Ten steps to safe e- banking
ASHISH PAI
Rajesh Kumar ( name changed) had been to a tourist spot during an
extended weekend holiday. He had a nice time with his family until his
wallet was picked.
The wallet contained ₹ 10,000, two debit cards and two credit cards.
He had also kept his netbanking passwords in the wallet.
He had a tough time, as he was exposed to the risk of losing money
through a wrongful swipe or net transfer.
Fortunately, his wife was a banker and guided him through the process
to protect his money. Many of us might have gone through such an
ordeal. We are exposed to an electronic risk which is much bigger than
the loss of hard currency.
Net banking, plastic cards and mobile payments are convenient banking
tools that allow one to spend on the go. However, you need to
segregate and protect the data used for virtual banking — the debit
card PIN, netbanking login ID, login password, transaction password,
CVV ( card verification value) number of debit or credit card, date of
birth, mobile number, etc.
In India, according to the terms and conditions in credit card
contracts, the bank isn't liable for any fraudulent transaction unless
the customer files a report immediately. Once reported, the card
holder is no longer liable. Card frauds can range from purchases made
on lost or stolen cards to phishing, identity theft, etc.
Fraudsters will also try account takeovers and identity theft. The
stolen data are used for transactions where the credit/ debit card's
physical presence is not required, such as online purchases.
Here are things to keep in mind while doing virtual banking:
Strong passwords
The password provides the access to the funds in your account. It is
essential to use strong passwords, which are a mixture of numbers and
letters and do not contain details a fraudster could easily guess. It
is also essential not to record these at any place which can be
accessed by others.
Data protection
When sharing data on the web or social networking sites, take care not
to share too much information about yourself. This could be misused by
fraudsters for virtual banking.
Mobile care
For those who use mobile banking, always lock your phone when not
using it, to prevent unauthorised user access. This will prevent
unauthorised access to your banking account.
Phishing
Be extremely cautious about any emails that appear to have come from
your bank. Never click on any link in the email that asks you to enter
your security details. No bank asks for such things through email.
Also, look for spelling mistakes in unsolicited emails. Never respond
to any that say you have won a prize for a competition that you do not
remember entering or that you have inherited money from a relative
whose name you do not recognise.
Avoid internet cafés for net banking
It is best to avoid using an internet café for net banking or online
payments. There is always a possibility of data theft.
Update address and mobile number
It is important to update the mobile and address details whenever
there is any change. Most banks provide SMS alerts, which can help in
instant knowledge of any debit to the account.
Skimming or cloning
It is something to be cautious about, especially when travelling
abroad. In this, data in your card's magnetic stripe are recorded
while swiping. This information is, then, used to make duplicates. It
can happen anywhere, at a fuel pump or a restaurant. So, make sure the
card is swiped in your presence.
Other precautions
Be suspicious of anyone who telephones or calls at your house
unexpectedly and regularly, to make sure straightaway to ascertain
whether it was a genuine payment or a of complaints if your bank has
failed to respond satisfactorily. A bank must respond within 30 days
from the date you lodged the complaint. In case of wrongful billing,
the card company should provide documentary evidence within 60 days.
If unsatisfied, the cardholder can go to the ombudsman.
There are some entities that provide a protection plan for any loss
due to theft of a debit or credit card.
Card protection plan
This provides insurance cover for your debit or credit cards. Suppose
you lose your wallet carrying multiple credit/ debit cards. There can
be a huge financial burden on account of theft. The solution: Take a
card protection plan.
This plan is suitable for those who use multiple credit/ debit cards
and are prone to losing or misplacing these. A card protection plan is
designed to help you safeguard all your credit, debit and ATM cards.
If you lose the card, inform the service provider, who in turn will
inform all issuers to cancel the cards. A few benefits of this
service: [1]You can block all your cards by a single call.
[1]In case you lost cash along with your cards, the service provider
will provide you emergency cash assistance, subject to a limit. This
advance is interest- free and you need to repay it within the
stipulated days.
[1]It also provides fraud protection cover to a certain limit. To
avail of the benefits, you need to report a loss within 24 hours. Card
protection plans are available at costs ranging from ₹ 1,145 to ₹
1,745, plus taxes.
Some banks provide insurance cover from any loss due to theft or
skimming. The cost may be borne by the card issuing bank or charged to
the customer in case he/ she opts for a voluntary cover.
Just like physical valuables, it is important to take care of your
virtual assets. By doing so, you can protect your financial assets and
avoid loss. Take care of money and money will take care of you!
The writer is a freelancer
Net banking might have made life easier but it can turn out to be a
nightmare if one is not careful enough
When the management denies board position to a shareholder
SUDIPTO DEY
New Delhi
Three individuals — Madhu Kapur, widow of YES Bank cofounder Ashok
Kapur, SKS Microfinance founder Vikram Akula, and Vikram Bakshi,
former McDonald's India's former managing director (North and East
India) — have, in some sense, one thing in common. They are fighting
incumbent managements (Bakshi is also the joint venture partner) even
though the circumstances of their legal battles are different.
In the YES Bank case, the board is fighting it out with the family of
the bank's co- founder, the late Ashok Kapur, over granting a seat to
Kapur's daughter. The Kapur family holds a 12 per cent stake in the
private bank.
Microfinance entrepreneur Vikram Akula, the founder of SKS
Microfinance, wants to make a comeback to the board, riding on the
original promoter SKS Trust Advisors' 12.6 per cent stake in the
venture.
Vikram Bakshi and McDonald's India — equal partners — are sparring it
out at the Company Law Board where the former has contested his ouster
from the managing director position in the joint venture, Connaught
Plaza Restaurants.
So, under what conditions can the management of a company deny a board
position to a shareholder? Mehul Modi, senior director at Deloitte
Touche Tohmatsu India Private Limited, says according to the companies
law — both under previous 1956 Act and the current 2013 Act — the
board of a company is under no obligation to give a board
representation to a minority shareholder. Experts say the company law
does not provide any specific privilege to any shareholder
irrespective of their shareholding. "It is well within the power of
the management to refuse a position on the board of directors to a
group of shareholders ( who do not have sufficient voting rights to
ensure a directorial position) and such rights have not been
recognised in the old or the new Act," says Debanjan Mandal, partner,
Fox & Mandal.
Articles of Association holds the key
Corporate lawyers point out that for management of company, the
Articles of Association of the company is the reference point. " If
the Articles of Association of a company does not specify giving such
right to a shareholder, the management can deny the same," says Modi.
In other words, in this case, no shareholder can claim a board
representation where the majority shareholders in the company are
opposed to the idea.
If the shareholders' agreement has a clause for board representation
for a shareholder, it has to be included in the Articles of
Association to be effective.
For instance, Madhu Kapur and her family have cited the Articles of
Association of the bank while demanding the right to nominate a
director on the board.
However, the management of a company can deny directorship to a
minority shareholder citing the fit- andproper guideline. YES Bank's
board has exercised this clause while denying Kapur's daughter a
position on the board.
Even when a minority shareholder is found fit- and- proper to hold a
board position, the resolution has to be passed by the board. This
decision, then, needs to be ratified through a general meeting.
However, the company law does give a shareholder who holds a 10 per
cent stake the right to call an extraordinary general meeting. By
convention, such a shareholder also gets a board seat, point out legal
experts.
According to Rajat Sethi, partner, S& R Associates, a Delhi- based
corporate law firm, as a general matter, the shareholders would have
the power to appoint directors at a general meeting by an ordinary
resolution ( that is, with greater than 50 per cent vote). However,
inclusion of any such right —the power to nominate directors — to
aparticular shareholder in the Articles of Association will require a
special resolution ( that is, 75 per cent votes), he adds.
Legal experts point out that " fit and proper" criterion can vary from
sector to sector. In sectors such as telecom, there would be
additional requirements for a certain number of directors to be
Indian.
Sethi points out that a significant minority shareholder — one who
holds less than 50 per cent of the shares — and who does not have the
power to nominate directors under the Articles of Association of the
company may not be able to procure a board position unless such a
shareholder is able to obtain a greater than 50 per cent vote at
ashareholders' meeting in support of the shareholders nominee
director.
Departures between the 1956 Act and the 2013 Act
For enforcing legal rights as a shareholder, the minority shareholder
has the right to approach the Company Law Board under the 1956 Act.
However, under the new 2013 Act, this task has been taken over by the
National Company Law Tribunal ( NCLT), a single window clearance for
liquidation, amalgamation, restructuring, strengthening the rights of
minority shareholders and addressing shareholder grievances. Another
departure from the previous Act is the role of the nomination and
remuneration committee in the board that decides on the qualifications
of the director and provides inputs into that process. This has now
been institutionalised in the new Act, says Sai Venkateshwaran,
partner and head accounting advisory services at KPMG India.
Also, the Companies Act 2013 permits alisted company to have a
representative of small shareholders on the board, although this is
not a mandatory appointment. The new Act empowers the NCLT to appoint
such directors as it deems fit, on an application made by such
shareholders' groups. These directors will be reporting to the
tribunal directly.
Clearly, Kapur, Akula and Bakshi could have a long- drawn battle on their hands.
The reference point for board representation by a shareholder is the
companys Articles of Association
'The days of serial independent directors are over'
What challenges do you see in front of independent directors, while
living up to the spirit of their new responsibilities?
Independent directors' role is no longer ornamental. Many of them were
what I call " serial" directors — rushing from one board meeting to
another during each quarterly board meetings. But now under the new
Act, they will have to get functional. They will be expected to get
deeper into the agenda of the company. Their accountability now is
almost at par with other directors on the board. As their work load
goes up and to be more effective, there has to be further restrictions
on the number of board positions aperson can hold for listed
companies.
Does the new Act live up to the corporate governance standards sought
by long- term serious investors, like pension funds?
It should help attract investment from long- term quality investors
like pension funds, endowment funds etc., as corporate governance
standards improve. Once you have a few class action suits, the message
would go across to all stakeholders on the importance of keeping up
the level of corporate governance.
What are your biggest concerns with the new Companies Act?
The length of independent director's term is a concern. They can be
there with the company for a fresh term of 10 years without factoring
the previous term which in many cases run for 20 or 30 years. Previous
term has to be computed at least for the listed companies.
Another concern is about related party transactions. Quantum of
royalty payouts should be decided by majority of minority
shareholders. The royalty should not be calculated on the basis of
turnover but should be based on profitability of the company. The
issue of corporate social responsibility ( CSR) spend has agitated
many in the corporate world. What is your take on this?
It is a step in the right direction. However, corporate social
responsibility spend should progressively be increased from two per
cent to five per cent. If the managing director can be allowed to take
five per cent of profit as commission without that being seen to
impact health of the company, why should CSR spend not be at par with
the managing director's commission?
ANIL SINGHVI, founder director of proxy advisory firm Institutional
Investor Advisory Services ( IIAS), favours more stringent
restrictions on the number of board positions that an independent
director can hold, and the length of their term. Respected in
corporate circles for his subtle deal- making abilities, the former
managing director- CEO of Ambuja Cements shares with Sudipto Dey his
take on some aspects of the new Companies Act. Edited excerpts:
Quo vadis, Goods and Services Tax?
The last week has not been a good one for the chequered Goods and
Services Tax ( GST). Indeed, if the news reports on the proceedings of
the Empowered Committee ( EC) are anything to go by, there is a need
to reflect on where GST is headed and whether it is likely to see the
light of day anytime soon. Hence, the title to the article.
Before we discuss the outcomes of the EC meeting, let us appreciate
the fact that GST is, in any case, not likely to be implemented before
2015 for the following reasons: [1]The recent categorical assertion by
the prime minister that GST will be implemented by the new government
that will assume office, after the general elections in 2014; [1]The
new government will most likely assume office only by mid- 2014, if
not later; and [1]GST is best introduced at the beginning of a fiscal
year.
For all these reasons, the earliest likely introduction of this
fundamental tax reform measure is April 2015. The question, therefore,
is whether even this long- delayed tryst with GST will be met.
Let us now consider the matters that were debated by the EC in its
meeting last week: [1]Inclusion of petroleum products and alcohol
within GST framework. The reported outcome of the EC meeting is that
most member states have opposed this inclusion, ostensibly on grounds
of revenue.
[1]Subsuming the entry tax in GST. Here again, the reported outcome of
the EC meeting is negative and states have opposed the move.
[1]Passage of the Constitution Amendment Bill relating to GST by
Parliament in its winter session of 2013. Here again, reports have it
that certain states believe that the Bill should be considered by
Parliament only after it is mooted by the new government that would
take office at the Centre in mid- 2014.
All these developments are dismaying, notwithstanding that the EC
chairman, Abdul Rahim Rather, has apparently stated that a final view
on these matters will only be taken by the EC in its next meeting in
November. This is because it is very unlikely that the EC's final
decision will be contrary to the outcomes listed above and also
because an agreement between the Centre and the EC is awaited on a
host of other critical aspects of GST as well.
Let us briefly consider the matters on which the EC has tentatively
reached some conclusions. It is, by now, acknowledged that GST should
be as broadbased as possible, so that the tax rates under GST are
consequently moderate. It follows, therefore, that the extension of
GST to petroleum products and alcohol is well merited. The states have
apparently pressed revenue considerations to oppose this broad-
basing. The straightforward answer to this point would be that the
states are free to impose excise taxes on these products, at
appropriate rates and without the benefit of input tax offsets, over
and above the maximum rates of GST that will likely be made applicable
to these products.
Surely, such a possible scheme of taxation of petroleum products and
alcohol under the GST will protect, and indeed enhance, states'
revenue collections from these products? It appears that the
apprehension of the states on the extension of GST to petroleum
products and alcohol is misplaced.
It is another point altogether that there is no clarity on how
taxation of these products, outside of GST, will coexist with GST that
would be in place for all other products, assuming the status quo
continues.
A related point is that the Bill seeks to exclude these products at
the threshold itself, whereas it is now universally acknowledged that
the exclusions, if at all, must only be brought about via
notifications, so the Bill should extend to all products without
reservation.
One hopes that the EC is at least agreeable to this very basic construct.
As to the point on entry tax, it is surely sub- optimal to keep this
tax outside of GST, both because of the pernicious implications of the
tax cascading that would result and also because it is detrimental to
bringing about a common market for goods in India, which is a key
objective of GST. If state revenues and local body revenues are
considerations, the answer would be to consequently enhance GST rates
by a small percentage to take care of entry tax revenues and to not
continue with such a regressive tax. Here again, it is another matter
that the levy of entry tax is facing a serious constitutional
challenge.
As to the final point on the passage of the Bill, it is again moot as
to why such afundamental enabler as the Bill, which is merely
preparatory to other measures and is a basic condition for GST, should
be postponed for discussion until the new Parliament, after the
elections of 2014, is constituted. This viewpoint is, thus, not a
defensible one.
In sum, the conclusions of the latest EC meeting are discouraging for
the advent of GST by 2015, which is, by itself, along- delayed start.
There is, however, too much at stake here and none of the
stakeholders, including industry, can afford to let matters rest.
Hence, despite last week's setback, stakeholders must continue to
engage and debate GST and persuade those opposed to it to support this
most fundamental of tax reform measures such that, by 2015 at least
and surely not later, GST is brought into force and the economy is
consequently positioned once again for double- digit growth. There is
no other choice.
The author is co- chair of the GST Task Force, Federation of Indian
Chambers of Commerce and Industry
With so many detractors this vital tax reform is struggling against the odds
SMADHAVAN
The apprehension of the states on the extension of GST to petroleum
products and alcohol is misplaced
BRIEF CASEN [1] M J ANTONY
A weekly selection of key court orders
Litigating with tax payers' money
The Supreme Court has dismissed a batch of appeals from the
Commissioner of Income Tax, expressing the hope that the revenue
department will implement its litigation policy with " a little more
practically and a little more seriously".
The question involved in these appeals was whether the benefit of an
entitlement to make duty- free imports of raw materials obtained by an
assessee through advanced licences and duty entitlement pass book
issued against export obligations, is income in the year in which the
exports are made or in the year in which the imports are made.
The court ruled the income does not accrue in the year of export but
in the year of import.
Excel Industries claimed deduction benefit, which was denied by the
authorities on the ground that any benefit arising from a business is
income. In this batch of cases, the court noted the authorities had
accepted deductions in certain years, but in other years they took a
contrary stand and moved the Bombay High Court and lost.
"That being so," said the Supreme Court, " the revenue authorities
cannot be allowed to flip- flop on the issue and it ought to let the
matter rest, rather than spend the tax payers' money in pursuing
litigation of its own sake... There was no need for it to continue
this litigation when it was quite clear that not only was it fruitless
but also that it may not have added anything to the public coffers".
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Wrong to penalise Himachal SEB
The Supreme Court has ruled it was not correct on the part of the
Himachal Pradesh State Electricity Commission to impose a penalty on
the state electricity board for not complying with the commission's
directions on the rate fixed by it. The commission, while fixing the
rate order, passed a series of other directions. The commission
monitored their implementation and found the board wanting, leading to
imposition of penalty in 2001. The board challenged the power of the
commission to do so. Meanwhile, the new Electricity Act was passed in
2003 and the complexion of the commission's power changed. The Supreme
Court stated the board had "substantially" complied with the
commission's directions and, therefore, the penalty was not warranted.
The commission shall hereafter proceed to take decisions under the new
Act, the judgment said.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Lender to pay VAT on vehicles sold
The Calcutta High Court has dismissed a batch of writ petitions moved
by Tata Motors Finance Ltd, ICICI Bank and Family Credit Ltd against
the order of the West Bengal Taxation Tribunal, on the question of
whether in respect of disposal of a vehicle for recovery of the loan,
the lending firms are liable to pay tax as ' dealers' according to the
West Bengal Value Added Tax Act. The tribunal had held they were
dealers under the VAT Act, as the sales are in course of their
business and such sales are effected in exercise of its statutory
right under the Banking Companies Regulations Act. Non- banking
finance companies were also held to be dealers under the
circumstances. The lenders argued they were not owners and the
borrowers were the owners of the vehicles sold. The firms also argued
they were not agents of the borrowers. Rejecting their contentions,
the court ruled that by hypothecation and getting the power of
attorney from the borrowers, the lending firms have become agents. The
judgment said: " When they are acting on the basis of power of
attorney, it cannot lie in their mouth to say that they are not the
agents of the borrowers."
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Old Monk' wins over ' Tall Mom'
The Delhi High Court has passed a permanent injunction against AB
Sugars Ltd on a petition by Mohan Meakin Ltd in a trademark dispute
over the brand names of alcoholic drinks. Mohan Meakin alleged the
rival distiller used labels deceptively similar to its reputed brand
Old Monk. The offending trademark was ' Told Mom'. In the three- year
litigation, AB Sugars had offered to change its brand name to ' Tall
Mom', but this was not acceptable to Mohan, which led to the present
suit. Mohan argued it was engaged in manufacturing and selling of
vatted rum under the trademark ' Old Monk' since 1959; it had the
largest selling rum brand in India; and that apart from the common law
rights accruing in favour of Old Monk by virtue of long and continuous
use, it also held proprietary rights over the trademark of Old Monk by
virtue of 15 registrations. AB Sugars defended its stand, submitting
that since its incorporation in 1997, it was one of the fastest-
growing companies and had entered into alliance with M/ s Ian Macleod
Distillers Ltd, a leading Scotland- based Scotch company, for bottling
of imported Scotch and had a vast distribution network in north India,
owning about 3,000 retail outlets in Punjab, Uttarakhand, Uttar
Pradesh and Haryana and having an IMFL (Indian- made foreign liquor)
bottling capacity of 150,000 cases a month and country liquor
production of 200,000 cases a month. Its label and colour scheme
distinguished the product from Old Monk, it argued. The high court,
however, ruled there was infringement of the trademark of Mohan
Meakin.
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> Capital gains on offshore deals
The Delhi High Court has quashed the decision of the Authority for
Advance Rulings ( AAR) on a petition moved by Cairn UK Holding Ltd, a
company registered in Scotland, and declared it would be entitled to
the benefit of Section 112( 1) of the Income Tax Act on sale of equity
shares.
The question involved the rate of tax applicable/ payable on the long-
term capital gains earned. The company had transferred 43.6 million
equity of Cairn India Limited to Petronas International Corporation
Ltd, Malaysia, for a consideration of $241,426,379. That transaction
was an off- market transaction, not through a stock exchange. It
resulted in long- term capital gain of $ 85,584,251 in the hands of
Cairn UK, after applying the benefit under Section 48 ( 1) of the
Income Tax Act.
The question raised related to the rate of tax applicable. The
assessee company argued it was liable to pay only 10 per cent on the
capital gains, and not 20 per cent as claimed by the revenue
authorities. AAR rejected the company's contention and ruled the lower
rate under Section 112( 1) was not applicable. Allowing the company's
appeal, the high court stated the decision in this case has gone
diametrically against the authority's own long- standing view in
several other cases. This has brought about " an uncertainty in
understanding the impact and the effect of the proviso to Section 112(
1)," the judgment said, adding: " Certainty is integral to rule of
law. Certainty and stability form the basis foundation of any fiscal
laws."
--
CS A Rengarajan
9381011200
CS Benevolent Fund is a collective effort towards extending the much
needed financial support to the community of Company Secretaries in
times of distress Let us lend support and join for noble cause.
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