Dear Patrons,
In the recent landmark judgment delivered by Bombay HC in Hubtown, IDBI Trusteeship Services Ltd v Hubtown Ltd [LSI-511-HC-2015-(BOM)], the Bombay High Court observed that an investment of Rs. 418 cr. in a holding company was a 'colorable device' used to circumvent FDI Policy and FDI Regulations. HC relied on the principle laid down by the Supreme Court in Vodafone International Holdings BV vs. Union of India to hold that a transaction is required to be viewed as a whole.
In this article, the authors, Ruchir Sinha (Head, Private Equity & Real Estate Practice at NDA), Ashish Kabra (Senior Member, International Litigation & Dispute Resolution Practice) and Satish Padhi (Member, Private Equity Practice), analyse the judgment and point out the 'look at' approach taken by the High Court. They state that "The judgments resonate the regulatory outlook towards foreign transaction and sets out to scrutinize the substance of the transaction rather than the form of it."
The authors further mention that "While the 'look at' test was adopted by the court, the judgment reflects that under such approach the courts are willing to scrutinize the transaction and its various elements to ascertain if the structure is in spirit compliant with the FDI Policy & FEMA Regulations." Thus, the authors also highlight the need for high caution to be exercised while adopting certain investment structures.
Click here to read the article titled "Bombay HC ruling in Hubtown : A note of caution"
This article was first published on Nishith Desai Associates' Website.
Best Regards
LSI Team.
Dismisses legal heir's claim on assets of partnership firm converted to co.
CLB dismisses a shareholder's oppression & mismanagement petition, seeking to direct respondents (director of pvt ltd co.) to disclaim properties which were acquired by the co. on its conversion from partnership firm ( wherein petitioner's father and respondents were partners), holds that "a shareholder of the company is not entitled to claim any right with respect to the company's assets"; Rejects petitioner's contention that on death of his father (partner), he inherited the property, thus, property could not be converted into co's property; Observes that petitioner was not inducted as partner and on conversion was only a shareholder, thus, he only has right to profits of business of company; With respect to petitioner's contention that he was not served with AGM notice, observes that petitioner was not residing in India and his USA address was not furnished to company, thus holds that in such circumstances, respondent cannot be held liable for oppression & mismanagement; Separately, also observes that petitioner had concealed information regarding conversion of partnership into co., holds that petitioner had approached with unclean hands, thus, petition liable to be dismissed on that ground itself:Mumbai CLB
The Order was passed by Shri Ashok Kumar Tripathi, Member (Judicial), CLB.
Advocate Pawan S. Godiawala argued on behalf of petitioner while respondents were represented by Dr. Nilesh Shah, Advocate.
SAT dismisses FTIL appeal; China rejects Gilead hepatitis C drug patent application
SAT dismisses FTIL appeal; China rejects Gilead hepatitis C drug patent application
CLB to process deposit related complaints till NCLT's constitution, MCA clarifies
MCA issues clarification on processing of deposit related complaints filed by investors u/s 74 of Companies Act, 2013 ('Act'); Clarifies that till the constitution of National Company Law Tribunal ('NCLT'), Company Law Board ('CLB') shall exercise its powers and process those complaints; States that depositor can freely file an application u/s 73(4) of Act with CLB if company fails to make repayment of deposits and similarly, company may also file application u/s 74(2) of Act with CLB seeking extension of time in making repayment; Further, w.r.t. deposits accepted prior to commencement of Act (April 1, 2014) by eligible public companies u/s 76 of Act, clarifies that they can be repaid in accordance with terms and conditions for which deposits had been accepted; Also empowers Registrar of Companies to file prosecution against a company if it fails to make repayment: MCA
Consumer's dependence on enterprise must to establish dominance; Rejects complaint, absent dominance
CCI rejects a flat buyer's (informant) complaint against Ghaziabad based real estate developer (Opposite Party, 'OP'), alleging non-delivery of possession, despite a legal notice, causing financial losses to informant; Delineates relevant market as "services of development and sale of residential flats in Ghaziabad"; Observes several other large real estate developers operating in the relevant market such as Amarpali Group, Anjara, Value Infra, holds that, "presence of other builders in the relevant market indicates that OP-1 may not be enjoying dominant position in the relevant market"; Points out that for determination of dominance, dependence of consumers on the enterprise is must, states that presence of other players with comparable projects in the relevant market indicates that buyers have options to buy flats from other developers; Further observing that no information was available on record or in the public domain to show OP's position of strength, holds that OP does not have dominant position in relevant market:CCI
Approves Royal Sundaram- Sundaram Finance combination, observes their vertical relationship as 'insignificant'
CCI approves acquisition of additional 26 percent stake in Royal Sundaram Alliance Insurance Company Limited ('Royal Sundaram') by Sundaram Finance Limited ('SFL'), which will give SFL sole control over Royal Sundaram; Notes that SFL is RBI registered NBFC, classified as an asset financing company, while Royal Sundaram is a general insurance company registered with IRDA; Thus, observes that, "The proposed combination envisages transfer from joint to sole control of SFL in Royal Sundaram...there is no horizontal overlap between the business of Royal Sundaram and SFL"; Further noting that proposed combination relates to insurance sector, observes that Royal Sundaram has an insignificant market share in general insurance sector in India which is characterised by large number of players in India; With regard to their vertical relationship, notes that SFL, currently, acts as a corporate agent of Royal Sundaram for distribution of Royal Sundaram's general insurance products under a license issued by IRDA; However, observes, "the said vertical relationship between SFL and Royal Sundaram is insignificant and not likely to give rise to any competition concern"; Thus, holds that the proposed combination is not likely to have appreciable adverse effect on competition in India:CCI
Approves merger of real-estate developers, notes insignificant market-share not competition adversarial
CCI approves merger of two subsidiaries each of Temasek Holdings (Private) Limited ('Temasek') and JTC Corporation ('JTC'), viz., Singbridge Pte. Ltd. ('Singbridge') and Surbana International Consultants Holdings Pte. Ltd. ('Surbana') of Temasek and Ascendas Pte. Ltd. ('Ascendas') and Jurong International Holdings Pte Ltd ('JIH') of JTC, whereby these four entities will become indirect subsidiaries of TJ Holdings III which would be under joint control of Temasek and JTC; Observes that the parties to the combination are primarily engaged in businesses of providing real estate development and related services and building / project consultancy services; Accordingly, notes that parties to the combination have an insignificant market share not only in real estate development and related services market in India as a whole but also in various cities; Further notes that there are several other major players such as DLF, Raheja and Larsen & Toubro etc. providing similar services in different cities of India; Thus, holds that proposed combination is not likely to have an appreciable adverse effect on competition in India :CCI
Approves Du Pont's chloroprene rubber business acquisition; Notes easy switching & competitors presence
CCI approves proposed combination relating to acquisition of chloroprene rubber ('CR') business of E.I. du Pont de Nemours and Company [USA based corporation] by Denka Performance Elastomer LLC [Joint venture of Japanese Corporations i.e. Denki Kagaku Kogyo Kabushiki Kaisha ('Denka') and Mitsui & Co. Ltd. ('Mitsui')]; Observes that entire consumption of CR in India is met through imports and post combination acquirers combined market share would only be in the range of 50-60%; Also notes presence of other major suppliers of CR to India, thus states that "there would be no significant barrier for the manufacturers of CR other than the Parties to increase their supply of CR to the customers in India" and acquirers would continue to face competition from other worldwide suppliers of CR as far as India is concerned; W.r.t. customers of CR, observes that CR is normally purchased by customers who enjoy countervailing buyer power as these purchases are generally made at negotiated prices and switching from one CR supplier to other is not uncommon, thus approves the combination:CCI
Directs promoters to make public announcement for clandestine acquisitions & takeover regulations breach
SEBI directs target company's promoter group ('Noticees') to make public announcement for acquiring shares of target company in accordance with 1997 Takeover Regulations, also directs consideration payment @ 10% p.a. interest; Observes that noticees substantially consolidated their shareholding in target company by acquiring shares when benefit of creeping acquisition was not available to them and when it was available they breached 5% limit and further consolidated their shareholding despite clarification issued by SEBI circular; Holds such subsequent acquisitions as clear proof of noticees little regard for process of law and/ or any intent to comply with the requirements of regulation 11(2) of Takeover Regulations, 1997, states that by failing to make requisite public announcement at the time of acquisition "noticees have deprived the shareholders the exit opportunity at the best offer price"; Also holds that noticees made impugned acquisitions clandestinely since they did not make requisite disclosures to stock exchange under regulation 7(1A) of Takeover Regulations; Relies on SAT observations in Nirvana Holdings Private Limited vs. SEBI:SEBI
Penalises co. for disclosures delay under Takeover-Regulations; Rejects 'previous management's responsibility' defence
SEBI imposes penalty of Rs.7 lakhs on Mipco Seamless Rings (Gujarat) Ltd. ['Noticee'] for delay in making annual disclosures for 4 financial years, thereby violating Regulation 8(3) SEBI (Substantial Acquisition of Shares & Takeover) Regulations, 1997; Rejects noticee's submission that such delays were done under previous management, states that adjudication proceeding are against the Noticee and not against erstwhile / present management; Observes that "SAST Regulations unequivocally states that the disclosure has to made by the company"; Also points out that "noticee is a separate and distinct legal entity from the management of the company with a perpetual succession":SEBI
Accepts Uttar Pradesh Stock Exchange's voluntary-exit application; Orders post exit obligations compliance
SEBI accepts voluntary exit application of Uttar Pradesh Stock Exchange ('UPSE') as it has substantially complied with all conditions contained in SEBI Exit Circular, 2012; Observes UPSE's substantial compliance with conditions required for de-recognising SE & seeking exit; Directs UPSE to comply with tax obligations, requisite undertakings given to SEBI & consequential conditions of Exit Order, 2012:SEBI
Allows Madhya Pradesh Stock Exchange exit, orders name change & tax compliance
SEBI allows exit of Madhya Pradesh Stock Exchange ('MPSE'); Observes MPSE's substantial compliance with conditions required for de-recognising Stock Exchange & seeking exit under SEBI Exit Circular, 2012; Directs compliance with tax obligations under Income Tax Act, 1961, compliance with undertakings given to SEBI & other consequential conditions of Exit Circular; Orders MPSE to change its name and not to use expression 'Stock Exchange' or its variant in its name and avoid any representation of present/ past affiliation with Stock Exchange, in all media:SEBI
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