.The proposed data protection law drafted by Justice BN Srikrishna Committee has prohibited technology companies from profiling, tracking, behavioural monitoring or advertising directed at children. The draft also proposed parental consent to sign up for apps.

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FACEBOOK SAYS MORE INSTAGRAM PASSWORDS EXPOSED THAN THOUGHT

Millions more Instagram users were affected by a password security lapse than parent company Facebook acknowledged nearly four weeks ago. The social media giant said in late March that it had inadvertently stored passwords in plain text making it possible for its thousands of employees to search them. It said the passwords were stored on internal company servers, where no outsiders could access them. Facebook said in a blog post Thursday that it now estimates that millions of Instagram users were affected by the lapse, instead of the tens of thousands it had originally reported. It had also said in March that the issue affected hundreds of millions of Facebook Lite users and millions of Facebook users. Facebook Lite is designed for people with older phones or slow internet connections.

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CS Meetesh Shiroya