CORPORATE UPDATES 02.05.2019

NOTIFICATION REGARDING COMPANIES (REGISTRATION OF CHARGES) AMENDMENT RULES, 2019

In exercise of the powers conferred by section 77 read with sub- . sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules, further to amend the Companies (Registration of Charges) Rules 2014, namely :-

1. (1) These rules may be called the Companies (Registration of Charges) Amendment Rules, 2019

(2) Save as otherwise provided, they shall come into force on the date of their publication in the Official Gazette.

2. In the Companies (Registration of Charges) Rules, 2014 (hereinafter referred to as the said rules), in rule 3, for sub- rules (2) and (3), the following sub-rules shall be substituted namely:-

"(2) If the particulars of a charge are not filed in accordance with sub-rule (1), such creation or modification shall be filed in Form No. CHG-l or Form No. CHG- 9 within the period as specified in section 77 on payment of additional fee or advalorem fee as prescribed in the Companies (Registration Offices and Fees) Rules, 2014. (3) Where the company fails to register the charge in accordance with sub-rule . (1) and the registration is effected on the application of the charge-holder, such charge-holder shall be entitled to recover from the company the amount of any fees or additional fees or advalorem fees paid by him 'to the Registrar for the purpose of registration of charge.".

3. In the said rules, for rule 4, the following rules shall be substituted namely:-

"4.Application to Registrar.- (1) For the purposes of the first proviso and clause (b) of the second proviso to sub-section (1) of section 77, the Registrar may, on being satisfied that the company had sufficient cause for not filing the particulars and instrument of charge, if any, within a period of thirty days of the date of creation of the charge including modification thereto, allow the registration of the same after thirty days but within the period as specified in the said provisos, on payment of fee, additional fee or advalorem fee, as may be applicable, as prescribed in the Companies (Registration Offices and Fees) Rules, 2014.

(2) The application under sub-rule (1) shall be made in Form No. CHG-l and Form No.CHG-9 supported by a declaration from the company signed by its company secretary or a director that such belated filing shall not adversely affect the rights of any other intervening creditors of the company.".

4. In the said rules, for rule 12, the following rule shall be substituted, namely:- "12. Rectification in register of charges on account of omission or misstatement of particulars in charge previously recorded and extension of time in filing of satisfaction of charge.- The Central Government may on an application filed in Form No. CHG-8 in accordance with section 87-

(a) direct rectification of the omission or misstatement of any particulars, in any filing, previously recorded with the Registrar with respect to any charge or modification thereof, or with respect to any memorandum of satisfaction or other entry made in pursuance of section 82 or section 83,

(b) direct extension of time for satisfaction of charge, if such filing is not made within a period of three hundred days from the date of such payment or satisfaction."

5. In the said rules, for Form Nos. CHG-l, CHG-8 and CHG-9, the forms shall be substituted, with effect from 1st August, 2019.

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NOTIFICATION REGARDING COMPANIES (APPOINTMENT AND QUALIFICATION OF DIRECTORS) AMENDMENT RULES 2019

In exercise of the powers conferred by the second proviso to sub-section (1), sub-section (4), clause (f) of sub-section (6) of section 149, sub-sections (3) and (a) of section 150, section 151, sub-section (5) of section 152, section 153, section 154, section 157,section 160, sub-section (1) of section 158 and section 170 read with section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Appointment and Qualification of Directors)Rules, 2014, namely: -

1. (1) These rules may be called the Companies (Appointment and Qualification of Directors) Amendment Rules, 2019

(2) They shall come into force on the date of their publication in the Official Gazette.

2. The Companies (Appointment and Qualification of Directors) Rules, 2014, in rule 12A, for the words and figures "on or before 30d, April of immediate next financial year" the words and figures "on or before 30^th June of immediate next financial year" shall be substituted

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NOTIFICATION REGARDING COMPANIES( ACCEPTANCE OF DEPOSITS )SECOND AMENDMENT RULES, 2019

In exercise of the powers conferred by section 73 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), the Central Government hereby makes the following rules further to amend the Companies (Acceptance of Deposits) Rules, 2014, namely:-

1. (1) These rules may be called the Companies (Acceptance of Deposits) Second Amendment Rules, 2019.

(2) They shall come into force on the date of their publication in the Official Gazette. 2. In the Companies (Acceptance of Deposits) Rules, 2014, in rule 16A, in sub-rule (3), -

(a) for the words "the date of publication of this notification in the Official Gazette", the figures, letters and word "31st March, 2019" shall be substituted

(b) for the words "ninety days from the date of said publication of this notification" the words, figures and letters" ninety days from 31st March, 2019" shall be substituted.

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EFORM DPT-3

eForm DPT-3 is required to be filed pursuant to rule 16 and 16A of the of the Companies (Acceptance of Deposits) Rules, 2014 which are reproduced for your reference.

Rule 16: Return of deposits to be filed with the Registrar

Every company other than Government company to which these rules apply, shall on or before the 30th day of June, of every year, file with the Registrar, a return in Form DPT-3 along with the fee as provided in Companies (Registration Offices and Fees) Rules, 2014 and furnish the information contained therein as on the 31st day of March of that year duly audited by the auditor of the company. Form DPT-3 shall be used for filing return of deposit or particulars of transaction not considered as deposit or both by every company other than Government company.

Rule 16(A) (3)

Every company other than Government company shall file a onetime return of outstanding receipt of money or loan by a company but not considered as deposits, in terms of clause (c) of sub-rule 1 of rule 2 from the 01st April, 2014 to the date of publication of this notification in the Official Gazette, as specified in Form DPT-3 within ninety days from the date of said publication of this notification along with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014]

Purpose of the Form

o Onetime Return for disclosure of details of outstanding money or loan received by a company but not considered as deposits in terms of rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014.

o Return of Deposit

o Particulars of transactions by a company not considered as deposit as per rule 2 (I) (c) of the Companies (Acceptance of Deposit) Rules, 2014

o Return of Deposit and Particulars of transactions by a company not considered as deposit

Date of last closing of accounts

The latest date of financial year end for which accounts has been closed by the company only if purpose is ‘Return of Deposit’ or ‘Particulars of transactions by a company not considered as deposit as per rule 2 (I) (c) of the Companies (Acceptance of Deposit) Rules, 2014’ or ‘Return of Deposit and Particulars of transactions by a company not considered as deposit’ is selected.

Net Worth as per the latest audited balance sheet preceding the date of the return.

Maximum limit of deposits (i.e. 35% of the above in case of all companies other than specified IFSC public companies and private companies)

The maximum limit of deposit only if purpose is ‘Return of Deposit’ or ‘Return of Deposit and Particulars of transactions by a company not considered as deposit’ is selected. This amount shall not be more than the maximum limit of deposits i.e. 35% of the Net worth in case of all companies other than Private companies and IFSC public companies.

Total number of deposit holders as on 1st April

Enter the total number of deposit holders as on 1st April only if purpose ‘Return of Deposit’ or ‘Return of Deposit and Particulars of transactions by a company not considered as deposit’ is selected.

Total number of deposit holders at the end of financial year

The total number of deposit holders at the end of financial year only if purpose ‘Return of Deposit’ or ‘Return of Deposit and Particulars of transactions by a company not considered as deposit’ is selected.

Particulars of deposits

The details of deposits as applicable only if purpose ‘Return of Deposit’ or ‘Return of Deposit and Particulars of transactions by a company not considered as deposit’ is selected:

(a) Amount of existing deposits as at 1st April

(b) Amount of deposits renewed during the year

(c) Amount of deposits accepted during the year

(i) Secured deposits

(ii) Unsecured deposits

(d) Amount of deposits repaid during the year

(e) Balance of deposits outstanding at the end of the year

Particulars of liquid assets Amount of deposits maturing before 31st March next year and following next year.

Amount required to be invested in liquid assets

The amount that the company will be investing in liquid assets. This amount cannot be less than 15% of sum of deposits maturing before 31st March next year and following next year, as mentioned in field 10(a).

Particulars of charge

The particulars of charge created for securing the deposits of the investors such as if applicable:

(a) Date of entering into trust deed

(b) Name of the trustee

(c) Short particulars of the property on which charge is created for securing depositors

(d) Value of the property

Total amounts of outstanding money or loan received by a company but not considered as deposits in terms of rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014 as specified in rule 16(A)(3)

The details only if purpose ‘Onetime Return for disclosure of details of outstanding money or loan received by a company but not considered as deposits in terms of rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014’ is selected.

Particulars of receipt of money or loan by a company but not considered as deposits at the end of financial year, in terms of clause (c) of sub-rule 1 of rule 2 of the Companies (Acceptance of Deposits) Rules,2014

The particulars of receipt of money or loan by a company but not considered as deposits, at the end of financial year such as if applicable (from a to s).

Being these fields mandatory, zero can be enter.

DSC

Ensure the eForm is digitally signed by the Director, Manager, CEO, CFO or Company Secretary.

Disqualified director should not be able to sign the form

Attachments

·       Auditor’s certificate

• Copy of trust deed – Mandatory if company has trust deed and details of same are mentioned in the form

• Copy of instrument creating charge – Mandatory if company has trust deed and details of same are mentioned in the form

• List of depositors - List of deposits matured, cheques issued but not yet cleared to be shown separately – Mandatory if company has balance of deposits outstanding at the end of the year.

• Details of liquid assets

• Optional attachment, if any.

Due Date for Filing of Form

Onetime Return for disclosure of details of outstanding money or loan received by a company but not considered as deposits in terms of rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014 - Within 30 days from 1st May, 2019

Return of deposits’ or ‘Particulars of transactions by a company not considered as deposit as per rule 2 (I) (c) of the Companies (Acceptance of Deposit) Rules, 2014’ Or ‘Return of Deposit and Particulars of transactions by a company not considered as deposit’ - 30th June of every year

Fee applicable in case of company have share capital

·       Less than 1,00,000 - Rupees 200 per document

·       1,00,000 to 4,99,999 - Rupees 300 per document

·       5,00,000 to 24,99,999 - Rupees 400 per document

·       25,00,000 to 99,99,999 - Rupees 500 per document

·       1,00,00,000 or more - Rupees 600 per document

·       Fee applicable in case of company not having share capital - Rupees 200 per document

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EFORM MSME FORM-I

Section Rule Number(s) eForm MSME FORM-I is required to be filed pursuant to Order dated 22 January, 2019 issued under Section 405 of the Companies Act, 2013 and which are reproduced for your reference:

1. Specified Companies (Furnishing of information about payment to micro and small enterprise suppliers) Order, 2019, all companies who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed forty five days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions of section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) (hereafter referred to as “Specified Companies”), shall submit a half yearly return to the Ministry of Corporate Affairs stating the following:

a. the amount of payment due and

b. the reasons of the delay;

2. Every specified company shall file in MSME Form I details of all outstanding dues to Micro or small enterprises suppliers existing on the date of notification of this order within thirty days from the date of publication of this notification.

3. Every specified company shall file a return as per MSME Form I, by 31st October for the period from April to September and by 30th April for the period from October to March.

Purpose to file the eForm

All companies, who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed forty-five days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions of section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (27 of 2006) (hereafter referred to as “Specified Companies”), shall submit a return to the Ministry of Corporate Affairs in the interval mentioned below

a. Initial return or

b. Regular half yearly return

Fee Rules for MSME FORM I

Form for furnishing half yearly return with the registrar in respect of outstanding payments to Micro or Small Enterprises. - No fee

Time limit (days) for filing - NA

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INSOLVENCY PROCEEDINGS: DEFAULTING PROMOTERS MAY GET CHANCE TO COME BACK

Defaulting promoters, who are barred from submitting resolution plans and bidding for their stressed companies under the Insolvency and Bankruptcy Code (IBC), may get a last chance to make a comeback at the liquidation stage A discussion paper on the corporate liquidation process along with draft regulations, floated by the Insolvency and Bankruptcy Board of India (IBBI), has proposed that a credible ‘compromise or arrangement’ proposal can be made by players (including promoters) to the liquidator under the Companies Act. This means if a stressed firm undergoing insolvency process doesn’t attract any resolution plan and is deemed for liquidation under the IBC, a last-ditch attempt can be made to save the company from liquidation through the compromise scheme by invoking section 230 of the Companies Act. Importantly, section 29A of the IBC, which makes defaulting promoters ineligible to become resolution applicants, won’t be applicable in such cases. In fact, the National Company Law Appellate Tribunal in the case of SC Sekaran has directed the liquidator to give the scheme of compromise a chance before selling any asset. The scheme of compromise and arrangement was also tried in cases of Amar Dye Chem and Gujarat NRE Coke during liquidation. The regulator has sought comments on the draft regulations from stakeholders and public in general by May 19. The draft regulations have also proposed that a stakeholders’ consultation committee — with representation from financial and operational creditors, among others — be set up to advise the liquidator on the sale of assets and/or business. Currently, under the IBC, only financial creditors are part of the committee of creditors that make decision on resolution plans. The draft regulations also said that liquidation should be achieved in one year and any extension of the deadline may be granted only by the NCLT. Currently, while there is a 270-day deadline for resolution, there is no such time frame for liquidation. While compromise or arrangement under section 230 of the (Companies) Act is proposed, it must be utilised first and only on its closure/failure, liquidation under the Code (IBC) may commence, the draft said. However, a credible proposal for compromise or arrangement must be made to the liquidator within seven days of the date of order for liquidation by the National Company Law Tribunal.

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GOVT DECLINES TO DEFER SA 701 ACCOUNTING STANDARD

The ministry of corporate affairs (MCA) has decided not to extend the deadline for applicability of accounting standard SA 701 till March 31, 2020, despite a demand from the Institute of Chartered Accountants of India (ICAI). The ministry has stated that enough time was given to auditors to familiarise themselves with SA 701. SA 701, which involves communicating key audit matters (KAM) in the independent auditor’s report, was first issued by the ICAI in May 2016 and was applicable for audit of financial statements after April 1, 2017. But in March 2017, ICAI deferred it to April 1, 2018, adding that members need more time to comply The standard applies to audit of financial statements of listed entities and circumstances when an auditor decides to communicate KAMs in his report. KAMs are issues that, in the auditor’s judgement, are very important in the audit of financial statements. In March, ICAI decided to defer its applicability, from April 2018 to April 2020, and communicated it to National Financial Reporting Authority (NFRA) for consideration. NFRA recommended that decision is not supported by justified and adequate reasoning and deferral should not be permitted. MCA told ICAI, It is pertinent to mention here that at that time (2017) NFRA was not constituted and therefore the ICAI’s decision was treated as final and not further examined The ministry emphasised that almost two years, May 2016 to March 2018, was there for awareness building and training. It stressed that SA 701 does not impose any new substantive procedural requirements on auditors. KAMs are chosen and picked out from matters already communicated and discussed with Those Charged With Governance (TCWG). Here auditor is only required to filter out KAM out of the matters discussed with the TCWG as matters of most significance in the audit. A senior MCA official said SA 701 enhances communicative value of auditors report by providing more transparency about audit and additional information to users of financial statements to understand matters of critical importance. Here, stakeholders are largely public who make investments in listed companies. It also provides additional information to users so as to enable them to understand an entity and areas of significant management judgement in audited financial statements, he added. Chartered accountants (CAs) largely had a mixed response to the development. Subramaniam R Iyer, a Delhi-based CA, said an auditor of a listed entity has great responsibility to complete, in a very limited time after year’s closing, the tasks of audit, company auditor’s report order (CARO) and opining on whether accounts are true and fair or whether his opinion is qualified or modified with reasons. Mandatory reporting on KAM by an auditor is as onerous as mandating management to disclose areas they focused on in the year. Substance over form needs to be invoked in all reportings. I feel this standard needs to be discussed in detail before being implemented in a hurried cavalier manner, he rued.

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'NO PUBLIC INTEREST'-SC SETS ASIDE THE FIRST FORCED MERGER BETWEEN TWO COMPANIES ORDERED BY CENTRAL GOVT

In a significant judgment, the Supreme Court set aside the forced merger of two companies ordered by the Ministry of Corporate Affairs, which was the first ever instance of invocation of Section 396 of the Companies Act 1956. It was in 2016 that the Union Ministry ordered the compulsory amalgamation of National Spot Exchange Ltd (NSEL) with its parent company Financial Technologies India Ltd (later name changed as 63 Moons Tech Ltd). NSEL was a trading company which fell into a major financial crisis in 2013. In this backdrop, the Forward Markets Commission(FMC) had proposed merger of NSEL with its parent company FTIL in 'public interest' so that dues amounting to ₹5,600 crore be paid to investors and traders of NSEL. Based on this, the MCA issued amalgamation order in 2016, invoking Section 396 of the Companies Act 1956, which gives power to the Central Government to order compulsory amalgamation of two companies if it is satisfied that it is essential in the public interest. The Bombay High Court rejected FTIL's challenge against the forced merger holding that it was essential in public interest In further appeal by FTIL, the SC held otherwise. The bench of Justices R F Nariman and Vineet Saran held that the amalgamation order was ultra-vires Section 396 and violative of Article 14 of the Constitution of India and struck it down. Private interests of investors do not amount to public interest. The SC noted that the immediate reason for amalgamation was that NSEL, as a corporate entity, seemed financially and physically incapable of effecting any substantial recovery from defaulting members. The amalgamation order by the MCA said that it was of the was of the considered opinion that to leverage combined assets, capital and reserves for efficient administration and satisfactory settlement of rights and liabilities of stakeholders and creditors of NSEL, it would be in essential public interest to amalgamate NSEL with FTIL This intention to protect the creditors of NSEL by forcing its parent company to satisfy the dues will not translate into essential public interest, held the Court. In the context of compulsory amalgamation of two or more companies, the expression public interest would mean the welfare of the public or the interest of society as a whole, as contrasted with the selfish interest of a group of private individuals. Thus, public interest may have regard to the interest of production of goods or services essential to the nation so that they may contribute to the nation's welfare and progress, and in so doing, may also provide much needed employment. Public interest in this context would, therefore, mean the combining of resources of two or more companies so as to impact production and consumption of goods and services and employment of persons relatable thereto for the general benefit of the community. Conversely, any action that impedes promotion of industry or obstructs growth which is in national or public interest would run counter to public interest as mentioned in this Section, observed the judgment authored by Justice Nariman. The sole object of the amalgamation order is really only to effect speedy recovery of dues of INR 5600 crore, observed the Court. What is important to note is that there is no interest of the general public as opposed to the businesses of the two companies that are referred to. It is important to notice that the leveraging of combined assets, capital, and reserves is only to settle liabilities of certain stakeholders and creditors when the order is read as a whole, and given the fact that the businesses of the two companies were completely different. We have seen that these (FMC) recommendations are in the form of a letter dated August 18, 2014, in which the 'business reality' is the fact that dues of ₹5,600 crore have to be paid, and that NSEL does not have the wherewithal to do so. Thus, its parent company's financial resources ought to be used to effect such payment. This 'business reality', therefore, speaks only of the private interest of the investors/traders who have been allegedly duped (which fact will only be established in suits filed by them in 2014), and nothing beyond (which would show some vestige of public interest), said Justice Nariman in the order. The High Court had justified the amalgamation order on following three grounds

(a) Restoring/safeguarding public confidence in forward contracts and exchanges which are an integral and essential part of Indian economy and financial system, by consolidating the businesses of NSEL and FTIL;

(b) Giving effect to business realities of the case by consolidating the businesses of FTIL and NSEL and preventing FTIL from distancing itself from NSEL, which is, even otherwise, its alter ego; and

(c) Facilitating NSEL in recovering dues from defaulters by pooling human and financial resources of FTIL and NSEL.

Regarding this, the SC observed that grounds (a) and (b) were not mentioned in the draft amalgamation order, thereby depriving an opportunity to stakeholders to raise objections. With respect to ground (c), the Court held protection of the private interest of a group of investors/traders, as distinct from public interest Essential Public Interest In arriving at the conclusion, the Court noted that Section 396 used the expression essential in public interest. Therefore, the amalgamation order must be not only in public interest, but also should satisfy the test of being essential the Central Government's mind has to be applied to whether a compulsory amalgamation under Section 396 is indispensably necessary, important in the highest degree, and whether such amalgamation is both basic and necessary, explained the Court. But the amalgamation order did not have any discussion regarding essentiality. it refers to essential public interest as if essential goes with public interest instead of being a separate and distinct condition precedent to the exercise of power under Section 396. On facts, therefore, it is clear that the essentiality test, which is the condition precedent to the applicable to Section 396, cannot be said to have been satisfied. The Court noted that other means such as taking over the management were not explored before issuing the amalgamation order. The apex court said one would have expected a resuscitation or revival of the commodities exchange of NSEL, which could have been achieved by takeover of its management and that it is difficult to imagine that grave shattering of public confidence by the permanent shutting down of NSEL would be remedied only by facilitating the paying of dues to certain allegedly duped investors/traders, which fact will be proved or disproved in suits filed by them which are pending adjudication in the Bombay High Court. Immunity under Article 31A(c) of Constitution not applicable Article 31A(c) of the Constitution of India states that no law providing for the amalgamation of two or more corporations either in the public interest or in order to secure the proper management of any of the corporations should be shall be deemed to be void on the ground that it is inconsistent with, or takes away or abridges any of the rights conferred by article 14 or article 19. There was an argument that because of this, the amalgamation order issued under Section 396 cannot be challenged on grounds of being violative of Articles 14 and 19. The bench did not accept this argument, holding that the amalgamation order was an administrative order issued under Section 396, which cannot be held to be law within the meaning of Article 13. Therefore, the government order cannot claim derivative immunity under Article 31A(c).

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NBCC ASKS COURT-APPOINTED INSOLVENCY RESOLUTION PROFESSIONAL TO RECONSIDER ITS BID

The government’s construction arm NBCC, which has received the go-ahead from all government departments for its revised offer to acquire the embattled Jaypee Infratech, has now written to the court-appointed insolvency resolution professional to reconsider its bid. In a letter to the appointed interim resolution professional (IRP) Anuj Jain, on May 1, NBCC said, All necessary administrative approvals have been obtained by us. We would request you to reconsider your decision and put up our plan for voting before the CoC. Please note that we shall take all steps, as may be necessary to protect our interest and the interest of the creditors of the Jaypee Infratech including the homebuyers, the letter said. In a regulatory filing, NBCC said it has got the necessary approvals from the Ministry of Housing and Urban Affairs and other concerned departments for its bid.

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IBBI SEEKS TO PENALISE ‘FLIPPANT’ BIDDERS TO PREVENT FRAUD AT BANKRUPT COMPANIES

The Insolvency and Bankruptcy Board of India (IBBI) is seeking to penalise ‘flippant’ bidders and managers of stressed assets to help quicken the recovery of banking funds locked in bad loans and prevent fraud at companies put into administration. After a Liberty House plan for a stressed automotive asset didn’t result in payments, IBBI has filed nearly a dozen cases in the past two months to punish fraud linked to bankruptcies, two people with direct knowledge of the matter told. Likely offences include malicious initiation of insolvency proceedings, wilful concealment of company properties, misconduct by any officer of the borrower during the resolution, and the administration fraud. Penalties include jail terms ranging from one to five years, and fines up to Rs 1 crore. Speedy action by IBBI will act as a deterrent, said Anil Goel. We have experienced various cases of planned insolvency where the property of the cor-porate debtor is concealed or removed or taken away for personal benefits before the commencement of the insolvency process. There are 28 special courts in India dealing with prosecutions in insolvencies These dedicated courts established three years ago, will only hear cases against alleged offences under the Insolvency and Bankruptcy Code (IBC). The objective behind setting up these special courts was the speedy disposal of cases.

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COMPANIES SHOULD VALUE WORKERS LIKE SHAREHOLDERS

Once again, we’re debating the purpose of corporations. On one side, progressives such as Sen. Elizabeth Warren argue that companies — given broad rights in court decisions such as Citizens United v. Federal Election Commission — must also accept broad social responsibilities such as paying attractive wages and protecting the environment. On the other side are many corporate leaders and business school professors (who train future leaders), who continue to believe in the Business Roundtable’s position in 1997 that the principal objective of a business enterprise is to generate economic returns to its owners. Such views echo free-market economist Milton Friedman, who emphasized nearly half a century ago that a business has only one responsibility, to maximize shareholder value. Exhortations for corporations to do much more will get louder in advance of the 2020 presidential election, and the silent resistance will increase proportionately. I believe there’s a middle path. While corporations cannot, and should not, take on responsibilities that are properly those of the government or the local community, they can do better for themselves and for society by explicitly identifying core stakeholders — financial investors, no doubt, but also workers, customers and suppliers who make significant investments in the business — and publicly committing to enhance their collective value. There’s merit still in many of Friedman’s concerns. At the time, he was particularly outraged at the growing clamor in the U.S. for corporations to forgo raising prices as part of their supposed national duty to help fight inflation. He rightly didn’t believe it was the job, or even within the abilities, of companies to control inflation. Moreover, price-fixing would prevent the free market from sending the right signals about shortages. Friedman also deemed the push for new corporate social responsibilities profoundly undemocratic Activists who could not get laws passed in Congress were using the bully-pulpit instead to shame corporations into changing behavior. His critics today complain that decisions by a corporate management focused solely on profits are harsh give the corporation too short a time horizon, and favor an overly narrow group, the shareholders. The first two don’t hold up to scrutiny. The private corporation’s fundamental contribution to society is to make products efficiently and offer consumers affordable choice. In a competitive market, profits show how well it does this. Share prices reflect the value of profits over time. Since companies looking to maximize the value of their shares will care about profits over the long-term, most will train workers where needed and foster lasting customer relationships instead of ripping off employees or customers. Put differently, even if CEOs do focus primarily on share prices, that doesn’t mean the market only rewards actions that boost this quarter’s earnings. Public companies such as Amazon.com Inc. have thrived despite investing in their businesses without showing much in the way of profits. At the extreme end, pharmaceutical companies and aircraft manufacturers take investment bets that won’t pay off for decades. Critics are right, however, in asking why management should maximize only shareholder value Friedman’s theoretical rationale was that shareholders get what is left over after fixed claimants such as debt holders and workers are paid. By maximizing shareholders’ residual claim, management maximizes the overall corporate pie, since the rest are fixed claims on that pie. In practice, though, many of what are thought of as fixed claims are actually variable over time. Long-term employees, for instance, invest in developing firm-specific skills. This means they are no longer commodity labor, paid a wage determined in a competitive market. Instead, they get a negotiated wage which fluctuates with the company’s fortunes. No less than shareholders then, such workers become residual claimants on the firm’s value. Companies that are dependent primarily on them — think of an accounting or consulting firm — often recognize this by making their employees equity partners. Management should work to enhance the value of these stakes — for instance, by helping long-term workers maintain their skills. Such a commitment will make employees more willing to put out for the firm, and thus also enhances shareholder value. Corporations will still have to take tough decisions from time to time, including letting workers go when absolutely necessary. But job cuts that boost shareholder value aren’t warranted if they reduce the value of other core stakeholders more. Some critics worry that if boards start focusing on goals other than maximizing shareholder value, it will be hard to monitor and control their performance. Yet U.S. courts have repeatedly decided not to second guess the business judgment of boards, thus protecting them from shareholder review except for the most egregious failures. Moreover, a majority of states have passed constituency statutes that allow board directors to consider the interests of non-shareholder constituents such as creditors or workers. Given the considerable leeway corporate boards already have, it would be a step in the right direction for them to specify whose interests, including workers’, they are protecting. That would allow investors to better gauge the trade-offs a board will make. It would also give core stakeholders greater confidence to invest in the corporation. Most important in these populist times, corporate boards can also then avoid unnecessary political flak by identifying their core stakeholders — those who make financial or other long-term real investments in the firm. That would not just circumvent progressive critics, it would also be the right thing to do.

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JAYPEE INFRATECH LENDERS, HOMEBUYERS VOTE ON SOLE BID BY SURAKSHA REALTY

Suraksha Realty was the lone player in the race to acquire the Jaypee group realty firm. Suraksha Realty-led consortium is the only player left in the race to acquire Jaypee Infratech after a lenders’ panel decided not to put NBCC’s bid to vote. The voting process kicked off on Tuesday (April 30) and is scheduled to end on May 3. Meanwhile, home-buyers are planning to write to Jaypee Infratech’s Interim Resolution Professional (IRP) Anuj Jain for including NBCC’s bid in voting process after the public sector firm got approvals from various government departments for its revised offer. Some of the home buyers complained of technical glitches in voting portals and also mentioned difficulties faced by old and not so tech-savvy people. The voting portal was down on Tuesday. Our old passwords are not working. While the banks use CDSL portal, we home buyers are forced to use a third party unsecure site, said Ranjeet Jha, a home buyer of Jaypee Infratech.

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NBCC GETS GOVT BACKING FOR REVISED OFFER TO TAKE OVER JAYPEE INFRATECH

State-owned NBCC (India) Ltd said on Wednesday it has received the government's approval for its revised offer to take over debt-riden developer Jaypee Infratech Ltd. NBCC said in a stock-exchange filing that the Ministry of Housing and Urban Affairs, its nodal ministry, has communicated its approval for the revised offer. The ministry communicated its decision after with consultation with the Department of Expenditure, the Department of Investment and Public Asset Management and the government's main policy think tank NITI Aayog, NBCC said. NBCC, formerly National Buildings Construction Corporation, had submitted its revised bankruptcy resolution plan for the takeover of Jaypee Infratech last month. NBCC has offered Rs 5,000 crore for land parcels (as against the earlier Rs 3,000 crore). It has also offered 100% equity of Yamuna Expressway, which is the only cash-generating asset with Jaypee Infratech. NBCC has also offered to sell unsold homes to the secured financial creditors of Jaypee Infratech, which is under debt of Rs 9,800 crore.

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RUCHI SOYA: PATANJALI GETS TIME TILL MAY 7 FOR RESOLUTION PLAN

Patanjali Ayurved on Wednesday sought more time from the National Company Law Tribunal to file a detailed resolution plan for edible oil firm Ruchi Soya which it has agreed to take over for ₹4,325 crore. The company owes ₹9,345 crore to the lenders led by SBI who Tuesday agreed, with around 96% vote, to go with the second revised bid by the company promoted by yoga practitioner Ram Dev. Its initial offer was ₹4,160 crore along with an ₹1,700 crore working capital. The deal leaves the banks with a huge haircut of over 51% of the debt. Granting time to Patanjali, the tribunal comprising VP Singh and Ravikumar Duraisamy posted the matter for further hearing on May 7.

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AMRAPALI GROUP COMMITTED FIRST DEGREE CRIME BY CHEATING HOME BUYERS: SC

Amrapali Group has committed a first degree crime by cheating thousands of home buyers and no matter how powerful the people behind this mess they will be booked and prosecuted, the Supreme Court said Tuesday. Fate is written on the wall for the group and its directors, the top court said while declining to hear their claims of no wrong doing. The embattled real estate firm cheated everybody including home buyers, banks and authorities and indulged in cartelization to prevent the Debt Recovery Tribunal from auctioning its unencumbered properties, it said. The limit of your fraud touched the sky. A bench of Justices Arun Mishra and U U Lalit said it cannot believe the justification given by Amrapali for alleged diversion of funds of over Rs 3,500 crore, looking at its dubious conduct. We should have cancelled the licences of statutory auditors of Amrapali for indulging in fraudulent practise long back and sent them to jail. We are saying in open court that there are powerful people behind this mess but no matter how powerful they are, we will book them and prosecute them. We are not going to spare anybody, the bench said. The hard hitting remarks of the bench came after senior advocates Geeta Luthra and Gaurav Bhatia, appearing for the group, said there was no wrong doing done on their part and there was no diversion of Rs 3,500 crore as claimed by the court appointed forensic auditors. Luthra said forensic auditors have erred on various aspects in their report like they had claimed that not a single penny was invested by directors of Amrapali but in reality Rs 60 to Rs 70 crore was put in by them. We have to believe the forensic auditors and their report looking at your dubious conduct. We believe them. You (Amrapali) have yourself admitted in your earlier affidavit that Rs 2,990 crore of home buyers money was diverted and now you are claiming that there was no diversion. You have made a peon as your director and he purchases shares worth crores of rupees for Amrapali. Is this not correct, the bench said. Luthra said the group acted in a bona fide manner and in the interest of home buyers but the problems started after the company ran into litigation. Your (Amrapali Group and its directors) fate is written on the wall. We are not inclined to hear your bona fide claims looking at your dubious conduct, the bench said.

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IL&FS BOARD SEEKS PUNITIVE ACTION AGAINST DELOITTE, BSR

The government-appointed board of Infrastructure Leasing & Financial Services has proposed punitive action against Deloitte Haskins & Sells (DHS) and BSR & Co, part of the KPMG network, said people with knowledge of the matter. In its report to the Ministry of Corporate Affairs (MCA), the board said it had found the two firms failed to issue warnings about shortcomings while auditing the books of IL&FS Financial Services (IFIN), a subsidiary of IL&FS. Sources added that both the board and the MCA are of the view that action must be taken against DHS and BSR, including the possibility of invoking Section 140 (5) of the Companies Act, which allows barring an auditor for a period of five years, and also Section 147, which deals with punishment for contravention of rules. As the auditors, the firms were duty bound to highlight the loans to companies that were in financial stress themselves, he said. Also, the probe has found instances of loans being granted in violation of RBI (Reserve Bank of India) guidelines. These firms were required to tell the company that its loans were violating the provisions.

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SUBMIT STATUS REPORT ON NSE ALGO SCAM BY MAY 22, DELHI HC TELLS CBI

The Delhi High Court on Tuesday directed the Central Bureau of Investigation (CBI) to submit on May 22 a detailed status report on its investigations into the NSE co-location scam. This came at a hearing on a PIL filed by petitioner Shantanu Guha Ray. The PIL is essentially a fallout of the CBI complaint filed by Ray in August 2017 in the NSE co-location matter. With the pace of CBI investigation being slower than expected and the scope of the FIR filed being extremely limited, the petitioner had recently moved the Delhi High Court seeking larger ambit and scope of investigation for CBI. Indian regulators, government and policy makers are yet to get a complete handle on the NSE co-location scam, which had resulted in wrongful gains of ₹ 50,000-75,000 crore to deviant brokers. The CBI is also unable to make any headway on the matter, it is learnt. The petitioner had, in the PIL, contended that the NSE had abused its market position and helped deviant brokers and politicians make unlawful and illegal gains, thereby rendering the institutional set up of exchanges itself at risk. It has also been alleged that SEBI has not taken any action against such brokers from the NSE, its concerned officers and other culpable persons.

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SEBI FINES NSE RS 1,100 CRORE, BANS TWO EX-MDS IN BROKERS’ SCAM

Sebi on Tuesday asked NSE, the largest stock exchange in India, to pay about Rs 1,100 crore for favouring a few brokers to make illegal gains by using unauthorised trading software, networks and servers in the same room where the exchange’s main trading servers were located. Sebi also banned Ravi Narain and Chitra Ramkrishna, both former MDs of the exchange, from the market for five years each and also asked them to disgorge part of their salaries for the years when NSE had demonstrated favouritism to three brokers — OPG Securities, GKN Securities and Way2Wealth Securities — over all other brokers. The regulator also asked NSE not to introduce any new derivatives contracts for the next six months. Sebi, through five different orders, also banned the three brokers from the market for up to five years and asked them to disgorge illegal gains and interest on the same, aggregating about Rs 51 crore. Sebi also banned Ajay Shah, a former finance ministry official and a professor of economics, from associating with any listed company for two years. Shah had used confidential trading data from NSE for personal benefits. Several other people and software vendors who played crucial roles in facilitating the brokers make illegal gains have also been either banned or fined by Sebi. While Narain had resigned as MD of NSE in May 2013 and took over as its vice-chairman, Ramkrishna took over as MD. For its role in the scam, Sebi also banned NSE from the stock market for six months, meaning the exchange cannot go for its IPO, which has been stalled for years on regulatory directions. An NSE spokesperson said that the exchange was in the process of examining Sebi’s order and will take appropriate steps as may be legally advised. Narain and Ramkrishna did not reply to TOI’s calls and messages for their comments. According to NSE MD Vikram Limaye, the orders will not impact regular trading on NSE and the trust on NSE and the Indian markets for all investors is rock solid. He also pointed out that the matter pertained to incidents that happened five to nine years ago. Since then NSE’s systems have undergone a sea change and are much robust than earlier, he said. Limaye joined NSE in July 2017 as part of Sebi’s clean-up process of the bourse’s board and management post the co-location scam. In the order, Sebi’s whole time member G Mahalingam noted that it was established beyond doubt that NSE had not exercised the requisite due diligence while putting in place the TBT architecture (a specialised trading software process). The same created a trading environment in which the information dissemination was asymmetric, which cannot be considered fair and equitable, he noted. According to Mahalingam, NSE being a market infrastructure institution cannot be treated at par with other market intermediaries or participants as it derives its power to act as a stock exchange from the recognition granted to it. In its order, Sebi asked NSE to pay Rs 625 crore and 12% interest from April 1, 2014 for its role in the co-location scam. It also directed NSE to pay Rs 62.6 crore and 12% interest from September 11, 2015. The fine has to be paid within 45 days from the date of the order. It also asked OPG Securities to pay Rs 15.6 crore, Way2Wealth Rs 15.34 crore and GKN Securities Rs 4.9 crore penalty. These three brokers will also pay 12% interest for four to five years on the amount of penalty.

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SEBI BANS OPG SECURITIES, 3 DIRECTORS FROM HANDLING SECURITIES MARKET FOR 5 YEARS

Sebi on Tuesday barred OPG Securities and its three directors for five years from accessing securities market and asked them to disgorge illegal gains of more than Rs 15 crore in the NSE co-location facility case. OPG Securities gained unfair advantage over other trading members and made illegal gains being the first logger as well as by connecting to a secondary server on a daily basis, a Sebi order said. The unlawful gains made OPG by connecting to secondary server, which is used only in case of trouble in primary server, amounted to Rs 15.57 crore, according to the order. Sebi observed that since trading members were permitted to trade through secondary pop server only in case of disconnections to primary pop server, OPG by connecting to secondary pop server almost on a daily basis without valid reasons, gained unfair advantage over other TMs. By doing so, it therefore made illegal gains being the first logger as well as by connecting to the secondary server which normally had very low load as other members would be connecting to primary pop server. The firm violated PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) norms and code of conduct for stock brokers. Regarding the directors, Sebi said they are responsible for the affairs of the OPG and therefore are liable for the conduct of the firm.

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SEBI IMPOSES RS 79 LAKH FINE ON MD, 6 DIRECTORS OF RANKLIN SOLUTIONS

Sebi has imposed a total penalty of Rs 79 lakh on the managing director and six directors of Ranklin Solutions for disclosure lapses and violation of insider trading norms. Under the Substantial Acquisition of Shares and Takeovers (SAST) norms, an entity has to make an open offer in case its shareholding goes beyond a certain threshold. The holding of Prakash in the company has crossed 15 per cent. Prakash is required to make a public announcement to acquire shares of the company in terms of SAST Regulations. However, it is observed that Prakash has failed to make open offer, Sebi said. Besides, Sebi in a separate order noted that Prakash along with six directors also failed to frame code of conduct for prevention of insider trading, as required under insider trading norms.

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SEBI LEVIES RS 36 LAKH FINE ON 7 ENTITIES FOR FRAUDULENT TRADE PRACTICES

Markets regulator Sebi imposed a total penalty of Rs 36 lakh on seven entities for indulging in manipulative and fraudulent trade practices in illiquid stock options of BSE. Sebi observed that a total of 2.91 lakh trades, comprising more than 80 per cent of all the trades executed in stock options of the exchange, were non-genuine and the firms were among the entities that had indulged in executing non-genuine trades. The manner of placing buy and sell orders in a synchronised manner within few minutes of each other and reversal of trades in a short time with wide price variation without any basis for such variation indicate that trades executed by the entities were non-genuine and created artificial trading volumes, Sebi noted.

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SEBI FINES 2 PROMOTERS OF AADI INDUSTRIES RS 30 LAKH FOR DISCLOSURE LAPSES

Markets regulator Sebi has imposed a total fine of Rs 30 lakh on two promoters of Aadi Industries for failing to disclose the change in their shareholding in the firm. Rushabh Jitendra Shah and Minesh Devendra Shah were promoter directors of the firm at the time of violation, as per Securities and Exchange Board of India (Sebi) order. During the probe, Sebi observed that Minesh executed off-market transactions and acquired more than 5 per cent of share capital of the company during each of the quarter period with effect from January 2012. Besides, Rushabh Shah had executed various on-market and off-market transactions and on asking the BSE about the disclosures made by any of them, the exchange in a reply to regulator said that no disclosures were received from any entities during the examination period. Under takeover norms and insider trading regulations, any acquirer who acquires more than 5 per cent shares in the target company, he is required to make disclosures to the exchange and the company within two working days. Accordingly, a fine of Rs 25 lakh was imposed on Rushabh Shah which includes a separate penalty for violating code of conduct. Minesh was levied a penalty of Rs 5 lakh. In a separate order, Sebi imposed Rs 15 lakh fine on Step-up Marketing and two of its directors -- Harjit Singh Dhariwal and Raghbir Kaur-- for illegally mobilising funds through unregistered collective investment schemes.

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SEBI REJECTED NSE’S CONSENT PLEA JUST HOURS BEFORE ORDER

Just a couple of hours before releasing its order against the National Stock Exchange (NSE) in the co-location case Tuesday evening, the Securities and Exchange Board of India (Sebi) had told the exchange that it was rejecting its consent application -- a form of negotiated settlement of civil proceedings between the regulator and securities law offenders--it had filed to settle the case The exchange had filed its consent application last year after Sebi alleged it gave preferential access to its trading platform to a few players. Sebi rejected our consent application last evening prior to issuing the order, Vikram Limaye, told. The consent mechanism helps entities or people settle the case without admitting guilt. The rejection of the consent order meant Sebi believed NSE was guilty. The country's largest exchange can now approach the Securities Appellate Tribunal against the Sebi order. On Tuesday, the regulator directed NSE to pay over Rs 1,000 crore for favouring a few brokers to make illegal gains by using unauthorised trading software and networks in the same room where the exchange’s main trading servers were located. Although the regulator passed a disgorgement order against NSE and its employees, it dropped allegations of fraudulent and unfair trade practices that it had levelled against them. The principle of disgorgement is when a person or entity in the securities market makes a profit by fraudulent means. A disgorgement order is issued to repay those gains to affected investors with interest. Lawyers said NSE could challenge the extent of the disgorgement amount given that the exchange was not fined for Fraudulent and Unfair Trade Practices. The fundamentals of disgorgement is being challenged in this case, said a senior corporate lawyer. Senior regulatory officials said disgorgement can also be used when there is violation of law and not just under FUTP (Fraudulent and Unfair Trade Practices). Sebi has used it against intermediaries in the past but it is for the first time it has used it against a market infrastructure institution. Let the principle of disgorgement get tested in the court of law, said a person familiar with the case.

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AJAY SHAH COLLUDED TO MISUSE NSE DATA FOR COMMERCIAL PURPOSES: SEBI

Among the multiple angles investigated by the stock market regulator in the National Stock Exchange of India Ltd (NSE) co-location case, one pertains to the alleged misuse of exchange data for commercial gains In one of the five orders it put out after a four-year-long investigation, the Securities and Exchange Board of India (Sebi) said Ajay Shah, along with his wife and sister-in-law, misused market data obtained from the NSE for commercial gains. Sebi has held that Shah, along with his sister-in-law and an NSE official, have collusively worked to fulfil their commercial goals by fraudulently using the data that was obtained by them from NSE to develop an algo trading software and products. This trading software was used for sale to market participants for dealing in the securities market. Some of these products were allegedly used by firms for unfair access to NSE’s systems. Shah said in an emailed response that he was very disappointed with the order. The order is not supported by facts. The data in question was never misused. I have no more comments at this point. Sebi charged Shah with violating Sebi’s Prevention of Fraud and Unfair Trade (PFUTP) norms and barred him from having association with any market infrastructure institute, listed company or registered intermediary for a period of two years. The order, however, did not go into whether any financial gain was made by the alleged misuse of the NSE data.

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FORMER NSE CHIEF RAVI NARAIN STEPS DOWN FROM BOARDS OF TWO LISTED FIRMS

Ravi Narain, stepped down from the board of automobile company Escorts and agro chemical company PI Industries, on Wednesday. Narain was an independent director on the board of these two firms. Both Escorts and PI Industries made a stock exchange disclosure stating that Narain had resigned with immediate effect. The move comes a day after the markets regulator Securities and Exchange Board of India (Sebi) prohibited Narain from associating with a listed company or market infrastructure institution (MII), or any other market intermediary — for a period of five years. Following his resignation from Escorts and PI, Narain is no longer associated with any listed firm. Previously, he had served on the boards of other listed companies, including Indostar Capital and Crompton Greaves. The regulator has also asked Narain to disgorge 25 per cent of his salary drawn during FY11 to FY13. ‘Disgorgement’ is a term used for returning ill-gotten gains.

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OPG SECURITIES AND GKN SECURITIES FILE APPEAL AGAINST SEBI’S MARKET BAN ORDER

Delhi-based brokerage firm OPG Securities Ltd has moved the Securities Appellate Tribunal (SAT) against the Securities and Exchange Board of India (SEBI)’s order, barring it from accessing the capital markets for five years, besides a fine of ₹15.57 crore for securing unfair access to systems of the National Stock Exchange of India (NSE). The SEBI had issued the order on Tuesday, and the matter will be heard by the SAT on Thursday. GKN Securities which was barred over misuse of the so-called dark fibre issue has also appealed against SEBI directions. The regulator, in a separate order, had also barred the NSE for six months from the securities market, and asked it to disgorge nearly ₹1,200 which is the profit made by NSE through its co-location services between 2010 and 2014 including interest. Under co-location services, some brokers trading from the same premises where NSE’s algorithmic trading servers are located were able to get faster access to the trading systems, thus gaining an unfair advantage over others. Meanwhile, OPG Securities on Wednesday got relief from SAT on the NSE’s September order that suspended the brokerage firm for six months as it had accessed secondary servers for faster access to NSE systems. SAT had then remanded the matter back to the NSE for fresh examination. In view of the fact that another forensic investigation report has come up, it would be in the interest of justice that the impugned order be quashed and set aside and the matter be remanded to the respondent stock exchange to have a fresh look in the matter, SAT said, referring to a forensic audit by Ernst and Young Llp, which was submitted to SEBI in June 2018. NSE has been asked to pass a fresh order within six weeks. NSE’s suspension notice to OPG was on the ground that secondary severs were a part of the contingency plan and members were supposed to log onto that only in case the first server failed.

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SHAKTIKANTA DAS: SEEN AS SAFE NO MATTER WHO WINS VOTE

India’s central bank Governor Shaktikanta Das has built up support on both sides of the political divide, making his position relatively safe under a new government no matter who wins the election. As an ex-career bureaucrat, Das has worked under administrations led by both Prime Minister Narendra Modi’s Bharatiya Janata Party and the opposition Indian National Congress. He’s likely to stay in his post after India concludes its election process on May 23, central bank watchers say. That should be a relief to investors who had to grapple with a fair bit of upheaval at the Reserve Bank of India late last year. Urjit Patel resigned abruptly as governor in December after tussling with Modi’s government over a number of issues. Das was appointed shortly after for a three-year term that ends in December 2021. Das has worked with distinction with both governments and therefore the probability of his continuing and completing the tenure should be extremely high, said Ashok Chawla. Before becoming governor, Das was economic affairs secretary in Modi’s government, and the public face of the prime minister’s controversial decision in November 2016 to ban high-value currency notes. Since his appointment at the central bank, he’s taken a number of steps to support the economy and that helps Modi’s regime: he’s lowered interest rates, relaxed lending norms for banks to increase credit flow, and named a panel to consider transferring the RBI’s excess capital to the government. He’s just as comfortable working with a Congress-led administration. As an official in the finance ministry under then Prime Minister Manmohan Singh, he was instrumental in preparing federal budgets, working closely with then-Finance Minister Palaniappan Chidambaram. Das was moved to the fertilizer ministry in December 2013 after a five-year stint at the finance ministry under the then Congress-led government. Modi brought him back to the finance ministry soon after coming to power in mid-2014, appointing Das to head up the tax department, which was trying at the time to win back investors’ confidence. Modi’s government has tried to show it’s more business-friendly, and Das has taken a more conciliatory approach toward banking sector regulations compared to his predecessor. He has been meeting with bankers to hear their concerns about liquidity constraints in the economy, and given more leeway to small and medium scale enterprises with regard to their loan repayments.

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SFIO QUESTIONS AUDIT PARTNER OF KPMG INDIA UNIT

The investigation wing of the corporate affairs ministry, Serious Fraud Investigation Office (SFIO), on Wednesday questioned an audit partner of BSR Co LLP in Delhi, widening the ambit of its probe into the role of auditors in the IL&FS case. BSR is the Indian audit arm of one of the big four consultants KPMG. BSR Co. LLP and Deloitte Haskins & Sells (DHS) LLP, member firm of Deloitte network had jointly audited the books of IL&FS Financial Services (IFIN), a subsidiary of Infrastructure Leasing & Financial Services Limited (IL&FS) for FY18. The partner was questioned in connection with IFIN. Since they had handled the account for FY-18 and up to June, 21, 2018, the audit partner was questioned on a range of issues like the loan granted to NPAs, loans granted despite negative credit rating and without sufficient collaterals, said an official in the know who spoke on the condition of anonymity. The crisis in IL&FS first came to light in July 2018, when its roads unit had difficulties making due repayments on bonds. Erstwhile IL&FS CMD Ravi Parthasarathy resigned on July 21, 2018. The official added that since the probe in IFIN is now concentrating on the roles of the auditors engaged by the company, all the auditor concerned with IFIN books are being examined. Our firm remains committed to the highest standards of ethics and audit quality. We transitioned into the audit of IL&FS Financial Services as joint auditors only recently in FY 18. We are not the auditors for IL&FS or any other material subsidiary of IL&FS. We stand by our audit, which was performed in line with the applicable auditing standards and regulations, and are fully committed to cooperating with the regulatory authorities on their inquiries, a BSR spokesperson said.

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CS Meetesh Shiroya