| RBI, CCI to vetall banking mergers |
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New Delhi, 18 November Mergers and acquisitions (M&As) in the banking space may require clearance from fair market watchdog, Competition Commission of India (CCI), as well as the sector regulator, Reserve Bank of India (RBI). Earlier, the indications were that only involuntary mergers and acquisitions, the ones directed by the RBI, would go to the central bank along with the CCI. However, all mergers and acquisitions may now come under both. While the CCI will look at the competition part of such deals, the RBI will see prudential aspects. "For M&A activities, banks will have to seek Reserve Bank approval from a prudential point of view. The RBI is the sector regulator, so the health of banks is its concern. The health of banks is not the CCI's concern. The CCI's concern is their behaviour in the market and the consumers in the market," a key CCI official told Business Standard . So, the banks concerned may have to go to the RBI for mergers, as they go for branches and other activities, and it will look at technical issues related to the sector, according to the official. However, under the proposed provisions in the amendment to the Competition Act, they will also have to seek approval from the CCI for M&A activities. The Cabinet recently approved the amendment to the CCI Act to clear the air over who would vet mergers and acquisitions. It brought all M&A activities under the CCI, except the amalgamation of a failed bank with another bank. According to CUTS International Secretary General Pradeep S Mehta, it could be difficult for both regulators to co-exist and if the amendment to the Competition Act goes through, the government will likely make amendments to the banking law Bill to take out the provision on RBI approval for competition-related issues. "The proposed amendment to the Competition Act would in any case make it mandatory for both regulators to consult each other in case there is any conflict. It also provides the CCI primacy to regulate M&As, so it will have a clear say in mergers and acquisitions across sectors, including banking," Mehta said. Earlier, the Banking Laws (Amendment) Bill, 2011 had proposed M&As in the banking sector be exempted from CCI purview. This proposed clause will now be removed or amended, say those in the know. CCI to examine competition part of deals, RBI prudential aspects Times Bankwas acquired byHDFC Bank, ICICI Banktookover Bank ofMadura and Lord Krishna Bank merged with Centurion Bankof Punjab in the post-1993 period SBI merged its associate, State BankofSaurashtra, with itself in 2008 State BankofIndore merged with SBI and BankofRajasthan merged with ICICI Bankin 2010 In an involuntarymerger, OBC amalgamated Global TrustBankin 2004 after an RBI moratorium on the operations ofthe Ramesh Gelli-promoted bank M&AsIN THE BANKING SPACE |
| Anand Sharma upbeaton retail FDI |
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On board PM's special aircraft, 18 November Three days before a stormy winter session of Parliament is slated to begin, Commerce and Industry Minister Anand Sharma said the government did not foresee a situation where investors'confidence would be dampened over the Opposition parties' protest against foreign direct investment (FDI) in multi-brand retailing. Part of the official delegation accompanying Prime Minister Manmohan Singh to the Association of South East Nations (Asean) summit in Phnom Penh, Cambodia, he was briefing the media on board the aircraft earlier today. Walmart, the world's largest retail chain, has said it is investigating corruption allegations in its India operation, and in some other countries. A separate investigation by the enforcement directorate (ED) has also begun into the American company's investments in India. On if this would hurt retail FDI rollout, Sharma said, "There are agencies and authorities to look into allegations. I will not like to comment on that." He, however, said the retail FDI policy, was "cast in stone" and would not be reversed. Investor confidence would not be dampened, he added. Attacking the critics of retail FDI, Sharma said it was time the "shrill sensationalism"", that had hurt India's economy and investment climate was stopped. One does not need the Opposition discourse when institutions and regulators are doing their work, the minister said, referring to the demand for a Parliament debate and voting on retail FDI over the Walmart issue. "I am surprised that the same government which was blamed for indecision earlier is now being criticised for its decisions," he said. "You can't expect vetting of policy by those with a partisan agenda." The ED is investigating an investment by the American chain in the Bharti group, to check for breaches of the Foreign Exchange Management Act. According to Sharma, this will be the first time in Indian democracy that an executive decision is being dragged into being the subject of a parliamentary motion. Opposition parties, including the ruling coalition's former constituent, the Trinamool Congress, have called for such a motion. The PM will attend the 10th India-Asean Summit, and the 7th East Asian Summit, on Monday and Tuesday in Phnom Penh. India is a dialogue partner of Asean, a 10member body, to boost its look-East policy. Besides bilateral talks with Asean members, and with Chinese premier Wen Jiabao, the government is launching negotiations for a comprehensive economic partnership between Asean and its free trade agreement partners. SNIPPETS Prime Minister Manmohan Singh is on a hectic two and a halfdays' visitto Phnom Penh, with back-to-back meetings all through. Sixbilateral meetings with Asean members and one with Chinese PM Wen Jiabao have been fixed. Butnone with USPresidentBarack Obama is on the agenda yet. Singh might, however, meetObama, who's clubbing Thailand and Burma with the Cambodia visit, atthe gala world leaders' dinner on Monday. Obama is in Phnom Penh to attend the EastAsia summit Alittle more than 100 people are travelling with the PM to the summit city. While the official delegation with Singh has 16 members, including top officials from the PM's office and external affairs ministry, and Commerce and IndustryMinister Anand Sharma, the restare doctors, securitypersonnel, media and a cook Phnom Penh's international airport, to be closed to the public for manyhours on Tuesdaydue to VVIP rush as the Asean summitdraws to a close, saw leaders from China, India and Korea arrive on Sunday. While the PM and the official delegation will stayin the luxury Cambodiana hotel, the bilateral meetings with other leaders will be hosted atother venues, including Hotel Sofitel, Intercontinental Hotel and Peace Palace. The gala dinner on Mondayis fixed atthe Diamond Island Convention Even as there are hopes riding on the conclusion ofthe investmentin services agreementwith Asean, the government has notgiven anyassurance. The services agreementwill implyfree flow oftrade and people across professions in the services sector. Even grantof banking licences would come under the purviewofsuch an agreement. On the status and time line ofthe pactgetting concluded, commerce and industry minister Anand Sharma said negotiations were continuing. "We want to bring itto an earlyclosure." On the issue ofhigh expectation from Asean countries and their disappointment atIndia's slowdelivery, Sharma asked, "Where are you getting this from?" Two-waytrade between India and Asean accounts for about$75 billion. Sharma did notspecifyanytargetfor where he sees the trade going, in terms offigures While he was in an attacking mode, referring to the Opposition demand for aparliamentarymotion on retail foreign directinvestment, Sharma did notforgetto take creditfor the success storyaround Swedish furniture giant Ikea. He said three single-brand retail FDI proposals were cleared lastmonth and a big one was setto getthe Foreign InvestmentPromotion Board nod nextweek. Then he smiled, and named Ikea, whose proposal is slated to be taken up atFIPB on Tuesday The business summiton the sidelines of the meetsawan interesting mixof global biggies. Officials atPhnom Penh said Indian businesses were missing in action. The business summitgotover on Saturday FROM THE HIGH WAVE AT PHNOM PENH |
| LEGAL DIGEST |
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The Supreme Court last week dismissed the appeal of North-East Electricity Company of Orissa demanding arrears from a company which had bought a wound-up unit that had not cleared its power bills. In this case, Raghunath Paper Mills had bought in auction Konark Paper & Industries Ltd which was in liquidation on "as is where is and whatever there is" basis. After buying the closed unit, Raghunath Mills applied for a new power connection. The electricity firm demanded payment of outstanding dues run up by the previous owner of the unit at the premises. The new owner refused to pay the arrears and moved the Orissa High Court. It allowed the petition and ordered a new connection. Therefore the electricity company appealed to the Supreme Court. It held that the buyer firm was not obliged to pay the arrears as it had applied for a new connection; not a transfer of the connection given to the premises used by the earlier consumer who defaulted. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Service taxappeal dismissed The Supreme Court has dismissed the appeal of Nagarjuna Construction Company against the judgment of the Andhra Pradesh High Court which had rejected its challenge to a 2008 circular of the central government on service tax. The circular was clarificatory and stated that "the classification of a taxable service is determined based on the nature of service provided whereas liability to pay service tax is related to receipt of consideration. Vivisecting a single composite service and classifying the same under two different taxable services depending upon the time of receipt of the consideration is not legally sustainable." Dismissing the appeal, the Supreme Court said that the construction company having paid service tax for taxable services, namely, erection, commissioning or installation service, was not entitled to change the classification of the single composite service for the payment of service tax. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Arbitration in Florida The Bombay High Court last week dismissed the arbitration petition of BG Strategic Advisors LLC, aFlorida corporation, in its dispute with the Indian company Arshiya International Ltd as it was not maintainable. The US firm wanted an order against the India firm to deposit $ 442,666.84 and for various interim measures. However, the high court pointed out that according to the contract, it was agreed that laws of Florida would apply. The parties had agreed further that disputes will be submitted to binding arbitration administered by the National Arbitration Forum in the US in accordance with the forum's Code of Procedure. It has also been agreed that the arbitration will take place in West Palm Beach, Florida and arbitrator shall apply Florida substantive law. The US corporation has already invoked arbitration there, the high court said. Therefore, the provisions of Part I of the Arbitration and Conciliation Act on international arbitration will not apply. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> National Aluminium snubbed The Orissa High Court has stated that it is "shocked to note that a central government public sector undertaking is avoiding to discharge its statutory obligation on some plea or other which is not at all tenable under the law." The issue involved in this case, National Aluminium Co Ltd vs ESI Corporation, was the contribution the company had to make for contract labour employed by it through contractors. Dismissing the petitions of the PSU against the ESI demands, the court stated that "all the pleas taken by it not to discharge its statutory obligation are not legally sustainable." The judgment further stated that the PSU had a duty cast under the Employees State Insurance Act to deposit with the ESI Corporation its share of contribution as well as the share of contribution of the employees irrespective of whether the corporation has provided fullfledged hospital or not or that the employees are willing or not to be covered under the ESI Scheme or that any kind of settlement has been entered into between the PSU and the Union of Contract Labourers. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Illegal strike orlock-out? When there is a dispute whether the labour strike was illegal or the lock-out was illegal, the state government has discretion to refer one part of the dispute to an industrial tribunal. In this case, Eastern Medikit Ltd vs state of Haryana, there was a labour strike and a lockout following it. The government thought it fit to refer only the allegation of lock-out to the tribunal. This was challenged by the management, which asserted that its action as well as the strike should have been referred to the tribunal. Rejecting this contention, the Punjab and Haryana High Court stated that "no illegality has been committed by the government while referring the dispute pertaining to only the lock-out and not the strike, as is sought to be claimed by the management. The power conferred on the government under Section 10 of the Industrial Disputes Act is discretionary and administrative in nature, though subject to judicial review." MJ ANTONY THINKSTOCK |
Company Secretary, Chennai
email csarengarajan@gmail.com
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